As filed with the Securities and Exchange Commission on January 25, 2007

Registration No. 333-

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549.

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

HAYNES INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware	3310	06-1185400
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(IRS Employer Identification No.)

1020 West Park Avenue Kokomo, Indiana 46904-9013 (765) 456-6000	Francis J. Petro President and Chief Executive Officer Haynes International, Inc. 1020 West Park Avenue Kokomo, Indiana 46904-9013 (765) 456-6000
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)	(Name and address, including zip code, and telephone number, including area code, of agent for service)

Copies To:

Stephen J. Hackman, Esq.
Ice Miller LLP
One American Square, Suite 3100
Indianapolis, Indiana 46282-0200
(317) 236-2100

Joseph A. Hall, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
(212) 450-4000

Approximate date of commencement of proposed sale of the common stock to the public: From time to time after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Amount to be Registered (1)	Proposed Maximum Offering Price Per Share (1)(2)			Proposed Maximum Aggregate Offering Price		Amount of Registration Fee
Common Stock, par value $0.001 per share	2,300,000 shares		$	52.00	$	119,600,000		$	12,798
Preferred Share Purchase Rights (3)	2,300,000 rights		$	—	$	—		$	—

(1) Includes shares and rights the underwriters have the option to purchase to cover over-allotments, if any.

(2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended, based on the last sale price of the registrant’s common stock reported through the “pink sheets” on January 23, 2007.

(3) Rights initially will trade together with the common stock. The value attributable to the rights, if any, will be reflected in the market price of the common stock.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

Subject to completion, dated January 25, 2007

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Prospectus

2,000,000 shares

Haynes International, Inc.

Common stock

This is a public offering of common stock by Haynes International, Inc. and the selling stockholders identified in this prospectus. Haynes is selling 1,000,000 shares and the selling stockholders are selling 1,000,000 shares. Haynes will not receive any proceeds from the sale of shares by the selling stockholders. The estimated public offering price is between $ and $ per share.

We have applied to list our common stock on The NASDAQ Global Market under the symbol HAYN.

	Per share	Total
Initial public offering price	$	$
Underwriting discounts and commissions	$	$
Proceeds to Haynes, before expenses	$	$
Proceeds to selling stockholders, before expenses	$	$

The selling stockholders have granted the underwriters an option for a period of 30 days to purchase up to 300,000 additional shares of common stock. If the underwriters exercise this option in full, total underwriting discounts and commissions will be $ and total proceeds to the selling stockholders, before expenses, will be $ .

Investing in our common stock involves a high degree of risk. See “Risk factors” beginning on page 12.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares of common stock to investors on or about , 2007.

JPMorgan
	Bear, Stearns & Co. Inc.
		KeyBanc Capital Markets

, 2007

[INSIDE FRONT COVER]

[Pictures of products in which Haynes alloys are used]

Table of contents

Prospectus summary		1
Risk factors		12
Forward-looking statements		20
Use of proceeds		21
Dividend policy		21
Market for common stock		22
Capitalization		23
Dilution		24
The reorganization		25
Selected consolidated financial and other data		26
Management’s discussion and analysis of financial condition and results of operations		29
Business		53
Management		72
Certain transactions		85
Principal and selling stockholders		86
Description of capital stock		89
Shares eligible for future sale		94
Underwriting		96
Legal matters		101
Experts		101
Where you can find more information		101
Index to consolidated financial statements		F-1

You should rely only on the information contained in this prospectus. We have not authorized any person to provide you with different or additional information. If anyone provides you with different or additional information, you should not rely on it. Haynes and the selling stockholders are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where such offers and sales are permitted. The information in this prospectus is accurate only as of the date on the front cover, regardless of the time of delivery of this prospectus or of any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date and may change again.

Prospectus summary

The following summary highlights information about us and is qualified in its entirety by the more detailed information and consolidated financial statements and notes thereto included elsewhere in this prospectus. You should carefully read and consider this entire prospectus, including the information set forth under the heading “Risk Factors.” All references to fiscal years in this prospectus refer to our fiscal years which, for all periods presented, ended on September 30. As used in this prospectus, the terms “our company,” “we,” “our,” and “us” include, when the context so requires, Haynes International, Inc. and its consolidated subsidiaries.

Our business

Haynes International, Inc. is one of the world’s largest producers of high-performance nickel- and cobalt-based alloys. We are focused on developing, manufacturing, marketing and distributing technologically advanced, high-performance alloys, which are used primarily in the aerospace, chemical processing and land-based gas turbine industries. Our products consist of high temperature resistant alloys, or HTA products, and corrosion resistant alloys, or CRA products. HTA products are used by manufacturers of equipment that is subjected to extremely high temperatures, such as jet engines for the aerospace industry, gas turbine engines used for power generation and waste incineration, and industrial heating equipment. CRA products are used in applications that require resistance to corrosive environments found in chemical processing, power plant emissions control and hazardous waste treatment. We believe we are one of four principal producers of high-performance alloys in sheet, coil and plate forms, and sales of these forms, in the aggregate, represented approximately 64% of our net revenues in fiscal 2006. We also produce our products as seamless and welded tubulars, and in bar, billet and wire forms.

We have achieved our growth through a combination of capitalizing on the growth of our end markets, increasing value-added services provided to our customers, increasing our presence in international markets and, to a lesser extent, selected strategic initiatives such as our November 2004 acquisition of assets of The Branford Wire and Manufacturing Company, or Branford Wire. For fiscal 2006, our net revenue was $434.4 million, a 33.7% increase over fiscal 2005’s net revenue of $325.0 million. As of September 30, 2006, our backlog orders were approximately $206.9 million, compared to approximately $188.4 million as of September 30, 2005 and approximately $93.5 million as of September 30, 2004. See “Business—Backlog” for a description of how we calculate backlog.

We have manufacturing facilities in Kokomo, Indiana; Arcadia, Louisiana; and Mountain Home, North Carolina. The Kokomo and Arcadia facilities specialize in flat and tubular products, respectively, and the Mountain Home facility manufactures stainless steel and high-performance alloy wire. We sell our products primarily through our direct sales organization, which includes 11 service and/or sales centers in the United States, Europe, Asia and India. All of these centers are company-operated. In fiscal 2006, approximately 82% of our net revenues was generated by our direct sales organization, and the remaining 18% was generated by a network of independent distributors and sales agents who supplement our direct sales efforts in the United States, Europe and Asia, some of whom have been associated with our company for over 30 years.

The breadth and quality of our products, combined with our superior customer service delivered through our service and sales center network, have resulted in long-standing relationships with many of our customers. We have supplied high-performance alloy products to our top 10 customers, based on fiscal 2006 sales, for an average of 20 years. We supply high-performance alloys that are used by a broad range of end use customers, including General Electric Co.; Pratt & Whitney; Rolls Royce plc; The Boeing Co.; SNECMA; E.I. DuPont de Nemours & Co.; The Dow Chemical Co.; Siemens Westinghouse; Solar Turbines, Inc.; British Petroleum p.l.c.; Celanese AG; and Eli Lilly and Co. None of these customers, or any of our other customers, accounted for more than 10% of our sales in fiscal 2006. Our top 20 customers accounted for approximately 38% of sales in fiscal 2006.

Our markets

We estimate that the global specialty alloy market, including stainless steels, general purpose nickel alloys and high-performance nickel- and cobalt-based alloys, represents total production volume of approximately 38.5 billion pounds per annum. Of this total market, we compete primarily in the high-performance nickel- and cobalt-based alloy sector which we estimate to represent approximately 200 million pounds of production per annum. Given the technologically advanced nature of the products, strict requirements of the end users and higher-growth end markets, we believe the high-performance alloy sector provides greater growth potential, higher profit margins and greater means for service, product and price differentiation than stainless steels and general purpose nickel alloys. We expect growth in worldwide demand for high-performance alloys to increase significantly over the next ten years based upon increasing demand in the aerospace, chemical processing and land-based gas turbine markets. While stainless steel and general purpose nickel alloy is generally sold in bulk through third-party distributors, our products are sold in smaller-sized orders which are customized and typically handled on a direct-to-customer basis. The high-performance alloy market demands diverse, specialty alloys suitable for use in precision manufacturing. We estimate that, due in part to the above factors, the average selling price per pound of high-performance alloys in 2006 was approximately $17.00, compared to approximately $2.50 for stainless steels and approximately $12.00 for general purpose nickel alloys.

Our primary end markets include the aerospace market, the chemical processing market and the land-based gas turbine market. Demand for our products in the aerospace market is primarily driven by the need for new and replacement parts for jet engines and other maintenance, repair and overhaul needs of operators of commercial and military aircraft. Demand for our products in the chemical processing market is driven by demand in pharmaceuticals, agriculture and the building of new chemical processing facilities as well as the maintenance, repair and overhaul of existing chemical processing facilities. Demand for our products in the land-based gas turbine market is driven by the construction of power generation facilities such as base load for electric utilities or backup sources to fossil fuel-fired utilities during times of peak demand. Our other markets include flue gas desulphurization (or FGD), waste incineration, industrial heat-treating, automotive, medical, and oil and gas.

Our strategy

Our goal is to grow our business and increase revenues and profitability while continuing to be our customers’ provider of choice for high-performance alloys. Our primary end markets have experienced significant expansion and we believe that they will continue to demonstrate attractive fundamentals with demand increasing for aerospace, chemical plants and land-based gas turbines. We intend to penetrate and capitalize on the growth in these end markets by taking advantage of our diverse product offerings and service capabilities and to increase our capacity and lower our costs through strategic investment in our manufacturing facilities. In order to accomplish these goals, we intend to pursue the following:

· Increase worldwide sales through international service and sales center locations . We intend to continue our efforts to increase our sales to non-U.S. customers and strategically position our service and sales centers in key international locations. We recently opened a service and sales center in China, the first service and sales center operated by any manufacturer of nickel- or cobalt-based alloys in China, and sales centers in Singapore and India. We intend to expand our sales center in India to include service as well as sales.

· Continue to expand our maintenance, repair and overhaul business . We believe that our maintenance, repair and overhaul, or MRO, business serves a growing market and represents both an expanding and recurring revenue stream. Products used in our end markets require periodic replacement due to the extreme environments in which they are used, which drives demand for recurring MRO work. We intend to continue to leverage the capabilities of our service and sales centers to respond quickly to our customers’ time-sensitive MRO needs to develop new and retain existing business opportunities.

new proprietary alloys, an accomplishment that we believe distinguishes us from our competitors. We expect our continued emphasis on product innovation to yield similar future results, and we expect to focus our development efforts on specialized automotive products, the biopharmaceutical industry, the energy market for fuel cells and the market for turbine components for higher temperature operations.

Risks associated with our business

The success of our business strategy will be affected by our ability to overcome certain risks. Some of these risks include:

· any significant decrease in customer demand for our products or in demand for our customers’ products;

· our dependence on production levels at our Kokomo facility and our ability to make capital improvements at that facility;

· rapid increases in the cost of nickel, energy and other raw materials;

· our ability to continue to develop new commercially viable applications and products;

· our ability to recruit and retain key employees;

· our ability to comply, and the costs of compliance, with applicable environmental laws and regulations; and

· economic and market risks associated with foreign operations and U.S. and world economic and political conditions.

More information about these and other risks can be found in “Risk Factors.”

Corporate information

Our operations began in 1912 as Haynes Stellite Works, which was purchased by Union Carbide and Carbon Corporation in 1920. In 1970, the operations were sold to Cabot Corporation. In 1987, we were incorporated as a stand-alone corporation in Delaware, and in 1989 we were sold by Cabot Corporation to Morgan Lewis Githens & Ahn Inc., a private investment firm. The Blackstone Group, a private investment firm, purchased our company from Morgan Lewis Githens & Ahn Inc. in 1997.

On March 29, 2004, we and our U.S. subsidiaries and U.S. affiliates as of that date filed voluntary petitions for reorganization relief under Chapter 11 of the U.S. Bankruptcy Code. Our plan of reorganization was confirmed on August 16, 2004, and became effective when we emerged from bankruptcy on August 31, 2004. Because of our emergence from bankruptcy and adoption of fresh start reporting, our historical financial information for periods prior to August 31, 2004 is not comparable to our financial information for periods after August 31, 2004. More detailed information about our reorganization can be found in “The reorganization.”

Our principal executive offices are located at 1020 West Park Avenue, Kokomo, Indiana 46904, and our telephone number is (765) 456-6000. Our website address is http://www.haynesintl.com . The information contained in, or that can be accessed through, our website is not part of this prospectus.

The offering

Shares of common stock offered by Haynes International, Inc.		1,000,000 shares
Shares of common stock offered by the selling stockholders		1,000,000 shares
Over-allotment option		300,000 shares, provided by the selling stockholders. See “Underwriting.”
Common stock to be outstanding after this offering		11,300,000 shares, or 11,450,000 shares if the over-allotment option is exercised in full.
Selling stockholders		The selling stockholders include certain officers and directors of Haynes who are exercising options and stockholders that purchased shares of our common stock from a seller who was an affiliate of Haynes at the time of sale. See “Principal and selling stockholders.”
Dividend policy		We have not declared cash dividends on our common stock in the last five fiscal years. We currently do not anticipate paying any cash dividends or making any other distributions on shares of our common stock in the foreseeable future. See “Dividend policy.”
Use of proceeds		We intend to use our net proceeds to repay amounts outstanding under our revolving credit facility. We expect to use the amounts available under our U.S. revolving credit facility to make strategic investments in our manufacturing facilities and equipment, to opportunistically make strategic acquisitions and for general corporate purposes. We will not receive any proceeds from the sale of common stock by the selling stockholders. See “Use of proceeds.”

Unless we specifically state otherwise, all information in this prospectus assumes that the underwriters do not exercise their over-allotment option.

Common stock to be outstanding after this offering includes 300,000 shares to be issued upon the exercise of existing options and sold by certain of the selling stockholders, or 450,000 such shares if the underwriters exercise their over-allotment option in full.

The aggregate number of shares of our common stock to be outstanding after this offering excludes 680,000 shares issuable pursuant to existing options under our stock option plans that will remain outstanding after this offering, or 530,000 already incorporated shares if the underwriters exercise their over-allotment option in full.

Summary consolidated financial and other data

Set forth below is summary consolidated financial and other data. This data should be read in conjunction with the consolidated financial statements and related notes thereto and “Management’s discussion and analysis of financial condition and results of operations” included elsewhere in this prospectus.

On March 29, 2004, Haynes and certain of our U.S. subsidiaries and U.S. affiliates as of that date filed for bankruptcy protection. Our plan of reorganization was confirmed by order of the Bankruptcy Court on August 16, 2004 and became effective on August 31, 2004. Our historical consolidated financial statements included elsewhere in this prospectus have been prepared on a going concern basis, which assumes continuity of operations and realization of assets and satisfaction of liabilities in the ordinary course of business, and, for periods subsequent to March 29, 2004, in accordance with the American Institute of Certified Public Accountants Statement of Position 90-7, “ Financial Reporting by Entities in Reorganization Under the Bankruptcy Code .” As of August 31, 2004, the effective date of our plan of reorganization, we began operating our business under a new capital structure, and we adopted fresh start reporting for our financial statements. Because of the emergence from bankruptcy and adoption of fresh start reporting, our historical financial information for periods prior to August 31, 2004 is not comparable to our financial information for periods after August 31, 2004. For more information see “The reorganization.”

The summary historical consolidated financial data as of and for the years ended September 30, 2005 and 2006, as of September 30, 2004 and for the period September 1, 2004 through September 30, 2004 is derived from the audited consolidated financial statements of our company after giving effect to the adoption of fresh start reporting (successor Haynes International, Inc.). The summary historical consolidated financial data for the period October 1, 2003 through August 31, 2004, and as of and for the years ended September 30, 2002 and 2003 is derived from the audited consolidated financial statements of our company prior to the adoption of fresh start reporting (predecessor Haynes International, Inc.).

	Predecessor								Successor
(in thousands, except average nickel price, share and per share information)	Year ended September 30,					Eleven months ended August 31,			One month ended September 30,			Year ended September 30,
	2002(1)		2003(1)			2004			2004(2)			2005(2)			2006(2)
Statement of operations data:
Net revenues	$	225,942	$	178,129		$	209,103		$	24,391		$	324,989		$	434,405
Cost of sales(3)	175,572		150,478			171,652			26,136			288,669			325,573
Selling, general and administrative expense(4)	24,628		24,411			24,038			2,658			32,963			40,296
Research and technical expense	3,697		2,747			2,286			226			2,621			2,659
Restructuring and other charges(5)	—		—			4,027			429			628			—
Operating income (loss)	22,045		493			7,100			(5,058		)	108			65,877
Interest expense, net	20,441		19,661			13,929			348			6,353			8,024
Reorganization items(6)	—		—			(177,653		)	—			—			—
Net income (loss)(7)	$	927	$	(72,255	)	$	170,734		$	(3,646	)	$	(4,134	)	$	35,540
Net income (loss) per share:
Basic	$	9,270	$	(722,550	)	$	1,707,340		$	(0.36	)	$	(0.41	)	$	3.55
Diluted	$	9,270	$	(722,550	)	$	1,707,340		$	(0.36	)	$	(0.41	)	$	3.46
Weighted average shares outstanding:
Basic	100		100			100			10,000,000			10,000,000			10,000,000
Diluted	100		100			100			10,000,000			10,000,000			10,270,642
Other data:
Capital expenditures	$	6,032	$	3,638		$	4,782		$	637		$	9,029		$	10,668
EBITDA(8)	$	28,121	$	3,311		$	192,527		$	(4,400	)	$	8,134		$	74,767
Adjusted EBITDA(8)	$	37,129	$	6,512		$	21,521		$	1,258		$	38,460		$	80,886
Average nickel price per pound (end of period)(9)	$	3.02	$	4.52		$	6.21		$	6.02		$	6.45		$	13.67

	Predecessor						Successor
At September 30, (in thousands)	2002(1)			2003(1)			2004(2)		2005(2)		2006(2)
Balance sheet data:
Working capital (deficit)	$	49,424		$	(99,901	)	$	61,826	$	59,494	$	101,864
Property, plant and equipment, net	42,721			40,229			80,035		85,125		88,921
Total assets	230,513			180,115			360,758		387,122		445,860
Total debt	189,685			201,007			85,993		106,383		120,043
Accrued pension and postretirement benefits(10)	121,717			127,767			120,019		122,976		126,488
Stockholders’ equity (deficiency)	(101,973		)	(172,858		)	115,576		111,869		151,548

(in millions)	2002		2003		2004		2005		2006
Backlog at fiscal quarter ended (11) :
December 31	$	88.0	$	49.0	$	54.7	$	110.9	$	203.5
March 31	77.2		53.6		69.6		134.8		207.4
June 30	63.9		54.5		82.6		159.2		200.8
September 30	52.5		50.6		93.5		188.4		206.9

(1) Restated. Effective October 1, 2003, Haynes changed its inventory costing method from the last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method. In accordance with generally accepted accounting principles, the change has been applied by restating the 2002 and 2003 consolidated financial data.

(2) As of August 31, 2004, the effective date of our plan of reorganization, Haynes adopted fresh start reporting for its consolidated financial statements. Because of the emergence from bankruptcy and adoption of fresh start reporting, the historical financial information for periods after August 31, 2004 is not comparable to periods before September 1, 2004. For more information see “The reorganization” and “Management’s discussion and analysis of financial condition and results of operations—Pro forma financial information.”

(3) As part of fresh start reporting, inventory was increased by approximately $30,497 to reflect its fair value at August 31, 2004. The fair value adjustment was recognized ratably in cost of sales as inventory was sold and was fully recognized by the end of the second quarter of fiscal 2005. Cost of sales for the one month ended September 30, 2004 and the year ended September 30, 2005 include non-cash charges of $5,083 and $25,414, respectively, for this fair value adjustment. Also, as part of fresh start reporting, machinery and equipment, buildings and patents were increased by $49,436 to reflect fair value at August 31, 2004. These values will be recognized in cost of sales over periods ranging from 2 to 14 years. Cost of sales for the one month ended September 30, 2004 and the years ended September 30, 2005 and 2006 include $403, $4,788 and $4,802, respectively, for this fair value adjustment.

(4) In fiscal 2003, $676 of terminated acquisition costs were accounted for as selling, general and administrative expense related to a potential acquisition that we did not pursue.

(5) Consists primarily of professional fees and credit facility fees related to the restructuring and refinancing activities.

(6) During fiscal 2004, Haynes recognized approximately $177,653 in reorganization items of which approximately $7,298 were expenses relating to professional fees, amendment fees, travel expenses, directors’ fees, write offs of bond discount and debt issuance costs, and other expenses, and approximately $184,951 was income relating to the gain on cancellation of 11 ⅝ % senior notes due September 1, 2004 and fresh start reporting adjustments as a result of the reorganization. See Note 8 to the consolidated financial statements included elsewhere in this prospectus for more information.

(7) Reflects a valuation allowance of approximately $60,307 recorded at September 30, 2003 on our U.S. net deferred tax assets as a result of our determination that, as of that date, it was more likely than not that certain future tax benefits would not be realized. See Note 6 to the consolidated financial statements included elsewhere in this prospectus for more information.

(8) EBITDA and adjusted EBITDA are measures used by management to measure operating performance. EBITDA is defined as net income plus net interest, taxes, depreciation, and amortization. Adjusted EBITDA excludes certain non-cash items, restructuring and reorganization items, expense recognition of fresh start accounting adjustments and other items that management does not utilize in assessing our operating performance. Management believes that it is useful to eliminate these items (as well as net interest, taxes, depreciation, and amortization, as noted above) because it allows management to focus on what it deems to be a more reliable indicator of ongoing operating performance. As a result, internal management reports used during monthly operating reviews feature the EBITDA and adjusted EBITDA metrics. However, management uses these metrics in conjunction with traditional operating performance measures determined in accordance with generally

accepted accounting principles, or GAAP, as part of its overall assessment of company performance and therefore does not place undue reliance on these non-GAAP measures of operating performance.

Neither EBITDA nor adjusted EBITDA is a recognized term under GAAP and neither purports to be an alternative to net income as an indicator of operating performance or any other GAAP measure. Because not all companies use identical calculations, this presentation of EBITDA and adjusted EBITDA may not be comparable to other similarly titled measures of other companies. EBITDA and adjusted EBITDA are not intended to be measures of free cash flow for management’s discretionary use since they do not consider certain cash requirements, such as interest payments, tax payments, debt service requirements and capital expenditures. However, these measures can still be useful in evaluating our performance against our peer companies because management believes the measures provide users with valuable insight into key components of GAAP amounts. For example, eliminating the effects of interest income and expense reduces the impact of a company’s capital structure on its performance. In addition, removing the provision for income taxes for EBITDA presentation purposes allows users to assess returns on a pre-tax basis.

All of the items included in the reconciliation from net income to adjusted EBITDA are either (i) non-cash items (e.g., depreciation, amortization, non-cash pension expense, expense recognized from fresh start accounting adjustments and stock-based compensation) or (ii) items that management does not consider to be useful in assessing our ongoing operating performance (e.g., income taxes, restructuring and other charges). In the case of the non-cash items, management believes that investors can better assess our operating performance if the measures are presented without such items because, unlike cash expenses, these adjustments do not affect our ability to generate free cash flow or invest in our business. For example, by eliminating depreciation and amortization from EBITDA, users can compare operating performance without regard to different accounting determinations such as useful life. In the case of the other items, management believes that investors can better assess our operating performance if the measures are presented without these items because their financial impact does not reflect ongoing operating performance.

The table below provides a reconciliation of net income to EBITDA and adjusted EBITDA for the periods indicated.

	Predecessor									Successor
	Year ended September 30,						Eleven months ended August 31,			One month ended September 30,				Year ended September 30,
	2002			2003			2004			2004				2005			2006
Net income	$	927		$	(72,255	)	$	170,734			$	(3,646	)	$	(4,134	)	$	35,540
Interest expense	20,585			19,724			13,964				354			6,385			8,121
Interest income	(144		)	(63		)	(35		)		(6		)	(32		)	(97		)
Provision for income taxes	677			49,281			90				(1,760		)	(2,111		)	22,313
Depreciation and amortization	6,076			6,624			7,774				658			8,026			8,890
EBITDA	28,121			3,311			192,527				(4,400		)	8,134			74,767
Pension/OPEB non-cash portion (a)	9,008			3,201			2,620				23			2,982			3,021
Stock based compensation expense (b)	—			—			—				123			1,302			2,786
Restructuring Items (c)	—			—			4,027				429			628			—
Reorganization items (d)	—			—			(177,653		)		—			—			—
Fresh start accounting-inventory (e)	—			—			—				5,083			25,414			—
Adjusted EBITDA	$	37,129		$	6,512		$	21,521			$	1,258		$	38,460		$	80,574

(a) Represents difference between pension expense and cash paid for pension and other post-retirement benefits.

(b) Represents non-cash, stock-based compensation expense.

(c) Represents restructuring items, primarily pre-petition professional fees and credit facility fees related to our Chapter 11 filing.

(d) Represents reorganization items resulting from the bankruptcy petition including gain on cancellation of debt, fresh-start adjustments and professional fees.

(e) Represents expense recognized for fresh-start inventory adjustments.

(9) Represents the average price for a cash buyer as reported by the London Metals Exchange for the 30 days ending on the last day of the period presented.

(10) During March 2006, Haynes communicated to employees and plan participants a negative plan amendment that caps our liability related to total retiree health care costs at $5,000 annually effective January 1, 2007. An updated actuarial valuation was performed at March 31, 2006, which reduced the accumulated post-retirement benefit liability due to this plan amendment by $46,300, that will be amortized as a reduction to expense over an eight-year period. This amortization period began in April 2006, reducing the amount of expense recognized for the second half of fiscal 2006 and the respective future periods.

(11) We define backlog to include firm commitments from customers for delivery of product at established prices. Approximately 30% of the orders in our backlog at any given time include prices that are subject to adjustment based on changes in raw material costs. Historically, approximately 75% of our backlog orders have shipped within six months and approximately 90% have shipped within 12 months. The backlog figures do not reflect the portion of our business conducted at our service and sales centers on a spot or “just-in-time” basis.

Risk factors

You should carefully consider the risks described below and all other information contained in this prospectus before making an investment decision. If any of the following risks, as well as other risks and uncertainties that are not yet identified or that we currently think are immaterial, actually occur, our business, financial condition and results of operations could be materially and adversely affected. In that event, the trading price of our shares could decline, and you may lose part or all of your investment.

Risks related to our business

Our revenues may fluctuate widely based upon changes in demand for our customers’ products.

Demand for our products is dependent upon and derived from the level of demand for the machinery, parts and equipment produced by our customers, which are principally manufacturers and fabricators of machinery, parts and equipment for highly specialized applications. Historically, certain of the markets in which we compete have experienced unpredictable, wide demand fluctuations. Because of the comparatively high level of fixed costs associated with our manufacturing processes, significant declines in those markets have had a disproportionately adverse impact on our operating results. For example, due in part to these factors, we encountered liquidity difficulties throughout fiscal 2003 and the first half of fiscal 2004, and could not generate sufficient cash to both satisfy our debt obligations and fund our operations. These liquidity difficulties contributed to our decision to file for reorganization relief under Chapter 11 of the U.S. Bankruptcy Code on March 29, 2004.

Since we became an independent company in 1987, we have, in several instances, experienced substantial year-to-year declines in net revenues, primarily as a result of decreases in demand in the industries to which our products are sold. In fiscal 1992, 1999, 2002 and 2003, our net revenues, when compared to the immediately preceding year, declined by approximately 24.9%, 15.4%, 10.3% and 21.2%, respectively. We may experience similar fluctuations in our net revenues in the future. Additionally, demand is likely to continue to be subject to substantial year-to-year fluctuations as a consequence of industry cyclicality, as well as other factors, and such fluctuations may have a material adverse effect on our financial condition or results of operation.

Profitability in the high-performance alloy industry is highly sensitive to changes in sales volumes.

The high-performance alloy industry is characterized by high capital investment and high fixed costs. Profitability is, therefore, very sensitive to changes in volume, and relatively small changes in volume can result in significant variations in earnings. The cost of raw materials is the primary variable cost in the manufacture of high-performance alloys and represents approximately 58% of our total cost of sales. Other manufacturing costs, such as labor, energy, maintenance and supplies, often thought of as variable, have a significant fixed element.

Our operations are dependent on production levels at our Kokomo facility.

Our principal assets are located at our primary integrated production facility in Kokomo, Indiana and at our production facilities in Arcadia, Louisiana and in Mountain Home, North Carolina. The Arcadia and Mountain Home plants rely to a significant extent upon feedstock produced at the Kokomo facility. Any production failures, shutdowns or other significant problems at the Kokomo facility could have a material adverse effect on our financial condition and results of operations. We believe that we maintain adequate property damage insurance to provide for reconstruction of damaged equipment, as well as business interruption insurance to mitigate losses resulting from any production shutdown caused by an insured loss; however, we may not be able to obtain such insurance that will adequately cover such losses.

Capital expenditures are required to continue to improve operating efficiencies.

Prior to fiscal 2005, we experienced periods of liquidity shortages which resulted in a lack of funds for capital improvements at the Kokomo facility. Although we believe that our facilities are generally in good operating condition, in fiscal 2005 and 2006 we started the process of making significant upgrades to our equipment in order to improve operating efficiencies through increased capacity, improved quality capability and reduced operating costs. In addition, we also expect that these upgrades will enable us to improve working capital management. We anticipate continuing to make these upgrades, spending approximately $30.0 million in fiscal 2007 and 2008, as compared to the $5.4 million we spent in fiscal 2004, $11.6 million spent in fiscal 2005 (including the Branford Wire acquisition) and the $10.7 million spent in fiscal 2006. An inability to make these upgrades could have a material adverse impact on the efficiency with which we will be able to manufacture our products and adversely affect our competitive standing within the industry. As we proceed with our capital upgrade program, we will experience some planned equipment downtime, which could affect our financial results in future periods.

Rapid increases in the price of nickel may materially adversely affect our operating results.

To the extent that the price of nickel or other raw material cost rises rapidly, there may be a negative effect on our gross profit margins. Nickel, a major component of many of our products, accounts for approximately 51% of our raw material costs, or approximately 30% of our total costs of sales. We enter into several different types of sales contracts with our customers, some of which allow us to pass on increases in nickel prices. In other cases, we price our products at the time of order, which allows us to establish prices with reference to known costs of materials, but which does not allow us to offset an unexpected rise in the price of nickel. We may not be able to successfully offset rapid increases in the price of nickel or other raw materials in the future. In the event that raw material price increases occur that we are unable to pass on to our customers, our cash flows or results of operations would be materially adversely affected.

Increases in energy costs and raw material costs may have a negative impact on our performance and financial condition.

Since fiscal 2003, we have experienced rising raw material and energy costs. Nickel, cobalt and molybdenum, the primary raw materials used to manufacture our products, all have experienced significant fluctuations in price. Continued industrial growth in China and other developing economies has contributed to increased demand for many of the raw materials used in our manufacturing processes, which has led to increased prices for these raw materials. Haynes uses

natural gas in the manufacturing process to reheat material for purposes of annealing and forming. Continuing increases in raw material and energy costs could have a material adverse effect on our cash flows or results of operation.

Failure to successfully develop, commercialize, market and sell new applications and new products could adversely affect our business.

We believe that our proprietary alloys and metallurgical manufacturing expertise provide us with a competitive advantage over other high-performance alloy producers. Our ability to maintain this competitive advantage depends on our ability to continue to offer products that have equal or better performance characteristics than competing products at competitive prices. Our future growth will depend, in part, on our ability to address the increasingly demanding needs of our customers by enhancing the properties of our existing alloys, by timely developing new applications for our existing products, and by timely developing, commercializing, marketing and selling new products. If we are not successful in these efforts, if we experience difficulties that delay or prevent the successful development, commercialization, marketing or selling of these products, or if our new products and product enhancements do not adequately meet the requirements of the marketplace and achieve market acceptance, our revenues, cash flows and results of operations could be negatively affected.

We may be adversely affected by environmental, health and safety laws, regulations, costs and other liabilities.

We are subject to various foreign, federal, state and local environmental, health and safety laws and regulations, including those governing the discharge of pollutants into the environment, the storage, handling, use, treatment and disposal of hazardous substances and wastes and the health and safety of our employees. In addition, some of these laws and regulations require our facilities to operate under permits that are subject to renewal or modification. These laws, regulations and permits can require expensive pollution control equipment or operational changes to limit actual or potential impacts to the environment. Violations of these laws, regulations or permits can also result in the imposition of substantial penalties, permit revocations and/or facility shutdowns. We cannot assure you that we have been or will at all times be in complete compliance with these laws, regulations or permits. In addition, our facilities are subject to periodic inspection by various regulatory authorities, who from time to time have issued notices of violations of laws, regulations and permits. For example, in the past five years, we have paid administrative fines for alleged violations of requirements relating to the handling and storage of hazardous wastes, requirements relating to the Kokomo facility’s Title V Air Permit, requirements relating to the handling of polychlorinated biphenyls and record keeping and notification requirements relating to industrial waste water discharge. Although none of these violations has had a material effect on our financial condition, alone or in the aggregate, future violations may result in material fines, require additional capital expenditures, or both. In addition, we may be required in the future to comply with certain regulations pertaining to the emission of hazardous air pollutants under the Clean Air Act. However, since these regulations have not been proposed or promulgated, we cannot predict the cost, if any, associated with compliance with such regulations.

Pursuant to certain environmental laws including the Comprehensive Environmental Response, Compensation and Liability Act of 1980, or CERCLA, if a release of hazardous substances occurs

on, under or from any of our current or former properties or any off-site location to which we sent or arranged to be sent wastes for disposal or treatment, we may be held liable for all costs arising therefrom, and there can be no assurance that the amount of such liability will not be material. We could also be held liable for any and all consequences arising out of human exposure to such substances or other hazardous substances that may be attributable to our products or other environmental damage. We have received permits from the Indiana Department of Environmental Management, or IDEM, and the U.S. Environmental Protection Agency, or EPA, to close and to provide post-closure monitoring and care for certain areas at our Kokomo facility that were used for the storage and disposal of wastes, some of which are classified as hazardous under applicable regulations. We are currently evaluating known groundwater contamination identified at our Kokomo site and are developing a plan to address it. Accordingly, additional corrective action may be required. We also have an application with IDEM pending for approval of closure and post-closure care for another area of the Kokomo site, which may also require corrective action. We have also received permits from the North Carolina Department of Environment and Natural Resources, or NCDENR, and the EPA to close and provide post-closure monitoring and care for a former waste disposal lagoon at our Mountain Home, North Carolina facility. We are required to monitor groundwater and to continue post-closure maintenance of the former disposal areas at this site. Further, if it is determined that site conditions have impacted the groundwater, additional corrective action by us could be required. We are currently unable to estimate the costs of any further corrective action at either site, if required. Accordingly, we cannot assure you that the costs of future corrective action would not have a material effect on our financial condition, results of operations or liquidity. Additionally, it is possible that we could be required to undertake other corrective action for any other solid waste management unit existing or determined to exist at any of our facilities.

We may also incur liability for alleged environmental damages associated with the off-site transportation and disposal of hazardous substances. Our operations generate hazardous substances, much of which we accumulate at our facilities for subsequent transportation and disposal off-site or recycling by third parties. Generators of hazardous substances which are transported to disposal sites where environmental problems are alleged to exist are subject to liability under CERCLA, and state counterparts. In addition, we may have generated hazardous substances disposed of at sites which are subject to CERCLA or equivalent state law remedial action. CERCLA imposes strict, joint and several liability for investigatory and cleanup costs upon hazardous substance generators, site owners and operators and other potentially responsible parties regardless of fault. We cannot assure you that we will not be named as a potentially responsible party at sites in the future or that the costs associated with current or future additional sites would not have a material adverse effect on our financial condition, results of operations or liquidity.

Environmental laws are complex, change frequently and have tended to become increasingly stringent over time. While we have budgeted for future capital and operating expenditures to comply with environmental laws, we cannot assure you that environmental laws will not change or become more stringent in the future. Therefore, we cannot assure you that our costs of complying with current and future environmental, health and safety laws, and our liabilities arising from past or future releases of, or exposure to, hazardous substances will not adversely affect our business, results of operations or financial condition. See “Business—Environmental Matters.”

Although a collective bargaining agreement is in place for certain employees, union or labor disputes could still disrupt our manufacturing process.

All eligible hourly employees at the Kokomo plant and the Lebanon, Indiana service center (approximately 516 in the aggregate as of September 30, 2006) are covered by a collective bargaining agreement. As part of negotiations with the United Steelworkers of America related to our emergence from bankruptcy, the collective bargaining agreement was extended until June 2007. Even though a collective bargaining agreement is in place, it is still possible that union or labor disputes could disrupt our manufacturing process. We expect to renegotiate the collective bargaining agreement prior to the expiration of the agreement currently in place. We believe that current relations with the union are satisfactory. We cannot assure you, however, that the renegotiation of the collective bargaining agreement will not lead to a labor stoppage and negative effect on earnings. For example, there was a brief labor stoppage in connection with renegotiation of the collective bargaining agreement in fiscal 2002, although there was no such stoppage in connection with the renegotiation in fiscal 2004 as part of our emergence from bankruptcy.

If we are unable to recruit, hire and retain skilled and experienced personnel, our ability to effectively manage and expand our business will be harmed.

Our success largely depends on the skills, experience and efforts of our officers and other key employees who may terminate their employment at any time. The loss of any of our senior management team could harm our business. The announcement of the loss of one of our key employees could negatively affect our stock price. Our ability to retain our skilled workforce and our success in attracting and hiring new skilled employees will be a critical factor in determining whether we will be successful in the future. We face challenges in hiring, training, managing and retaining employees in certain areas including metallurgical researchers, equipment technicians, and sales and marketing staff. This could delay new product and alloy development and commercialization, and hinder our marketing and sales efforts, which would adversely impact our competitiveness and financial results.

U.S. and world economic and political conditions, including acts or threats of terrorism and/or war, could adversely affect our business.

National and international political developments, instability and uncertainties could result in continued economic weakness in the United States and in international markets. These uncertainties include ongoing military activity in Afghanistan and Iraq, threatened hostilities with other countries, political unrest and instability around the world and continuing threats of terrorist attacks. Any actual armed hostilities, and any future terrorist attacks in the United States or abroad, could also have an adverse impact on the U.S. economy, global financial markets and our business. The effects may include, among other things, a decrease in demand in the aerospace industry due to reduced air travel, as well as reduced demand in the other industries we serve. Depending upon the severity, scope and duration of these effects, the impact on our financial position, results of operations and cash flows could be material.

The risks inherent in our international operations may adversely impact our revenues, results of operations and financial condition.

We anticipate we will continue to derive a significant portion of our revenues from operations in international markets. As we continue to expand internationally, we will need to hire, train and retain qualified personnel for our direct sales efforts and retain distributors and train their personnel in countries where language, cultural or regulatory impediments may exist. We cannot ensure that distributors, regulators or other government agencies will continue to accept our products, services and business practices. In addition, we purchase raw materials on the international market. The sale and shipment of our products and services across international borders, as well as the purchase of raw materials from international sources, subject us to the different trade regulations of the various countries involved. Compliance with such regulations is costly. Any failure to comply with applicable legal and regulatory obligations could impact us in a variety of ways that include, but are not limited to, significant criminal, civil and administrative penalties, including imprisonment of individuals, fines and penalties, denial of export privileges, seizure of shipments and restrictions on certain business activities. Failure to comply with applicable legal and regulatory obligations could result in the disruption of our shipping, sales and service activities. Our international sales operations expose us and our representatives, agents and distributors to risks inherent in operating in foreign jurisdictions, including:

· our ability to obtain, and the costs associated with obtaining, U.S. export licenses and other required export or import licenses or approvals;

· changes in duties and tariffs, taxes, trade restrictions, license obligations and other non-tariff barriers to trade;

· burdens of complying with a wide variety of foreign laws and regulations;

· business practices or laws favoring local companies;

· fluctuations in foreign currencies;

· restrictive trade policies of foreign governments;

· longer payment cycles and difficulties collecting receivables through foreign legal systems;

· difficulties in enforcing or defending agreements and intellectual property rights; and

· foreign political or economic conditions.

We cannot ensure that one or more of these factors will not harm our business. Any material decrease in our international revenues or inability to expand our international operations would adversely impact our revenues, results of operations and financial condition.

Risks related to our common stock

Our common stock has not been traded on a securities exchange prior to this offering, and the market price of our common stock could be extremely volatile and could decline following this offering, resulting in a substantial loss on, or total loss of, your investment.

Prior to this offering, our common stock was not listed on any national securities exchange and was quoted in the “pink sheets.” Although we intend to list the common stock on The NASDAQ Global Market in connection with this offering, an active trading market for our common stock may never develop or be sustained, which could adversely affect your ability to sell your shares and could depress the market price of your shares. In addition, the public offering price will be determined through negotiations among us, the selling stockholders and the representative of the underwriters, and may bear no relationship to the price at which the common stock will trade upon completion of this offering.

The stock market in general has been highly volatile. As a result, the market price of our common stock is likely to be similarly volatile, and investors in our common stock may experience a decrease in the value of their stock, including decreases unrelated to our operating performance or prospects. The price of our common stock could be subject to wide fluctuations in response to a number of factors, including those listed elsewhere in this “Risk factors” section and others such as:

· our operating performance and the performance of other similar companies and companies deemed to be similar;

· fluctuations in the market price of nickel, raw materials or energy;

· market conditions in the end markets into which our customers sell their products, principally aerospace, power generation and chemical processing;

· announcements of technological innovations or new products and services by us or our competitors;

· the operating and stock price performance of other companies that investors may deem comparable to us;

· announcements by us of acquisitions, alliances, joint development efforts or corporate partnerships in the high temperature resistant alloy and corrosion resistant alloy markets;

· market conditions in the technology, manufacturing or other growth sectors; and

· rumors relating to us or our competitors.

You may not receive a return on investment through dividend payments nor upon the sale of your shares of our common stock.

The terms of our current U.S. revolving credit facility restrict us from paying cash dividends, and we do not anticipate paying cash dividends or making any other distributions on shares of our common stock in the foreseeable future. Instead, we intend to retain future earnings for use in the operation and expansion of our business. Therefore, you should not expect to receive a return on your investment in shares of our common stock through the payment of cash dividends. You also may not realize a return on your investment upon selling your shares of our common stock.

Provisions of our certificate of incorporation, by-laws and Rights Agreement could discourage potential acquisition proposals and could deter or prevent a change in control.

Some provisions in our certificate of incorporation and by-laws, as well as Delaware statutes, may have the effect of delaying, deferring or preventing a change in control. These provisions, including those providing for the possible issuance of shares of our preferred stock and regulating the nomination of directors, may make it more difficult for other persons, without the approval of our Board of Directors, to make a tender offer or otherwise acquire a substantial number of shares of our common stock or to launch other takeover attempts that a stockholder might consider to be in his or her best interest. These provisions could limit the price that some investors might be willing to pay in the future for shares of our common stock.

On August 13, 2006, we entered into a Rights Agreement with Wells Fargo Bank, N.A., pursuant to which we declared a dividend of a preferred share purchase right for each outstanding share of our common stock. The preferred share purchase rights have certain anti-takeover effects. The preferred share purchase rights will cause substantial dilution to a person or group who attempts to acquire us on terms not approved by our board, except pursuant to an offer conditioned on a substantial number of preferred share purchase rights being acquired. This may deter third parties from seeking to acquire us, and thus potentially prevent common stockholders from receiving an acquisition premium for their shares. At our annual meeting of stockholders to be held on February 20, 2007, our stockholders will vote upon a proposal to ratify and continue the Rights Agreement. If not ratified by our stockholders, the Rights Agreement will terminate.

Our historical financial information is not comparable to our current financial information.

As a result of our emergence from bankruptcy, we are operating our business with a new capital structure, and are subject to fresh start reporting requirements prescribed by generally accepted accounting principles. As required by fresh start reporting, assets and liabilities as of August 31, 2004 were recorded at fair value, with the enterprise value being determined in connection with our emergence from bankruptcy. Accordingly, our historical financial information for periods prior to August 31, 2004 is not comparable to our financial information for periods after August 31, 2004.

Forward-looking statements

This prospectus contains statements that constitute “forward-looking statements” as defined by federal securities laws. Those statements appear in a number of places and may include, but are not limited to, statements regarding our intent, belief or current expectations or those of our management with respect to our strategic plans; trends in the demand for our products; trends in the industries that consume our products; our ability to develop new products; and our ability to make capital expenditures and finance operations. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of various factors, many of which are beyond our control.

In addition, we have based these forward-looking statements on our current expectations and projections about future events. Although we believe that the assumptions on which the forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate. As a result, the forward-looking statements based upon those assumptions also could be incorrect. Risks and uncertainties which may affect the accuracy of forward-looking statements include, but are not limited to the following:

· wide fluctuations in revenues based upon changes in demand for our customers’ products;

· decreases in demand in the aerospace, land-based gas turbine or chemical processing industries;

· our ability to make capital expenditures to upgrade our primary production facility;

· rapid increases in the price of nickel, our primary raw material;

· increases in the cost of energy or other raw materials;

· unplanned shut-downs or other production problems at our manufacturing facilities;

· changes in and compliance with environmental and safety laws and policies;

· our ability to develop, commercialize, market and sell new applications and new products that meet the needs of our customers;

· foreign currency fluctuations;

· our inability to recruit or retain key personnel;

· war and acts of terrorism; or

· the other factors that we describe under “Risk Factors.”

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Use of proceeds

Our net proceeds from the sale of 1,000,000 shares of common stock in this offering are estimated to be approximately $ million, assuming a public offering price of $ per share, which is the mid-point of the estimated offering price range shown on the cover of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any proceeds from the sale of the shares of common stock by the selling stockholders.

We intend to use all of our net proceeds to repay amounts outstanding under our U.S. revolving credit facility. Availability under the U.S. revolving credit facility will be increased by the amount of the offering proceeds used to repay amounts outstanding. Reducing the amount outstanding under our U.S. revolving credit facility will better position us to execute our strategy. In particular, we intend to use a portion of the available amounts to make strategic investments in our manufacturing facilities and equipment and to opportunistically pursue strategic acquisitions and alliances. The remaining availability under our U.S. revolving credit facility will also be used for general corporate purposes. At January 18, 2007, the amount available under our U.S. and U.K. revolving credit facilities was $61.7 million. Borrowings under the U.S. credit facility as of that date were $76.3 million, and bore interest at 7.32% per annum. There were no borrowings outstanding under our U.K. credit facility as of that date.

The amount and timing of our expenditures will depend upon several factors, including cash flows from our operations and the anticipated growth of our business. Accordingly, our management will have broad discretion in the application of the proceeds of our borrowings under the revolving credit facility and investors will be relying on the judgment of our management regarding the application of these proceeds.

Dividend policy

We have not declared cash dividends on our common stock in the last five fiscal years. We intend to retain all future earnings for the operation and expansion of our business, and therefore, we do not anticipate paying cash dividends or making any other distributions on our common stock in the foreseeable future. The payment of dividends will be at the sole discretion of our Board of Directors and will depend on our results of operations, capital requirements, financial condition, prospects, contractual arrangements, any limitations on the payment of dividends present in any current and future credit agreements and other factors that our Board of Directors may deem relevant. We are subject to covenants under our current U.S. revolving credit facility that restrict us from paying cash dividends.

Market for common stock

Our common stock is not currently listed on any national securities exchange and there is no established trading market for our securities. Our common stock is currently quoted in the “pink sheets” under the symbol HYNI.PK. Over-the-counter market quotations reflect inter-dealer prices without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. You are advised to obtain current market quotations for our common stock. No assurance can be given as to the market prices of our common stock at any time after the date of this prospectus.

The following table sets forth the range of high and low closing prices by fiscal quarter for the common stock as reported through Bloomberg L.P.

Fiscal quarter ended:	High		Low
March 31, 2007 (through January 23, 2007)	$	53.00	$	52.00
December 31, 2006	$	54.00	$	36.00
September 30, 2006	$	39.00	$	35.60
June 30, 2006	$	39.00	$	31.00
March 31, 2006	$	31.00	$	24.00
December 31, 2005	$	25.00	$	21.00
September 30, 2005	$	25.00	$	18.00
June 30, 2005	$	19.50	$	16.50
March 31, 2005	$	20.50	$	15.00
December 31, 2004 (from October 29, 2004)	$	15.00	$	9.90

The last reported sale price of our common stock on January 23, 2007 was $52.00 per share. As of January 12, 2007, there were approximately 14 record holders of our common stock.

Capitalization

The following table sets forth our cash and cash equivalents, short-term debt and capitalization as of September 30, 2006:

· on an actual basis; and

· on an adjusted basis to reflect our sale of 1,000,000 shares of common stock at an assumed public offering price of $ per share (the midpoint of the range set forth on the cover page of this prospectus), and application of the net proceeds, after deducting estimated underwriting discounts and commissions and estimated offering expenses, to repay amounts outstanding under our U.S. revolving credit facility, as described under “Use of proceeds.” Each $1.00 increase (decrease) in the public offering price per share would increase (decrease) the as adjusted figure shown below for “additional paid-in capital,” “total stockholders’ equity” and “total capitalization” by $ million, after deducting estimated underwriting discounts and commissions and the as adjusted amount for “revolving credit facility” and “total short-term debt” would decrease (increase) by $ . The adjustments also reflect the sale of 300,000 shares of common stock by the selling stockholders in this offering who are exercising options.

This table should be read in conjunction with “Selected consolidated financial and other data,” “Management’s discussion and analysis of financial condition and results of operations” and our consolidated financial statements and notes thereto appearing elsewhere in this prospectus.

September 30, 2006 (in thousands, except share amounts)	Actual		As adjusted
Cash and cash equivalents	$	6,182		$	6,182
Short-term debt:
Revolving credit facility(1)	$	116,836
Current maturities of long-term obligations	110			110
Total short-term debt	$	116,946
Long-term obligations (less current portion)	$	3,097		$	3,097
Stockholders’ equity:
Common stock, $0.001 par value (20,000,000 shares authorized, 10,000,000 shares issued and outstanding actual, 11,300,000 shares issued and outstanding as adjusted)(2)	10			11
Preferred stock, $0.001 par value (20,000,000 shares authorized, no shares issued and outstanding)	—			—
Additional paid-in capital	122,937
Accumulated earnings	27,760			27,760
Accumulated other comprehensive income	841			841
Total stockholders’ equity	151,548
Total capitalization (including short-term debt)	$	271,591		$

(1) The actual amounts shown for the “revolving credit facility” and “total short-term debt” do not reflect a repayment of $48.1 million on the outstanding balance of the U.S. revolving credit facility in the first quarter of fiscal 2007.

(2) Common stock to be outstanding after this offering includes 300,000 shares to be issued upon the exercise of existing options and sold by certain of the selling stockholders, or 450,000 shares if the underwriters exercise their over-allotment option in full. If the underwriters exercise their over-allotment option in full, as adjusted amounts for “additional paid-in capital,” “total stockholders’ equity” and “total capitalization” would increase by $ and the as adjusted amount for “revolving credit facility” and “total short-term debt” would decrease by $ , to reflect our receipt of the option exercise price on common stock issued pursuant to these options and the application of the amounts received as described above.

Dilution

Our pro forma net tangible book value as of December 31, 2006, was $ million, or $ per share of common stock. Net tangible book value per share represents the amount of stockholders’ equity divided by shares of common stock outstanding after giving effect to the conversion of all outstanding options into shares of common stock.

Net tangible book value dilution per share to new investors represents the difference between the amount per share paid by purchasers of shares of common stock in this offering and the pro forma net tangible book value per share of common stock immediately after the completion of this offering. After giving effect to our sale of 1,000,000 shares of common stock in this offering at an assumed public offering price of $ per share (the midpoint of the range set forth on the cover page of this prospectus), after deducting estimated underwriting discounts and commissions and estimated offering expenses, our pro forma net tangible book value as of December 31, 2006 would have been, $ million, or $ per share. This represents an immediate increase in net tangible book value of $ per share to existing stockholders and an immediate dilution in net tangible book value of $ per share to investors purchasing common stock in this offering, as illustrated in the following table:


Initial public offering price per share		$
Pro forma net tangible book value per share as of December 31, 2006	$
Increase per share attributable to new investors
Pro forma net tangible book value per share after this offering
Dilution per share to new investors		$

The following table presents on a pro forma basis as of December 31, 2006, after giving effect to our sale of 1,000,000 shares, the differences between the existing stockholders and purchasers of shares in this offering with respect to the number of shares purchased from us, the total consideration paid and the average price paid per share:

Shares purchased

Total consideration

Average
price per

Number

Percent

Amount

Percent

share

Existing stockholders

New investors

Total .

100.0

The reorganization

Haynes encountered liquidity difficulties throughout fiscal 2003 and the first half of fiscal 2004 due to concurrent down cycles in our largest markets, rising raw material and energy costs, and debt service obligations. We could not generate sufficient cash to both satisfy our debt service obligations and fund our operations. On March 29, 2004, Haynes and certain of its U.S. affiliates and subsidiaries as of that date filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code (11 U.S.C. § 101 et seq .). From March 29, 2004 through August 31, 2004, Haynes continued to operate as debtor-in-possession subject to the supervision of the bankruptcy court. On August 31, 2004, Haynes emerged from bankruptcy pursuant to a court-approved plan of reorganization.

Prior to the reorganization, all of the outstanding shares of our common stock were owned by Haynes Holdings, Inc., a Delaware corporation. In connection with the reorganization, Haynes Holdings, Inc. and Haynes International, Inc. were merged, and Haynes was the surviving corporation of the merger. Pursuant to the plan of reorganization, all of the shares of our common stock were cancelled, and 10.0 million new shares of our common stock, were issued in connection with our emergence from bankruptcy. Under the terms of the plan of reorganization, each former holder of our 11 5 ¤ 8 % senior notes due September 1, 2004 received its pro rata share of 9.6 million shares of our new common stock in full satisfaction of all of our obligations under the senior notes. Additionally, each former holder of the shares of common stock of Haynes Holdings, Inc. received its pro rata share of the remaining 400,000 shares of our new common stock in exchange for its outstanding shares of Haynes Holdings, Inc. common stock.

The plan of reorganization also provided for the payment or satisfaction of all secured and unsecured claims against Haynes, except as reinstated under the plan of reorganization and except with respect to the 11 5 ¤ 8 % senior notes due September 1, 2004, which were exchanged for equity as described above. Further detail concerning the treatment of claims under the plan of reorganization may be obtained through a review of the terms of the plan of reorganization which is filed as an exhibit to the registration statement of which this prospectus is a part.

Accounting impact of the reorganization

Upon implementation of the plan of reorganization, Haynes adopted fresh start reporting in accordance with AICPA Statement of Position 90-7, or SOP 90-7, “ Financial Reporting by Entities in Reorganization under the Bankruptcy Code ,” because holders of shares of the common stock of Haynes Holdings, Inc., the former parent of Haynes, immediately prior to confirmation of the plan of reorganization received less than 50% of the shares of our new common stock issued upon emergence from bankruptcy and the reorganization value upon emergence was less than our post-petition liabilities and allowed claims. Under fresh start reporting, the reorganization value was allocated to our net assets based on their relative fair values in a manner similar to the accounting provisions applied to business combinations under Statement of Financial Accounting Standards No. 141, “ Business Combinations .” Our reorganization value was determined based on consideration of numerous factors and various valuation methodologies, including discounted cash flows, believed by management and our financial advisors to be representative of our business and industry. Information regarding the determination of the reorganization value and application of fresh start reporting is included in Note 1 to the consolidated financial statements included elsewhere in this prospectus. As a result of the plan of reorganization and adoption of fresh start reporting, our consolidated balance sheet as of September 30, 2004 is not comparable to our historical balance sheets as of any date prior to September 1, 2004 and our results of operations after August 31, 2004 are not comparable to our results of operations for periods prior to September 1, 2004. For more information see “Management’s discussion and analysis of financial condition and results of operation—Pro forma financial information.”

Selected consolidated financial and other data

Set forth below is selected consolidated financial and other data. This data should be read in conjunction with the consolidated financial statements and related notes thereto and “Management’s discussion and analysis of financial condition and results of operations” included elsewhere in this prospectus.

On March 29, 2004, we and certain of our U.S. subsidiaries and U.S. affiliates as of that date filed for bankruptcy protection. Our plan of reorganization was confirmed by order of the Bankruptcy Court on August 16, 2004 and became effective on August 31, 2004. Our historical consolidated financial statements included elsewhere in this prospectus have been prepared on a going concern basis, which assumes continuity of operations and realization of assets and satisfaction of liabilities in the ordinary course of business, and, for periods subsequent to March 29, 2004, in accordance with the American Institute of Certified Public Accountants Statement of Position 90-7, “ Financial Reporting by Entities in Reorganization Under the Bankruptcy Code .” As of August 31, 2004, the effective date of our plan of reorganization, we began operating our business under a new capital structure, and we adopted fresh start reporting for our financial statements. Because of the emergence from bankruptcy and adoption of fresh start reporting, our historical financial information for periods prior to August 31, 2004 is not comparable to our financial information for periods after August 31, 2004. See “The reorganization.”

The selected historical consolidated financial data as of and for the years ended September 30, 2005 and 2006, as of September 30, 2004 and for the period September 1, 2004 through September 30, 2004 is derived from the audited consolidated financial statements of our company after giving effect to the adoption of fresh start reporting (successor Haynes International, Inc.). The selected historical consolidated financial data for the period October 1, 2003 through August 31, 2004, and as of and for the years ended September 30, 2002 and 2003 is derived from the audited consolidated financial statements of our company prior to the adoption of fresh start reporting (predecessor Haynes International, Inc.).

	Predecessor								Successor
(in thousands, except average nickel price, share and	Year ended September 30,					Eleven months ended August 31,			One month ended Sept ember 30,				Year ended September 30,
per share information)	2002(1)		2003(1)			2004			2004(2)				2005(2)			2006(2)
Statement of operations data:
Net revenues	$	225,942	$	178,129		$	209,103			$	24,391		$	324,989		$	434,405
Cost of sales(3)	175,572		150,478			171,652				26,136			288,669			325,573
Selling, general and administrative expense(4)	24,628		24,411			24,038				2,658			32,963			40,296
Research and technical expense	3,697		2,747			2,286				226			2,621			2,659
Restructuring and other charges(5)	—		—			4,027				429			628			—
Operating income (loss)	22,045		493			7,100				(5,058		)	108			65,877
Interest expense, net	20,441		19,661			13,929				348			6,353			8,024
Reorganization items(6)	—		—			(177,653		)		—			—			—
Net income (loss)(7)	927		(72,255		)	170,734				(3,646		)	(4,134		)	35,540
Net income (loss) per share:
Basic	$	9,270	$	(722,550	)	$	1,707,340			$	(0.36	)	$	(0.41	)	$	3.55
Diluted	$	9,270	$	(722,550	)	$	1,707,340			$	(0.36	)	$	(0.41	)	$	3.46
Weighted average shares outstanding:
Basic	100		100			100				10,000,000			10,000,000			10,000,000
Diluted	100		100			100				10,000,000			10,000,000			10,270,642
Other data:
Capital expenditures	$	6,032	$	3,638		$	4,782			$	637		$	9,029		$	10,668
Average nickel price per pound (end of period)(8)	$	3.02	$	4.52		$	6.21			$	6.02		$	6.45		$	13.67

At September 30,	Predecessor						Successor
(in thousands)	2002(1)			2003(1)			2004(2)		2005(2)		2006(2)
Balance sheet data:
Working capital (deficit)	$	49,424		$	(99,901	)	$	61,826	$	59,494	$	101,864
Property, plant and equipment, net	42,721			40,229			80,035		85,125		88,921
Total assets	230,513			180,115			360,758		387,122		445,860
Total debt	189,685			201,007			85,993		106,383		120,043
Accrued pension and postretirement benefits(9)	121,717			127,767			120,019		122,976		126,488
Stockholders’ equity (deficiency)	(101,973		)	(172,858		)	115,576		111,869		151,548

(in millions)	2002		2003		2004		2005		2006
Backlog at fiscal quarter ended(10):
December 31	$	88.0	$	49.0	$	54.7	$	110.9	$	203.5
March 31	77.2		53.6		69.6		134.8		207.4
June 30	63.9		54.5		82.6		159.2		200.8
September 30	52.5		50.6		93.5		188.4		206.9

(1) Restated . Effective October 1, 2003, Haynes changed its inventory costing method from the last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method. In accordance with generally accepted accounting principles, the change has been applied by restating the 2002 and 2003 consolidated financial data.

See “The reorganization” and “Management’s discussion and analysis of financial condition and results of operations—Pro forma financial information.”

(3) As part of fresh start reporting, inventory was increased by approximately $30,497 to reflect its fair value at August 31, 2004. The fair value adjustment was recognized ratably in cost of sales as inventory was sold and was fully recognized by the end of the second quarter of fiscal 2005. Cost of sales for the one month ended September 30, 2004 and the years ended September 30, 2005 and 2006 include non-cash charges of $5,083, $25,414 and $0, respectively, for this fair value adjustment. Also, as part of fresh start reporting, machinery and equipment, buildings and patents were increased by $49,436 to reflect fair value at August 31, 2004. The majority of these values have been recognized, commencing in 2004 and will continue to be recognized in costs of sales over periods ranging from 2 to 14 years. Cost of sales for the one month ended September 30, 2004 and the years ended September 30, 2005 and 2006 include $403, $4,788 and $4,802, respectively, for this fair value adjustment.

(4) In fiscal 2003, $676 of terminated acquisition costs were accounted for as selling, general and administrative expense related to a potential acquisition that we did not pursue.

(5) Consists primarily of professional fees and credit facility fees related to the restructuring and refinancing activities.

(6) During fiscal 2004, Haynes recognized approximately $177,653 in reorganization items of which approximately $7,298 were expenses relating to professional fees, amendment fees, travel expenses, directors’ fees, write offs of bond discount and debt issuance costs, and other expenses, and approximately $184,951 was income relating to the gain on cancellation of 11 5 ¤ 8 % senior notes due September 1, 2004 and fresh start reporting adjustments as a result of the reorganization. See Note 8 to the consolidated financial statements included elsewhere in this prospectus for more information.

(8) Represents the average price for a cash buyer as reported by the London Metals Exchange for the 30 days ending on the last day of the period presented.

(9) During March 2006, Haynes communicated to employees and plan participants a negative plan amendment that caps our liability related to total retiree health care costs at $5,000 annually effective January 1, 2007. An updated actuarial valuation was performed at March 31, 2006, which reduced the accumulated post-retirement benefit liability due to this plan amendment by $46,300, that will be amortized as a reduction to expense over an eight-year period. This amortization period began in April 2006, reducing the amount of expense recognized for the second half of fiscal 2006 and the respective future periods.

(10) We define backlog to include firm commitments from customers for delivery of product at established prices. Approximately 30% of the orders in our backlog at any given time include prices that are subject to adjustment based on changes in raw material costs. Historically, approximately 75% of our backlog orders have shipped within six months and approximately 90% have shipped within 12 months. The backlog figures do not reflect that portion of our business conducted at our service and sales centers on a spot or “just-in-time” basis.

Management’s discussion and analysis of financial condition and results of operations

Reorganization and presentation of financial results

On March 29, 2004, Haynes and its U.S. subsidiaries and U.S. affiliates as of that date filed voluntary petitions for reorganization relief under Chapter 11 of the U.S. Bankruptcy Code. Haynes emerged from bankruptcy on August 31, 2004 pursuant to a plan of reorganization. Our historical results for the period from October 1, 2003 through August 31, 2004 (the “predecessor company”) are being presented along with our financial results from September 1, 2004 through September 30, 2004, and full years of fiscal 2005 and fiscal 2006 (the “successor company”). As of August 31, 2004, the effective date of the plan of reorganization, the successor company began operating under a new capital structure and adopted fresh start reporting for its financial statements. Because of our emergence from bankruptcy and adoption of fresh start reporting, the predecessor company’s historical financial information for periods prior to August 31, 2004 is not comparable to the successor company’s financial information for periods after August 31, 2004. For more information see “The reorganization” and “—Impact of fresh start reporting on cost of sales.”

Pro forma financial information

The following unaudited pro forma consolidated statement of operations for the year ended September 30, 2004 is derived from the application of pro forma adjustments to the historical statement of operations of the predecessor Haynes International, Inc. for the period October 1, 2003 to August 31, 2004 as if the effective date of the plan of reorganization were October 1, 2003. The pro forma combined statement of operations for the year ended September 30, 2004 includes the historical results of operations of the successor Haynes International, Inc. for the period September 1, 2004 to September 30, 2004, combined with the pro forma results of operations of the predecessor Haynes International, Inc. for the period October 1, 2003 to August 31, 2004. The pro forma statement of operations should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this prospectus.

The pro forma adjustments are described in the notes to the pro forma statement of operations and are based on available information and assumptions that we believe are reasonable. The pro forma statement of operations is not necessarily indicative of the future results of operations of the successor Haynes International, Inc. or results of operations of the successor Haynes International, Inc. that would have actually occurred had the plan of reorganization been consummated as of October 1, 2003.

	Predecessor			Successor							Successor
(in thousands, except share and per share data)	Period October 1, 2003 to August 31, 2004			Period September 1, 2004 to September 30, 2004			Pro forma adjustments(1)				Pro forma combined year ended September 30, 2004
Statement of operations:
Net revenues	$	209,103		$	24,391			$	—		$	233,494
Cost of sales(2)	171,652			26,136				4,433			202,221
Selling, general and administrative expense(3)	24,038			2,658				1,356			28,052
Research and technical expense	2,286			226				—			2,512
Restructuring and other charges	4,027			429				—			4,456
Operating income (loss)	7,100			(5,058		)		(5,789		)	(3,747		)
Interest expense(4)	13,964			354				(9,363		)	4,955
Interest income	(35		)	(6		)		—			(41		)
Income (loss) before reorganization items and income taxes	(6,829		)	(5,406		)		3,574			(8,661		)
Reorganization items(5)	177,653			—				(177,653		)	—
Income (loss) before income taxes	170,824			(5,406		)		(174,079		)	(8,661		)
Provision for (benefit from) income taxes(6)	90			(1,760		)		(1,621		)	(3,291		)
Net income (loss)	$	170,734		$	(3,646	)		$	(172,458	)	$	(5,370	)
Net income (loss) per share:
Basic	$	1,707,340		$	(0.36	)					$	(0.54	)
Diluted	$	1,707,340		$	(0.36	)					$	(0.54	)
Weighted average shares outstanding:
Basic	100			10,000,000							10,000,000
Diluted	100			10,000,000							10,000,000

(1) The pro forma adjustments do not include the non-recurring charge to expense of the flow through fair value adjustment to inventory of $25,415. The effect of this adjustment was included in cost of sales during the first five months of fiscal 2005.

(2) To reflect the net change in historical cost of sales of the predecessor company resulting from the application of fresh start reporting. Change is due to an increase in historical depreciation expense of $239 per month for a period of eleven months and the addition of patent amortization expense of $164 per month for a period of eleven months. Each of these adjustments was calculated using the new basis of accounting result from the adoption of fresh start reporting.

(3) To reflect compensation expense for the stock options granted by the successor company of $123 per month for a period of eleven months.

(4) To reflect the elimination of interest expense on the $140,000 11 ⅝ % senior notes due September 1, 2004 of $9,363.

(5) To eliminate reorganization items.

(6) To reflect the net change between the historical income tax benefit and the expected income tax benefit on the pro forma operations in order to achieve our expected effective tax rate of 38%.

Overview of business

The global specialty alloy market consists of three primary sectors: stainless steel, general purpose nickel alloys and high-performance alloys. Except for its stainless steel wire products, Haynes competes exclusively in the high-performance nickel- and cobalt-based alloy sector, which includes high temperature resistant alloys, or HTA products, and corrosion resistant alloys, or CRA products. HTA and CRA products accounted for 75% and 25%, respectively, of our net revenues in fiscal 2005, and 68% and 32%, respectively, of our net revenues in fiscal 2006 (in each case excluding stainless steel wire). Based on available industry data, we believe that we are one of four principal producers of high-performance alloys in flat product form, which includes sheet, coil and plate forms. Flat products accounted for 72% of shipment pounds and 69% of net revenues in fiscal 2005, and 69% of shipment pounds and 67% of net revenues in fiscal 2006. We also produce our alloys as seamless and welded tubulars, and in bar, billet and wire forms. On an historical basis, flat products have accounted for a majority of our net revenues, and are anticipated to continue to do so on a prospective basis.

We sell our products primarily through our direct sales organization, which includes 11 service and/or sales centers in the United States, Europe, Asia and India. All of these centers are company-operated. During fiscal 2005, we opened our service and sales center in China and our sales center in India. Our direct sales organization generated approximately 81% and 82% of our net revenues in fiscal 2005 and fiscal 2006, respectively. The remaining 19% and 18% of our net revenues in fiscal 2005 and fiscal 2006, respectively, were generated by a network of independent distributors and sales agents who supplement our direct sales efforts in all markets, some of whom have been associated with Haynes for over 30 years. We are currently in the process of evaluating the efficiency of some of our overseas distribution channels, including the appropriate number of distributors, the types of products sold through third party distributors and the distribution partners. On a prospective basis, we expect our direct sales force to continue to generate approximately 80% of total sales. This percentage may increase, however, as we open new service and sales centers.

Sales to customers outside the United States represented approximately 39% of our net revenues in both fiscal 2005 and fiscal 2006. It is anticipated that sales to customers outside of the United States will continue to grow with our addition of foreign service and sales centers. Although no data is available, we believe a portion of the material that is sold to domestic distributors and fabricators is resold and shipped overseas.

Lead times from order to shipment can be a competitive factor, as well as an indication of the strength of the demand for high-performance alloys. Our current average lead times from order to shipment for mill-produced products, depending on product form, are approximately 10 to 30

weeks. An order from a service and sales center can be filled in less than one week, depending upon the availability of materials in stock.

Overview of markets

The following table includes a breakdown of net revenues, shipments and average selling prices to the markets served by Haynes for the periods shown.

2002

2003

2004(1)

2005

2006

Year ended September 30,
(dollars in millions)

Amount

Percent
of
total

Amount

Percent
of
total

Amount

Percent
of
total

Amount

Percent
of
total

Amount

Percent
of
total

Net revenues:

Aerospace	$	92.8	41.1	%	$	80.3	45.1	%	$	98.1	42.0	%	$	126.1	38.8	%	$	165.8	38.2	%
Chemical processing	45.8		20.3		44.6		25.0		61.4		26.3		76.2		23.5		129.4		29.8
Land-based gas turbines	52.6		23.3		26.7		15.0		41.1		17.6		67.1		20.6		77.9		17.9
Other markets	32.1		14.1		25.5		14.3		31.1		13.3		53.2		16.4		56.4		13.0
Total product	223.3		98.8		177.1		99.4		231.7		99.2		322.6		99.3		429.5		98.9
Other revenue (2)	2.6		1.2		1.0		0.6		1.8		0.8		2.4		0.7		4.9		1.1
Net revenues	$	225.9	100.0	%	$	178.1	100.0	%	$	233.5	100.0	%	$	325.0	100.0	%	$	434.4	100.0	%
U.S.	$	142.4	63.0	%	$	103.6	58.2	%	$	143.3	61.4	%	$	196.5	60.5	%	$	265.1	61.0	%
Foreign	$	83.5	37.0	%	$	74.5	41.8	%	$	90.2	38.6	%	$	128.5	39.5	%	$	169.3	39.0	%
Shipments by market (millions of pounds):
Aerospace	5.4		32.9	%	4.7		37.6	%	5.5		36.7	%	6.1		29.2	%	7.1		32.9	%
Chemical processing	3.8		23.2		3.9		31.2		4.2		28.0		3.8		18.2		5.0		23.1
Land-based gas turbines	5.0		30.5		2.3		18.4		3.5		23.3		4.7		22.5		4.8		22.2
Other markets	2.2		13.4		1.6		12.8		1.8		12.0		6.3		30.1		4.7		21.8
Total shipments	16.4		100.0	%	12.5		100.0	%	15.0		100.0	%	20.9		100.0	%	21.6		100.0	%
Average selling price per pound:
Aerospace	$	17.19			$	17.09			$	17.84			$	20.63			$	23.28
Chemical processing	12.05				11.44				14.62				19.84				25.97
Land-based gas turbines	10.52				11.61				11.74				14.25				16.27
Other markets(3)	14.59				15.94				17.28				8.50				11.87
All markets(4)	13.62				14.17				15.45				15.42				19.84

(1) This information was derived from and should be read in conjunction with the information under “Pro forma financial information.”

(2) Other revenue consists of toll conversion, royalty income, and scrap sales.

(3) During fiscal 2005 and 2006, the “Other markets” category includes $15.8 million and $15.1 million in revenue, respectively, and 4.8 million pounds and 3.2 million pounds, respectively, of stainless steel wire as a result of our November 2004 acquisition of assets of Branford Wire.

(4) Average selling price per pound excludes “Other revenue.” If “Other revenue” were included, the total average selling price per pound for all markets would be $15.53 for fiscal 2005 and $20.07 for fiscal 2006.

Aerospace . Demand for our products in the aerospace market is largely driven by orders for new jet engines, as well as requirements for spare parts and replacement parts for jet engines. Haynes experienced strong growth in the late 1990’s through fiscal 2001 due to the aerospace

demand cycle. As a result of increased new aircraft production during this cycle and maintenance requirements, our net revenues from sales to the aerospace supply chain peaked in fiscal 2001. Our sales to the aerospace market declined throughout fiscal 2002 and fiscal 2003, but started to improve with the turn-around of the aerospace cycle in late fiscal 2003. The improvement continued through fiscal 2006. Excluding any catastrophic economic or political events, based on forecasted engine and airframe build schedules, we believe that the aerospace market should remain strong through fiscal 2007. We view the maintenance, repair and overhaul (or MRO) business as an area of future growth, and expect the number of engines in service to increase in the next ten to twenty years.

Net revenues to the aerospace market in fiscal 2006 increased by 31.5% from fiscal 2005 as commercial aircraft production by the major manufacturers continued to increase from the prior year, resulting in improvements in aircraft orders and aircraft maintenance requirements. Due to these improved market conditions there was a 16.6% increase in the number of pounds shipped in this market and a 12.8% increase in the average selling price per pound, which also reflects generally improved product pricing as a result of changes in product mix and higher raw material costs.

Chemical processing. Growth in the chemical processing market tends to track overall economic activity. Demand for our products in this market is driven by the level of maintenance, repair and expansion requirements of existing chemical processing facilities, as well as the construction of new facilities. We believe that the basic elements that drive the use of our products in the chemical processing market are still present, but the focus for new plant construction will be in Asia, while maintenance and debottlenecking projects to avoid capital expansion will be the trend in Europe and North America. Concerns regarding the reliability of chemical processing facilities, their potential impact on the environment and the safety of their personnel, as well as the need for higher chemical throughput, should support future demand for more sophisticated alloys, such as our specialty and proprietary CRA products. Our key proprietary CRA products, including HASTELLOY C-2000, which we believe provides better overall corrosion resistance and versatility than any other readily available CRA product, HASTELLOY B-3, HASTELLOY G-35 and HASTELLOY C-22, are expected to contribute to improving activity in this market.

Net revenues from the chemical processing market in fiscal 2003 represented our lowest levels in the previous five fiscal years. Net revenues from this market have increased steadily since fiscal 2003. In fiscal 2006, our net revenues in the chemical processing market increased by 69.7% from those in fiscal 2005. In fiscal 2006, the number of pounds shipped to customers in the chemical processing market increased 29.7% as compared to fiscal 2005, primarily as a result of improved market conditions. Average selling price per pound in this market increased 30.9% compared to fiscal 2005, due primarily to an improved product mix which included a higher percentage of proprietary alloys and the effect of higher raw material costs.

Land-based gas turbines. We have leveraged our metallurgical expertise to develop land-based gas turbine applications for alloys we have historically sold to the aerospace market. Land-based gas turbines are favored in electric generating facilities due to low capital cost at installation, low cycle installation time, flexibility in use of alternative fuels, and fewer SO2 emissions than traditional fossil fuel-fired facilities. In addition to power generation, land-based gas turbines are required as mechanical drivers primarily for production and transportation of oil and gas, as well as emerging applications in commercial marine propulsion and micro turbines for standby or

emergency power systems. We believe these factors have historically been primarily responsible for creating demand for our products in the land-based gas turbine market.

We believe growth in this market will continue as long as global demand for increase in power generation capacity remains strong. With the opening of sales centers in China and India in fiscal 2005, we believe we are well-positioned to take advantage of the growth in those areas of demand for power generation.

Prior to the enactment of the Clean Air Act, land-based gas turbines were used primarily to satisfy peak power requirements. We believe that land-based gas turbines are a clean, low-cost alternative to fossil fuel-fired electric generating facilities. In the early 1990’s when Phase I of the Clean Air Act was being implemented, selection of land-based gas turbines to satisfy electric utilities’ demand helped to establish this power source. We believe that the mandated Phase II of the Clean Air Act and certain advantages of land-based gas turbines compared to coal-fired generating plants will further contribute to demand for our products over the next three to five years.

Beginning in fiscal 2002, there was a decline in the land-based gas turbine market as a result of both the general economic slowdown and the energy crisis precipitated by the Enron bankruptcy. In that year, land-based gas turbine projects which were in progress were completed; however, projects not yet started were put on hold and new projects were not initiated. Since that time, there has been a significant improvement in the market. Specifically, starting in the last half of fiscal 2003, several projects put on hold were restarted and new projects were initiated, which contributed to the significantly improved performance in this market beginning in fiscal 2004. In fiscal 2006, shipments of our products to the land-based gas turbine market increased from those in fiscal 2005 due to a continued increase in demand for maintenance and repair parts for gas turbines. Net revenues from products sold to the land-based gas turbine market increased 16.2% in fiscal 2006 as compared to fiscal 2005, due to a 1.8% increase in the number of pounds shipped and a 14.2% increase in average selling price per pound which reflects generally improved product pricing as a result of market demand, increasing levels of maintenance and repair business and higher raw material costs.

Other markets and other revenues. In addition to the markets described above, we also target a variety of other markets. Representative markets served in fiscal 2006 include flue gas desulphurization (FGD), waste incineration, industrial heat-treating, automotive, medical, and oil and gas. The Clean Air Act and comparable legislation in Europe and Asia, which create regulatory imperatives requiring the reduction of sulfur emissions, are the primary factor in determining the demand for high-performance alloys in the FGD market. The automotive and industrial heat-treating markets are highly cyclical and very competitive. Opportunities continue to exist, however, in the automotive market due to new safety-related technology, higher operating temperatures, engine control systems, and emission control systems. Also, increasing requirements for improved materials performance in industrial heating are expected to increase demand for our products. Our participation in the oil and gas market consists primarily of providing tubular goods for sour gas production.

Waste incineration presents opportunities for the use of our alloys to reduce the use of landfill space and to respond to government concerns over land disposal of waste, pollution, chemical weapon stockpiles, and chemical and nuclear waste handling. Markets capable of providing

growth are being driven by increasing performance, reliability and service life requirements for products used in these markets, which could provide further applications of our products.

In connection with our acquisition of assets of Branford Wire in the first quarter of fiscal 2005, we acquired a facility that manufactured both stainless steel wire and high-performance alloy wire. We continue to produce stainless steel wire at the Branford facility. The high-performance alloy wire produced is reflected within the appropriate category where the wire is sold. For example, high-performance alloy wire produced for use in the chemical processing market is reflected in that category. The stainless steel wire is reflected in the “Other Markets” category and reduced the average selling price per pound within that category on a comparative basis. Our strategy is to reduce production of stainless steel wire and increase production of high-performance alloy wire due to higher margins obtained from high-performance alloy wire. During fiscal 2006, this category included $15.1 million of net revenue, which represented 3.2 million pounds of stainless steel wire product, as a result of the Branford Wire acquisition, as compared to $15.8 million of net revenue and 4.7 million pounds of stainless steel wire product in fiscal 2005.

In fiscal 2006, net revenues from products sold in the “Other Markets” category increased by 5.9% when compared to fiscal 2005, primarily as a result of improving market demand and passing through higher raw material and energy costs.

In fiscal 2006, net revenues from our products in the “Other Revenues” category increased by 104.2% when compared to those in fiscal 2005 primarily due to toll conversion income and scrap sales.

Impact of fresh start reporting on cost of sales

Upon implementation of the plan of reorganization, we adopted fresh start reporting in accordance with SOP 90-7. Under fresh start reporting, the reorganization value is allocated to our net assets based on their relative fair values in a manner similar to the accounting provisions applied to business combinations under Statement of Financial Standards No. 141, Business Combinations (“SFAS No. 141”).

Our operating income was reduced by the recognition of the fair market value adjustments to our assets required by the adoption of fresh start reporting. Cost of sales included $5.5 million, $30.2 million and $4.8 million of these costs in the one month period ended September 30, 2004 and the years ended September 30, 2005 and 2006, respectively. See Notes 1 and 2 to the consolidated financial statements included elsewhere in this prospectus for more information.

The fair market value adjustments to the historical basis of assets are being recognized as follows (dollars in thousands):

	Fair value adjustment				Recognition period	Expense recognized from September 1 to September 30, 2004(1)				Expense recognized from October 1, 2004 to September 30, 2005(1)				Expense recognized from October 1, 2005 to September 30, 2006(1)
Goodwill(2)(3)		$	42,265		N/A		$	—			$	—			$	—
Inventory(4)		30,497			6 months		5,083				25,414				—
Machinery and equipment		41,628			14 years		245				2,974				3,124
Buildings		(859		)	12 years		(6		)		(72		)		(72		)
Land		41			N/A		—				—				—
Trademarks(3)		3,800			N/A		—				—				—
Patents		8,667			2 to 14 years		164				1,886				1,750
							$	5,486			$	30,202			$	4,802

(1) Non-cash expenses for inventory, machinery and equipment, buildings and patents are reflected in cost of goods sold.

(2) Goodwill increased by $1,912 due to the finalization of pre-emergence tax returns, which affected net operating loss carry forwards.

(3) Under applicable accounting rules, goodwill and trademarks are not amortized but are assessed to determine impairment at least annually.

(4) Recognition period represents estimated length of time for one complete inventory turn.

Results of operations

The following table is presented for comparative purposes.

	Predecessor			Successor
(in thousands, except share and	Eleven months ended August 31,			One month ended September 30,			Pro forma combined year ended September 30,			Year ended September 30,
per share information)	2004			2004(1)			2004(2)			2005			2006(1)
Statement of operations data:
Net revenues	$	209,103		$	24,391		$	233,494		$	324,989		$	434,405
Cost of sales(3)	171,652			26,136			202,221			288,669			325,573
Selling, general and administrative expense	24,038			2,658			28,052			32,963			40,296
Research and technical expense	2,286			226			2,512			2,621			2,659
Restructuring and other charges(4)	4,027			429			4,456			628			—
Operating income (loss)	7,100			(5,058		)	(3,747		)	108			65,877
Interest expense, net	13,929			348			4,914			6,353			8,024
Reorganization items(5)	(177,653		)	—			—			—			—
Provision (benefit) for income taxes	90			(1,760		)	(3,291		)	(2,111		)	22,313
Net income (loss)	$	170,734		$	(3,646	)	$	(5,370	)	$	(4,134	)	$	35,540
Net income (loss) per share:
Basic	$	1,707,340		$	(0.36	)	$	(0.54	)	$	(0.41	)	$	3.55
Diluted	$	1,707,340		$	(0.36	)	$	(0.54	)	$	(0.41	)	$	3.46
Weighted average shares outstanding:
Basic	100			10,000,000			10,000,000			10,000,000			10,000,000
Diluted	100			10,000,000			10,000,000			10,000,000			10,270,642

(1) As of August 31, 2004, the effective date of the plan of reorganization, Haynes adopted fresh start reporting for its financial statements. Because of the emergence from bankruptcy and adoption of fresh start reporting, the historical financial information for periods after August 31, 2004 is not comparable to periods before September 1, 2004. For more information see “The reorganization” and “Pro forma financial information.”

(2) This information was derived from and should be read in conjunction with “—Pro forma financial information.”

(3) As part of fresh start accounting, inventory was increased by approximately $30.5 million to reflect its fair value at August 31, 2004. The fair value adjustment was recognized ratably in cost of sales as inventory was sold and was fully recognized by the end of the second quarter of fiscal 2005. Cost of sales for the one-month period ended September 30, 2004 and the year ended September 30, 2005 include non-cash charges of $5.1 million and $25.4 million, respectively, for this fair value adjustment.

(4) Consists primarily of professional fees and credit facility fees related to the restructuring and refinancing activities.

(5) During fiscal 2004, Haynes recognized approximately $177.7 million in reorganization items of which approximately $7.3 million were expenses relating to professional fees, amendment fees, travel expenses, directors’ fees, write offs of bond discount and debt issuance costs, and other expenses, and approximately $185.0 million was income relating to the gain on cancellation of 11 ⅝ % senior notes due September 1, 2004 and fresh start reporting adjustments as a result of the reorganization. See Note 8 to the consolidated financial statements included elsewhere in this prospectus for more information.

The following table sets forth, for the periods indicated, consolidated statement of operations data as a percentage of net revenues:

	Predecessor			Successor
	Eleven months ended August 31,			One month ended September 30,			Pro forma combined year ended September 30,			Year ended September 30,
	2004			2004(1)			2004(2)			2005(1)			2006(1)
Statement of operations data:
Net revenues		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		82.1			107.2			86.6			88.8			74.9
Selling, general and administrative expense		11.5			10.9			12.0			10.1			9.3
Research and technical expense		1.1			0.9			1.1			0.8			0.6
Restructuring and other charges		1.9			1.7			1.9			0.2			—
Operating income (loss)		3.4			(20.7	)		(1.6	)		0.1			15.2
Interest expense, net		6.7			1.5			2.1			2.0			1.8
Reorganization items		(85.0	)		—			—			—			—
Provision (benefit) for income taxes		—			(7.2	)		(1.4	)		(0.6	)		5.1
Net income (loss)		81.7	%		(15.0	)%		(2.3	)%		(1.3	)%		8.3	%

(2) This information was derived from and should be read in conjunction with “—Pro forma financial information.”

Year ended September 30, 2006 compared to year ended September 30, 2005

Net revenues. Net revenues increased by $109.4 million, or 33.7%, to $434.4 million in fiscal 2006 from $325.0 million in fiscal 2005. Volume increased by 3.4% to 21.6 million pounds in fiscal 2006 from 20.9 million pounds in fiscal 2005. Volume of high-performance alloys increased by 12.9% to 18.4 million pounds in fiscal 2006 as compared to 16.3 million pounds in fiscal 2005. Volume of stainless steel wire decreased by 31.9% to 3.2 million pounds in fiscal 2006 as compared to 4.7 million pounds in fiscal 2005 as a result of our strategy to reduce production of stainless steel wire and increase production of high-performance alloy wire due to higher margins obtained from high-performance alloy wire. The average selling price per pound increased by 29.2% to $20.07 per pound in fiscal 2006 from $15.53 per pound in fiscal 2005 due primarily to improved market demand and passing through higher raw material prices. Our backlog increased by $18.5 million, or 9.8%, to $206.9 million at September 30, 2006 from $188.4 million at September 30, 2005. We expect the demand for high-performance alloys to be positively driven by the continuation of favorable trends in the aerospace markets, chemical processing facility construction and maintenance and the energy construction business. These favorable market trends reflect the anticipated growth in the emerging economies of Asia.

Sales to the aerospace market increased by 31.5% to $165.8 million in fiscal 2006 from $126.1 million in fiscal 2005, due to a 12.8% increase in the average selling price per pound

combined with a 16.6% increase in volume. The increase in the average selling price per pound is due to improved market demand, a product mix that includes a higher percentage of specialty alloy products and forms with a higher value and average selling price when compared to the product mix sold in fiscal 2005, and the effect of passing through higher raw material and energy costs. In addition, as a result of our recent capital improvements, we has been able to increase production of these higher valued alloys, allowing us to take advantage of the increased demand and step up marketing efforts related to these alloys. We believe sales have also increased as a result of a shift in demand by major aerospace fabricators away from large, mill-direct orders toward smaller, more frequent orders from value-added service centers, such as we can provide.

Sales to the chemical processing market increased by 69.7% to $129.4 million in fiscal 2006 from $76.2 million in fiscal 2005, due to a 30.9% increase in the average selling price per pound combined with a 29.7% increase in volume. The increase in the average selling price per pound is due to improved market demand, a change in product mix to higher valued specialty alloys and forms, and the effect of passing through higher raw material and energy costs. We believe that construction of new chemical processing facilities in China has contributed to volume improvement in this market. We believe that product mix has improved as a result of the generally improved economy which has increased the willingness of our customers to invest in products that are more expensive initially, but that are longer-lived and require less maintenance and replacement expense in the future. In addition, as a result of our recent capital improvements, we have been able to increase production of these higher-valued alloys, allowing us to take advantage of the increased demand and step up marketing efforts related to these alloys.

Sales to the land-based gas turbine market increased by 16.2% to $77.9 million for fiscal 2006 from $67.1 million in fiscal 2005, due to an increase of 16.3% in the average selling price per pound. The volume for the land-based gas turbine market on a year-to-year basis is essentially flat, increasing by 1.8%. However, starting with the third quarter of fiscal 2005, volume has increased every quarter, with volume in the fourth quarter of fiscal 2006 reaching almost 1.5 million pounds. Both total volume and ingot volume for this market can fluctuate due, at least in part, to ingot sales, which are influenced based on original equipment manufacturing (or OEM) projects. The overall volume in this market between fiscal 2005 and fiscal 2006 reflects ingot pounds which increased by approximately 34% and an equivalent decrease in the aggregate sheet and plate volumes. This change in product mix from year-to-year is representative of increased OEM business. The average selling price increased for all forms within this market on a year-to-year basis. However, the ingot product form comprised a larger percentage of the total mix in fiscal 2006 versus fiscal 2005 and, because ingots sell at a lower average selling price than the other forms, the effect is to mute the increase in average selling price. The other forms average selling price for this market increased almost 24% between periods. We believe sales have increased due to higher demand from power generation, oil and gas production, and alternative power systems applications.

Sales to other markets increased by 5.9% to $56.4 million in fiscal 2006 from $53.2 million in fiscal 2005, due to a 39.6% increase in average selling price per pound, which was partially offset by a 24.2% decrease in volume. The selling price increase is related to improving market demand and passing through higher raw material and energy costs compared to fiscal 2005. The primary reason for the overall reduction in volume was a decrease in the volume of stainless steel wire in fiscal 2006 compared to fiscal 2005 as a result of our strategy to reduce production of stainless steel wire.

Other revenue. Other revenue increased by 106.6% to $4.9 million in fiscal 2006 from $2.4 million for fiscal 2005. The increase is due to higher activity in toll conversion revenue, scrap sales and miscellaneous sales.

Cost of sales. Cost of sales as a percentage of net revenues decreased to 74.9% in fiscal 2006 from 88.8% in fiscal 2005. This decrease can be attributed to a combination of the following factors:

· a $25.4 million decrease of non-cash amortization of fresh start fair value adjustment to $4.8 million in fiscal 2006 from $30.2 million in fiscal 2005,

· improved product pricing,

· overall improvement in volume, resulting in the increased absorption of fixed manufacturing costs, and

· reductions in manufacturing cost gained from the capital improvements program.

These positive factors were partially offset by higher raw material and energy costs. Our energy costs increased by $5.1 million in fiscal 2006 compared to fiscal 2005, primarily due to rising natural gas prices and higher usage. Higher raw material costs as represented by the significant increase year-to-year in the cost of nickel, which makes up approximately 51% of our raw material costs. As reported by the London Metals Exchange, the average price per pound for 30-day cash buyers for nickel at September 30, 2006 was $13.67 compared to $6.45 at September 30, 2005.

Selling, general and administrative expense. Selling, general and administrative expense increased by $7.3 million to approximately $40.3 million in fiscal 2006 from $33.0 million in fiscal 2005. In fiscal 2005, gross selling, general and administrative expense was reduced by a one-time gain of $2.1 million recognized from the sale of land and building at our Openshaw, England facility. The remaining $5.2 million increase in selling, general and administrative expenses was due to a combination of the following factors:

· increased cost of $3.0 million from growth in foreign operations and higher overall business activity,

· an increase of $1.5 million from higher employee compensation cost for stock options,

· an increase of $1.0 million for payments made under the management incentive plan, and

· an increase of $1.1 million related to our evaluation of strategic alternatives.

These increases were partially offset by a decrease from fiscal 2005 of $0.6 million of consulting costs related to compliance with the provisions of the Sarbanes-Oxley Act of 2002 and a decrease of $0.8 million for the preparation and filing of a registration statement with the Securities and Exchange Commission. Selling, general and administrative expense as a percentage of net revenues decreased to 9.3% in fiscal 2006 compared to 10.1% for fiscal 2005 due primarily to the increased level of net revenues.

Research and technical expense. Research and technical expense remained relatively flat at $2.7 million, or 0.6% of net revenues, in fiscal 2006 compared to $2.6 million, or 0.8% of net revenues, in fiscal 2005.

Restructuring and other charges. During fiscal 2005, Haynes incurred $0.6 million of professional fees in connection with the completion of the U.S. operations’ filing for reorganization relief under Chapter 11 of the U.S. Bankruptcy Code. There was no corresponding expense for fiscal 2006.

Operating income. As a result of the above factors, operating income in fiscal 2006 was $65.9 million compared to $0.1 million in fiscal 2005.

Interest expense. Interest expense increased by $1.7 million to $8.1 million in fiscal 2006 from $6.4 million for fiscal 2005. The increase is due to higher aggregate borrowings on our revolving credit facility and higher interest rates partially offset by interest capitalized on long-term capital projects.

Income taxes. Income taxes increased to an expense of $22.3 million in fiscal 2006 from a benefit of $2.1 million in fiscal 2005. The effective tax rate for fiscal 2006 was 38.6% compared to a tax benefit of 33.8% in fiscal 2005. The increase in effective tax rate is primarily attributable to more taxable income in the United States at a higher tax rate as compared to foreign taxable income at the lower tax rate.

Net income. As a result of the above factors, net income increased by $39.6 million to $35.5 million in fiscal 2006 compared to net loss of $(4.1) million in fiscal 2005.

Year ended September 30, 2005 compared to year ended September 30, 2004 pro forma

The following discussion provides a comparison of the results of operations for the year ended September 30, 2005 and that of the year ended September 30, 2004 on a pro forma basis. The discussion is provided for comparative purposes only, but the value of such comparison may be limited. For more information see “The reorganization,” “—Pro forma financial information” and “—Impact of fresh start reporting on cost of sales.”

Net revenues. Net revenues increased by approximately $91.5 million or 39.2% to approximately $325.0 million in fiscal 2005 from approximately $233.5 million in fiscal 2004 on a pro forma basis. Volume increased 39.3% to approximately 20.9 million pounds in fiscal 2005 from approximately 15.0 million pounds in fiscal 2004 on a pro forma basis. The average selling price per pound decreased 0.2% to $15.42 per pound in fiscal 2005 from $15.45 per pound in fiscal 2004 on a pro forma basis. Raw material increases resulted in increases to average selling price, but were more than fully offset by the inclusion of stainless steel wire. As discussed under “—Overview of markets,” the reduction in average selling price is due to the inclusion of stainless steel wire of $15.8 million in net revenue and 4.8 million pounds that is not included in the comparable period in fiscal 2004 on a pro forma basis. High-performance alloy volume increased 1.2 million pounds or 8.0%. Our backlog increased by approximately $94.9 million or 101.5% to approximately $188.4 million at September 30, 2005 from approximately $93.5 million at September 30, 2004. Order entry increased by $128.8 million or 46.8% for fiscal 2005, as compared to fiscal 2004 on a pro forma basis.

Sales to the aerospace market increased by 28.5% to approximately $126.1 million in fiscal 2005 from approximately $98.1 million on a pro forma basis for the same period a year earlier. The improvement can be attributed to an increase in the average selling price per pound, which is

due to a generally improved market pricing structure, reflecting the higher raw material costs and improved market demand. Additionally, a greater proportion of the volume sold was higher-priced specialty alloys and titanium tubulars as compared to the lower-priced nickel-base alloy product forms sold in the same period a year earlier.

Sales to the chemical processing market increased by 24.1% to approximately $76.2 million in fiscal 2005 from approximately $61.4 million on a pro forma basis for the same period a year earlier due to the combined effects of a 35.7% increase in the average selling price per pound, which was partly offset by a 9.5% decrease in volume. The volume decrease is attributable to our emphasis on more specialty higher-margin product, versus large-project lower-margin commodity grades. The significant increase in the average selling price is due to improved market prices as a result of generally higher raw material costs, and to improving demand in the marketplace for high-end specialty products and improved product mix.

Sales to the land-based gas turbine market increased by 63.3% to approximately $67.1 million in fiscal 2005 from approximately $41.1 million on a pro forma basis for the same period a year earlier, due to an increase in volume of 34.3% and a 21.4% increase in the average selling price per pound. The increase in volume was mainly due to improved global sales of proprietary alloy round products and specialty alloy flat products to domestic fabricators to support the growing demand of the gas turbine manufacturers. The increase in the average selling price is attributed to improved market prices as a result of generally higher raw material costs and improving market demand.

Sales to other markets increased by 71.1% to approximately $53.2 million in fiscal 2005 from approximately $31.1 million on a pro forma basis for the same period a year earlier. The volume and revenue in this category increased during this time period as compared to the same period a year earlier due to the inclusion of the stainless steel wire business and higher selling prices due to increased raw material costs. For fiscal 2005, the “Other Markets” category includes $15.8 million in net revenue and 4.7 million pounds of stainless steel wire as a result of the Branford Wire acquisition, which were not included in the same period of the prior year.

Cost of sales. Cost of sales as a percent of net revenues increased to 88.8% in fiscal 2005 from 86.6% in fiscal 2004 on a pro forma basis. The increasing percentage of cost of sales as compared to net revenue can be attributed primarily to the non-cash amortization of fresh start fair value adjustments. Improved product pricing and greatly improved volume (which improved absorption of fixed manufacturing costs) were partially offset by unplanned equipment downtime and higher raw material and energy costs between comparable periods. Specifically, the fourth quarter of fiscal 2005 was impacted by unplanned equipment outages costing approximately $3.0 million, which increased cost of sales by approximately 1% for the fiscal year.

Selling, general and administrative expense. Selling, general and administrative expense increased by approximately $4.9 million to approximately $33.0 million for fiscal 2005 from approximately $28.1 million for fiscal 2004 on a pro forma basis. The increase in selling, general and administrative expense was due to higher non-recurring professional fees of $1.2 million for preparation and filing of a registration statement with the Securities and Exchange Commission; $1.1 million related to professional and consulting fees for readiness compliance with the Sarbanes Oxley Act of 2002; $1.1 million in higher sales commission expense due to increased sales levels; $1.2 million in selling, general and administrative expense related to the Branford

Wire acquisition and $2.4 million in higher costs associated with a higher level of business activity, increased head count required for restoration to proper service levels previously eliminated in market downturns and growth in foreign entities. These increases were partially offset by the gain on sale of land and buildings at our Openshaw, England facility of $2.1 million. Selling, general and administrative expenses as a percentage of net revenues decreased to 10.1% in fiscal 2005 compared to 12.0% in fiscal 2004 on a pro forma basis.

Research and technical expense. Research and technical expense remained relatively flat at $2.6 million or 0.8% of net revenues in fiscal 2005 compared to 1.1% of net revenues in fiscal 2004 on a pro forma basis.

Restructuring and other charges. During fiscal 2005, Haynes incurred approximately $0.6 million of professional fees in connection with the completion of the U.S. operations’ filing for reorganization relief under Chapter 11 of the U.S. Bankruptcy Code. Corresponding expense for fiscal 2004 on a pro forma basis was $4.5 million.

Operating income (loss). As a result of the above factors, operating income for fiscal 2005 was approximately $0.1 million compared to an operating loss of approximately $(3.7) million for fiscal 2004 on a pro forma basis.

Interest expense. Interest expense increased by approximately $1.5 million to approximately $6.4 million for fiscal 2005 from approximately $4.9 million for fiscal 2004 on a pro forma basis. The $4.9 million of interest expense in fiscal 2004 on a pro forma basis consisted of $1.1 million in non-recurring fees and expenses related to the revolving credit facility put in place upon our emergence from bankruptcy and $3.8 million in interest expense related to our outstanding balances under our credit agreement. Our interest expense increase for fiscal 2005 was due to a higher outstanding balance on our revolving credit facility primarily resulting from high sales growth and increasing raw material cost. Interest expense of approximately $16.3 million in prior years does not exist in fiscal 2005 as the 11 5 ¤ 8 % senior notes were discharged in connection with our emergence from bankruptcy. This discussion does not reflect the elimination of interest on the notes when comparing fiscal 2004 on a pro forma basis to fiscal 2005.

Income taxes. The income tax benefit decreased by approximately $1.2 million to approximately $2.1 million for fiscal 2005 from approximately $3.3 million for fiscal 2004 on a pro forma basis. The effective tax rate was 33.8% for fiscal 2005 compared to 38.0% for fiscal 2004 on a pro forma basis. This decrease is primarily attributable to foreign rate differentials and non deductible restructuring and SEC filing costs.

Net loss. As a result of the above factors, the net loss was approximately $(4.1) million for fiscal 2005 compared to the net loss of approximately $(5.4) million for fiscal 2004 on a pro forma basis.

Eleven months ended August 31, 2004 and one month ended September 30, 2004

Other items impacting the predecessor eleven months ended August 31, 2004 or the successor one month period ended September 30, 2004 are discussed below.

Reorganization items. During the eleven months ended August 31, 2004, Haynes incurred approximately $177.7 million in reorganization items, of which $7.3 million was expense relating to professional fees, contract amendment fees, travel expenses, directors’ fees, and write offs of bond discount and debt issuance costs, and $185.0 million was income relating to the gain on cancellation of the 11 5 ¤ 8 % senior notes due September 1, 2004, fresh start accounting adjustments, and fair value adjustments required as a result of the filing of a petition for reorganization relief pursuant to the Chapter 11 of the U.S. Bankruptcy Code and related emergence from bankruptcy.

Interest expense. Haynes recorded $14.0 million of interest expense during the eleven months ended August 31, 2004. Pursuant to SOP 90-7, $6.9 million of interest expense on the 11 5 ¤ 8 % senior notes due September 1, 2004 was not recorded because payment was not expected to occur.

Income taxes. The income tax expense for the eleven months ended August 31, 2004, was minimal due to the tax treatment for the various items related to our emergence from bankruptcy and the application of fresh start reporting. Haynes recorded income tax expense based upon the U.S. statutory rate adjusted for forgiveness of debt income, fresh start accounting adjustments, non-deductible restructuring costs, foreign tax rate differentials, and state income taxes.

Liquidity and capital resources

Comparative cash flow analysis

The following analysis provides a comparison of cash flow for the years ended September 30, 2006, 2005 and 2004 (on a combined basis for the predecessor company and the successor company).

During fiscal 2006 and fiscal 2005, our primary sources of cash were borrowings under our revolving credit facility with a group of lenders led by Wachovia Capital Finance Corporation (Central) (described below) and cash from operations. Historically issuing debt securities was a source of cash. At September 30, 2006, Haynes had cash and cash equivalents of approximately $6.2 million compared to cash and cash equivalents of approximately $2.9 million at September 30, 2005.

Net cash provided in operating activities was $0.3 million in fiscal 2006, as compared to cash used of $4.8 million in fiscal 2005. At September 30, 2006, inventory balances were approximately $30.1 million higher than fiscal 2005 year end balances, as a result of the continued increase in the costs of the raw materials (nickel, molybdenum and cobalt), and a higher level of inventory required to be maintained to support the increased level of sales. The increased level of sales also resulted in increased accounts receivable of $18.1 million at September 30, 2006 compared to September 30, 2005. Net cash used in investing activities was $10.6 million in 2006, primarily as a result of our continuing capital expenditure program. Net cash used in operating and investing activities in fiscal 2006 was funded by cash from financing activities, primarily borrowings of $12.4 million on our revolving credit facility.

Net cash used in operating activities was $4.8 million in fiscal 2005, as compared to $23.9 million in fiscal 2004. At September 30, 2005, inventory balances, including the effects of the Branford

Wire acquisition, were approximately $14.2 million higher than fiscal 2004 year end balances, as a result of our $42.5 million net cash investment in inventory during the period, which was offset by $25.4 million of non-cash fresh start accounting adjustments to inventory required by SOP 90-7 upon our emergence from bankruptcy recognized as expense during the period. The amount of our net cash investment in inventory was affected by rising costs of the raw materials nickel, molybdenum and cobalt, and a higher level of inventory required to be maintained to support the increased level of sales. The increase in cash used in operating activities was partially offset by an increase in accounts payable of approximately $10.4 million due to the increasing cost of raw materials and the rising level of sales activity. Net cash used in investing activities in fiscal 2005 was $14.7 million, which includes capital expenditures of $9.0 million and $8.3 million for the Branford Wire acquisition (which includes $2.6 million for property, plant and equipment), partially offset by proceeds from sales of property of $2.3 million. In fiscal 2005, net cash used in operating and investing activities was funded by cash from financing activities, primarily borrowings of $22.0 million on our revolving credit facility.

Net cash used in operating activities in fiscal 2004 was approximately $23.9 million, as compared to net cash used in operating activities of approximately $8.0 million in fiscal 2003. The increase in net cash used in operating activities in fiscal 2004 was the result of increased sales activity which resulted in increased accounts receivable balances and increased investments in inventory to support the higher sales levels. Accounts receivable increased from $35.3 million at September 30, 2003 to $54.4 million at September 30, 2004, and inventories increased from $85.8 million at September 30, 2003 to $130.8 million at September 30, 2004. Approximately $25.4 million of the inventory increase is attributable to the non-cash fresh start accounting adjustments required by SOP 90-7 upon emergence from bankruptcy. Higher inventory requirements at higher raw material costs, particularly the cost of nickel, were responsible for the remainder of the increase in inventory balances. The increase in accounts receivable and inventories was partially offset by an increase in accounts payable from $23.2 million at September 30, 2003 to $34.2 million at September 30, 2004 due primarily to rising costs of raw materials and a higher level of inventory due to increasing levels of business.

Future sources of liquidity

Our sources of cash in fiscal 2007 are expected to consist primarily of cash generated from operations and cash on hand, borrowings under both the U.S. revolving credit facility and the U.K. revolving credit facility (described below), the after-tax proceeds, net of expenses, of the $50.0 million up-front payment received from Titanium Metals Corporation, or TIMET, in the first quarter of fiscal 2007 (for more information see “Business—Agreement with Titanium Metals Corporation”), and the net proceeds of this offering. The U.S. revolving credit facility and the U.K. revolving credit facility combine to provide borrowings in a maximum amount of $145.0 million, subject to a borrowing base formula and certain reserves. At September 30, 2006, Haynes had access to a total of approximately $29.5 million ($21.3 million in the United States and $8.2 million in the U.K.) under both revolving credit facilities (subject to borrowing base and certain reserves) and cash of approximately $6.2 million. We believe that the resources described above will be sufficient to fund planned capital expenditures and working capital requirements over the next twelve months, although there can be no assurance that this will be the case.

U.S. revolving credit facility. The U.S. revolving credit facility provides for revolving loans in a maximum amount of $130.0 million. Borrowings under this revolving credit facility bear interest

at either Wachovia Bank, National Association’s “prime rate,” plus up to 1.5% per annum, or the adjusted Eurodollar rate used by the lender, plus up to 3.0% per annum, at our option. As of September 30, 2006, the revolving credit facility had an outstanding balance of $112.8 million and bore interest at a weighted average interest rate of 7.32%. In addition, Haynes must pay monthly in arrears a commitment fee of 0.375% per annum on the unused amount of the U.S. revolving credit facility total commitment. For letters of credit, Haynes must pay 2.5% per annum on the daily outstanding balance of all issued letters of credit, plus customary fees for issuance, amendments, and processing. We are subject to certain covenants as to EBITDA and fixed charge coverage ratios and other customary covenants, including covenants restricting the incurrence of indebtedness, the granting of liens, the sale of assets and the declaration of dividends and other distributions on our capital stock. As of September 30, 2006, the most recent required measurement date under the agreement documentation, we were in compliance with these covenants. The U.S. revolving credit facility matures on April 12, 2009. Borrowings under this revolving credit facility are collateralized by a pledge of substantially all of the U.S. assets of Haynes, with the exception of the four-high Steckel rolling mill and related assets, which are pledged to TIMET.

U.K. revolving credit facility. Our U.K. subsidiary, Haynes U.K., has entered into an agreement with a U.K.-based lender providing for a $15.0 million revolving credit facility maturing on April 2, 2007. We are expecting to renew this facility or replace the facility with one of similar availability. Haynes U.K. is required to pay interest on loans made under the revolving credit facility in an amount equal to LIBOR (as calculated in accordance with the terms of the revolving credit facility), plus 3% per annum. As of September 30, 2006, the revolving credit facility had an outstanding balance of $4.0 million and bore interest at a weighted average interest rate of 8.34%. Availability under this revolving credit facility is limited by the receivables available for sale to the lender, the net of stock and inventory and certain reserves established by the lender in accordance with the terms of the revolving credit facility. Haynes U.K. must meet certain financial covenants relating to tangible net worth and cash flow. As of September 30, 2006, the most recent measurement date required under the revolving credit facility, Haynes U.K. was in compliance with these covenants. The revolving credit facility is secured by a pledge of substantially all of the assets of Haynes U.K.

Future uses of liquidity

Our primary uses of cash over the next twelve months are expected to consist of expenditures related to:

· increasing levels of working capital due to increased levels of operations and rising raw material cost;

· capital spending to improve reliability and performance of the equipment;

· reduction of debt;

· pension plan funding;

· income tax payments, including obligations associated with the TIMET conversion agreement; and

· interest payments on outstanding indebtedness.

Planned fiscal 2007 capital spending is targeted at $13.0 million. The main projects for fiscal 2007 include the completion of the projects already started related to the electroslag remelt equipment, rolling mills and the upgrade of the annealing equipment at the Kokomo, Indiana facility. We believe that the completion of these capital projects and the related improvement in the reliability and performance of the equipment will have a positive effect on our profitability and working capital management. Planned downtime is scheduled for fiscal 2007 to implement these capital improvements.

We are also evaluating the desirability of possible additional capital expansion projects to capitalize on current market opportunities. Additionally, acceleration of future capital spending beyond what is currently planned may occur in order to accelerate the realization of the benefits such as improved working capital management, reduced manufacturing cost and increased capacity. Consideration will also be given to potential acquisitions similar to the Branford Wire acquisition which complement our product line, reduce production costs and increase capacity.

Contractual obligations

The following table sets forth our contractual obligations for the periods indicated, as of September 30, 2006:

	Payments due by period
(in thousands)	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Debt obligations (including interest)(1)	$	141,253	$	9,082	$	132,171	$	—		$	—
Operating lease obligations	9,201		3,201		4,890		1,110			—
Raw material contracts	173,094		94,018		79,076		—			—
Mill supplies contracts	473		473		—		—			—
Capital projects	12,986		10,000		2,986		—			—
Pension plan(2)	3,134		3,134		—		—			—
Other postretirement benefits(3)	50,000		5,000		10,000		10,000			25,000
Non-compete obligations(4)	550		110		220		220			—
Total	$	390,691	$	125,018	$	229,343	$	11,330		$	25,000

(1) Interest is calculated annually using the principal balance and interest rates as of September 30, 2006.

(2) Haynes has a current funding obligation to contribute $2.0 million to the domestic pension plan and all benefit payments under the domestic pension plan will come from the plan and not Haynes. Haynes expects its U.K. subsidiary to contribute $1.1 million in fiscal 2007 to the U.K. pension plan arising from an obligation in the U.K. revolving credit facility.

(3) Represents expected postretirement benefits only.

(4) Pursuant to an escrow agreement, as of April 11, 2005, Haynes established an escrow account to satisfy its obligation to make payments under a non compete agreement entered into as part of the Branford Wire acquisition. This amount is reported as restricted cash.

At September 30, 2006, Haynes also had $0.3 million outstanding under letters of credit. The letters of credit are outstanding primarily in connection with post-closure environmental assurance and building lease obligations.

Inflation

Historically, Haynes has had the ability to pass on to customers both increases in consumable costs and material costs because of the value-added contribution the material makes to the final product. However, there is no guarantee that Haynes will continue to be able to achieve this in the future.

Critical accounting policies and estimates

Overview

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to bad debts, inventories, income taxes, assets, impairments and retirement benefits. The process of determining significant estimates is fact specific and takes into account factors such as historical experience, current and expected economic conditions, product mix and, in some cases, actuarial techniques, and various other factors that are believed to be reasonable under the circumstances. The results of this process form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Haynes constantly reevaluates these significant factors and makes adjustments where facts and circumstances dictate. Actual results may differ from these estimates under different assumptions or conditions.

Our accounting policies are more fully described in Note 2 to the consolidated financial statements included elsewhere in this prospectus. Haynes has identified certain critical accounting policies, which are described below. The following listing of policies is not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles, with no need for management’s judgment in their application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result.

Revenue recognition

Revenue is recognized when title passes to the customer which is generally at the time of shipment (F.O.B. shipping point or at a foreign port for certain export customers). Allowances for sales returns are recorded as a component of net revenues in the periods in which the related sales are recognized. Management determines this allowance based on historical experience and we have not had any history of returns that have exceeded our recorded allowances.

Pension and post-retirement benefits

Haynes has defined benefit pension and postretirement plans covering most of its current and former employees. Significant elements in determining the assets or liabilities and related income or expense for these plans are the expected return on plan assets (if any), the discount rate used

to value future payment streams, expected trends in health care costs, and other actuarial assumptions. Annually, Haynes evaluates the significant assumptions to be used to value its pension and postretirement plan assets and liabilities based on current market conditions and expectations of future costs. If actual results are less favorable than those projected by management, additional expense may be required in future periods. There were no changes to the terms of these benefits in connection with our emergence from bankruptcy.

We believe the expected rate of return on plan assets of 8.5% is a reasonable assumption based on our asset allocation of 65% equity, 32% fixed income and 3% real estate/other. Our assumption for expected rate of return for plan assets for equity, fixed income, and real estate/other are 10.25%, 5.5% and 8.5%, respectively. This position is supported through a review of investment criteria, and consideration of historical returns over a several year period.

Salaried employees hired after December 31, 2005 are not covered by the pension plan; however, they are eligible for an enhanced matching program of the defined contribution plan (401(k)).

Impairment of long-lived assets, goodwill and other intangible assets

Haynes reviews long-lived assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of the asset to the undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount exceeds the fair value of the asset. Haynes reviews goodwill for impairment annually or more frequently if events or circumstances indicate that the carrying amount of goodwill may be impaired. Recoverability of goodwill is measured by a comparison of the carrying value to the fair value of a reporting unit in which the goodwill resides. If the carrying amount of a reporting unit exceeds its fair value, an impairment charge is recognized to the extent that the implied fair value of the reporting unit’s goodwill exceeds its carrying value. The implied fair value of goodwill is the residual fair value, if any, after allocating the fair value of the reporting unit to all of the assets (recognized and unrecognized) and all of the liabilities of the reporting unit. The fair value of reporting units is generally determined using a discounted cash flow approach. Assumptions and estimates with respect to estimated future cash flows used in the evaluation of long-lived assets and goodwill impairment are subject to a high degree of judgment and complexity. Haynes reviewed goodwill and trademarks for impairment as of August 31, 2006, and concluded no impairment adjustment was necessary. No events or circumstances have occurred that would indicate the carrying value of goodwill or trademarks may be impaired since its testing date.

Share-based compensation

Haynes had previously adopted the disclosure only provisions of SFAS No. 123, Accounting for Stock Based Compensation . In connection with the plan of reorganization, the successor company has adopted a stock option plan for certain key management employees and non-employee directors pursuant to the terms set forth in the First Amended Joint Plan of Reorganization. Our stock option plans authorize the granting of non-qualified stock options to certain key employees and non-employee directors of Haynes to purchase up to 1,500,000 shares of our common stock.

In December 2004, SFAS No. 123(R), Share Based Payment, a replacement of SFAS No. 123, Accounting for Stock Based Compensation , and a rescission of APB Opinion No. 25, Accounting for Stock Issued to Employees , was issued. This statement requires compensation costs related to share based payment transactions to be recognized in the financial statements. The amount of compensation cost is measured based upon the grant date fair value. The fair value of the option grants is estimated on the date of grant using the Black Scholes option pricing model with assumptions on dividend yield, risk-free interest rate, expected volatilities, and expected lives of the options. Haynes implemented SFAS No. 123(R) on October 1, 2005 for all unvested options using the modified prospective method of adoption.

Income taxes

Haynes accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes (“SFAS No. 109”), which requires deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between book and tax bases of recorded assets and liabilities. SFAS No. 109 also requires deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. The determination of whether or not a valuation allowance is needed is based upon an evaluation of both positive and negative evidence and the expected reversal date of temporary differences to be deducted on future income tax returns. In its evaluation of the need for a valuation allowance, Haynes assesses prudent and feasible tax planning strategies and expected reversal dates. The ultimate amount of deferred tax assets realized could be different from those recorded, as influenced by potential changes in enacted tax laws and the availability of future taxable income.

Recently issued accounting pronouncements

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109 (FIN 48). FIN 48 seeks to reduce the diversity in practice associated with certain aspects of measuring and recognition in accounting for income taxes. In addition, FIN 48 requires expanded disclosure with respect to the uncertainty in income taxes and is effective as of the beginning of our 2008 fiscal year. We are currently evaluating the impact, if any, that FIN 48 will have on our financial statements.

In September 2006, the FASB issued FASB Statement No. 157, Fair Value Measurement (SFAS 157). SFAS 157 addresses standardizing the measurement of fair value for companies who are required to use a fair value measure of recognition for recognition or disclosure purposes. The FASB defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measure date.” The statement is effective for fiscal years beginning after November 15, 2007 and for interim periods within those fiscal years. We are required to adopt SFAS 157 beginning on October 1, 2008. We are currently evaluating the impact, if any, of SFAS 157 on our financial position, results of operations and cash flows.

In September 2006, the FASB issued FASB Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans (SFAS 158). SFAS 158 requires companies to recognize the funded status of defined benefit pension and other postretirement plans as a net

asset or liability in its financial statements. In addition, disclosure requirements related to such plans are affected by SFAS 158. If SFAS 158 had been implemented in fiscal 2006, the estimated impact on our financial position would have been a reduction in pension and postretirement benefits liability of $5.2 million, an increase in stockholders’ equity accumulated other comprehensive income of $3.2 million, and a reduction of deferred tax asset of $2.0 million. Haynes will begin recognition of the funded status of its defined benefit pension and postretirement plans and will include the required disclosures under the provisions of SFAS 158 at the end of fiscal 2007. The adoption of SFAS 158 is not expected to impact our debt covenants or cash position or significantly affect the results of operations.

In June 2006, the EITF reached consensus on EITF 06-3, Disclosure Requirements for Taxes Assessed by a Government Authority on Revenue-Producing Transactions . EITF 06-3 requires disclosure of a company’s accounting policy with respect to presentation of taxes collected on a revenue producing transaction between a seller and a customer. For taxes that are reported on a gross basis (included in revenues and costs), EITF 06-3 also requires disclosure of the amount of taxes included in the financial statements. EITF 06-3 is effective for interim and annual reporting periods beginning after December 15, 2006. Haynes does not expect the adoption of EITF 06-3 to have a material impact on our consolidated financial statements.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108 (“SAB 108”), which provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. SAB 108 is effective for the first fiscal year ending after November 15, 2006, which will be our fiscal year ending September 30, 2007. The adoption of this statement is not expected to have a material impact on our financial position or results of operations.

In February 2006, the FASB issued FASB Statement No. 155, Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and 140 (SFAS 155), that allows a preparer to elect fair value measurement at acquisition, at issuance, or when a previously recognized financial instrument is subject to a re-measurement (new basis) event, on an instrument-by-instrument basis, in cases in which a derivative would otherwise have to be bifurcated. It also eliminates the exemption from applying Statement 133 to interests in securitized financial assets so that similar instruments are accounted for similarly regardless of the form of the instruments. This Statement is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. Haynes does not anticipate that the adoption of SFAS 155 will have an impact on our overall results of operations or financial position.

In March 2006, the FASB issued FASB Statement No. 156, Accounting for Servicing of Financial Assets—an amendment of FASB Statement No. 140 (SFAS 156), that applies to the accounting for separately recognized servicing assets and servicing liabilities. This Statement requires that all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable. An entity should adopt this Statement as of the beginning of its first fiscal year that begins after September 15, 2006. Haynes does not anticipate that the adoption of SFAS 156 will have an impact on our overall results of operations or financial position.

Internal control over financial reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined by Exchange Act rules 13a-15(f) and 15d-15(f)) for Haynes. With the participation of the Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework and criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations (COSO) of The Treadway Commission. Based on our assessment, management has concluded that, as of September 30, 2006, our internal control over financial reporting is effective based on those criteria.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management’s assessment of the effectiveness of internal control over financial reporting as of September 30, 2006 has been audited by Deloitte and Touche LLP, our independent registered public accounting firm, and Deloitte & Touche has issued a report on our management’s assessment of our internal control over financial reporting.

Business

General

Haynes International, Inc. is one of the world’s largest producers of high-performance nickel- and cobalt-based alloys in sheet, coil and plate forms. We are focused on developing, manufacturing, marketing and distributing technologically advanced, high-performance alloys, which are used primarily in the aerospace, chemical processing and land-based gas turbine industries. Our products consist of high temperature resistant alloys, or HTA products, and corrosion resistant alloys, or CRA products. HTA products are used by manufacturers of equipment that is subjected to extremely high temperatures, such as jet engines for the aerospace industry, gas turbine engines used for power generation and waste incineration, and industrial heating equipment. CRA products are used in applications that require resistance to very corrosive media found in chemical processing, power plant emissions control and hazardous waste treatment. We believe we are one of four principal producers of high-performance alloy products in sheet, coil and plate forms, and sales of these forms, in the aggregate, represented approximately 64% of our net revenues in fiscal 2006. We also produce our products as seamless and welded tubulars, and in bar, billet and wire forms.

We have achieved our growth through a combination of capitalizing on the growth of our end markets, increasing value-added services provided to our customers, increasing our presence in international markets and, to a lesser extent, selected strategic initiatives such as our November 2004 acquisition of assets of Branford Wire. For fiscal 2006, our net revenue was $434.4 million, a 33.7% increase over fiscal 2005’s net revenue of $325.0 million. As of September 30, 2006, our backlog orders were approximately $206.9 million, compared to approximately $188.4 million as of September 30, 2005 and approximately $93.5 million as of September 30, 2004. See “Business—Backlog” for a description of how we calculate backlog.

The breadth and quality of our products, combined with our superior customer service delivered through our service and sales center network, have resulted in long-standing relationships with many of our customers. We have supplied high-performance alloys to our top 10 customers, based on fiscal 2006 sales, for an average of 20 years. We supply high-performance alloys that are used by a broad range of end use customers, including General Electric Co.; Pratt & Whitney; Rolls Royce plc; The Boeing Co.; SNECMA; E.I. DuPont de Nemours & Co.; The Dow Chemical Co.; Siemens Westinghouse; Solar Turbines, Inc.; British Petroleum p.l.c.; Celanese AG; and Eli Lilly and Co. None of these customers, or any of our other customers, accounted for more than 10% of our sales in fiscal 2006. Our top 20 customers accounted for approximately 38% of sales in fiscal 2006.

Our markets

We estimate that the global specialty alloy market, including stainless steels, general purpose nickel alloys and high-performance nickel- and cobalt-based alloys, represents total production volume of approximately 38.5 billion pounds per annum. Of this total market, we compete in the high-performance nickel- and cobalt-based alloy sector which we estimate to represent approximately 200 million pounds of production per annum. Given the technologically advanced nature of the products, strict requirements of the end users and higher-growth end markets, we believe the high-performance alloy sector provides greater growth potential, higher profit margins and greater means for service, product and price differentiation than stainless steels and general purpose nickel alloys. We expect growth in worldwide demand for high-performance alloys to increase significantly over the next ten years based upon increasing demand in the aerospace, chemical processing and land-based gas turbine markets. While stainless steel and general purpose nickel alloy is generally sold in bulk through third-party distributors our products are sold in smaller-sized orders which are customized and typically handled on a direct-to-customer basis. The high-performance alloy market demands diverse, specialty alloys suitable for use in precision manufacturing. We estimate that, due in part to the above factors, the average selling price per pound of high-performance alloy in 2006 was approximately $17.00, compared to approximately $2.50 for stainless steel and approximately $12.00 for general purpose nickel alloys.

Aerospace . Haynes has manufactured HTA products for the aerospace market since the late 1930s, and has developed numerous proprietary alloys for this market. Customers in the aerospace market tend to be the most demanding with respect to meeting specifications within very low tolerances and achieving new product performance standards. Stringent safety standards and continuous efforts to reduce equipment weight require close coordination between Haynes and its customers in the selection and development of HTA products. As a result, sales to aerospace customers tend to be made through our direct sales force. Demand for our products in the aerospace industry is based on the new and replacement market for jet engines and the maintenance needs of operators of commercial and military aircraft. The hot sections of jet engines are subjected to substantial wear and tear and accordingly require periodic maintenance, replacement and overhaul. Haynes views the maintenance, replacement and overhaul business as an area of continuing growth, and expects the number of engines in service to increase significantly in the next ten to twenty years.

Chemical processing . The chemical processing market represents a large base of customers with diverse CRA applications driven by demand for key end use industries such as automobiles, housing, health care, agriculture and metals production. CRA products supplied by Haynes have been used in the chemical processing market since the early 1930s. Demand for our products in this market is driven by the level of maintenance, repair and expansion requirements of existing chemical processing facilities, as well as the construction of new facilities. We believe our extensive worldwide network of company-operated service and sales centers, as well as our network of independent distributors and sales agents who supplement our direct sales efforts in Europe and Asia, is a competitive advantage in marketing our CRA products in the chemical processing market.

Land-based gas turbines. Demand for our products in this market is driven by the construction of cogeneration facilities such as base load for electric utilities or as backup sources to fossil fuel-

fired utilities during times of peak demand. Demand for our alloys in the land-based gas turbine market has also been driven by concerns regarding lowering emissions from generating facilities powered by fossil fuels. Land-based gas turbine generating facilities have gained acceptance as clean, low-cost alternatives to fossil fuel-fired electric generating facilities. Land-based gas turbines are also used in power barges with mobility and as temporary base-load-generating units for countries that have numerous islands and a large coastline. Further demand is generated in mechanical drive units used for oil and gas production and pipeline transportation, as well as microturbines that are used as back up sources of power generation for hospitals and shopping malls. We believe this will continue to be an area of growth for us as long as global demand for power generation capacity remains strong. In addition, with the opening of a service and sales center in China and a sales center in India in fiscal 2005, we are well-positioned to take advantage of the growth in those areas in demand for power generation.

Prior to the enactment of the Clean Air Act, land-based gas turbines were used primarily to satisfy peak power requirements. Haynes believes that land-based gas turbines are a clean, low-cost alternative to fossil fuel-fired electric generating facilities. In the early 1990’s when Phase I of the Clean Air Act was being implemented, selection of land-based gas turbines to satisfy electric utilities’ demand firmly established this power source. Haynes believes that the mandated Phase II of the Clean Air Act and certain advantages of land-based gas turbines compared to coal-fired generating plants will further contribute to demand for its products over the next three to five years.

Other markets. Other industries to which Haynes sells its HTA products and CRA products include flue gas desulphurization (or FGD), waste incineration, industrial heat-treating, automotive, medical and oil and gas. The FGD industry has been driven by both legislated and self-imposed standards for lowering emissions from fossil fuel-fired electric generating facilities. With the completion of our currently active capital projects over the next 18 months, Haynes anticipates participating in the growth in the FGD industry due to the increased production capacity and the improved cost structure which will result from the completion of the capital projects. In addition, incineration of municipal, biological, industrial and hazardous waste products typically produces very corrosive conditions that demand high-performance alloys. Haynes also sells its products for use in the oil and gas industry, primarily in connection with sour gas production. Markets capable of providing growth are being driven by increasing performance, reliability and service life requirements for products used in these markets which could provide further applications for our products. As part of the Branford Wire acquisition, we also began selling stainless steel wire, but our strategy is to reduce production of lower margin stainless steel wire and increase production of higher margin high-performance alloy wire.

Our strategy

capacity and lower our costs through strategic investment in our manufacturing facilities. In order to accomplish these goals, we intend to pursue the following:

· Increase productivity through strategic equipment investment . We expect to continue to improve operating efficiencies through ongoing capital investment in our manufacturing facilities and equipment. Recent investment in our equipment has significantly improved our operating efficiency by increasing capacity, reducing downtime and manufacturing costs and improving working capital management and product quality. Our four-high Steckel mill, one of only two of its kind used to roll high-performance alloys, in conjunction with our sophisticated, multi-stage, melting and refining operation, produces a broad array of sheet, coil and plate products made to exacting specifications. At the same time, our smaller mills enable us to produce customized batch orders, which are generally more profitable, and which often are not practical or economical for our competitors to manufacture. Because we are one of the few manufacturers with the expertise and facilities to produce high-performance alloys, we believe that our investments will enable us to continue to satisfy increased customer demand for value-added products that meet precise specifications. We expect ongoing investment in fiscal 2007 and 2008 to capitalize on and continue to improve our operating efficiencies.

· Increase sales by providing value-added processing services . We believe that our network of service and sales centers throughout North America, Europe and Asia distinguishes us from our competitors. Our service and sales centers enable us to develop close customer relationships through direct interaction and to respond to customer orders quickly. Furthermore, unlike our competitors, who focus on broader markets and non-customized products, our service and sales centers give us the ability to provide precision laser and water jet processing services to cut and shape our products to our customers’ precise specifications. These services allow our customers to minimize their processing costs and outsource non-core activities. In addition, our rapid response time and enhanced processing services have allowed us to institute value-added pricing resulting in higher-margin sales and enhanced profitability. The value-added processing performed at our service and sales centers also allows us to capture our customers’ MRO business. Sales through our service and sales centers accounted for approximately 55.0% of our total revenue in fiscal 2006.

· Continue to expand our maintenance, repair and overhaul business . We believe that our MRO business serves a growing market and represents both an expanding and recurring revenue stream. Products used in hot section components for the aerospace industry require periodic replacement due to the intense stress of repetitive heating and cooling cycles, which drives a demand for recurring MRO work. In addition, products used in the land-based gas turbine business require significant overhaul approximately every three years, which we expect will further drive the growth of our MRO business. We expect the

MRO business to drive our growth in the chemical processing industries in North America and Western Europe as a result of the ongoing need for maintenance of installed capacity in those markets. Over time, we expect that the MRO business will support our growth in the chemical processing industries in China and India, due to the widespread building of chemical plants in those markets. We intend to continue to leverage the capabilities of our service and sales centers to respond quickly to our customers’ time-sensitive MRO needs to develop new and retain existing business opportunities.

· Increase revenue by developing new products and new applications for existing alloys . We believe that we are the industry leader in developing new alloys designed to meet our customers’ specialized and demanding requirements. We continue to work closely with customers and end users of our products to identify, develop, manufacture and test new high-performance alloys. Our engineering and technological group is continually developing new products and new applications for existing products and refining our manufacturing processes. The group, comprised of personnel with extensive industry and technological experience, operates from seven separate, fully equipped laboratories, including a process laboratory with a full spectrum of pilot scale melting/remelting equipment and hot and cold working equipment. Over the last five years, our technical programs have yielded five new proprietary alloys, an accomplishment that we believe distinguishes us from our competitors. Four of these new alloys are protected by U.S. patents, and one has a patent pending. We expect our continued emphasis on product innovation to yield similar future results, and we expect to focus our development efforts on specialized automotive products, the biopharmaceutical industry, the energy market for fuel cells and the market for turbine components for higher temperature operations.

· Expand product capability through strategic acquisitions and alliances . We will continue to examine opportunities that enable us to offer customers an enhanced and more competitive product line to complement our core flat products. These opportunities may include product line enhancement, such as that provided by our acquisition of certain assets from Branford Wire in November 2004. The Branford Wire acquisition has enabled us to provide a broader product line to customers, expand our markets, increase our production capacity in the high-margin business of high-performance alloy wire and reduce our cost structure for wire production. We will continue to look for opportunities that enhance the portfolio of products provided to customers such as wire, tubing, fittings and bar. We will also continue to evaluate strategic relationships with third parties in the industry in order to enhance our competitive position and relationships with customers. Such relationships could be similar to our 20-year conversion agreement we entered into with Titanium Metals Corporation in November 2006, which allowed us to monetize a portion of our excess production capacity on our four-high Steckel mill. Other potential strategic relationships could include new or enhanced relationships with long-term distribution sources.

Agreement with Titanium Metals Corporation

On November 17, 2006, we entered into a 20-year agreement to provide conversion services to Titanium Metals Corporation, or TIMET, for up to ten million pounds of titanium metal annually at prices established by the terms of the agreement. The transaction is documented by an Access and Security Agreement and a Conversion Services Agreement, both dated November 17, 2006. TIMET paid us a $50.0 million up-front fee and will also pay us for its processing services during the term of the agreement at prices established by the terms of the agreement. In addition to the volume commitment, we have granted TIMET a security interest in our four-high Steckel rolling mill, along with certain rights of access. TIMET may exercise an option to have ten million additional pounds of titanium converted annually, provided that it offers to loan up to $12.0 million to us for certain capital expenditures which would be required to expand capacity. We have the option to purchase titanium sheet and plate products from TIMET and have agreed not to produce our own titanium products (other than cold reduced titanium tubing). We have also agreed not to provide titanium conversion services to any entity other than TIMET for the term of the Conversion Services Agreement. The cash received of $50.0 million (up-front fee) will be recognized in income on a straight-line basis over the 20-year term of the agreement. The portion not recognized in income will be shown as deferred revenue on our consolidated balance sheet. Income taxes associated with the up-front fee will be primarily paid in fiscal 2008. We used the net proceeds of the $50.0 million payment to reduce the balance of our U.S. revolving credit facility. Upon certain instances of a change in control, a violation of the non-compete provisions or a performance default or upon the occurrence of an event of a force majeure which results in a performance default, we are required to return the unearned portion of the up-front fee.

Branford Wire acquisition

On November 5, 2004, Haynes Wire Company, a wholly owned subsidiary of Haynes, acquired certain assets of The Branford Wire and Manufacturing Company and certain of its affiliates for a purchase price of $8.3 million, which was paid in cash. As part of the transaction, Haynes Wire acquired a wire manufacturing plant in Mountain Home, North Carolina, manufacturing equipment, accounts receivable and inventory.

The Branford Wire acquisition has increased our wire manufacturing capacity. Prior to the acquisition, our high-performance alloy wire production capacity was approximately 500,000 pounds per year. Haynes Wire’s two-shift manufacturing capacity is estimated to be approximately 2.2 million pounds of finished stainless wire per year, with the capability to expand to approximately 3.0 million pounds per year. The Branford Wire acquisition allowed Haynes to reduce its cost of wire production and improve the quality of the wire it produces. Haynes Wire’s manufacturing facilities and equipment are designed to produce wire products efficiently and cost-effectively. In addition, the employees at the Mountain Home, North Carolina facility are experienced at producing wire products and are able to maintain high quality standards.

This acquisition provides opportunities for increasing wire sales through improvements in quality and manufacturing processes in the high-performance alloy wires we produce, and by offering the expanded wire product line through our service and sales centers worldwide. Our expertise in producing high quality wire products is enabling us to expand our product offerings and increase our participation in the nickel- and cobalt-based alloy welding market.

Customers

The breadth and quality of our products, combined with our network of service centers which enhance customer service, have resulted in long-standing relationships with many of our customers. We have supplied high-performance alloy products to our top 10 customers, based on fiscal 2006 sales, for an average of 20 years. We supply high-performance alloys to a broad range of end use customers, including General Electric Co.; Pratt & Whitney; Rolls Royce plc; The Boeing Co.; SNECMA; E.I. DuPont de Nemours & Co.; The Dow Chemical Co.; Siemens Westinghouse; Solar Turbines, Inc.; British Petroleum p.l.c.; Celanese AG; and Eli Lilly and Co. None of these customers, or any of our other customers, accounted for more than 10% of our sales in fiscal 2006. Our top 20 customers accounted for approximately 38% of sales in fiscal 2006.

Products

The global specialty alloy market consists of three primary sectors: stainless steel general purpose nickel alloys and high-performance nickel- and cobalt-based alloys. Except for its stainless steel wire products, Haynes competes exclusively in the high-performance alloy sector, which includes HTA products and CRA products. We believe that the high-performance alloy sector represents 200 million pounds of production volume per annum out of a total specialty alloy market of 38.5 billion pounds of production volume per annum. In fiscal 2004, 2005 and 2006, HTA products accounted for approximately 73%, 75% and 68%, respectively, of our net revenues (excluding stainless steel wire). In fiscal 2003, 2004, and 2005, CRA products accounted for approximately 27%, 25% and 32%, respectively, of our net revenues (excluding stainless steel wire). These percentages of our total product revenue and volume are based on data which include revenue and volume associated with sales by us to our foreign subsidiaries, but exclude revenue and volume associated with sales by foreign subsidiaries to their customers. We believe, however, that the effect of including revenue and volume data associated with sales by our foreign subsidiaries would not materially change the percentages presented in this section.

High temperature resistant alloys . HTA products are used primarily in manufacturing components for the hot sections of gas turbine engines. Stringent safety and performance standards in the aerospace industry result in development lead times typically as long as eight to ten years in the introduction of new aerospace-related market applications for HTA products. However, once a particular new alloy is shown to possess the properties required for a specific application in the aerospace market, it tends to remain in use for extended periods. HTA

products are also used in gas turbine engines produced for use in applications such as naval and commercial vessels, electric power generators, power sources for offshore drilling platforms, gas pipeline booster stations and emergency standby power stations. The following table sets forth information with respect to our significant high temperature resistant alloys, applications and features:

Alloy	Year introduced	End markets and applications(1)	Features
HAYNES HR-160 Alloy(2)	1990	Waste incineration/CPI-boiler tube shields	Good resistance to sulfidation at high temperatures
HAYNES 242 Alloy(2)	1990	Aero-seal rings	High strength, low expansion and good fabricability
HAYNES HR-120 Alloy(2)	1990	LBGT-cooling shrouds	Good strength-to-cost ratio as compared to competing alloys
HAYNES 230 Alloy(2)	1984	Aero/LBGT-ducting, combustors	Good combination of strength, stability, oxidation resistance and fabricability
HAYNES 214 Alloy(2)	1981	Aero-honeycomb seals	Good combination of oxidation resistance and fabricating among nickel-based alloys
HAYNES 188 Alloy(2)	1968	Aero-burner cans, after-burner components	High strength, oxidation resistant cobalt-based alloys
HAYNES 625 Alloy	1964	Aero/CPI-ducting, tanks, vessels, weld overlays	Good fabricability and general corrosion resistance
HAYNES 263 Alloy	1960	Aero/LBGT-components for gas turbine hot gas exhaust pan	Good ductility and high strength at temperatures up to 1600 ° F
HAYNES 718 Alloy	1955	Aero-ducting, vanes, nozzles	Weldable high strength alloy with good fabricability
HASTELLOY X Alloy	1954	Aero/LBGT-burner cans, transition ducts	Good high temperature strength at relatively low cost
HAYNES Ti 3A1-2.5 Alloy	1950	Aero-aircraft hydraulic and fuel systems components	Light weight, high strength titanium-based alloy
HAYNES 25 Alloy(2)	1950	Aero-gas turbine parts, bearings, and various industrial applications	Excellent strength, good oxidation, resistance to 1800 ° F

(1) “Aero” refers to the aerospace market; “LBGT” refers to the land-based gas turbine market; “CPI” refers to the chemical processing market.

(2) Represents a patented product or a product that we believe has limited or no significant competition.

Corrosion resistant alloys . CRA products are used in a variety of applications, such as chemical processing, power plant emissions control, hazardous waste treatment, sour gas production and pharmaceutical vessels. Historically, the chemical processing market has represented the largest end-user sector for CRA products. Due to maintenance, safety and environmental considerations, we believe this market continues to represent an area of potential long-term growth. Unlike aerospace applications within the HTA product market, the development of new market applications for CRA products generally does not require long lead times. The following table sets forth information with respect to certain of our significant corrosion resistant alloys, applications and features:

Alloy	Year introduced	End markets and applications(1)	Features

HASTELLOY Alloy C-2000(2)	1995	CPI-tanks, mixers, piping	Versatile alloy with good resistance to uniform corrosion
HASTELLOY Alloy B-3(2)	1994	CPI-acetic acid plants	Better fabrication characteristics compared to other nickel-molybdenum alloys
HASTELLOY Alloy D-205(2)	1993	CPI-plate heat exchangers	Corrosion resistance to hot sulfuric acid
ULTIMET Alloy(2)	1990	CPI-pumps, valves	Wear and corrosion resistant nickel-based alloy
HASTELLOY Alloy C-22	1985	CPI/FGD-tanks, mixers, piping	Resistance to localized corrosion and pitting
HASTELLOY Alloy G-30(2)	1985	CPI-tanks, mixers, piping	Lower cost alloy with good corrosion resistance in phosphoric acid
HASTELLOY Alloy C-4	1973	CPI-tanks, mixers, piping	Good thermal stability
HASTELLOY Alloy C-276	1968	CPI/FGD/oil land gas-tanks, mixers, piping	Broad resistance to many environments

(1) “CPI” refers to the chemical processing market; “FGD” refers to the flue gas desulfurization market.

(2) Represents a patented product or a product that we believe has limited or no significant competition.

Patents and trademarks

We currently maintain a total of approximately 20 U.S. patents and approximately 200 foreign counterpart patents and applications targeted at countries with significant or potential markets for the patented products and continues to develop, manufacture and test high-performance nickel- and cobalt-based alloys. Over the last six years, our technical programs have yielded six new proprietary alloys, three of which are currently commercially available and three of which are being prepared to be brought to market. HAYNES 282 alloy, which we believe has very significant commercial potential, is the subject of a patent application filed in fiscal 2004, which, if granted, will provide protection until 2024. Also, U.S. patent applications were filed in 2006 for a new “HYBRID Corrosion-resistant Alloy” and a new high-temperature resistant alloy strengthened by a novel technique. Both of these new materials have significant, medium to long-term commercial potential and will be protected until 2026, if these patents are granted. In addition, three additional new proprietary alloys are at the laboratory stages of development. However, while we believe our patents are important to our competitive position, significant barriers to entry continue to exist beyond the expiration of any patent period. These barriers to entry and production include the unique equipment required to produce this material and the exacting process required to achieve the desired metallurgical properties. These processing requirements include such items as specific annealing temperature, processing speeds and reduction per rolling pass. We believe that the current alloy development program and these noted barriers to entry reduce the potential impact of patent expirations on us.

Trademarks on the names of many of our alloys have also been applied for or granted in certain foreign countries. Patents or other proprietary rights are an essential element of our business. Our strategy is to file patent applications in the United States and any other country that represents an important potential commercial market to us. In addition, we seek to protect our technology which is important to the development of our business. We also rely upon trade secret rights to protect our technologies and our development of new applications and alloys. We protect our trade secrets in part through confidentiality and proprietary information agreements with our customers.

For additional information see “—Research and Technical Development.”

Sales and marketing and distribution

We sell our products primarily through our direct sales organization, which operates from 13 total locations in the United States, Europe, Asia and India, 11 of which are service and sales centers. All of our service and sales centers are operated either directly by us or though our wholly-owned subsidiaries. Approximately 82% of our net revenues in fiscal 2006 was generated by our direct sales organization. The remaining 18% of our fiscal 2006 net revenues was generated by a network of independent distributors and sales agents who supplement our direct sales in the United States, Europe and Asia, some of whom have been associated with Haynes for over 30 years. We are currently in the process of evaluating the efficiency of some of our overseas distribution channels, including the appropriate number of distributors, the types of products sold through third party distributors and our distribution partners. On a prospective basis, we expect our direct sales force to continue to generate approximately 82% of total sales. This percentage may increase, however, as we open new service and sales centers.

Providing technical assistance to customers is an important part of our marketing strategy. We provide performance analyses of our products and those of our competitors for our customers. These analyses enable us to evaluate the performance of our products and to make recommendations as to the use of our products in appropriate applications, enabling our products to be included as part of the technical specifications used on the production of customers’ products. Our market development professionals are assisted by our engineering and technology staff in directing the sales force to new opportunities. We believe our combination of direct sales, technical marketing, engineering and customer support provides an advantage over other manufacturers in the high-performance alloy industry. This activity allows us to obtain direct insight into customers’ alloy needs and allows us to develop proprietary alloys that provide solutions to our customers’ problems.

Although there is a concentrated effort to expand foreign sales, the effort to grow domestic business also continues. The majority of revenue and profits continue to be provided by sales to U.S. customers and we continue to pursue opportunities to expand this market. This includes, but is not limited to, continued expansion of ancillary product forms, such as wire through the acquisition of The Branford Wire and Manufacturing Company, the continued development of new high-performance alloys, the utilization of external conversion resources to expand and improve the product form quality of mill produced product, the addition of equipment in U.S. service and sales centers to improve our ability to provide a product closer to the form required by the customer and the continued effort through our technical expertise to find solutions to customer challenges.

The following table sets forth the approximate percentage of our fiscal 2006 net revenues generated through each of our distribution channels.

	Domestic			Foreign			Total
Haynes mill direct/service and sales centers		50	%		32	%		82	%
Independent distributors/sales agents		11	%		7	%		18	%
Total		61	%		39	%		100	%

Our top twenty customers accounted for approximately 34% and 38% of our net revenues in fiscal 2005 and 2006, respectively. No customer or group of affiliated customers accounted for more than 10% of our net revenues in fiscal 2004, 2005 or 2006.

Our foreign and export sales were approximately $90.2 million, $128.5 million and $169.3 million for fiscal 2004, 2005 and 2006, respectively. Additional information concerning foreign operations and export sales is set forth in Note 16 to the consolidated financial statements included elsewhere in this prospectus.

Manufacturing process

High-performance alloys require a lengthier, more complex production process and are more difficult to manufacture than lower performance alloys, such as stainless steel alloys. The alloying elements in high-performance alloys must be highly refined during melting and the manufacturing process must be tightly controlled to produce precise chemical properties. The resulting alloyed material is more difficult to process because, by design, it is more resistant to deformation. Consequently, high-performance alloys require that a greater force be applied

when hot or cold working and are less susceptible to reduction or thinning when rolling or forging. This results in more cycles of rolling, annealing and pickling compared to a lower performance alloy to achieve proper dimensions. Certain alloys may undergo as many as 40 distinct stages of melting, remelting, annealing, forging, rolling and pickling before they achieve the specifications required by a customer. We manufacture our high-performance alloy in various forms, including sheet, plate, billet/ingot, tubular, wire and other forms.

The manufacturing process begins with raw materials being combined, melted and refined in a precise manner to produce the chemical composition specified for each high-performance alloy. For most high-performance alloys, this molten material is cast into electrodes and additionally refined through electroslag remelting. The resulting ingots are then forged or rolled to an intermediate shape and size depending upon the intended final product form. Intermediate shapes destined for flat products are then sent through a series of hot and cold rolling, annealing and pickling operations before being cut to final size.

The Argon Oxygen Decarburization gas controls in our primary melt facility remove carbon and other undesirable elements, thereby allowing more tightly controlled chemistries, which in turn produce more consistent properties in the high-performance alloys. The Argon Oxygen Decarburization gas control system also allows for statistical process control monitoring in real time to improve product quality.

We have a four-high Steckel mill for use in hot rolling material. Our four-high mill was installed in 1982 and is one of only two such mills in the high-performance alloy industry. The mill is capable of generating approximately 12.0 million pounds of separating force and rolling a plate up to 72 inches wide. The mill includes integrated computer controls (with automatic gauge control and programmed rolling schedules), two coiling Steckel furnaces and five heating furnaces. Computer controlled rolling schedules for each of the hundreds of combinations of product shapes and sizes we produce allow the mill to roll numerous widths and gauges to exact specifications without stoppages or changeovers.

We also operate a three-high rolling mill and a two-high rolling mill, each of which is capable of custom processing much smaller quantities of material than the four-high mill. These mills provide us with significant flexibility in running smaller batches of varied products in response to customer requirements. We believe the flexibility provided by the three-high and two-high mills provides us an advantage over our major competitors in obtaining smaller specialty orders.

Backlog

We define backlog to include firm commitments from customers for delivery of product at established prices. Approximately 30% of the orders in our backlog at any given time include prices that are subject to adjustment based on changes in raw material costs. Historically, approximately 75% of our backlog orders have shipped within six months and approximately 90% have shipped within 12 months. The backlog figures do not reflect that portion of our business conducted at our service and sales centers on a spot or “just-in-time” basis.

(in millions)	2004		2005		2006

Backlog at fiscal quarter ended:
December 31	$	54.7	$	110.9	$	203.5
March 31	69.6		134.8		207.4
June 30	82.6		159.2		200.8
September 30	93.5		188.4		206.9

Raw materials

Due to the increase in the cost of raw materials during fiscal 2006, raw material rose as a percentage of cost of sales to 58% from 50% in the prior year. Nickel, a major component of many of our products, accounts for approximately 51% of our raw material costs, or approximately 30% of our total cost of sales. Each pound of high-performance alloy contains, on average, 48% nickel. Other raw materials include cobalt, chromium, molybdenum and tungsten. Melt materials consist of virgin raw material, purchased scrap and internally produced scrap.

The average price for cash buyers for the 30 day period ended on the last day of the period presented, as reported by the London Metals Exchange for fiscal 2004, 2005 and 2006, was $6.02, $6.45 and $13.67, respectively.

Since most of our products are produced pursuant to specific orders, we purchase materials against known production schedules. The materials are purchased from several different suppliers through various arrangements including annual contracts and spot purchases, and involve a variety of pricing mechanisms. Because we maintain a policy of pricing our products at the time of order placement, we attempt to establish selling prices with reference to known costs of materials, thereby reducing the risk associated with changes in the cost of raw materials. However, to the extent that the price of nickel rises rapidly, there may be a negative effect on our gross profit margins. We are considering forward purchase opportunities with certain suppliers. See “Risk Factors.”

Effective October 1, 2003, we changed our inventory costing method for domestic inventories from the LIFO method to the FIFO method. We believe that the FIFO method is preferable to LIFO because:

· FIFO inventory values presented in our balance sheet will more closely approximate the current value of inventory,

· costs of sales are still appropriately charged in the period of the related sales, and

· the change to FIFO method for domestic inventories results in our using a uniform method of inventory valuation globally.

Although we believe that FIFO is preferable to LIFO for the reasons stated, the use of FIFO during a period of rapidly rising or falling commodity prices can result in an imprecise matching of revenues and expenses in the short term.

Research and technical support

Our technology facilities, located at our Kokomo headquarters, consist of 19,000 square feet of offices and laboratories, as well as an additional 90,000 square feet of paved storage area. We have seven fully equipped technology testing laboratories, including a mechanical test lab, a metallographic lab, an electron microscopy lab, a corrosion lab, a high temperature lab and a welding lab. These facilities also contain a reduced scale, fully equipped melt shop and process lab. As of September 30, 2006, the technology, engineering and technological testing staff consisted of 27 persons, 17 of whom have engineering or science degrees, including five with doctoral degrees, with the majority of degrees in the field of metallurgical engineering.

Research and technical support costs primarily relate to efforts to develop new proprietary alloys and in the development of new applications for already existing alloys. Haynes spent approximately $2.5 million, $2.6 million and $2.7 million for research and technical support activities for fiscal 2004, 2005, and 2006 respectively.

During fiscal 2006, research and development projects were focused on new alloy development, new product form development, and new alloy concept validation, all relating to products for the aerospace, land-based gas turbine, chemical processing, and oil and gas industries. In addition, significant projects were conducted to generate technical data in support of major market application opportunities in areas such as solid oxide fuel cells, biotechnology (including waste incineration of toxic properties and manufacturing of pharmaceuticals), chemical processing and power generation.

For additional information see “—Patents and Trademarks.”

Competition

The high-performance alloy market is a highly competitive market in which eight to ten producers participate in various product forms. Our primary competitors include Special Metals Corporation which is now a part of Precision Cast Parts, Allegheny Technologies, Inc., and Krupp VDM GmbH, a subsidiary of Thyssen Krupp Stainless. We face strong competition from domestic and foreign manufacturers of both high-performance alloys (similar to those we produce) and other competing metals. We may face additional competition in the future to the extent new materials are developed, such as plastics or ceramics, that may be substituted for our products. We also believe that we will face increased competition from non-U.S. entities in the next five to ten years, especially from competitors located in Eastern Europe and Asia. Additionally, in recent years we have benefited from a weak United States dollar, which makes the goods of foreign competitors more expensive to import into the United States. In the event that the United States dollar strengthens, we may face increased competition in the United States from foreign competitors.

Employees

As of September 30, 2006, we employed approximately 1,072 full-time employees worldwide. All eligible hourly employees at the Kokomo plant and the Lebanon, Indiana service and sales center (approximately 516 in the aggregate) are covered by a collective bargaining agreement. As part of negotiations with the United Steelworkers of America related to our emergence from bankruptcy, the collective bargaining agreement was extended until June 2007. We will renegotiate the collective bargaining agreement in fiscal 2007 prior to the expiration of the agreement currently in place. We believe that current relations with the union are satisfactory. There can be no assurance, however, that the renegotiation of the collective bargaining agreement will not lead to a labor stoppage, which could have a negative effect on earnings. For example, there was a brief labor stoppage in connection with renegotiation of the collective bargaining agreement in fiscal 2002, although there was no such stoppage in connection with the renegotiation in fiscal 2004 as part of our emergence from bankruptcy. None of the employees of our Arcadia, Louisiana, Mountain Home, North Carolina, European or Asian operations are represented by a labor union. We consider our employee relations in each of those facilities to be satisfactory.

Environmental matters

We are subject to various foreign, federal, state and local laws and regulations relating to the protection of human health and the environment, including those governing the discharge of pollutants into the environment, the storage, handling, use, treatment and disposal of hazardous substances and wastes and the health and safety of our employees. In addition, some of these laws and regulations require our facilities to operate under permits that are subject to renewal and modification. Violations of these laws, regulations and permits can result in the imposition of substantial penalties, permit revocations, and facility shutdowns and can require facilities improvements. In addition, we may be required in the future to comply with additional regulations pertaining to the emission of hazardous air pollutants under the Clean Air Act. However, since these regulations have not been proposed or promulgated, we cannot predict the cost, if any, associated with compliance with such regulations. Expenses related to environmental compliance (including air pollution control improvements, as discussed below) were approximately $1.3 million for fiscal 2005, $1.5 million for fiscal 2006 and are expected to be at a similar level for fiscal 2007.

Our facilities are subject to periodic inspection by various regulatory authorities, who from time to time have issued violations of governing laws, regulations and permits. In the past five years, we have paid administrative fines, none of which has had a material effect on our financial condition, for alleged violations relating to environmental matters, including the handling and storage of hazardous wastes, requirements relating to the Kokomo facility’s Title V Air Permit, requirements relating to the handling of polychlorinated biphenyls and violations of record keeping and notification requirements relating to industrial waste water discharge. Capital expenditures of approximately $542,000 and $140,000 were made for pollution control improvements during fiscal 2005 and 2006 respectively, with additional expenditures of $150,000 planned for fiscal 2007.

We are conducting remedial activities at our Kokomo, Indiana and our Mountain Home, North Carolina facilities. We have received permits from the Indiana Department of Environmental

Management, or IDEM, and the U.S. Environmental Protection Agency, or EPA, to close and to provide post closure monitoring and care for certain areas at the Kokomo facility previously used for the storage and disposal of wastes, some of which are classified as hazardous under applicable regulations. Construction of the South Landfill was completed in May 1994 and closure certification was received in fiscal 1999 for one area at the Kokomo facility and post-closure care is ongoing there. We have an application with IDEM pending for approval of closure and post-closure care for another area of our Kokomo facility. In addition, we are currently evaluating known groundwater contamination at our Kokomo site and are developing a plan to address it. Accordingly, additional corrective action may be necessary. We have also received permits from the North Carolina Department of Environmental Natural Resources, or NC DENR, and the EPA to close and provide post-closing monitoring and care for the lagoon at our Mountain Home, North Carolina facility. The lagoon area has been closed and is currently undergoing post-closure monitoring. We are required to monitor groundwater and to continue post closure maintenance of the former disposal areas at this site. As a result, we are aware of elevated levels of certain contaminants in the groundwater and additional corrective action could be required. We are currently unable to estimate the costs of any further corrective action at either site if required. Accordingly, we cannot assure you that the costs of any future corrective action at these or any other current or former sites would not have a material effect on our financial condition, results of operations or liquidity. Additionally, it is possible that we could be required to undertake other corrective action commitments for any other solid waste management unit existing or determined to exist at any of our facilities.

As a condition of the Kokomo and Mountain Home post closure permits, we must provide and maintain assurances to IDEM and EPA of our capability to satisfy closure and post closure groundwater monitoring requirements, including possible future corrective action as necessary. We currently provide these required assurances through a statutory financial assurance test as provided by Indiana law. Additionally, we are also required to provide assurances to the NCDENR and the EPA of our ability to satisfy closure and post closure monitoring requirements, including possible future corrective actions for the closed lagoon at the Mountain Home, North Carolina facility. These assurances are currently provided through letters of credit. The amount of accrued liabilities for these obligations is $1.5 million as of September 30, 2006.

We may also incur liability for alleged environmental damages associated with the off site transportation and disposal of hazardous substances. Our operations generate hazardous substances, much of which we accumulate at our facilities for subsequent transportation and disposal off site or recycling by third parties. Generators of hazardous substances which are transported to disposal sites where environmental problems are alleged to exist are subject to liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, or CERCLA, and state counterparts. CERCLA imposes strict, joint and several liability for investigatory and cleanup costs upon hazardous substance generators, site owners and operators and other potentially responsible parties. We may have generated hazardous substances disposed of at sites subject to CERCLA or equivalent state law remedial action. Thus, we cannot assure you that we will not be named as a potentially responsible party at sites in the future or that the costs associated with those sites would not have a material adverse effect on our financial condition, results of operations of liquidity.

Properties

Manufacturing facilities. We own manufacturing facilities in the following locations:

· Kokomo, Indiana—manufactures and sells all product forms, other than tubular and wire goods;

· Arcadia, Louisiana—manufactures and sells welded and seamless tubular goods; and

· Mountain Home, North Carolina—manufactures and sells stainless and nickel alloy wire.

Our Kokomo plant, our primary production facility, is located on approximately 180 acres of industrial property and includes over 1.0 million square feet of building space. There are three sites consisting of (1) a headquarters and research laboratory; (2) primary and secondary melting, annealing furnaces, forge press and several smaller hot mills; and (3) our four-high Steckel mill and sheet product cold working equipment, including two cold strip mills. All alloys and product forms other than tubular and wire goods and drawn wire, are produced in Kokomo.

Our Arcadia plant is located on approximately 42 acres of land, and includes 135,000 square feet of buildings on a single site. Arcadia uses feedstock produced in Kokomo to fabricate welded and seamless alloy pipe and tubing and purchases extruded tube hollows to produce seamless titanium tubing. Manufacturing processes at Arcadia require cold pilger mills, weld mills, draw benches, annealing furnaces and pickling facilities.

Our Mountain Home plant is located on approximately 29 acres of land, and includes approximately 100,000 square feet of building space. The Mountain Home facility is primarily used to manufacture finished specialty stainless, nickel and a limited amount of cobalt alloy wire products. A limited amount of warehousing is also done at this facility.

Our owned facilities located in the United States are subject to a mortgage which secures our obligations under our U.S. revolving credit facility with a group of lenders led by Wachovia Capital Finance Corporation. For more information see “Management’s discussion and analysis of financial condition and results of operations” and Note 9 to the consolidated financial statements included elsewhere in this prospectus.

Service and sales centers. Our service and sales centers contain equipment capable of precision laser and water jet processing services to cut and shape products to customers’ precise specifications. We own service and sales centers in the following locations:

· Openshaw, England—stocks and sells all product forms; and

· Lenzburg, Switzerland—stocks and sells all product forms.

The Openshaw plant, located near Manchester, England, consisted of approximately seven acres of land and over 200,000 square feet of buildings on a single site. Haynes has closed the manufacturing portion of the Openshaw plant and is sourcing the required bar product for customers from external vendors. This closure did not have a material effect on the overall revenue of the U.K. operation or our overall operations or financial position. In April 2005, Haynes sold eight acres of the Openshaw site for a profit of $2.1 million, but retained ownership of the buildings. It is anticipated that Haynes will continue to own and operate the balance of the land, totaling 7 acres, and the buildings.

In addition, we lease service and sales centers in the following locations:

· La Mirada, California—stocks and sells all product forms;

· Houston, Texas—stocks and sells all product forms;

· Lebanon, Indiana—stocks and sells all product forms;

· Paris, France—stocks and sells all product forms;

· Shanghai, China—stocks and sells all product forms; and

· Windsor, Connecticut—stocks and sells all product forms.

Sales centers. We lease sales centers in the following locations:

· Singapore—sells all product forms; and

· Chennai, India—sells all product forms.

All owned and leased service and sales centers not described in detail above are single site locations and are less than 100,000 square feet. The service centers contain equipment capable of precision laser and water jet processing services to cut and shape products to customers’ precise specifications. We believe that our existing facilities are suitable for our current business needs.

Legal proceedings

On March 29, 2004, Haynes and its U.S. subsidiaries and U.S. affiliates as of that date filed voluntary petitions for reorganization relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Indiana (the “Bankruptcy Court”). Haynes filed for relief under Chapter 11 for a variety of reasons. On August 16, 2004, the Bankruptcy Court entered its Findings of Fact, Conclusions of Law, and Order Under 11 U.S.C. 1129(a) and (b) and Fed. R. Bankr. P. 3020 Confirming the First Amended Joint Plan of Reorganization of Haynes International, Inc. and its Affiliated Debtors and Debtors in Possession as Further Modified (the “Confirmation Order”). The Confirmation Order and related Chapter 11 Plan, among other things, provide for the release and discharge of pre-petition claims and causes of action. The Confirmation Order further provides for an injunction against the commencement of any actions with respect to claims held prior to the Effective Date of the Plan. The Effective Date occurred on August 31, 2004. When appropriate, Haynes pursues the dismissal lawsuits premised upon claims or causes of action discharged in the Confirmation Order and related Chapter 11 Plan. For more information see “The reorganization.”

We are subject to extensive federal, state and local laws and regulations. Future developments and increasingly stringent regulations could require us to make additional unforeseen expenditures for these matters. We are regularly involved in litigation, both as a plaintiff and as a defendant, relating to our business and operations. Such litigation includes federal and state EEOC administrative actions and litigation and administrative actions relating to environmental matters. For more information see “—Environmental Matters.”

Litigation may result in substantial costs and may divert management’s attention and resources, and the level of future expenditures for legal matters cannot be determined with any degree of

certainty. Nonetheless, based on the facts presently known, management does not believe that expenditures for legal proceedings will have a material effect on our financial position, results of operations or liquidity.

We are currently, and have in the past, been subject to claims involving personal injuries allegedly relating to our products. For example, we are presently involved in two actions involving welding rod-related injuries. One lawsuit was filed in California state court against numerous manufacturers, including our company, in May 2006, alleging that the welding-related products of the defendant manufacturers harmed the users of such products through the inhalation of welding fumes containing manganese. A second case with similar allegations is pending in Texas. We believe that we have defenses to these allegations and, that if we were found liable, the cases would not have a material effect on our financial position, results of operations or liquidity. In addition to these cases, we have in the past been named a defendant in several other lawsuits, including 52 filed in the state of California, alleging that our welding-related products harmed the users of such products through the inhalation of welding fumes containing manganese. We have since been voluntarily dismissed from all of these lawsuits on the basis of the release and discharge of claims contained in the Confirmation Order. While we contest such lawsuits vigorously, and may have applicable insurance, there are several risks and uncertainties that may affect our liability for claims relating to exposure to welding fumes and manganese. It is possible, however, that we will be named in additional suits alleging welding-rod injuries. Should such litigation occur, it is possible that the aggregate claims for damages, if we are found liable, could have a material adverse effect on our financial condition, results of operations or liquidity.

Management

Directors and executive officers

The following table sets forth certain information concerning the persons who served as our directors and executive officers as of the date of this prospectus. Except as indicated in the following paragraphs, the principal occupations of these persons have not changed during the past five years.

Name	Age	Position with Haynes International, Inc.

Francis J. Petro	67	President and Chief Executive Officer; Director
John C. Corey	59	Chairman of the Board; Director
Paul J. Bohan	61	Director
Donald C. Campion	58	Director
Robert H. Getz	44	Director
Timothy J. McCarthy	66	Director
William P. Wall	44	Director
Ronald W. Zabel	63	Director
August A. Cijan	51	Vice President, Operations
Michael Douglas	54	Vice President, Arcadia Tubular Products
Anastacia S. Kilian	32	Vice President, General Counsel, Corporate Secretary
James A. Laird	54	Vice President, Research and European Sales & Marketing
Marlin C. Losch	46	Vice President, Sales—North America
Marcel Martin	57	Vice President, Finance; Chief Financial Officer; Treasurer
Daniel W. Maudlin	40	Controller, Chief Accounting Officer
Jean C. Neel	47	Vice President, Corporate Affairs
Scott R. Pinkham	39	Vice President, Manufacturing Planning
Gregory M. Spalding	51	Vice President, Haynes Wire, Chief Operating Officer
Charles J. Sponaugle	58	Vice President, Business Planning
Jeffrey L. Young	49	Vice President, Chief Information Officer

Mr. Petro was elected President and Chief Executive Officer and a director of Haynes in January 1999. From 1995 to the time he joined Haynes, Mr. Petro was President and Chief Executive Officer of Inco Alloys International, a company owned by The International Nickel Company of Canada. Mr. Petro is also a director of Algoma Steel, Inc.

Mr. Corey has been a director and the Chairman of the Board since our emergence from bankruptcy on August 31, 2004. Mr. Corey also serves as a member of the Corporate Governance Committee of the Board. In January 2006, he became the President, Chief Executive Officer and a

director of Stoneridge, Inc., a manufacturer of electrical and electronic components, modules and systems for the automotive, medium- and heavy-duty thick, agricultural and off-highway vehicle markets. From October 2000 through December 2005, Mr. Corey served as the President, Chief Executive Officer and a director of Safety Component International, Inc., a manufacturer of automotive airbags. Before becoming President and Chief Executive Officer of Safety Components International in October 2000, he served as President and Chief Operating Officer.

Mr. Bohan has been a director since our emergence from bankruptcy on August 31, 2004. Mr. Bohan also serves as the Chairman of the Corporate Governance Committee of the Board. He retired as a Managing Director of Citigroup in February 2001. Mr. Bohan currently serves on the Board of Directors of Arena Brands, Inc.; Revlon, Inc.; and the New York Police and Fire Widows’ and Children’s Benefit Fund.

Mr. Campion has been a director since our emergence from bankruptcy on August 31, 2004. Mr. Campion also serves as the Chairman of the Audit Committee and as a member of the Compensation Committee of the Board. From January 2003 until July 2004, Mr. Campion served as Chief Financial Officer of Verifone, Inc. Mr. Campion previously served as Chief Financial Officer of several companies, including Special Devices, Inc., Cambridge, Inc., Oxford Automotive, Inc., and Delco Electronics Corporation. He has had experience with implementation of internal controls and Sarbanes-Oxley 404 compliance. Mr. Campion also currently serves on the Board of Directors of Catuity, Inc. and McLeod USA, Incorporated.

Mr. Getz has been a director since March 2006. Mr. Getz also serves as a member of the Audit Committee of the Board. Mr. Getz is a private investor and since December 1996 has served as a Managing Director and Partner of Cornerstone Equity Investors, LLC, a New York-based private equity investment firm. Prior to the formation of Cornerstone in 1996, Mr. Getz spent nine years at Prudential Equity Investors, Inc. in several roles, most recently serving as a Managing Director. Mr. Getz also serves as a director for Novatel Wireless, Inc. and Sitel Corporation.

Mr. McCarthy has been a director since our emergence from bankruptcy on August 31, 2004. Mr. McCarthy also serves as the Chairman of the Compensation Committee and as a member of the Audit Committee of the Board. Since 1985 he has served as the President and Chief Executive Officer of C.E. Minerals, an industrial mineral business.

Mr. Wall has been a director since our emergence from bankruptcy on August 31, 2004. Mr. Wall also serves on the Audit and Corporate Governance Committees of the Board. Mr. Wall joined Abrams Capital, LLC, a value-oriented investment firm headquartered in Boston, in February 2006, where he serves as general counsel and a director of Abrams Capital International, Ltd. From July 2003 through April 2005, Mr. Wall was a partner in Andover Capital, a hedge fund focused on leveraged companies. Prior to that, he spent seven years at Fidelity Investments in several roles, most recently serving as a Managing Director of Fidelity Capital Investors, a private equity group funded by Fidelity.

Mr. Zabel has been a director since our emergence from bankruptcy on August 31, 2004. Mr. Zabel also serves as a member of the Compensation Committee of the Board. Since November 2005, he has served as the Chief Executive Officer of Springs Industries, and prior to that time served as the President of Springs Window Fashions, LLC starting in 1999. Mr. Zabel also sits on the Board of Directors of Springs Industries.

Mr. Cijan has served as Vice President, Operations of Haynes since April 1996. Prior to this, Mr. Cijan served as Manufacturing Manager since joining Haynes in 1993.

Mr. Douglas has served as Vice President, Tubular Products, and is accountable for the operations of the Arcadia Tubular Products Facility since joining Haynes in May 2005. From 1994 to 2005, Mr. Douglas was Executive Vice President and Managing Director of Interactive Resource Management. Mr. Douglas has over twenty years of prior executive management experience in the metals industry.

Ms. Kilian has served as Vice President, General Counsel and Corporate Secretary since July 2006. Prior to joining Haynes, beginning in 2000, Ms. Kilian was a lawyer in private practice with the law firm Ice Miller LLP in Indianapolis, Indiana.

Mr. Laird has served as Vice President, Research and European Sales of Haynes since July 2000, after having served in various sales and marketing positions with Haynes since 1983.

Mr. Losch has served as Vice President, North American Sales since February 2006. Mr. Losch was Midwest Regional Manager prior to this and has served in various marketing, quality, engineering and production positions since joining Haynes in February 1988.

Mr. Martin was elected Vice President, Finance, Chief Financial Officer and Treasurer on July 1, 2004, after having served as Controller and Chief Accounting Officer of Haynes since October 2000. From 1996 to 2000 Mr. Martin was Vice President of Finance and Chief Financial Officer of Duferco Farrell Corporation.

Mr. Maudlin has served as Controller and Chief Accounting Officer effective as of September 20, 2004. Prior to his employment with Haynes, Mr. Maudlin was corporate controller at Jordan Specialty Plastics, Inc. from April, 2001. Prior to that he served as Group Controller for Heritage Environmental Services, Inc. from May 1991 through April 2001. Mr. Maudlin is a licensed CPA in the state of Indiana.

Ms. Neel has served as Vice President, Corporate Affairs of Haynes since April 2000, after having served as Director, Corporate Affairs since joining Haynes in July 1999.

Mr. Pinkham has served as Vice President, Manufacturing Planning since March 2004, after having served in various manufacturing and production capacities since joining Haynes in August 1999.

Mr. Spalding has served as Vice President, Haynes Wire and Chief Operating Officer since February 2006. Prior to this he served as Vice President, North American Sales since he joined Haynes in July 1999.

Mr. Sponaugle has served as Vice President, Business Planning of Haynes since 2000, after having served as Vice President, Sales since June 1998 and in various sales, marketing and manufacturing positions since 1981.

Mr. Young has served as Vice President and Chief Information Officer since November 2005, after having served in various Information Technology positions since joining Haynes in November 1984.

Our by-laws authorize the Board of Directors to designate the number of directors to be not less than three nor more than nine. The Board of Directors has set the number of directors at eight. Directors of Haynes serve until their successors are duly elected and qualified or until their earlier resignation or removal. Officers of Haynes serve at the discretion of the Board of Directors, subject, in the case of Mr. Petro, to the terms of his employment contract.

The Board of Directors has established an Audit Committee, a Compensation Committee and a Corporate Governance Committee. The Audit Committee is responsible for retaining, reviewing and dismissing the independent auditors, reviewing, in connection with the independent auditors, the audit plan, the adequacy of internal controls, the audit report and management letter, and undertaking such other incidental functions as the board may authorize. The Audit Committee is also responsible for reviewing and approving conflict of interest transactions for Haynes. The Board of Directors has determined that Mr. Campion is an audit committee financial expert (as defined by Item 401(h) of Regulation S-K). The Compensation Committee is responsible for administering the stock option plans, determining executive compensation policies and administering compensation plans and salary programs, including performing an annual review of the total compensation and recommended adjustments for all executive officers. The Corporate Governance Committee is responsible for assisting the board by overseeing the performance and composition of the board to ensure effective governance. Except for Mr. Petro, all of the members of the Board of Directors, including all of the members of the Audit Committee, the Compensation Committee and the Corporate Governance Committee, meet the criteria for independence set forth in Rule 10A-3(b)(1) of the Securities Exchange Act of 1934, as amended.

Executive compensation

The following summary compensation table sets forth certain information concerning total compensation paid by us during our last three completed fiscal years to (i) our Chief Executive Officer and (ii) each of our four other most highly compensated executive officers, who served as executive officers as of September 30, 2006 (collectively referred to as the “Named Executive Officers”).

		Annual compensation(1)				Long-term compensation
Name and principal position	Fiscal year	Salary		Bonus		Securities underlying options(2)		All other compensation(3)
Francis J. Petro(4)	2006	$	480,000	$	288,000		—		$	269,749
President & Chief Executive	2005	$	480,000	$	460,000		—		$	343,526
Officer	2004	$	473,077	$	0		200,000		$	317,084
Marcel Martin	2006	$	196,923	$	85,500		—		$	6,543
Vice President, Finance & Chief	2005	$	190,000	$	140,000		—		$	8,021
Financial Officer, Treasurer	2004	$	163,992	$	0		100,000		$	3,678
August A. Cijan	2006	$	192,308	$	85,500		—		$	6,471
Vice President, Operations	2005	$	190,000	$	106,000		—		$	8,167
	2004	$	178,051	$	0		100,000		$	4,171
James A. Laird	2006	$	192,308	$	85,500		—		$	5,798
Vice President, Marketing,	2005	$	190,000	$	106,000		—		$	6,903
Research & European Sales	2004	$	157,115	$	0		100,000		$	5,388
Gregory M. Spalding	2006	$	162,308	$	40,000		—		$	5,561
Vice President, Haynes Wire &	2005	$	160,000	$	65,000		—		$	5,555
Chief Operating Officer	2004	$	149,335	$	0		50,000		$	2,925

(1) Additional compensation in the form of perquisites was paid to certain of the named officers in the periods presented; however, the amount of such compensation was less than the level required for reporting.

(2) The options set forth in the table were granted on August 31, 2004 pursuant to the plan of reorganization.

(3) Premium payments to the group term life insurance plan, gain sharing payments and relocation reimbursements which were made by Haynes, 401(k) match, executive disability, and 401(m) match.

(4) Includes $289,000, $314,000 and $246,000 for fiscal 2004, 2005 and 2006, respectively which accrued pursuant to our Supplemental Executive Retirement Plan and which is payable upon Mr. Petro’s retirement. For more information, see “Pension Plans—Supplemental Executive Retirement Plan.”

The Chief Executive Officer and each of the Named Executive Officers received a cash bonus payment in the first quarter of fiscal 2007 in connection with our fiscal 2006 management incentive plan. The following table shows the amounts of those payments, which were recommended by the Compensation Committee and approved by the Board based upon certain financial indicators of our performance, including EBITDA and revolver availability, as of and for the year ended September 30, 2006:

Named executive officers	Bonus amount
Francis J. Petro.	$	432,000
Marcel Martin.	$	148,500
August A. Cijan	$	135,000
James A. Laird.	$	135,000
Gregory M. Spalding	$	63,750

Director compensation

As of January 23, 2007, the non-management members of the Board of Directors of Haynes received a $40,000 per year stipend related to their Board of Directors duties and responsibilities, and $2,000 per meeting. Additionally, there is a $20,000 annual stipend for serving as Chairman of the Board, a $15,000 annual stipend for serving as the chairman of the Audit Committee, and a $10,000 annual stipend for serving as chairman of any other committee of the Board. Directors are reimbursed by Haynes for their out-of-pocket expenses incurred in attending meetings of the Board of Directors. In addition, each non-employee director (other than Mr. Getz) was granted a non-qualified stock option to purchase 15,000 shares of our common stock at a price of $12.80 per share under the Stock Option Plan. Mr. Getz received 15,000 stock options granted on March 31, 2006 at a price of $31.00 per share. Members of the Offering and Pricing Committee will receive $10,000 for their services in such capacity, plus $2,000 for each substantive in-person meeting attended.

Compensation committee interlocks and insider participation

The members of the Compensation Committee as of September 30, 2006 were Timothy J. McCarthy, Ronald W. Zabel and Donald C. Campion. None of the members of the Compensation Committee are now serving or previously have served as employees or officers of Haynes or any subsidiary, and none of our executive officers serve as directors of, or in any compensation related capacity for, companies with which members of the Compensation Committee are affiliated.

Stock option plans

We have two stock option plans that authorize the granting of non-qualified stock options to certain of our key employees and non-employee directors for the purchase of a maximum of 1,500,000 shares of our common stock. Our original option plan was adopted in 2004 pursuant to our plan of reorganization and provides for the grant of options to purchase up to 1,000,000 shares of our common stock. In January 2007, our Board of Directors adopted a new option plan that provides for options to purchase up to 500,000 shares or our common stock. Unless the Compensation Committee determines otherwise, options granted under the option plans are exercisable for a period of ten years from the date of grant and vest 33 ⅓ % per year over three years from the grant date. Upon our emergence from bankruptcy, options were granted to certain of our executive officers and non-employee directors at that time at $12.80 per share. Options granted thereafter are granted at fair market value on the date of grant. As of January 23, 2007, options to purchase 980,000 shares of our common stock were outstanding under the option plans and options covering 520,000 shares of our common stock were available for future grants.

Unvested options will become fully vested upon the occurrence of certain acceleration events, including the death or disability (as defined in the Option Plan) of the participant and certain events constituting a Change in Control (as defined in the option plans). The option plans also authorize the Board of Directors to accelerate the vesting of options upon certain Change in Control events in its discretion or to terminate the options and provide for the purchase of options from the option holders for a price equal to the amount that would have been attained by the holder if the option were fully vested. If an employee participant in the option plan ceases to be an employee of Haynes due to a termination for cause (as defined in the option plan), or if such participant terminates his or her employment with Haynes without good reason (as defined in the option plan), all stock options previously granted to such participant, whether or not vested, will be cancelled and will not be exercisable. If an employee participant ceases to be an employee of Haynes for any reason other than for cause or for good reason, the vested portion of all options granted to such participant under the original option plan will remain exercisable for a period of six months and the remaining options will be forfeited. The 2007 option plan includes similar provisions if the employee participant is terminated for cause, but does not provide for vesting of options if the employee participant terminates employment for good reason.

Option grants in last fiscal year and fiscal year end option values

None of the executive officers named in the summary compensation table were granted or exercised stock options in fiscal 2006. The following table provides the total number of securities underlying unexercised stock options held by the executive officers named in the summary compensation table as of September 30, 2006:

	Number of securities underlying unexercised options at fiscal year end				Value of unexercised in-the-money options at fiscal year end
	Exercisable		Unexercisable		Exercisable		Unexercisable
Francis J. Petro		133,333		66,667	$	3,493,325		$ 1,746,675
August A. Cijan		66,667		33,333	1,746,675			873,325
Marcel Martin		66,667		33,333	1,746,675			873,325
James A. Laird		66,667		33,333	1,746,675			873,325
Gregory M. Spalding		33,333		16,667	873,325			436,675

Termination benefits agreements

Haynes has entered into Termination Benefits Agreements with certain executive officers (including the named executive officers) of Haynes, other than Mr. Petro, the Chief Executive Officer. The Termination Benefits Agreements provide for an initial term expiring September 30, 2007, subject to two-year automatic extensions (unless terminated by Haynes or the eligible employee at least 60 days prior to the renewal date).

The Termination Benefits Agreement provides that if an eligible employee’s employment with Haynes is terminated by Haynes without Cause (as defined in the Termination Benefits Agreement), by the employee for Good Reason (as defined in the Termination Benefits Agreements) or by reason of such eligible employee’s disability or death, Haynes will pay the eligible employee (or his estate) his accrued but unpaid Base Salary (as defined in the Termination Benefits Agreement) plus any bonus or incentive compensation earned or payable as of the Date of Termination (as defined in the Termination Benefits Agreement), and a bonus equal to the eligible employee’s total annual target bonus in the fiscal year of the termination pro rated for the number of days the employee worked in the fiscal year. In the event that the eligible employee’s employment is terminated by Haynes for Cause, by the employee without Good Reason or due to the employee’s retirement, Haynes is obligated only to pay the eligible employee his accrued but unpaid Base Salary and any other accrued but unpaid compensation through the Date of Termination. In addition, if within 12 months following a Change in Control (as defined in the Termination Benefits Agreement) the eligible employee’s employment is terminated by the eligible employee with Good Reason or by Haynes without Cause, Haynes must (among other things):

· pay the eligible employee such eligible employee’s accrued but unpaid Base Salary and any bonus or incentive compensation earned or payable as of the Date of Termination;

· pay the eligible employee such eligible employee’s Base Salary that would be payable over the 12 months following the Date of Termination;

· pay the eligible employee a bonus equal to the eligible employee’s total annual target bonus in the fiscal year of the termination; and

· continue to provide life insurance and medical and hospital benefits to the eligible employee for up to 12 months following the Date of Termination.

As a condition to receipt of severance payments and benefits, the Termination Benefits Agreement requires that eligible employees execute a release of all claims.

Pursuant to the Termination Benefits Agreement, each eligible employee agrees that during his employment with Haynes and for an additional one year following the Date of Termination of the eligible employee’s employment with Haynes, the eligible employee will not, directly or indirectly, engage in any business in competition with the business of Haynes, solicit any customer or employee of Haynes, or disclose any Confidential Information (as defined in the Termination Benefits Agreement).

Employment agreement with our President and Chief Executive Officer

Haynes has entered into an Employment Agreement with its President and Chief Executive Officer, Francis J. Petro, which was entered into August 31, 2004, in connection with our emergence from bankruptcy, and will terminate on September 30, 2007, unless renewed by a subsequent agreement of the parties. Pursuant to this Employment Agreement, Mr. Petro’s base salary is $480,000 per year, with bonus targets to be determined by the Board of Directors annually prior to or at the commencement of the applicable fiscal year. This compensation is identical to the compensation being paid to Mr. Petro prior to the emergence from bankruptcy.

If Mr. Petro’s employment is terminated by reason of the expiration of the employment term, Mr. Petro will be entitled to (i) any earned but unpaid base salary and bonuses and reimbursement of business expenses; and (ii) the benefits that he has been granted under our Supplemental Executive Retirement Plan. In addition, any unvested stock options held by Mr. Petro at the time of the expiration of his employment term will terminate immediately and any vested options will remain exercisable for 90 days following termination or until the option expires, whichever is less.

If Mr. Petro’s employment is terminated by Haynes for “cause” or he resigns without “good reason,” Mr. Petro will be entitled to (i) any earned but unpaid base salary and bonuses and reimbursement of business expenses; and (ii) the benefits that he has been granted under the Supplemental Executive Retirement Plan of Haynes. In addition, (i) if Mr. Petro’s termination is for “cause,” any vested and unvested stock options will terminate immediately; and (ii) if his termination is for “good reason,” any unvested stock options will terminate immediately and any vested options will remain exercisable for 30 days following termination or until the option expires, whichever is less.

If Mr. Petro’s employment is terminated by Haynes without “cause” or by Mr. Petro without “good reason,” Mr. Petro will be entitled to (i) any earned but unpaid base salary and bonuses and reimbursement of business expenses; (ii) two times his annual base salary; (iii) two times his average bonus for the two fiscal years preceding his termination; (iv) continuation of certain health and welfare benefits for two years following termination or until comparable benefits are obtained from a new employer, whichever is less; and (v) the benefits that he has been granted

under our Supplemental Executive Retirement Plan. In addition, any unvested stock options will vest immediately and all options held by Mr. Petro will remain exercisable for one year following termination or until the option expires, whichever is less.

If Mr. Petro’s employment is terminated by reason of his death, disability or retirement, Mr. Petro or his heirs, estate, personal representative or legal guardian, as appropriate will be entitled to (i) any earned but unpaid base salary and bonuses and reimbursement of business expenses; and (ii) the benefits that he has been granted under the Supplemental Executive Retirement Plan of Haynes. In addition, any unvested stock options will vest immediately and all options held by Mr. Petro will remain exercisable for one year in the event of death or disability and six months in the event of retirement or until the option expires, whichever is less.

Mr. Petro is subject to a confidentiality restriction during his employment and thereafter, and to non-compete and non-solicitation restrictions during his employment and for two years following termination.

Supplemental executive retirement plan

Effective as of January 1, 2002, Haynes adopted its Supplemental Executive Retirement Plan, which provides benefits to a select group of management and highly compensated employees as selected by our Compensation Committee upon the termination of employment or death of such employee. The benefits to be received by each participant are defined in plan agreements between Haynes and the individual participants. Currently, Francis J. Petro, our President and Chief Executive Officer, is the only participant in the Supplemental Executive Retirement Plan. Pursuant to Mr. Petro’s Plan Agreement, Mr. Petro’s benefit under the Supplemental Executive Retirement Plan is equal to 3% of the product of his years of service and his average compensation, reduced by the value of benefits to which Mr. Petro may be entitled under the Company’s Pension Plan. The benefit will be paid in an actuarial equivalent lump sum payment upon the termination of employment or death as previously elected by Mr. Petro.

U.S. pension plan

Haynes maintains a defined benefit pension plan for the benefit of eligible domestic employees designated as the Haynes International, Inc. Pension Plan. The pension plan is qualified under Section 401 of the Internal Revenue Code, permitting Haynes to deduct for federal income tax purposes all amounts contributed by it to the pension plan pursuant to funding requirements. Our reorganization did not change the terms of the pension plan.

Under the pension plan, all company employees (except those employed pursuant to a written agreement which provides that the employee shall not be eligible to participate, temporary or seasonal employees, or any employees employed in a job category that includes no pension benefits) are eligible to participate in the plan. Participants are eligible to receive an unreduced pension annuity upon the first to occur of (i) reaching age 65, (ii) reaching age 62 and completing ten years of benefit service, or (iii) completing 30 years of benefit service. The final option is available only for union employees hired before June 11, 1999 or for salaried employees who were plan participants in the pension plan on March 31, 1987.

For salaried employees who retire on or after July 2, 2002 under option (i) or (ii) above, and for union employees hired on or after July 3, 1988 who retire on or after July 2, 2002 under option (i), (ii), or (iii) above, the normal monthly pension benefit provided under the pension plan is the greater of (i) 1.4% of the employee’s average monthly earnings multiplied by years of benefit service, plus an additional 0.5% of the employee’s average monthly earnings, if any, in excess of Social Security covered compensation multiplied by years of benefit service up to 35 years, or (ii) the employee’s accrued benefits as of September 30, 2002. For salaried employees who retire on or after July 2, 2002 under option (iii) above (with 30 years of benefit service), the normal monthly pension provided under the pension plan is equal to one of the following as elected by the participant: (i) the accrued benefit as of March 31, 1987 plus any supplemental retirement benefit payable to age 62, (ii) the accrued benefit as of March 31, 1987 plus any supplemental retirement benefit payable to any age elected by the participant (prior to 62) and thereafter the actuarial equivalent of the benefit payable for retirement under options (i) and (ii) above, or (iii) if the participant is at least age 55, the actuarial equivalent of the benefit payable for retirement under options (i) and (ii) above. Salaried employees who commenced employment with Haynes after December 31, 2005 are not eligible to participate in the plan.

There are provisions for delayed retirement, early retirement benefits, disability retirement, death benefits, optional methods of benefits payments, payments to an employee who leaves after five or more years of service, and payments to an employee’s surviving spouse. Participants’ interests are vested and they are eligible to receive pension benefits after completing five years of service. However, all participants as of October 1, 2001, became 100% vested in their benefits on that date. Vested benefits are generally paid beginning at or after age 55.

The following table sets forth the range of estimated annual benefits payable upon retirement for graduated levels of average annual earnings and years of service for employees under the plan, based on retirement at age 65 on or after October 1, 2006. The maximum annual salary permitted for 2006 under Section 401(a)(17) of the Code is $220,000. The maximum annual benefit permitted for 2006 under Section 415(b) of the Code is $175,000.

	Years of service
Average annual remuneration	15		20		25		30		35
$100,000	$	24,656	$	32,875	$	41,094	$	49,312	$	57,531
$150,000	38,906		51,875		64,844		77,812		90,781
$200,000	53,156		70,875		88,594		106,312		124,031
$250,000	58,856		78,475		98,094		117,712		137,331
$300,000	58,856		78,475		98,094		117,712		137,331
$350,000	58,856		78,475		98,094		117,712		137,331
$400,000	58,856		78,475		98,094		117,712		137,331
$450,000	58,856		78,475		98,094		117,712		137,331

The estimated credited years of service of each of the named executive officers as of September 30, 2006 are as follows:

Named executive officer		Credited service
Francis J. Petro		7
Marcel Martin		20
August A. Cijan		13
James A. Laird		23
Gregory M. Spalding		7

U.K. pension plan

Haynes maintains a pension plan for its employees of Haynes International, Ltd., our U.K. subsidiary. The U.K. pension plan is a contributory plan under which eligible employees contribute 3.5% or 6% of their annual earnings. Normal retirement age under the U.K. pension plan is age 65. The annual pension benefit provided at normal retirement age under the U.K. pension plan ranges from 1% to 1 2/3% of the employee’s final average annual earnings for each year of credited service, depending on the level of employee contributions made each year during the employee’s period of service with Haynes. The maximum annual pension benefit for employees with at least 10 years of service is two-thirds of the individual’s final average annual earnings. Similar to the U.S. pension plan, the U.K. pension plan also includes provisions for delayed retirement benefits, early retirement benefits, disability and death benefits, optional methods of benefit payments, payments to employees who leave after a certain number of years of service, and payments to an employee’s surviving spouse. The U.K. pension plan also provides for payments to an employee’s surviving children. Our reorganization did not change the terms of the U.K. pension plan.

Profit sharing and savings plan

We maintain the Haynes International, Inc. Combined Profit Sharing and Savings Plan to provide retirement, tax-deferred savings for eligible domestic employees and their beneficiaries. The profit sharing and savings plan consists of Cabot profit sharing and Cabot PAYSOP accounts attributable to matching made by us under prior plans and profit sharing contributions based on our profits and savings accounts attributable to employee pre-tax deferrals and after-tax contributions. The profit sharing and savings plan is qualified under Section 401 of the Internal Revenue Code, permitting us to deduct for federal income tax purposes all amounts contributed by it to the profit sharing and savings plan. We regularly makes matching contributions based on participant elective pre-tax contributions; however, no profit sharing contributions were made to the profit sharing and savings plan for the fiscal years 2004, 2005, or 2006. Our reorganization did not change the terms of the profit sharing and savings plan.

Under the profit sharing and savings plan, all of our employees (except those employed pursuant to a written agreement which provides that the employee shall not be eligible to participate, those who are classified as an independent contractor even if later determined to be an employee, leased employees, and employees of an affiliated employer who has not adopted the

plan in writing) are eligible to participate in the plan. Employees completing a one-month period of employment are eligible to participate in the elective pre-tax, after-tax voluntary, and our matching portions of the plan. Employees completing a 12-month period of employment are eligible to participate in our profit sharing contribution portion of the plan.

Participants may choose to make elective pre-tax contributions to the plan in amounts up to 50% of their plan compensation. Participants may also choose to make after-tax contributions to the plan in amounts up to 20% of their plan compensation. Eligible employees may make a rollover contribution to the plan if accepted by the plan administrator pursuant to the terms of the plan.

Effective June 14, 1999, we agreed to match 50% of a participant’s elective pre-tax and after-tax contributions to the plan up to a maximum contribution of 3% of the participant’s plan compensation. Each participant’s share in our profit sharing allocation, if any, is represented by the percentage, which his or her plan compensation (up to $225,000 in 2007) bears to the total plan compensation of all participants in the profit sharing and savings plan. Salaried employees hired after December 31, 2005 are not covered by the pension plan, but are eligible for an enhanced matching program in the combined profit sharing and savings plan under which Haynes matches 60% of a participant’s contributions up to a maximum of 6% of the participant’s compensation.

Participants who elect to make elective pre-tax and/or after-tax contributions to the plan and receive our match are immediately vested in their accounts attributable to those contributions. For plan years starting before January 1, 2007, participants become 100% vested in any of our profit sharing contributions made on their behalf after completing five years of service. For plan years starting on or after January 1, 2007 participants become 100% vested in any of our profit sharing contributions made on their behalf after completing three years of service.

Participants may make withdrawals from their vested accounts while still employed under certain circumstances pursuant to the terms of the profit sharing and savings plan. Under the profit sharing portion of the plan, vested individuals account balances attributable to our contributions may be withdrawn only after the amount to be distributed has been held by the plan trustee in the account for at least 24 consecutive calendar months.

Limitation on liability and indemnification agreements

Effective August 13, 2006, Haynes agreed to indemnify Francis J. Petro, John C. Corey, Timothy J. McCarthy, Donald C. Campion, Paul J. Bohan, Ronald W. Zabel, William P. Wall and Robert H. Getz, each of whom is a member of the Board of Directors, against loss or expense arising from such individuals’ service to Haynes and its subsidiaries and affiliates, and to advance attorneys fees and other costs of defense to such individuals in respect of claims that may be eligible for indemnification under certain circumstances.

Certain transactions

August 2004 registration rights agreement

The following is a summary of certain provisions of the registration rights agreement that we entered into in August 2004 for the benefit of stockholders who were issued shares of our common stock pursuant to our plan of reorganization. Readers are encouraged to review the complete registration rights agreement, which is included as an exhibit to the registration statement of which this prospectus is a part.

In connection with the registration rights agreement, we filed a registration statement with the Securities and Exchange Commission on May 16, 2005 and have maintained the effectiveness of such registration statement. We are permitted to suspend the right of a holder to sell pursuant to this registration statement under certain circumstances relating to pending corporate developments and similar events.

Parties to the registration rights agreement are entitled to piggyback registration rights relating to this offering, and the selling stockholders in this offering (other than our directors and officers) are exercising these rights.

Indemnification agreements

We have entered into agreements to indemnify our Board of Directors in addition to the indemnification provided for in our amended and restated certificate of incorporation and by-laws. For more information regarding indemnification matters, see “Management—Limitations on liability and indemnification.”

Stock option grants

Since August 2004, we have granted options to purchase an aggregate of 980,000 shares of our common stock to our current directors and executive officers, including each of our executive officers named in the Summary Compensation Table, at a weighted-average exercise price of $14.49. For more information see “Management—Stock option plan.”

Employment agreement

We have entered into a formal executive employment agreement with Francis Petro, our President and Chief Executive Officer. For more information see “Management—Employment agreement with our President and Chief Executive Officer.”

Principal and selling stockholders

The following table provides, as of the date of this prospectus, information regarding the beneficial ownership of the shares of our common stock by:

· each of our named executive officers and directors,

· all of our directors and executive officers as a group,

· each person known to Haynes to be the beneficial owner of more than five percent of any class of our voting securities as calculated in accordance with Rule 13d-3 under the Securities Exchange Act of 1934 and

· each other selling stockholder.

The information below assumes no exercise of the underwriters’ over-allotment option.

	Amount and nature of beneficial ownership	Percentage of class before this offering			Amount being sold in this offering	Percentage of class after this offering
Named executive officers and directors(1)(2):
Francis J. Petro	138,040		1.4	%
John C. Corey	10,000		*
Paul J. Bohan	10,000		*
Donald C. Campion	10,000		*
Robert H. Getz	5,000		*
Timothy J. McCarthy	10,000		*
William P. Wall	10,000		*
Ronald W. Zabel	10,000		*
August A. Cijan	66,667		*
James A. Laird	66,667		*
Marcel Martin	66,667		*
Gregory Spalding	33,333		*
All directors and executive officers as a group (19 persons)(3)	628,328		6.28	%
Principal stockholders:	—
JANA Partners LLC(4) 200 Park Avenue, Suite 3300 New York, NY 10166	1,501,900		15.0	%
Jefferies Group, Inc.(5) 520 Madison Avenue, 12 th Floor New York, New York, 10022	649,991		6.5	%

Harbinger Capital Partners Master Fund I, Ltd.(6) c/o International Fund Services (Ireland) Limited Third Floor, Bishop’s Square, Redmond’s Hill Dublin 2, Ireland	2,500,000	25.0	%
Harbinger Capital Partners Offshore Manager, L.L.C.(7) One Riverchase Parkway South Birmingham, Alabama 35244	2,500,000	25.0	%
HMC Investors, L.L.C.(8) One Riverchase Parkway South Birmingham, Alabama 35244	2,500,000	25.0	%
Harbert Management Corporation(9) One Riverchase Parkway South Birmingham, Alabama 35244	2,800,000	28.0	%
Philip Falcone(10) 555 Madison Avenue, 16 th Floor New York, New York 10022	2,800,000	28.0	%
Raymond J. Harbert(11) One Riverchase Parkway South Birmingham, Alabama 35244	2,800,000	28.0	%
Michael D. Luce(12) One Riverchase Parkway South Birmingham, Alabama 35244	2,800,000	28.0	%
Other selling stockholders(1)(13):
Charles J. Sponaugle, Vice President Business Planning	33,623	*
Jean C. Neel, Vice President Corporate Affairs	33,333	*
Michael Douglas, Vice President Tubular Products	16,666	*
Scott Pinkham, Vice President Manufacturing Planning	33,333	*
Jeff Young, Vice President & Chief Information Officer	33,333	*
Daniel E. Maudlin, Controller and Chief Accounting Officer	33,333	*

* Represents beneficial ownership of less than one percent of the outstanding common stock.

(1) The business address of each person indicated is c/o Haynes International, Inc., 1020 West Park Avenue, Kokomo, Indiana 46904-9013.

(2) Shares beneficially owned before this offering include shares issuable pursuant to options exercisable within 60 days after the date of this prospectus as follows: for Mr. Petro, options to purchase 133,333 shares; for Mr. Corey, options to purchase 10,000 shares; for Mr. Bohan, options to purchase 10,000 shares; for Mr. Campion, options to purchase 10,000 shares; for Mr. Getz, options to purchase 5,000 shares; for Mr. McCarthy, options to purchase 10,000 shares; for Mr. Wall, options to purchase 10,000 shares; for Mr. Zabel, options to purchase 10,000 shares; for Mr. Cijan, options to purchase 66,666 shares; for Mr. Laird, options to purchase 66,666 shares; for Mr. Martin, options to purchase 66,666 shares; and for Mr. Spalding, options to purchase 33,333 shares.

(3) Includes shares subject to options exercisable within 60 days of the date of this prospectus.

(4) Based solely upon Form 13F filed with the Securities and Exchange Commission on November 14, 2006. JANA Partners LLC, a Delaware limited liability company, is a private money management firm which holds our common stock in various accounts under its management and control. The principals of JANA Partners LLC are Barry Rosenstein and Gary Claar.

(5) Based solely upon Schedule 13G filed with the Securities and Exchange Commission on October 27, 2006.

(6) Based solely upon Schedule 13D filed with the Securities and Exchange Commission on August 4, 2006. Harbinger Capital Partners Master Fund I, Ltd. (the “Master Fund”) may be deemed to be the beneficial owner of 2,500,000 shares, constituting 25.0% of our shares, based upon 10,000,000 shares outstanding. The Master Fund has the sole power to vote or direct the vote of 0 shares; has the shared power to vote or direct the vote of 2,500,000 shares; has the sole power to dispose or direct the disposition of 0 shares; and has shared power to dispose or direct the disposition of 2,500,000 shares.

(7) Based solely upon Schedule 13D filed with the Securities and Exchange Commission on August 4, 2006. Harbinger Capital Partners Offshore Manager, L.L.C. (“Harbinger Management”) is the investment manager of the Master Fund. Harbinger Management may be deemed to be the beneficial owner of 2,500,000 shares, constituting 25.0% of our shares, based upon 10,000,000 shares outstanding. Harbinger Management has the sole power to vote or direct the vote of 0 shares; has the shared power to vote or direct the vote of 2,500,000 shares; has sole power to dispose or direct the disposition of 0 shares; and has shared power to dispose or direct the disposition of 2,500,000 shares. Harbinger Management specifically disclaims beneficial ownership in the shares reported herein except to the extent of its pecuniary interest therein.

(8) Based solely upon Schedule 13D filed with the Securities and Exchange Commission on August 4, 2006. HMC Investors, L.L.C. (“HMC Investors”) is the managing member of the Master Fund. HMC Investors may be deemed to be the beneficial owner of 2,500,000 shares, constituting 25.0% of our shares, based upon 10,000,000 shares outstanding. HMC Investors has the sole power to vote or direct the vote of 0 shares; has the shared power to vote or direct the vote of 2,500,000 shares; has sole power to dispose or direct the disposition of 0 shares; and has shared power to dispose or direct the disposition of 2,500,000 shares. HMC Investors specifically disclaims beneficial ownership in the shares reported herein except to the extent of its pecuniary interest therein.

(9) Based solely upon Schedule 13D filed with the Securities and Exchange Commission on August 4, 2006. Harbert Management Corporation (“HMC”) is the managing member of HMC Investors. HMC may be deemed to be the beneficial owner of 2,800,000 shares, constituting 28.0% of our shares, based upon 10,000,000 shares outstanding. HMC has the sole power to vote or direct the vote of 0 shares; has the shared power to vote or direct the vote of 2,800,000 shares; has sole power to dispose or direct the disposition of 0 shares; and has shared power to dispose or direct the disposition of 2,800,000 shares. HMC specifically disclaims beneficial ownership in the shares reported herein except to the extent of its pecuniary interest therein.

(10) Based solely upon Schedule 13D filed with the Securities and Exchange Commission on August 4, 2006. Philip Falcone is a shareholder of HMC and the portfolio manager of the Master Fund and the Harbinger Capital Partners Special Situations Fund, L.P. (“Special Situations Fund”). Mr. Falcone may be deemed to be the beneficial owner of 2,800,000 shares, constituting 28.0% of our shares, based upon 10,000,000 shares outstanding. Mr. Falcone has the sole power to vote or direct the vote of 0 shares; has the shared power to vote or direct the vote of 2,800,000 shares; has sole power to dispose or direct the disposition of 0 shares; and has shared power to dispose or direct the disposition of 2,800,000 shares. Mr. Falcone specifically disclaims beneficial ownership in the shares reported herein except to the extent of his pecuniary interest therein.

(11) Based solely upon Schedule 13D filed with the Securities and Exchange Commission on August 4, 2006. Raymond J. Harbert is a shareholder of HMC. Mr. Harbert may be deemed to be the beneficial owner of 2,800,000 shares, constituting 28.0% of our shares, based upon 10,000,000 shares outstanding. Mr. Harbert has the sole power to vote or direct the vote of 0 shares; has the shared power to vote or direct the vote of 2,800,000 shares; has sole power to dispose or direct the disposition of 0 shares; and has shared power to dispose or direct the disposition of 2,800,000 shares. Mr. Harbert specifically disclaims beneficial ownership in the shares reported herein except to the extent of his pecuniary interest therein.

(12) Based solely upon Schedule 13D filed with the Securities and Exchange Commission on August 4, 2006. Michael D. Luce is a shareholder of HMC. Mr. Luce may be deemed to be the beneficial owner of 2,800,000 shares, constituting 28.0% of our shares, based upon 10,000,000 shares outstanding. Mr. Luce has the sole power to vote or direct the vote of 0 shares; has the shared power to vote or direct the vote of 2,800,000 shares; has sole power to dispose or direct the disposition of 0 shares; and has shared power to dispose or direct the disposition of 2,800,000 shares. Mr. Luce specifically disclaims beneficial ownership in the shares reported herein except to the extent of his pecuniary interest therein.

(13) Shares beneficially owned before this offering include shares issuable pursuant to options exercisable within 60 days after the date of this prospectus as follows: for Messrs. Sponaugle, Pinkham, Young and Maudlin and Ms. Neel, options to purchase 33,333 shares; for Mr. Douglas, options to purchase 16,666 shares; and for Mr. Losch, options to purchase 8,333 shares.

Description of capital stock

The following information describes our common stock and preferred stock and certain provisions of our second restated certificate of incorporation and by-laws. This description is a summary. You can obtain more information about our capital stock by reviewing our by-laws and certificate of incorporation, which were filed as exhibits to the registration statement of which this prospectus forms a part.

Our authorized capital stock consists of 20.0 million shares of common stock, par value $0.001 per share, and 20.0 million shares of preferred stock, par value $0.001 per share. At our annual meeting of stockholders to be held on February 20, 2007, our stockholders will vote upon a proposal to increase the number of authorized shares of common stock to 40.0 million.

Common stock

As of the date of this prospectus, 10.0 million shares of our common stock were issued and outstanding. After giving effect to the sale of common stock offered by us in this offering, there will be 11.3 million shares of common stock outstanding, or 11.45 million shares if the underwriters exercise their over-allotment option in full. For more information see “Underwriting.”

The holders of shares of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders. Our common stockholders have no preemptive, redemption, cumulative voting or conversion rights. Our common stockholders are entitled to receive dividends out of funds legally available for distribution when and if declared by our Board of Directors, in its sole discretion. For more information see “Dividend policy.”

The holders of shares of our common stock shall share ratably in our assets legally available for distribution to our stockholders in the event of our liquidation, dissolution or winding up, after the payment in full of all debts and distributions and after the holders of all series of outstanding preferred stock have received their liquidation preferences in full.

The transfer agent and registrar for the shares of our common stock is Wells Fargo Bank, N.A. located at 161 North Concord Exchange South, St. Paul, Minnesota 55075 and can be contacted by telephone at (651) 552-6948.

Preferred stock

As of the date of this prospectus, there are no shares of preferred stock issued and outstanding, and, except in connection with the preferred share purchase rights described below, we have no current plans to issue any shares of our preferred stock. It is not possible to state the actual effect of the issuance of any shares of our preferred stock not currently authorized on the rights of holders of shares of our common stock until the Board of Directors determines the specific rights attached to the shares of any such class of preferred stock. The effects of an issuance by us of preferred stock not currently authorized could include one or more of the following: restricting dividends on shares of our common stock, diluting the voting power of shares of our common stock, impairing the liquidation rights of shares of our common stock, or delaying or preventing a change of control.

Our Board of Directors has the authority under our certificate of incorporation, without action by stockholders, to classify or reclassify any unissued shares of our preferred stock from time to time by setting or changing the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of the shares of such preferred stock.

Preferred share purchase rights

On August 13, 2006, Haynes entered into a Rights Agreement with Wells Fargo Bank, N.A., as rights agent. In connection with the adoption of the Rights Agreement, the Board of Directors of Haynes declared a dividend of one preferred share purchase right for each outstanding share of our common stock, par value $.001 per share. The dividend was payable on August 25, 2006 to stockholders of record as of the close of business on such date. In addition, one preferred share purchase right automatically attached to each share of common stock issued between August 25, 2006 and the date on which the rights become exercisable. Once exercisable, each preferred share purchase right will allow its holder to purchase from Haynes one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share, for $135.00, subject to adjustment under certain conditions.

The preferred share purchase rights have certain anti-takeover effects. The preferred share purchase rights will cause substantial dilution to a person or group who attempts to acquire Haynes on terms not approved by the Board, except pursuant to an offer conditioned on a substantial number of preferred share purchase rights being acquired. The preferred share purchase rights should not interfere with any merger or other business combination approved by the Board prior to any person or group becoming an Acquiring Person since the Board may redeem the preferred share purchase rights at $0.01 per Right at any time until the date on which a person or group has become an Acquiring Person.

The preferred share purchase rights will not be exercisable until:

· 10 days after the public announcement that a person or group has (subject to certain exceptions) become an “Acquiring Person” by obtaining beneficial ownership of 15% or more of our outstanding common stock (or with respect to any person or group beneficially owning 15% or more of the outstanding common stock at the time of adoption of the Rights Agreement or at any time thereafter and prior to the first public announcement of the adoption of the Rights Agreement, by acquiring beneficial ownership of any additional shares of common stock after the first public announcement of the adoption of the Rights Agreement if after giving effect to such acquisition such person or group owns 15% or more of the outstanding common stock); or

· 10 business days (or a later date determined by the Board before any person or group becomes an Acquiring Person) after a person or group begins a tender or exchange offer which, if completed, would result in that person or group becoming an Acquiring Person.

The date when the preferred share purchase rights become exercisable is referred to as the “Distribution Date.” Until that date, the common stock certificates will also evidence the preferred share purchase rights, any transfer of shares of common stock will constitute a transfer of preferred share purchase rights, and new common stock certificates issued after the record date will contain a notation referencing the Rights Agreement. After the Distribution Date, the

preferred share purchase rights will separate from the common stock and be evidenced by preferred share purchase rights certificates that Haynes will mail to all eligible holders of common stock. Any preferred share purchase rights held by an Acquiring Person will be void and may not be exercised.

If a person or group becomes an Acquiring Person, all holders of preferred share purchase rights (except the Acquiring Person) may exercise the rights and purchase for the $135.00 purchase price shares of common stock with a market value of two times $135.00, based on the market price of the common stock prior to such acquisition. In the event Haynes does not have a sufficient number of common shares available, Haynes may under certain circumstances substitute preferred shares for the common shares into which the preferred share purchase rights would have otherwise been exercisable.

If we are acquired in a merger or similar transaction after an Acquiring Person becomes such, all holders of preferred share purchase rights (except the Acquiring Person) may exercise the rights and purchase shares of the acquiring company, for $135.00, with a market value of two times $135.00, based on the market price of the acquiring company’s stock prior to such merger.

Each share of Series A Junior Participating Preferred Stock, if issued:

· will not be redeemable;

· will entitle holders to quarterly dividend payments of $10.00, or an amount equal to 1,000 times the dividend paid on one share of common stock, whichever is greater;

· will entitle holders upon liquidation either to receive $1,000.00 or an amount equal to 1,000 times the payment made on one share of common stock, whichever is greater;

· will have 1,000 votes and vote together with the common stock, except as required by law; and

· if shares of common stock are exchanged via merger, consolidation, or a similar transaction, will entitle holders to 1,000 times the payment made on one share of common stock.

Because of the nature of the dividend, liquidation and voting rights of the Series A Junior Participating Preferred Stock, the value of one one-thousandth interest in a Series A Junior Participating Preferred Stock should approximate the value of one share of common stock.

The Board may redeem the preferred share purchase rights, in whole but not in part, for $.01 per preferred share purchase right at any time before any person or group becomes an Acquiring Person. If the Board redeems any preferred share purchase rights, it must redeem all of the preferred share purchase rights. Once the preferred share purchase rights are redeemed, the only right of the holders of preferred share purchase rights will be to receive the redemption price of $.01 per preferred share purchase rights. The redemption price will be adjusted if in the event of a stock split or stock dividends of the common stock.

After a person or group becomes an Acquiring Person, but before an Acquiring Person owns 50% or more of the outstanding common stock, the Board may extinguish the preferred share purchase rights by exchanging one share of common stock or an equivalent security for each preferred share purchase rights, other than preferred share purchase rights held by the Acquiring Person.

The preferred share purchase rights will expire at 5:00 P.M., Minneapolis, Minnesota time, on the earlier of (a) August 13, 2016 or (b) the thirtieth (30th) day following the date of the 2007 Annual Meeting of Stockholders of Haynes if at such meeting the stockholders, by the affirmative vote of a majority of stockholders present, in person or by proxy, and entitled to vote on such matter, vote to terminate the Rights Agreement. The Board may amend the Rights Agreement at any time, including to shorten or lengthen any time period; provided, that, the Rights Agreement may not be amended in any manner which would negatively affect the holders of preferred share purchase rights at any time after a person or group becomes an Acquiring Person. The preferred share purchase rights may be redeemed or exchanged prior to the expiration date by the Board.

At our annual meeting of stockholders to be held on February 20, 2007, our stockholders will vote upon a proposal to ratify and continue the Rights Agreement.

Indemnification of directors and officers

We are a corporation organized under the laws of the State of Delaware. Section 145 of the Delaware General Corporation Law (the “DGCL”) permits a Delaware corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise. A corporation may indemnify against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding if the person indemnified acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. In the case of an action or suit by or in the right of the corporation to procure a judgment in its favor, no indemnification may be made in respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery of the State of Delaware, or the court in which such action or suit was brought, shall determine upon application that, despite the adjudication of liability, such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper. Section 145 provides that, to the extent a present or former director or officer of a corporation has been successful in the defense of any action, suit or proceeding referred to above or in the defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him or her in connection therewith.

Pursuant to authority conferred by Delaware law, our certificate of incorporation contains provisions providing that no director shall be liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent that such exemption from liability or limitation thereof is not permitted under Delaware law as then in effect or as it may be amended. This provision is intended to eliminate the risk that a director might incur personal liability to us or our stockholders for breach of the duty of care.

Our certificate of incorporation and by-laws contain provisions requiring us to indemnify and advance expenses to our directors and officers to the fullest extent permitted by law. Among other things, these provisions generally provide indemnification for our directors and officers against liabilities for judgments in and settlements of lawsuits and other proceedings and for the advancement and payment of fees and expenses reasonably incurred by the director or officer in defense of any such lawsuit or proceeding if the director or officer acted in good faith and in a manner he or she reasonably believed to be in or not opposed to our best interests, and in certain cases only if the director or officer is not adjudged to be liable to us.

Delaware anti-takeover law and certain charter and by-law provisions

We are subject to Section 203 of the DGCL, an anti-takeover law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years following the date that the person became an interested stockholder, unless the “business combination” or the transaction in which the person became an interested stockholder is approved in a prescribed manner. Generally, a “business combination” includes a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own 15% or more of a corporation’s voting stock. The existence of this provision may have an anti-takeover effect with respect to transactions not approved in advance by our Board of Directors, including discouraging attempts that might result in a premium over the market price for the shares of common stock held by stockholders.

Our certificate of incorporation and by-laws provide that vacancies on our Board of Directors during the interim between our annual stockholder meetings or special meetings of our stockholders called for the election of directors may be filled by a vote of a majority of the directors then in office. Furthermore, any director may be removed only for cause by a vote of a majority of the voting power of the shares of our common stock entitled to vote for the election of directors. These provisions of our certificate of incorporation and by-laws could make it more difficult for a third party to acquire, or discourage a third party from attempting to acquire, control of us and therefore may limit the price that certain investors might be willing to pay in the future for shares of our common stock.

Our certificate of incorporation and by-laws do not permit action by our stockholders by written consent. These provisions could have the effect of delaying stockholder actions that are favored by the holders of a majority of our outstanding voting securities until the next annual stockholders’ meeting, particularly because special meetings of the stockholders may only be called by a resolution adopted by a majority of the Board of Directors, the Chairman of the Board of Directors or the President of Haynes. The ability of the stockholders to call a special meeting of the stockholders is specifically denied. These provisions may also discourage another person or entity from making a tender offer for our stock, because such person or entity, even if it acquired a majority of our outstanding voting securities, would be able to take action as a stockholder (such as election of new directors or approving a merger) only at a duly called stockholders meeting.

Shares eligible for future sale

Prior to this offering, our common stock was not listed on any national securities exchange and was not actively traded. Future sales of substantial amounts of our common stock in the public market could adversely affect market prices prevailing from time to time. Upon completion of this offering, we will have shares of common stock outstanding, assuming the exercise of the underwriters’ over-allotment option and no exercise of any options and warrants outstanding. Of these shares, shares, or shares if the underwriters exercise their over-allotment option in full, will be freely transferable without restriction or registration under the Securities Act. The remaining shares of common stock existing are “restricted shares” as defined in Rule 144. Restricted shares may be sold in the public market only if registered or if they qualify for an exemption from registration under Securities Act.

Rule 144

In general, under Rule 144 as currently in effect, a person, or persons whose shares are aggregated, who owns shares that were purchased from us, or any affiliate, at least one year previously, is entitled to sell within any three-month period a number of shares that does not exceed the greater of 1% of our then-outstanding shares of common stock, or the average weekly trading volume of our common stock during the four calendar weeks preceding the filing of a notice of the sale on Form 144. Sales under Rule 144 are also subject to manner of sale provisions, notice requirements and the availability of current public information about us. We are unable to estimate the number of shares that will be sold under Rule 144 since this will depend on the market price for our common stock, the personal circumstances of the stockholder and other factors.

Under Rule 144(k), a person who is not deemed to have been one of our affiliates at any time during the three months preceding a sale, and who owns shares within the definition of “restricted securities” under Rule 144 that were purchased from us, or any affiliate, at least two years previously, would be entitled to sell shares under Rule 144(k) without regard to these volume limitations, manner of sale provisions, public information requirements or notice requirements.

Registration rights

Upon completion of this offering, the holders of shares of common stock will be entitled to various rights with respect to the registration of these shares under the Securities Act. See “Certain transactions.” Registration of these shares under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration, except for shares purchased by affiliates.

Stock options

As of January 23, 2007, options to purchase a total of 980,000 shares of common stock were outstanding. An additional 520,000 shares of common stock were available for future option grants under our stock option plans.

Lock-up agreements

Our executive officers and directors and the selling stockholders who will hold an aggregate of approximately shares of our common stock after completion of this offering (assuming no exercise of the underwriters’ over-allotment option), have agreed, subject to limited exceptions, not to offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, shares of common stock for a period of 90 days after the date of this prospectus, without the prior written consent of J.P. Morgan Securities Inc. For further information, see “Underwriting.”

Underwriting

We and the selling stockholders are offering the shares of common stock described in this prospectus through a number of underwriters. J.P. Morgan Securities Inc. is acting as sole book-running manager and representative of the underwriters for this offering. We and the selling stockholders have entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement, we and each selling stockholder have severally agreed to sell to each underwriter, and each underwriter has severally agreed to purchase, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus, the number of shares of our common stock listed next to such underwriter’s name in the following table:

Name	Number of shares
J.P. Morgan Securities Inc.
Bear, Stearns & Co. Inc.
KeyBanc Capital Markets, a division of McDonald Investments Inc.






Total		2,000,000

The underwriters are committed to purchase all the shares of common stock offered by us and the selling stockholders if they purchase any shares. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may be increased or the offering may be terminated.

The underwriters propose to offer the shares of common stock directly to the public at the public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $ per share. Any such dealers may resell shares to certain other brokers or dealers at a discount of up to $ per share from the public offering price. After the public offering of the shares, the offering price and other selling terms may be changed by the underwriters. Sales of shares made outside of the United States may be made by affiliates of the underwriters. The representative has advised us that the underwriters do not intend to confirm discretionary sales in excess of 5% of the common shares offered in this offering.

The underwriters have an option to buy up to 300,000 additional shares of our common stock from the selling stockholders to cover sales of shares by the underwriters that exceed the number of shares specified in the table above. The underwriters have 30 days from the date of this prospectus to exercise this over-allotment option. If any shares are purchased with this over-allotment option, the underwriters will purchase shares in approximately the same proportion as shown in the table above. If any additional shares of our common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares are being offered.

The underwriting fee is equal to the public offering price per share of common stock less the amount paid by the underwriters per share of common stock. The underwriting fee is $ per share. The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares.

	Without over-allotment exercise	With full over-allotment exercise
Per share	$	$
Total	$	$

We estimate that the total expenses of this offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding the underwriting discounts and commissions, will be approximately $ , $ of which will be paid by us and $ of which will be paid by the selling stockholders.

A prospectus and accompanying prospectus in electronic format may be made available on the websites maintained by one or more underwriters, or selling group members, if any, participating in this offering. The underwriters may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the representative to underwriters and selling group members that may make internet distributions on the same basis as other allocations.

We have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Securities and Exchange Commission a registration statement relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of J.P. Morgan Securities Inc. for a period of 90 days after the date of this prospectus. In addition, our directors, our executive officers and the selling stockholders entered into lock-up agreements with the underwriters prior to the commencement of this offering pursuant to which each of these persons, with limited exceptions, for the same 90-day restricted period, may not, without the prior written consent of J.P. Morgan Securities Inc.:

· offer, pledge, announce the intention to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of our common stock (including, without limitation, common stock which may be deemed to be beneficially owned by any such person in accordance with the rules and regulations of the Securities and Exchange Commission and securities which may be issued upon exercise of a stock option or warrant) or

· enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the common stock,

whether any such transaction described above is to be settled by delivery of common stock or such other securities, in cash or otherwise.

The 90-day restricted period described above is subject to extension under certain circumstances. If:

· during the last 17 days of the 90-day restricted period, we issue an earnings release or material news or a material event relating to our company occurs or

· prior to the expiration of the 90-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 90-day period,

the restrictions described above shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.

We and the selling stockholders, jointly and severally, have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act of 1933.

We have applied to list our common stock on The NASDAQ Global Market under the symbol HAYN.

In connection with this offering, the underwriters may engage in stabilizing transactions, which involves making bids for, purchasing and selling shares of common stock in the open market for the purpose of preventing or retarding a decline in the market price of the common stock while this offering is in progress. These stabilizing transactions may include making short sales of the common stock, which involves the sale by the underwriters of a greater number of shares of common stock than they are required to purchase in this offering, and purchasing shares of common stock on the open market to cover positions created by short sales. Short sales may be “covered” shorts, which are short positions in an amount not greater than the underwriters’ over-allotment option referred to above, or may be “naked” shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their over-allotment option, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares through the over-allotment option. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect investors who purchase in this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position.

The underwriters have advised us that, pursuant to Regulation M promulgated by the Securities and Exchange Commission, they may also engage in other activities that stabilize, maintain or otherwise affect the price of the common stock, including the imposition of penalty bids. This means that if the representative of the underwriters purchases common stock in the open market in stabilizing transactions or to cover short sales, the representative can require the underwriters that sold those shares as part of this offering to repay the underwriting discount received by them.

These activities may have the effect of raising or maintaining the market price of the common stock or preventing or retarding a decline in the market price of the common stock, and, as a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at

any time. The underwriters may carry out these transactions on The NASDAQ Global Market, in the over-the-counter market or otherwise.

Determination of offering price

Prior to this offering, our common stock was not listed on any national securities exchange, and was quoted in the “pink sheets” under the symbol HYNI.PK. The initial public offering price of the common stock being offered by this prospectus will be determined by negotiation by us, the selling stockholders and the representative of the underwriters. In determining the initial public offering price, we, the selling stockholders and the representative of the underwriters expect to consider a number of factors including:

· the information set forth in this prospectus and otherwise available to the representative;

· our prospects and the history and prospects for the industry in which we compete;

· an assessment of our management;

· our prospects for future earnings;

· the general condition of the securities markets at the time of this offering;

· the recent market prices of, and demand for, publicly traded common stock of generally comparable companies;

· the historical trading prices of our common stock in the “pink sheets,” which may not be indicative of prices that will prevail in the trading market for our common stock on The NASDAQ Global Market; and

· other factors deemed relevant by the representative, us and the selling stockholders.

Neither we nor the underwriters can assure investors that an active trading market will develop for our common stock, or that the shares will trade in the public market at or above the initial public offering price.

Certain of the underwriters and their affiliates have provided in the past to us and our affiliates and may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future.

An affiliate of J.P. Morgan Securities Inc. is a lender under the U.S. revolving credit facility that we intend to repay with our net proceeds from this offering. As a result, because more than 10% of the net proceeds of this offering may be received by the underwriters or their affiliates, this offering is being conducted in compliance with Rule 2710(h) of the Conduct Rules of the National Association of Securities Dealers, Inc. Rule 2710(h) requires that the price at which an equity issue is to be distributed to the public be established at a price no higher than that recommended by a “qualified independent underwriter,” as defined by the National Association of Securities

Dealers. Bear, Stearns & Co. Inc. is serving in that capacity and has performed due diligence investigations and reviewed and participated in the preparation of the registration statement of which this prospectus forms a part. We have agreed to indemnify Bear, Stearns & Co. Inc. in its capacity as a qualified independent underwriter, and its controlling persons, against certain liabilities, including certain liabilities under the Securities Act of 1933.

Certain sales outside the United States

Each underwriter has agreed that (i) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the “FSMA”)) received by it in connection with the issue or sale of any of our common stock in circumstances in which Section 21(1) of the FSMA does not apply to us and (ii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom.

In relation to each Member State of the European Economic Area (the European Union, Iceland, Norway and Liechtenstein) which has implemented the Prospectus Directive (each, a “Relevant Member State”), each underwriter has agreed that with effect from and including the date on which the European Union Prospectus Directive (the “EU Prospectus Directive”) is implemented in that Relevant Member State (the “Relevant Implementation Date”) it has not made and will not make an offer of our common stock to the public in that Relevant Member State prior to the publication of a prospectus in relation to our common stock which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the EU Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of our common stock to the public in that Relevant Member State at any time:

· to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;

· to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than € 43,000,000 and (3) an annual net turnover of more than € 50,000,000, as shown in its last annual or consolidated accounts; or

· in any other circumstances which do not require the publication by us of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer of our common stock to the public” in relation to any shares of our common stock in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares of our common stock to be offered so as to enable an investor to decide to purchase or subscribe the shares of our common stock, as the same may be varied in that Member State by any measure implementing the EU Prospectus Directive in that Member State and the expression “EU Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

100

Legal matters

The validity of the shares of common stock being offered hereby and certain other matters are being passed upon for us by Ice Miller LLP, Indianapolis, Indiana. Certain legal matters relating to the offering are being passed upon for the underwriters by Davis Polk & Wardwell, New York, New York.

Experts

The consolidated financial statements as of September 30, 2006 and 2005, and for the fiscal years ended September 30, 2006 and September 30, 2005, the period September 1, 2004 (inception) to September 30, 2004 (collectively, successor Haynes International, Inc.), the period October 1, 2003 to August 31, 2004, and the fiscal year ended September 30, 2003 (collectively, predecessor Haynes International, Inc.) and management’s report on the effectiveness of internal control over financial reporting as of September 30, 2006 included in this prospectus, have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports appearing herein (which reports (1) express an unqualified opinion on the consolidated financial statements and includes an explanatory paragraph referring to our application of AICPA Statement of Position 90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy Code , and an explanatory paragraph regarding our change of accounting for share-based payments as required by Statement of Financial Accounting Standards No. 123 (R), Share-Based Payment, (2) express an unqualified opinion on management’s assessment regarding the effectiveness of internal control over financial reporting, and (3) express an unqualified opinion on the effectiveness of internal control over financial reporting), and have been so included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

Where you can find more information

Haynes has filed with the Securities and Exchange Commission a registration statement on Form S-1 under the Securities Act of 1933 with respect to the shares of common stock offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules filed therewith. For further information with respect to Haynes and the common stock offered hereby, please refer to the registration statement. You may read and copy any document Haynes files, including the registration statement, at the SEC’s public reference rooms at 100 F Street, N.E., Room 1850, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. You may also obtain copies of the registration statement by mail from the Public Reference Section of the SEC, 100 F Street, N.E., Room 1850, Washington, D.C. 20549, at prescribed rates. The SEC also maintains an Internet World Wide Web site that contains reports, information statements and other information about issuers, including Haynes, who file electronically with the SEC. The address of that site is http://www.sec.gov.

We also maintain a website at http://www.haynesintl.com, at which you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information contained in, or that can be accessed through, our website is not part of this prospectus.

101

Haynes International, Inc.
Index to consolidated financial statements

	Page
Audited Consolidated Financial Statements of Haynes International, Inc. (Haynes—successor) as of September 30, 2006 and 2005 and for the years ended September 30, 2006 and September 30, 2005 and for the period September 1, 2004 to September 30, 2004 and Haynes International, Inc. (Haynes—predecessor) for the period October 1, 2003 to August 31, 2004
Reports of independent registered public accounting firm		F-2
Consolidated balance sheets		F-4
Consolidated statements of operations		F-5
Consolidated statements of comprehensive income (loss)		F-6
Consolidated statements of stockholders’ equity (deficiency)		F-7
Consolidated statements of cash flow		F-8
Notes to consolidated financial statements		F-9

F-1

Report of independent registered public
accounting firm

To The Board of Directors and Stockholders of
Haynes International, Inc.

We have audited the accompanying consolidated balance sheets of Haynes International, Inc. and subsidiaries (“Haynes—successor”) as of September 30, 2005 and 2006, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for the period September 1, 2004 (inception) to September 30, 2004 and for the years ended September 30, 2005 and 2006. We have also audited the Haynes International, Inc. and subsidiaries (“Haynes—predecessor”) consolidated statements of operations, comprehensive income (loss), stockholders’ equity (deficiency) and cash flows for the period October 1, 2003 to August 31, 2004. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 1 to the consolidated financial statements, on August 16, 2004, the bankruptcy court entered an order confirming the plan of reorganization of Haynes—predecessor which became effective after the close of business on August 31, 2004. Accordingly, the accompanying consolidated balance sheets as of September 30, 2005 and 2006 and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows of Haynes—successor for the period September 1, 2004 (inception) to September 30, 2004 and for the years ended September 30, 2005 and 2006, have been prepared in conformity with AICPA Statement of Position 90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy Code , as a new entity with assets, liabilities and capital structure having carrying values not comparable with prior periods.

In our opinion, the consolidated financial statements referred to above of Haynes—successor present fairly, in all material respects, the financial position of Haynes—successor as of September 30, 2005 and 2006, and the results of their operations and their cash flows for the period September 1, 2004 (inception) to September 30, 2004 and for the years ended September 30, 2005 and 2006, in conformity with accounting principles generally accepted in the United States of America. Further, in our opinion, the consolidated financial statements referred to above for Haynes—predecessor present fairly, in all material respects, the results of their operations and their cash flows for the period October 1, 2003 to August 31, 2004 in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 2 to the consolidated financial statements, effective October 1, 2005, Haynes—successor changed its method of accounting for share-based payments as required by Statement of Financial Accounting Standards No. 123(R), Share-Based Payment .

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of September 30, 2006, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated December 7, 2006 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP
Indianapolis, Indiana
December 7, 2006

F- 2

Attestation report of independent registered public accounting firm

To the Board of Directors and Stockholders of
Haynes International, Inc.

We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, that Haynes International, Inc. and subsidiaries (the “Company”) maintained effective internal control over financial reporting as of September 30, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of September 30, 2006, is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2006, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended September 30, 2006 of the Company and our report dated December 7, 2006 expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company’s change of accounting for share-based payments as required by Statement of Financial Accounting Standards No. 123(R), Share-Based Payment .

/s/ DELOITTE & TOUCHE LLP
Indianapolis, Indiana
December 7, 2006

F-3

Haynes International, Inc. and subsidiaries
consolidated balance sheet

At September 30, (in thousands, except share data)	2005			2006
Assets
Current assets:
Cash and cash equivalents	$	2,886		$	6,182
Restricted cash—current portion	110			110
Accounts receivable, less allowance for doubtful accounts of $1,514 and $1,751, respectively	58,730			77,962
Inventories, net	147,860			179,712
Deferred income taxes	7,298			10,759
Total current assets	216,884			274,725
Property, plant and equipment, net	85,125			88,921
Deferred income taxes—long term portion	27,665			27,368
Prepayments and deferred charges, net	2,457			2,719
Restricted cash—long term portion	550			440
Goodwill	43,055			42,265
Other intangible assets	11,386			9,422
Total assets	$	387,122		$	445,860
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses	$	45,495		$	45,487
Income taxes payable	399			2,294
Accrued pension and postretirement benefits	5,527			8,134
Revolving credit facilities	104,468			116,836
Current maturities of long term obligations	1,501			110
Total current liabilities	157,390			172,861
Long-term obligations (less current portion)	414			3,097
Accrued pension and postretirement benefits	117,449			118,354
Total liabilities	275,253			294,312
Stockholders’ equity:
Common stock, $0.001 par value (20,000,000 shares authorized, 10,000,000 shares issued and outstanding)	10			10
Preferred stock, $0.001 par value (20,000,000 shares authorized, 0 shares issued and outstanding)	—			—
Additional paid-in capital	120,972			122,937
Accumulated earnings (deficit)	(7,780		)	27,760
Accumulated other comprehensive income (loss)	(512		)	841
Deferred stock compensation	(821		)	—
Total stockholders’ equity	111,869			151,548
Total liabilities and stockholders’ equity	$	387,122		$	445,860

See notes to consolidated financial statements.

F- 4

Haynes International, Inc. and subsidiaries
consolidated statements of operations

(in thousands, except per	Predecessor							Successor
share data)	Period October 1, 2003 to August 31,			Period September 1, 2004 to September 30,				Year Ended September 30,
	2004			2004				2005			2006
Net revenues	$	209,103			$	24,391		$	324,989		$	434,405
Cost of sales	171,652				26,136			288,669			325,573
Selling, general and administrative	24,038				2,658			32,963			40,296
Research and technical	2,286				226			2,621			2,659
Restructuring and other charges	4,027				429			628			—
Operating income (loss)	7,100				(5,058		)	108			65,877
Interest expense (contractual interest of $20,876 for the period October 1, 2003 to August 31, 2004)	13,964				354			6,385			8,121
Interest income	(35		)		(6		)	(32		)	(97		)
Income (loss) before reorganization items and income taxes	(6,829		)		(5,406		)	(6,245		)	57,853
Reorganization items	177,653				—			—			—
Income (loss) before income taxes	170,824				(5,406		)	(6,245		)	57,853
Provision for (benefit from) income taxes	90				(1,760		)	(2,111		)	22,313
Net income (loss)	$	170,734			$	(3,646	)	$	(4,134	)	$	35,540
Net income (loss) per share:
Basic	$	1,707,340			$	(0.36	)	$	(0.41	)	$	3.55
Diluted	$	1,707,340			$	(0.36	)	$	(0.41	)	$	3.46
Weighted average shares outstanding:
Basic	100				10,000,000			10,000,000			10,000,000
Diluted	100				10,000,000			10,000,000			10,270,642

See notes to consolidated financial statements.

F- 5

Haynes International, Inc. and subsidiaries
consolidated statements of comprehensive income (loss)

	Predecessor			Successor
(in thousands)	Period October 1, 2003 to August 31,			Period September 1, 2004 to September 30,				Year Ended September 30,
	2004			2004				2005				2006
Net income (loss)		$	170,734		$	(3,646	)		$	(4,134	)	$	35,540
Other comprehensive income (loss), net of tax:
Minimum pension adjustment		—			—				—			(217		)
Foreign currency translation adjustment		2,124			363				(875		)	1,570
Other comprehensive income (loss)		2,124			363				(875		)	1,353
Comprehensive income (loss)		$	172,858		$	(3,283	)		$	(5,009	)	$	36,893

See notes to consolidated financial statements .

F- 6

Haynes International, Inc. and subsidiaries
consolidated statements of stockholders’ equity

(in thousands, except share data)	Common Stock				Additional Paid-in				Retained Earnings (Accumulated				Deferred Stock				Accumulated Other Comprehensive				Total Stockholders’ Equity
	Shares		Par		Capital				Deficit)				Compensation				Income (Loss)				(Deficiency)
Predecessor
Balance October 1, 2003	100		$	—		$	51,381			$	(222,232	)		$	—			$	(2,007	)		$	(172,858	)
Net income										170,734												170,734
Other comprehensive income																		2,124				2,124
Plan of reorganization and fresh-start:
Elimination of accumulated deficit	—		—			—				51,498								(117		)		51,381
Cancellation of predecessor company shares	(100	)				(51,381		)														(51,381		)
Issuance of stock under plan of reorganization	10,000,000		10			118,726																118,736
Balance August 31, 2004	10,000,000		$	10		$	118,726			$	—			$	—			$	—			$	118,736

Successor
Balance September 1, 2004	10,000,000		$	10		$	118,726			$	—			$	—			$	—			$	118,736
Net loss										(3,646		)										(3,646		)
Other comprehensive income																		363				363
Grant of stock options						2,419								(2,419		)
Amortization of deferred stock compensation														123								123
Balance September 30, 2004	10,000,000		$	10		$	121,145			$	(3,646	)		$	(2,296	)		$	363			$	115,576
Net loss										(4,134		)										(4,134		)
Other comprehensive loss																		(875		)		(875		)
Forfeiture of stock options						(173		)						173								—
Amortization of deferred stock compensation														1,302								1,302
Balance September 30, 2005	10,000,000		$	10		$	120,972			$	(7,780	)		$	(821	)		$	(512	)		$	111,869
Net income										35,540												35,540
Other comprehensive income																		1,353				1,353
Reclass reporting of deferred stock compensation						(821		)						821								—
Stock compensation						2,786																2,786
Balance September 30, 2006	10,000,000		$	10		$	122,937			$	27,760			$	—			$	841			$	151,548

See notes to consolidated financial statements.

F- 7

Haynes International, Inc. and subsidiaries
consolidated statements of cash flow

(in thousands)	Predecessor				Successor
	Period October 1, 2003 to August 31,				Period September 1, 2004 to September 30,				Year Ended September 30,
	2004				2004				2005				2006
Cash flows from operating activities:
Net income (loss)		$	170,734			$	(3,646	)		$	(4,134	)	$	35,540
Depreciation		5,035				494				6,131			6,926
Amortization		2,739				164				1,895			1,964
Stock compensation expense		—				—				1,302			2,786
Deferred income taxes		0				(1,648		)		(5,655		)	(2,644		)
Loss (gain) on disposition of property		(437		)		(13		)		(1,937		)	140
Reorganization items		(177,653		)		—				—			—
Change in assets and liabilities (net of effects of acquisition):
Accounts receivable		(15,281		)		(4,241		)		(2,211		)	(18,125		)
Inventories		(15,254		)		853				(14,244		)	(30,122		)
Other assets and reorganization items		(521		)		503				(374		)	(216		)
Accounts payable and accrued expenses		12,864				6,604				10,364			(925		)
Income taxes payable		(96		)		(88		)		1,124			1,901
Accrued pension and postretirement benefits		480				312				2,957			3,043
Net cash provided (used) in operating activities before reorganization costs		(17,390		)		(706		)		(4,782		)	268
Reorganization items paid		(5,799		)		—				—			—
Net cash provided (used) in operating activities		(23,189		)		(706		)		(4,782		)	268
Cash flows from investing activities:
Additions to property, plant and equipment		(4,782		)		(637		)		(9,029		)	(10,668		)
Proceeds from sale of property, plant and equipment		1,270				15				2,326			—
Acquisition of The Branford Wire and Manufacturing Company, net of cash acquired		—				—				(8,300		)	—
Change in restricted cash		1,009				(12		)		337			110
Net cash used in investing activities		(2,503		)		(634		)		(14,666		)	(10,558		)
Cash flows from financing activities:
Net repayment of short term borrowings		(56,815		)		—				—			—
Net increase in revolving credit		80,296				1,060				21,986			12,368
Changes in long-term obligations		—				—				(1,596		)	1,009
Payment of debt issuance cost		—				—				(465		)	—
Net cash provided by financing activities		23,481				1,060				19,925			13,377
Effect of exchange rates on cash		80				97				(68		)	209
Increase (decrease) in cash and cash equivalents		(2,131		)		(183		)		409			3,296
Cash and cash equivalents:
Beginning of period		4,791				2,660				2,477			2,886
End of period		$	2,660			$	2,477			$	2,886		$	6,182
Supplemental disclosures of cash flow information:
Cash paid during period for:
Interest (net of capitalized interest)		$	3,426			$	354			$	6,377		$	7,992
Income Taxes		$	161			—				$	2,681		$	23,148

Supplemental disclosures of non-cash activities:

During the period October 1, 2003 to August 31, 2004, the minimum pension liability was eliminated as a result of the adoption of fresh start accounting in accordance with SOP 90-7 “Financial Reporting by Entities in Reorganization under the Bankruptcy Code”.

During 2006, goodwill decreased and deferred income tax asset increased by $790 due to the finalization of pre-emergence tax returns which affected net operating loss carryforwards.

During 2006 a $310 minimum pension liability was recorded in accumulated other comprehensive income.

See notes to consolidated financial statements.

F- 8

Haynes International, Inc. and subsidiaries
notes to consolidated financial statements

(in thousands, except per share data and otherwise noted)

Note 1 Background and organization

Description of business

Haynes International, Inc. and its subsidiaries (the “Company” or “Haynes”) develops, manufactures, markets and distributes technologically advanced, high-performance alloys primarily for use in the aerospace, land based gas turbine and chemical processing industries. The Company’s products are high-temperature resistant alloys (“HTA”) and corrosion resistant alloys (“CRA”). The Company’s HTA products are used by manufacturers of equipment that is subjected to extremely high temperatures, such as jet engines for the aerospace industry, gas turbine engines for power generation, waste incineration, and industrial heating equipment. The Company’s CRA products are used in applications that require resistance to extreme corrosion, such as chemical processing, power plant emissions control and hazardous waste treatment. The Company produces its high-performance alloys primarily in sheet, coil and plate forms. In addition, the Company produces its products as seamless and welded tubulars, and in bar, billets and wire forms.

High-performance alloys are characterized by highly engineered often proprietary, metallurgical formulations primarily of nickel, cobalt and other metals with complex physical properties. The complexity of the manufacturing process for high-performance alloys is reflected in the Company’s relatively high average selling price per pound, compared to the average selling price of other metals, such as carbon steel sheet, stainless steel sheet and aluminum. The high-performance alloy industry has significant barriers to entry such as the combination of (i) demanding end-user specifications, (ii) a multi-stage manufacturing process, and (iii) the technical sales, marketing and manufacturing expertise required to develop new applications.

Basis of presentation

On March 29, 2004 (the “Petition Date”), the Company and its U.S. subsidiaries and U.S. affiliates filed voluntary petitions for reorganization relief under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Indiana (the “Bankruptcy Court”). The bankruptcy cases thus commenced were jointly administered under the caption in re Haynes International, Inc., et al., Case No.: 04-5364-AJM-11 (the “Bankruptcy Cases”). Throughout the Bankruptcy Cases, the Company and its U.S. subsidiaries and U.S. affiliates managed their properties and operated their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code. The Company’s European and Singapore operations were not included in the Bankruptcy Cases.

Prior to August 31, 2004, the Company, Haynes—predecessor, was a wholly-owned subsidiary of Haynes Holdings, Inc. (“Holdings”). Effective August 31, 2004 the Company and Holdings were merged as part of the plan of reorganization with the Company emerging as the successor entity (“Haynes—successor”). As a result of the Company’s emergence from bankruptcy and the Company’s implementation of fresh start reporting as described below, the consolidated financial

F- 9

statements of the Company for periods subsequent to August 31, 2004 reflect a new basis of accounting and are not comparable to the historical consolidated financial statements for periods prior to the effective date of the plan of reorganization.

The Company and its U.S. operations filed for reorganization relief because liquidity shortfalls hampered their ability to meet interest and principal obligations on long-term debt obligations. These shortfalls were primarily a result of reduced customer demand caused by a weak economic environment for its products and higher raw material and energy costs.

In connection with the Bankruptcy Cases, motions necessary for the Company and its U.S. subsidiaries and U.S. affiliates operations to conduct normal business activities were filed with and approved by the Bankruptcy Court, including (i) approval of a $100 million debtor-in-possession credit facility for working capital needs and other general corporate purposes, (ii) authorization to pay pre-petition liabilities related to certain essential trade creditors, (iii) authorization to pay most pre-petition payroll and employee related obligations and (iv) authorization to pay certain pre-petition shipping and import/export related obligations.

On April 28, 2004, the Company and its U.S. subsidiaries and U.S. affiliates filed schedules and statements of financial affairs with the Bankruptcy Court setting forth, among other things, the assets and liabilities of the Company and its U.S. subsidiaries and U.S. affiliates. All of the schedules were subject to further amendment or modification. Differences between amounts scheduled by the Company and its U.S. subsidiaries and U.S. affiliates and claims submitted by creditors were investigated and resolved in accordance with an established claims resolution process.

On May 25, 2004, the Company and its U.S. subsidiaries and U.S. affiliates filed a plan of reorganization and related disclosure statement with the Bankruptcy Court. The plan was amended on June 29, 2004, and the Bankruptcy Court entered an order confirming the Company and its U.S. subsidiaries and U.S. affiliates plan of reorganization, as amended, on August 16, 2004. As part of the consummation of the confirmed plan of reorganization, holders of the Company’s 11 5 ¤ 8 % Senior Notes due September, 2004 (the “Senior Notes”) exchanged the $140 million of the Senior Notes outstanding and accrued interest for 96% of the equity in the reorganized Haynes—successor. The pre-petition majority equity holder of the Company’s former parent, Holdings, agreed to cancel its equity interests in exchange for 4% of the equity in Haynes—successor.

The Company and its U.S. subsidiaries and U.S. affiliates emerged from bankruptcy on August 31, 2004. The Company has determined that it qualified for fresh start accounting under AICPA Statement of Position 90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy Code (SOP 90-7) and applied fresh start accounting on the date of emergence, August 31, 2004. The reorganization value was determined to be $200 million.

The plan of reorganization provided for the following to occur as of the effective date of the plan (or as soon thereafter as practicable):

· The cancellation of all existing stock authorized and outstanding (“Old Common Stock”) and all existing stock options, warrants, and related rights.

· The authorization for the issuance of ten million shares of new common stock, $0.001 par value per share.

F- 10

· The authorization for the future issuance of an additional ten million shares of new common stock, $0.001 par value per share. Future issuance upon terms to be designated from time to time by the board of directors.

· The authorization of twenty million shares of new preferred stock. Future issuance upon terms to be designated from time to time by the board of directors.

· Senior Note Holders to receive its pro rata share of 96% of the shares of the new common stock in full satisfaction of the debt obligation under the Senior Notes.

· Holders of the Old Common Stock interests to receive their pro rate share of 4% of the new common stock.

· The approval of new collective bargaining agreement with the United Steelworkers of America that contains certain modifications and extends the agreement through June 2007.

· Congress Financial Corporation (Central) to provide exit financing of $100 million for working capital financing subject to reserves and borrowing base restrictions.

· The payment of all pre-petition general unsecured claims at 100%.

· The implementation of a stock option plan for certain key management employees and non-employee directors of the Company.

Fresh start reporting

Upon implementation of the plan of reorganization, fresh start reporting was adopted in accordance with SOP 90-7, since holders of Haynes International, Inc.’s common stock immediately prior to confirmation of the plan of reorganization received less than 50% of the voting shares of the successor entity and its reorganization value was less than its post-petition liabilities and allowed claims. Under fresh start reporting, the reorganization value was allocated to the Company’s net assets based on their relative fair values in a manner similar to the accounting provisions applied to business combinations under Statement of Financial Standards No. 141, Business Combinations (SFAS No. 141). The Company’s reorganization value exceeded the fair value of the Company’s net assets acquired pursuant to the plan of reorganization. In accordance with SFAS No. 141, the excess of the reorganization value over the fair value of the net assets was recorded as goodwill. Liabilities existing at the effective date of the plan of reorganization are stated at the present value of amounts to be paid discounted at appropriate current rates.

In connection with its development of the plan of reorganization, a valuation analysis of Haynes’ business and the securities to be registered under the plan of reorganization was performed in March 2004. In preparing this analysis, the Company, among other things, (a) reviewed the recent financial and operating results, (b) considered current operations and prospects, (c) reviewed certain operating and financial forecasts including the financial projections contained in Haynes’ Disclosure Statement, (d) evaluated key assumptions related to the financial projections, (e) evaluated a three year discounted cash flow analysis based on the financial projections, utilizing various discount rates ranging from 10.5% to 14.5% based on a weighted cost of capital analysis and EBITDA terminal multiples of 5.5x to 7.5x based on relevant comparable company

F- 11

projected multiples and trading multiples during recent business cycles, (f) considered the market value of certain publicly traded companies in businesses reasonably comparable to the operating business of Haynes and (g) conducted such other analyses as deemed necessary under the circumstances. The financial projections reflected a significant reduction in interest expense as a result of the reorganization and a post restructuring effective tax rate of 40%.

As a result of such analyses, review, discussions, considerations and assumptions, the total enterprise value of Haynes was within a range of $160 million to $240 million with a mid-point value of $200 million. The Company used the mid-point valuation of $200 million as the basis for its reorganization value for purposes of applying fresh-start reporting. The total enterprise value of $200 million and its derivation was a key element in negotiations with Haynes’ creditors and equity holders in developing the plan of reorganization which was ultimately approved by Haynes’ creditors and the Bankruptcy Court. Differences between actual cash flows, interest rates, the effective tax rate and the assumptions used would have a material effect on the reorganization value.

The allocation of the reorganization value as of the effective date of the plan of reorganization is summarized as follows and shown to be less than the Company’s post-petition liabilities and allowed claims:

Common equity value	$	118,736
Revolver debt, European debt, and capital leases, less cash	81,264
Reorganization value	$	200,000
Post-petition liabilities and allowed claims
Current liabilities	$	116,137
Pension and postretirement benefits and other long term debt	124,775
Liabilities subject to compromise:
Senior notes	140,000
Accrued interest on senior notes	9,363
Accrued fees to an affiliate of Holdings	1,612
Total liabilities and allowed claims	391,887
Reorganized value	200,000
Excess of liabilities over reorganized value	$	191,887

F- 12

The following table reflects adjustment to the consolidated balance sheet resulting from implementation of the plan of reorganization and application of fresh start reporting on August 31, 2004, the effective date of the reorganization.

	Predecessor												Successor
	Haynes International, Inc. August 31, 2004				Plan of Reorganization				Fresh Start				Haynes International, Inc. August 31, 2004
Assets
Current assets:
Cash and cash equivalents		$	2,660			$	—			$	—			$	2,660
Restricted cash		1,009												1,009
Accounts receivable		50,087				—				—				50,087
Inventories, net		100,603				—				30,982		(b)		131,585
Refundable income taxes		656												656
Total current assets		155,015				—				30,982				185,997
Property, plant and equipment, net		38,998				—				40,810		(b)		79,808
Deferred income taxes		547				—				36,143		(d)		36,690
Prepayments and deferred charges, net		12,376				—				(9,891		)(b)		2,485
Goodwill		—				—				40,353		(c)		40,353
Other intangible assets		—				—				12,467		(b)		12,467
Total assets		$	206,936			$	—			$	150,864			$	357,800
Liabilities and stockholders’ equity (deficiency)
Current liabilities:
Accounts payable and accrued expenses		$	27,732			$	—			$	—			$	27,732
Accrued postretirement benefits		4,890				—				—				4,890
Revolving credit facility		82,466				—				—				82,466
Deferred income taxes		—				—				6,692		(d)		6,692
Current maturities of long term debt		1,049				—				—				1,049
Total current liabilities		116,137				—				6,692				122,829
Long term debt		1,418				—				—				1,418
Accrued pension and postretirement benefits		123,357				—				(8,540		)(b)		114,817
Liabilities subject to compromise		150,975				(150,975		) (a)		—				—
Total liabilities		391,887				(150,975		)		(1,848		)		239,064
Commitments and contingencies
Stockholders’ equity (deficiency):
Old common stock, $0.01 par value (100 shares authorized, issued and outstanding)
New common stock, $0.001 par value (20,000,000 shares authorized, 10,000,000 shares issued and outstanding)						10								10
Preferred stock, $0.001 par value (20,000,000 shares authorized, 0 shares issued and outstanding
Old additional paid-in capital		51,381				—				(51,381		)		—
New additional paid-in capital						118,726		(a)		—				118,726
Accumulated deficit		(236,449		)		32,239		(a)		204,210				—
Accumulated other comprehensive income		117				—				(117		)		—
Deferred stock compensation		—				—				—				—
Total stockholders’ equity (deficiency)		(184,951		)(c)		150,975		(c)		152,712		(c)		118,736		(c)
Total liabilities and stockholders’ equity (deficiency)		$	206,936			$	—			$	150,864			$	357,800

(a) To reflect the cancellation of debt related to the settlement of the pre-petition liabilities subject to compromise:

Liabilities subject to compromise	$	150,975
New common stock and additional paid-in capital	(118,736		)
Gain on cancellation of debt	$	32,239

F- 13

(b) To reflect fresh start accounting adjustments related to the revaluation of certain assets and liabilities to fair market value:

Inventories
Fair value adjustments	$	30,982
Property, Plant and Equipment
Fair value adjustments—Machinery and equipment	$	41,628
Fair value adjustments—Buildings	(859		)
Fair value adjustments—Land	41
	$	40,810
Prepayments and Deferred Charges
Europe debt issuance cost write-off	$	(245	)
Adjust pension assets	(9,646		)
	$	(9,891	)
Other Intangibles
Fair value adjustments—Patents	$	8,667
Fair value adjustments—Trademarks	3,800
	$	12,467
Accrued Pension and Postretirement Benefits
Adjust pension liabilities	$	(8,540	)

Predecessor stockholders’ deficiency at August 31, 2004	$	(184,951	)
Cancellation of debt	150,975
Successor equity at August 31, 2004	(118,736		)
Fresh start reporting and fair value adjustments	(152,712		)
Fair value adjustments	84,259
Deferred income tax adjustments	29,451
Debt issuance cost write-off	(245		)
Pension adjustments	(1,106		)
Goodwill at August 31, 2004	$	(40,353	)

(d) Deferred income tax accounts were adjusted to give effect to temporary differences between the new accounting and carryover tax bases.

Note 2. Summary of significant accounting policies

A. Principles of consolidation and nature of operations

The consolidated financial statements include the accounts of Haynes International, Inc. and its wholly-owned subsidiaries. All significant intercompany transactions and balances are eliminated. The Company develops, manufactures, markets and distributes technologically advanced, high-performance alloys primarily for use in the aerospace and chemical processing industries worldwide. The Company has manufacturing facilities in Kokomo, Indiana; Mountain Home, North Carolina; and Arcadia, Louisiana with distribution service centers in Lebanon, Indiana; LaMirada, California; Houston, Texas; Windsor, Connecticut; Paris, France; Openshaw, England; Zurich, Switzerland; and Shanghi, China; and a sales office in Singapore and Chennai, India. In October 2003, management decided to close its manufacturing operations in Openshaw, England and operate only as a distribution service center. In April 2005, the Company sold eight acres of the Openshaw site and recorded a gain of $2.1 million which is reflected as a reduction of selling, general and administrative expense.

F- 14

Branford Wire acquisition

On November 5, 2004, Haynes Wire Company (“Haynes Wire”), a wholly owned subsidiary of the Company, acquired certain assets of The Branford Wire and Manufacturing Company and certain of its affiliates for a purchase price of $8.3 million, which was paid in cash. As part of the transaction, Haynes Wire acquired a wire manufacturing facility in Mountain Home, North Carolina, which includes plant and equipment, accounts receivable and inventory with fair values of $2,615, $2,190, and $3,620, respectively. Because the effect of the acquisition is not material to the consolidated results of operations, supplemental pro forma results of operations information have been omitted. Haynes Wire also entered into a non-compete agreement with the former president and owner, restricting his ability to compete with Haynes Wire’s operations for a period of seven years following the closing date. The non-compete agreement requires Haynes Wire to make total payments of $770, with $110 paid at closing and the remaining $660 paid in equal installments on the next six anniversaries of the closing date. On April 11, 2005 pursuant to the terms of the non-compete agreement, the Company deposited the remaining $660 of installments to be paid pursuant to the non-compete agreement into an escrow account. Non-compete amortization expense was $84 for fiscal 2006 and $77 for fiscal 2005.

B. Cash and cash equivalents

The Company considers all highly liquid investment instruments, including investments with original maturities of three months or less at acquisition, to be cash equivalents, the carrying value of which approximates fair value due to the short maturity of these investments.

C. Accounts receivable

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company markets its products to a diverse customer base, both in the United States of America and overseas. Trade credit is extended based upon evaluation of each customer’s ability to perform its obligation, which is updated periodically. The Company purchases credit insurance for certain foreign trade receivables.

D. Revenue recognition

The Company recognizes revenue when title passes to the customer which is generally at the time of shipment with freight terms of FOB shipping point or at a foreign port for certain export customers. Allowances for sales returns are recorded as a component of net sales in the periods in which the related sales are recognized. The Company determines this allowance based on historical experience and has not had a history of returns that have exceeded recorded allowances.

E. Inventories

Inventories are stated at the lower of cost or market. The cost of inventories is determined using the first-in, first-out (“FIFO”) method. The Company writes down its inventory for estimated obsolescence or unmarketable inventory in an amount equal to the difference between the cost of inventory and the estimated market or scrap value, if applicable, based upon assumptions about future demand and market conditions. Cost of goods sold for the years ended

F- 15

September 30, 2006 and 2005 and the one month ended September 30, 2004 includes $0, $25,414 and $5,083 respectively of additional costs resulting from fresh start write-up adjustments.

F. Intangible assets and goodwill

Goodwill was created as a result of the Company’s reorganization pursuant to Chapter 11 of the U.S. Bankruptcy Code and fresh start accounting. The Company adopted SFAS No. 142, Goodwill and Other Intangible Assets. Pursuant to SFAS No. 142 goodwill is not amortized and the value of goodwill be reviewed annually for impairment. If the carrying value exceeds the fair value (determined on a discounted cash flow basis or other fair value method), impairment of goodwill may exist resulting in a charge to earnings to the extent of goodwill impairment.

The Company also has patents, trademarks and other intangibles. As the patents have a definite life, they are amortized over lives ranging from two to fourteen years. As the trademarks have an indefinite life, the Company tests them for impairment annually. If the carrying value exceeds the fair value (determined by calculating a fair value based upon a discounted cash flow of an assumed royalty rate), impairment of the trademark may exist resulting in a change to earnings to the extent of impairment. Amortization of the patents and other intangibles was $1,964 for the year ended September 30, 2006; $1,972 for the year ended September 30, 2005 and $164 for the one month period ended September 30, 2004.

Goodwill and trademarks were tested for impairment on August 31, 2006 with no impairment recognized because the fair values exceeded the carrying values. Goodwill decreased during year ended September 30, 2006 by $790 and increased during the year September 30, 2005 by $2,702 due to the finalization of pre-emergence tax returns, which affected net operating loss carryforwards.

The following represents a summary of intangible assets and goodwill at September 30, 2005 and 2006:

September 30, 2005	Gross Amount			Accumulated Amortization				Adjustments			Carrying Amount
Goodwill		$	40,353		$	—			$	2,702	$	43,055
Patents		8,667			(2,048		)		—		6,619
Trademarks		3,800			—				—		3,800
Non-compete		590			(77		)		—		513
Other		465			(11		)		—		454
		$	53,875		$	(2,136	)		$	2,702	$	54,441

September 30, 2006	Gross Amount			Accumulated Amortization				Adjustments				Carrying Amount
Goodwill		$	43,055		$	—			$	(790	)	$	42,265
Patents		8,667			(3,800		)		—			4,867
Trademarks		3,800			—				—			3,800
Non-compete		590			(161		)		—			429
Other		465			(139		)		—			326
		$	56,577		$	(4,100	)		$	(790	)	$	51,687

F- 16

Estimate of Aggregate Amortization Expense:
Year Ending September 30,
2007	$	1,129
2008	983
2009	708
2010	376
2011	363

G. Property, plant and equipment

Additions to property, plant and equipment are recorded at cost with depreciation calculated primarily by using the straight-line method based on estimated economic useful lives. Buildings and machinery and equipment for the Company are generally depreciated over estimated useful lives ranging from five to fourteen years.

Expenditures for maintenance and repairs and minor renewals are charged to expense; major renewals are capitalized. Upon retirement or sale of assets, the cost of the disposed assets and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to operations.

The Company records capitalized interest for long-term construction projects to capture the cost of capital committed prior to the placed in service date as a part of the historical cost of acquiring the asset.

The Company reviews long-lived assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of the asset to the undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount exceeds the fair value of the asset.

H. Environmental remediation

When it is probable that a liability has been incurred or an asset of the Company has been impaired, a loss is recognized assuming the amount of the loss can be reasonably estimated. The measurement of environmental liabilities by the Company is based on currently available facts, present laws and regulations, and current technology. Such estimates take into consideration the expected costs of post-closure monitoring based on historical experience.

I. Pension and postretirement benefits

The Company has defined benefit pension and postretirement plans covering most of its current and former employees. Significant elements in determining the assets or liabilities and related income or expense for these plans are the expected return on plan assets (if any), the discount rate used to value future payment streams, expected trends in health care costs, and other actuarial assumptions. Annually, the Company evaluates the significant assumptions to be used to value its pension and postretirement plan assets and liabilities based on current market conditions and expectations of future costs. As a result of fresh start reporting, the intangible pension asset of $9,646 was written off and the accrued pension and postretirement liabilities were written down by $8,540 in the eleven month period ended August 31, 2004. Salaried employees hired after December 31, 2005 are not covered by the pension plan; however, they are eligible for an enhanced matching program of the defined contribution plan (401(k)).

F- 17

J. Foreign currency exchange

The Company’s foreign operating entities’ financial statements are stated in the functional currencies of each respective country, which are the local currencies. Substantially all assets and liabilities are translated to U.S. dollars using exchange rates in effect at the end of the year, and revenues and expenses are translated at the weighted average rate for the year. Translation gains or losses are recorded as a separate component of comprehensive income (loss) and transaction gains and losses are reflected in the consolidated statements of operations.

K. Research and technical costs

Research and technical costs are expensed as incurred. Research and technical costs for the years ended September 30, 2006 and 2005, one month ended September 30, 2004, and the eleven month period ended August 31, 2004, were $2,659, $2,621, $226, and $2,286, respectively.

L. Income taxes

Income taxes are accounted for under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax impact of temporary differences arising from assets and liabilities whose tax bases are different from financial statement amounts. A valuation allowance is established if it is more likely than not that all or a portion of deferred tax assets will not be realized. Realization of the future tax benefits of deferred tax assets is dependent on the Company’s ability to generate taxable income within the carryforward period and the periods in which net temporary differences reverse.

The Company regularly reviews its deferred tax assets in accordance with SFAS No. 109, Accounting for Income Taxes. SFAS No. 109 requires the Company to assess all available evidence, both positive and negative, to determine whether a valuation allowance is needed based on the weight of that evidence.

M. Stock based compensation

In connection with the plan of reorganization, Haynes-successor has adopted a stock option plan for certain key management employees and non-employee directors pursuant to the terms set forth in the First Amended Joint Plan of Reorganization. The stock option plan authorizes the granting of non-qualified stock options to certain key employees and non-employee directors of the Company to purchase up to 1,000,000 shares of the Company’s common stock.

On October 1, 2005, the Company adopted SFAS No. 123 (R), Share-Based Payment, a replacement of SFAS No. 123, Accounting for Stock-Based Compensation, and a rescission of APB Opinion No. 25, Accounting for Stock Issued to Employees. The statement requires compensation costs related to share-based payment transactions to be recognized in the financial statements. This statement applies to all awards granted after the effective date and to modifications, repurchases or cancellations of existing awards. Additionally, under the modified prospective method of adoption, the Company recognizes compensation expense for the portion of outstanding awards on the adoption date for which the requisite service period has not yet been rendered based on the grant-date fair value of those awards calculated under SFAS No. 123 and 148 for pro forma disclosures. Therefore prior periods have not been restated. Compensation expense in prior periods related to stock options continues to be disclosed on a pro forma basis

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only. The amount of compensation cost is measured based upon the grant-date fair value. The fair value of the option grants is estimated on the date of grant using the Black-Scholes option pricing model with assumptions on dividend yield, risk-free interest rate, expected volatilities, and expected lives of the options. See Note 14 to the Consolidated Financial Statements.

N. Financial instruments and concentrations of risk

The Company accounts for derivative instruments in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. The Company may periodically enter into forward currency exchange contracts to minimize the variability in the Company’s operating results arising from foreign exchange rate movements. The Company does not engage in foreign currency speculation. At September 30, 2006 and 2005, the Company had no foreign currency exchange options outstanding.

Financial instruments which potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents and accounts receivable. At September 30, 2006, and periodically throughout the year, the Company has maintained cash balances in excess of federally insured limits. The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value because of the relatively short maturity of these instruments. In addition, the carrying amount of the Company’s debt approximates fair value.

During 2006 and 2005, the Company did not have sales to any group of affiliated customers that were greater than 10% of net revenues. The Company generally does not require collateral with the exception of letters of credit with certain foreign sales. Credit losses have been within management’s expectations. In addition, the Company purchases credit insurance for certain foreign trade receivables. The Company does not believe it is significantly vulnerable to the risk of near-term severe impact from business concentrations with respect to customers, suppliers, products, markets or geographic areas.

The Company has approximately 47% of its labor force subject to a collective bargaining agreement that will expire in June 2007. The Company will renegotiate the collective bargaining agreement in fiscal 2007 prior to the expiration of the agreement currently in place. The Company considers its employee relations to be satisfactory. There can be no assurance, however, that the renegotiation of the collective bargaining agreement will not lead to a labor stoppage and negative effect on earnings.

O. Accounting estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to bad debts, inventories, income taxes, retirement benefits, and environmental matters. The process of determining significant estimates is fact specific and takes into account factors such as historical experience, current and expected economic conditions, product or pension asset mix and in some cases, actuarial techniques, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and

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liabilities that are not readily apparent from other sources. The Company routinely reevaluates these significant factors and makes adjustments where facts and circumstances dictate. Actual results may differ from these estimates under different assumptions or conditions.

P. Earnings per share

The Company accounts for earnings per share in accordance with SFAS No. 128, Earnings Per Share. SFAS 128 requires two presentations of earnings per share—“basic” and “diluted.” Basic earnings per share is computed by dividing net income available to common stockholders for the period by the weighted average number of common shares outstanding for the period. The computation of diluted earnings per share is similar to basic earnings per share, except the denominator is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued less any treasury stock purchased. The treasury stock method is used, which assumes that the Company will use the proceeds from the exercise of the options to purchase shares of stock for treasury.

Diluted net loss per share for the one month ended September 30, 2004 and the year ended September 30, 2005 exclude all stock options, because their effect would be anti-dilutive due to the net loss. For the year ended September 30, 2006, weighted average common shares for diluted per share computations were increased by 270,642 shares for the dilutive effect of stock options. Diluted net income per share for the year ended September 30, 2006, excludes 80,000 stock options because their effect would be anti-dilutive. Contingently issuable shares related to stock rights are excluded from the diluted net income per share computation, because the condition under which the stock rights can be exercised has not occurred as of September 30, 2006.

Q. New accounting pronouncements

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, Accounting for uncertainty in Income Taxes—an interpretation of FASB Statement No. 109 (FIN 48). FIN 48 seeks to reduce the diversity in practice associated with certain aspects of measuring and recognition in accounting for income taxes. In addition, FIN 48 requires expanded disclosure with respect to the uncertainty in income taxes and is effective as of the beginning of our 2008 fiscal year. We are currently evaluating the impact, if any, that FIN 48 will have on our financial statements.

In September 2006, the FASB issued FASB Statement No. 157, Fair Value Measurement (SFAS 157). SFAS 157 addresses standardizing the measurement of fair value for companies who are required to use a fair value measure of recognition for recognition or disclosure purposes. The FASB defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measure date.” The statement is effective for fiscal years beginning after November 15, 2007 and for interim periods within those fiscal years. The Company is required to adopt SFAS 157 beginning on October 1, 2008. The Company is currently evaluating the impact, if any, of SFAS 157 on its financial position, results of operations and cash flows.

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asset or liability in its financial statements. In addition, disclosure requirements related to such plans are affected by SFAS 158. The Company will begin recognition of the funded status of its defined benefit pension and postretirement plans and include the required disclosures under the provisions of SFAS 158 at the end of fiscal year 2007. The adoption of SFAS 158 is not expected to impact the Company’s debt covenants or cash position. If implemented on September 30, 2006, the estimated impact on the Company’s financial position would be a reduction in pension and postretirement benefits liability of $5.2 million, an increase in stockholders’ equity accumulated other comprehensive income of $3.2 million, and a reduction of deferred tax asset of $2.0 million. Additionally, the Company does not expect the adoption of SFAS 158 to significantly affect the results of operations.

In June 2006, the EITF reached consensus on EITF 06-3, “Disclosure Requirements for Taxes Assessed by a Government Authority on Revenue-Producing Transactions.” EITF 06-3 requires disclosure of a company’s accounting policy with respect to presentation of taxes collected on a revenue producing transaction between a seller and a customer. For taxes that are reported on a gross basis (included in revenues and costs), EITF 06-3 also requires disclosure of the amount of taxes included in the financial statements. EITF 06-3 is effective for interim and annual reporting periods beginning after December 15, 2006. The Company does not expect the adoption of EITF 06-3 to have a material impact on the Company’s consolidated financial statements.

In September 2006, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 108 (“SAB 108”), which provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. SAB 108 is effective for the first fiscal year ending after November 15, 2006, which will be our fiscal year ending September 30, 2007. The adoption of this statement is not expected to have a material impact on the Company’s financial position or results of operations.

In February 2006, the FASB issued FASB Statement No. 155, Accounting for Certain Hybrid Financial Instruments—an amendment to FASB Statements No. 133 and 140 (SFAS 155), that allows a preparer to elect fair value measurement at acquisition, at issuance, or when a previously recognized financial instrument is subject to a re-measurement (new basis) event, on an instrument-by-instrument basis, in cases in which a derivative would otherwise have to be bifurcated. It also eliminates the exemption from applying Statement 144 to interests in securitized financial assets so that similar instruments are accounted for similarly regardless of the form of the instruments. This Statement is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The Company does not anticipate that the adoption of SFAS 155 will have an impact on the Company’s overall results of operations or financial position.

In March 2006, the FASB issued FASB Statement No. 156, Accounting for Servicing of Financial Assets—an amendment of FASB Statement No. 140 (SFAS 156), that applies to the accounting for separately recognized servicing assets and servicing liabilities. This Statement requires that all separately recognized servicing assets and servicing liabilities be initially measured at faire value, if practicable. An entity should adopt this Statement as of the beginning of its first fiscal year that begins after September 15, 2006. The Company does not anticipate that the adoption of SFAS 156 will have an impact on the Company’s overall results of operations or financial position.

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R. Comprehensive income (loss)

Comprehensive income (loss) includes changes in equity that result from transactions and economic events from non-owner sources. Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss) items, including minimum pension and foreign currency translation adjustments, net of tax when applicable.

The following is a breakdown of accumulated other comprehensive income:

Year ended September 30,	2005			2006
Minimum Pension Adjustment	$	—		$	(217	)
Foreign Currency Translation Adjusted	(512		)	1,058
	$	(512	)	$	841
Tax included in above amounts	$	364		$	474

S. Stock rights agreement

On August 13, 2006, the Company entered into a Rights Agreement and declared a dividend of one preferred share purchase right for each outstanding share of the Company’s common stock, par value $.001 per share. One right will automatically attach to each share of common stock. Each right will allow its holder to purchase from the Company one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share, for $135.00 (the ”Purchase Price”) once the rights become exercisable. The rights will not be exercisable until a person has become an “Acquiring Person” by obtaining beneficial ownership of 15% or more of the outstanding common stock. Any rights held by an Acquiring Person will be void and may not be exercised. If a person becomes an Acquiring Person, all holders of rights, except the Acquiring Person may, upon exercise of a right, purchase for the Purchase Price shares of common stock with a market value of two times the Purchase Price, based on the market price of the common stock prior to such acquisition. In the event the Company does not have a sufficient number of Common Shares available, the Company may under certain circumstances substitute Preferred Shares for the Common Shares into which the Rights would have otherwise been exercisable. If the Company is acquired in a merger or similar transaction after an Acquiring Person becomes such, all holders of rights except the Acquiring Person may, upon exercise of a right, purchase for the Purchase Price shares of the acquiring company with a market value of two times the Purchase Price, based on the market price of the acquiring company’s stock prior to such merger.

Each Preferred Share, if issued: will not be redeemable; will entitle holders to quarterly dividend payments of $10.00, or an amount equal to 1,000 times the dividend paid on one share of common stock, whichever is greater; will entitle holders upon liquidation either to receive $1,000 or an amount equal to 1,000 times the payment made on one share of common stock, whichever is greater; will have 1,000 votes and vote together with the common stock, except as required by law; and if shares of common stock are exchanged via merger, consolidation, or a similar transaction, will entitle holders to 1,000 times the payment made on one share of common stock. Because of the nature of the dividend, liquidation and voting rights of the Preferred Shares, the value of one one-thousandth interest in a Preferred Share should approximate the value of one share of common stock.

The Rights have certain anti-takeover effects. The Rights will cause substantial dilution to a person or group who attempts to acquire the Company on terms not approved by the Board,

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except pursuant to an offer conditioned on a substantial number of Rights being acquired. The Rights should not interfere with any merger or other business combination approved by the Board prior to any person or group becoming an Acquiring Person since the Board may redeem the Rights at $0.01 per Right at any time until the date on which a person or group has become an Acquiring Person.

Note 3 Inventories

As a part of fresh start reporting described in Note 1, inventory was written-up by $30,497 to fair value as of August 31, 2004 and was expensed as the inventory was sold. Expense of $25,414 and $5,083 was recognized for the year ended September 30, 2005 and the one month ended September 30, 2004, respectively, for this fair value adjustment.

Inventories are stated at the lower of cost or market. The cost of inventories is determined using the first-in, first-out (“FIFO”) method. The following is a summary of the major classes of inventories:

September 30,	2005			2006
Raw materials		$	6,740		$	7,214
Work-in-process		83,232			96,674
Finished goods		56,517			74,575
Other, net		1,371			1,249
		$	147,860		$	179,712

Note 4 Property, plant and equipment

As part of fresh start reporting described in Note 1, property, plant and equipment was written-up by $40,810 to fair value as of August 31, 2004 and resulted in additional depreciation expense of $3,052 and $2,902 for the years ended September 30, 2006 and 2005, respectively and $239 for the one month period ended September 30, 2004.

The following is a summary of the major classes of property, plant and equipment:

September 30,	2005				2006
Land and land improvements		$	2,551			$	2,842
Buildings		7,076				7,645
Machinery and equipment		73,504				82,290
Construction in process		5,624				7,596
		88,755				100,373
Less accumulated depreciation		(3,630		)		(11,452		)
		$	85,125			$	88,921

The Company has no assets under capital leases.

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Note 5 Accounts payable and accrued expenses

The following is a summary of the major classes of accounts payable and accrued expenses:

September 30,	2005			2006
Accounts payable, trade		$	31,673		$	33,528
Employee compensation		4,885			6,669
Taxes, other than income taxes		1,087			1,015
Other		7,850			4,275
		$	45,495		$	45,487

Note 6 Income taxes

The components of income (loss) before provision for income taxes are as follows:

	Predecessor				Successor
	Eleven months ended August 31,				One month ended September 30,				Year ended September 30,
	2004				2004				2005				2006
Income (loss) before provision for income taxes:
U.S.		$	172,906			$	(6,461	)		$	(9,950	)		$	55,282
Foreign		(2,082		)		1,055				3,705				2,571
Total		$	170,784			$	(5,406	)		$	(6,245	)		$	57,853
Income tax provision (benefit):
Current:
U.S. Federal		$	36			$	13			$	1,630			$	19,466
Foreign		10				(51		)		391				632
State		44				15				1,541				5,020
Total		90				(23		)		3,562				25,118
Deferred:
U.S. Federal		—				(1,913		)		(4,068		)		(2,439		)
Foreign		—				483				183				282
State		—				(307		)		(1,788		)		(648		)
Total		—				(1,737		)		(5,673		)		(2,805		)
Total provision (benefit) for income taxes		$	90			$	(1,760	)		$	(2,111	)		$	22,313

F- 24

The provision (benefit) for income taxes applicable to results of operations differed from the U.S. federal statutory rate as follows:

	Predecessor				Successor
	Eleven months ended August 31,				One month ended September 30,				Year ended September 30,
	2004				2004				2005				2006
Statutory federal tax rate		34%				34%				34%				35%
Tax provision (benefit) at the statutory rate		$	58,080			$	(1,838	)		$	(2,123	)		$	20,248
Foreign tax rate differentials		718				85				(685		)		13
Provision (benefit) for state taxes, net of federal taxes		29				(193		)		(163		)		2,987
U.S. tax on distributed and undistributed earnings of foreign subsidiaries		—				—				121				66
Manufacturer’s deduction		—				—				—				(665		)
Forgiveness of debt income, fresh start accounting adjustments		(62,883		)		—				—				—
Non-deductible restructuring costs		3,295				165				628				—
Other, net		851				21				111				(336		)
Provision at effective tax rate		$	90			$	(1,760	)		$	(2,111	)		$	22,313

Upon emergence from bankruptcy, the tax bases of assets and liabilities were carried over to Haynes—successor. Deferred income tax amounts were recorded in fresh start accounting for temporary differences between the accounting and tax bases of assets and liabilities. Goodwill recorded in fresh start accounting is not tax deductible, and therefore, deferred income taxes were not provided.

F- 25

Deferred tax assets (liabilities) are comprised of the following:

September 30,	2005				2006
Current deferred tax assets (liabilities):
Inventories		$	3,344			$	5,288
Pension and Postretirement benefits		1,932				2,768
Accrued expenses and other		574				626
Environmental accrual		538				39
Accrued compensation and benefits		1,200				1,440
Other foreign related		(290		)		598
Total net current deferred tax assets (liabilities)		7,298				10,759
Noncurrent deferred tax assets (liabilities):
Property, plant and equipment, net		(17,400		)		(16,901		)
Intangible assets		(4,015		)		(3,303		)
Other foreign related		368				(17		)
Undistributed earnings of foreign subsidiary		(49		)		(281		)
Environmental accrual		—				497
Pension and Postretirement benefits		45,065				44,964
Alternative minimum tax credit carryforwards		1,601				—
Accrued compensation and benefits		1,444				2,192
Debt issuance costs		651				217
Total net noncurrent deferred tax assets		27,665				27,368
Net deferred tax assets (liabilities)		$	34,963			$	38,127

At September 30, 2006, the Company evaluated whether the utilization of net deferred tax assets was more likely than not. Based upon the new capital structure and fiscal 2006 results of operations, management believes realization of net deferred tax assets is more likely than not.

During the years ended September 30, 2006 and 2005 deferred tax assets increased by $790 and decreased by $2,702, respectively, due to the finalization of pre-emergence tax returns, which affected net operating loss carryforwards.

The Company has excluded undistributed earnings of $22,457 of three foreign affiliates from its calculation of deferred tax liabilities because they will be permanently invested for the foreseeable future. Should management decide in the future to repatriate all or a portion of these undistributed earnings, the Company would then be required to provide for taxes on such amounts.

Note 7 Restructuring and other charges

During the eleven months ended August 31, 2004, Haynes—predecessor recorded restructuring and other charges of $4,027, related to its filing for reorganization relief under Chapter 11 of U.S. Bankruptcy Code. These costs consisted of pre-petition professional fees and credit facilities fees. During the one month ended September 30, 2004 and the year ended September 30, 2005, Haynes—successor recorded restructuring and other charges of $429 and $628, respectively. These costs consisted of professional fees related to its filing for reorganization relief under

F- 26

Chapter 11 of U.S. Bankruptcy Code. No corresponding restructuring and other charges occurred in fiscal 2006.

Note 8 Reorganization items

Reorganization items represent income from fresh-start adjustments and costs incurred by the Company as a result of the filing of a petition for reorganization relief under Chapter 11 of U.S. Bankruptcy Code and are summarized as follows:

	Predecessor
	Eleven months ended August 31, 2004
Consulting fees		$	3,982
Employment costs		489
Write off Senior Note discount and debt issuance costs		481
Revolver debt issue costs		1,599
Amendment fees		184
Travel and other expenses		104
Fees related to an agreement with previous Chairman		430
Directors’ fees		29
Gain on cancellation of debt		(32,239		)
Fresh Start reporting adjustments and fair value adjustments		(152,712		)
		$	(177,653	)

Note 9 Debt

As discussed in Note 1, on March 29, 2004, the Company and its U.S. subsidiaries and U.S. affiliates filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code. The Company’s $140 million of Senior Notes due on September 1, 2004, accrued and unpaid interest of $9.4 million on the Senior Notes, and accrued and unpaid Blackstone Group monitoring fees of $1.6 million were classified as liabilities subject to compromise. Effective March 29, 2004, the Company ceased accruing interest on the Senior Notes and other U.S. subsidiaries and U.S. affiliates’ pre-petition debt in accordance with SOP 90-7.

The Company and its U.S. operations had a credit agreement, as amended, (the “Prepetition Credit Agreement”), with Fleet Capital Corporation, which provided the Company and its U.S. subsidiaries and U.S. affiliates with a $72 million revolving facility.

In April 2004, Congress Financial Corporation (Central) (“Congress”) agreed to provide the Company with two post-petition facilities maturing in April 2007. Haynes UK entered into a credit agreement (the “Haynes UK Credit Agreement”) which provides Haynes UK with a $15 million credit facility. In addition, the Company entered into a credit agreement (the “Postpetition Credit Agreement”) which provides the Company with a $100 million credit facility with a sub-limit of $10 million for letters of credit, all subject to a borrowing base formula and certain reserves. The amounts outstanding under the Haynes UK Credit Agreement facility reduce amounts available to be borrowed under the Postpetition Credit Agreement facility on a dollar for dollar basis. Borrowings under the Postpetition Credit Agreement facility were used to repay the outstanding indebtedness under the Prepetition Credit Agreement.

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Borrowings under the Postpetition Credit Agreement are either prime rate loans or Eurodollar loans and bear interest at either the prime rate plus up to 1.5% or the adjusted Eurodollar rate used by Congress plus up to 3.0%, at the Company’s option. In addition, the Company pays monthly in arrears a commitment fee of 3 ¤ 8% per annum on the unused amount of the Postpetition Facility commitment. For letters of credit, the Company pays 2 1 ¤ 2% per annum on the daily outstanding balance of all issued letters of credit ($972 and $321 at September 30, 2005 and 2006, respectively) plus customary fees for issuance, amendments, and processing.

When the Company emerged from bankruptcy on August 31, 2004, the Postpetition Credit Agreement structure and loan limits continued, and a new $10 million multi-draw equipment acquisition term loan sub-facility was added (collectively, the “Post-Effective Date Facility”). The Post-Effective Date Facility is subject to a borrowing base formula and certain reserves and is secured by substantially all of the assets of the Company. This credit facility is classified as current pursuant to EITF No. 95-22, “Balance Sheet Classification of Borrowings Outstanding Under Revolving Credit Arrangements that Include Both Subjective Acceleration Clause and a Lock-Box Arrangement.”

The Postpetition Credit Agreement structure was revised, per Amendment No. 4 dated August 31, 2005, by and among the Company and Wachovia Capital Finance Corporation (Central) (“Wachovia”), formerly known as Congress. The maximum credit amount under this agreement is $130 million with the maturity date of April 12, 2009.

Debt and long-term obligations consist of the following (in thousands):

September 30,	2005			2006
Postpetition Revolving Credit Agreement
U.S. Facility, 6.19% 2005; 7.32% 2006, expires April 2009		$	104,468		$	112,763
U.K. Facility, 6.97% 2005; 8.34% 2006, expires April 2007		—			4,073
		$	104,468		$	116,836
Three year mortgage note, 3.1%, due in December 2008 (Swiss Subsidiary)		$	1,391		$	1,360
Other long-term obligations		524			1,847
		1,915			3,207
Less amounts due within one year		1,501			110
		$	414		$	3,097

The credit facility requires that the Company comply with certain financial covenants and restricts the payment of dividends. As of September 30, 2006, the most recent required measuring date, the Company was in compliance with these covenants. The carrying amount of debt approximates fair value, because substantially all debt bears interest at variable interest rates.

At September 30, 2006, the Company had access to approximately $29.5 million ($21.3 million U.S. and $8.2 million U.K.) under its credit agreements (subject to borrowing base and certain reserves). The Company’s French subsidiary (Haynes International, SARL) has an overdraft banking facility of 2,770 Euro ($3,513) all of which was available on September 30, 2006. The Company’s Swiss subsidiary (Nickel-Contor AG) had an overdraft banking facility of 1,000 Swiss Francs ($800) all of which was available on September 30, 2006.

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Maturities of long-term debt are as follows at September 30, 2006:

Year ending
2007	$	110
2008	1,434
2009	92
2010	93
2011	93
2012 and thereafter	1,385
	$	3,207

Note 10 Pension plan and retirement benefits

Defined contribution plans

The Company sponsors a defined contribution plan (401(k)) for substantially all U.S. employees. The Company contributes an amount equal to 50% of an employee’s contribution to the plan up to a maximum contribution of 3% of the employee’s salary, except for salaried employees hired after December 31, 2005 that are not eligible for the pension plan. The Company contributes an amount equal to 60% of an employee’s contribution to the plan up to a maximum contribution of 6% of the employee’s salary for this group. Expenses associated with this plan for the eleven months ended August 31, 2004 and the years ended September 30, 2005 and 2006 totaled $474, $545 and $586, respectively. The Company did not contribute to this plan for the one month ended September 30, 2004.

The Company sponsors certain profit sharing plans for the benefit of employees meeting certain eligibility requirements. There were no contributions to these plans the eleven months ended August 31, 2004, the one month ended September 30, 2004 and for the years ended September 30, 2005 and 2006.

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Defined benefit plans

The Company has non-contributory defined benefit pension plans which cover most employees in the United States and certain foreign subsidiaries. Salaried employees hired after December 31, 2005 are not covered by the pension plan; however, they are eligible for an enhanced matching program of the defined contribution plan (401(k)).

Benefits provided under the Company’s domestic defined benefit pension plan are based on years of service and the employee’s final compensation. The Company’s funding policy is to contribute annually an amount deductible for federal income tax purposes based upon an actuarial cost method using actuarial and economic assumptions designed to achieve adequate funding of benefit obligations.

The Company has non-qualified pensions for current and former executives of the Company. Non-qualified pension plan expense for the eleven months ended August 31, 2004 and the one-month ended September 30, 2004, and for the years ended September 30, 2005 and 2006 was $1,358, $55, $409 and $297, respectively. Accrued liabilities in the amount of $2,533 and $2,355 for these benefits are included in accrued pension and postretirement benefits at September 30, 2006 and 2005, respectively.

In addition to providing pension benefits, the Company provides certain health care and life insurance benefits for retired employees. Substantially all domestic employees become eligible for these benefits, if they reach normal retirement age while working for the Company. During March 2006, the Company communicated to employees and plan participants a negative plan amendment that caps the Company’s liability related to total retiree health care costs at $5,000 annually effective January 1, 2007. An updated actuarial valuation was performed at March 31, 2006, which reduced the accumulated postretirement benefit liability due to this plan amendment by $46,313 that will be amortized as a reduction to expense over an eight year period. This amortization period began in April 2006 thus reducing the amount of expense recognized for the second half of fiscal 2006 and the respective future periods.

The Company made no contributions to fund its domestic Company-sponsored pension plan for the year ended September 30, 2005 or the year ended September 30, 2006. The Company’s U.K. subsidiary made contributions of $1,058 and $1,123 for the year ended September 30, 2005 and the year ended September 30, 2006, respectively, to the U.K. pension plan.

F- 30

The Company uses a September 30 measurement date for its plans. The status of employee pension benefit plans and other post-retirement benefit plans are summarized below:

	Defined benefit pension plans						Post-retirement health care benefits
Year ended September 30	2005			2006			2005			2006
Change in benefit obligation:
Projected benefit obligation at beginning of year	$	149,601		$	162,701		$	88,761		$	126,713
Service cost	3,283			3,746			1,264			2,152
Interest cost	8,967			9,009			5,261			5,904
Plan amendment	—			—			—			(46,313		)
Losses (gains)	10,119			6,002			36,747			(6,486		)
Employee contributions	64			68			—			—
Benefits paid	(9,333		)	(9,215		)	(5,320		)	(5,113		)
Projected benefit obligation at end of year	$	162,701		$	172,311		$	126,713		$	76,857
Change in plan assets:
Fair value of plan assets at beginning of year	$	121,550		$	128,814		$	—		$	—
Actual return on assets	15,476			9,964			—			—
Employer contributions	1,058			1,123			5,320			5,113
Employee contributions	63			67			—			—
Benefits paid	(9,333		)	(9,215		)	(5,320		)	(5,113		)
Fair value of plan assets at end of year	$	128,814		$	130,753		$	—		$	—
Funded status of plan:
Unfunded status	$	(33,887	)	$	(41,558	)	$	(126,713	)	$	(76,857	)
Unrecognized actuarial loss (gain)	3,163			9,549			36,816			28,640
Unrecognized prior service cost	—			—			—			(43,419		)
Net amount recognized	$	(30,724	)	$	(32,009	)	$	(89,897	)	$	(91,636	)

Amounts recognized in the consolidated balance sheets are as follows:

	Defined benefit pension plans						Post-retirement health care benefits						Non-qualified pension plans						All plans combined
	September 30,						September 30,						September 30,						September 30,
	2005			2006			2005			2006			2005			2006			2005			2006
Accrued benefit liability	$	(30,724	)	$	(32,319	)	$	(89,897	)	$	(91,636	)	$	(2,355	)	$	(2,533	)	$	(122,976	)	$	(126,488	)
Accumulated other comprehensive income	—			310			—			—			—			—			—			310
Net amount recognized	$	(30,724	)	$	(32,009	)	$	(89,897	)	$	(91,636	)	$	(2,355	)	$	(2,533	)	$	(122,976	)	$	(126,178	)

The Company follows SFAS No. 106, “Employers Accounting for Postretirement Benefits Other Than Pensions,” which requires the cost of postretirement benefits to be accrued over the years employees provide service to the date of their full eligibility for such benefits. The Company’s policy is to fund the cost of claims on an annual basis.

F- 31

The components of net periodic pension cost and postretirement health care benefit cost are as follows:

	Defined benefit pension plans
	Predecessor				Successor
	Eleven months ended August 31,				One month ended September 30,				Year ended September 30,
	2004				2004				2005				2006
Service cost		$	2,933			$	265			$	3,283			$	3,746
Interest cost		7,991				753				8,967				9,009
Expected return on assets		(9,095		)		(830		)		(9,730		)		(10,349		)
Amortization of unrecognized net gain		633				—				—				—
Amortization of unrecognized prior service cost		763				—				—				—
Amortization of unrecognized transition obligation		97				—				—				—
Net periodic cost		$	3,322			$	188			$	2,520			$	2,406

	Postretirement health care benefits
	Predecessor				Successor
	Eleven
	months ended August 31,				One month ended September 30,			Year ended September 30,
	2004				2004			2005			2006
Service cost		$	1,524			$	97		$	1,264		$	2,152
Interest cost		5,774				451			5,261			5,904
Amortization of unrecognized net gain		313				—			—			—
Amortization of unrecognized prior service cost		(3,096		)		—			—			(2,895		)
Recognized actuarial loss		—				—			—			1,690
Net periodic cost		$	4,515			$	548		$	6,525		$	6,851

Assumptions

A 6.8% (7.2%-2005) annual rate of increase for ages under 65 and an 7.5% (8.1%-2005) annual rate of increase for ages over 65 in the costs of covered health care benefits were assumed for 2006, gradually decreasing for both age groups to 5.0% (5.0%-2005) by the year 2011. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one percentage-point change in assumed health care cost trend rates would have no effect in 2006, due to the negative plan amendment that caps the Company costs at $5,000 per year.

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The actuarial present value of the projected pension benefit obligation and postretirement health care benefit obligation for the domestic plans at September 30, 2004, 2005, and 2006 were determined based on the following assumptions:

September 30,	2005	2006
Discount rate	5.750%	6.000%
Rate of compensation increase (pension plan only)	4.000%	4.000%

The net periodic pension and postretirement health care benefit costs for the domestic plans were determined using the following assumptions:

	Defined benefit pension and postretirement health care plans
	Predecessor		Successor
	Eleven Months Ended August 31,		One Month Ended September 30,		Year Ended September 30,
	2004		2004		2005		2006
Discount rate		6.250%		6.125%		6.125%		5.750%	(1)
Expected return on plan assets		9.000%		9.000%		8.500%		8.500%
Rate of compensation increase (pension plan only)		4.000%		4.000%		4.000%		4.000%

(1) Effective April 1, 2006, the discount rate for the postretirement health care plan was changed to 6.250% due to the actuarial revaluation for the negative plan amendment.

The accumulated benefit obligation for the pension plans was $153,180 and $146,705 at September 30, 2006 and 2005, respectively. There was an increase in the additional minimum liability included in other comprehensive income of $310 for the year ended September 30, 2006.

The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $172,310, $153,180 and $130,753 respectively, as of September 30, 2006, and $162,701, $146,705 and $128,814, respectively, as of September 30, 2005.

Plan Assets and Investment Strategy

The Company’s pension plans weighted-average asset allocations by asset category are as follows:

September 30,	2005	2006
Equity Securities	63%	65%
Debt Securities	31%	32%
Real Estate	6%	1%
Other	0%	2%
Total	100%	100%

The primary financial objectives of the Plan are to minimize cash contributions over the long-term and preserve capital while maintaining a high degree of liquidity. A secondary financial objective is, where possible, to avoid significant downside risk in the short-run. The objective is based on a long-term investment horizon so that interim fluctuations should be viewed with appropriate perspective.

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The desired investment objective is a long-term real rate of return on assets that is approximately 7.00% greater than the assumed rate of inflation as measured by the Consumer Price Index, assumed to be 1.50%, equaling a nominal rate of return of 8.50%. The target rate of return for the Plan has been based upon an analysis of historical returns supplemented with an economic and structural review for each asset class. The Company realizes that the market performance varies and that a 7.00% real rate of return may not be meaningful during some periods. The Company also realizes that historical performance is no guarantee of future performance.

It is the policy of the Plan to invest assets with an allocation to equities as shown below. The balance of the assets shall be maintained in fixed income investments, and in cash holdings, to the extent permitted below.

Asset classes as a percent of total assets:

Asset Class	Target(1)
Equity		60%
Fixed Income		35%
Real Estate and Other		5%

(1) From time to time the Company may adjust the target allocation by an amount not to exceed 10%.

Contributions and benefit payments

The Company expects to contribute approximately $2,011 to its domestic pension plans, $5,000 to its domestic other post-retirement benefit plans, and $1,123 to the U.K. pension plan in 2007.

Pension and post-retirement health care benefits (which include expected future service) are expected to be paid out of the respective plans as follows:

Fiscal year ending September 30	Pension		Post-retirement health care
2007	$	9,454		$	5,000
2008	9,572			5,000
2009	9,687			5,000
2010	9,823			5,000
2011	10,110			5,000
2012 - 2016 (in total)	56,502			25,000

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Note 11 Commitments

The Company leases certain transportation vehicles, warehouse facilities, office space and machinery and equipment under cancelable and non-cancelable leases, most of which expire within 10 years and may be renewed by the Company. Rent expense under such arrangements totaled $2,117, $201, $2,957 and $3,042 for the eleven months ended August 31, 2004, the one month ended September 30, 2004 and for the years ended September 30, 2005 and 2006, respectively. Rent expense does not include income from sub-lease rentals totaling $151, $14, $179 and $180 for the eleven months ended August 31, 2004, the one month ended September 30, 2004 and for the years ended September 30, 2005 and 2006, respectively. Future minimum rental commitments under non-cancelable operating leases at September 30, 2006, are as follows:

Year Ended	Operating
2007		$	3,201
2008		2,487
2009		2,403
2010		762
2011		348
2012 and thereafter		0
		$	9,201

Future minimum rental commitments under non-cancelable operating leases have not been reduced by minimum sub-lease rentals of $875 due in the future.

Note 12 Environmental and legal

The Company is periodically involved in litigation, both as a plaintiff and as a defendant, relating to its business and operations, including environmental matters. Future expenditures for environmental and other legal matters cannot be determined with any degree of certainty; however, based on the facts presently known, management does not believe that such costs will have a material effect on the Company’s financial position, results of operations or cash flows.

The Company previously reported that it was a defendant in 52 lawsuits filed in the state of California alleging that the Company’s welding-related products harmed the users of such products through the inhalation of welding fumes containing manganese. The suits were instituted against the Company starting in fiscal year 2005. On July 3, 2006, the state court in California issued orders dismissing the Company as a plaintiff in 42 of the lawsuits pending in the state of California. The other ten cases originally filed in California were removed to federal court in the U.S. District Court in Cleveland, in what is called a multidistrict litigation, or MDL. On July 30, 2006, the MDL court dismissed the Company as a defendant in these actions.

The Company is presently involved in two actions involving welding rod-related injuries. One new lawsuit was filed in California state court in May 2006, again alleging that the Company’s welding-related products harmed the users of such products through the inhalation of welding fumes containing manganese. A second case with similar allegations is also pending in the state of Texas. The estimated claims for damages in these cases, alone or in the aggregate, do not

F-35

exceed 1% of the Company’s current assets as of September 30, 2006. Additionally, the Company believes that it has insurance coverage for these cases.

The Company believes that any and all claims arising out of conduct or activities that occurred prior to March 29, 2004 are subject to dismissal. On March 29, 2004, the Company and certain of its subsidiaries and affiliates filed voluntary petitions for reorganization relief under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the Southern District of Indiana (the “Bankruptcy Court”). On August 16, 2004, the Bankruptcy Court entered its Findings of Fact, Conclusions of Law, and Order Under 11 U.S.C. 1129(a) and (b) and Fed. R. Bankr. P. 3020 Confirming the First Amended Joint Plan of Reorganization of Haynes International, Inc. and its Affiliated Debtors and Debtors-in-Possession as Further Modified (the “Confirmation Order”). The Confirmation Order and related plan of reorganization, among other things, provide for the release and discharge of prepetition claims and causes of action. The Confirmation Order further provides for an injunction against the commencement of any actions with respect to claims held prior to the Effective Date of the plan of reorganization. The Effective Date occurred on August 31, 2004. The Company intends to pursue the dismissal of all pending and any future lawsuits premised upon claims or causes of action discharged in the Confirmation Order and related plan of reorganization. It is possible, however, that the Company will be named in additional suits in welding-rod litigation cases, in which case, the aggregate claims for damages cannot be estimated and, if the Company is found liable, may have a material adverse effect on the Company’s financial statements unless such claims are also subject to insurance coverage and/or subject to dismissal, as discussed above.

The Company has received permits from the Indiana Department of Environmental Management, or IDEM, and the US Environmental Protection Agency, or EPA, to close and to provide post-closure monitoring and care for certain areas at the Kokomo facility that were used for the storage and disposal of wastes, some of which are classified as hazardous under applicable regulations. A closure certification was received in fiscal 1999 for one area at the Kokomo facility and post-closure monitoring is ongoing there. The Company also has an application pending for approval of closure and post-closure care for another area at its Kokomo facility. The Company has also received permits from the North Carolina Department of Environment and Natural Resources, or NCDENR, and the EPA to close and provide post-closure monitoring and care for the lagoon at its Mountain Home, North Carolina facility. The lagoon area has been closed and is currently undergoing post-closure monitoring. The Company is required to monitor groundwater and to continue post-closure maintenance of the former disposal areas at each of these sites. The Company is aware of elevated levels of certain contaminants in the groundwater associated with the closed areas in Kokomo and Mountain Home. If it is determined that the disposal areas or other solid waste management units at the Mountain Home facility or in other areas of the Kokomo facility have impacted the groundwater, additional corrective action by the Company could be required. The Company is unable to estimate the costs of such action, if any. There can be no assurance, however, that the costs of future corrective action would not have a material effect on the Company’s financial condition results of operations or liquidity. Additional, it is possible that the Company could be required to undertake other corrective action commitments for any other solid waste management unit existing or determined to exist at its facilities.

As of September 30, 2006 and 2005, the Company has accrued $1,483 and $1,363, respectively for post-closure monitoring and maintenance activities. In accordance with SFAS 143, Accounting for Asset Retirement Obligations , accruals for these costs are calculated by estimating the cost to

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monitor and maintain each post-closure site and multiplying that amount by the number of years remaining in the 30 year post-closure monitoring period referred to above. At each fiscal year-end, or earlier if necessary, the Company evaluates the accuracy of the estimates for these monitoring and maintenance costs for the upcoming fiscal year. The accrual was based upon the undiscounted amount of the obligation of $1,871 which was then discounted using an appropriate discount rate. The cost associated with closing the sites has been incurred in financial periods prior to those presented, with the remaining cost to be incurred in future periods related solely to post-closure monitoring and maintenance. Based on historical experience, the Company estimates that the cost of post-closure monitoring and maintenance will approximate $98 per year over the remaining obligation period.

Note 13 Related parties

On November 7, 2005, the Compensation Committee of the Board of approved a compensation arrangement whereby members of the Board of Directors who are requested by the Chairman of the Board of Directors to provide services to the Company which are over and above the services that are routinely provided to the Company by its directors are to be compensated in the amount of $1 thousand per day for each day on which such services are provided.

From October 1, 2003 through September 30, 2004, the Company had an agreement with the previous Chairman of the Board to perform services related to implementing various strategic initiatives, including but not limited to financial restructuring. The Company believed that the Chairman’s knowledge, skill and experience were essential to achieving the strategic initiatives. Costs relating to this agreement of $430 are included in reorganization items for the eleven months ended August 31, 2004.

Note 14 Stock-based compensation

As discussed in Note 1, the plan of reorganization resulted in the cancellation of all outstanding shares of common stock of Haynes International, Inc., as well as all options to purchase or otherwise receive shares of Haynes-predecessor common stock.

In connection with the plan of reorganization, the Haynes—successor has adopted a stock option plan for certain key management employees and non-employee directors pursuant to the terms set forth in the First Amended Joint Plan of Reorganization. The stock option plan authorizes the granting of non-qualified stock options to certain key employees and non-employee directors of the Company to purchase up to 1,000,000 shares of the Company’s common stock. On August 31, 2004, recipients of the initial grant received 10-year stock options, which will vest at 33 1 ¤ 3 % per year over three years. The exercise price for the initial grant of options was $12.80 per share. The fair value of the Company’s common stock on the stock option grant date was $15.37 per share without regard to any adjustment for lack of marketability or minority discount, but based upon a contemporaneous valuation of the enterprise as a whole using the same discounted cash flow method used in determining the reorganization value of the Company as described in Note 1. All grants subsequent to August 31, 2004 had an exercise price equal to or higher than the fair market value of the Company’s common stock on the grant date.

On November 7, 2005, the Board of Directors of the Company approved an amendment of the Haynes International, Inc. Stock Option Plan (“the Plan”), whereby, in the event of a Change in Control (as defined in the Plan) of the Company, all outstanding options to purchase shares of

F-37

the Company’s common stock would become and remain exercisable as to all shares covered by such options without regard to any vesting schedule without any action by the Board of Directors or the Compensation Committee. The Plan had previously authorized the Board of Directors to accelerate the vesting of options upon a Change in Control in its discretion. This modification did not result in any incremental compensation. All of the directors and certain executive officers of the Company hold options under the Plan.

Pertinent information covering stock option plans for Haynes-predecessor and Haynes-successor are as follows:

	Number of shares		Exercise price per share		Fiscal year of expiration	Aggregate intrinsic value			Weighted average exercise prices			Weighted average remaining contractual life
Predecessor
Outstanding at October 1, 2003	769,632		$	2.00 - 10.15	2003 - 2010					$	3.14
Granted	—
Exercised	—
Canceled	(769,632	)
Outstanding at August 31, 2004	—
Successor
Granted	940,000		12.80
Exercised	—
Canceled	—
Outstanding at September 30, 2004	940,000		12.80		2014					12.80
Granted	60, 000		19. 00		2015					19.00
Exercised
Canceled	(100,000	)	12.80							12.80
Outstanding at September 30, 2005	900,000		12.80 - 19.00		2014 - 2015					13.21
Granted	80,000		25.50 - 31.00		2014 - 2015					28.88
Exercised	—
Canceled	—
Outstanding at September 30, 2006	980,000		$	12.80 - 31.00			$	24,018		$	14.49		8.07 yrs.
Exercisable at September 30, 2006	580,000		$	12.80 - 19.00			$	15,072		$	13.01		7.94 yrs.

F-38

	Outstanding							Exercisable
Grant date	Number of shares		Exercise price per share			Remaining contractual life in years		Number of shares		Exercise price per share
August 31, 2004		840,000		$	12.80		7.92		560,000		$	12.80
May 5, 2005		60,000		19.00			8.58		20,000		19.00
October 1, 2005		15,000		25.50			9.00		—		—
February 21, 2006		50,000		29.25			9.42		—		—
March 31, 2006		15,000		31.00			9.50		—		—
		980,000							580,000

Adoption of SFAS 123(R)

Effective October 1, 2005 under the modified prospective method, the Company adopted the provisions of SFAS No. 123 (R), Share-Based Payment, a replacement of SFAS No. 123, Accounting For Stock-Based Compensation, and rescission of APB Opinion No. 25, Accounting for Stock Issued to Employees . This statement applies to all awards granted after the effective date and to modifications, repurchases or cancellations of existing awards. Additionally, under the modified prospective method of adoption, the Company recognizes compensation expense for the portion of outstanding awards on the adoption date for which the requisite service period has not yet been rendered based on the grant-date fair value of those awards calculated under SFAS No. 123 and 148 for pro forma disclosures. Compensation expense in fiscal 2004 and 2005 related to stock options continues to be disclosed on a pro forma basis only. Using the fair value based method the weighted average fair value of shares granted in fiscal 2004, 2005, and 2006 was $ 8.10 per share, $9.08 per share and $14.11 per share, respectively. The fair value of the option grants is estimated as of the date of the grant using the Black-Scholes option pricing model with the following assumptions:

Grant date	Fair value		Dividend yield		Risk-free interest rate		Expected volatility		Expected life
August 31, 2004	$	8.10		0%		2.74%		70.00%		3 years
May 5, 2005	9.08			0%		2.74%		70.00%		3 years
October 1, 2005	11.81			0%		2.74%		70.00%		3 years
February 21, 2006	14.43			0%		4.68%		70.00%		3 years
March 31, 2006	15.33			0%		4.83%		70.00%		3 years

The stock-based employee compensation expense for year ended September 30, 2006 was $2,786 ($1,699 net of tax) leaving a remaining unrecognized compensation expense at September 30, 2006 of $3,348 to be recognized over a weighted average period of 1.14 years.

F-39

During the first quarter of fiscal 2006, in accordance with the modified prospective transition method, the Company eliminated its balance in stockholders’ equity of deferred stock compensation, which represented unrecognized compensation cost for non-vested stock options. Financial statements for prior periods have not been restated.

SFAS 123 (R) requires that forfeitures be estimated over the vesting period, rather than being recognized as a reduction of compensation expense when the forfeiture actually occurs. The cumulative effect of the use of the estimated forfeiture method for prior periods upon adoption of SFAS 123 (R) was not material.

Prior to the adoption of SFAS 123(R)

During fiscal 2005 the Company had adopted the disclosure only provisions of SFAS No. 123, Accounting for Stock-Based Compensation . The Company had recorded compensation expense for stock options, since the exercise price of the stock options was less than the fair market value of the underlying common stock at the date of grant. Had compensation cost for the plan been determined based on the fair value at the grant dates for awards under the plan consistent with the fair value method of SFAS No. 123, the effect on the Company’s net income (loss) would have been the following:

	Predecessor				Successor
	Eleven months ended August 31,				One month ended September 30,				Year ended September 30,
	2004				2004				2005
Net income (loss) as reported		$	170,734			$	(3,646	)		$	(4,134	)
Add: Total stock-based employee compensation expense determined under the intrinsic value based method, net of related tax effect		—				74				788
Deduct: Total stock-based employee compensation expense determined under the fair value based method, net of related tax effect		(22		)		(128		)		(1,475		)
Adjusted net income (loss)		$	170,712			$	(3,700	)		$	(4,821	)
As reported net income (loss) per share:
Basic and Diluted		$	1,707,340			$	(.36	)		$	(.41	)
Pro forma net income (loss) per share:
Basic and Diluted		$	1,707,120			$	(.37	)		$	(.48	)

Note 15 Quarterly data (unaudited)

The unaudited quarterly results of operations of the Company for the years ended September 30, 2006 and the 2005 are as follows:

Quarter ended 2006	December 31			March 31		June 30		September 30
Net revenues		$	94,407	$	110,981	$	114,932		$	114,085
Gross profit		17,312		28,593		33,234			29,693
Net income		3,333		9,959		11,975			10,273
Net income per share:
Basic		$	0.33	$	1.00	$	1.20		$	1.03
Diluted		$	0.33	$	0.97	$	1.16		$	1.00

F-40

Quarter ended 2005	December 31				March 31				June 30		September 30
Net revenues		$	66,043			$	86,196		$	79,638		$	93,112
Gross profit (loss)		(2,577		)		7,683			16,938			14,276
Net income (loss)		(8,584		)		(2,931		)	5,555			1,826
Net income (loss) per share:
Basic		$	(0.86	)		$	(0.29	)	$	0.56		$	0.18
Diluted		$	(0.86	)		$	(0.29	)	$	0.55		$	0.18

Note 16 Segment reporting

The Company operates in one business segment: the design, manufacture, marketing and distribution of technologically advanced, high-performance alloys for use in the aerospace, land based gas turbine and chemical processing industries. The Company has operations in the United States and Europe, which are summarized below. Sales between geographic areas are made at negotiated selling prices.

September 30	2005		2006
Long-lived Assets by Geography:
United States	$	135,519	$	136,628
Europe	4,047		3,980
Total long-lived assets	$	139,566	$	140,608

	Predecessor			Successor
	Eleven months ended August 31,			One month ended September 30,			Year ended September 30,
	2004			2004			2005			2006
Net Revenue by Geography:
United States		$	128,988		$	14,304		$	196,477		$	265,133
Europe		58,552			7,091			88,002			101,448
Other		21,563			2,996			40,510			67,824
Net Revenues		$	209,103		$	24,391		$	324,989		$	434,405
Net Revenue by Product Group:
High temperature resistant alloys		$	152,645		$	17,805		$	243,742		$	295,395
Corrosive resistant alloys		56,458			6,586			81,247			139,010
Net revenues		$	209,103		$	24,391		$	324,989		$	434,405

Note 17 Valuation and qualifying accounts

	Balance at beginning of period			Additions charged to expense			Deductions(1)				Balance at end of period
Allowance for doubtful accounts receivables:
September 30, 2006		$	1,514		$	373		$	(136	)		$	1,751
September 30, 2005		1,099			733			(318		)		1,514
September 30, 2004		1,221			23			(145		)		1,099
August 31, 2004		974			568			(321		)		1,221

(1) Uncollectible accounts written off net of recoveries.

Note 18 Subsequent event

On November 17, 2006, the Company entered into a twenty-year agreement to provide conversion services to Titanium Metals Corporation (“TIMET”) for up to ten million pounds of titanium metal annually at prices established in the agreement. The transaction is documented by an Access and Security Agreement and a Conversion Services Agreement, both dated November 17, 2006. TIMET paid the Company a $50.0 million up-front fee and will also pay the Company for its processing services during the term of the agreement at agreed-upon prices. In addition to the volume commitment, the Company has granted TIMET a security interest on its four-high Steckel rolling mill, along with certain rights of access. TIMET may exercise an option to have ten million additional pounds of titanium converted annually, provided that it offers to loan up to $12.0 million to the Company for certain capital expenditures which would be required to expand capacity. The Company has the option to purchase titanium sheet and plate products from TIMET and has agreed not to produce its own titanium products (other than cold reduced titanium tubing). The Company has also agreed not to provide titanium conversion services to any entity other than TIMET for the term of the Conversion Services Agreement. The cash received of $50.0 million will be recorded as deferred revenue on the consolidated balance sheet. Pending completion of the Company’s evaluation of its capital structure, the Company has used the after-tax proceeds, net of expenses, of the $50 million up-front fee paid by TIMET to reduce the balance of its revolving credit facility. Upon certain instances of a change in control, a violation of the non-compete provisions or a performance default or upon the occurrence of a force majeure which results in a performance default, the Company is required to return the unearned portion (as defined) of the up-front fee.

F-41

[ Inside Back Cover ]

2,000,000 shares

Common stock

Prospectus

JPMorgan

Bear, Stearns & Co. Inc.

KeyBanc Capital Markets

, 2007

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, common shares only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common shares.

No action is being taken in any jurisdiction outside the United States to permit a public offering of the common shares or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus applicable to that jurisdiction.

Until , 2007, all dealers that buy, sell or trade in our common shares, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

Part II

Information not required in prospectus

Item 13. Other expenses of issuance and distribution.

The following table sets forth all costs and expenses, other than underwriting discounts and commissions, payable by the Company in connection with the sale and distribution of the common stock being registered. All amounts shown are estimates except for the SEC registration fee, the NASD filing fee and The NASDAQ Global Market listing fee.

SEC registration fee	$	12,798
NASD fee	12,460
NASDAQ Global Market listing fee	5,000
Blue sky qualification fees and expenses	*
Printing and engraving expenses	*
Legal fees and expenses	*
Accounting fees and expenses	*
Directors and officers’ liability insurance premium .	*
“Road Show” and Miscellaneous expenses(1) .	*
Total:	$	*

* To be completed by amendment.

(1) This amount represents additional expenses that may be incurred by the Company in connection with the offering over and above those specifically listed above, including distribution and mailing costs.

Item 14. Indemnification of directors and officers.

The Company is a corporation organized under the laws of the State of Delaware.

Section 145 of the Delaware General Corporation Law (the “DGCL”) permits a Delaware corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise. A corporation may indemnify against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding if the person indemnified acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. In the case of an action or suit by or in the right of the corporation to procure a judgment in its favor, no indemnification may be made in respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery of the State of Delaware, or the court in which such action or suit was brought, shall determine upon application that, despite the adjudication of liability, such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper. Section 145 provides that, to the extent a present or former director or officer of a corporation has been successful in the

II-1

defense of any action, suit or proceeding referred to above or in the defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him or her in connection therewith.

Pursuant to authority conferred by Delaware law, the Company’s certificate of incorporation contains provisions providing that no director shall be liable to it or its stockholders for monetary damages for breach of fiduciary duty as a director except to the extent that such exemption from liability or limitation thereof is not permitted under Delaware law as then in effect or as it may be amended. This provision is intended to eliminate the risk that a director or member might incur personal liability to the Company or its stockholders for breach of the duty of care.

The Company’s certificate of incorporation and by-laws contain provisions requiring it to indemnify and advance expenses to its directors and officers to the fullest extent permitted by law. Among other things, these provisions generally provide indemnification for the Company’s directors and officers against liabilities for judgments in and settlements of lawsuits and other proceedings and for the advancement and payment of fees and expenses reasonably incurred by the director or officer in defense of any such lawsuit or proceeding if the director or officer acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the registrant, and in certain cases only if the director or officer is not adjudged to be liable to us.

Effective August 13, 2006, the Company agreed to indemnify Francis J. Petro, John C. Corey, Timothy J. McCarthy, Donald C. Campion, Paul J. Bohan, Ronald W. Zabel, William P. Wall and Robert H. Getz, each of whom is a member of the Company’s board of directors, against loss or expense arising from such individuals’ service to the Company and its subsidiaries and affiliates, and to advance attorneys fees and other costs of defense to such individuals in respect of claims that may be eligible for indemnification under certain circumstances.

Item 15. Recent sales of unregistered securities.

On August 31, 2004, the effective date of the plan of reorganization, the Company issued the following securities:

· Each former holder of our 11 5 ¤ 8 % senior notes due September 1, 2004 received its pro rata share of 9.6 million shares of our common stock in full satisfaction of all of the Company’s obligations under the senior notes.

· Each former holder of the shares of common stock of Haynes Holdings, Inc., the former parent of the Company, received its pro rata share of 400,000 shares of our common stock issued in exchange for the outstanding shares of Haynes Holdings, Inc. common stock.

Based upon the exemption provided by Section 1145 of the Bankruptcy Code, we believe that the issuance of these securities was exempt from registration under the Securities Act and state securities laws.

Item 16. Exhibits and financial statements schedules.

(a) Exhibits. Please see Index to Exhibits, which is incorporated herein by reference.

(b) Financial Statements

II-2

All financial statement schedules have been omitted because they are inapplicable or not required or because the information is contained elsewhere in this registration statement.

Item 17. Undertakings.

(a) The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.

(2) For purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-3

Signatures

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Kokomo, State of Indiana, on the 24th day of January, 2007.

	HAYNES INTERNATIONAL, INC.
	By:	/s/ MARCEL MARTIN
		Marcel Martin Vice President, Finance; Chief Financial Officer; Treasurer

KNOWN ALL BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Francis J. Petro, Stacy Kilian and Marcel Martin, and each of them, as his true and lawful attorneys-in-fact and agents, each with the full power of substitution, for him and in his name, place or stead, in any and all capacities, to sign any and all amendments to this Registration Statement (including post-effective amendments), and to sign any registration statement for the same offering covered by this Registration Statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act, and all post-effective amendments thereto, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their, his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

	Signature		Title		Date
/s/ FRANCIS PETRO		President and Chief Executive Officer;
Francis Petro		Director (Principal Executive Officer)		January 22, 2007
/s/ MARCEL MARTIN		Chief Financial Officer (Principal
Marcel Martin		Financial Officer)		January 24, 2007
/s/ DANIEL W. MAUDLIN		Controller and Chief Accounting Officer
Daniel W. Maudlin		(Principal Accounting Officer)		January 22, 2007
/s/ JOHN C. COREY
John C. Corey		Chairman of the Board, Director		January 24, 2007

II-4

/s/ PAUL J. BOHAN
Paul J. Bohan	Director	January 24, 2007
/s/ DONALD C. CAMPION
Donald C. Campion	Director	January 22, 2007
/s/ ROBERT H. GETZ
Robert H. Getz	Director	January 24, 2007
/s/ TIMOTHY J. MCCARTHY
Timothy J. McCarthy	Director	January 24, 2007
/s/ WILLIAM P. WALL
William P. Wall	Director	January 24, 2007
/s/ RONALD W. ZABEL
Ronald W. Zabel	Director	January 22, 2007

II-5

Index to exhibits

Exhibit Number		Description
1.1	**	Form of Underwriting Agreement.
2.1		First Amended Joint Plan of Reorganization of Haynes International, Inc. and its Affiliated Debtors and Debtors-In-Possession dated June 29, 2004.
2.2		Asset Purchase Agreement by and among Haynes Wire Company, The Branford Wire and Manufacturing Company, Carolina Industries, Inc., and Richard Harcke, dated as of October 28, 2004.
3.1		Second Restated Certificate of Incorporation of Haynes International, Inc.
3.2		Amended and Restated By-laws of Haynes International, Inc.
3.3		Certificate of Designations of Series A Junior Participating Preferred Stock of Haynes International, Inc.
4.1		Specimen Common Stock Certificate.
4.2		Second Restated Certificate of Incorporation of Haynes International, Inc. (incorporated by reference to Exhibit 3.1 hereof).
4.3		Amended and Restated By-laws of Haynes International, Inc. (incorporated by reference to Exhibit 3.2 hereof).
4.4		Rights Agreement dated as of August 13, 2006 between Haynes International, Inc. and Wells Fargo Bank, N.A., as Rights Agent.
4.5		Form of Right Certificate.
4.6		Certificate of Designations of Series A Junior Participating Preferred Stock of Haynes International, Inc. (incorporated by reference to Exhibit 3.3 hereof).
5.1	**	Opinion of Ice Miller LLP.
10.1		Form of Termination Benefits Agreements by and between Haynes International, Inc. and certain of its employees.
10.2		Haynes International, Inc. Death Benefit Plan, effective January 1, 2003.
10.3		Amendment No. One to the Haynes International, Inc. Death Benefit Plan, dated August 30, 2004.
10.4		Haynes International, Inc. Supplemental Executive Retirement Plan, Plan Document effective January 1, 2002.
10.5		Amendment No. One to the Haynes International, Inc. Supplemental Executive Retirement Plan, dated August 30, 2004.
10.6		Haynes International Inc. Supplemental Executive Retirement Plan(s), Master Trust Agreement, effective January 1, 2003.
10.7		Amendment No. One to the Master Trust Agreement, dated August 30, 2004.
10.8		Plan Agreement by and between Haynes International, Inc. and Francis J. Petro, effective January 1, 2002.
10.9		Amendment No. One to the Plan Agreement by and between Haynes International, Inc. and Francis J. Petro, dated August 30, 2004.
10.10		Amended and Restated Executive Employment Agreement by and between Haynes International, Inc. and Francis J. Petro, dated August 31, 2004.
10.11		Registration Rights Agreement by and among Haynes International, Inc. and the parties specified on the signature pages thereof, dated August 31, 2004.
10.12		Amended and Restated Loan and Security Agreement by and among Haynes International, Inc., certain affiliates of Haynes International, Inc., the Lenders (as defined therein), Congress Financial Corporation (Central), as agent for the Lenders, and Bank One, N.A., as documentation agent, dated August 31, 2004.

II-6

10.13		Amendment No. 1 to Amended and Restated Loan and Security Agreement by and among Haynes International, Inc., certain affiliates of Haynes International, Inc., the Lenders (as defined therein), and Congress Financial Corporation (Central), as agent for the Lenders, dated November 5, 2004.
10.14		Consulting, Non-Competition and Confidentiality Agreement by and between Richard Harcke and Haynes Wire Company, dated November 5, 2004.
10.15		Facility Agreement by and between Haynes International Limited and Burdale Financial Limited, dated April 2, 2004.
10.16		Summary of Compensation of Executive Officers and Directors.
10.17		Amendment No. 2 to Amended and Restated Loan and Security Agreement by and among Haynes International, Inc., certain affiliates of Haynes International, Inc., the Lenders (as defined therein), and Congress Financial Corporation (Central), as agent for the Lenders named therein, dated January 27, 2005.
10.18		Amendment No. 3 to Amended and Restated Loan and Security Agreement by and among Haynes International, Inc., certain affiliates of Haynes International, Inc., the Lenders (as defined therein), and Wachovia Capital Finance Corporation (Central), as agent for the other Lenders named therein, dated November 5, 2004.
10.19		Amendment No. 4 to Amended and Restated Loan and Security Agreement by and among Haynes International, Inc., certain affiliates of Haynes International, Inc., the Lenders (as defined therein), and Wachovia Capital Finance Corporation (Central), as agent for the other Lenders named therein, dated August 31, 2005.
10.20		Amendment No. 5 to Amended and Restated Loan and Security Agreement, by and among the Company, Haynes Wire Company, the Lenders (as defined therein), and Wachovia Capital Finance Corporation (Central), as agent for the Lenders, dated February 2, 2006.
10.21		Form of Director Indemnification Agreement between Haynes International, Inc. and certain of its directors named in the schedule to the Exhibit.
10.22	*	Conversion Services Agreement by and between the Company and Titanium Metals Corporation, dated November 17, 2006. Portions of this exhibit have been omitted pursuant to a request for confidentail treatment and filed separately with the Securities and Exchange Commission.
10.23		Amendment No. 6 to Amended and Restated Loan and Security Agreement, by and among the Company, Haynes Wire Company, the Lenders (as defined therein), and Wachovia Capital Finance Corporation (Central), as agent for the Lenders, dated November 17, 2006.
10.24		Summary of 2007 Management Incentive Plan.
10.25		Haynes International, Inc. 2007 Stock Option Plan as adopted by the Board of Directors on January 19, 2007.
10.26		Form of Non-Qualified Stock Option Agreement to be used in conjunction with grants made pursuant to the Haynes International, Inc. 2007 Stock Option Plan.
10.27		Second Amended and Restated Haynes International, Inc. Stock Option Plan as adopted by the Board of Directors on January 22, 2007.

II-7

10.28		Form of Non-Qualified Stock Option Agreements between Haynes International, Inc. and certain of its executive officers and directors named in the schedule to the Exhibit pursuant to the Haynes International, Inc. Second Amended and Restated Stock Option Plan.
10.29		Non-Qualified Stock Option Agreement between Haynes International, Inc. and its President and Chief Executive Officer pursuant to the Haynes International, Inc. Second Amended and Restated Stock Option Plan.
21.1		Subsidiaries of the Registrant.
23.1	**	Consent of Ice Miller LLP (included in Exhibit 5.1).
23.2		Consent of Deloitte & Touche LLP.
24.1		Power of Attorney, pursuant to which amendments to this Form S-1 may be filed, is included on the signature page contained in Part II of this Form S-1.

* Confidential treatment has been requested for certain portions of these documents, which have been blacked out in the copy of the exhibit filed with the Securities and Exchange Commission. The omitted information has been filed separately with the Securities and Exchange Commission pursuant to the application for confidential treatment.

** To be filed by amendment.

II-8

Exhibit 2.1

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE SOUTHERN DISTRICT OF INDIANA

INDIANAPOLIS DIVISION

In re:		)	Chapter 11
		)
HAYNES INTERNATIONAL, INC., et al.		)	Case No. 04-05364 (AJM)
		)
	Debtors.	)	Jointly Administered

FIRST AMENDED JOINT PLAN OF REORGANIZATION

OF HAYNES INTERNATIONAL, INC. AND ITS AFFILIATED

DEBTORS AND DEBTORS-IN-POSSESSION

John Wm. Butler, Jr. (IL ARDC No. 06209373)

J. Eric Ivester (IL ARDC No. 06215581)

Kristin E. Rooney (IL ARDC No. 06256593)

SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP

333 West Wacker Drive

Chicago, Illinois 60606-1285

Telephone: (312) 407-0700

Jeffrey A. Hokanson

Ben T. Caughey

ICE MILLER

One American Square

Box 82001

Indianapolis, Indiana 46282-0002

Telephone: (317) 236-2100

Attorneys for Debtors and

Debtors-in-Possession

Dated: Indianapolis, Indiana
June 29, 2004

TABLE OF CONTENTS

			PAGE

INTRODUCTION			1

ARTICLE I. DEFINED TERMS AND RULES OF INTERPRETATION			9

A.	SCOPE OF DEFINITIONS; RULES OF CONSTRUCTION		9
B.	DEFINITIONS		9
	1.1.	503 DEADLINE	9
	1.2.	AD HOC NOTEHOLDERS	9
	1.3.	ADMINISTRATIVE CLAIM	9
	1.4.	AFFILIATE DEBTORS	9
	1.5.	AFFILIATES	10
	1.6.	ALLOWED	10
	1.7.	ALLOWED CLAIM or ALLOWED INTEREST	10
	1.8.	AVOIDANCE CLAIMS	10
	1.9.	BALLOT	10
	1.10.	BANKRUPTCY CODE	10
	1.11.	BANKRUPTCY COURT	10
	1.12.	BANKRUPTCY RULES	10
	1.13.	BAR DATE	11
	1.14.	Bar Date Order	11
	1.15.	BLACKSTONE	11
	1.16.	BUSINESS DAY	11
	1.17.	CASH	11
	1.18.	CASH COLLATERAL ORDER	11
	1.19.	CAUSES OF ACTION	11
	1.20.	CERTIFICATE	11
	1.21.	CERTIFICATES OF INCORPORATION AND BYLAWS	11
	1.22.	CHAPTER 11 CASES	11
	1.23.	CLAIM	11
	1.24.	CLAIMHOLDER	11
	1.25.	CLAIMS AGENT	11
	1.26.	CLAIMS/INTERESTS OBJECTION DEADLINE	12
	1.27.	CLASS	12
	1.28.	CLASS 7 NOTICE	12
	1.29.	COLLECTIVE BARGAINING AGREEMENT	12
	1.30.	COMMITMENT LETTER	12
	1.31.	CONFIRMATION DATE	12
	1.32.	CONFIRMATION HEARING	12
	1.33.	CONFIRMATION ORDER	12
	1.34.	CONGRESS	12
	1.35.	CONTINUING INDEMNIFICATION RIGHTS	12
	1.36.	CREDITORS COMMITTEE	12
	1.37.	CURE	12

1.38.	CURE CLAIM	13
1.39.	CURE CLAIM OBJECTION DEADLINE	13
1.40.	CURE CLAIM SUBMISSION DEADLINE	13
1.41.	D&O INSURANCE	13
1.42.	DEBTOR OR DEBTORS	13
1.43.	DISALLOWED CLAIM	13
1.44.	DISALLOWED INTEREST	13
1.45.	DISBURSING AGENT	13
1.46.	DISCLOSURE STATEMENT	13
1.47.	DISPUTED CLAIM	13
1.48.	DISPUTED INTEREST	14
1.49.	DISTRIBUTION DATE	14
1.50.	DISTRIBUTION RESERVE	14
1.51.	EFFECTIVE DATE	14
1.52.	ESTATES	14
1.53.	EXHIBIT	14
1.54.	EXHIBIT FILING DATE	14
1.55.	EXISTING SECURITIES	14
1.56.	FILE, FILED OR FILING	14
1.57.	FINAL ORDER	14
1.58.	GENERAL UNSECURED CLAIM	15
1.59.	HAYNES	15
1.60.	HAYNES HOLDINGS	15
1.61.	HAYNES SOUR GAS	15
1.62.	HAYNES SPECIALTY STEELS	15
1.63.	HOLDBACK AMOUNT	15
1.64.	HOLDBACK ESCROW ACCOUNT	15
1.65.	IMPAIRED	15
1.66.	INDEMNIFICATION RIGHTS	15
1.67.	INDEMNITEE	15
1.68.	INDENTURE	15
1.69.	INSURANCE COVERAGE	15
1.70.	INSURED WORKERS’ COMPENSATION PROGRAMS	15
1.71.	INTERCOMPANY CLAIM	16
1.72.	INTERESTHOLDER	16
1.73.	INTERESTS	16
1.74.	LONG-TERM INCENTIVE PLAN	16
1.75.	MASTER BALLOT	16
1.76.	NEW BOARD OF REORGANIZED HAYNES	16
1.77.	NEW COMMON STOCK	16
1.78.	NEW PREFERRED STOCK	16
1.79.	OLD COMMON STOCK INTERESTS	16
1.80.	OLD COMMON STOCKHOLDER SHARES	16
1.81.	OTHER OLD EQUITY INTERESTS	16
1.82.	OTHER PRIORITY CLAIM	16
1.83.	PBGC	16

	1.84.	PENSION PLAN	16
	1.85.	PERIODIC DISTRIBUTION DATE	17
	1.86.	PERSON	17
	1.87.	PETITION DATE	17
	1.88.	PLAN	17
	1.89.	POST-EFFECTIVE DATE CREDIT AGREEMENT	17
	1.90.	POST-EFFECTIVE DATE FACILITY	17
	1.91.	POST-EFFECTIVE DATE LENDERS	17
	1.92.	POSTPETITION AGENT	17
	1.93.	POSTPETITION CREDIT AGREEMENT	17
	1.94.	POSTPETITION FACILITY	17
	1.95.	POSTPETITION FACILITY CLAIM	17
	1.96.	POSTPETITION FACILITY ORDER	17
	1.97.	POSTPETITION INTEREST	18
	1.98.	POSTPETITION LENDERS	18
	1.99.	PRIORITY TAX CLAIM	18
	1.100.	PRO RATA	18
	1.101.	PROFESSIONAL	18
	1.102.	PROFESSIONAL FEE CLAIM	18
	1.103.	PROFESSIONAL FEE ORDER	18
	1.104.	REGISTRATION RIGHTS AGREEMENT	18
	1.105.	REINSTATED OR REINSTATEMENT	18
	1.106.	RELEASED PARTIES	19
	1.107.	REORGANIZED	19
	1.108.	REORGANIZED DEBTORS	19
	1.109.	RESTRUCTURING TRANSACTION(s)	19
	1.110.	RETAINED ACTIONS	19
	1.111.	RETAINED AVOIDANCE CLAIMS	20
	1.112.	RETIREE MEDICAL PROGRAMS	20
	1.113.	SCHEDULES	20
	1.114.	SECURED CLAIM	20
	1.115.	SECURITIES ACT	20
	1.116.	SENIOR NOTEHOLDER	20
	1.117.	SENIOR NOTEHOLDER SHARES	20
	1.118.	SENIOR NOTE CLAIM	20
	1.119.	SENIOR NOTES	20
	1.120.	SENIOR NOTES TRUSTEE	20
	1.121.	SERVICER	20
	1.122.	SOLICITATION ORDER	20
	1.123.	TENTATIVE AGREEMENT	20
	1.124.	UNIMPAIRED CLAIM	21
	1.125.	VOTING DEADLINE	21
C.	RULES OF INTERPRETATION		21
D.	COMPUTATION OF TIME		21
E.	REFERENCES TO MONETARY FIGURES		21
F.	EXHIBITS		22

iii

G.	GOVERNING LAW		22

ARTICLE II. ADMINISTRATIVE EXPENSES AND PRIORITY TAX CLAIMS			22

	2.1.	ADMINISTRATIVE CLAIMS	22
	2.2.	PRIORITY TAX CLAIMS	22

ARTICLE III. CLASSIFICATION OF CLAIMS AND INTERESTS			23

	3.1.	CLASS 1	23
	3.2.	CLASS 2	23
	3.3.	CLASS 3	23
	3.4.	CLASS 4	23
	3.5.	CLASS 5	23
	3.6.	CLASS 6	23
	3.7.	CLASS 7	23

ARTICLE IV. IDENTIFICATION OF CLASSES OF CLAIMS AND INTERESTS IMPAIRED AND UNIMPAIRED BY THE PLAN			24

	4.1.	UNIMPAIRED CLASSES OF CLAIMS	24
	4.2.	IMPAIRED CLASSES OF CLAIMS AND INTERESTS	24

ARTICLE V. PROVISIONS FOR TREATMENT OF CLAIMS AND INTERESTS			24

	5.1.	CLASS 1:	24
	5.2.	CLASS 2:	25
	5.3.	CLASS 3:	25
	5.4.	CLASS 4:	25
	5.5.	CLASS 5:	25
	5.6.	CLASS 6:	26
	5.7.	CLASS 7:	26
	5.8.	RESERVATION OF RIGHTS	26

ARTICLE VI. ACCEPTANCE OR REJECTION OF THE PLAN; EFFECT OF REJECTION BY ONE OR MORE IMPAIRED CLASSES OF CLAIMS OR INTERESTS			26

	6.1.	IMPAIRED CLASSES ENTITLED TO VOTE	26
	6.2.	ACCEPTANCE BY IMPAIRED CLASSES	26
	6.3.	CLASSES DEEMED TO ACCEPT THE PLAN	27
	6.4.	CLASSES DEEMED TO REJECT PLAN	27
	6.5.	CONFIRMATION PURSUANT TO SECTION 1129(b) OF THE BANKRUPTCY CODE	27
	6.6.	CONFIRMABILITY AND SEVERABILITY OF A PLAN	27

ARTICLE VII. MEANS FOR IMPLEMENTATION OF THE PLAN			27

	7.1.	CONTINUED CORPORATE EXISTENCE	27
	7.2.	SUBSTANTIVE CONSOLIDATION	27
	7.3.	RESTRUCTURING TRANSACTIONS	28
	7.4.	CORPORATE ACTION	28
	7.5.	CERTIFICATES OF INCORPORATION AND BYLAWS	29
	7.6.	CANCELLATION OF EXISTING SECURITIES AND AGREEMENTS	29
	7.7.	REINSTATEMENT OF COMMON STOCK OF AFFILIATE DEBTORS	30
	7.8.	DIRECTORS AND OFFICERS	30
	7.9.	PENSION PLAN AND RETIREE MEDICAL PROGRAMS	31
	7.10.	EMPLOYMENT, INDEMNIFICATION AND OTHER AGREEMENTS	31
	7.11.	CONTINUATION OF INSURED WORKERS’ COMPENSATION PROGRAMS	32
	7.12.	IMPLEMENTATION OF THE LONG-TERM INCENTIVE PROGRAM	32
	7.13.	ISSUANCE OF NEW COMMON STOCK	32
	7.14.	POST-EFFECTIVE DATE FINANCING	33
	7.15.	PRESERVATION OF CAUSES OF ACTION	33
	7.16.	EFFECTUATING DOCUMENTS AND FURTHER TRANSACTIONS	34
	7.17.	EXEMPTION FROM TRANSFER TAXES AND RECORDING FEES	34

ARTICLE VIII. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES			35

	8.1.	ASSUMED CONTRACTS AND LEASES	35
	8.2.	REJECTED CONTRACTS AND LEASES	35
	8.3.	PAYMENTS RELATED TO ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES	35
	8.4.	REJECTION DAMAGES BAR DATE	36
	8.5.	COLLECTIVE BARGAINING AGREEMENT; TENTATIVE AGREEMENT	36
	8.6.	PRESERVATION OF INSURANCE	36

ARTICLE IX. PROVISIONS GOVERNING DISTRIBUTIONS; PROCEDURES FOR RESOLVING DISPUTED, CONTINGENT AND UNLIQUIDATED CLAIMS AND INTERESTS			36

	9.1.	TIME OF DISTRIBUTIONS	36
	9.2.	NO INTEREST ON CLAIMS OR INTERESTS	36
	9.3.	DISBURSING AGENT	37
	9.4.	SURRENDER OF SECURITIES OR INSTRUMENTS	37
	9.5.	INSTRUCTIONS TO DISBURSING AGENT	37
	9.6.	SERVICES OF INDENTURE TRUSTEES, AGENTS AND SERVICERS	37
	9.7.	CLAIMS ADMINISTRATION RESPONSIBILITY	38
	9.8.	DELIVERY OF DISTRIBUTIONS	38
	9.9.	PROCEDURES FOR TREATING AND RESOLVING DISPUTED AND CONTINGENT CLAIMS AND INTERESTS	38
	9.10.	FRACTIONAL SECURITIES; FRACTIONAL DOLLARS	40
	9.11.	MEANS OF CASH PAYMENT	40
	9.12.	WITHHOLDING AND REPORTING REQUIREMENTS	40

	9.13.	OBJECTION DEADLINE; PROSECUTION OF OBJECTIONS	40

ARTICLE X. ALLOWANCE AND PAYMENT OF CERTAIN ADMINISTRATIVE CLAIMS			41

	10.1.	POSTPETITION FACILITY CLAIM	41
	10.2.	PROFESSIONAL CLAIMS	41
	10.3.	SUBSTANTIAL CONTRIBUTION COMPENSATION AND EXPENSES BAR DATE	42
	10.4.	OTHER ADMINISTRATIVE CLAIMS	42

ARTICLE XI. EFFECT OF THE PLAN ON CLAIMS AND INTERESTS			42

	11.1.	REVESTING OF ASSETS	42
	11.2.	DISCHARGE OF DEBTORS	43
	11.3.	COMPROMISES AND SETTLEMENTS	43
	11.4.	RELEASE BY DEBTORS OF CERTAIN PARTIES	43
	11.5.	RELEASE BY HOLDERS OF CLAIMS AND INTERESTS	44
	11.6.	SETOFFS	44
	11.7.	EXCULPATION AND LIMITATION OF LIABILITY	44
	11.8.	INDEMNIFICATION OBLIGATIONS	44
	11.9.	INJUNCTION	45
	11.10.	WAIVER OF DISTRIBUTIONS BY NON-EMPLOYEE HOLDERS OF OLD COMMON STOCK INTERESTS AND THEIR AFFILIATES	45

ARTICLE XII. CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF THE PLAN			45

	12.1.	CONDITIONS TO CONFIRMATION	45
	12.2.	CONDITIONS TO CONSUMMATION	46
	12.3.	WAIVER OF CONDITIONS TO CONFIRMATION OR CONSUMMATION	47

ARTICLE XIII. RETENTION OF JURISDICTION			48

ARTICLE XIV. MISCELLANEOUS PROVISIONS			49

	14.1.	BINDING EFFECT	49
	14.2.	MODIFICATION AND AMENDMENTS	49
	14.3.	ALLOCATION OF PLAN DISTRIBUTIONS BETWEEN PRINCIPAL AND INTEREST	50
	14.4.	COMMITTEES	50
	14.5.	REVOCATION, WITHDRAWAL, OR NON-CONSUMMATION	50
	14.6.	SEVERABILITY OF PLAN PROVISIONS	50
	14.7.	NOTICES	51
	14.8.	TERM OF INJUNCTIONS OR STAYS	52
	14.9.	GOVERNING LAW	52
	14.10.	NO WAIVER OR ESTOPPEL	52
	14.11.	CONFLICTS	53

INTRODUCTION

Haynes International, Inc. (“Haynes”) and certain of its subsidiaries and affiliates, as debtors and debtors-in-possession in the above-captioned jointly administered Chapter 11 Cases (collectively, the “Debtors”), hereby propose the following Joint Plan of Reorganization (the “Plan”) for the resolution of the outstanding Claims against and Interests in the Debtors. Reference is made to the Disclosure Statement with Respect to the Joint Plan of Reorganization of Haynes International, Inc. and its Affiliated Debtors and Debtors-in-Possession (the “Disclosure Statement”), distributed contemporaneously herewith, for a discussion of the Debtors’ history, business, properties and operations, projections for those operations, risk factors, a summary and analysis of the Plan, and certain related matters including, among other things, the securities to be issued under the Plan. The Debtors are the proponents of the Plan within the meaning of section 1129 of the Bankruptcy Code.

The direct and indirect subsidiaries incorporated outside of the United States have not commenced cases under Chapter 11 of the Bankruptcy Code. These subsidiaries continue to operate their businesses outside of bankruptcy.

This Plan contemplates the reorganization of the Debtors and the resolution of the outstanding Claims against and Interests in the Debtors pursuant to sections 1121(a) and 1123 of the Bankruptcy Code. For the purposes of voting and distributions, the Debtors have assumed that General Unsecured Claims are Impaired. Claimholders asserting General Unsecured Claims will receive Cash in an amount equal to one hundred percent (100%) of the Allowed Amount of such claims. Claimholders with respect to Senior Note Claims will receive New Common Stock on account of their Claims. Senior Note Claims are deemed Allowed Claims under the Plan. Holders of Old Common Stock Interests will receive a distribution of New Common Stock under the Plan. The distributions to be made to the claimants in each of the Classes of creditor claims and equity interests are set forth in ARTICLE V herein.

These reorganization cases have been consolidated for procedural purposes and are being jointly administered pursuant to an order of the United States Bankruptcy Court for the Southern District of Indiana, Indianapolis Division. This Plan provides for the substantive consolidation of Haynes Holdings, Inc., Haynes, Haynes Specialty Steels Company and Haynes Sour Gas Tubulars, Inc. for all Plan purposes, including for voting and distribution purposes. This Plan is deemed a motion for substantive consolidation to the extent necessary.

The Plan also provides that Haynes Holdings, Inc. will be merged into Haynes at the Effective Date of the Plan to create Reorganized Haynes.

Under section 1125(b) of the Bankruptcy Code, a vote to accept or reject the Plan may not be solicited from a Claimholder or Interestholder until the Disclosure Statement has been approved by the Bankruptcy Court and distributed to Claimholders and Interestholders. In this case, the Disclosure Statement was approved by the Bankruptcy Court by order entered on June 28, 2004, and has been distributed simultaneously with this Plan to all parties whose votes are being solicited. The Disclosure Statement contains, among other things, a discussion of the Debtors’ history, business, properties and operations, projections for those operations, risk factors associated with the business and Plan, a summary and analysis of this Plan, and certain related

matters including, among other things, the securities to be issued under this Plan. ALL CLAIMHOLDERS AND INTERESTHOLDERS THAT ARE ELIGIBLE TO VOTE ON THE PLAN ARE ENCOURAGED TO READ THIS PLAN AND THE DISCLOSURE STATEMENT IN THEIR ENTIRETY BEFORE VOTING TO ACCEPT OR REJECT THIS PLAN.

Subject to the restrictions on modifications set forth in section 1127 of the Bankruptcy Code, Bankruptcy Rule 3019, and ARTICLE XIV of this Plan, the Debtors expressly reserve their right to alter, amend or modify this Plan, one or more times, before the Plan’s substantial consummation; PROVIDED, HOWEVER, that modification to the Plan that materially effects certain Classes of Claims will only be made with the consent of the Creditors Committee.

ARTICLE I.

DEFINED TERMS AND RULES OF INTERPRETATION

A. SCOPE OF DEFINITIONS; RULES OF CONSTRUCTION

For purposes of this Plan, except as expressly provided or unless the context otherwise requires, all capitalized terms not otherwise defined shall have the meanings ascribed to them in ARTICLE I of this Plan. Any term used in this Plan that is not defined herein, but is defined in the Bankruptcy Code or the Bankruptcy Rules, shall have the meaning ascribed to that term in the Bankruptcy Code or the Bankruptcy Rules.

B. DEFINITIONS

1.1. 503 DEADLINE shall have the meaning ascribed to it in Section 10.3 hereof.

1.2. AD HOC NOTEHOLDERS Committee means the ad hoc committee formed by certain holders of the Senior Notes, which such committee disbanded on April 6, 2004.

1.3. ADMINISTRATIVE CLAIM means a Claim for costs and expenses of administration of the Chapter 11 Cases Allowed under section 503(b) or 1114(e)(2) of the Bankruptcy Code and entitled to priority pursuant to section 507(a)(1) of the Bankruptcy Code, including, but not limited to: (a) any actual and necessary costs and expenses incurred after the Petition Date of preserving the Debtors’ Estates and operating the businesses of the Debtors (such as wages, salaries, commissions for services and payments for inventories, leased equipment and premises) and Claims of governmental units for taxes (including tax audit Claims related to tax years commencing after the Petition Date, but excluding Claims relating to tax periods, or portions thereof, ending on or prior to the Petition Date); (b) compensation for legal, financial, advisory, accounting and other services and reimbursement of expenses Allowed by the Bankruptcy Court under section 328, 330, 331 and/or 503(b) of the Bankruptcy Code to the extent incurred prior to the Effective Date; and (c) all fees and charges assessed against the Estates under section 1930, Chapter 123 of Title 28, United States Code, and all Allowed Claims (including reclamation claims) that are entitled to be treated as Administrative Claims pursuant to Final Order of the Bankruptcy Court under 546(c)(2)(A).

1.4. AFFILIATE DEBTORS means all of the Debtors other than Haynes.

1.5. AFFILIATES shall have the meaning ascribed to such term by section 101(2) of the Bankruptcy Code.

1.6. ALLOWED means, when used in reference to a Claim or Interest within a particular Class, an Allowed Claim or Allowed Interest of the type described in such Class.

1.7. ALLOWED CLAIM or ALLOWED INTEREST means a Claim or any portion thereof, or an Interest or any portion thereof, (a) that has been allowed by a Final Order of the Bankruptcy Court (or such other court as the Reorganized Debtors and the holder of such Claim or Interest agrees may adjudicate such Claim or Interest and objections thereto), or (b) as to which, on or by the Effective Date, (i) no proof of claim or interest has been filed with the Bankruptcy Court and (ii) the liquidated and noncontingent amount of which is Scheduled (other than a Claim or Interest that is Scheduled at zero, in an unknown amount, or as disputed), or (c) for which a proof of claim or interest in a liquidated amount has been timely filed with the Bankruptcy Court pursuant to the Bankruptcy Code, any Final Order of the Bankruptcy Court or other applicable bankruptcy law, and as to which either (i) no objection to its allowance has been filed within the periods of limitation fixed by the Plan, the Bankruptcy Code or by any order of the Bankruptcy Court or (ii) any objection to its allowance has been settled, withdrawn, or denied by a Final Order, or (d) that is expressly allowed in a liquidated amount in this Plan (regardless whether such Claim or Interest is Scheduled and whether or not a proof of claim is filed in respect thereof).

1.8. AVOIDANCE CLAIMS means Causes of Action against Persons arising under any of sections 502, 510, 541, 542, 543, 544, 545, 547 through 551 and 553 of the Bankruptcy Code, or under related state or federal statutes and common law, including fraudulent transfer laws, whether or not litigation is commenced to prosecute such Avoidance Claims, but excluding any and all Claims released under the Plan. A nonexclusive list of the Retained Actions and Retained Avoidance Claims is attached hereto as EXHIBIT A.

1.9. BALLOT means each of the ballot forms that are distributed with the Disclosure Statement to Claimholders and Interestholders included in Classes that are Impaired under this Plan and entitled to vote to accept or reject the Plan on which the holder is to indicate acceptance or rejection of this Plan.

1.10. BANKRUPTCY CODE means the Bankruptcy Reform Act of 1978, as codified in Title 11 of the United States Code, 11 U.S.C. Sections 101-1330, as in effect on the date hereof.

1.11. BANKRUPTCY COURT means the United States Bankruptcy Court for the Southern District of Indiana, Indianapolis Division or such other court as may have jurisdiction over the Chapter 11 Cases.

1.12. BANKRUPTCY RULES means, collectively, the Federal Rules of Bankruptcy Procedure and the Official Bankruptcy Forms, as amended, the Federal Rules of Civil Procedure, as amended, as applicable to the Chapter 11 Cases or proceedings therein, and the Local Rules of the Bankruptcy Court, as applicable to the Chapter 11 Cases or proceedings therein, as the case may be.

1.13. BAR DATE means the deadline established by the Bankruptcy Court pursuant to the Bar Date Order or other Final Order for filing all proofs of Claim or Interest in the Chapter 11 Cases, including Claims of governmental units in accordance with section 502(b)(9) of the Bankruptcy Code.

1.14. Bar Date Order means that order entered by the Bankruptcy Court on April 22, 2004, which, among other things, established the Bar Date for prepetition Claims and Interests as June 3, 2004.

1.15. BLACKSTONE means The Blackstone Group L.P. and its affiliates.

1.16. BUSINESS DAY means any day, other than a Saturday, Sunday or “legal holiday” (as defined in Bankruptcy Rule 9006(a)).

1.17. CASH means legal tender of the United States of America and equivalents thereof.

1.18. CASH COLLATERAL ORDER means together, (a) the Interim Order (I) Authorizing Use of Cash Collateral Pursuant to 11 U.S.C. Sections 363, (II) Granting Adequate Protection Pursuant to 11 U.S.C. Sections 361 and 363 and (III) Scheduling a Final Hearing Pursuant to Bankruptcy Rule 4001(b) entered by the Bankruptcy Court on March 29, 2004, and (b) the Final Order with respect thereto entered by the Bankruptcy Court on April 22, 2004.

1.19. CAUSES OF ACTION means any and all actions, proceedings, causes of action, suits, accounts, controversies, agreements, promises, rights to legal remedies, rights to equitable remedies, rights to payment and claims, whether known, unknown, reduced to judgment, not reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured and whether asserted or assertable directly or derivatively, in law, equity or otherwise.

1.20. CERTIFICATE shall have the meaning ascribed to it in Section 9.4 hereof.

1.21. CERTIFICATES OF INCORPORATION AND BYLAWS means the Certificates

of Incorporation and Bylaws (or other similar documents) of the Reorganized Debtors in substantially the forms attached hereto as EXHIBIT B and EXHIBIT C, respectively.

1.22. CHAPTER 11 CASES means the cases under Chapter 11 of the Bankruptcy Code commenced by the Debtors in the Bankruptcy Court.

1.23. CLAIM means a “claim” against the Debtors (or any of them), whether or not asserted, as defined in section 101(5) of the Bankruptcy Code.

1.24. CLAIMHOLDER means a holder of a Claim.

1.25. CLAIMS AGENT means Kurtzman Carson Consultants LLC, 12910 Culver Boulevard, Suite I, Los Angeles, CA 90066, the Claims, Noticing and Balloting Agent as approved by the Bankruptcy Court on April 22, 2004.

1.26. CLAIMS/INTERESTS OBJECTION DEADLINE means the first Business Day which is 120 days after the Effective Date as the same may be from time to time extended by the Bankruptcy Court without further notice to parties in interest.

1.27. CLASS means a category of Claimholders or Interestholders, as described in ARTICLE III of this Plan.

1.28. CLASS 7 NOTICE means the notice to members of Class 7 Other Old Equity Interests, after a Final Order of the Bankruptcy Court or other Court of competent jurisdiction, providing that Class 7 Other Old Equity Interests is deemed to have rejected the Plan and members of such Class are not entitled to vote on the Plan.

1.29. COLLECTIVE BARGAINING AGREEMENT means that certain Collective Bargaining Agreement with the United Steelworkers of America, which was ratified on July 2, 2002, and which expires on June 11, 2005, as modified by the Tentative Agreement.

1.30. COMMITMENT LETTER means that certain Commitment Letter dated March 26, 2004 among the Debtors and Congress pursuant to which Congress committed to provide the Debtors with (i) the Postpetition Facility and (ii) the Post-Effective Date Facility.

1.31. CONFIRMATION DATE means the date of entry of the Confirmation Order.

1.32. CONFIRMATION HEARING means the hearing held by the Bankruptcy Court pursuant to section 1128 of the Bankruptcy Code to consider confirmation of this Plan, as such hearing may be adjourned or continued from time to time.

1.33. CONFIRMATION ORDER means the order of the Bankruptcy Court confirming this Plan in accordance with its terms pursuant to section 1129 of the Bankruptcy Code.

1.34. CONGRESS means Congress Financial Corporation (Central).

1.35. CONTINUING INDEMNIFICATION RIGHTS means those Indemnification Rights held by any Indemnitee who is a Released Party and serves as a director, officer or employee (or in any similar capacity) of the Reorganized Debtors immediately following the occurrence of the Effective Date together with any Indemnification Rights held by any Indemnitee on account of events occurring on or after the Petition Date.

1.36. CREDITORS COMMITTEE means the statutory committee appointed in these cases by the Office of the United States Trustee on or about April 2, 2004, as reconstituted from time to time.

1.37. CURE means the distribution of Cash, or such other property as may be agreed upon by the parties or ordered by the Bankruptcy Court, with respect to the assumption (or assumption and assignment) of an executory contract or unexpired lease, pursuant to section 365(b) of the Bankruptcy Code, in an amount equal to all unpaid monetary obligations, without interest, or such other amount as may be agreed upon by the parties, under such executory contract or unexpired lease, to the extent such obligations are enforceable under the Bankruptcy Code and applicable non-bankruptcy law.

1.38. CURE CLAIM shall have the meaning ascribed to it in Section 8.3 hereof.

1.39. CURE CLAIM OBJECTION DEADLINE shall have the meaning ascribed to it in Section 8.3 hereof.

1.40. CURE CLAIM SUBMISSION DEADLINE shall have the meaning ascribed to it in Section 8.3 hereof.

1.41. D&O INSURANCE means insurance maintained by the Debtors which, among others, covers the Debtors’ directors and officers.

1.42. DEBTOR OR DEBTORS means, individually, any of Haynes or the Affiliate Debtors and, collectively, all of Haynes and the Affiliate Debtors in the above-captioned jointly administered Chapter 11 Cases.

1.43. DISALLOWED CLAIM means a Claim or any portion thereof that (a) has been disallowed by a Final Order, (b) is Scheduled at zero or as contingent, disputed or unliquidated and as to which a proof of claim bar date has been established but no proof of claim has been timely filed or deemed timely filed with the Bankruptcy Court pursuant to either the Bankruptcy Code or any Final Order of the Bankruptcy Court or otherwise deemed timely filed under applicable law, or (c) is not Scheduled and as to which a proof of claim bar date has been set but no proof of claim has been timely filed or deemed timely filed with the Bankruptcy Court pursuant to either the Bankruptcy Code or any Final Order of the Bankruptcy Court or otherwise deemed timely filed under applicable law.

1.44. DISALLOWED INTEREST means an Interest or any portion thereof that (a) has been disallowed by a Final Order, (b) is Scheduled at zero or as contingent, disputed or unliquidated and as to which a proof of interest bar date has been established but no proof of interest has been timely filed or deemed timely filed with the Bankruptcy Court pursuant to either the Bankruptcy Code or any Final Order of the Bankruptcy Court or otherwise deemed timely filed under applicable law, or (c) is not Scheduled and as to which a proof of interest bar date has been set but no proof of interest has been timely filed or deemed timely filed with the Bankruptcy Court pursuant to either the Bankruptcy Code or any Final Order of the Bankruptcy Court or otherwise deemed timely filed under applicable law.

1.45. DISBURSING AGENT means the Reorganized Debtors, or any party designated by the Reorganized Debtors, to serve as disbursing agent under the Plan.

1.46. DISCLOSURE STATEMENT means the written disclosure statement that relates to the Plan, as amended, supplemented, or modified from time to time, and that is prepared and distributed in accordance with section 1125 of the Bankruptcy Code and Bankruptcy Rule 3018.

1.47. DISPUTED CLAIM means a Claim or any portion thereof, that is neither an Allowed Claim nor a Disallowed Claim and includes, without limitation, Claims that (a) (i) have not been Scheduled by the Debtors or have been Scheduled at zero, as unknown or as contingent, unliquidated, or disputed and (ii) are not the subject of an objection in the Bankruptcy Court, (b) are the subject of a proof of claim that differs in nature, amount or priority from the Schedules,

or (c) are the subject of an objection filed in the Bankruptcy Court and which objection has not been withdrawn, settled or overruled by a Final Order of the Bankruptcy Court.

1.48. DISPUTED INTEREST means an Interest or any portion thereof, that is neither an Allowed Interest nor a Disallowed Interest and includes, without limitation, Interests that (a) (i) have not been Scheduled by the Debtors or have been Scheduled at zero, as unknown or as contingent, unliquidated, or disputed and (ii) are not the subject of an objection in the Bankruptcy Court, (b) are the subject of a proof of interest that differs in nature, amount or priority from the Schedules, or (c) are the subject of an objection filed in the Bankruptcy Court and which objection has not been withdrawn, settled or overruled by a Final Order of the Bankruptcy Court.

1.49. DISTRIBUTION DATE means, except with respect to Claims Reinstated under the Plan, as to which all distributions shall be timely made in accordance with the terms thereof, the Effective Date or as soon thereafter as is reasonably practicable.

1.50. DISTRIBUTION RESERVE means the shares of New Common Stock for distribution on account of Allowed Class 6 Old Common Stock Interests to be reserved pending allowance of Disputed Interests in accordance with Section 9.9(b) of the Plan.

1.51. EFFECTIVE DATE means the Business Day determined by the Debtors on which all conditions to the consummation of the Plan set forth in Section 12.2 hereof have been either satisfied or waived as provided in Section 12.3 hereof and is the day upon which this Plan is substantially consummated.

1.52. ESTATES means the bankruptcy estates of the Debtors created under section 541 of the Bankruptcy Code.

1.53. EXHIBIT means an exhibit annexed to either this Plan or as an appendix to the Disclosure Statement.

1.54. EXHIBIT FILING DATE means the date on which Exhibits to the Plan shall be filed with the Bankruptcy Court, which date shall be at least seven (7) days prior to the Voting Deadline or such later date as may be approved by the Bankruptcy Court without further notice.

1.55. EXISTING SECURITIES means, collectively, the Senior Notes, the Old Common Stock Interests, the Other Old Equity Interests, and all options, warrants and rights (whether fixed or contingent, matured or unmatured, disputed or undisputed), contractual, legal, equitable or otherwise, to acquire any of the foregoing.

1.56. FILE, FILED OR FILING means file, filed or filing with the Bankruptcy Court or its authorized designee in the Chapter 11 Cases.

1.57. FINAL ORDER means an order or judgment, the operation or effect of which has not been stayed, reversed, or amended and as to which order or judgment (or any revision, modification, or amendment thereof) the time to appeal or seek review or rehearing has expired and as to which no appeal or petition for review or rehearing was filed or, if filed, remains pending.

1.58. GENERAL UNSECURED CLAIM means a Claim that is not an Administrative Claim, Priority Tax Claim, Secured Claim, Other Priority Claim, Senior Note Claim, Intercompany Claim, or a claim of an employee or former employee of the Debtors that is not being affected by this Plan as contemplated in ARTICLE VII of this Plan.

1.59. HAYNES means Haynes International, Inc., a Delaware corporation.

1.60. HAYNES HOLDINGS means Haynes Holdings, Inc., a Delaware corporation.

1.61. HAYNES SOUR GAS means Haynes Sour Gas Tubulars, Inc., a Delaware corporation.

1.62. HAYNES SPECIALTY STEELS means Haynes Specialty Steels Company, a Delaware corporation.

1.63. HOLDBACK AMOUNT means the amount equal to 20% of fees billed to the Debtors in a given month that was retained by the Debtors as a holdback on payment of Professional Fee Claims pursuant to the Professional Fee Order. The Holdback Amount shall not be considered property of the Debtors, the Reorganized Debtors, or the Estates.

1.64. HOLDBACK ESCROW ACCOUNT means the escrow account established by the Disbursing Agent into which Cash equal to the Holdback Amount shall be deposited on the Effective Date for the payment of Allowed Holdback Amounts to the extent not previously paid or Disallowed.

1.65. IMPAIRED means, when used in reference to a Claim or Interest, a Claim or Interest that is impaired within the meaning of section 1124 of the Bankruptcy Code.

1.66. INDEMNIFICATION RIGHTS means any obligations or rights of the Debtors to indemnify, reimburse, advance or contribute to the losses, liabilities or expenses of an Indemnitee pursuant to the Debtors’ certificates of incorporation, bylaws, or policy of providing employee indemnification, or other applicable law or specific agreement in respect of any claims, demands, suits, causes of action or proceedings against an Indemnitee based upon any act or omission related to an Indemnitee’s service with, for or on behalf of the Debtors.

1.67. INDEMNITEE means all present and former directors, officers, employees, agents or representatives of the Debtors who are entitled to assert Indemnification Rights.

1.68. INDENTURE means the Indenture dated as of August 23, 1996, between Haynes, as issuer, and the Senior Notes Trustee, as trustee, relating to the Senior Notes, as amended from time to time.

1.69. INSURANCE COVERAGE shall have the meaning ascribed to it in Section 11.8 hereof.

1.70. INSURED WORKERS’ COMPENSATION PROGRAMS means, collectively, the Debtors’ workers’ compensation programs in all states in which they operate pursuant to which the Debtors provide their employees with workers’ compensation coverage for claims arising from or related to their employment with the Debtors.

1.71. INTERCOMPANY CLAIM means a Claim by a Debtor against another Debtor.

1.72. INTERESTHOLDER means a holder of an Interest.

1.73. INTERESTS means (a) the legal, equitable, contractual and other rights (whether fixed or contingent, matured or unmatured, disputed or undisputed) of any Person with respect to the Old Common Stock Interests and any equity securities of the Debtors and (b) the legal, equitable, contractual or other rights of any Person to acquire or receive any of the foregoing.

1.74. LONG-TERM INCENTIVE PLAN means that certain plan by which the Reorganized Debtors shall deliver certain stock options and stock appreciation rights to certain members of management and other employees on or after the Effective Date, all as is more specifically described on EXHIBIT D hereto.

1.75. MASTER BALLOT means the ballot distributed to nominees or holders of record of the Senior Notes and Old Common Stock Interests to record the votes, if any, of the beneficial holders of such instruments.

1.76. NEW BOARD OF REORGANIZED HAYNES shall have the meaning ascribed to it in Section 7.8(b) hereof.

1.77. NEW COMMON STOCK means the shares of new common stock of Reorganized Haynes, par value $.01, authorized under the Certificate of Incorporation of Reorganized Haynes.

1.78. NEW PREFERRED STOCK shall have the meaning ascribed to it in Section 7.5 hereof.

1.79. OLD COMMON STOCK INTERESTS means that certain common stock, par value $.01, authorized by Haynes Holdings prior to the Petition Date.

1.80. OLD COMMON STOCKHOLDER SHARES means 400,000 shares of New Common Stock.

1.81. OTHER OLD EQUITY INTERESTS means all options, warrants, call rights, puts, awards, or other agreements to acquire (a) Old Common Stock Interests or (b) any equity securities of the Debtors outstanding immediately prior to the Petition Date.

1.82. OTHER PRIORITY CLAIM means a Claim, other than an Administrative Claim or Priority Tax Claim, that is entitled to priority in payment pursuant to section 507(a) of the Bankruptcy Code.

1.83. PBGC shall mean the Pension Benefit Guaranty Corporation, a wholly-owned United States government corporation that administers the defined benefit pension plan termination insurance program under Title IV of ERISA.

1.84. PENSION PLAN shall mean the Haynes International, Inc. Pension Plan, a defined benefit pension plan covered by Title IV of ERISA that Haynes sponsors.

1.85. PERIODIC DISTRIBUTION DATE means (a) the Distribution Date, as to the first distribution made by the Reorganized Debtors, and (b) thereafter, (i) the first Business Day occurring one hundred twenty (120) days after the Distribution Date and (ii) subsequently, the first Business Day occurring one hundred twenty (120) days after the immediately preceding Periodic Distribution Date.

1.86. PERSON means an individual, corporation, partnership, joint venture, association, joint stock company, limited liability company, limited liability partnership, trust, estate, unincorporated organization, governmental unit (as defined in section 101(27) of the Bankruptcy Code), or other entity.

1.87. PETITION DATE means March 29, 2004, the date on which the Debtors filed their petitions for relief commencing these Chapter 11 Cases.

1.88. PLAN means this joint Chapter 11 plan of reorganization for the resolution of outstanding Claims and Interests in the Chapter 11 Cases, as herein proposed by the Debtors, including all supplements, appendices and schedules thereto, either in its present form or as the same may be altered, amended or modified from time to time.

1.89. POST-EFFECTIVE DATE CREDIT AGREEMENT means the Postpetition Credit Agreement, as amended and restated or otherwise replaced, from and after the Effective Date.

1.90. POST-EFFECTIVE DATE FACILITY means the financing facility provided to the Reorganized Debtors by the Post-Effective Date Lenders pursuant to the Post-Effective Date Credit Agreement and agreements related thereto.

1.91. POST-EFFECTIVE DATE LENDERS means the lenders from time to time party to the Post-Effective Date Credit Agreement.

1.92. POSTPETITION AGENT means the administrative agent for the Postpetition Lenders under the Postpetition Credit Agreement.

1.93. POSTPETITION CREDIT AGREEMENT means that Loan and Security Agreement, dated as of April 12, 2004, as amended from time to time thereafter, among Haynes, as borrower, Haynes Holdings, as guarantor, the Postpetition Agent and the Postpetition Lenders, which was executed by the Debtors in connection with the Postpetition Facility.

1.94. POSTPETITION FACILITY means the debtor-in-possession secured financing facility provided to the Debtors by the Postpetition Lenders pursuant to the Postpetition Credit Agreement and agreements related thereto as authorized by the Bankruptcy Court pursuant to the Postpetition Facility Order.

1.95. POSTPETITION FACILITY CLAIM means all super priority administrative claims of the Postpetition Agent and the Postpetition Lenders arising under or pursuant to the Postpetition Facility.

1.96. POSTPETITION FACILITY ORDER means, collectively, the interim order that was entered by the

Bankruptcy Court on March 29, 2004, the final order that was entered by the Bankruptcy Court on April 22, 2004, authorizing and approving the Postpetition Credit Agreement and the agreements related thereto, and any subsequent orders approving amendments to the Postpetition Credit Agreement.

1.97. POSTPETITION INTEREST means, collectively, such interest, reasonable fees, costs, or charges provided for under the agreements between a Debtor and a Claimholder whose Claim is secured by property of the Estates to the extent such items have accrued and are payable pursuant to the provisions of the Bankruptcy Code including, without limitation, section 506(b) of the Bankruptcy Code.

1.98. POSTPETITION LENDERS means the lenders from time to time party to the Postpetition Credit Agreement.

1.99. PRIORITY TAX CLAIM means a Claim of a governmental unit of the kind specified in sections 502(i) and 507(a)(8) of the Bankruptcy Code.

1.100. PRO RATA means, from time to time, unless the Plan specifically provides otherwise, (i) with respect to Allowed Claims, the same proportion that the Allowed Amount of a Claim of a Creditor in a particular Class of a Debtor bears to the sum of the aggregate Allowed Amounts of all Claims (including Disputed Claims, but excluding Disallowed Claims) of that particular Class of Claims for all Debtors and (ii) with respect to Allowed Interests, the proportion of the number of shares or units held by such Interestholder in relation to the total number of such shares or units outstanding included in such Class (including Disputed Interests, but excluding Disallowed Interests); PROVIDED, HOWEVER, that with respect to Senior Note Claims in Class 4, “Pro Rata” means the proportion that the principal face amount of the Senior Notes held by the holder of a Claim in Class 4 bears to the aggregate principal face amount of the Senior Notes.

1.101. PROFESSIONAL means (a) any professional employed in the Chapter 11 Cases pursuant to section 327 or 1103 of the Bankruptcy Code or otherwise and (b) any professional or other entity seeking compensation or reimbursement of expenses in connection with the Chapter 11 Cases pursuant to section 503(b)(4) of the Bankruptcy Code.

1.102. PROFESSIONAL FEE CLAIM means an Administrative Claim under section 330(a), 331, 503 or 1103 of the Bankruptcy Code for compensation of a Professional or other entity for services rendered or expenses incurred in the Chapter 11 Cases on or prior to and including the Effective Date.

1.103. PROFESSIONAL FEE ORDER means the order entered by the Bankruptcy Court on April 22, 2004, authorizing the interim payment of Professional Fee Claims subject to the Holdback Amount.

1.104. REGISTRATION RIGHTS AGREEMENT means the agreement, a form of which is attached hereto as EXHIBIT E, whereby Reorganized Haynes will be obligated to register certain shares of New Common Stock pursuant to the terms and conditions of such agreement.

1.105. REINSTATED OR REINSTATEMENT means (i) leaving unaltered the legal, equitable, and contractual rights to which a Claim or Interest entitles the holder of such Claim or Interest so as

to leave such Claim or Interest unimpaired in accordance with section 1124 of the Bankruptcy Code or (ii) notwithstanding any contractual provision or applicable law that entitles the holder of such Claim or Interest to demand or receive accelerated payment of such Claim or Interest after the occurrence of a default (a) curing any such default that occurred before or after the Petition Date, other than a default of a kind specified in section 365(b)(2) of the Bankruptcy Code; (b) reinstating the maturity of such Claim or Interest as such maturity existed before such default; (c) compensating the holder of such Claim or Interest for any damages incurred as a result of any reasonable reliance by such holder on such contractual provision or such applicable law; and (d) not otherwise altering the legal, equitable, or contractual rights to which such Claim or Interest entitles the holder of such Claim or Interest.

1.106. RELEASED PARTIES means, collectively, (i) all officers of each of the Debtors, all members of the boards of directors of each of the Debtors, and all employees of each of the Debtors, in each case, as of the date of commencement of the hearing on confirmation of the Plan, (ii) the Creditors Committee and all members of the Creditors Committee in their respective capacities as such, (iii) the Ad Hoc Noteholders Committee and all members of the Ad Hoc Noteholders Committee in their capacities as such, (iv) the Postpetition Agent in its capacity as such, (v) the Postpetition Lenders in their capacities as such, (vi) the Senior Notes Trustee in its capacity as such, (vii) Blackstone, (viii) all Professionals, and (ix) with respect to each of the above-named Persons, such Person’s affiliates, principals, employees, agents, officers, directors, financial advisors, attorneys and other professionals, in their capacities as such.

1.107. REORGANIZED means the applicable Debtor from and after the Effective Date, subject to the Restructuring Transactions.

1.108. REORGANIZED DEBTORS means collectively, the Debtors, or any successors thereto by merger, consolidation, or otherwise, on or after the Effective Date.

1.109. RESTRUCTURING TRANSACTION(s) means a dissolution or winding up of the corporate existence of a Debtor or the consolidation, merger, contribution of assets, or other transaction in which a Reorganized Debtor merges with or transfers substantially all of its assets and liabilities to a Reorganized Debtor or their Affiliates, on or after the Effective Date in accordance with Section 7.3 of this Plan.

1.110. RETAINED ACTIONS means (a) all claims, rights of action, suits and proceedings, whether in law or in equity, whether known or unknown, which any Debtor or any Debtor’s estate may hold against any Person, including, without limitation, any Causes of Action brought prior to the Petition Date, and actions against any Persons for failure to pay for products or services provided or rendered by the Debtors, (b) all claims, Causes of Action, suits and proceedings relating to strict enforcement of the Debtors’ intellectual property rights, including patents, copyrights and trademarks, and (c) all claims or Causes of Action seeking the recovery of the Debtors’ or the Reorganized Debtors’ accounts receivable or other receivables or rights to payment created or arising in the ordinary course of the Debtors’ or the Reorganized Debtors’ business; PROVIDED THAT any and all claims released under the Plan are excluded from the foregoing. A nonexclusive list of the Retained Actions and Retained Avoidance Claims is set forth in EXHIBIT A attached hereto.

1.111. RETAINED AVOIDANCE CLAIMS means all Avoidance Claims other than Claims released under the Plan. A nonexclusive list of the Retained Actions and Retained Avoidance Claims is set forth in EXHIBIT A attached hereto.

1.112. RETIREE MEDICAL PROGRAMS means the various programs in effect as of the Petition Date pursuant to which the Debtors provide medical, denta1, life insurance and prescription drug benefits to retired employees, including former union workers, and dependents located in the United States.

1.113. SCHEDULES means the schedules of assets and liabilities and the statements of financial affairs, if any, Filed by the Debtors pursuant to section 521 of the Bankruptcy Code and Bankruptcy Rules, as such schedules or statements have been or may be further modified, amended or supplemented in accordance with Bankruptcy Rule 1009 or orders of the Bankruptcy Court.

1.114. SECURED CLAIM means a Claim that is secured by a lien on property in which the Debtors’ Estates have an interest or that is subject to setoff under section 553 of the Bankruptcy Code, to the extent of the value of the Claimholder’s interest in the Estates’ interest in such property or to the extent of the amount subject to setoff, as applicable, as determined pursuant to section 506(a) of the Bankruptcy Code or, in the case of setoff, pursuant to section 553 of the Bankruptcy Code.

1.115. SECURITIES ACT means the Securities Act of 1933, 15 U.S.C. Sections 77c-77aa, as now in effect or hereafter amended.

1.116. SENIOR NOTEHOLDER means the holders of the Senior Notes.

1.117. SENIOR NOTEHOLDER SHARES means 9,600,000 shares of New Common Stock.

1.118. SENIOR NOTE CLAIM means a Claim for principal or interest on account of the Senior Notes.

1.119. SENIOR NOTES means those certain 11 ?% Senior Notes due September 1, 2004 issued by Haynes under the Indenture.

1.120. SENIOR NOTES TRUSTEE means Wells Fargo Bank, N.A., as successor trustee under the Indenture.

1.121. SERVICER has the meaning ascribed to it in Section 7.6 hereof.

1.122. SOLICITATION ORDER means the order entered by the Bankruptcy Court establishing procedures with respect to the solicitation and tabulation of votes to accept or reject this Plan.

1.123. TENTATIVE AGREEMENT means that certain Tentative Collective Bargaining Agreement between Haynes and the United Steel Workers of America, for itself and on behalf of its Local No. 2958, dated February 5, 2004, ratified by United Steel Workers of America Local No. 2958 on February 13, 2004, which modifies the Collective Bargaining Agreement.

1.124. UNIMPAIRED CLAIM means a Claim that is not impaired within the meaning of section 1124 of the Bankruptcy Code.

1.125. VOTING DEADLINE means the voting deadline date for voting to accept or reject this Plan, as determined by the Bankruptcy Court and set forth in the Solicitation Order.

C. RULES OF INTERPRETATION

For purposes of this Plan, unless otherwise provided herein, (a) whenever from the context it is appropriate, each term, whether stated in the singular or the plural, will include both the singular and the plural; (b) each pronoun stated in the masculine, feminine or neuter includes the masculine, feminine and neuter; (c) unless otherwise provided in this Plan, any reference in this Plan to a contract, instrument, release or other agreement or document being in a particular form or on particular terms and conditions means that such document will be substantially in such form or substantially on such terms and conditions; (d) any reference in this Plan to an existing document or schedule filed or to be filed means such document or schedule, as it may have been or may be amended, modified or supplemented pursuant to this Plan; (e) any reference to an entity as a holder of a Claim or Interest includes that entity’s successors and assigns; (f) all references in this Plan to Sections, Articles and Exhibits are references to Sections, Articles and Exhibits of or to this Plan; (g) the words “herein,” “hereunder” and “hereto” refer to this Plan in its entirety rather than to a particular portion of this Plan; (h) captions and headings to Articles and Sections are inserted for convenience of reference only and are not intended to be a part of or to affect the interpretation of this Plan; (i) subject to the provisions of any contract, certificates of incorporation, by laws, instrument, release or other agreement or document entered into in connection with this Plan, the rights and obligations arising under this Plan shall be governed by, and construed and enforced in accordance with, federal law, including the Bankruptcy Code and Bankruptcy Rules; and (j) the rules of construction set forth in section 102 of the Bankruptcy Code will apply.

This Plan is the product of extensive discussions and negotiations between and among, inter alia, the Debtors, the Creditors Committee, and certain other creditors and constituencies. Each of the foregoing was represented by counsel who either (a) participated in the formulation and documentation of, or (b) was afforded the opportunity to review and provide comments on, the Plan, Disclosure Statement, and the documents ancillary thereto. Accordingly, the general rule of contract construction known as “contra preferentem” shall not apply to the construction or interpretation of any provision of this Plan, Disclosure Statement, or any contract, instrument, release, indenture, exhibit, or other agreement or document generated in connection herewith.

D. COMPUTATION OF TIME

In computing any period of time prescribed or allowed by the Plan, unless otherwise expressly provided, the provisions of Bankruptcy Rule 9006(a) shall apply.

E. REFERENCES TO MONETARY FIGURES

All references in the Plan to monetary figures shall refer to United States of America currency unless otherwise expressly provided.

F. EXHIBITS

All Exhibits are incorporated into and are a part of the Plan as if set forth in full herein and, to the extent not annexed hereto, such Exhibits shall be filed with the Bankruptcy Court on or before the Exhibit Filing Date. After the Exhibit Filing Date, copies of Exhibits can be obtained upon written request to Skadden, Arps, Slate, Meagher & Flom LLP, 333 West Wacker Drive, Suite 2100, Chicago, Illinois 60606 (Attn: John Wm. Butler, Jr., Esq. and J. Eric Ivester, Esq.), counsel to the Debtors, by downloading such exhibits from the Court’s website at www.insb.uscourts.gov (a PACER account is required), or on the Claims Agent’s Internet website, www.kccllc.net/haynes. To the extent any Exhibit is inconsistent with the terms of the Plan, unless otherwise ordered by the Bankruptcy Court, the non-Exhibit portion of the Plan shall control.

G. GOVERNING LAW

Unless a rule of law or procedure is supplied by federal law (including the Bankruptcy Code and Bankruptcy Rules), the laws of (i) the State of Indiana shall govern the construction and implementation of the Plan and any agreements, documents, and instruments executed in connection with the Plan (unless such agreement, document or instrument provides otherwise) and (ii) the laws of the state of incorporation of the Debtors shall govern corporate governance matters with respect to the Debtors, in either case without giving effect to the principles of conflicts of law thereof.

ARTICLE II.

ADMINISTRATIVE EXPENSES
AND PRIORITY TAX CLAIMS

2.1. ADMINISTRATIVE CLAIMS. Subject to the provisions of Articles IX and X of this Plan, on (a) the first Periodic Distribution Date occurring after the date an Administrative Claim becomes an Allowed Administrative Claim or (b) the date an Allowed Administrative Claim becomes payable pursuant to any agreement between a Debtor (or a Reorganized Debtor) and the holder of such Allowed Administrative Claim, provided that such date may not precede the first Periodic Distribution Date, an Allowed Administrative Claimholder in any Debtor’s Chapter 11 Case, shall receive, in full satisfaction, settlement, release, and discharge of and in exchange for such Administrative Claim, (x) Cash equal to the unpaid portion of such Allowed Administrative Claim or (y) such other treatment as to which the Debtors (or the Reorganized Debtors) and such Claimholder shall have agreed upon in writing; PROVIDED, HOWEVER, that Allowed Administrative Claims with respect to liabilities incurred by the Debtors in the ordinary course of business during the Chapter 11 Cases shall be paid in the ordinary course of business in accordance with the terms and conditions of any agreements relating thereto.

2.2. PRIORITY TAX CLAIMS. Commencing on (a) the first Periodic Distribution Date occurring after the date a Priority Tax Claim becomes an Allowed Priority Tax Claim or (b) the date an Allowed Priority Tax Claim first becomes payable pursuant to any agreement between a Debtor (or a Reorganized Debtor) and the holder of such Allowed Priority Tax Claim, provided that such date may not precede the first Periodic Distribution Date, at the sole option of the

Debtors (or the Reorganized Debtors after the Effective Date), the Allowed Priority Tax Claimholder shall receive on account of such Priority Tax Claim, in full satisfaction, settlement, release, and discharge of and in exchange for such Allowed Priority Tax Claim, (a) equal Cash payments made on the last Business Day of every three (3) month period following the Effective Date, over a period not exceeding six (6) years after the assessment of the tax on which such Claim is based, totaling the principal amount of such Claim plus simple interest on any outstanding balance from the Effective Date calculated at a fixed rate of five percent (5%) per annum from the Effective Date, or such lesser rate agreed to by a particular taxing authority, (b) such other treatment agreed to by the Allowed Priority Tax Claimholder and the Debtors (or the Reorganized Debtors), provided such treatment is on more favorable terms to the Debtors (or the Reorganized Debtors after the Effective Date) than the treatment set forth in subsection (a) above, or (c) payment in full in Cash.

ARTICLE III.

CLASSIFICATION OF CLAIMS AND INTERESTS

Pursuant to section 1122 of the Bankruptcy Code, set forth below is designation of Classes of Claims against and Interests in the Debtors. A Claim or Interest is placed in a particular Class for purposes of voting on the Plan and of receiving distributions pursuant to the Plan only to the extent that such Claim or Interest is an Allowed Claim or an Allowed Interest in that Class and such Claim or Interest has not been paid, released or otherwise settled prior to the Effective Date. In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Claims and Priority Tax Claims of the kinds specified in sections 507(a)(1) and 507(a)(8) of the Bankruptcy Code have not been classified, and their treatment is set forth in ARTICLE II herein.

Because of the request that the Debtors be substantively consolidated for various purposes including for voting and distribution purposes, all of the Claims against and Interests in the Debtors are included in the Classes described below.

3.1. CLASS 1. Class 1 consists of all Secured Claims.

3.2. CLASS 2. Class 2 consists of all Other Priority Claims.

3.3. CLASS 3. Class 3 consists of all General Unsecured Claims.

3.4. CLASS 4. Class 4 consists of all Senior Note Claims.

3.5. CLASS 5. Class 5 consists of all Intercompany Claims.

3.6. CLASS 6. Class 6 consists of all Old Common Stock Interests.

3.7. CLASS 7. Class 7 consists of all Other Old Equity Interests.

ARTICLE IV.

IDENTIFICATION OF CLASSES OF CLAIMS
AND INTERESTS IMPAIRED AND UNIMPAIRED BY THE PLAN

4.1. UNIMPAIRED CLASSES OF CLAIMS. The following Classes are Unimpaired by the Plan:

Class 1 (Secured Claims)

Class 2 (Other Priority Claims)

4.2. IMPAIRED CLASSES OF CLAIMS AND INTERESTS. The following Classes are or may be Impaired by the Plan:

Class 3 (General Unsecured Claims)

Class 4 (Senior Note Claims)

Class 5 (Intercompany Claims)

Class 6 (Old Common Stock Interests)

Class 7 (Other Old Equity Interests)

ARTICLE V.

PROVISIONS FOR TREATMENT
OF CLAIMS AND INTERESTS

5.1. CLASS 1: SECURED CLAIMS. Except as otherwise provided in and subject to Section 9.9 of this Plan, at the option of the Debtors (or the Reorganized Debtors), with the consent of the Creditors Committee, which consent will not be unreasonably withheld, (i) the legal, equitable, and contractual rights of each Allowed Secured Claimholder shall be Reinstated or (ii) each Allowed Secured Claimholder shall receive, in full satisfaction, settlement and release of, and in exchange for, its Allowed Secured Claim (A) Cash in an amount equal to the value of the Secured Claimholder’s interest in the property of the Estate which constitutes collateral for such Allowed Secured Claim, or (B) the property of the Estate which constitutes collateral for such Allowed Secured Claim, or (C) such other treatment as to which the Debtors (or the Reorganized Debtors), with the consent of the Creditors Committee, which consent will not be unreasonably withheld, and the holder of such Allowed Secured Claim have agreed upon in writing, provided that such treatment is not more favorable than the treatment in clause (A) or clause (B) above. The Debtors (or the Reorganized Debtors), with the consent of the Creditors Committee, which consent will not be unreasonably withheld, shall determine which treatment of those set forth in the preceding sentence will be provided to each Allowed Secured Claim on the later of (i) the Effective Date or (ii) ten days after the date such Claim becomes an Allowed Secured Claim. The Reorganized Debtors shall provide notice of the treatment to be provided to each holder of an Allowed Secured Claim as soon as practicable after the later of (x) the Effective Date or (y) ten days after the date such Claimholder’s claim becomes an Allowed Secured Claim. In the event the Debtors or the Reorganized Debtors, as the case may be, fail to designate the treatment of an Allowed Secured Claim, the legal, equitable, and contractual rights of the Allowed Secured Claimholder with respect to such Allowed Secured Claim shall be Reinstated. The failure of a

party in interest to object to such Secured Claims in their Chapter 11 Cases shall be without prejudice to the Reorganized Debtors’ right to contest or otherwise defend against such Claims in the Bankruptcy Court or other appropriate non-bankruptcy forum (at the option of the Debtors or the Reorganized Debtors) when and if such Claims are sought to be enforced by the Secured Claimholder. Notwithstanding section 1141(c) or any other provision of the Bankruptcy Code, all valid, enforceable and perfected prepetition liens on property of the Debtors held by or on behalf of the Secured Claimholders with respect to such Claims shall survive the Effective Date and continue in accordance with the contractual terms of the underlying agreements with such Claimholders and/or applicable law until, as to each such Claimholder, the Allowed Secured Claims of such Secured Claimholder are satisfied in accordance with the provisions of this Section 5.1.

5.2. CLASS 2: OTHER PRIORITY CLAIMS. Except as otherwise provided in and subject to Section 9.9 of this Plan, on (i) the first Periodic Distribution Date occurring after the date an Other Priority Claim becomes an Allowed Other Priority Claim or (ii) the date an Allowed Other Priority Claim becomes payable pursuant to any agreement between a Debtor (or a Reorganized Debtor) and the holder of such Allowed Other Priority Claim, provided that such date may not precede the first Periodic Distribution Date, at the sole option of the Debtors (or the Reorganized Debtors), the holder of an Allowed Other Priority Claim shall receive, in full satisfaction, settlement, release, and discharge of and in exchange for such Other Priority Claim, (x) Cash equal to the amount of such Allowed Other Priority Claim or (y) such other treatment as to which the applicable Debtor (or Reorganized Debtor) and such Claimholder shall have agreed in writing.

5.3. CLASS 3: GENERAL UNSECURED CLAIMS. The Debtors have assumed that General Unsecured Claims are Impaired by the Plan. Except as otherwise provided in and subject to Section 9.9 of this Plan, on (i) the first Periodic Distribution Date occurring after the date a General Unsecured Claim becomes an Allowed General Unsecured Claim or (ii) the date an Allowed General Unsecured Claim becomes payable pursuant to any agreement between the Debtors (or the Reorganized Debtors) and the holder of such General Unsecured Claim, provided that such date may not precede the first Periodic Distribution Date, each Allowed General Unsecured Claimholder shall receive, in full satisfaction, settlement, release, and discharge of, and in exchange for, such General Unsecured Claim, Cash equal to 100% of the Allowed Amount of the Claim without interest accruing on or after the Petition Date.

5.4. CLASS 4: SENIOR NOTE CLAIMS. Senior Note Claims shall be deemed Allowed Claims in the aggregate amount of $149,476,910.00. On or as soon as reasonably practicable after the Distribution Date, each holder of an Allowed Senior Note Claim shall receive, in full satisfaction, release, and discharge of its Allowed Senior Note Claim, its Pro Rata share of the Senior Noteholder Shares (subject to dilution by the shares of New Common Stock issued pursuant to or on account of any management or employee incentive plan or other similar plan or issued in order to list the New Common Stock on a national securities exchange or for quotation on a national automated interdealer quotation system).

5.5. CLASS 5: INTERCOMPANY CLAIMS. On the Effective Date, all Intercompany Claims will, in the sole discretion of the applicable Debtor or Reorganized Debtor, (a) be preserved and

Reinstated, (b) be released, waived and discharged as of the Effective Date, or (c) be contributed to the capital of the obligor corporation.

5.6. CLASS 6: OLD COMMON STOCK INTERESTS. On the Effective Date, the Old Common Stock Interests shall be cancelled. On or as soon as reasonably practicable after the Distribution Date, each holder of an Allowed Old Common Stock Interest shall receive in full satisfaction, release, and discharge of its Allowed Old Common Stock Interests and any and all claims and liabilities arising pursuant to or in any way related to the Old Common Stock Interests, such Interestholder’s Pro Rata share of the Old Common Stockholder Shares (subject to dilution by the shares of New Common Stock issued pursuant to or on account any management or employee incentive plan or other similar plan or issued in order to list the New Common Stock on a national securities exchange or for quotation on a national automated interdealer quotation system).

5.7. CLASS 7: OTHER OLD EQUITY INTERESTS. On the Effective Date, the Other Old Equity Interests will be cancelled and the holders of Other Old Equity Interests shall not receive or retain any distribution of property on account of such Other Old Equity Interests under the Plan.

5.8. RESERVATION OF RIGHTS. Except as otherwise explicitly provided in the Plan, nothing will affect the Debtors’ or the Reorganized Debtors’ rights and defenses, both legal and equitable, with respect to any Unimpaired Claims, including, but not limited to, all rights with respect to legal and equitable defenses to alleged rights of setoff or recoupment of Unimpaired Claims. Except to the extent a Reorganized Debtor expressly assumes an obligation or liability of a Debtor or another Reorganized Debtor, the Plan will not operate to impose liability on any Reorganized Debtor for the Claims against any other Debtor or the debts and obligations of any other Debtor or Reorganized Debtor, and from and after the Effective Date, each Reorganized Debtor will be separately liable for its own obligations.

ARTICLE VI.

ACCEPTANCE OR REJECTION OF THE PLAN;
EFFECT OF REJECTION BY ONE OR MORE
IMPAIRED CLASSES OF CLAIMS OR INTERESTS

6.1. IMPAIRED CLASSES ENTITLED TO VOTE. Except as otherwise provided in any order(s) of the Bankruptcy Court pertaining to solicitation of votes on this Plan and Section 6.4 of the Plan, each Impaired Class of Claims and Interests that will receive or retain property or any interest in property under the Plan shall be entitled to vote to accept or reject the Plan.

6.2. ACCEPTANCE BY IMPAIRED CLASSES.

(a) IMPAIRED CLAIMS. Pursuant to section 1126(c) of the Bankruptcy Code, an Impaired Class of Claims shall have accepted the Plan if (a) the holders (other than any holder designated under section 1126(e) of the Bankruptcy Code) of at least two-thirds (2/3) in amount of the Allowed Claims actually voting in such Class have voted to accept the Plan and (b) the holders (other than any holder designated under section 1126(e) of the Bankruptcy Code) of

more than one-half (1/2) in number of the Allowed Claims actually voting in such Class have voted to accept the Plan.

(b) IMPAIRED INTERESTS. Pursuant to section 1126(d) of the Bankruptcy Code, an Impaired Class of Interests shall have accepted the Plan if the holders (other than any holder designated under section 1126(e) of the Bankruptcy Code) of at least two-thirds (2/3) in amount of the Allowed Interests of such Class actually voting on the Plan have voted to accept the Plan.

6.3. CLASSES DEEMED TO ACCEPT THE PLAN. Class 1 Secured Claims and Class 2 Other Priority Claims and are Unimpaired by the Plan. Under section 1126(f) of the Bankruptcy Code, such Claimholders are conclusively presumed to have accepted the Plan, and the votes of such Claimholders will not be solicited. Because all Debtors are proponents of this Plan, Class 5 Intercompany Claims are deemed to have accepted this Plan. The votes of holders of such Claims therefore will not be solicited.

6.4. CLASSES DEEMED TO REJECT PLAN. Since holders of Class 7 Other Old Equity Interests are not receiving a distribution on account of such Interests under the Plan, such Class is conclusively presumed to have rejected the Plan, and the votes of such holders will not be solicited.

6.5. CONFIRMATION PURSUANT TO SECTION 1129(b) OF THE BANKRUPTCY CODE. The Debtors will request confirmation of the Plan, as it may be modified from time to time, under section 1129(b) of the Bankruptcy Code with respect to any Class which rejects, or is deemed to have rejected, the Plan.

6.6. CONFIRMABILITY AND SEVERABILITY OF A PLAN. The Debtors, in consultation with the Creditors Committee, reserve the right to alter, amend, modify, revoke or withdraw the Plan as it applies to any particular Debtor. A determination by the Bankruptcy Court that the Plan, as it applies to any particular Debtor, is not confirmable pursuant to section 1129 of the Bankruptcy Code shall not limit or affect (a) the confirmability of the Plan as it applies to any other Debtor or (b) the Debtors’ ability to modify the Plan, as it applies to any particular Debtor, to satisfy the confirmation requirements of section 1129 of the Bankruptcy Code.

ARTICLE VII.

MEANS FOR IMPLEMENTATION OF THE PLAN

7.1. CONTINUED CORPORATE EXISTENCE. Subject to the Restructuring Transactions, each of the Debtors shall continue to exist after the Effective Date as a separate corporate entity, with all the powers of a corporation under applicable law in the jurisdiction in which it is incorporated and pursuant to the articles or certificate of incorporation and bylaws in effect prior to the Effective Date, except to the extent such articles or certificate of incorporation and bylaws are amended by this Plan, without prejudice to any right to terminate such existence (whether by merger or otherwise) under applicable law after the Effective Date.

7.2. SUBSTANTIVE CONSOLIDATION. This Plan provides for the substantive consolidation of Haynes Holdings, Haynes, Haynes Specialty Steels and Haynes Sour Gas for Plan purposes, including voting and distribution purposes. This Plan is deemed a motion for substantive

consolidation to the extent necessary. For such purposes, on the Effective Date, (a) all guaranties of any Debtor of the payment, performance, or collection of another Debtor with respect to any Class of Claims or Interests shall be deemed eliminated and cancelled; (b) any obligation of any Debtor and all guaranties with respect to any Class of Claims or Interests executed by one or more of the other Debtors and any joint or several liability of any of the Debtors shall be treated as a single obligation, and any obligation of two or more Debtors, and all multiple Impaired Claims against Debtors on account of such joint obligations, shall be treated and Allowed only as a single Claim against the consolidated Debtors; and (c) each Claim filed in the Chapter 11 Cases of any Debtor shall be deemed filed against the consolidated Debtors and shall be deemed a Claim against and an obligation of the consolidated Debtors. Except as set forth in this Article and elsewhere in this Plan, such substantive consolidation will not (other than for purposes related to this Plan) (a) affect the legal and corporate structures of the Debtors or Reorganized Debtors, subject to the right of the Debtors or Reorganized Debtors to effect the Restructuring Transactions contemplated by this Plan, (b) cause any Debtor to be liable for any Claim or Interest under this Plan for which it otherwise is not liable, and the liability of any Debtor for any such Claim or Interest will not be affected by such substantive consolidation, (c) affect Intercompany Claims of Debtors against Debtors, except as otherwise provided in this Plan, or (d) affect the Interests in the Affiliate Debtors, except as otherwise provided in this Plan and as may be required in connection with the Restructuring Transactions contemplated by this Plan.

7.3. RESTRUCTURING TRANSACTIONS. On or prior to the Effective Date, the Debtors and Reorganized Debtors shall take such actions as may be necessary or appropriate to effect the relevant Restructuring Transactions, including, but not limited to, the merger of Haynes Holdings into Haynes, and all of the transactions described in this Plan. Such actions may also include: (a) the execution and delivery of appropriate agreements or other documents of merger, consolidation or reorganization containing terms that are consistent with the terms of this Plan and that satisfy the requirements of applicable law; (b) the execution and delivery of appropriate instruments of transfer, assignment, assumption or delegation of any property, right, liability, duty or obligation on terms consistent with the terms of this Plan; (c) the filing of appropriate certificates of incorporation, merger or consolidation with the appropriate governmental authorities under applicable law; and (d) all other actions that such Debtors and Reorganized Debtors determine are necessary or appropriate, including the making of filings or recordings in connection with the relevant Restructuring Transaction. The form of each Restructuring Transaction shall be determined by the boards of directors of a Debtor or Reorganized Debtor party to any Restructuring Transaction. In the event a Restructuring Transaction is a merger transaction, from and after the consummation of such Restructuring Transaction, the surviving Reorganized Debtor shall assume and perform the obligations under this Plan of each non-surviving Reorganized Debtor. In the event a Reorganized Debtor is liquidated, the Reorganized Debtors (or the Reorganized Debtor which owned the stock of such liquidating Reorganized Debtor prior to such liquidation) shall assume and perform such obligations. Implementation of the Restructuring Transactions shall not affect the distributions under the Plan.

7.4. CORPORATE ACTION. Each of the matters provided for under the Plan involving the corporate structure of the Debtors or corporate action to be taken by or required of the Debtors shall, as of the Effective Date, be deemed to have occurred and be effective as provided herein, and shall be authorized and approved in all respects without any requirement of further action by stockholders, creditors, or directors of the Debtors.

7.5. CERTIFICATES OF INCORPORATION AND BYLAWS. The certificates of incorporation and bylaws of the Reorganized Debtors shall be amended as necessary to satisfy the provisions of the Plan and the Bankruptcy Code. The Certificate of Incorporation of Reorganized Haynes shall, among other things, (a) authorize the issuance of ten million (10,000,000) shares of New Common Stock, $0.01 par value per share; (b) authorize an additional ten million (10,000,000) shares of New Common Stock, $0.01 par value per share, for future issuance upon terms to be designated from time to time by the board of directors of Reorganized Haynes; (c) authorize twenty million (20,000,000) shares of preferred stock (the “New Preferred Stock”) upon terms to be designated from time to time by the board of directors of Reorganized Haynes; (d) authorize Reorganized Haynes to dilute the New Common Stock, upon terms to be designated from time to time by the New Board of Reorganized Haynes, but only to the extent necessary to list the New Common Stock on a national securities exchange or to make available for quotation on a national automated interdealer quotation system; and (e) pursuant to section 1123(a)(6) of the Bankruptcy Code, include (x) a provision prohibiting the issuance of non-voting equity securities for a period of two (2) years from the Effective Date, and, if applicable, (y) a provision setting forth an appropriate distribution of voting power among classes of equity securities possessing voting power, including, in the case of any class of equity securities having a preference over another class of equity securities with respect to dividends, adequate provisions for the election of directors representing such preferred class in the event of default in the payment of such dividends. After the Effective Date, the Reorganized Debtors may amend and restate the Certificates of Incorporation and Bylaws as permitted by applicable law. The Certificates of Incorporation and Bylaws of the Reorganized Debtors shall be in substantially the form attached to this Plan as EXHIBIT B and EXHIBIT C, respectively.

7.6. CANCELLATION OF EXISTING SECURITIES AND AGREEMENTS. On the Effective Date, except as otherwise specifically provided for herein, (a) the Existing Securities and any other note, bond, indenture, or other instrument or document evidencing or creating any indebtedness or obligation of or ownership interest in the Debtors, except such notes or other instruments evidencing indebtedness or obligations of the Debtors that are Reinstated under the Plan, shall be cancelled, and (b) the obligations of, Claims against, and/or Interests in the Debtors under, relating, or pertaining to any agreements, indenture, certificates of designation, bylaws, or certificate or articles of incorporation or similar document governing the Existing Securities and any other note, bond, indenture, or other instrument or document evidencing or creating any indebtedness or obligation of the Debtors, except such notes or other instruments evidencing indebtedness or obligations of the Debtors that are Reinstated under the Plan, as the case may be, shall be released and discharged; PROVIDED, HOWEVER, that the Indenture and any other agreement that governs the rights of the Claimholder and that is administered by an indenture trustee, an agent, or a servicer (each hereinafter referred to as a “Servicer”) shall continue in effect solely for purposes of allowing such Servicer to make the distributions to be made on account of such Claims under the Plan as provided in ARTICLE IX of the Plan. All reasonable compensation, fees, expenses, and disbursements incurred by the Indenture Trustee before, on and after the Petition Date, but before the Effective Date, including the reasonable fees, expenses and disbursements of agents and counsel retained by the Indenture Trustee, shall be paid in Cash on or as soon as practicable after the Effective Date by Reorganized Haynes as an Administrative Expense, without the need for application to, or approval of, any court. The Debtors estimate that payments pursuant to Sections 7.6 and 9.6 of the Plan for compensation, fees, expenses and disbursements incurred prior to the Effective Date do not exceed seventy-five thousand dollars

($75,000), the Indenture Trustee estimates that such fees may total one hundred twenty-five thousand dollars ($125,000). Any dispute as to the reasonableness of such fees shall be determined by the Bankruptcy Court in accordance with section 503 of the Bankruptcy Code. To the extent that the Indenture Trustee provides services after the Effective Date related to the distributions pursuant to the Plan, the Indenture Trustee will be paid by Reorganized Haynes, without court approval, reasonable compensation for such services and reimbursement of reasonable expenses incurred in connection therewith. Such payments will be in amounts to be agreed upon by the Indenture Trustee and the Reorganized Debtors.

7.7. REINSTATEMENT OF COMMON STOCK OF AFFILIATE DEBTORS. Subject to the Restructuring Transactions, the common stock in the Affiliate Debtors shall be Reinstated in exchange for Haynes’ agreement to cause the distribution of New Common Stock and other consideration provided for under this Plan to holders of Allowed Claims and Allowed Interests in accordance with the terms of this Plan.

7.8. DIRECTORS AND OFFICERS.

(a) The existing senior officers of the Debtors shall serve as senior officers of the Reorganized Debtors in their current capacities after the Effective Date, subject to the terms of the applicable employment agreements and the rights of the respective boards of directors.

(b) Upon the Effective Date, the new board of directors of Reorganized Haynes (the “New Board of Reorganized Haynes”) shall consist of seven (7) directors, including Francis J. Petro (or in the event of his death, incapacity, or resignation, the chief executive officer of Reorganized Haynes) and six representatives designated by the Creditors Committee. The New Board of Reorganized Haynes, including any required committee(s) thereof, shall comply with any other qualification, experience, and independence requirements under applicable law, including the Sarbanes-Oxley Act of 2002. The chairman of the board shall be designated by a majority of the members of the New Board of Reorganized Haynes. Thereafter, unless otherwise provided in the Plan, the selection and the term of the board of directors of Reorganized Haynes shall be subject to the provisions of the certificate of incorporation and bylaws of Reorganized Haynes.

(c) The Persons designating board members shall file with the Bankruptcy Court and give to the Debtors written notice of the identities of such members on a date that is not less than ten (10) days prior to the Confirmation Hearing; PROVIDED, HOWEVER, that if and to the extent that any party fails to file and give such notice, the Debtors shall designate the members of the New Board of Reorganized Haynes by announcing their identities at the Confirmation Hearing.

(d) Board members shall serve an initial term for a period from the Effective Date through the date of the annual meeting that first occurs after a date which is one (1) year after the Effective Date and for one (1) year terms thereafter (with such subsequent terms subject to election by shareholder vote) as provided in the certificates of incorporation and bylaws of the Reorganized Debtors.

(e) On the Effective Date, the term of the current members of the board of directors of Haynes Holdings, Haynes Sour Gas and Haynes Specialty Steels shall expire. From and after the Effective Date, the initial board of directors of Reorganized Haynes Holdings (if applicable), Reorganized Haynes Sour Gas and Reorganized Haynes Specialty Steels shall be the same directors as those Persons designated as directors of Reorganized Haynes pursuant to the procedures set forth above.

7.9. PENSION PLAN AND RETIREE MEDICAL PROGRAMS.

(a) Upon the occurrence of the Effective Date, the Reorganized Debtors intend to continue the Pension Plan, meet the minimum funding standards under ERISA and the Internal Revenue Code, pay all PBGC insurance premiums if applicable, and administer and operate the Pension Plan in accordance with its terms and ERISA. Nothing in this Plan shall be deemed to discharge, release, or relieve the Debtors, Reorganized Debtors, any member of the Debtors’ controlled groups (as defined in 29 U.S.C. Section 1301(a)(14)), or any other party, in any capacity, from any current or future liability with respect to the Pension Plan, and the PBGC and the Pension Plan shall not be enjoined or precluded from enforcing such liability as a result of the Plan’s provisions or consummation.

(b) Upon the occurrence of the Effective Date, the Reorganized Debtors intend to continue to pay benefits under the Retiree Medical Programs if and to the extent the Debtors are otherwise obligated to provide such benefits. Nothing in this Plan shall be deemed to discharge, release, or relieve the Debtors or the Reorganized Debtors from any liability with respect to the Retiree Medical Programs and the beneficiaries of the Retiree Medical Programs or their representatives shall not be enjoined or precluded from enforcing such liability as a result of the Plan’s provisions or confirmation.

(c) Notwithstanding anything to the contrary in the Plan, the Reorganized Debtors shall maintain all of their existing rights, including, but not limited to, any rights that they may have to amend, modify or terminate those retirement and other agreements discussed in Section 7.9 of the Plan.

7.10. EMPLOYMENT, INDEMNIFICATION AND OTHER AGREEMENTS.

(a) Except as otherwise provided in the Plan, upon the occurrence of the Effective Date pursuant to section 365(b) of the Bankruptcy Code and in accordance with Section 8.1 of the Plan, the Debtors shall assume the employment agreements and/or severance agreements as modified of certain executives and members of senior management. Copies of the modified agreements are attached to the Plan as group EXHIBIT D and shall be filed on or before the Exhibit Filing Date. Except as otherwise provided in the Plan, to the extent that any of the Debtors has in place as of the Effective Date, employment, retirement, indemnification or other agreements with their respective active directors, officers and employees who will continue in such capacities after the Effective Date, or retirement income plans, welfare benefits plans and other plans for such Persons, such agreements, programs and plan will remain in place after the Effective Date, and the Reorganized Debtors intend to continue to honor such agreements programs and plans. Benefits provided under such agreements or plans may include benefits under qualified and non-qualified retirement plans; health and dental coverage; short and long-

term disability benefits; death and supplemental accidental death benefits; vacation; leased car; club memberships; financial consulting; tax preparation and estate planning as well as an annual physical examination, each paid or provided commensurate with an employee’s position in accordance with the Debtors’ or Reorganized Debtors’ policies then in effect. Such agreements and plans also may include equity, bonus and other incentive plans in which officers and other employees of the Reorganized Debtors may be eligible to participate; PROVIDED, HOWEVER, that pursuant to the Long-Term Incentive Plan, there shall be reserved for certain members of management and other employees of the Reorganized Debtors a certain number of shares of New Common Stock and other securities all as more fully described in Section 7.12 of the Plan. However, as of the Effective Date, the Reorganized Debtors shall have the authority to terminate, amend or enter into employment, retirement, indemnification and other agreements with its respective active directors, officers and employees and to terminate, amend or implement retirement income plans, welfare benefits plans and other plans for active employees, subject to the existing contractual rights, if any, of the directors, officers and employees affected thereby.

(b) Notwithstanding anything to the contrary herein, the Reorganized Debtors shall maintain all of their existing rights, including, but not limited to, any rights that they may have to amend, modify or terminate those employment, indemnification and other agreements discussed in this Section 7.10.

7.11. CONTINUATION OF INSURED WORKERS’ COMPENSATION PROGRAMS. Upon occurrence of the Effective Date, the Reorganized Debtors shall continue the Insured Workers’ Compensation Programs in accordance with applicable state laws. Nothing in the Plan shall be deemed to discharge, release, or relieve the Debtors or Reorganized Debtors from any current or future liability with respect to any of the Insured Workers’ Compensation Programs. The Reorganized Debtors shall be responsible for all valid claims for benefits and liabilities under the Insured Workers’ Compensation Programs regardless of when the applicable injuries were incurred. Any and all obligations under the Insured Workers’ Compensation Programs shall be paid in accordance with the terms and conditions of the Insured Workers’ Compensation Programs and in accordance with all applicable laws. Notwithstanding anything to the contrary herein, the Reorganized Debtors shall maintain all of their existing rights, including, but not limited to, any rights that they may have to amend, modify or terminate the Insured Workers’ Compensation Programs.

7.12. IMPLEMENTATION OF THE LONG-TERM INCENTIVE PROGRAM. The Reorganized Debtors shall implement the Long-Term Incentive Plan in order to promote the growth and general prosperity of the Reorganized Debtors by offering incentives to key employees who are primarily responsible for the growth of the Reorganized Debtors, and to attract and retain qualified employees and thereby benefit the shareholders of the Reorganized Debtors based on growth of the Reorganized Debtors. The Long-Term Incentive Plan will be administered by the New Board of Reorganized Haynes. EXHIBIT D hereto includes a description of the Long-Term Incentive Plan.

7.13. ISSUANCE OF NEW COMMON STOCK.

(a) As described in Section 7.5 herein, on the Effective Date, Reorganized Haynes will authorize up to twenty million (20,000,000) shares of New Common Stock. On or

as soon as reasonably practicable after the Effective Date, Reorganized Haynes shall issue and exchange, as necessary, for the benefit of holders of Senior Note Claims and Old Common Stock Interests, ten million (10,000,000) shares of the New Common Stock in accordance with the terms of the Plan. The issuance of the New Common Stock is authorized without the need for any further corporate action. The issuance of the New Common Stock and the distribution thereof to Claimholders and Interestholders shall be exempt from registration under applicable securities laws pursuant to section 1145(a) of the Bankruptcy Code. Without limiting the effect of section 1145 of the Bankruptcy Code, Reorganized Haynes will enter into a Registration Rights Agreement with each holder of an Allowed Class 4 Senior Note Claim in the Haynes Chapter 11 Case (i) who by virtue of holding New Common Stock to be distributed under the Plan and/or its relationship with Reorganized Haynes could reasonably be deemed to be an “affiliate” (as such term is used within the meaning of applicable securities laws) of Reorganized Haynes, and (ii) who requests in writing that Reorganized Haynes execute such agreement, such request to be made within 90 days after the Effective Date. A form Registration Rights Agreement will be filed by the Debtors, as EXHIBIT E hereto, with the Bankruptcy Court no later than the Exhibit Filing Date. The Registration Rights Agreement shall contain certain registration rights for the benefit of the signatories thereto.

(b) Reorganized Haynes shall use commercially reasonable efforts to list the New Common Stock on a national securities exchange or for quotation on a national automated interdealer quotation system within one year of the Effective Date unless the New Board of Reorganized Haynes determines otherwise, with such efforts to commence as soon as reasonably practicable after the Effective Date. Reorganized Haynes shall have no liability if it is unable to list the New Common Stock as described above. Persons receiving distributions of New Common Stock, by accepting such distributions, shall have agreed to cooperate with Reorganized Haynes’ reasonable requests to assist Reorganized Haynes in its efforts to list the New Common Stock on a securities exchange or quotation system.

7.14. POST-EFFECTIVE DATE FINANCING. The Postpetition Credit Agreement will be amended and restated or otherwise replaced in a manner consistent with the terms of the Commitment Letter and will be the Reorganized Debtors’ primary source of working capital from and after the Effective Date. Documents evidencing the amendment and restatement or other replacement of the Postpetition Credit Agreement shall be filed by the Debtors with the Bankruptcy Court no later than the Exhibit Filing Date and will be deemed attached hereto as EXHIBIT F. Prior notice of any proposed material modification to the Post-Effective Date Credit Agreement or the Commitment Letter with respect thereto after its filing with the Bankruptcy Court shall be provided to the Creditors Committee. In the Confirmation Order, the Bankruptcy Court shall approve the Post-Effective Date Credit Agreement in substantially the form filed with the Bankruptcy Court and authorize the Debtors to execute such documents as the Post-Effective Date Lenders may require in order to effectuate the treatment afforded to such parties under the Post-Effective Date Credit Agreement (whether effected through an amendment and restatement or other replacement of Postpetition Credit Agreement) as provided in this Section 7.14.

7.15. PRESERVATION OF CAUSES OF ACTION.In accordance with section 1123(b)(3) of the Bankruptcy Code and except as otherwise provided in the Plan and/or the Confirmation Order, the Reorganized Debtors shall retain and may (but are not required to) enforce all Retained

Actions and all Retained Avoidance Claims, and other similar claims arising under applicable state laws, including, without limitation, fraudulent transfer claims, if any, and all other Causes of Action of a trustee and debtor-in-possession under the Bankruptcy Code. A nonexclusive list of Retained Actions and Retained Avoidance Claims is set forth on EXHIBIT A. The Debtors, in consultation with the Creditors Committee, or the Reorganized Debtors will determine whether to bring, settle, release, compromise, or enforce any such rights (or decline to do any of the foregoing). The Reorganized Debtors or any successors may pursue such litigation claims in accordance with the best interests of the Reorganized Debtors or any successors holding such rights of action. The failure of the Debtors to specifically list any claim, right of action, suit or proceeding in the Debtors’ Schedules or in EXHIBIT A does not, and will not be deemed to, constitute a waiver or release by the Debtors of such claim, right of action, suit or proceeding, and the Reorganized Debtors will retain the right to pursue such claims, rights of action, suits or proceedings in their sole discretion and, therefore, no preclusion doctrine, collateral estoppel, issue preclusion, claim preclusion, estoppel (judicial, equitable or otherwise) or laches will apply to such claim, right of action, suit or proceeding upon or after the confirmation or consummation of the Plan.

7.16. EFFECTUATING DOCUMENTS AND FURTHER TRANSACTIONS. Each of the chief executive officer, chief financial officer, any other officer of any of the Debtors, or their respective designees shall be authorized to execute, deliver, file, or record such contracts, instruments, releases, indentures, and other agreements or documents, and take such actions as may be necessary or appropriate to effectuate and further evidence the terms and conditions of the Plan. The secretary or assistant secretary of any of the Debtors shall be authorized to certify or attest to any of the foregoing actions.

7.17. EXEMPTION FROM TRANSFER TAXES AND RECORDING FEES. Pursuant to section 1146(c) of the Bankruptcy Code, (a) the issuance, transfer or exchange of notes or equity securities under the Plan; (b) the creation of any mortgage, deed of trust, lien, pledge or other security interest; (c) the making or assignment of any lease or sublease; or (d) the making or delivery of any deed or other instrument of transfer under, in furtherance of, or in connection with, the Plan, including, without limitation, any merger agreements; agreements of consolidation, restructuring, disposition, liquidation or dissolution; deeds; bills of sale; and transfers of tangible property, will not be subject to any stamp tax, recording tax, personal property tax, real estate transfer tax, sales or use tax or other similar tax. Any transfers from the Debtors to the Reorganized Debtors or otherwise pursuant to the Plan shall not be subject to any such taxes, and the Confirmation Order shall direct the appropriate state or local governmental officials or agents to forego the collection of any such tax or governmental assessment and to accept for filing and recordation any of the foregoing instruments or other documents without the payment of any such tax or governmental assessment. Unless the Bankruptcy Court orders otherwise, any and all of the foregoing transactions whether taken on or after the Effective Date shall be deemed to have been in furtherance of, or in connection with, the Plan.

ARTICLE VIII.

TREATMENT OF EXECUTORY CONTRACTS
AND UNEXPIRED LEASES

8.1. ASSUMED CONTRACTS AND LEASES.Each executory contract and unexpired lease to which the Debtors are a party shall be deemed automatically assumed and Reinstated as of the Effective Date, unless such executory contract or unexpired lease (a) shall have been previously rejected by the Debtors, (b) is the subject of a motion to reject filed, or a notice of rejection served pursuant to order of the Bankruptcy Court, on or before the Confirmation Date, (c) is listed on the schedule of rejected contracts and leases annexed hereto as EXHIBIT G, or (d) expired prior to the Effective Date and/or is no longer executory on the Effective Date by its own terms. The Confirmation Order shall constitute an order of the Bankruptcy Court approving such assumptions, pursuant to section 365(b)(1) of the Bankruptcy Code and, to the extent applicable, section 365(b)(3) of the Bankruptcy Code, as of the Effective Date.

Each executory contract and unexpired lease that is assumed and relates to the use, ability to acquire, or occupancy of real property shall include (a) all modifications, amendments, supplements, restatements, or other agreements made directly or indirectly by any agreement, instrument, or other document that in any manner affect such executory contract or unexpired lease and (b) all executory contracts or unexpired leases appurtenant to the premises, including all easements, licenses, permits, rights, privileges, immunities, options, rights of first refusal, powers, uses, reciprocal easement agreements, and any other interests in real estate or rights IN REM related to such premises, unless any of the foregoing agreements has been rejected pursuant to a Final Order of the Bankruptcy Court or is otherwise rejected as a part of this Plan.

8.2. REJECTED CONTRACTS AND LEASES. Except with respect to executory contracts and unexpired leases that have previously been rejected or are the subject of a motion to reject filed, or a notice of rejection served pursuant to an order of the Bankruptcy Court, on or before the Confirmation Date, all executory contracts and unexpired leases set forth on EXHIBIT G shall be deemed automatically rejected as of the Effective Date; PROVIDED, HOWEVER, that neither the inclusion by the Debtors of a contract or lease on EXHIBIT G nor anything contained in this Plan shall constitute an admission by the Debtors that such lease or contract is an unexpired lease or executory contract or that any Debtor, or any of the Debtors’ Affiliates, has any liability thereunder. The Confirmation Order shall constitute an order of the Bankruptcy Court approving such rejections, pursuant to section 365 of the Bankruptcy Code. The Debtors reserve the right to file a motion on or before the Confirmation Date to reject any executory contract or unexpired lease.

8.3. PAYMENTS RELATED TO ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES. The provisions (if any) of each executory contract and unexpired lease to be assumed and Reinstated under this Plan which are or may be in default shall be satisfied solely by Cure. Any Person claiming that a monetary cure amount is due in connection with the assumption of any executory contract or unexpired leases as contemplated by section 365(b) of the Bankruptcy Code must file a monetary cure claim with the Bankruptcy Court asserting all alleged amounts accrued through the Effective Date, if any (a “Cure Claim”), no later than thirty (30) days after the Effective Date (the “Cure Claim Submission Deadline”). Any party failing to submit a Cure

Claim by the Cure Claim Submission Deadline shall be forever barred from asserting, collecting, or seeking to collect any amounts relating thereto against the Debtors or the Reorganized Debtors. The Reorganized Debtors shall have thirty (30) days from the Cure Claim Submission Deadline to file an objection to any Cure Claim (the “Cure Claim Objection Deadline”). Any disputed Cure Claims shall be resolved either consensually by the parties, or by the Bankruptcy Court. Disputed Cure Claims shall be set for status at subsequent hearings following the Cure Claim Submission Deadline with separate evidentiary hearings to be set by the Bankruptcy Court as needed. If the Reorganized Debtors do not dispute a Cure Claim, then the Reorganized Debtors shall pay the Cure Claim, if any, to the claimant within twenty (20) days of the Cure Claim Objection Deadline. Disputed Cure Claims that are resolved by agreement or Final Order shall be paid by the Reorganized Debtors within twenty (20) days of such agreement or Final Order.

8.4. REJECTION DAMAGES BAR DATE. If the rejection by the Debtors (pursuant to the Plan or otherwise) of an executory contract or unexpired lease results in a Claim, then such Claim shall be forever barred and shall not be enforceable against either the Debtors or the Reorganized Debtors or such entities’ properties unless a proof of claim is filed with the clerk of the Bankruptcy Court and served upon counsel to the Debtors within thirty (30) days after service of the earlier of (a) notice of the Confirmation Order or (b) other notice that the executory contract or unexpired lease has been rejected.

8.5. COLLECTIVE BARGAINING AGREEMENT; TENTATIVE AGREEMENT. The Debtors will assume the Collective Bargaining Agreement as modified by the Tentative Agreement upon the occurrence of the Effective Date in accordance with the provisions and requirements of sections 365 and 1123 of the Bankruptcy Code.

8.6. PRESERVATION OF INSURANCE. The discharge and release of the Debtors as provided herein shall not diminish or impair the enforceability of any insurance policies that may cover claims against the Debtors or any other person or entity. Furthermore, assumption of any insurance policy pursuant to ARTICLE VIII of the Plan does not alter, amend, or otherwise affect either the Debtors’ or insurers’ rights pursuant to such insurance policy; PROVIDED, HOWEVER, nothing herein waives any contractual, state or federal rights the Debtors may have including, without limitation, those set forth in Section 365(b)(2) of the Bankruptcy Code.

ARTICLE IX.
PROVISIONS GOVERNING DISTRIBUTIONS;
PROCEDURES FOR RESOLVING DISPUTED, CONTINGENT
AND UNLIQUIDATED CLAIMS AND INTERESTS

9.1. TIME OF DISTRIBUTIONS. Except as otherwise provided for herein or ordered by the Bankruptcy Court, distributions under the Plan shall be made on a Periodic Distribution Date.

9.2. NO INTEREST ON CLAIMS OR INTERESTS. Unless otherwise specifically provided for in the Plan or as otherwise required by section 506(b) of the Bankruptcy Code, the Confirmation Order, the Postpetition Credit Agreement or the Postpetition Facility Order, Postpetition Interest shall not accrue or be paid on Claims, and no Claimholder or Interestholder shall be entitled to interest accruing on or after the Petition Date on any Claim, right, or Interest. Additionally, and

without limiting the foregoing, interest shall not accrue or be paid on any Disputed Claim or Disputed Interest in respect of the period from the Effective Date to the date a final distribution is made when and if such Disputed Claim or Disputed Interest becomes an Allowed Claim or an Allowed Interest.

9.3. DISBURSING AGENT. The Disbursing Agent shall make all distributions required under this Plan except with respect to a Claimholder or Interestholder whose distribution is governed by the Indenture or other agreement and is administered by a Servicer, which distributions shall be deposited with the appropriate Servicer, who shall deliver such distributions to the Claimholders and Interestholders in accordance with the provisions of this Plan and the terms of the Indenture or other governing agreement; PROVIDED, HOWEVER, that if any such Servicer is unable to make such distributions, the Disbursing Agent, with the cooperation of such Servicer, shall make such distributions.

9.4. SURRENDER OF SECURITIES OR INSTRUMENTS. On or before the Distribution Date, or as soon as practicable thereafter, each holder of an instrument evidencing either a Claim or Interest, including, without limitation, a Claim on account of the Indenture (as to each, a “Certificate”), shall surrender such Certificate to the Disbursing Agent, or, with respect to indebtedness that is governed by the Indenture or other agreement and administered by a Servicer, the respective Servicer, and such Certificate shall be cancelled solely with respect to the Debtors and such cancellation shall not alter the obligations or rights of any non-Debtor third parties vis-a-vis one another to such instruments. No distribution of property hereunder shall be made to or on behalf of any such holder unless and until such Certificate is received by the Disbursing Agent or the respective Servicer or the unavailability of such Certificate is reasonably established to the satisfaction of the Disbursing Agent or the respective Servicer. Any holder who fails to surrender or cause to be surrendered such Certificate, or fails to execute and deliver an affidavit of loss and indemnity reasonably satisfactory to the Disbursing Agent or the respective Servicer prior to the second anniversary of the Effective Date, shall be deemed to have forfeited all rights and Claims in respect of such Certificate and shall not participate in any distribution hereunder, and all property in respect of such forfeited distribution, including any dividends or interest attributable thereto, shall revert to the Reorganized Debtors notwithstanding any federal or state escheat laws to the contrary.

9.5. INSTRUCTIONS TO DISBURSING AGENT. Prior to any distribution on account of any Claim or Interest pursuant to the Indenture or other agreement, the Servicer with respect to the Indenture or other agreement shall (a) inform the Disbursing Agent as to the amount of properly surrendered claim pursuant thereto and (b) instruct the Disbursing Agent, in a form and manner that the Disbursing Agent reasonably determines to be acceptable, of the names of such Claimholders or Interestholders who have properly surrendered Certificates.

9.6. SERVICES OF INDENTURE TRUSTEES, AGENTS AND SERVICERS. The services, with respect to implementation of the distributions contemplated by the Plan, of Servicers under the Indenture and other agreements that govern the rights of Claimholders or Interestholders shall be as set forth elsewhere in the Plan, and the Reorganized Debtors shall reimburse any Servicer in the ordinary course for reasonable and necessary services performed by it as contemplated by, and in accordance with, this Plan without the need for the filing of an application with, or approval by, the Bankruptcy Court. The Debtors estimate that payments pursuant to Sections 7.6 and 9.6 of

the Plan for compensation, fees, expenses and disbursements incurred prior to the Effective Date do not exceed seventy-five thousand dollars ($75,000), the Indenture Trustee estimates that such fees may total one hundred twenty-five thousand dollars ($125,000). Any dispute as to the reasonableness of such fees shall be determined by the Bankruptcy Court in accordance with section 503 of the Bankruptcy Code. To the extent that the Indenture Trustee provides services after the Effective Date related to the distributions pursuant to the Plan, the Indenture Trustee will be paid by Reorganized Haynes, without court approval, reasonable compensation for such services and reimbursement of reasonable expenses incurred in connection therewith. Such payments will be in amounts to be agreed upon by the Indenture Trustee and the Reorganized Debtors.

9.7. CLAIMS ADMINISTRATION RESPONSIBILITY. The Reorganized Debtors will retain responsibility for administering, disputing, objecting to, compromising, or otherwise resolving and making distributions (if any) with respect to all Claims against and Interests in the Debtors; PROVIDED, HOWEVER, that the foregoing shall not be deemed to divest the rights, if any, of any party in interest to object to Claims or Interests.

9.8. DELIVERY OF DISTRIBUTIONS. Distributions to Allowed Claimholders and Allowed Interestholders shall be made by the Disbursing Agent or the appropriate Servicer, as the case may be (a) at the addresses set forth on the proofs of claim or interest filed by such Claimholders, Interestholders or Servicers, (b) at the addresses set forth in any written notices of address changes delivered to the Disbursing Agent after the date of any related proof of claim or interest, (c) at the addresses reflected in the Schedules if no proof of claim or interest has been filed and the Disbursing Agent has not received a written notice of a change of address, or (d) in the case of a Claimholder or Interestholder whose Claim or Interest is governed by an Indenture or other agreement and is administered by a Servicer, at the addresses contained in the official records of such Servicer. If any Claimholder’s or Interestholder’s distribution is returned as undeliverable, no further distributions to such Claimholder or Interestholder shall be made unless and until the Disbursing Agent or the appropriate Servicer is notified of such Claimholder’s or Interestholder’s then current address, at which time all missed distributions shall be made to such Claimholder or Interestholder without interest. Amounts in respect of undeliverable distributions shall be returned to the Reorganized Debtors until such distributions are claimed. All claims for undeliverable distributions shall be made on or before the first anniversary of the Effective Date. After such date, all unclaimed property shall revert to the Reorganized Debtors. Upon such reversion, the claim of any Claimholder or Interestholder, or their successors, with respect to such property shall be discharged and forever barred notwithstanding any federal or state escheat laws to the contrary.

9.9. PROCEDURES FOR TREATING AND RESOLVING DISPUTED AND CONTINGENT CLAIMS AND INTERESTS.

(a) NO DISTRIBUTIONS PENDING ALLOWANCE. No payments or distributions shall be made with respect to all or any portion of a Disputed Claim or Disputed Interest unless and until all objections to such Disputed Claim or Disputed Interest have been settled or withdrawn or have been determined by a Final Order, and the Disputed Claim or Disputed Interest has become an Allowed Claim or an Allowed Interest. All objections to Claims or Interests must be filed on or before the Claims/Interests Objection Deadline.

(b) DISTRIBUTION RESERVE. The Disbursing Agent shall withhold a separate Distribution Reserve from the property to be distributed to holders of Class 6 Old Common Stock Interests. The amount of New Common Stock withheld as a part of the Distribution Reserve shall be equal to the amount the Reorganized Debtors reasonably determine is necessary to satisfy the distributions required to be made to the Interestholders in such Class when the allowance or disallowance of each Interest is ultimately determined. The Disbursing Agent may request estimation for any Disputed Interest that is contingent or unliquidated (but is not required to do so). The Disbursing Agent will also place in the Distribution Reserve any dividends, payments, or other distributions made on account of, as well as any obligations arising from, the property withheld in the Distribution Reserve, to the extent that such property continues to be withheld in the Distribution Reserve at the time such distributions are made or such obligations arise. The Interestholder shall not be entitled to receive or recover any amount in excess of the amount provided in the Distribution Reserve to pay such Interest. Nothing in the Plan or the Disclosure Statement will be deemed to entitle the Interestholder to interest accruing on or after the Petition Date on any Interest.

(c) DISTRIBUTIONS AFTER ALLOWANCE. Payments and distributions from the Distribution Reserve to each respective Interestholder on account of a Disputed Interest, to the extent that it ultimately becomes an Allowed Interest, will be made in accordance with provisions of the Plan that govern distributions to such Interestholders. On the first Periodic Distribution Date following the date when a Disputed Interest becomes an Allowed Interest, the Disbursing Agent will distribute to the Interestholder any Cash or New Common Stock from the Distribution Reserve that would have been distributed on the dates distributions were previously made to Interestholders had such Allowed Interest been an Allowed Interest on such dates. After a Final Order has been entered, or other final resolution has been reached with respect to all Disputed Interests, any remaining New Common Stock or other property held in the Distribution Reserve will be distributed Pro Rata to Allowed Interestholders in accordance with the other provisions of this Plan. Subject to Section 9.2 hereof, all distributions made under subsection 9.9(c) hereof on account of an Allowed Interest will be made together with any dividends, payments, or other distributions made on account of, as well as any obligations arising from, the distributed property as if such Allowed Interest had been an Allowed Interest on the dates distributions were previously made to Allowed Interestholders included in the applicable class. The Disbursing Agent shall be deemed to have voted any New Common Stock held in the Distribution Reserve in the same proportion as shares previously disbursed by the Disbursing Agent. The Servicers shall be deemed to have voted any New Common Stock held by such Servicers in the same proportion as shares previously disbursed by such Servicers.

(d) DE MINIMIS DISTRIBUTIONS. Neither the Distribution Agent nor any Servicer shall have any obligation to make a distribution on account of an Allowed Claim or an Allowed Interest from any Distribution Reserve or otherwise if (a) the aggregate amount of all distributions authorized to be made from such Distribution Reserve or otherwise on the Periodic Distribution Date in question is or has a value less than $250,000, or (b) if the amount to be distributed to the specific holder of an Allowed Claim or an Allowed Interest on the particular Periodic Distribution Date does not constitute a final distribution to such holder and is or has a value less than $50.

9.10. FRACTIONAL SECURITIES; FRACTIONAL DOLLARS. No fractional shares of New Common Stock will be issued or distributed under the Plan. Each Person entitled to receive New Common Stock will receive the total whole number of shares of New Common Stock to which such Person is entitled. Whenever any distributions to a Person would otherwise call for distribution of a fraction of a share of New Common Stock, the actual distribution of such New Common Stock will be rounded to the next higher or lower whole number with fractions of less than or equal to one-half (1/2) being rounded to the next lower whole number. No consideration will be provided in lieu of fractional shares of New Common Stock that are rounded down. The total number of shares of New Common Stock to be distributed to each Class of Claims will be adjusted as necessary to account for the rounding provided herein. Any other provision of the Plan notwithstanding, neither the Debtors, the Disbursing Agent nor the Servicer will be required to make distributions or payments of fractions of dollars. Whenever any payment of a fraction of one dollar under the Plan would otherwise be called for, the actual payment made will reflect a rounding of such fraction to the nearest whole dollar (up or down), with one-half (1/2) dollars being rounded down.

9.11. MEANS OF CASH PAYMENT. Payments of Cash made pursuant to the Plan shall be in U.S. dollars and shall be made, at the option and in the sole discretion of the Reorganized Debtors, by (a) checks drawn on or (b) wire transfer from a domestic bank selected by the Reorganized Debtors. Cash payments to foreign creditors may be made, at the option of the Reorganized Debtors, in such funds and by such means as are necessary or customary in a particular foreign jurisdiction.

9.12. WITHHOLDING AND REPORTING REQUIREMENTS. In connection with the Plan and all distributions thereunder, the Reorganized Debtors shall comply with all withholding and reporting requirements imposed by any federal, state, local or foreign taxing authority, and all distributions hereunder shall be subject to any such withholding and reporting requirements. The Reorganized Debtors shall be authorized to take any and all actions that may be necessary or appropriate to comply with such withholding and reporting requirements. Notwithstanding any other provision of the Plan, (i) each holder of an Allowed Claim or Allowed Interest that is to receive a distribution of Cash or New Common Stock shall have sole and exclusive responsibility for the satisfaction and payment of any tax obligations imposed by any governmental unit, including income, withholding and other tax obligations, on account of such distribution, and (ii) no distribution shall be made to or on behalf of such holder pursuant to the Plan unless and until such holder has made arrangements satisfactory to the Reorganized Debtors for the payment and satisfaction of such tax obligations or has, to the Reorganized Debtors’ satisfaction, established an exemption therefrom. Any Cash or New Common Stock to be distributed pursuant to the Plan shall, pending the implementation of such arrangements, be treated as undeliverable pursuant to Section 9.8 hereof.

9.13. OBJECTION DEADLINE; PROSECUTION OF OBJECTIONS.No later than the Claims/Interests Objection Deadline (unless extended by an order of the Bankruptcy Court), the Debtors or Reorganized Debtors, as the case may be, shall file objections to Claims and Interests with the Bankruptcy Court and serve such objections upon the holders of each of the Claims and Interests to which objections are made, PROVIDED, HOWEVER, that the Debtors and the Reorganized Debtors shall not object to Claims or Interests Allowed pursuant to the Plan. Nothing contained herein, however, shall limit the Reorganized Debtors’ right to object to Claims or Interests, if

any, that are not Allowed under the Plan and that are filed or amended after the Claims/Interests Objection Deadline. The Debtors and Reorganized Debtors shall be authorized to, and shall, resolve all Disputed Claims or Disputed Interests by withdrawing or settling such objections thereto, or by litigating to judgment in the Bankruptcy Court or such other court having jurisdiction over the validity, nature and/or amount thereof.

ARTICLE X.

ALLOWANCE AND PAYMENT OF
CERTAIN ADMINISTRATIVE CLAIMS

10.1. POSTPETITION FACILITY CLAIM. On the Effective Date, the Postpetition Facility Claim shall be allowed in an amount to be agreed upon by the Debtors and the Postpetition Lenders not less than five Business Days prior to the Effective Date. The Creditors Committee shall be notified of the agreed upon amount of the Postpetition Facility Claim upon agreement by the Debtors and the Postpetition Lenders. All obligations (other than contingent indemnity obligations) of the Debtors under the Postpetition Facility shall be satisfied either by payment in full in Cash on the Effective Date or the amendment and restatement of the Postpetition Credit Agreement with the Post-Effective Date Facility on the Effective Date, provided, however, that nothing herein that requires the indefeasible payment in full of all obligations under the Postpetition Facility on the Effective Date shall affect the commitment of the Postpetition Lenders to provide the Post-Effective Date Facility on the terms and conditions set forth in the Commitment Letter. Notwithstanding anything to the contrary in the Plan, all of the rights, liens, claims, protections and priorities granted to the Postpetition Lenders under the Postpetition Facility shall remain in full force and effect until the Postpetition Facility Claim is paid or otherwise satisfied.

10.2. PROFESSIONAL CLAIMS.

(a) FINAL FEE APPLICATIONS. All final requests for payment of Professional Fee Claims must be filed no later than the last day of the second full month after the Effective Date. After notice and a hearing in accordance with the procedures established by the Bankruptcy Code and prior orders of the Bankruptcy Court, the allowed amounts of such Professional Fee Claims shall be determined by the Bankruptcy Court.

(b) PAYMENT OF INTERIM AMounts. Subject to the Holdback Amount, on the Effective Date, the Debtors or the Reorganized Debtors shall pay all amounts owing to Professionals for all outstanding amounts relating to prior periods through the Effective Date. In order to receive payment on the Effective Date for unbilled fees and expenses incurred through such date, the Professionals shall estimate fees and expenses due for periods that have not been billed as of the Effective Date and shall deliver such estimate to counsel for the Debtors and the Creditors Committee. A Professional receiving payment for the estimated period shall submit a detailed invoice covering such period in the manner and providing the detail as set forth in the Professional Fee Order no later than the last day of the first full month after the Effective Date.

(c) HOLDBACK ESCROW ACCOUNT. On the Effective Date, the Debtors or the Reorganized Debtors shall pay to the Disbursing Agent, in order to fund the Holdback Escrow

Account, Cash equal to the aggregate Holdback Amount for all Professionals. The Disbursing Agent shall maintain the Holdback Escrow Account in trust for the Professionals with respect to whom fees have been held back pursuant to the Professional Fee Order. Such funds shall not be considered property of the Reorganized Debtors. Holdback Amounts owing to the Professionals shall be paid to such Professionals by the Disbursing Agent from the Holdback Escrow Account when such claims are finally allowed by the Bankruptcy Court. When all Professional Claims have been paid in full, amounts remaining in the Holdback Escrow Account, if any, shall be paid to the Reorganized Debtors. The remaining amount of Professional Fee Claims owing to the Professionals as of the Effective Date other than the Holdback Amount shall be paid to such Professionals by the Reorganized Debtors.

(d) POST-EFFECTIVE DATE COMPENSATION. Upon the Effective Date, any requirement that Professionals comply with sections 327 through 331 and 1103 of the Bankruptcy Code in seeking retention or compensation for services rendered after such date will terminate.

10.3. SUBSTANTIAL CONTRIBUTION COMPENSATION AND EXPENSES BAR DATE. Any Person who requests compensation or expense reimbursement for making a substantial contribution in the Chapter 11 Cases pursuant to sections 503(b)(3), 503(b)(4), and 503(b)(5) of the Bankruptcy Code must file an application with the clerk of the Bankruptcy Court, on or before a date which is thirty days after the Effective Date (the “503 Deadline”), and serve such application on counsel for the Debtors and the Creditors Committee and as otherwise required by the Bankruptcy Court and the Bankruptcy Code on or before the 503 Deadline, or be forever barred from seeking such compensation or expense reimbursement.

10.4. OTHER ADMINISTRATIVE CLAIMS. All other requests for payment of an Administrative Claim (other than as set forth in Sections 10.1, 10.2 and 10.3 of this Plan) must be filed with the Bankruptcy Court and served on counsel for the Debtors or Reorganized Debtors no later than thirty (30) days after the Effective Date. Unless the Debtors, the Reorganized Debtors or another party-in-interest objects to an Administrative Claim by the Claims/Interests Objection Deadline, such Administrative Claim shall be deemed allowed in the amount requested. In the event that the Debtors or the Reorganized Debtors object to an Administrative Claim, the Bankruptcy Court shall determine the Allowed amount of such Administrative Claim. Notwithstanding the foregoing, no request for payment of an Administrative Claim need be filed with respect to an Administrative Claim which is paid or payable by the Debtors in the ordinary course of business.

ARTICLE XI.

EFFECT OF THE PLAN ON CLAIMS AND INTERESTS

11.1. REVESTING OF ASSETS. Except as otherwise explicitly provided in this Plan, on the Effective Date all property comprising the Estates (including Retained Actions and Retained Avoidance Claims) shall revest in each of the Debtors and, ultimately, in the Reorganized Debtors, free and clear of all Claims, liens, charges, encumbrances, rights and Interests of creditors and equity security holders (other than as expressly provided herein). As of the Effective Date, each of the Reorganized Debtors may operate their businesses and use, acquire,

and dispose of property and settle and compromise Claims without supervision of the Bankruptcy Court, free of any restrictions of the Bankruptcy Code or Bankruptcy Rules, other than those restrictions expressly imposed by the Plan and Confirmation Order.

11.2. DISCHARGE OF DEBTORS. Pursuant to section 1141(d) of the Bankruptcy Code, except as otherwise specifically provided in this Plan or in the Confirmation Order, the distributions and rights that are provided in this Plan shall be in complete satisfaction, discharge, and release, effective as of the Confirmation Date (but subject to the occurrence of the Effective Date), of Claims and Causes of Action, whether known or unknown, against, liabilities of, liens on, obligations of, rights against, and Interests in the Debtors or any of their assets or properties, regardless of whether any property shall have been distributed or retained pursuant to the Plan on account of such Claims, rights, and Interests, including, but not limited to, demands and liabilities that arose before the Confirmation Date, any liability (including withdrawal liability) to the extent such Claims relate to services performed by employees of the Debtors prior to the Petition Date and that arise from a termination of employment or a termination of any employee or retiree benefit program regardless of whether such termination occurred prior to or after the Confirmation Date, and all debts of the kind specified in sections 502(g), 502(h) or 502(i) of the Bankruptcy Code, in each case whether or not (i) a proof of claim or interest based upon such debt, right, or Interest is filed or deemed filed under section 501 of the Bankruptcy Code, (ii) a Claim or Interest based upon such debt, right, or Interest is allowed under section 502 of the Bankruptcy Code, or (iii) the holder of such a Claim, right, or Interest accepted the Plan. The Confirmation Order shall be a judicial determination of the discharge of all liabilities of and Interests in the Debtors, subject to the Effective Date occurring.

11.3. COMPROMISES AND SETTLEMENTS. Pursuant to Bankruptcy Rule 9019(a), the Debtors may compromise and settle various Claims (a) against them and (b) that they have against other Persons. The Debtors expressly reserve the right (with Bankruptcy Court approval, following appropriate notice and opportunity for a hearing) to compromise and settle Claims against them and claims that they may have against other Persons, up to and including the Effective Date. After the Effective Date, such right shall pass to the Reorganized Debtors as contemplated in Section 11.1 of this Plan, without the need for further approval of the Bankruptcy Court, except as otherwise set forth in the Plan.

11.4. RELEASE BY DEBTORS OF CERTAIN PARTIES. Pursuant to section 1123(b)(3) of the Bankruptcy Code, except as otherwise expressly provided in this Plan, effective as of the Effective Date, each Debtor, in its individual capacity and as a debtor-in-possession for and on behalf of its Estate, shall release and discharge and be deemed to have conclusively, absolutely, unconditionally, irrevocably and forever released and discharged all Released Parties for and from any and all claims or Causes of Action existing as of the Effective Date in any manner arising from, based on or relating to, in whole or in part, the Debtors, the subject matter of, or the transactions or events giving rise to, any Claim or Interest that is treated in this Plan, the business or contractual arrangements between any Debtor or any Released Party, the restructuring of Claims and Interests prior to or in the Chapter 11 Cases, or any act, omission, occurrence or event in any manner related to any such Claims, Interests, restructuring or the Chapter 11 Cases. The Reorganized Debtors shall be bound, to the same extent the Debtors are bound, by all of the releases set forth above.

11.5. RELEASE BY HOLDERS OF CLAIMS AND INTERESTS. ON THE EFFECTIVE DATE, (a) EACH PERSON THAT VOTES TO ACCEPT THIS PLAN; AND (b) TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, AS SUCH LAW MAY BE EXTENDED OR INTERPRETED SUBSEQUENT TO THE EFFECTIVE DATE, EACH ENTITY (OTHER THAN A DEBTOR), THAT HAS HELD, HOLDS OR MAY HOLD A CLAIM OR INTEREST, IN CONSIDERATION FOR THE OBLIGATIONS OF THE DEBTORS AND THE REORGANIZED DEBTORS UNDER THIS PLAN AND THE CASH, NEW COMMON STOCK, AND OTHER CONTRACTS, INSTRUMENTS, RELEASES, AGREEMENTS OR DOCUMENTS TO BE DELIVERED IN CONNECTION WITH THIS PLAN (EACH, A “RELEASE OBLIGOR”), SHALL HAVE CONCLUSIVELY, ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND FOREVER, RELEASED AND DISCHARGED EACH RELEASED PARTY FROM ANY CLAIM OR CAUSE OF ACTION EXISTING AS OF THE EFFECTIVE DATE ARISING FROM, BASED ON OR RELATING TO, IN WHOLE OR IN PART, THE SUBJECT MATTER OF, OR THE TRANSACTION OR EVENT GIVING RISE TO, THE CLAIM OR INTEREST OF SUCH RELEASE OBLIGOR, AND ANY ACT, OMISSION, OCCURRENCE OR EVENT IN ANY MANNER RELATED TO SUCH SUBJECT MATTER, TRANSACTION OR OBLIGATION.

11.6. SETOFFS. The Debtors may, but shall not be required to, set off against any Claim or Interest, and the payments or other distributions to be made pursuant to the Plan in respect of such Claim or Interest, claims of any nature whatsoever that the Debtors may have against such Claimholder or Interestholder; but neither the failure to do so nor the allowance of any Claim or Interest hereunder shall constitute a waiver or release by the Debtors or the Reorganized Debtors of any such claim that the Debtors or the Reorganized Debtors may have against such Claimholder or Interestholder.

11.7. EXCULPATION AND LIMITATION OF LIABILITY. Except as otherwise specifically provided in this Plan, the Debtors, the Reorganized Debtors, the Ad Hoc Noteholders Committee, the members of the Ad Hoc Noteholders Committee in their capacities as members of the Ad Hoc Noteholders Committee, the Creditors Committee, the members of the Creditors Committee in their capacities as such, the Postpetition Lenders in their capacities as such, the Postpetition Agent in its capacity as such, the Senior Notes Trustee in its capacity as such, Blackstone, any of such parties’ respective present officers, directors (but with respect to such parties related to the Debtors, only those that are Released Parties shall be covered hereby), employees, advisors, attorneys, representatives, financial advisors, investment bankers, or agents and any of such parties’ successors and assigns, shall not have or incur, and are hereby released from, any claim, obligation, Cause of Action, or liability to one another or to any Claimholder or Interestholder, or any other party in interest, or any of their respective agents, employees, representatives, financial advisors, attorneys or Affiliates, or any of their successors or assigns, for any act or omission in connection with, relating to, or arising out of the filing the Chapter 11 Cases, negotiation and filing of the Plan, the pursuit of confirmation of the Plan, the consummation of the Plan, the administration of the Plan or the property to be distributed under the Plan, except for their willful misconduct, gross negligence or violation of written agreements with the Debtors, if any, and in all respects shall be entitled to reasonably rely upon the advice of counsel with respect to their duties and responsibilities under the Plan.

11.8. INDEMNIFICATION OBLIGATIONS. In satisfaction and compromise of the Indemnitees’ Indemnification Rights: (a) all Indemnification Rights shall be released and discharged on and as of the Effective Date except for Continuing Indemnification Rights (which shall remain in full force and effect to the fullest extent allowed by law or contract on and after the Effective Date and shall not be modified, reduced, discharged, or otherwise affected in any way by the Chapter

11 Cases); (b) the Debtors or the Reorganized Debtors, as the case may be, covenant to maintain directors’ and officers’ insurance providing coverage for those Indemnitees currently covered by such policies for a period of two years after the Effective Date, shall maintain tail coverage under policies in existence as of the Effective Date, to the fullest extent permitted by such provisions, in each case insuring such parties in respect of any Claims, demands, suits, Causes of Action, or proceedings against such Persons based upon any act or omission related to such Person’s service with, for, or on behalf of the Debtors in at least the scope and amount as currently maintained by the Debtors (the “Insurance Coverage”) and hereby further indemnify such Indemnitees without Continuing Indemnification Rights solely to pay for any deductible or retention amount that may be payable in connection with any claim covered under the foregoing Insurance Coverage; (c) the insurers who issue the Insurance Coverage are authorized to pay any professional fees and expenses incurred in connection with any action relating to any Indemnification Rights and Continuing Indemnification Rights; and (d) the Debtors or the Reorganized Debtors, as the case may be, hereby indemnify Indemnitees with Continuing Indemnification Rights and agree to pay for any deductible or retention amount that may be payable in connection with any claim covered under either the foregoing Insurance Coverage or any prior similar policy.

11.9. INJUNCTION. The Confirmation Order shall provide that satisfaction, release, and discharge pursuant to ARTICLE XI of this Plan shall also act as an injunction against any Person commencing or continuing any action, employment of process, or act to collect, offset, or recover any Claim or Cause of Action satisfied, released, or discharged under this Plan to the fullest extent permissible under applicable law, including, without limitation, to the extent provided for or authorized by sections 524 and 1141 of the Bankruptcy Code.

11.10. WAIVER OF DISTRIBUTIONS BY NON-EMPLOYEE HOLDERS OF OLD COMMON STOCK INTERESTS AND THEIR AFFILIATES. Notwithstanding any other provision of the Plan to the contrary, non-employee holders of Old Common Stock Interests and their affiliates, as well as any assignee(s) or transferee(s) of the Claims of such entities, will not receive any distribution on account of any Claims that they may have against the Debtors other than the distribution of New Common Stock as set forth in this Plan; provided, however, that non-employee holders of Old Common Stock Interests and their affiliates will receive a full and complete release from the Debtors and those parties voting in favor of the Plan as set forth in Article XI of this Plan as a result of their waiver of such distribution rights.

ARTICLE XII.

CONDITIONS PRECEDENT TO
CONFIRMATION AND CONSUMMATION OF THE PLAN

12.1. CONDITIONS TO CONFIRMATION. The following are conditions precedent to confirmation of the Plan that may be satisfied or waived in accordance with Section 12.3 of the Plan:

(a) The Bankruptcy Court shall have approved a disclosure statement with respect to the Plan in form and substance acceptable to the Debtors, in their discretion, and the Creditors Committee, in its reasonable discretion.

(b) The Confirmation Order shall be in form and substance acceptable to the Debtors, in their discretion, and the Creditors Committee, the Postpetition Agent and the Postpetition Lenders, in their reasonable discretion.

12.2. CONDITIONS TO CONSUMMATION. The following are conditions precedent to the occurrence of the Effective Date, each of which may be satisfied or waived in accordance with Section 12.3 of the Plan:

(a) The Bankruptcy Court shall have entered one or more orders (which may include the Confirmation Order) authorizing the assumption and rejection of unexpired leases and executory contracts by the Debtors as contemplated by ARTICLE VIII hereof.

(b) The Debtors shall have amended and restated or otherwise replaced the Postpetition Credit Agreement in a manner consistent with the terms of the Commitment Letter and all conditions precedent to the consummation thereof (other than the occurrence of the Effective Date of the Plan) shall have been waived or satisfied in accordance with the terms thereof and the lenders under the Post-Effective Date Facility shall be ready to fund the amounts required by the Debtors upon the Effective Date.

(c) The Confirmation Order in form and substance acceptable to the Debtors, in their discretion, and the Creditors Committee, in its reasonable discretion, shall have been entered by the Bankruptcy Court and shall be a Final Order, and no request for revocation of the Confirmation Order under section 1144 of the Bankruptcy Code shall have been made, or, if made, shall remain pending.

(d) Each Exhibit, document or agreement to be executed in connection with the Plan shall be in form and substance acceptable to the Debtors, in their discretion, and the Creditors Committee, in its reasonable discretion.

(e) The Confirmation Date shall have occurred and the Confirmation Order shall, among other things, provide that:

(1) the provisions of the Confirmation Order and the Plan are nonseverable and mutually dependent;

(2) all executory contracts or unexpired leases assumed by the Debtors during the Chapter 11 Cases or under the Plan shall be assigned and transferred to, and remain in full force and effect for the benefit of, the Reorganized Debtors, notwithstanding any provision in such contract or lease (including those described in sections 365(b)(2) and 365(f) of the Bankruptcy Code) that prohibits such assignment or transfer or that enables or requires termination of such contract or lease;

(3) the transfers of property by the Debtors (A) to the Reorganized Debtors (1) are or shall be legal, valid, and effective transfers of property, (2) vest or shall vest the Reorganized Debtors with good title to such property free and clear of all liens, charges, Claims, encumbrances, or Interests, except as expressly provided in the Plan or Confirmation Order, (3) do not and shall not constitute avoidable transfers under the Bankruptcy Code or under applicable nonbankruptcy law, and (4) do not and shall not

subject the Reorganized Debtors to any liability by reason of such transfer under the Bankruptcy Code or under applicable nonbankruptcy law, including, without limitation, any laws affecting successor or transferee liability, and (B) to Claimholders and Interestholders under the Plan are for good consideration and value and are in the ordinary course of the Debtors’ businesses;

(4) except as expressly provided in the Plan or the Confirmation Order, the Reorganized Debtors are discharged effective upon the Effective Date from any “debt” (as that term is defined in section 101(12) of the Bankruptcy Code), and the Debtors’ liability in respect thereof is extinguished completely, whether reduced to judgment or not, liquidated or unliquidated, contingent or noncontingent, asserted or unasserted, fixed or unfixed, matured or unmatured, disputed or undisputed, legal or equitable, known or unknown, or that arose from any agreement of the Debtors entered into or obligation of the Debtors incurred before the Effective Date, or from any conduct of the Debtors prior to the Effective Date, or that otherwise arose before the Effective Date, including, without limitation, all interest, if any, on any such debts, whether such interest accrued before or after the Petition Date;

(5) the Plan does not provide for the liquidation of all or substantially all of the property of the Debtors and its confirmation is not likely to be followed by the liquidation of the Reorganized Debtors or the need for further financial reorganization; and

(6) the New Common Stock (including the offer of New Common Stock through any warrant, option, right to subscribe, or conversion privilege or the sale of the New Common Stock upon exercise of such warrant, option, right to subscribe, or conversion privilege) to be issued under the Plan in exchange for Claims against and Interests in the Debtors are exempt from registration under the Securities Act of 1933 pursuant to, and to the extent provided by, section 1145 of the Bankruptcy Code.

12.3. WAIVER OF CONDITIONS TO CONFIRMATION OR CONSUMMATION. The conditions set forth in Sections 12.1 and 12.2 of the Plan may be waived, in whole or in part, by the Debtors (after consultation with the Creditors Committee) without any notice to parties in interest or the Bankruptcy Court and without a hearing, PROVIDED, HOWEVER, that any such waiver(s) shall not affect the rights and remedies of the Postpetition Lenders under the Postpetition Facility Order, Section 10.1 of the Plan or under applicable law. The failure to satisfy or waive any condition to the Confirmation Date or the Effective Date may be asserted by the Debtors in their sole discretion regardless of the circumstances giving rise to the failure of such condition to be satisfied (including any action or inaction by the Debtors in their sole discretion). The failure of the Debtors in their sole discretion to exercise any of the foregoing rights shall not be deemed a waiver of any other rights, and each such right shall be deemed an ongoing right, which may be asserted at any time.

ARTICLE XIII.

RETENTION OF JURISDICTION

Pursuant to sections 105(a) and 1142 of the Bankruptcy Code, the Bankruptcy Court shall have exclusive jurisdiction of all matters arising out of, and related to, the Chapter 11 Cases and the Plan, including, among others, the following matters:

(a) to hear and determine pending motions for (i) the assumption or rejection or (ii) the assumption and assignment of executory contracts or unexpired leases to which the Debtors are a party or with respect to which the Debtors may be liable, and to hear and determine the allowance of Claims resulting therefrom including the amount of Cure, if any, required to be paid;

(b) to adjudicate any and all adversary proceedings, applications, and contested matters that may be commenced or maintained pursuant to the Chapter 11 Cases or the Plan, or that were the subject of proceedings before the Bankruptcy Court prior to the Effective Date, proceedings to adjudicate the allowance of Disputed Claims and Disputed Interests, and all controversies and issues arising from or relating to any of the foregoing;

(c) to adjudicate any and all disputes arising from the distribution or retention of the New Common Stock or the consideration under this Plan;

(d) to ensure that distributions to Allowed Claimholders and Allowed Interestholders are accomplished as provided herein;

(e) to hear and determine any and all objections to the allowance of Claims and Interests and the estimation of Claims and Interests, both before and after the Confirmation Date, including any objections to the classification of any Claim or Interest, and to allow or disallow any Claim or Interest, in whole or in part;

(f) to enter and implement such orders as may be appropriate if the Confirmation Order is for any reason stayed, revoked, modified, or vacated;

(g) to issue orders in aid of execution, implementation, or consummation of the Plan;

(h) to consider any modifications of the Plan, to cure any defect or omission, or to reconcile any inconsistency in any order of the Bankruptcy Court, including, without limitation, the Confirmation Order;

(i) to hear and determine all applications for compensation and reimbursement of Professional Claims under the Plan or under sections 330, 331, 503(b), 1103, and 1129(a)(4) of the Bankruptcy Code;

(j) to determine requests for the payment of Claims entitled to priority under section 507(a)(1) of the Bankruptcy Code, including compensation of and reimbursement of expenses of parties entitled thereto;

(k) to hear and determine disputes arising in connection with the interpretation, implementation, or enforcement of the Plan, the Confirmation Order, including disputes arising under agreements, documents, or instruments executed in connection with this Plan;

(l) to hear and determine all suits or adversary proceedings to recover assets of the Debtors and property of their Estates, wherever located;

(m) to hear and determine matters concerning state, local, and federal taxes in accordance with sections 346, 505, and 1146 of the Bankruptcy Code;

(n) to hear any other matter not inconsistent with the Bankruptcy Code;

(o) to hear and determine all disputes involving the existence, nature, or scope of the Debtors’ discharge, including any dispute relating to any liability arising out of the termination of employment or the termination of any employee or retiree benefit program, regardless of whether such termination occurred prior to or after the Effective Date;

(p) to enter a final decree closing the Chapter 11 Cases; and

(q) to enforce all orders previously entered by the Bankruptcy Court. Unless otherwise specifically provided herein or in a prior order of the Bankruptcy Court, the Bankruptcy Court shall have exclusive jurisdiction to hear and determine disputes concerning Claims, Interests, Retained Actions, Retained Avoidance Claims, and any motions to compromise or settle such disputes. Despite the foregoing, if the Bankruptcy Court is determined not to have jurisdiction with respect to the foregoing, or if the Reorganized Debtors chooses to pursue any Retained Action or Retained Avoidance Claims in another court of competent jurisdiction, the Reorganized Debtors will have authority to bring such action in any other court of competent jurisdiction.

ARTICLE XIV.

MISCELLANEOUS PROVISIONS

14.1. BINDING EFFECT. Upon the Effective Date, the Plan shall be binding upon and inure to the benefit of the Debtors, the Reorganized Debtors, all present and former Claimholders, all present and former Interestholders, other parties in interest and their respective heirs, successors, and assigns.

14.2. MODIFICATION AND AMENDMENTS. The Debtors may alter, amend, or modify the Plan or any Exhibits thereto under section 1127(a) of the Bankruptcy Code at any time prior to the Confirmation Hearing provided that the Debtors shall not make any such alteration, amendment or modification that materially affects treatment, distributions or rights afforded to holders of Class 3 General Unsecured Claims and Class 4 Senior Note Claims without the consent of the Creditors Committee. After the Confirmation Date and prior to substantial consummation of the Plan as defined in section 1101(2) of the Bankruptcy Code, the Debtors may, under section 1127(b) of the Bankruptcy Code, institute proceedings in the Bankruptcy

Court to remedy any defect or omission or reconcile any inconsistencies in the Plan, the Disclosure Statement, or the Confirmation Order, and such matters as may be necessary to carry out the purposes and effects of the Plan.

14.3. ALLOCATION OF PLAN DISTRIBUTIONS BETWEEN PRINCIPAL AND INTEREST. To the extent that any Allowed Claim entitled to a distribution under the Plan is composed of indebtedness and accrued but unpaid interest thereon, such distribution shall, to the extent permitted by applicable law, be allocated for United States federal income tax purposes to the principal amount of the Claim first and then, to the extent the consideration exceeds the principal amount of the Claim, to the portion of the Claim representing accrued but unpaid interest.

14.4. COMMITTEES. Effective on the Effective Date, the Creditors Committee shall dissolve automatically, whereupon its members, professionals, and agents shall be released from any further duties and responsibilities in the Chapter 11 Cases and under the Bankruptcy Code, except with respect to applications for Professional Claims and except with respect to obligations arising under confidentiality agreements entered by then which shall remain in full force and effect according to their terms.

14.5. REVOCATION, WITHDRAWAL, OR NON-CONSUMMATion.

(a) RIGHT TO REVOKE OR WITHDRAW. Each of the Debtors, in consultation with the Creditors Committee, reserves the right to revoke or withdraw the Plan at any time prior to the Effective Date.

(b) EFFECT OF WITHDRAWAL, REVOCATION, OR NON-CONSUMMATION. If any of the Debtors revokes or withdraws the Plan prior to the Effective Date, or if the Confirmation Date or the Effective Date does not occur, then the Plan, any settlement, or compromise embodied in the Plan (including the fixing or limiting to an amount certain any Claim or Interest or Class of Claims or Interests with respect to such Debtor or Debtors), the assumption or rejection of executory contracts or unexpired leases effected by the Plan, and any document or agreement executed pursuant to the Plan shall be null and void. In such event, nothing contained herein, and no acts taken in preparation for consummation of the Plan, shall be deemed to constitute a waiver or release of any Claims by or against or Interests in the Debtors or any other Person, to prejudice in any manner the rights of the Debtors or any Person in any further proceedings involving the Debtors, or to constitute an admission of any sort by the Debtors or any other Person.

14.6. SEVERABILITY OF PLAN PROVISIONS. If, prior to the Confirmation Date, any term or provision of the Plan is held by the Bankruptcy Court to be illegal, impermissible, invalid, void or unenforceable, or otherwise to constitute grounds for denying confirmation of the Plan, the Bankruptcy Court shall, with the consent of the Debtors (in consultation with the Creditors Committee), have the power to interpret, modify or delete such term or provision (or portions thereof) to make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of the term or provision held to be invalid, void or unenforceable, and such term or provision shall then be operative as interpreted, modified or deleted. Notwithstanding any such interpretation, modification or deletion, the remainder of the terms and provisions of the

Plan shall in no way be affected, impaired or invalidated by such interpretation, modification or deletion.

14.7. NOTICES. Any notice required or permitted to be provided to the Debtors, Creditors Committee, Postpetition Agent, or under the Plan shall be in writing and served by (a) certified mail, return receipt requested, (b) hand delivery, or (c) overnight delivery service, to be addressed as follows:

If to the Debtors:

HAYNES INTERNATIONAL, INC.

1020 West Park Avenue

Kokomo, Indiana 46904-9013

Attn: Chief Financial Officer

with copies to:

SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP

333 West Wacker Drive, Suite 2100

Chicago, Illinois 60606-1285

Telephone: (312) 407-0700

Facsimile: (312) 407-0411

Attn: John Wm. Butler, Jr., Esq.

J. Eric Ivester, Esq.

Kristin E. Rooney, Esq.

- and -

ICE MILLER

One American Square

Box 82001

Indianapolis, Indiana 46282-0002

Telephone: (317) 236-2100

Facsimile: (317) 236-2219

Attn: Jeffrey A. Hokanson, Esq.

Ben T. Caughey, Esq.

If to the Creditors Committee:

Akin Gump Strauss Hauer & Feld LLP

590 Madison Avenue

New York, New York 10022

Telephone: (212) 872-1000

Fax: (212) 872-1002

Attn: Michael S. Stamer, Esq.

Phillip C. Dublin, Esq.

- and -

Baker & Daniels

300 North Meridian Street

Indianapolis, Indiana 46204

Telephone: (317) 237-1190

Fax: (317) 237-1000

Attn: James M. Carr, Esq.

If to the Postpetition Agent:

Congress Financial Corporation (Central)

150 South Wacker Drive

Chicago, Illinois 60606

Telephone: (312) 332-0420

Fax: (312) 332-0424

Attn: Portfolio Manager

with copies to:

Otterbourg, Steindler, Houston & Rosen, P.C.

230 Park Avenue

New York, New York 10169

Telephone: (212) 661-9100

Fax: (212) 682-6104

Attn: Jonathan N. Helfat, Esq.

14.8. TERM OF INJUNCTIONS OR STAYS. Unless otherwise provided herein or in the Confirmation Order, all injunctions or stays provided for in the Chapter 11 Cases under sections 105 or 362 of the Bankruptcy Code or otherwise, and extant on the Confirmation Date, shall remain in full force and effect until the Effective Date.

14.9. GOVERNING LAW. Except to the extent the Bankruptcy Code, the Bankruptcy Rules or other federal law is applicable, or to the extent an exhibit or schedule to the Plan provides otherwise, (i) the rights and obligations arising under this Plan shall be governed by, and construed and enforced in accordance with, the laws of the State of Indiana, and (ii) the laws of the state of incorporation of the Debtors shall govern corporate governance matters with respect to the Debtors, in either case without giving effect to the principles of conflicts of law thereof.

14.10. NO WAIVER OR ESTOPPEL. Each Claimholder or Interestholder shall be deemed to have waived any right to assert that its Claim or Interest should be Allowed in a certain amount, in a certain priority, secured or not subordinated by virtue of an agreement made with the Debtors and/or their counsel, the Creditors Committee and/or its counsel, or any other Person, if

such agreement was not disclosed in the Plan, the Disclosure Statement, or papers filed with the Bankruptcy Court prior to the Confirmation Date.

14.11. CONFLICTS. In the event that the provisions of the Disclosure Statement and the provisions of the Plan conflict, the terms of the Plan shall govern.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

Dated: Indianapolis, Indiana

June 29, 2004

		Respectfully submitted,
		HAYNES INTERNATIONAL, INC.
		AND THE DEBTOR AFFILIATES


		By :	/s/ Francis J. Petro
			Francis J. Petro
			President and Chief Executive Officer
			of Haynes International, Inc. and authorized
			signatory for each of the other Debtors

John Wm. Butler, Jr. (IL ARDC No. 06209373)
J. Eric Ivester (IL ARDC No. 06215581)
Kristin E. Rooney (IL ARDC No. 06256593)
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
333 West Wacker Drive, Suite 2100
Chicago, Illinois 60606-1285
Telephone: (312) 407-0700
Facsimile: (312) 407-0411

- and -

Jeffrey A. Hokanson

Ben T. Caughey

ICE MILLER

One American Square

Box 82001

Indianapolis, Indiana 46282-0002

Telephone: (317) 236-2100

Facsimile: (317) 236-2219

ATTORNEYS FOR HAYNES INTERNATIONAL, INC.

AND THE DEBTOR AFFILIATES

[Exhibit A - Nonexclusive list of the Retained Actions and Retained Avoidance Claims, Exhibit B - Certificate of Incorporation, Exhibit C - Bylaws, Exhibit D - Long-Term Incentive Plan, and Exhibit E - Registration Rights Agreement have been omitted from the Plan of Reorganization as filed with the Securities and Exchange Commission (the “SEC”). The omitted information is considered immaterial from an investor’s perspective. The Registrant will furnish supplementally a copy of any of the omitted Exhibits to the SEC upon request from the SEC.]

Exhibit 2.2

ASSET PURCHASE AGREEMENT

BY AND AMONG

HAYNES WIRE COMPANY,

THE BRANFORD WIRE AND MANUFACTURING COMPANY,

CAROLINA INDUSTRIES, INC.,

AND

RICHARD HARCKE

DATED AS OF OCTOBER 28, 2004

TABLE OF CONTENTS

		PAGE

ARTICLE I.	DEFINITIONS	1

ARTICLE II.	SALE AND PURCHASE	7

Section 2.01.	Transfer of Assets	7
Section 2.02.	Sale Free of Encumbrances	7
Section 2.03.	Certain Excluded Assets	7
Section 2.04.	No Assumption of Liabilities	8
Section 2.05.	Subsequent Documentation	8
Section 2.06.	Post-Closing Adjustments to Purchased Inventory	8

ARTICLE III.	PURCHASE PRICE	9

Section 3.01.	Purchase Price and Payment	9
Section 3.02.	Fair Consideration	9
Section 3.03.	Allocation of the Purchase Price	9
Section 3.04.	Taxes	10

ARTICLE IV.	CLOSING	10

Section 4.01.	Closing Date	10
Section 4.02.	Deliveries by Sellers	10
Section 4.03.	Deliveries by Buyer	11
Section 4.04.	Possession of Acquired Assets	12

ARTICLE V.	REPRESENTATIONS AND WARRANTIES OF SELLERS AND HARCKE	12

Section 5.01.	Organization; Power	12
Section 5.02.	Authorization and Validity of Agreement	12
Section 5.03.	No Conflict or Violation	13
Section 5.04.	Consents and Approvals	13
Section 5.05.	Financial Statements	13
Section 5.06.	Absence of Certain Changes or Events	14
Section 5.07.	Tax Matters	14
Section 5.08.	Absence of Undisclosed Liabilities	15
Section 5.09.	Real Property	15
Section 5.10.	Conformity of the Real Property	16
Section 5.11.	Equipment and Machinery	16

Section 5.12.	Intellectual Property and Software	16
Section 5.13.	Accounts Receivable	17
Section 5.14.	Employee Benefit Plans	17
Section 5.15.	Labor Relations	18
Section 5.16.	Environmental Compliance	18
Section 5.17.	Licenses and Permits	19
Section 5.18.	Insurance; Bonds	19
Section 5.19.	Assigned Contracts	19
Section 5.20.	Customers	19
Section 5.21.	Compliance with Law	19
Section 5.22.	Litigation	20
Section 5.23.	Title to the Acquired Assets and Related Matters	20
Section 5.24.	Absence of Certain Business Practices	20
Section 5.25.	No Other Agreements to Sell Assets	20
Section 5.26.	Debts of Branford	20
Section 5.27.	Due Diligence	20
Section 5.28.	Broker’s and Finder’s Fees	21
Section 5.29.	All Material Information	21
Section 5.30.	Sellers and Harcke Independently Advised	21
Section 5.31.	Condition of Acquired Assets	21

ARTICLE VI.	REPRESENTATIONS AND WARRANTIES OF BUYER	21

Section 6.01.	Organization; Power	21
Section 6.02.	Authorization and Validity of Agreement	21
Section 6.03.	No Conflict or Violation	21
Section 6.04.	Approvals and Consents	22
Section 6.05.	Broker’s and Finder’s Fees	22

ARTICLE VII.	COVENANTS OF SELLERS AND HARCKE	22

Section 7.01.	Regulatory and Other Approvals	22
Section 7.02.	Fulfillment of Conditions	22
Section 7.03.	Conduct of Business	23
Section 7.04.	Certain Restrictions	23
Section 7.05.	No Solicitation	24
Section 7.06.	Use of Names	24
Section 7.07.	Post-Closing Operations	25
Section 7.08.	Notification	25

ARTICLE VIII.	COVENANTS OF BUYER	25

Section 8.01.	Access	25
Section 8.02.	Fulfillment of Conditions	25
Section 8.03.	Employee Matters	26
Section 8.04.	Assumed Liabilities	27

ARTICLE IX.	CONDITIONS TO OBLIGATIONS OF BUYER	27

Section 9.01.	Representations and Warranties	27
Section 9.02.	Performance	27
Section 9.03.	Closing Deliveries	27
Section 9.04.	Laws	27
Section 9.05.	Regulatory Consents and Approvals	27
Section 9.06.	No Material Adverse Change	27
Section 9.07.	Balance Sheet	27
Section 9.08.	Bulk Sales Compliance	27
Section 9.09.	Approval of Board of Directors	28

ARTICLE X.	CONDITIONS TO OBLIGATIONS OF SELLERS AND HARCKE	28

Section 10.01.	Representations and Warranties	28
Section 10.02.	Performance	28
Section 10.03.	Laws	28
Section 10.04.	Regulatory Consents and Approvals	28

ARTICLE XI.	EXCESS INVENTORY	28

Section 11.01.	Procedures for Storage and Disposition of Excess Inventory	28
Section 11.02.	Compliance	30
Section 11.03.	Sales Efforts	30
Section 11.04.	Offset of Returns for Credit	30

ARTICLE XII.	OTHER AGREEMENTS	30

Section 12.01.	Tax Returns; Cooperation on Tax Matters	30
Section 12.02.	Files and Records	31
Section 12.03.	Certain Costs	31
Section 12.04.	Payment of Debts	31
Section 12.05.	Collection of Certain Accounts Receivable	31
Section 12.06.	Costs of Clean-up of PCP Contamination	32

ARTICLE XIII.	INDEMNIFICATION	32

Section 13.01.	Survival	32
Section 13.02.	Indemnification by Sellers	32
Section 13.03.	Indemnification by Buyer	33
Section 13.04.	Procedure	34
Section 13.05.	Buyer Right to Offset	34

ARTICLE XIV.	TERMINATION	34

Section 14.01.	Termination	34
Section 14.02.	Effect of Termination	35

iii

ARTICLE XV.	MISCELLANEOUS	35

Section 15.01.	Confidential Information	35
Section 15.02.	Public Announcements	35
Section 15.03.	Expenses	35
Section 15.04.	Utilities Proration	35
Section 15.05.	Reasonable Efforts; Cooperation	36
Section 15.06.	Notices	36
Section 15.07.	Headings	36
Section 15.08.	Construction	36
Section 15.09.	Severability	37
Section 15.10.	Entire Agreement	37
Section 15.11.	Amendments; Waivers	37
Section 15.12.	Parties in Interest	37
Section 15.13.	Successors and Assigns	38
Section 15.14.	Governing Law; Jurisdiction	38
Section 15.15.	Counterparts	38

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (“AGREEMENT”), dated as of October 28, 2004 (the “EFFECTIVE DATE”), is made and entered into by and among Haynes Wire Company, a Delaware corporation (“BUYER”), The Branford Wire and Manufacturing Company, a Connecticut corporation (“BRANFORD”), Carolina Industries, Inc., a Connecticut corporation (“CAROLINA INDUSTRIES”) (Branford and Carolina Industries, collectively, “SELLERS”) and Richard Harcke (“HARCKE”).

WITNESSETH:

WHEREAS, Sellers are engaged in the business of owning and operating a wire manufacturing business (the “BUSINESS”); and

WHEREAS, Buyer desires to purchase from Sellers, and Sellers desire to sell to Buyer, the Acquired Assets, as hereinafter defined, upon the terms and subject to the conditions set forth in this Agreement;

NOW, THEREFORE, in consideration of the foregoing and of the mutual representations, warranties, covenants, and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

AGREEMENT

ARTICLE I.

DEFINITIONS

As used in this Agreement, the following terms have the meanings indicated below:

“ACCOUNTS RECEIVABLE” means all accounts and notes receivable, rights to refunds, and deposits of any kind of Branford other than Excluded Accounts receivable and Uncollectible Accounts Receivable.

“ACQUIRED ASSETS” means the Accounts Receivable, Assigned Contracts, Equipment and Machinery, Files and Records, Intangible Assets, Intellectual Property, Licenses and Permits, Miscellaneous Assets, Purchased Inventory, Real Property, exclusive use of the names “Branford Wire and Manufacturing Company” and “B&S Wire Rod Sales” and all other assets of Branford as of the Closing Date (including all such items shown or reflected in the Closing Balance Sheet of the Seller, with additions thereto, net of dispositions in the ordinary course of the Business, since the Balance Sheet Date), of every kind, nature, character, and description, whether real, personal or mixed, whether accrued, contingent or other, and wherever situated, and whether or not reflected in any financial statement of Branford, used or useful in conducting the Business

including, without limitation, those listed on SCHEDULE 1.01 hereto, but excluding all of the Excluded Assets.

“ACQUIRED WORKING CAPITAL” means, as of any date of determination, an amount equal to the sum of (i) Sellers’ Accounts Receivable PLUS (ii) Sellers’ Inventory (other than Excess Inventory), in each case as reflected on Seller’s balance sheet prepared in accordance with past practice.

“AFFILIATE” means any person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, a specified Person or which together with a specified Person is a member of a controlled group (within the meaning of Code Section 1563(a) determined without regard to Sections 1563(a)(4) and 1563(e)(3)(C)) of the Code.

“ASSIGNED CONTRACTS” means the leases, contracts, agreements and arrangements assigned to Buyer by Seller hereunder and set forth in SCHEDULE 1.02.

“ASSUMED LIABILITIES” has the meaning specified in SECTION 2.04.

“BALANCE SHEET DATE” means September 30, 2004 (the date of the Interim Balance Sheet).

“BRANFORD” has the meaning set forth in the introductory paragraph hereto.

“BRANFORD’S BENEFIT OBLIGATIONS” means all obligations, arrangements or customary practices (other than those contained in or provided under Branford’s Plans), whether or not legally enforceable, to provide benefits (other than salary or wages) to present or former directors, employees, or agents of Branford. Branford’s Benefit Obligations also includes consulting agreements under which the compensation paid does not depend upon the amount of service rendered, sabbatical policies, severance payment policies and fringe benefits within the meaning of Section 132 of the Code.

“BRANFORD’S PLANS” means each voluntary employees’ beneficiary association under Section 501(c)(9) of the Code whose members include employees of Branford and all employee benefit plans, as defined in Section 3(3) of ERISA, to which Branford is a plan sponsor, as defined in Section 3(16)(B) of ERISA, or to which Branford otherwise contributes or has contributed, or in which Branford otherwise participates or has participated.

“BUSINESS” has the meaning set forth in the recitals hereto.

“BUSINESS DAY” means any day that the banks in Indianapolis, Indiana, U.S.A. are open for business.

“BUYER” has the meaning set forth in the introductory paragraph hereto.

“BUYER BENEFIT PLANS” has the meaning specified in SECTION 8.03(b).

“CAROLINA INDUSTRIES” has the meaning set forth in the introductory paragraph hereto.

“CERCLA” means the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended.

“CLAIM” has the meaning specified in SECTION 13.02.

“CLOSING” has the meaning specified in SECTION 4.01.

“CLOSING BALANCE SHEET” has the meaning specified in SECTION 3.02(b).

“CLOSING DATE” has the meaning specified in SECTION 4.01.

“CLOSING DATE A/R REPORT” has the meaning specified in SECTION 2.06(b).

“CLOSING DATE INVENTORY REPORT” has the meaning specified in SECTION 2.06(b).

“COBRA” means Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

“CODE” means the Internal Revenue Code of 1986, as amended.

“CONTRACTS” means any agreement, lease, license, evidence of indebtedness, mortgage, indenture, security agreement or other contract.

“EFFECTIVE DATE” has the meaning specified in the first paragraph of this Agreement.

“ENCUMBRANCES” means all liens (statutory or other), leases, mortgages, pledges, security interests, conditional sales agreements, charges, claims, options, easements, rights of way (other than easements of record), rights of third parties and other encumbrances of any kind or nature whatsoever.

“ENVIRONMENTAL REQUIREMENTS” mean all past, present and future Laws, rules, regulations, ordinances, policies, guidance documents, approvals, plans, authorizations, Licenses and Permits issued by any Governmental Entity of the United States, state or political subdivision thereof, and any foreign governmental body and all judicial, administrative, and regulatory decrees, judgments, and orders relating to human health, pollution, or protection of the environment (including ambient air, surface water, ground water, land surface or surface strata), including (i) Laws relating to emissions, discharges, releases, or threatened releases of Hazardous Materials, (ii) Laws relating to the identification, generation, manufacture, processing, distribution, use, treatment, storage, disposal, recovery, transport or other handling of Hazardous Materials, (iii) CERCLA; the Toxic Substances Control Act, as amended; the Hazardous Materials Transportation Act, as amended; RCRA; the Clean Water Act, as amended; the Safe Drinking Water Act, as amended; the Clean Air Act, as amended; the Atomic Energy Act of 1954, as amended; and the Occupational Safety and Health Act, as amended; and (iv) any similar Law.

“EQUIPMENT AND MACHINERY” means (i) all equipment, machinery, furniture, fixtures and improvements, tooling, spare parts, supplies, computer hardware and software, and motor vehicles (certificated or uncertificated) owned or leased by Branford in connection with the

Business (including all leases of such property), (ii) any rights of Branford to warranties applicable to the foregoing (to the extent assignable), and licenses received from the manufacturers or sellers of any such item, and (iii) any related claims, credits, and rights of recovery with respect thereto.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“EXCESS INVENTORY” means the Inventory of Sellers that is not Purchased Inventory, ownership of which shall remain in [CAROLINA INDUSTRIES] from and after the Effective Date until purchased by Buyer or otherwise disposed of as provided in SECTION 11.01.

“EXCLUDED ACCOUNTS RECEIVABLE” means the accounts receivable of Sellers identified on SCHEDULE 1.03.

“EXCLUDED ASSETS” has the meaning specified in SECTION 2.03.

“FILES AND RECORDS” mean all files and records of the Seller relating to the Business, whether in hard copy or magnetic or other format including customer and supplier records, equipment maintenance records, equipment warranty information, plant plans, specifications and drawings, sales and advertising material, computer software and records relating to employees to be employed by the Buyer following the Closing.

“FINAL A/R REPORT” has the meaning specified in SECTION 2.06(b).

“FINAL INVENTORY REPORT” has the meaning specified in SECTION 2.06(b).

“GAAP” means generally accepted accounting principles in the United States of America, in effect from time to time, consistently applied.

“GOVERNMENTAL ENTITY” means any court, government agency, department, commission, board, bureau or instrumentality of the United States, any local, county, state, federal or political subdivision thereof, or any foreign governmental body of any kind.

“HARCKE” has the meaning set forth in the introductory paragraph hereto.

“HAZARDOUS MATERIALS” mean (i) any substance that is or becomes defined as a “hazardous substance,” “hazardous waste,” “hazardous material,” pollutant, or contaminant under any Environmental Requirements, including CERCLA; the Superfund Amendments and Reauthorization Act, as amended; the RCRA; and any analogous and applicable Law; (ii) petroleum (including crude oil and any fraction thereof); and (iii) any natural or synthetic gas (whether in liquid or gaseous state).

“HIRED EMPLOYEES” has the meaning specified in SECTION 8.03(a).

“INDEBTEDNESS” of any Person means, without duplication, all obligations of such Person (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar instruments, (iii) for the deferred purchase price of goods or services (other than trade payables incurred in the

ordinary course of business), (iv) under capital leases and (v) in the nature of guarantees of the obligations described in clauses (i) through (iv) above of any other Person.

“INDEMNIFIED PARTY” has the meaning specified in SECTION 13.04.

“INDEMNIFYING PARTY” has the meaning specified in SECTION 13.04.

“INTANGIBLE ASSETS” mean all intangible personal property rights of the Seller, including goodwill, customer lists and related information, and all contract rights with respect to the Assigned Contracts.

“INTELLECTUAL PROPERTY” means any and all of the following and all rights in, arising out of, or associated therewith: (i) all United States and foreign patents and applications therefor and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof; (ii) all inventions (whether patentable or not), invention disclosures, improvements, trade secrets, proprietary information, proprietary processes or formulae, franchises, licenses, know how, technology, technical data and customer lists, and all documentation relating to any of the foregoing; (iii) all copyrights, copyright registrations and applications therefor and all other rights corresponding thereto throughout the world; (iv) all trade names, logos, common law trademarks and service marks; trademark and service mark registrations and applications therefor and all goodwill associated therewith throughout the world; (v) all databases and data collections and all rights therein throughout the world; (vi) all computer software including all source code, object code, algorithms, display screens, layouts, firmware, development tools, files, records and data, all media on which any of the foregoing is recorded, all Web addresses, sites and domain names; (vii) any similar, corresponding or equivalent rights to any of the foregoing; and (viii) all documentation related to any of the foregoing.

“INTERIM BALANCE SHEET” has the meaning specified in SECTION 5.05.

“INVENTORY” means all Inventory of Sellers, wherever located, including all finished goods, work in process and raw materials.

“LAW” or “LAWS” means any local, county, state, federal or other law, statute, regulation, ordinance, rule, order, decree, judgment, consent decree, settlement agreement or governmental requirement enacted, promulgated, entered into, agreed or imposed by any Governmental Entity.

“LICENSES AND PERMITS” mean all licenses, permits, franchises, authorizations, and approvals issued by or under the authority of a Governmental Entity that relate directly or indirectly to, or are necessary for, the conduct of the Business, including those described in SCHEDULE 5.17.

“MATERIAL ADVERSE EFFECT,” when used with respect to Sellers or the Business, means any event, change, occurrence, condition or circumstance which has had or may have a material adverse impact on any of the Acquired Assets, the prospects, operations or financial condition of the Business as conducted by Sellers immediately prior to the date hereof or the Closing, as applicable, or the ability of Sellers to consummate any of the transactions contemplated by this Agreement, and when used with respect to Buyer, means any event, change, occurrence,

condition or circumstance which has had or may have a material adverse impact on the ability of Buyer to consummate any of the transactions contemplated by this Agreement.

“MISCELLANEOUS ASSETS” means all telephone numbers, web site addresses and post office boxes used by Branford in the Business, all materials and supplies (other than Inventory) to be used or consumed by Sellers in the production of finished goods and all prepaid expenses reflected on the Closing Balance Sheet to the extent such expenses accrue to the benefit of Buyer after the Effective Date.

“NONCOMPETITION AGREEMENTS” means the Confidentiality and Noncompetition Agreements in the Form attached as EXHIBITS 4.02(g)(i) and 4.02(g)(ii).

“PERSON” means any individual, corporation, partnership, joint venture, association, limited liability company, joint-stock company, trust, or unincorporated organization, or any Governmental Entity.

“PERSONNEL” means the current and former officers, employees and/or agents of any Seller.

“POLICIES” and “POLICY” have the meanings specified in SECTION 5.18.

“PURCHASE PRICE” has the meaning specified in SECTION 3.01.

“PURCHASED INVENTORY” means the Inventory of Sellers consisting of inventory consigned to third parties for sale, work-in-process that is committed to customer orders, work-in-process that is semi-finished goods, raw materials necessary to fulfill Sellers’ existing order backlog and other raw materials, each as set forth on SCHEDULE 1.04, adjusted as provided in SECTION 2.06.

“RCRA” means the Resource Conservation and Recovery Act, as amended.

“REAL PROPERTY” has the meaning specified in SECTION 5.09.

“RELATED AGREEMENTS” means all agreements, instruments and certificates (other than this Agreement) to be executed by Sellers or Harcke in connection with the transactions contemplated by this Agreement, including without limitation each Bill of Sale, each Assignment and Assumption Agreement and each Noncompetition Agreement.

“REPLACEMENT COST” has the meaning specified in SECTION 11.01(c).

“SALE OF ASSETS” means the sale of the Acquired Assets by Sellers to Buyer pursuant to the terms of this Agreement.

“SECURITY AGREEMENT” has the meaning specified in SECTION 4.02(a).

“SELLERS” has the meaning specified in the first paragraph of this Agreement.

“SITE ASSESSMENT” has the meaning specified in SECTION 4.02(n).

“STORAGE SITE” has the meaning specified in SECTION 11.01(a).

“TAX” or “TAXES” mean all federal, state, local and foreign taxes (including excise taxes, value added taxes, occupancy taxes, employment taxes, unemployment taxes, ad valorem taxes, custom duties, transfer taxes, and fees), levies, imposts, fees, impositions, assessments and other governmental charges of any nature imposed upon a Person including all taxes and governmental charges imposed upon any of the personal properties, real properties, tangible or intangible assets, income, receipts, payrolls, transactions, stock transfers, capital stock, net worth or franchises of a Person (including all sales, use, withholding or other taxes which a Person is required to collect and/or pay over to any Governmental Entity), and all related additions to tax, penalties or interest thereon.

“TAX RETURNS” mean all returns, reports, information returns, and other documents (including all related and supporting information) filed or required to be filed with any Governmental Entity in connection with the determination, assessment, collection, or administration of any Taxes.

“TERMINATED EMPLOYEES” has the meaning specified in SECTION 8.03(e).

“UNCOLLECTIBLE ACCOUNTS RECEIVABLE” shall mean any account receivable of Sellers that has been written off as uncollectible prior to the Closing Date and included on the list of such accounts receivable delivered by the Sellers to the Buyer pursuant to SECTION 12.05.

ARTICLE II.

SALE AND PURCHASE

SECTION 2.01. TRANSFER OF ASSETS. Subject to the terms and conditions set forth in this Agreement, at the Closing, Sellers shall sell, convey, transfer, assign and deliver to Buyer, and Buyer shall purchase, acquire and accept from Sellers all of the right, title, and interest of Sellers in and to the Acquired Assets.

SECTION 2.02. SALE FREE OF ENCUMBRANCES. Sellers and Harcke, jointly and severally, represent, warrant and agree that the sale, conveyance, transfer, assignment and delivery by Sellers of the Acquired Assets to Buyer as provided herein is being made free and clear of all Encumbrances.

SECTION 2.03. CERTAIN EXCLUDED ASSETS. Notwithstanding any other provision of this Agreement to the contrary, the Acquired Assets shall not include the following assets of Sellers (collectively, the “EXCLUDED ASSETS”):

(a) all cash on hand or on deposit;

(b) rights under agreements with suppliers (other than Assigned Contracts);

(d) assets held in any employee benefit plan of any Seller;

(e) the Excess Inventory; and

(f) the Excluded Accounts Receivable.

SECTION 2.04. NO ASSUMPTION OF LIABILITIES. Buyer is not assuming, and shall not be responsible for in any manner, any obligations or liabilities of any Seller, direct or indirect, known or unknown, choate or inchoate, absolute, fixed or contingent, except (a) that Buyer agrees to assume and timely pay or perform all obligations of Seller under the Assigned Contracts which (i) initially accrue or arise after the Closing Date and (ii) are not the result of or caused by any breach or default thereunder by any Seller, and (b) as set forth in SCHEDULE 2.04 (such obligations, collectively, the “ASSUMED LIABILITIES”). Any Excluded Assets that remain on the Real Property, as defined herein, as of the Closing Date remain at Sellers’ sole risk. Buyer will have no liability for damage to or destruction of Excluded Assets whether caused by Buyer’s negligence or otherwise.

SECTION 2.05. SUBSEQUENT DOCUMENTATION. At any time and from time to time after the Closing Date, Sellers shall, upon the request of Buyer, and Buyer shall, upon the request of Sellers, promptly execute, acknowledge, and deliver, or cause to be executed, acknowledged, and delivered, such further instruments and other documents, and perform or cause to be performed such further acts, as may be reasonably required to evidence or effectuate (a) the sale, conveyance, transfer, assignment and delivery hereunder of the Acquired Assets, (b) the performance by the parties of any of their other respective obligations under this Agreement, and (c) the purposes and intent of this Agreement.

SECTION 2.06. POST-CLOSING ADJUSTMENTS TO PURCHASED INVENTORY.

(a) The amount of Purchased Inventory shall be increased or decreased by a number of pounds having a value as of the Closing Date equal to (i) the dollar amount by which Branford’s Accounts Receivable as shown on the Final A/R Report, is lower or higher, respectively, than Branford’s Accounts Receivable as shown on the Closing Date A/R Report; PLUS (ii) the amount by which the net book value of the Equipment and Machinery included in the Acquired Assets is less than $275,000. If the adjustment required by this SECTION 2.06 results in a net decrease in Purchased Inventory, Buyer shall deliver to Sellers a quantity of the Purchased Inventory (in the inverse order specified in SCHEDULE 1.04) equal to the amount of such decrease and the Inventory so delivered shall become Excess Inventory for all purposes of this Agreement. If the adjustment required by this SECTION 2.06 results in a net increase in Purchased Inventory, Sellers shall deliver to Buyer a quantity of Excess Inventory (in the order specified in SCHEDULE 1.04) equal to the amount of such increase and the amount so delivered shall become Purchased Inventory for all purposes of this Agreement. Any transfer of Inventory as a result of the application of this SECTION 2.06 shall be completed within five (5) Business Days of determination of the Closing Balance Sheet, as provided for herein.

(b) On the Closing Date, Sellers shall deliver to Buyer a written report showing all accounts receivable of Sellers outstanding on the Closing Date, excluding Excluded Accounts Receivable (the “CLOSING DATE A/R REPORT”), and a written report showing all Inventory of Sellers as of the Closing Date divided into the categories identified on SCHEDULE 1.04 (the “CLOSING DATE INVENTORY REPORT”). Not later than twenty (20) days after the Closing Date, Buyer may disagree with the information set forth in the Closing Date A/R Report or the Closing Date Inventory Report and notify Sellers in writing specifying in reasonable detail the items in

disagreement and the basis therefor. If Buyer so disagrees, Buyer and Sellers shall meet and attempt in good faith to resolve the disagreement on a mutually satisfactory basis. If Buyer and Sellers are unable to resolve the disagreement within 10 days, Sellers and Buyer shall cause their respective accountants to, within 15 days after the end of such 10-day period, agree upon a final Closing Date A/R Report or Closing Date Inventory Report, in which case such agreed-upon report shall be final and binding on the parties. In the event that their respective accountants cannot agree upon such final report within such timeframe, their respective accountants shall, within 2 days, jointly select an independent auditor of recognized national standing to determine, within 10 days, a final report as of the Closing Date, in which case such determined final report shall be final and binding on the parties. The final Closing Date A/R Report and the final Closing Date Inventory Report prepared and finally determined in accordance with this SECTION 2.06(b) are referred to herein respectively as the “FINAL A/R REPORT” and the “FINAL INVENTORY REPORT”.

ARTICLE III.

PURCHASE PRICE

SECTION 3.01. PURCHASE PRICE AND PAYMENT. Subject to the terms and conditions set forth in this Agreement, as full consideration for the Acquired Assets, Buyer shall:

(a) pay to Sellers at Closing in cash by wire transfer to an account designated by Sellers at least two (2) Business Days prior to the Closing Date an amount equal to Eight Million Three Hundred Thousand Dollars ($8,300,000); and

(b) assume the Assumed Liabilities.

The amounts set forth in subsections (a) and (b) are referred to collectively as the “PURCHASE PRICE.”

SECTION 3.02. FAIR CONSIDERATION. All of the parties acknowledge and agree that the consideration provided for in this ARTICLE III represents fair consideration and reasonably equivalent value for the sale and transfer of the Acquired Assets and the transactions, covenants and agreements set forth in this Agreement, which consideration was agreed upon as the result of arm’s-length, good-faith negotiations between the parties and their respective representatives.

SECTION 3.03. ALLOCATION OF THE PURCHASE PRICE. Buyer and Sellers agree that the Purchase Price shall be allocated to the Acquired Assets sold by Sellers as set forth on SCHEDULE 3.03 subject to adjustment by written consent of both Sellers and the Buyer following a determination of the Closing Balance Sheet and shall file Internal Revenue Service Form 8594 (and/or other appropriate Tax Returns) with the applicable Taxing authorities, and shall not file any amendments or take any action inconsistent with the foregoing in any audit, refund claim, Tax Return, or any other administration or judicial proceeding, pursuant to Section 1060 of the Code and underlying Treasury Regulations promulgated thereunder. Sellers shall make its Tax Returns and amendments thereof available for inspection by Buyer for the purpose of verifying compliance with this SECTION 3.03.

SECTION 3.04. TAXES. Sellers shall timely pay (a) all Taxes arising out of (i) the ownership or use of the Excluded Assets, (ii) the ownership or use of the Acquired Assets on or before the Closing Date, including all real or personal property Taxes and payroll withholding Taxes due and payable (or assessed for periods) on or before the Closing Date; and (b) all Taxes, including gross and net income Taxes, and transfer, recording, sales and use Taxes arising out of the sale or transfer of the Acquired Assets pursuant to this Agreement or the other agreements and instruments contemplated hereby or the recording or filing of any sale or transfer agreements or instruments.

ARTICLE IV.

CLOSING

SECTION 4.01. CLOSING DATE. The closing of the transactions contemplated by this Agreement (the “CLOSING”) shall take place at a date and time mutually agreed upon by the parties to the Agreement following satisfaction or waiver of all conditions set forth herein at the offices of Ice Miller, One American Square, 34th Floor, Indianapolis, Indiana (the “CLOSING DATE”).

SECTION 4.02. DELIVERIES BY SELLERS. At the Closing, and simultaneously with delivery of possession of all of the Acquired Assets to Buyer, Sellers have delivered (or caused to be delivered) to Buyer originals or copies, if specified, of the following agreements, documents and other items:

(a) A Security Agreement by and among Sellers and Buyer (the “SECURITY AGREEMENT”), executed by Buyer, in the form attached hereto as EXHIBIT 4.02(a);

(b) A Bill of Sale, executed by Sellers, in the form attached hereto as EXHIBIT 4.02(b);

(c) Copies of all the resolutions adopted by Sellers’ Boards of Directors and shareholders authorizing and approving the execution and delivery of this Agreement and all agreements contemplated hereby and the consummation of the transactions contemplated hereby and thereby, certified to be true and complete and in full force and effect by the corporate Secretary of each Seller;

(d) An Assignment and Assumption Agreement, executed by Sellers, in the form attached hereto as EXHIBIT 4.02(d);

(e) Copies of each consent, waiver, authorization and approval required pursuant to SECTION 5.04 of this Agreement or necessary for the sale of the Acquired Assets or the assignment of the Assigned Contracts to Buyer as contemplated hereby;

(f) Certificates of Good Standing of each Seller issued by the Secretary of State of the State of Connecticut or other appropriate Governmental Authority, and Certificates of Authorization for each Seller from the North Carolina Secretary of State, dated within fifteen (15) days of the Closing;

(g) Noncompetition Agreements, executed by each Seller and Harcke;

(h) Certificates of title for the motor vehicles included in the Acquired Assets, duly endorsed, and all other documents necessary to effect transfer of title to any such motor vehicles;

(i) The original of the ALTA title insurance policy with respect to the Real Property, as defined herein, issued by Chicago Title Insurance Company;

(j) A Certificate executed by Sellers acknowledging delivery by Buyer of the items set forth in SECTION 4.03 of this Agreement and certifying that Sellers have performed in all respects all of the covenants, agreements, obligations and conditions required under this Agreement to be performed, complied with or fulfilled by Sellers on or before the Closing Date;

(k) An opinion of counsel to Sellers, dated as of the Closing Date, in substantially the form attached hereto as EXHIBIT 4.02(k);

(l) The Closing Date A/R Report and the Closing Date Inventory Report;

(m) A copy of the ALTA survey certified by Professional Surveying Services for the Real Property, as defined herein;

(n) A copy of the Phase I environmental site assessment (“SITE ASSESSMENT”) of the Real Property;

(o) Evidence of zoning of the Real Property that is satisfactory to Buyer, in its reasonable discretion;

(p) The list of Uncollectible Accounts Receivable provided for in SECTION 12.05(d);

(q) The evidence of compliance with applicable bulk sales or bulk transfer laws required by SECTION 9.08;

(r) Non-Foreign Affidavit executed by Sellers, in connection with the transfer of the Real Property;

(s) Owner’s Affidavit executed by Sellers, in connection with the transfer of the Real Property;

(t) General Warranty Deed executed by Sellers, in connection with the transfer of the Real Property; and

(u) Such other documents and certificates, as Buyer shall reasonably request.

SECTION 4.03. DELIVERIES BY BUYER. At the Closing and simultaneously with the payment of the Purchase Price to Sellers, Buyer has delivered (or has caused to be delivered) to Sellers originals, or copies if specified, of the following agreements, documents and other items:

(a) The Purchase Price to be paid at the Closing pursuant to SECTION 3.01 by wire transfer to accounts designated by Sellers;

(b) The Security Agreement, executed by Sellers, in the form attached as EXHIBIT 4.02(a);

(c) Copies of all resolutions adopted by the Board of Directors of Buyer authorizing and approving the execution and delivery of this Agreement and all agreements contemplated hereby and the consummation of the transactions contemplated hereby and thereby, certified to be true and complete and in full force and effect by the corporate Secretary of Buyer;

(d) An Assignment and Assumption Agreement, executed by Buyer, in the form attached hereto as EXHIBIT 4.02(d);

(e) A Certificate executed by Buyer acknowledging delivery by Sellers of the items set forth in SECTION 4.02 of this Agreement and certifying that Buyer has performed in all respects all of the covenants, agreements, obligations and conditions required under this Agreement to be performed, complied with or fulfilled by Buyer on or before the Closing Date;

(f) The Noncompetition Agreements, executed by Buyer;

(g) A Certificate of Good Standing of Buyer issued by the Secretary of State of the State of Delaware, dated within fifteen (15) days of the Closing; and

(h) Such other documents and certificates, as Sellers shall reasonably request.

SECTION 4.04. POSSESSION OF ACQUIRED ASSETS. Immediately following the Closing on the Closing Date, the Seller shall take all actions which are required or requested by the Buyer to put the Buyer in full possession and control of all of the Acquired Assets.

ARTICLE V.

REPRESENTATIONS AND WARRANTIES OF SELLERS AND HARCKE

As a material inducement to Buyer to enter into this Agreement and to consummate the transactions contemplated hereby, Sellers and Harcke jointly and severally represent and warrant to Buyer as follows:

SECTION 5.01. ORGANIZATION; POWER. Each Seller is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. Each Seller is qualified as a foreign corporation and is in good standing in each state or jurisdiction where qualification is necessary because of the nature of the assets and properties it owns, leases or operates or because of the nature of the business it conducts.

SECTION 5.02. AUTHORIZATION AND VALIDITY OF AGREEMENT. Each Seller has all requisite corporate power and authority to own, lease and operate the Acquired Assets, to carry on the Business as it is now being conducted, and to enter into, execute and deliver this Agreement and all Related Agreements executed by it, to consummate the transactions contemplated by this Agreement and other Related Agreements and to comply with and fulfill the terms and conditions of this Agreement and such Related Agreements. Harcke has the legal capacity and authority to enter into this Agreement and each of the Related Agreements, to be executed by

Harcke and to carry out his obligations hereunder and thereunder. The execution, delivery and performance of this Agreement and each Related Agreement by each Seller and Harcke and the consummation by each Seller and Harcke of the transactions contemplated by this Agreement and each Related Agreement have been duly authorized by all necessary corporate action by the Board of Directors and shareholders of each Seller, and no other corporate proceedings on the part of any Seller are necessary to authorize such execution, delivery, performance or consummation. This Agreement and each Related Agreement has been duly executed and delivered by each Seller and Harcke, as applicable, and constitutes a legal, valid and binding obligation of each Seller and Harcke, as applicable, enforceable against each Seller and Harcke in accordance with their respective terms and conditions.

SECTION 5.03. NO CONFLICT OR VIOLATION. The execution, delivery and performance of this Agreement by each Seller and Harcke does not and will not: (a) violate or conflict with any provision of the certificate of incorporation, bylaws or other governing document of Sellers, (b) violate any provision of Law of any Governmental Entity applicable to any Seller, Harcke, or the Business; (c) violate or result in a breach of or constitute (with due notice or lapse of time or both) a default under any contract, lease, loan agreement, mortgage, security agreement, trust, indenture, license, consent order or other instrument or obligation to which any Seller or Harcke is a party, or by which any Seller is bound or to which any Seller’s or Harcke’s assets or properties may be bound; or (d) result in the imposition of any Encumbrance or restriction on the Business or any of the Acquired Assets.

SECTION 5.04. CONSENTS AND APPROVALS. SCHEDULE 5.04 sets forth a list of each consent, waiver, authorization or approval of any Governmental Entity or of any other Person, and each declaration to or filing or registration with any Governmental Entity required in connection with the execution and delivery of this Agreement by any Seller or Harcke or the performance by any Seller and Harcke of its or his obligations hereunder.

SECTION 5.05. FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 5.05 are true, correct and complete copies of (i) the balance sheets of Sellers as of April 30, 2003 and 2002 and the related statements of income, changes in stockholders’ equity and cash flows for each of the fiscal years ended April 30, 2003, 2002 and 2001, together with a true and correct copy of the review letter on such information by Sally Massagee, Sellers’ independent public accountant, (ii) the balance sheet of Sellers as of April 30, 2004 and the related statement of income, changes in stockholders’ equity and cash flows for the year then ended, and (iii) the unaudited balance sheet of the Sellers as of July 31, 2004 (the “INTERIM BALANCE SHEET”), and the related unaudited statements of income, changes in stockholders’ equity and cash flows for the three (3) months then ended, together with the notes thereto. All financial statements referred to in this SECTION 5.05 have been prepared in a manner consistent with the manner in which Sellers’ Tax Returns are prepared. All of the financial statements fairly present, in all material respects, the financial position of the Sellers as of the respective dates thereof and the results of the Sellers’ operations and changes in the stockholders’ equity and cash flows for the period then ended, subject, in the case of clauses (ii) and (iii) above, to normal recurring adjustments which are not, individually or in the aggregate, material.

SECTION 5.06. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on SCHEDULE 5.06, since the Balance Sheet Date, Sellers have operated the Business in the ordinary course consistent with past practice and there has not been any:

(a) (i) increase in the compensation payable or to become payable to any Personnel engaged in the Business, (ii) bonus, incentive compensation, service award or other like benefit granted, made or accrued, contingently or otherwise, for or to any Personnel engaged in the Business, (iii) addition to or modification of any of the Branford’s Benefit Obligations and Branford’s Plans agreed to by any Seller for any Personnel engaged in the Business other than in the ordinary course of the Business consistent with past practice, or (iv) new employment agreement with any Personnel engaged in the Business;

(b) cancellation of any indebtedness or waiver of any rights having a value of $5,000 or greater, whether or not in the ordinary course of the Business, or increase in any obligation or liability of Branford except in the ordinary course of the Business consistent with past practice;

(c) execution and delivery, amendment, cancellation or termination of any contract, license or other instrument material to the Business;

(d) failure to preserve the Business intact, to keep available to Buyer the services of the Personnel and to preserve for Buyer the goodwill of each of the Branford’s dealers, suppliers, customers and others having business relations with it;

(e) change in accounting methods or practices;

(f) damage, destruction or loss (whether or not covered by insurance) affecting the Acquired Assets or the Business;

(g) sale, assignment, transfer or encumbering (or subjecting to any Encumbrance) of any of the assets or properties except in the ordinary course of the Business consistent with past practice;

(h) agreement by any Seller to do any of the foregoing; or

(i) other event or condition of any character which in any one case or in the aggregate has had or may have a Material Adverse Effect on any Seller, the Business or any of the Acquired Assets.

SECTION 5.07. TAX MATTERS. Each Seller has duly and timely filed all Tax Returns required to have been filed with any federal, state, local or foreign Taxing authority on or before the Closing Date and has timely paid all Taxes due and payable by it on or before the Closing Date, whether or not shown on such Tax Returns. Branford has set up reserves or accruals on the Agreement Balance Sheet which are adequate for the payment of all Taxes for all periods through the Closing Date. No Taxing authority has asserted any claim against any Seller for the assessment of any additional Tax liability or initiated any action or proceeding which could result in such an assertion. Each Seller has made all withholding of Taxes required to be made under all applicable Laws and regulations, including withholding with respect to sales and use Taxes and compensation paid to employees, and the amounts withheld have been properly paid

over to the appropriate Taxing authorities. The state, federal and local Tax Returns of each Seller have been audited for or through the respective periods set forth on SCHEDULE 5.07 hereof, and there have been no waivers or extensions by such Seller of statutes of limitations with respect to Taxes. Neither Seller is a “foreign person” within the meaning of Section 1445(f)(3) of the Code. The transactions contemplated by this Agreement are not subject to the Tax withholding provisions of Section 3406 of the Code or of Sub-Chapter A or Chapter 3 of the Code, or of any other comparable provision of Law.

SECTION 5.08. ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on SCHEDULE 5.08, Branford has no indebtedness or liability which is not shown on the Agreement Balance Sheet or provided for thereon, other than liabilities incurred or accrued in the ordinary course of the Business consistent with past practice since the Balance Sheet Date. The Acquired Assets are being conveyed to Buyer pursuant to this Agreement free and clear of all Encumbrances and Buyer will not incur any liability or obligation as a result of its acquisition of the Acquired Assets (other than the Assumed Liabilities).

SECTION 5.09. REAL PROPERTY. SCHEDULE 5.09 sets forth a list of all real property owned, used or occupied by any Seller (or any of their Affiliates) which is used in the business (the “REAL PROPERTY”). None of the real property used by any Seller in the Business is leased. All of the following apply to the Real Property:

(a) None of the Real Property is subject to any option to purchase, purchase agreement, lease, sublease, right of first refusal or any other grant to any Person of any right to the purchase, lease, sublease, use, occupancy or enjoyment of such property or any portion thereof by any Seller.

(b) There is no litigation or proceeding pending or, to the knowledge of any Seller, threatened against or relating to the Real Property, including, without limitation, condemnation proceedings relating to any of the Real Property.

(d) All Licenses and Permits and approvals necessary for the occupancy and use of the Real Property for the conduct of the Business have been obtained.

(e) Good, marketable and indefeasible fee simple title to each parcel of the Real Property is owned by Carolina Industries, free and clear of every kind or description of lien, lease or encumbrance except easements, agreements and restrictions of record and current taxes not delinquent.

(f) There are no easements, agreements and restrictions which encumber the Real Property or frustrate Buyer’s intended use of the Real Property.

(g) There are no unpaid claims for labor done upon or materials furnished for the Real Property in respect of which liens have been or may be filed.

(h) There is no judgment of any court of any State or of the United States that is or may become a lien on the Real Property.

(i) The improvements upon the Real Property are all located entirely within the bounds of the Real Property, and there are no encroachments thereon.

(j) Each parcel of the Real Property is now in possession of Sellers and no other person has a right to possession or claims possession of all or any part of the Real Property. Sellers will deliver possession of the Real Property to Buyer at the Closing, free and clear of any right or claim of any person to the possession of the Real Property except as disclosed in writing to Buyer.

(k) Each parcel of the Real Property has direct access to a publicly-dedicated right-of-way.

(l) Neither Seller is a foreign corporation, foreign partnership, foreign trust or foreign estate (as those terms are defined in the Code and regulations adopted pursuant thereto).

(m) All utilities presently serving the Real Property are operated through public easements or rights-of-way, or through valid private easements or rights-of-way in favor of the applicable owner of the Real Property, and all installation and connection charges relating thereto have been paid in full.

SECTION 5.10. CONFORMITY OF THE REAL PROPERTY. All buildings, structures and improvements located on, fixtures contained in, and appurtenances attached to the Real Property conform in all respects to applicable Laws, including those related to zoning, use or construction, and the Real Property is zoned for the purposes for which it is presently used by Sellers. All such buildings, structures, improvements, fixtures and appurtenances are in good condition and repair, subject to normal wear and tear and obsolescence, and no condition exists which interferes with the economic value or use thereof. The conduct of the Business on the Real Property is in full compliance with applicable Laws, and no portion of the Real Property is operated as a legally existing nonconforming use.

SECTION 5.11. EQUIPMENT AND MACHINERY. Included in SCHEDULE 1.01 is a list of, or SCHEDULE 1.01 otherwise describes, all material items of Equipment and Machinery included in the Acquired Assets. Each item of Equipment and Machinery is in good operating condition and repair (except for ordinary wear and tear) and is in conformity in all respects with all applicable Laws, ordinances, orders, regulations and other requirements.

SECTION 5.12. INTELLECTUAL PROPERTY AND SOFTWARE. All Intellectual Property owned by Sellers and material to the Business is listed on SCHEDULE 5.12. All Intellectual Property material to the Business is owned by Sellers, free and clear of all Encumbrances, and is not known by Sellers to be the subject of any challenge. Sellers have all Intellectual Property necessary to conduct the Business as presently operated. No Seller is aware of any facts that would invalidate or render any Intellectual Property unenforceable. Except as disclosed on SCHEDULE 5.12, (a) there are no licenses now outstanding or other rights granted to third parties under any Intellectual Property, and (b) no Seller is a party to any agreement or understanding with respect to any Intellectual Property. All software used in the Business is assignable to Buyer without the consent or approval of any Person, which has not already been obtained. There are no unresolved claims made, and there has not been communicated to Sellers the threat of any such claim, that

any of the Intellectual Property or activities of Sellers in connection with the Intellectual Property constitutes unfair competition or is in violation or infringement of any patent, trademark, trade name, service mark, trade dress, right of publicity, copyright or registration therefore, of any other Person. The Intellectual Property does not infringe the patent, trademark, copyright, trade secret or other proprietary right of any third party. All filings or recordations necessary or appropriate to protect the interests of Sellers in any Intellectual Property have been duly made and are in full force and effect.

SECTION 5.13. ACCOUNTS RECEIVABLE. Except for the Uncollectible Accounts Receivable and the Excluded Accounts Receivable, the Accounts Receivable reflected or to be reflected in the Closing Date A/R Report represent or shall represent bona fide claims against debtors for sales, services performed, or other charges arising in the ordinary course of business, and are not subject to dispute or counterclaim. Except for the Uncollectible Accounts Receivable and the Excluded Accounts Receivable, all Accounts Receivable are collectible in the ordinary course of business (without the necessity of legal proceedings) within 90 days after the date of the invoice therefor.

SECTION 5.14. EMPLOYEE BENEFIT PLANS.

(a) SCHEDULE 5.14(a) contains a true and complete list of all of Branford’s Plans and Branford’s Benefit Obligations. All of Branford’s Plans and Branford’s Benefit Obligations are in full force and effect and are in compliance in all respects, both as to form and operation, with applicable provisions of ERISA, the Code, and any other applicable Laws, and with any applicable collective bargaining agreement. No event has occurred, and there exists no condition or set of circumstances which has resulted in or which could result in the imposition of any liability on Branford under ERISA, the Code or other applicable Law with respect to Branford’s Plans or Branford’s Benefit Obligations.

(b) Branford is not part of a controlled group of employers with any other person (as defined in Section 7701(a)(l) of the Code) which is considered a single employer under Sections 414(b), (c), (m), or (o) of the Code, or Section 3(5) or 4001(b)(1) of ERISA, or the regulations promulgated thereunder.

(c) Branford does not sponsor, maintain, contribute to, nor is required to contribute to, any “multi-employer plan” within the meaning of Section 3(37) or 4001(a)(3) of ERISA, and has no liability of any nature, whether known or unknown, fixed or contingent, with respect to any such multi-employer plan.

(d) Branford does not sponsor, maintain, contribute to, nor is required to contribute to, any medical, health, life or other welfare benefits for present or future terminated or retired employees or their spouses or dependents, other than as required by Part 6 of Subtitle B of Title I of ERISA, COBRA, or any comparable state Law, and has no liability of any nature, whether known or unknown, fixed or contingent, with respect to any such post-termination welfare benefits.

SECTION 5.15. LABOR RELATIONS.

(a) None of the Sellers is a party to or bound by any collective bargaining agreements and there have been no union claims to represent any of Sellers’ Personnel.

(b) There is no labor strike, lockout, dispute, slowdown or stoppage pending or, to the knowledge of Sellers or Harcke, threatened against or involving any Seller, nor has any such event or labor difficulty occurred within the past five (5) years.

(c) No Seller has entered into any severance or similar arrangement in respect of any Personnel that shall result in any obligation (absolute or contingent) of any Seller or Buyer to make any payment to any Personnel following termination of employment, including the termination of employment effected by the transactions contemplated by this Agreement. The consummation of the transactions contemplated by this Agreement will not trigger any severance or similar arrangement of any Seller payable by Buyer after the Closing.

SECTION 5.16. ENVIRONMENTAL COMPLIANCE.

(a) Except as set forth on SCHEDULE 5.16(a), no Hazardous Material has been disposed of, spilled, leaked or otherwise released on any Real Property nor has any Hazardous Material come to be located in the soil, surface water or groundwater on or below any Real Property. Except as set forth on SCHEDULE 5.16(a), no Hazardous Materials are or have been generated, manufactured, treated, stored, transported, used or otherwise handled by the Seller either on or off of any Real Property and there are no underground storage tanks thereon (whether or not regulated and whether or not out of service, closed or decommissioned). There is no condition affecting any Real Property known to Sellers or Harcke which is in violation of any Environmental Requirement. There are no asbestos-containing materials incorporated into the buildings or interior improvements that are part of any of the Real Property, or into other assets of Sellers. There is no electrical transformer, fluorescent light fixture with ballasts or other equipment containing polychlorinated biphenyls on any of the Real Property. Sellers have not conducted activities on the Real Property involving the treatment, storage or disposal of Hazardous Materials. To the knowledge of Seller or Harcke, no previous owner or tenant of the Real Property has spilled, disposed, discharged, emitted or released any Hazardous Materials into, upon or from any Real Property or into or upon the soil, ground or surface water nor has violated any Environmental Requirements with respect to the Real Property.

(b) Except as set forth on SCHEDULE 5.16(b), each Seller is in compliance and has complied in all material respects with all federal, state and local Environmental Requirements and has not been cited for any violation of any such Environmental Requirements. Except as set forth on SCHEDULE 5.16(b), no capital expenditures will be required for compliance with any applicable Environmental Requirements. Except as set forth on SCHEDULE 5.16(b), there is no pending investigation, civil, criminal or administrative action, notice or demand letter, notice of violation, or other proceeding known to Sellers or Harcke by any Governmental Entity with respect to ground or surface water, soil or air contamination, the storage, treatment, release, transportation or disposal of Hazardous Materials, the use of underground storage tanks by Sellers or the violation of any Environmental Requirement. Except as set forth on SCHEDULE 5.16(b), Sellers have not received any notice or other communication concerning any past,

present or future events, actions or conditions which under present Law may give rise to any liability of Sellers relating to the presence of Hazardous Materials on the Real Property or on the real property of any Person. Except as set forth on SCHEDULE 5.16(b), Sellers do not have any agreement with any Governmental Entity relating to any such environmental matter or any environmental or Hazardous Materials cleanup.

SECTION 5.17. LICENSES AND PERMITS. Sellers have obtained all Licenses and Permits necessary for the conduct of the Business and all Licenses and permits are in full force and effect, including those Licenses and Permits necessary to comply with Environmental Requirements. The Licenses and Permits are described in SCHEDULE 5.17. All of the Licenses and Permits are assignable to Buyer as contemplated by this Agreement. The consummation of the transactions contemplated hereby shall not interrupt or give any Governmental Entity the right to terminate or interrupt the continuation of any of the Licenses and Permits or the conduct of the Business. Sellers are in compliance with all terms, conditions and requirements of all Licenses and Permits and no proceeding is pending or, to the knowledge of Sellers or Harcke, threatened relating to the termination, revocation, limitation or modification of any of the Licenses or Permits.

SECTION 5.18. INSURANCE; BONDS. SCHEDULE 5.18 lists all policies of liability, fire, casualty, business interruption, workers’ compensation and other forms of insurance (collectively, “POLICIES” and individually, a “POLICY”) insuring the properties, assets or operation of the Business, setting forth the carrier, policy number, expiration dates, premiums, description of type of coverage and coverage amounts. Sellers have made true and complete copies of all such policies available to Buyer for inspection. Except as set forth on SCHEDULE 5.18, there are no outstanding bonds or other surety arrangements issued or entered into in connection with the assets and properties of Sellers or the Business. Except as set forth on SCHEDULE 5.18, no bond or other surety arrangement is required to satisfy any contractual, statutory or regulatory requirement applicable to Sellers or the Business or to conduct the Business as currently conducted and all bonds or other surety arrangements of each Seller are in full force and effect.

SECTION 5.19. ASSIGNED CONTRACTS. Each Assigned Contract is in full force and effect. Neither Sellers, nor, to the knowledge of Sellers or Harcke, any other party thereto has breached any provision of, or is in default under, the terms of any of the Assigned Contracts. None of the Assigned Contracts require any consents or approvals to the assignment thereof to Buyer as contemplated hereby, except as set forth on SCHEDULE 5.19.

SECTION 5.20. CUSTOMERS. SCHEDULE 5.20 sets forth a list of the Branford’s twenty (20) largest customers by volume (with specification of the volume) in each of the fiscal years ended April 30, 2002, 2003 and 2004. No customer of Branford has terminated or changed in any material respect, or to the knowledge of Sellers or Harcke, intends to terminate or change in any material respect, its customer relationship with Branford.

SECTION 5.21. COMPLIANCE WITH LAW. Sellers and the Business are in compliance with all applicable Laws, including those applicable to discrimination in employment, occupational safety and health, trade practices, competition and pricing, product warranties, zoning, building, sanitation, employment, retirement, labor relations, product advertising and any applicable Environmental Requirements. Sellers are not in default or violation with respect to any order,

writ, judgment, award, injunction or decree of any Governmental Entity or arbitrator applicable to them or the Business, their Personnel or any of the Acquired Assets, or are aware of any factual circumstances which are likely to result in such default or violation.

SECTION 5.22. LITIGATION. Except as set forth on SCHEDULE 5.22, (a) there are no claims, actions, suits, proceedings, arbitral actions, or investigations pending or, to the knowledge of the Sellers or Harcke, threatened against or directly or indirectly involving Sellers, the Business, or any of the Acquired Assets; and (b) there are no unsatisfied judgments of any kind against Sellers, the Business or the Acquired Assets.

SECTION 5.23. TITLE TO THE ACQUIRED ASSETS AND RELATED MATTERS. Sellers have good, marketable and insurable title to all of the Acquired Assets, free and clear of all Encumbrances. Sellers have the complete and unrestricted power and the unqualified right to sell, convey, assign, transfer and deliver the Acquired Assets, and the deeds and other instruments of assignment and transfer executed and delivered by Sellers to Buyer are valid and binding obligations of Sellers, enforceable in accordance with their respective terms, and effectively vest in the Buyer good, marketable and insurable title to the Acquired Assets. All consents necessary to consummate the transactions contemplated by this Agreement have been obtained and are valid and binding upon the persons giving the same. The Acquired Assets include all assets (tangible and intangible, and all leases and other agreements) necessary or desirable to permit the Buyer to carry on the Business subsequent to the Closing as presently conducted by Sellers.

SECTION 5.24. ABSENCE OF CERTAIN BUSINESS PRACTICES. Within the five (5) years immediately preceding the date of this Agreement, neither Sellers, nor any Personnel, nor any other Person acting on behalf of Sellers has given or agreed to give, directly or indirectly, any gift or similar benefit to any dealer, supplier, customer, governmental employee or other Person who is or may be in a position to help or hinder the Business (or assist Sellers in connection with any actual or proposed transaction relating to the Business or the Acquired Assets), which might subject Sellers to any damage or penalty in any civil, criminal or governmental litigation or proceeding.

SECTION 5.25. NO OTHER AGREEMENTS TO SELL ASSETS. No Seller has any obligation, absolute or contingent, to any other Person to sell any of the Acquired Assets, or to effect any merger, consolidation or other reorganization of Sellers, or to enter into any agreement with respect thereto.

SECTION 5.26. DEBTS OF BRANFORD. The sum of the net proceeds received by Branford under this Agreement and the value of the Excluded Assets will be sufficient to permit Branford to pay all debts due and owing by Branford.

SECTION 5.27. DUE DILIGENCE. With respect to all representations and warranties which are qualified “to the knowledge of Sellers or Harcke,” “known to Sellers or Harcke,” or words of similar import, Sellers and Harcke have made reasonable investigation of the subject matter of the representation (and in the case of Sellers conferred with appropriate Personnel and other representatives of Sellers) and examined all appropriate records and documents in Sellers’ or Harcke’s possession or control.

SECTION 5.28. BROKER’S AND FINDER’S FEES. No broker, finder or other Person is entitled to any commission or finder’s fee in connection with this Agreement or the transactions contemplated by this Agreement as a result of any actions or commitments of Sellers or Harcke.

SECTION 5.29. ALL MATERIAL INFORMATION. Neither Sellers nor Harcke has withheld from Buyer any material facts relating to Sellers, the Acquired Assets, the Business or the prospects of the Business. No representation or warranty made herein by Sellers or Harcke and no statement contained in any certificate or other agreement or instrument furnished or to be furnished to Buyer by Sellers or Harcke in connection with the transactions contemplated by this Agreement contains an untrue statement of a material fact or omits to state any material fact necessary in order to make any representation, warranty or other statement of Sellers or Harcke not misleading.

SECTION 5.30. SELLERS AND HARCKE INDEPENDENTLY ADVISED. Sellers and Harcke have been represented and advised by independent legal and tax counsel in connection with this Agreement and the transactions contemplated by this Agreement, and are not relying upon Buyer or any of its employees or professional advisors with respect to such matters.

SECTION 5.31. CONDITION OF ACQUIRED ASSETS. The Acquired Assets are in the same condition as they were on April 30, 2004, reasonable wear and tear excepted.

ARTICLE VI.

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby represents and warrants to Sellers as follows:

SECTION 6.01. ORGANIZATION; POWER. Buyer is a corporation duly and validly existing under the laws of the State of Delaware, and Buyer has all requisite corporate power and authority to own its properties and assets and to conduct its business as now conducted.

SECTION 6.02. AUTHORIZATION AND VALIDITY OF AGREEMENT. Buyer has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement and the performance of the obligations of Buyer hereunder have been duly authorized by all necessary corporate action by the Board of Directors of Buyer, and no other corporate proceedings on the part of Buyer are necessary to authorize the execution, delivery or performance. This Agreement has been duly executed by Buyer and constitutes Buyer’s valid and binding obligation, enforceable against Buyer in accordance with its terms.

SECTION 6.03. NO CONFLICT OR VIOLATION. The execution, delivery and performance of this Agreement by Buyer does not and shall not: (a) violate or conflict with any provision of its certificate of incorporation, bylaws or other governing document of Buyer, (b) violate any provision of Law of any Governmental Entity, or (c) violate or result in a breach of or constitute (with due notice or lapse of time or both) a default under any contract, lease, loan agreement, mortgage, security agreement, trust, indenture or other agreement or instrument to which Buyer is a party, or by which it is bound or to which any of its properties or assets is subject.

SECTION 6.04. APPROVALS AND CONSENTS. The execution, delivery and performance of this Agreement by Buyer does not require Buyer to obtain the consent or approval of, or to make any filing with, any Governmental Entity or other Person except (a) as may be required to obtain the transfer of any Licenses or Permits, and (b) such consents, approvals and filings, the failure to obtain or make which would not, individually or in the aggregate, have a Material Adverse Effect on Buyer or on the ability of Buyer to perform its obligations hereunder.

SECTION 6.05. BROKER’S AND FINDER’S FEES. No broker, finder or other Person is entitled to any commission or finder’s fee in connection with this Agreement or the transactions contemplated by this Agreement as a result of any actions or commitments of Buyer.

ARTICLE VII.

COVENANTS OF SELLERS AND HARCKE

Sellers and Harcke covenant and agree with Buyer that, at all times from and after the date hereof, Sellers and Harcke will comply with all covenants and provisions of this ARTICLE VII to the extent such covenants apply to such party, except to the extent Buyer may otherwise consent in writing.

SECTION 7.01. REGULATORY AND OTHER APPROVALS. Sellers and Harcke will as promptly as reasonably practicable take all commercially reasonable steps necessary to (a) obtain all consents, approvals or actions of, make all filings with and give all notices to Governmental Entity or any other Person required of Sellers or Harcke to transfer the Acquired Assets as contemplated hereby, including, without limitation, any consents or approvals required under any Contracts to which Sellers or Harcke is a party or by which any of their Acquired Assets is bound or under any Licenses or Permits issued to Branford, (b) provide such other information and communications to such Governmental Entity or other Persons as such Governmental Entity or other Persons may reasonably request in connection therewith and (c) provide reasonable cooperation to Buyer in connection with the performance of its obligations under SECTIONS 8.03 and 8.04 below. Branford will provide, or cause to be provided, notification to Buyer when any such consent, approval, action, filing or notice referred to in clause (a) above is obtained, taken, made or given, as applicable, and will advise Buyer of any communications (and, unless precluded by Law, provide copies of any such communications that are in writing) with any Governmental Entity or other Person regarding any of the transactions contemplated by this Agreement.

SECTION 7.02. FULFILLMENT OF CONDITIONS. Sellers and Harcke, as applicable (a) will execute and deliver at the Closing each certificate, document and instrument that Sellers or Harcke, as applicable, is hereby required to execute and deliver as a condition to Closing, (b) will take all commercially reasonable steps necessary and proceed diligently and in good faith (i) to satisfy each condition to the obligations of Buyer contained in this Agreement and (ii) to consummate all of the transactions contemplated by this Agreement, and (c) will not take or fail to take any commercially reasonable action that would reasonably be expected to result in the nonfulfillment of any obligation of Sellers or Harcke contained in this Agreement.

SECTION 7.03. CONDUCT OF BUSINESS. Branford will, from the date hereof until the earlier of the Closing Date or termination of this Agreement, conduct business only in the ordinary course in a manner consistent with past practices. Sellers will not, from the date hereof until the earlier of the Closing date or termination of this Agreement, make any bulk sales of Inventory inconsistent with past practice to any third party without the express prior written consent of Buyer.

SECTION 7.04. CERTAIN RESTRICTIONS. Branford will, from the date hereof until the earlier of the Closing Date or termination of this Agreement, refrain from:

(a) amending its articles of incorporation or bylaws (or other comparable charter documents) or taking any action with respect to any such amendment or any recapitalization, reorganization, liquidation or dissolution, except as specifically contemplated by this Agreement;

(b) except as specifically contemplated by this Agreement, authorizing, issuing, selling or otherwise disposing of any shares of capital stock or other equity security of Branford or any security convertible into or exchangeable or exercisable for any shares of capital stock or other equity security of Branford;

(c) engaging with any Person in any merger or other business combination, or purchase substantially all of the assets of, or otherwise acquire any material assets or business of any corporation, partnership, association or other business organization or division thereof;

(d) making capital expenditures or commitments for additions to property, plant or equipment constituting capital assets which exceed $5,000 in the aggregate;

(e) entering into, modifying in any material respect or terminating any Contract requiring payments to or by Branford in an amount in excess of $5,000, other than such Contracts that are terminable without material cost or penalty to Branford without more than 30 days notice; provided, however, in the event that Branford provides written notice to Buyer requesting Buyer’s consent to enter into, materially modify or terminate any material Contract for which such execution, modification or termination would otherwise be prohibited by this SECTION 7.04(e) (which notice shall include a copy of the new or amended Contract or otherwise describe the material terms of any requested action by Branford), Buyer shall have three (3) Business Days to notify Branford that Buyer does not consent to such action and, unless such written notice is delivered to Seller on or before the close of business of such third business day, such consent shall be deemed to be granted and it shall not be a breach of this SECTION 7.04(e) for Branford to enter into, modify or terminate such Contract as described, and on the terms specified, in Branford’s written notice to Buyer;

(f) making any change in any method of accounting or accounting practice;

(g) mortgaging, pledging or encumbering or selling, assigning, transferring, conveying, leasing or otherwise disposing of any material Acquired Assets except in the ordinary course of business or as contemplated by this Agreement;

(h) except as otherwise required by law, taking any action with respect to the grant of any severance or termination pay (otherwise than pursuant to the terms of Branford’s Plans in

effect on the date hereof and made available to Purchaser) which will become due and payable after the Closing Date;

(i) hiring any additional officer or terminating existing officers;

(j) adopting, entering into or amending in any material respect any of Branford’s Plans;

(k) making any loans or advances to any Person, except for advances to any employee of Branford with respect to expenses incurred on behalf of Branford in the ordinary course of business or in the usual course of such employee’s employment;

(l) making any income tax election;

(m) declaring, paying or incurring any obligation to declare or pay any dividend or other distribution on its capital stock or making or incurring any obligation to make any redemption with respect to, or purchase of, any share of its capital stock;

(n) entering into any line of business other than the business of Branford as of the date hereof;

(o) paying the principal amount of any Indebtedness of Branford other than as expressly required by the terms thereof or repayment of working capital borrowings in the ordinary course;

(p) take any action that would have a Material Adverse Effect on the title to or the condition of the Real Property; or

(q) entering into any Contract to do or engage in any of the foregoing; provided, however, that nothing contained in this Agreement shall in any way prohibit or restrict Branford from, to the extent necessary, paying consent, modification or waiver fees in respect thereto or in respect of SECTION 7.01.

SECTION 7.05. NO SOLICITATION. From the date hereof through the Closing Date or earlier termination of this Agreement pursuant to SECTION 14.01, neither Sellers nor Harcke shall, or shall knowingly permit their respective Affiliates, officers, directors, employees, representatives and agents to, directly or indirectly, encourage, solicit, participate in or initiate discussions or negotiations with, encourage the submission of any inquiry, proposal or offer from any Person or entity related to the acquisition of any debt or equity securities, or any substantial portion of the assets of Branford, or provide any information to, any Person or group of Persons (other than Buyer or any of its Affiliates) in furtherance of any merger, sale of assets, sale of shares of capital stock or similar transactions involving Branford. Either Seller or Harcke, as the case may be, will notify Buyer immediately if any person or entity makes any proposal, offer, inquiry, or contact with respect to any of the foregoing.

SECTION 7.06. USE OF NAMES. Sellers shall take any and all actions as may be necessary to transfer exclusive use of the names “Branford Wire & Manufacturing Company” and “B&S Sales” to Buyer. On and after the Closing Date, Sellers shall cease any use of the names

“Branford Wire & Manufacturing Company” and “B&S Wire Rod Sales” and shall amend their relevant organizational documents to change all relevant names to a name that is not confusingly similar to either.

SECTION 7.07. POST-CLOSING OPERATIONS. For a period of forty-five (45) days following the Closing Date, Sellers hereby irrevocably grant, authorize and license Buyer (as its contractor or otherwise), to the extent Buyer and Sellers are entitled to do so under applicable Laws, at Buyer’s option, to operate the Business under any or all of Sellers’ Licenses and Permits and interstate and intrastate operating authorities (and license plates). Sellers shall not take any action to terminate, abandon or revoke any of such Licenses or Permits or operating authorities during such 45-day period, except as may be required by applicable Law.

SECTION 7.08. NOTIFICATION.

(a) Between the date of this Agreement and the Closing Date, Sellers and Harcke will promptly notify Buyer in writing if they or any of them become aware after the date of this Agreement of the occurrence of any event that would (except as expressly contemplated by this Agreement) cause or constitute a breach of any representation or warranty of Sellers or Harcke contained in this Agreement had such representation or warranty been made as of the time of the occurrence of such event.

(b) Between the date of this Agreement and the Closing Date, Sellers and Harcke will promptly notify Buyer of the occurrence of any breach of any covenant of such party in this ARTICLE VII or of the occurrence of any event that may make the satisfaction of the conditions in ARTICLE IX impossible or unlikely.

ARTICLE VIII.

COVENANTS OF BUYER

Buyer covenants and agrees with Seller that, at all times from and after the date hereof, Buyer will comply with all covenants and provisions of this ARTICLE VIII.

SECTION 8.01. ACCESS. After the Closing, Buyer shall permit Sellers and Harcke and their representatives to have access, during regular business hours and upon reasonable advance notice, to all books and records of Sellers for any purpose relating to taxes or regulatory matters, and shall furnish, or cause to be furnished, to Sellers or Harcke such other information that is available as Sellers or Harcke shall from time to time reasonably request. In addition, Buyer shall provide Sellers with reasonable access to Buyer’s controller to provide accounting support to Sellers for six (6) months following Closing at a mutually agreed upon fee.

SECTION 8.02. FULFILLMENT OF CONDITIONS. Buyer, (a) will execute and deliver at the Closing each certificate, document and instrument that Buyer, as applicable, is hereby required to execute respectively, and deliver as a condition to the Closing, (b) will promptly and affirmatively take all commercially reasonable steps necessary and proceed diligently and in good faith (i) to satisfy each other condition to the obligations of Sellers and Harcke contained in this Agreement and (ii) to consummate all of the transactions contemplated in this Agreement, and (c) will not take or fail to take any commercially reasonable action that would reasonably be

expected to result in the nonfulfillment of any obligation of Buyer, as applicable, contained in this Agreement.

SECTION 8.03. EMPLOYEE MATTERS.

(a) Buyer shall have the right, but not the obligation, to offer employment to all active full-time and part-time employees of Sellers who work in the Business as of the Closing, with all such employees who accept Buyer’s offer of employment at or immediately following the Closing being the “HIRED EMPLOYEES.”

(b) Effective on the Closing Date, Buyer shall provide Hired Employees the opportunity to participate in employee benefit plans, programs and arrangements substantially similar to those provided by Sellers prior to Closing (“BUYER BENEFIT PLANS”). Buyer shall waive any requirements or conditions under the Buyer Benefit Plans that relate to length of service or waiting periods in such Buyer Benefit Plans subject to any requirements under applicable insurance contracts.

(c) Hired Employees shall receive credit for all purposes, including, without limitation, eligibility to participate, vesting, and eligibility to receive benefits, under any employee benefit plan, program or arrangement (including vacation benefits) offered within one (1) year following the Closing Date to such Hired Employees by Buyer for service accrued or deemed accrued prior to the Closing Date with Sellers; provided, however that such crediting of service shall not operate to duplicate any benefit or funding of any such benefit for any period of service.

(d) Branford shall fully vest all employees participating in its Tax-qualified Code Section 401(a) plan as of the Closing. Branford shall terminate its Tax-qualified Code Section 401(a) plan in accordance with its terms, as soon as practicable on or after the Closing Date and, in any event, within sixty (60) days following the Closing Date. Buyer’s Tax-qualified Code Section 401(a) retirement plan will accept eligible direct rollover distributions from Branford’s Tax-qualified Code Section 401(a) plan, with respect to distributions to Hired Employees from such plan, on receipt of a statement from Branford on or about the time such distributions are rolled into Buyer’s Tax-qualified Code Section 401(a) retirement plan that such plan continues to meet the requirements of Code Section 401(a).

(e) Buyer shall not be responsible for any obligation, whether arising prior to or after the Closing Date, with respect to those employees of any Seller to whom Buyer does not offer employment or who do not accept Buyer’s offer of employment at the Closing (“TERMINATED EMPLOYEES”). Sellers shall be solely responsible and liable for providing any and all severance payments or other benefits to Terminated Employees, including, without limitation, any medical and/or health benefits required under COBRA, arising from or with any qualifying event (as defined under COBRA) which occurred on or before the Closing Date.

(f) Sellers shall be responsible for all claims, charges, complaints or suits of any nature whatsoever by Hired Employees, Terminated Employees or former employees that arose out of or in the course of the employment or other relationship, or termination of such employment or other relationship, with Sellers on or prior to the Closing Date.

SECTION 8.04. ASSUMED LIABILITIES. Buyer will timely pay and perform the Assumed Liabilities in accordance with their terms.

ARTICLE IX.

CONDITIONS TO OBLIGATIONS OF BUYER

The obligations of Buyer hereunder are subject to the fulfillment, at or before the Closing, of each of the following conditions (all or any of which may be waived in whole or in part by Buyer in its sole discretion):

SECTION 9.01. REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties made by Sellers and Harcke in this Agreement shall be true and correct as of the Closing.

SECTION 9.02. PERFORMANCE. Sellers and Harcke shall have performed and complied with the agreements, covenants and obligations required by this Agreement to be so performed or complied with by Sellers and Harcke, as the case may be, at or before the Closing.

SECTION 9.03. CLOSING DELIVERIES. All deliveries by Seller pursuant to SECTION 4.02 have been delivered.

SECTION 9.04. LAWS. There shall not be in effect on the Closing Date any Law restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement.

SECTION 9.05. REGULATORY CONSENTS AND APPROVALS. All consents, approvals and actions of, filings with and notices to any Governmental or Regulatory Authority necessary to permit Buyer, Sellers and Harcke to perform their respective obligations under this Agreement and to consummate the purchase and sale of the Acquired Assets contemplated hereby as set forth on SCHEDULE 9.05 shall have been duly obtained, made or given and shall be in full force and effect, and all terminations or expirations of waiting periods imposed by any Governmental or Regulatory Authority necessary for the consummation of the transactions contemplated by this Agreement shall have occurred.

SECTION 9.06. NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date, there shall not have occurred any event or circumstance which, individually or in the aggregate, had or would reasonably be expected to have a Material Adverse Effect on Sellers or any of the Acquired Assets.

SECTION 9.07. BALANCE SHEET. There shall be no extraordinary adverse changes in the financial condition of any Seller from that set forth on the Interim Balance Sheet, except for changes resulting from business done in the ordinary course consistent with past practice.

SECTION 9.08. BULK SALES COMPLIANCE. Sellers shall have complied with all applicable bulk sales or bulk transfer laws in a manner that is satisfactory to Buyer and shall have delivered to Buyer on or prior to the Closing Date evidence of such compliance in form and substance satisfactory to Buyer and its counsel.

SECTION 9.09. APPROVAL OF BOARD OF DIRECTORS. The purchase of the Acquired Assets shall have been approved by the Board of Directors of Haynes International, Inc.

ARTICLE X.

CONDITIONS TO OBLIGATIONS OF SELLERS AND HARCKE

The obligations of Sellers and Harcke hereunder are subject to the fulfillment, at or before the Closing, of each of the following conditions (all or any of which may be waived in whole or in part by Sellers and/or Harcke, as the case may be, in its or his sole discretion):

SECTION 10.01. REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties made by Buyer in this Agreement shall be true and correct as of the Closing Date.

SECTION 10.02. PERFORMANCE. Buyer shall have performed and complied with the agreements, covenants and obligations required by this Agreement to be so performed or complied with by Buyer as applicable at or before the Closing.

SECTION 10.03. LAWS. There shall not be in effect on the Closing Date any Law restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement.

SECTION 10.04. REGULATORY CONSENTS AND APPROVALS. All consents, approvals and actions of, filings with and notices to any Governmental Entity necessary to permit Sellers, Harcke and Buyer to perform their obligations under this Agreement and to consummate the transactions contemplated hereby, shall have been duly obtained, made or given and shall be in full force and effect and all terminations or expirations of waiting periods imposed by any Governmental or Regulatory Authority necessary for the consummation of the transactions contemplated by this Agreement shall have occurred.

ARTICLE XI.

EXCESS INVENTORY

SECTION 11.01. PROCEDURES FOR STORAGE AND DISPOSITION OF EXCESS INVENTORY. For a period of thirty-six (36) months following the Closing Date, title and risk of loss and/or damage to the Excess Inventory shall remain with Carolina Industries unless and until purchased by Buyer in accordance with this ARTICLE XI. During such time period, the Excess Inventory shall be dealt with according to the following procedures:

(a) The Excess Inventory shall be stored at Buyer’s facility located at 158 N. Egerton Road, Mountain Home, NC 28758-0677 (the “STORAGE SITE”) and shall be segregated from Buyer’s inventory located at the Storage Site.

(b) The Excess Inventory shall be classified by industrial alloy identification and size, and Buyer shall purchase such materials from no party other than Carolina Industries to the extent that there are materials of the same industrial alloy identification and size remaining in

Excess Inventory at the time of such purchase, except for those commitments to purchase such materials that remain open at Closing and are assumed by Buyer.

(c) The purchase price Buyer shall pay to Carolina Industries for any Excess Inventory purchased pursuant to this ARTICLE XI shall be the Replacement Cost of such material. For purposes of this ARTICLE XI, “REPLACEMENT COST” shall mean the average replacement cost, including material costs and alloy surcharges, quoted by one foreign and one domestic manufacturer of material of the same industrial alloy identification number and size from a reputable provider of such materials. The purchase price for Excess Inventory purchased by Buyer in accordance with this ARTICLE XI shall be payable to Carolina Industries within ten (10) days of the date of any such purchase.

(d) In the event that Buyer removes any Excess Inventory from the Storage Site or destroys or damages any Excess Inventory by any intentional act or by its negligence, Buyer shall be immediately obligated to purchase the portion of the Excess Inventory so removed, damaged or destroyed. Buyer shall not be obligated to purchase any Excess Inventory removed by Carolina Industries or damaged or destroyed by the intentional act or negligence of Carolina Industries.

(e) After the closing and continuing until such time as all Excess Inventory has been sold, Carolina Industries, upon reasonable written request, shall have access to the inventory and sales records of Buyer that are reasonably necessary to determine Buyer’s compliance with the provisions of this ARTICLE XI.

(f) Carolina Industries shall have the right to sell the Excess Inventory to any third party, whether such third party is related or unrelated to Buyer. In addition, Buyer shall have a right of first refusal to purchase any amounts of Excess Inventory offered to be sold to any such third party on either (in Buyer’s sole discretion) (i) the terms and conditions set forth in this ARTICLE XI or (ii) the terms upon which Carolina Industries offered such amounts of Excess Inventory to such third party. Prior to any proposed sale of Excess Inventory to a third party, Carolina Industries shall, at least one (1) Business Day prior to the consummation of such proposed sale, report to Buyer in writing the details of such proposed sale, including the amount, industrial alloy identification and size of the Excess Inventory to be sold as well as the proposed terms and conditions of such sale, and shall not consummate any such proposed sale before expiration of such one (1) Business Day period.

(g) Upon reasonable prior written request, Buyer shall load Excess Inventory sold to any third party onto Carolina Industries trucks at no cost to Carolina Industries. Carolina Industries shall make all arrangements for truck and rail transportation of any Excess Inventory sold to a third party from the Storage Site and pay any and all shipping and handling charges incurred FOB the Storage Site.

(h) Until all Excess Inventory has been sold, Carolina Industries shall have the right to conduct periodic physical inventories and audits of the Excess Inventory. Buyer shall cooperate with Carolina Industries in any such inventories and audits, including making available such personnel and equipment as may be reasonably necessary to allow Carolina Industries to access, move and count such Excess Inventory. Buyer shall also allow Carolina

Industries to consult with Buyer’s personnel regarding the disposition of excess inventory upon reasonable prior request.

(i) At the end of the thirty-six (36) month period following the Closing Date, Buyer shall purchase from Carolina Industries all Excess Inventory then remaining upon the terms and conditions set forth in this SECTION 11.01.

SECTION 11.02. COMPLIANCE. Each of Buyer and Carolina Industries shall perform their obligations under this ARTICLE XI in compliance with good safety practices and all applicable Federal, State of North Carolina and local laws, rules, regulations and safety requirements. Buyer and Carolina Industries shall each be responsible for acquiring at its cost any licenses, permits, franchises, authorizations, or approvals issued by or under the authority of a Governmental Authority that relate directly or indirectly to, or are necessary for, their performance under this ARTICLE XI. Carolina Industries shall also comply with all rules and regulations of Buyer while on Buyer’s premises. Each of Buyer and Carolina Industries shall be severally liable for its own failure to comply with this SECTION 11.02, but neither Buyer nor Carolina Industries shall be liable for any failure of the other to comply with this SECTION 11.02.

SECTION 11.03. SALES EFFORTS. Buyer shall, after the Closing Date, continue to market and sell, for its own account, raw materials of the same industrial alloy identification and size as those contained in Excess Inventory at prices and on other terms determined by Buyer from time to time, utilizing Buyer’s employee, Tom Sigler, for so long as Mr. Sigler continues to be employed by Buyer.

SECTION 11.04. OFFSET OF RETURNS FOR CREDIT. In the event that any returns for credit are received and made by Buyer with respect to sales of inventory made by any Seller prior to the Closing Date, Buyer shall be entitled to an offset against any amounts to be paid to Carolina Industries for Excess Inventory purchased by Buyer pursuant to this ARTICLE XI in an amount equal to the amount of the credit given to such customer MINUS any scrap or resale value for such returned inventory which value is received by Buyer.

ARTICLE XII.

OTHER AGREEMENTS

SECTION 12.01. TAX RETURNS; COOPERATION ON TAX MATTERS. Sellers and Harcke shall prepare and file or cause to be prepared and filed with the appropriate Tax authority all Tax Returns required to be filed by Sellers or Harcke with respect to any period ending on or prior to the Closing Date, including without limitation the federal and state corporate and individual Tax Returns for Sellers and Harcke for the calendar year 2004, and shall timely pay all Taxes shown to be due on such Tax Returns. Sellers shall furnish or cause to be furnished to Buyer, as promptly as practicable, whether before or after the Closing Date, such information and assistance relating to the Business as is reasonably necessary for the preparation and filing by the Buyer of any Tax Return, claim for refund, or other required or optional filings relating to Tax matters, for the preparation by Buyer for, and proof of facts during, any Tax audit, for the preparation by Buyer for any Tax protest, for the prosecution or defense by Buyer of any suit or

other proceeding relating to Tax matters, or for the answer by Buyer to any Governmental Entity inquiry relating to Tax matters.

SECTION 12.02. FILES AND RECORDS. Buyer shall retain possession of all Files and Records transferred to Buyer hereunder and coming into existence after the Closing Date which relate to the Business before the Closing Date, for a period up to and not to exceed the time period which is statutorily required by law for such Files and Records.

SECTION 12.03. CERTAIN COSTS. Buyer shall bear the cost of the title insurance policies and surveys and the Site Assessment required to be delivered at Closing under ARTICLE IV.

SECTION 12.04. PAYMENT OF DEBTS. Sellers will pay all debts due and owing and will use the net proceeds from the Sale of Assets hereunder to pay or provide for payment of all debts and obligations of Sellers.

SECTION 12.05. COLLECTION OF CERTAIN ACCOUNTS RECEIVABLE.

(a) For a period of one (1) year after the Closing Date, Buyer agrees to use reasonable commercial efforts to collect Excluded Accounts Receivable in a manner consistent with the manner in which Buyer collects current accounts receivable for its own account, but in no event shall Buyer be obligated to employ a collection agency, engage counsel or institute any other extraordinary collection efforts or litigation to collect any Excluded Accounts Receivable. All amounts received by Buyer from any account debtor who is obligated on any Excluded Accounts Receivable during the one (1) year period following the Closing Date shall be applied to the Excluded Accounts Receivable or to the accounts receivable of Buyer as directed by the account debtor in its transmittal of the applicable payment or otherwise; provided, however, if such account debtor fails to specifically direct the application of its payment in its transmittal, the payment shall be applied to the account receivable of Buyer with respect to such account debtor and then to any Excluded Accounts Receivable of such account debtor.

(b) Ninety-five percent (95%) of any amounts received by Buyer in respect of any Excluded Accounts Receivable during the one-year period following the Closing Date will be remitted to Sellers by Buyer on a monthly basis. From and after the date which is one (1) year after the Closing Date through the date that is three (3) years after the Closing Date, eighty percent (80%) of any amounts received by Buyer in respect of any Excluded Accounts Receivable will be remitted to Sellers by Buyer on a monthly basis. From and after the date that is three (3) years after the Closing Date, Buyer shall be relieved of any and all obligations to remit to Sellers any amount received with respect to any Excluded Accounts Receivable.

(c) Buyer shall not have any obligation to make any efforts to collect any Uncollectible Accounts Receivable. Notwithstanding the foregoing, eighty percent (80%) of any amounts collected by Buyer in respect of any Uncollectible Accounts Receivable during the three (3) year period following the Closing Date will be remitted to Sellers by Buyer on a monthly basis. From and after the date which is three (3) years after the Closing Date, Buyer shall be relieved of any and all obligations to remit to Sellers any amount collected with respect to any Uncollectible Accounts Receivable.

(d) On the Closing Date, Sellers shall deliver to Buyer a written list setting forth all of the Uncollectible Accounts Receivable, including the name and address of the account debtor, the invoice date and the outstanding balance as of the Closing Date of each Uncollectible Accounts Receivable, and such other information as the parties shall otherwise agree.

SECTION 12.06. COSTS OF CLEAN-UP OF PCP CONTAMINATION. Sellers and Buyer are aware of certain pentachlorophenol (“PCP”) contamination on the Real Property. Buyer shall control and direct any and all investigation, remediation, clean-up, monitoring and all such other actions as may be required by the State of North Carolina to obtain a closure letter or other documentation stating that all Environmental Requirements in any way relating to the PCP contamination have been satisfied and no further obligations exist on the part of Buyer. Sellers shall either pay directly or reimburse Buyer, as the parties shall mutually agree, for any and all costs of the investigation, remediation, clean-up, monitoring and all such other actions as described above up to a maximum of Five Hundred Thousand Dollars ($500,000.00); provided that Buyer agrees to conduct any and all such required actions in a commercially reasonable manner. In order to secure the payment of all amounts due or to become due under this SECTION 12.06, Sellers have agreed to grant a security interest in the Excess Inventory, to be evidenced by the Security Agreement. Sellers agree to pay the first Five Hundred Thousand Dollars ($500,000.00) of proceeds resulting from sales of the Excess Inventory into an escrow account with an escrow agent acceptable to Buyer and Sellers pursuant to an escrow agreement to be executed as of the Closing that is acceptable to Buyer and Seller that shall secure the payment of all amount due or to become due under this SECTION 12.06. Once the principal amount deposited by Sellers into the aforementioned escrow is equal to Five Hundred Thousand Dollars ($500,000.00), the Security Agreement shall terminate.

ARTICLE XIII.

INDEMNIFICATION

SECTION 13.01. SURVIVAL. All representations and warranties contained in this Agreement shall survive the execution, delivery and performance hereof, notwithstanding any investigation conducted at any time with respect thereto, for the longer of (a) December 31, 2007 and until the resolution of the indemnification Claims received by the Indemnifying Party prior to such date, or (b) in the case of the representations and warranties made in any of SECTIONS 5.07, 5.08, 5.14 5.16, 5.17 and 5.21, a period ending sixty (60) days after the expiration of the statutory period of limitations, applicable to any matter subject to the representations and warranties contained in those sections and until the resolution of the indemnification Claims received by the Indemnifying Party prior to the expiration of such period; provided, however, that the representations and warranties set forth in SECTIONS 5.01, 5.02, 5.23 and 5.29, shall survive indefinitely.

SECTION 13.02. INDEMNIFICATION BY SELLERS. Each Seller jointly and severally (but not Harcke), shall indemnify and hold harmless Buyer and its successors and assigns and their respective shareholders, employees, officers, directors, members, representatives, Affiliates and agents from and against any and all damages, losses, obligations, liabilities, claims, encumbrances, penalties, costs and expenses, including reasonable attorneys’ fees (and costs and reasonable attorneys’ fees in respect of any suit to enforce this provision) (each a “CLAIM”),

arising from or relating to (a) any misrepresentation in or breach of any representation or warranty made by Sellers or Harcke in this Agreement or any Related Agreement; (b) nonfulfillment of any of the covenants or agreements of Sellers or Harcke in this Agreement or any Related Agreement; (c) any liability, obligation or commitment of any nature (absolute, accrued, contingent or other) of Sellers or relating to the Acquired Assets or the operation of the Business arising out of transactions entered into or events occurring prior to the Closing, including any successor liability or responsible officer liability asserted against Buyer for Taxes or otherwise relating to events occurring prior to the Closing; (d) any liability, obligation or commitment under any of the Assigned Contracts which Sellers performed or were obligated to perform prior to the Closing; (e) any investigation, civil, criminal or administrative action, notice or demand letter, notice of violation, or other proceeding by any Governmental Entity with respect to ground or surface water, soil or air contamination, the storage, treatment, release, transportation or disposal of Hazardous Materials, or the use of underground storage tanks, aboveground storage tanks, vaults, process tanks, other containment and associated piping and transformers by Sellers to the extent such contamination, storage, treatment, release, transportation, disposal or use occurred relating to any time on or before the Closing Date; (f) any investigation, civil, criminal or administrative action with respect to Branford’s Benefit Obligations or the Branford’s Plans; (g) any COBRA obligation of Sellers arising from any qualifying event as defined under Code Section 4980B(f)(3) and ERISA Section 603 occurring on or before the Closing Date; (h) any damage to property or injury to Persons resulting from the presence of Excluded Assets on the Real Property past the Closing Date, or in connection with the removal of such Excluded Assets from the Real Property; and (h) any and all actions, suits, investigations, proceedings, demands, assessments, audits and judgments arising out of any of the foregoing.

In addition, each Seller shall jointly and severally indemnify and hold Buyer harmless from and against any loss, claim, expense, damage or liability (including reasonable attorneys’ fees and expenses) to which Buyer and/or the Acquired Assets may become subject insofar as such loss, claim, damage or liability (or actions in respect thereof) arises out of or is based upon a breach or alleged breach of, or failure to comply with any provision of, or to give any notice or make any filing pursuant to, any bulk sales Law or similar Law of any state or other jurisdiction, whether or not Sellers or Buyer attempt to comply with such bulk sales Law. Nothing in this SECTION 13.02 shall estop or prevent either Sellers or Buyer from asserting as a bar or defense to any action or proceeding brought under any state bulk sales Law that such Law is not applicable to the transactions contemplated by this Agreement.

SECTION 13.03. INDEMNIFICATION BY BUYER. Buyer shall indemnify and hold harmless Sellers and Harcke and their respective successors and assigns and their respective shareholders, officers, directors, representatives, Affiliates and agents from and against any and all Claims resulting from or relating to (a) any misrepresentation in or breach of any representation or warranty made by Buyer in this Agreement or any Related Agreement; (b) nonfulfillment of any of the covenants or agreements of Buyer in this Agreement or any Related Agreement, (c) any liability, obligation or commitment under any of the Assigned Contracts which Buyer assumed and was obligated to perform after the Closing; and (d) any and all suits, actions, investigations, proceedings, demands, assessments, audits and judgments arising out of any of the foregoing.

SECTION 13.04. PROCEDURE. Promptly after acquiring knowledge of any Claim for which one of the parties hereto (the “INDEMNIFIED PARTY”) may seek indemnification against another party (the “INDEMNIFYING PARTY”) pursuant to this ARTICLE XIII, the Indemnified Party shall give written notice thereof to the Indemnifying Party. Failure to provide written notice shall not relieve the Indemnifying Party of its obligations under this ARTICLE XIII except to the extent that the Indemnifying Party demonstrates actual damage caused by that failure. The Indemnifying Party shall have the right to assume the defense of any Claim with counsel reasonably acceptable to the Indemnified Party upon delivery of written notice to that effect to the Indemnified Party. If the Indemnifying Party, after written notice from the Indemnified Party, fails to take timely action to defend the action resulting from the Claim, the Indemnified Party shall have the right to defend the action resulting from the Claim by counsel of its own choosing, but at the cost and expense of the Indemnifying Party. The Indemnified Party shall have the right to settle or compromise any Claim against it, and, as the case may be, recover from the Indemnifying Party any amount paid in settlement or compromise thereof, if it has given written notice thereof to the Indemnifying Party and the Indemnifying Party has failed to take timely action to defend the same. The Indemnifying Party shall have the right to settle or compromise any claim against the Indemnified Party without the consent of the Indemnified Party.

SECTION 13.05. BUYER RIGHT TO OFFSET. Buyer shall have the right to offset any amount owing to it under SECTION 12.06 and/or this ARTICLE XIII against any amount to be paid to Branford under ARTICLE XI.

ARTICLE XIV.

TERMINATION

SECTION 14.01. TERMINATION. This Agreement may be terminated, and the transactions contemplated hereby may be abandoned:

(a) at any time before the Closing, by mutual written agreement of Buyer, Sellers and Harcke;

(b) at any time before the Closing without liability to the terminating party, by Buyer, Sellers or Harcke, in the event that any Law becomes effective and no longer subject to appeal or further administrative or judicial reconsideration or review, restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement upon notification of the non-terminating party by the terminating party;

(c) at any time before the Closing, by notice given by Buyer, Sellers or Harcke (i) in the event of a breach of this Agreement or any Real Estate Purchase Agreement by the non-terminating party which would reasonably be expected to have a Material Adverse Effect on the terminating party, if such non-terminating party fails to cure such breach within ten (10) Business Days following notification thereof by the terminating party or (ii) upon the satisfaction of any condition to the terminating party’s obligations under this Agreement or any Real Estate Purchase Agreement becoming impossible or impracticable with the use of commercially reasonable efforts, if the failure of such condition to be satisfied is not caused by a breach of this Agreement or any Real Estate Purchase Agreement by the terminating party.

SECTION 14.02. EFFECT OF TERMINATION. If this Agreement is validly terminated pursuant to SECTION 14.01 above, this Agreement will forthwith become null and void, and, except as set forth in the next sentence, there will be no liability or obligation on the part of Buyer, Sellers or Harcke (or any of their respective officers, directors, employees, agents or other representatives or Affiliates) in respect to this Agreement, except that the provisions with respect to expenses in SECTION 15.03 below and confidentiality in SECTION 15.01 below will continue to apply following any such termination. Notwithstanding any other provision in this Agreement or any Real Estate Purchase Agreement to the contrary, upon termination of this Agreement pursuant to clauses (c) or (d) of SECTION 14.01 above, Sellers and Harcke will remain liable to Buyer as the case may be, for any breach of this Agreement or any Real Estate Purchase Agreement by any Seller or Harcke, as the case may be, existing at the time of such termination, Buyer will remain liable to Sellers and Harcke, as the case may be, for any breach of this Agreement or any Real Estate Purchase Agreement by Buyer existing at the time of such termination, and Buyer, Sellers or Harcke, as the case may be, may seek such remedies, including damages and attorneys’ fees, against the other with respect to any such breach as are provided in this Agreement or the Real Estate Purchase Agreement or as are otherwise available at Law or in equity.

ARTICLE XV.

MISCELLANEOUS

SECTION 15.01. CONFIDENTIAL INFORMATION. Each party hereto agrees that it will treat in confidence all documents, materials and other information regarding the other parties which it shall have obtained during the course of the negotiations leading to the consummation of the transactions contemplated by this Agreement and the Related Agreements (whether obtained before or after the date hereof) or the preparation of this Agreement and the Related Agreements. The obligation of each party to treat such documents, materials and other information in confidence shall not apply to any information which (a) such party can demonstrate was already lawfully in its possession prior to the disclosure thereof by the other parties, (b) is known to the public and did not become so known through any violation of a legal obligation, (c) became known to the public through no fault of such party, (d) is later lawfully acquired by such party from other sources, (e) is required to be disclosed under the provisions of any state or United States statute or regulation issued by a duly authorized agency, board or commission thereof, or (f) is required to be disclosed by a rule or order of any court of competent jurisdiction.

SECTION 15.02. PUBLIC ANNOUNCEMENTS. Neither Buyer, Sellers nor Harcke shall make any press release or public announcement concerning the transactions provided for in this Agreement except as expressly mutually agreed upon by Buyer, Sellers and Harcke.

SECTION 15.03. EXPENSES. Except as otherwise provided herein, each of the parties hereto shall pay its own expenses in connection with this Agreement and the transactions contemplated hereby, including any legal and accounting fees.

SECTION 15.04. UTILITIES PRORATION. Buyer shall be solely responsible for all utility charges with respect to the Business on and after the Closing Date. Sellers shall use commercially reasonable efforts to have meters for electricity, telephone, gas and water read as of the close of business on the day before the Closing Date or the opening of business on the

Closing Date and for bills to be rendered to Sellers based upon such readings. To the extent such meter readings are not used as the basis for calculating all such charges, the electricity, telephone, gas and water utility charges shall be pro-rated as of the opening of business on the Closing Date between Sellers and Buyer (based upon the number of days in applicable pre-Closing and post-Closing periods.)

SECTION 15.05. REASONABLE EFFORTS; COOPERATION. Subject to the terms and conditions of this Agreement, each party will use its commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable under applicable Laws and regulations to consummate the transactions contemplated by this Agreement. The parties each agree to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable in order to consummate or implement expeditiously the transactions contemplated by this Agreement, and from time to time, upon the request of the other parties to this Agreement and without further consideration, to execute, acknowledge and deliver in proper form any further instruments, and take such other action as the other parties may reasonably require, in order to effectively carry out the intent of this Agreement.

SECTION 15.06. NOTICES. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (a) on the date of service if served personally on the party to whom notice is to be given, (b) on the day of transmission if sent via facsimile transmission to the facsimile number provided following the parties’ signatures on the signature pages hereto, provided that telephonic confirmation of receipt is obtained promptly after completion of transmission, (c) on the day after delivery to a nationally recognized overnight courier service or the Express Mail service maintained by the United States Postal Service, or (d) on the fifth (5th) day after mailing, if mailed to the party to whom notice is to be given, by first class mail, registered or certified, postage prepaid and addressed as provided following the parties’ signatures on the signature pages hereto.

Any party may change its address for the purpose of this SECTION 15.06 by giving the other parties written notice of its new address in the manner set forth above.

SECTION 15.07. HEADINGS. The article, section and paragraph headings in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

SECTION 15.08. CONSTRUCTION.

(a) The parties have participated jointly in the negotiation and drafting of this Agreement, and, in the event of an ambiguity or a question of intent or a need for interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.

(b) Except as otherwise specifically provided in this Agreement (such as by “sole,” “absolute discretion,” “complete discretion”, or words of similar import), if any provision of this

Agreement requires or provides for the consent, waiver or approval of a party, such consent, waiver and/or approval shall not be unreasonably withheld or delayed.

(c) Nothing in the schedules and/or exhibits to this Agreement shall be deemed adequate to disclose an exception to a representation or warranty made herein unless the schedule or exhibit identifies the exception with particularity and describes the relevant facts in reasonable detail.

(d) The parties intend that each representation, warranty and covenant herein shall have independent significance. If any party has breached any representation, warranty or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the party has not breached shall not detract from or mitigate the fact that the party is in breach of the first representation, warranty or covenant, as the case may be.

(e) Words of any gender used in this Agreement shall be held and construed to include any other gender; words in the singular shall be held to include the plural; and words in the plural shall be held to include the singular; unless and only to the extent the context indicates otherwise.

(f) Any reference to any Law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.

(g) The word “including” means “including, without limitation.”

SECTION 15.09. SEVERABILITY. If any provision of this Agreement is declared by any Governmental Entity to be null, void or unenforceable, this Agreement shall be construed so that the provision at issue shall survive to the extent it is not so declared and that all of the other provisions of this Agreement shall remain in full force and effect.

SECTION 15.10. ENTIRE AGREEMENT. This Agreement contains the entire understanding among the parties hereto with respect to the transactions contemplated hereby and supersedes and replaces all prior and contemporaneous agreements and understandings, oral or written, with regard to those transactions. All exhibits and schedules hereto are expressly made a part of this Agreement as fully as though completely set forth herein.

SECTION 15.11. AMENDMENTS; WAIVERS. This Agreement may be amended or modified, and any of the terms, covenants, representations, warranties or conditions hereof may be waived, only by a written instrument executed by the parties hereto, or in the case of a waiver, by the party waiving compliance. Any waiver by any party of any condition, or of the breach of any provision, term, covenant, representation or warranty contained in this Agreement, in any one or more instances, shall not be deemed to be or construed as a further or continuing waiver of any condition or of the breach of any other provision, term, covenant, representation or warranty of this Agreement.

SECTION 15.12. PARTIES IN INTEREST. Nothing in this Agreement is intended to confer any rights or remedies under or by reason of this Agreement on any Person other than Buyer, Sellers and Harcke and their respective successors and assigns.

SECTION 15.13. SUCCESSORS AND ASSIGNS. No party hereto shall assign or delegate this Agreement or any rights or obligations hereunder without the prior written consent of the other parties hereto, and any attempted assignment or delegation without prior written consent shall be void and of no force or effect; provided, however, (i) Buyer may without consent assign this Agreement and all of its rights and delegate its obligations hereunder to an Affiliate of Buyer or to any Person who shall acquire all or substantially all of the assets of Buyer, and (ii) Sellers consent to the assignment as security and the grant of a security interest in all right, title and interest of Buyer in, to and under the Agreement and all related agreements to Congress Financial Corporation (Central), as agent, and shall execute such acknowledgement thereof as it may request, provided that in no event shall Buyer be relieved of any obligation hereunder. This Agreement shall inure to the benefit of and shall be binding upon the successors and permitted assigns of the parties hereto.

SECTION 15.14. GOVERNING LAW; JURISDICTION. This Agreement shall be construed and enforced in accordance with, and governed by, the Laws of the State of Indiana (without giving effect to the principles of conflicts of laws thereof). The parties hereto irrevocably agree and consent to the non-exclusive jurisdiction of the courts of the State of Indiana and the federal courts of the United States, sitting in Indianapolis, Indiana for the adjudication of any matters arising under or in connection with this Agreement.

SECTION 15.15. COUNTERPARTS. This Agreement is executed in two or more counterparts, each of which shall be deemed an original, but all of which shall together constitute the same instrument.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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

“SELLERS”

THE BRANFORD WIRE AND
MANUFACTURING COMPANY


By:	/s/ Richard A. Harcke

Title:		President

158 N. Egerton Rd.
Mtn. Home NC, 28758
Attn: Richard Harcke, President
Tel. No. 828-692-5791
Fax No. 828-697-9818


CAROLINA INDUSTRIES, INC.


By:	/s/ Richard A. Harcke

Title:		President

158 N. Egerton Rd.
Mtn. Home NC, 28758
Attn: Richard Harcke, President
Tel. No. 828-692-5791
Fax No. 828-697-9818


“HARCKE”


/s/ Richard A. Harcke
Richard Harcke

158 N. Egerton Rd.
Mtn. Home NC, 28758
Attn: Richard Harcke, President
Tel. No. 828-692-5791
Fax No. 828-697-9818

“BUYER”

HAYNES WIRE COMPANY, INC.


By:	/s/ Marcel Martin

Title:		CFO

1020 West Park Avenue
P.O. Box 9013
Kokomo, IN 46904-9013
Attn: Francis J. Petro, President and CEO
Tel. No. (765) 456-6000
Fax. No. (765) 456-6125

[Exhibits 4.02(g)(i) and 4.02(g)(ii) - Non-Compete Agreements, Exhibit 4.02(a) - Security Agreement, Exhibit 4.02(b) - Bill of Sale, Exhibit 4.02(d) - Assignment and Assumption Agreement, Exhibit 4.02(k) - Form of opinion of counsel to Sellers, and the Disclosure Schedules have been omitted from the Agreement as filed with the Securities and Exchange Commission (the “SEC”). The omitted information is considered immaterial from an investor’s perspective. The Registrant will furnish supplementally a copy of any of the omitted exhibits and schedules to the SEC upon request from the SEC.]

Exhibit 3.1

SECOND RESTATED CERTIFICATE OF INCORPORATION

HAYNES INTERNATIONAL, INC.

* * * * *

Pursuant to Sections 242, 245 and 303 of
the General Corporation Law of the State of Delaware

* * * * *

The undersigned, on behalf of Haynes International, Inc. (the “Corporation”), a corporation duly organized and existing under and by virtue of the General Corporation Law of the State of Delaware (“DGCL”), does hereby certify as follows:

(1) The name of the Corporation is “Haynes International, Inc.” The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on December 1, 1986; and a Restated Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on July 10, 1987.

(2) This Second Restated Certificate of Incorporation of the Corporation is being effected pursuant to Sections 242, 245 and 303 of the General Corporation Law of the State of Delaware. The making and filing of this Second Restated Certificate of Incorporation has been authorized pursuant to the First Amended Joint Plan of Reorganization of Haynes International, Inc. and certain of its subsidiaries and affiliates, Case Nos. 04-05364 through 04-05367 under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”), as confirmed by the United States Bankruptcy Court for the Southern District of Indiana, Indianapolis Division, at a hearing on August 16, 2004 and the Findings of Fact, Conclusions of Law, and Order Under 11 U.S.C. Sections 1129(a) and (b) and Fed. R. Bankr. P. 3020 Confirming the First Amended Plan of Reorganization of Haynes International, Inc. and its Affiliated Debtors and Debtors-in-Possession, dated August 16, 2004.

(3) The text of the certificate of incorporation is restated in its entirety as follows:

FIRST: The name of the Corporation is “Haynes International, Inc.”

SECOND: The address of the Corporation’s registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company.

THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may now or hereafter be organized under the DGCL.

FOURTH: CAPITAL STOCK. (a) AUTHORIZED CAPITAL STOCK. The total number of shares of stock which the Corporation shall have authority to issue is Forty Million

(40,000,000), which shall be divided into two classes, one to be designated “Common Stock,” which shall consist of Twenty Million (20,000,000) authorized shares, par value $0.001 per share, and a second class to be designated as “Preferred Stock,” which shall consist of Twenty Million (20,000,000) authorized shares, par value $0.001 per share.

(b) PREFERRED STOCK. The Preferred Stock may be issued from time to time in one or more series, each series to be appropriately designated by a distinguishing number, letter or title prior to the issue of any shares thereof. Each series of Preferred Stock shall consist of such number of shares and have such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, as shall be stated in the resolution or resolutions providing for the issuance of such series adopted by the Board of Directors of the Corporation, and the Board of Directors is hereby expressly vested with authority, to the full extent now or hereafter provided by law, to adopt any such resolution or resolutions, provided, however, that the Board of Directors may not decrease the number of shares authorized within a class or series to less than the number of shares within such class or series that are then issued and outstanding and may not increase the number of shares within a series above the total number of authorized shares of the applicable class for which the powers, designations, preferences and rights have not otherwise been set forth herein. The authority of the Board of Directors with respect to each series shall include, but not be limited to, determination of the following:

(1) the number of shares constituting that series and the distinctive designation of that series;

(2) the dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series;

(3) whether that series shall have voting rights, in addition to the voting rights provided by law, and if so, the terms of such voting rights;

(4) whether that series shall have conversion privileges and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversation rate in such events as the Board of Directors shall determine;

(5) whether the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates;

(6) whether that series shall have a sinking fund for the redemption or purchase of shares of that series and, if so, the terms and amount of such sinking fund;

(7) the rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series; and

(8) any other relative rights, preferences and limitations of that series.

(c) COMMON STOCK. The powers, preferences and rights, and the qualifications, limitations and restrictions, of the Common Stock are as follows:

(1) (a) VOTING. Except as otherwise expressly required by law or provided in this Second Restated Certificate of Incorporation, the holders of any outstanding shares of Common Stock shall vote together as a single class on all matters with respect to which stockholders are entitled to vote under applicable law, this Second Restated Certificate of Incorporation or the By-Laws of the Corporation, as amended from time to time, or upon which a vote of stockholders is otherwise called for by the Corporation. At each annual or special meeting of stockholders, each holder of record of shares of Common Stock on the record date for such meeting shall be entitled to cast one vote in person or by proxy for each share of the Common Stock standing in such holder’s name on the stock transfer records of the Corporation on such record date. Notwithstanding the foregoing, unless otherwise required by applicable law, no holder of Common Stock, as such, shall be entitled to vote on or consent to any matter submitted to a vote of any series of preferred stock in which the holders of such series of preferred stock, either separately or together with any other series of preferred stock, are entitled to vote pursuant to this Second Restated Certificate of Incorporation or a certificate of designations of a series of preferred stock, unless otherwise provided herein or in such certificate of designations.

(b) NON-CUMULATIVE. The holders of shares of Common Stock shall not have cumulative voting rights.

(2) DIVIDENDS. Subject to any other provisions of this Second Restated Certificate of Incorporation, holders of shares of Common Stock shall be entitled to receive such dividends and other distributions in cash, stock or property of the Corporation when, as and if declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefor.

(3) LIQUIDATION. In the event of any liquidation, dissolution or winding up (either voluntary or involuntary) of the Corporation, the holders of shares of Common Stock shall be entitled to share equally, on a share for share basis, the assets and funds of the Corporation available for distribution, after payments to creditors and to the holders of any preferred stock of the Corporation that may at the time be outstanding. Neither the consolidation nor the merger of the Corporation with or into any other person, nor the sale, transfer or lease of all or substantially all of the assets of the Corporation shall itself be deemed to be a liquidation, dissolution or winding up of the affairs of the Corporation within the meaning of this Section 3.

(4) PREEMPTIVE RIGHTS. No holder of shares of Common Stock shall be entitled to preemptive or subscription rights.

(d) PURCHASE AND SALE OF SHARES. Subject to the requirements of applicable law, the Corporation shall have the power to issue and sell all or any part of any shares of any class of stock herein or hereafter authorized to such persons, and for such

consideration, as the Board of Directors shall from time to time, in its discretion, determine, whether or not greater consideration could be received upon the issue or sale of the same number of shares of another class, and as otherwise permitted by law. Subject to the requirements of applicable law, the Corporation shall have the power to purchase any shares of any class of stock herein or hereafter authorized from such persons, and for such consideration, as the Board of Directors shall from time to time, in its discretion, determine, whether or not less consideration could be paid upon the purchase of the same number of shares of another class, and as otherwise permitted by law.

FIFTH: The Corporation shall not issue any nonvoting equity securities to the extent prohibited by Section 1123 of the Bankruptcy Code as in effect on the effective date of the Plan of Reorganization of Haynes International, Inc. and its Affiliated Debtors and Debtors in Possession (the “Reorganization Plan”); provided, however, that this Article FIFTH (a) will have no further force and effect beyond that required under Section 1123 of the Bankruptcy Code, (b) will have such force and effect, if any, only for so long as such section of the Bankruptcy Code is in effect and applicable to the Corporation, and (c) in all events may be amended or eliminated in accordance with such applicable law as from time to time may be in effect.

SIXTH: LIABILITY; INDEMNIFICATION (a) A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation therefor is not permitted under the DGCL as the same exists or may hereafter be amended. If the DGCL is amended hereafter to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent authorized by the DGCL, as so amended. Any repeal or modification of this paragraph shall not adversely affect any right or protection of a director of the Corporation existing hereunder with respect to any act or omission occurring prior to such repeal or modification.

(b) Any person who was or is made a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (“proceeding”) by reason of the fact that such person or person for whom such person is a legal representative, is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, nonprofit entity or other enterprise, including service with respect to employee benefit plans (“Covered Person”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, or in any other capacity while serving as a director, officer, employee or agent shall be indemnified and held harmless by the Corporation to the fullest extent authorized or permitted by applicable law.

(c) The rights conferred on any Covered Person by this Article SIXTH shall not be exclusive of any other rights which any Covered Person may have or hereafter acquire under law, this Second Restated Certificate of Incorporation, the Amended and Restated By-laws of the Corporation, an agreement, vote of stockholders or disinterested directors, or otherwise.

(d) Any repeal or amendment of the Article SIXTH by the stockholders of the Corporation or by changes in law, or the adoption of any other provision of this Second Restated Certificate of Incorporation inconsistent with this Article SIXTH, will, unless otherwise required by law, by prospective only (except to the extent such amendment or change in law permits the Corporation to provide broader indemnification rights on a retroactive basis than permitted prior thereto), and will not in any way diminish or adversely affect any right or protection existing at the time of such repeal or amendment or adoption of such inconsistent provision in respect of any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision.

(e) This Article SIXTH shall not limit the right of the Corporation, to the extent and in the manner authorized or permitted by law, to indemnify and to advance expenses to persons other than Covered Persons.

SEVENTH: Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation, and the ability of the stockholders to consent in writing to the taking of any action is hereby specifically denied.

EIGHTH: Meetings of stockholders may be held within or without the State of Delaware, as the By-Laws may provide. The books of the Corporation may be kept (subject to any provision contained in the DGCL) within or without the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-Laws of the Corporation.

NINTH: The Corporation reserves the right to amend this Second Restated Certificate of Incorporation in any manner permitted by the DGCL, as amended from time to time, and all rights and powers conferred herein on stockholders, directors and officers, if any, are subject to this reserved power. Notwithstanding any other provision of this Second Restated Certificate of Incorporation (and in addition to any other vote that may be required by law), the affirmative vote of the holders of at least a majority of the voting power of the shares entitled to vote in an election of directors shall be required to amend, alter, change or repeal, or to adopt any provision as part of this Second Restated Certificate of Incorporation.

IN WITNESS WHEREOF, I have hereunto signed my name this 31st day of August, 2004.

	By:	/s/ Jean C. Neel

	Name:	Jean C. Neel
	Title:	Vice President, Corporate Affairs and
		Corporate Secretary

Exhibit 3.2

AMENDED AND RESTATED BY-LAWS

HAYNES INTERNATIONAL, INC.

ARTICLE I

OFFICES

SECTION 1. REGISTERED OFFICE. The registered office of Haynes International, Inc. (the “Corporation”) in the State of Delaware shall be in the City of Wilmington, County of New Castle, and the registered agent in charge thereof shall be The Corporation Trust Company.

SECTION 2. OTHER OFFICES. The Corporation may also have offices at such other places, both within or without the State of Delaware, as the Board of Directors may from time to time determine.

ARTICLE II

MEETINGS OF THE STOCKHOLDERS

SECTION 1. TIME AND PLACE OF MEETINGS. All meetings of the stockholders shall be held at such place, either within or without the State of Delaware, on such date and at such time as may be determined from time to time by the Board of Directors. The Board of Directors may, in its sole discretion, determine that a meeting of the stockholders shall not be held at any place, but may instead be held by means of remote communication in the manner authorized by the General Corporation Law of the State of Delaware (the “DGCL”).

SECTION 2. ANNUAL MEETINGS. Annual meetings of the stockholders shall be held to elect the directors and transact such other business as may properly be brought before the meeting.

SECTION 3. SPECIAL MEETINGS. Unless otherwise required by law or by the Second Restated Certificate of Incorporation of the Corporation, as amended and/or restated from time to time (the “Certificate of Incorporation”), special meetings of the stockholders, for any purpose or purposes, may be called by either (a) a resolution adopted by a majority of the Board of Directors, (b) the Chairman of the Board of Directors, if there be one, or (c) the President of the Corporation. The ability of the stockholders to call a special meeting of the stockholders is specifically denied.

SECTION 4. NATURE OF BUSINESS AT MEETINGS OF STOCKHOLDERS. No business may be transacted at an annual meeting of stockholders, other than business that is either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (b) otherwise properly brought before the annual meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof), or (c) otherwise properly brought before the annual meeting by any

stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this SECTION 4 and on the record date for the determination of stockholders entitled to notice of and to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this SECTION 4.

In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation.

To be timely, a stockholder’s notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the anniversary date of the immediately preceding annual meeting; provided, however, that in the event that the annual meeting is called for a date that is not within twenty five (25) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs.

To be in proper written form, a stockholder’s notice to the Secretary must set forth as to each matter such stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and record address of such stockholder, (c) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, (d) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder in such business and (e) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting.

No business shall be conducted at an annual meeting except business brought before the annual meeting in accordance with the procedures set forth in this SECTION 4; PROVIDED, HOWEVER, that, once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this SECTION 4 shall be deemed to preclude discussion by any stockholder of any such business. If the chairman of an annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, the chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted.

SECTION 5. NOTICE OF MEETINGS. Whenever the stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by the DGCL, written notice of any meeting shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each

stockholder entitled to vote at such meeting. If mailed, such notice is given when deposited in the United States mail, with postage thereon prepaid, directed to the stockholder at his address as it appears on the record of stockholders. In the event of a change of address, such stockholder shall file with the Secretary of the Corporation a written request that such stockholder’s address be changed in the records of the Corporation, in which event notices to such stockholder shall be directed to such stockholder at such other address. Any meeting of the stockholders may be adjourned from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place, if any, thereof and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or after the adjournment a new record date is fixed by the Board of Directors for the adjourned meeting, a notice, pursuant to this SECTION 5, of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

SECTION 6. QUORUM, ADJOURNMENTS. Unless otherwise required by law or the Certificate of Incorporation, the holders of a majority of the issued and outstanding capital stock entitled to vote, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. When a specified item of business is required to be voted on by a class or classes, a majority of the shares of such class or classes in person or represented by proxy shall constitute a quorum entitled to take action with respect to the transaction of such specified item of business. If a quorum is not present, the Chairman of the Board of Directors, the President or the holders of a majority of the shares present in person or represented by proxy at the meeting, and entitled to vote at the meeting, may adjourn the meeting to another time or place, in the manner provided in SECTION 5 hereof, until a quorum shall be present or represented.

SECTION 7. VOTING. Unless otherwise required by law, the Certificate of Incorporation, these By-Laws or a Certificate of Designation governing the rights and preferences of a series of Preferred Stock, each stockholder at every meeting of the stockholders shall be entitled to one (1) vote for each outstanding share of capital stock of the Corporation held by such stockholder. Unless otherwise required by law, the Certificate of Incorporation, these By-Laws, or a Certificate of Designation governing the rights and preferences of a series of Preferred Stock, so long as a quorum is present at a meeting of the stockholders, the affirmative vote of a majority of the shares of capital stock of the Corporation present, in person or by proxy, at a meeting of the stockholders and entitled to vote on the subject matter shall be the act of the respective stockholders.

SECTION 8. PROXIES. Each stockholder entitled to vote at a meeting of the stockholders may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. Without limiting the manner in which a stockholder may authorize another person or persons to act for such stockholder as proxy, the following shall constitute a valid means by which a stockholder may grant such authority:

(a) A stockholder may execute a writing authorizing another person or persons to act for such stockholder as proxy. Execution may be accomplished by the stockholder or such stockholder’s authorized officer, director, partner, member, employee or agent signing such writing or causing such person’s signature to be affixed to such writing by any reasonable means, including, but not limited to, by facsimile signature.

(b) A stockholder may authorize another person or persons to act for such stockholder as proxy by transmitting or authorizing the transmission of a facsimile, telegram or cablegram to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such facsimile, telegram or cablegram must either set forth or be submitted with information from which it can be determined that the facsimile, telegram or cablegram was authorized by the stockholder. If it is determined that such facsimiles, telegrams or cablegrams or other transmissions are valid, the inspectors or, if there are no inspectors, such other persons making that determination shall specify the information on which they relied.

Any copy, facsimile telecommunication or other reliable production of the writing or transmission authorizing another person or persons to act as proxy for a stockholder may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used; provided, however, that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.

SECTION 9. LIST OF THE STOCKHOLDERS ENTITLED TO VOTE. The officer of the Corporation who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the Corporation. In the event that the Corporation determines to make the list available on an electronic network, the Corporation shall take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.

SECTION 10. RECORD DATE. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of the stockholders or any adjournment thereof, the Board of

Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of the stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of the stockholders of record entitled to notice of or to vote at a meeting of the stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

SECTION 11. STOCK LEDGER. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by SECTION 9 of this ARTICLE II or the books of the Corporation, or to vote in person or by proxy at any meeting of the stockholders.

SECTION 12. ORGANIZATION. At each meeting of the stockholders, the Chairman of the Board of Directors, if one shall have been elected, or in his or her absence or if one shall not have been elected, the President) shall act as chairperson of the meeting. The Secretary (or in his or her absence or inability to act, the person whom the chairperson of the meeting shall appoint as secretary of the meeting) shall act as secretary of the meeting.

SECTION 13. INSPECTORS OF ELECTION. In advance of any meeting of the stockholders, the Board of Directors shall appoint one or more inspectors to act at the meeting and make a written report thereof. One or more other persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of the stockholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Unless otherwise required by applicable law, inspectors may be officers, employees or agents of the Corporation. Each inspector, before entering upon the discharge of the duties of inspector, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability. The inspector shall have the duties prescribed by law and shall take charge of the polls and, when the vote is completed, shall make a certificate of the result of the vote taken and of such other facts as may be required by applicable law. Inspectors need not be stockholders.

ARTICLE III

DIRECTORS

SECTION 1. GENERAL POWERS. Except as otherwise provided in the Certificate of Incorporation, the business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not reserved to the stockholders by applicable Law, the Certificate of Incorporation or these By-Laws.

SECTION 2. NUMBER, ELECTION AND TERM OF OFFICE. The number of directors which shall constitute the whole board shall be fixed from time to time by resolution of the Board of Directors but shall not be less than three (3) nor more than nine (9). The directors shall be elected at the annual meeting of the stockholders, except as provided in SECTION 13 of this

ARTICLE III, and each director so elected shall hold office until such director’s successor is elected and qualified or until his earlier death, resignation or removal. Directors need not be stockholders. Election of directors need not be by ballot.

SECTION 3. NOMINATION OF DIRECTORS. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation. Nominations of persons for election to the Board of Directors may be made at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors, (a) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (b) by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this SECTION 3 and on the record date for the determination of stockholders entitled to notice of and to vote at such meeting and (ii) who complies with the notice procedures set forth in this SECTION 3.

In addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation.

To be timely, a stockholder’s notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation (a) in the case of an annual meeting, not less than ninety (90) days nor more than one hundred twenty (120) days prior to the anniversary date of the immediately preceding annual meeting; PROVIDED, HOWEVER, that in the event that the annual meeting is called for a date that is not within twenty five (25) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs; and (b) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth (10th) day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever first occurs.

If mailed, such notice is given when deposited in the United States mail, with postage thereon prepaid, directed to the stockholder at his address as it appears on the record of stockholders. In the event of a change of address, such stockholder shall file with the Secretary of the Corporation a written request that such stockholder’s address be changed in the records of the Corporation, in which event notices to such stockholder shall be directed to such stockholder at such other address.

To be in proper written form, a stockholder’s notice to the Secretary must set forth (a) as to each person whom the stockholder proposes to nominate for election as a director (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the person, and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder; and (b) as to the

stockholder giving the notice (i) the name and record address of such stockholder, (ii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, (iii) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice, and (v) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected.

No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this SECTION 3. If the chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded.

SECTION 4. QUORUM, MANNER OF ACTING, ADJOURNMENT. Unless the Certificate of Incorporation or these By-Laws require a greater number, a majority of the total number of directors shall constitute a quorum for the transaction of business, and the affirmative vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors the directors present thereat may adjourn the meeting, from time to time, without notice other than announcement at the meeting, until a quorum shall be present. When a meeting is adjourned to another time or place (whether or not a quorum is present), notice need not be given of the adjourned meeting if the time and place thereof are announced at the original meeting at which the adjournment is taken. At the adjourned meeting, the Board of Directors may transact any business which might have been transacted at the original meeting.

SECTION 5. TIME AND PLACE OF MEETINGS. The Board of Directors shall hold its meetings at such place, either within or without the State of Delaware, and at such time as may be determined from time to time by the Board of Directors (or the Chairman in the absence of a determination by the Board of Directors).

SECTION 6. ANNUAL MEETING. The Board of Directors shall meet for the purpose of organization, the election of officers and the transaction of other business, as soon as practicable after each annual meeting of the stockholders, on the same day and at the same place where such annual meeting shall be held. Notice of such meeting need not be given. In the event such annual meeting is not so held, the annual meeting of the Board of Directors may be held at such place either within or without the State of Delaware, on such date and at such time as shall be specified in a notice thereof given as hereinafter provided in SECTION 8 of this ARTICLE III or in a waiver of notice thereof signed by any director who chooses to waive the requirement of notice.

SECTION 7. REGULAR MEETINGS. After the place and time of regular meetings of the Board of Directors shall have been determined and notice thereof shall have been once given to

each member of the Board of Directors, regular meetings may be held without further notice being given.

SECTION 8. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by the Chairman of the Board or the President and shall be called by the Chairman of the Board, President, or Secretary on the written request of three directors. Notice of special meetings of the Board of Directors shall be given to each director in such manner as is determined by the Board of Directors at least three (3) days before the date of the meeting.

SECTION 9. COMMITTEES. The Board of Directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the by-laws of the Corporation; and unless the resolution of the Board of Directors or the Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.

SECTION 10. ACTION BY CONSENT. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof maybe taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the board or committee.

SECTION 11. TELEPHONIC MEETINGS. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

SECTION 12. RESIGNATION. Any director may resign at any time by giving written notice to the Board of Directors or to the secretary of the Corporation. The resignation of any director shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

SECTION 13. VACANCIES. Unless otherwise provided in the Certificate of Incorporation, vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director. Each director so elected shall hold office until his successor is elected and qualified, or until his earlier death, resignation or removal. If there are no directors in office, then an election of directors may be held in accordance with the DGCL. Unless otherwise provided in the Certificate of Incorporation, when one or more directors shall resign from the board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in the filling of other vacancies.

SECTION 14. REMOVAL. Except as otherwise required by applicable law, any director or the entire Board of Directors may be removed from office at any time, but only for cause, and only by the affirmative vote of the holders of majority of the voting power of the Corporation’s then outstanding capital stock entitled to vote generally in the election of directors.

SECTION 15. COMPENSATION. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, the Board of Directors (or a duly authorized committee thereof) shall have authority to fix the compensation of directors, including fees and reimbursement of expenses.

SECTION 16. INTERESTED DIRECTORS. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because any such director’s or officer’s vote is counted for such purpose if: (a) the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (b) the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (c) the contract or transaction is fair as to the Corporation as determined on a good faith basis by the Board of Directors as of the time it is authorized, approved or ratified by the Board of Directors, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.

ARTICLE IV

OFFICERS

SECTION 1. GENERAL. The officers of the Corporation shall be chosen by the Board of Directors and shall be a President, a Secretary and a Treasurer. The Board of Directors, in its discretion, also may choose a Chairman of the Board of Directors (who must be a director) and one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any number of offices may be held by the same person, unless otherwise prohibited by law, the Certificate of Incorporation or these By-Laws. The officers of the Corporation need not be stockholders of the Corporation nor, except in the case of the Chairman of the Board of Directors, need such officers be directors of the Corporation.

SECTION 2. ELECTION. The Board of Directors, at its first meeting held after each annual meeting of stockholders, shall elect the officers of the Corporation who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors; and each officer of the Corporation shall hold office until such officer’s successor is elected and qualified, or until such officer’s earlier death, resignation or removal. Any officer elected by the Board of Directors may be removed with or without cause at any time by the Board of Directors. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. The compensation of all officers of the Corporation shall be fixed by the Board of Directors or a duly authorized committee thereof.

SECTION 3. VOTING SECURITIES OWNED BY THE CORPORATION. Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the President or any Vice President or any other officer authorized to do so by the Board of Directors and any such officer may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation or other entity in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons.

SECTION 4. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board of Directors, if there be one, shall preside at all meetings of the stockholders and of the Board of Directors. The Chairman of the Board of Directors shall also perform such other duties and may exercise such other powers as may from time to time be assigned by these By-Laws or by the Board of Directors.

SECTION 5. PRESIDENT. The President shall, subject to the control of the Board of Directors and, if there be one, the Chairman of the Board of Directors, have general supervision of the business of the Corporation, shall see that all orders and resolutions of the Board of Directors are carried into effect and shall be the Chief Executive Officer of the Corporation. The President shall execute all bonds, mortgages, contracts and other instruments of the Corporation

requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except that the other officers of the Corporation may sign and execute documents when so authorized by these By-Laws, the Board of Directors or the President. In the absence or disability of the Chairman of the Board of Directors, or if there be none, the President shall preside at all meetings of the stockholders and, provided the President is also a director, the Board of Directors. The President shall also perform such other duties and may exercise such other powers as may from time to time be assigned to such officer by these By-Laws or by the Board of Directors.

SECTION 6. VICE PRESIDENTS. At the request of the President or in the President’s absence or in the event of the President’s inability or refusal to act (and if there be no Chairman of the Board of Directors), the Vice President, or the Vice Presidents if there are more than one (in the order designated by the Board of Directors), shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Each Vice President shall perform such other duties and have such other powers as the Board of Directors from time to time may prescribe. If there be no Chairman of the Board of Directors and no Vice President, the Board of Directors shall designate the officer of the Corporation who, in the absence of the President or in the event of the inability or refusal of the President to act, shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President.

SECTION 7. SECRETARY. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties for committees of the Board of Directors when required. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors, the Chairman of the Board of Directors or the President, under whose supervision the Secretary shall be. If the Secretary shall be unable or shall refuse to cause to be given notice of all meetings of the stockholders and special meetings of the Board of Directors, and if there be no Assistant Secretary, then either the Board of Directors or the President may choose another officer to cause such notice to be given. The Secretary shall have custody of the seal of the Corporation and the Secretary or any Assistant Secretary, if there be one, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest to the affixing by such officer’s signature. The Secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be.

SECTION 8. TREASURER. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so

requires, an account of all transactions as Treasurer and of the financial condition of the Corporation.

SECTION 9. ASSISTANT SECRETARIES. Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, any Vice President, if there be one, or the Secretary, and in the absence of the Secretary or in the event of the Secretary’s inability or refusal to act, shall perform the duties of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary.

SECTION 10. ASSISTANT TREASURERS. Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, any Vice President, if there be one, or the Treasurer, and in the absence of the Treasurer or in the event of the Treasurer’s inability or refusal to act, shall perform the duties of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer.

SECTION 11. OTHER OFFICERS. Such other officers as the Board of Directors may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors. The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers.

ARTICLE V

GENERAL PROVISIONS

SECTION 1. CERTIFICATES OF STOCK. Each stockholder is entitled to a certificate signed (manually or in facsimile) by the President or a Vice President and the Secretary or an Assistant Secretary, setting forth (a) the name of the Corporation and that it was organized under Delaware law, (b) the name of the person to whom issued, and (c) the number, class, and, if applicable, series of shares represented. The Board of Directors shall prescribe the form of certificate.

SECTION 2. LOST OR DESTROYED CERTIFICATES. Any person claiming a certificate to be lost or destroyed shall make an affidavit or affirmation of that fact and shall give the Corporation, if the Board of Directors or the President shall so require, and/or the transfer agents and registrars, if they shall so require, a bond of indemnity, in form and with one or more sureties satisfactory to the Board of Directors or the President and/or the transfer agents and registrars, in such amount as the Board of Directors or the President may direct and/or the transfer agents and registrars may require, whereupon a new certificate may be issued of the same tenor and for the same number of shares as the one alleged to be lost or destroyed.

SECTION 3. DIVIDENDS. Subject to limitations contained in the DGCL and the Certificate of Incorporation, the Board of Directors may declare and pay dividends upon the shares of capital stock of the Corporation, which dividends may be paid either in cash, in property, or in shares of the capital stock of the Corporation.

SECTION 4. FISCAL YEAR. The fiscal year of the Corporation shall commence on October 1 and end on September 30 of each year.

SECTION 5. CORPORATE SEAL. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words “Corporate Seal, Delaware”. The seal may be used by causing it or a facsimile thereof to be impressed, affixed or otherwise reproduced.

SECTION 6. TRANSFERS. Stock of the Corporation shall be transferable in the manner prescribed by applicable law and in these By-Laws. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by such person’s attorney lawfully constituted in writing and upon the surrender of the certificate therefore, properly endorsed for transfer and payment of all necessary transfer taxes; provided, however, that such surrender and endorsement or payment of taxes shall not be required in any case in which the officers of the Corporation shall determine to waive such requirement. Every certificate exchanged, returned or surrendered to the Corporation shall be marked “Cancelled,” with the date of cancellation, by the Secretary or Assistant Secretary of the Corporation or the transfer agent thereof. No transfer of stock shall be valid as against the corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred.

SECTION 7. RECORD OWNERS. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise required by law.

SECTION 8. TRANSFER AND REGISTRY AGENTS. The Corporation may from time to time maintain one or more transfer offices or agencies and registry offices or agencies at such place or places as may be determined from time to time by the Board of Directors.

ARTICLE VI

INDEMNIFICATION

SECTION 1. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN THOSE BY OR IN THE RIGHT OF THE CORPORATION. Subject to SECTION 3 of this ARTICLE VI, the Corporation shall indemnify and hold harmless any person who was or is made or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that such person or a person for whom such person is the legal representative, is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, nonprofit entity or other enterprise, including service with respect to employee benefit plans, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such

person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was unlawful.

SECTION 2. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION. Subject to SECTION 3 of this ARTICLE VI, the Corporation shall indemnify and hold harmless any person who was or is made or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Corporation, or a person for whom such person is the legal representative, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against all judgments, penalties (including excise and similar taxes), fines, settlements, expenses and liability suffered or incurred (including attorneys’ fees and court costs, each of which are actually and reasonably incurred) by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

SECTION 3. AUTHORIZATION OF INDEMNIFICATION. Any indemnification under this ARTICLE VI (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the present or former director or officer is proper in the circumstances because such person has met the applicable standard of conduct set forth in SECTION 1 or SECTION 2 of this ARTICLE VI, as the case may be. Such determination shall be made, with respect to a person who is a director or officer at the time of such determination, (i) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (ii) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion or (iv) by the stockholders. Such determination shall be made, with respect to former directors and officers, by any person or persons having the authority to act on the matter on behalf of the Corporation. To the extent, however, that a present or former director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith, without the necessity of authorization in the specific case.

SECTION 4. GOOD FAITH DEFINED. For purposes of any determination under SECTION 3 of this ARTICLE VI, a person shall be deemed to have acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe such person’s conduct was unlawful, if such person’s action is based on the records or books of account of the Corporation or another enterprise, or on information supplied to such person by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise. The provisions of this SECTION 4 shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in SECTION 1 or SECTION 2 of this ARTICLE VI, as the case may be.

SECTION 5. INDEMNIFICATION BY A COURT. Notwithstanding any contrary determination in the specific case under SECTION 3 of this ARTICLE VI, and notwithstanding the absence of any determination thereunder, any director or officer may apply to the Court of Chancery of the State of Delaware or any other court of competent jurisdiction in the State of Delaware for indemnification to the extent otherwise permissible under SECTION 1 or SECTION 2 of this ARTICLE VI. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director or officer is proper in the circumstances because such person has met the applicable standard of conduct set forth in SECTION 1 or SECTION 2 of this ARTICLE VI, as the case may be. Neither a contrary determination in the specific case under SECTION 3 of this ARTICLE VI nor the absence of any determination thereunder shall be a defense to such application or create a presumption that the director or officer seeking indemnification has not met any applicable standard of conduct. Notice of any application for indemnification pursuant to this SECTION 5 shall be given to the Corporation promptly upon the filing of such application. If successful, in whole or in part, the director or officer seeking indemnification shall also be entitled to be paid the expense of prosecuting such application.

SECTION 6. EXPENSES PAYABLE IN ADVANCE. Expenses incurred (including attorneys’ fees and court costs, each of which are actually and reasonably incurred) by a director or officer in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this ARTICLE VI. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents may be so paid upon such terms and conditions, if any, as the Corporation deems appropriate.

SECTION 7. NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES. The indemnification and advancement of expenses provided by, or granted pursuant to, this ARTICLE VI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the Certificate of Incorporation, these By-Laws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office, it being the policy of the Corporation that indemnification of the persons specified in SECTION 1 and

SECTION 2 of this ARTICLE VI shall be made to the fullest extent permitted by law. The provisions of this ARTICLE VI shall not be deemed to preclude the indemnification of any person who is not specified in SECTION 1 or SECTION 2 of this ARTICLE VI but whom the Corporation has the power or obligation to indemnify under the provisions of the DGCL, or otherwise.

SECTION 8. INSURANCE. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Corporation would have the power or the obligation to indemnify such person against such liability under the provisions of this ARTICLE VI.

SECTION 9. CERTAIN DEFINITIONS. For purposes of this ARTICLE VI, references to “the Corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors or officers, so that any person who is or was a director or officer of such constituent corporation, or is or was a director or officer of such constituent corporation serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this ARTICLE VI with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. The term “another enterprise” as used in this ARTICLE VI shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which such person is or was serving at the request of the Corporation as a director, officer, employee or agent. For purposes of this ARTICLE VI, references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Corporation” shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred to in this ARTICLE VI.

SECTION 10. SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES. The indemnification and advancement of expenses provided by, or granted pursuant to, this ARTICLE VI shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person.

SECTION 11. LIMITATION ON INDEMNIFICATION. Notwithstanding anything contained in this ARTICLE VI to the contrary, except for proceedings to enforce rights to indemnification (which shall be governed by SECTION 5 of this ARTICLE VI), the Corporation shall not be obligated to indemnify any director or officer (or his or her heirs, executors or personal or legal representatives) or advance expenses in connection with a proceeding (or part thereof) initiated

by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors of the Corporation.

SECTION 12. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this ARTICLE VI to directors and officers of the Corporation.

ARTICLE VII

AMENDMENTS

SECTION 1. BY THE BOARD OF DIRECTORS. These By-Laws may be altered, amended or repealed or new by-laws may be adopted by the affirmative vote of a majority of the entire Board of Directors.

SECTION 2. BY THE STOCKHOLDERS. These By-Laws may be altered, amended or repealed or new by-laws may be adopted by the affirmative vote of the holders of at least a majority of the voting power of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote in the election of directors at any regular meeting of the stockholders, or at any special meeting of the stockholders, provided notice of such alteration, amendment, repeal or adoption of new by-laws shall have been stated in the notice of such special meeting.

EXHIBIT 3.3

CERTIFICATE OF DESIGNATIONS

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

HAYNES INTERNATIONAL, INC.

(Pursuant to Section 151 of the
Delaware General Corporation Law)

Haynes International, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (hereinafter called the “ Corporation ”), hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation as required by Section 151 of the General Corporation Law at a meeting duly called and held on August 13, 2006:

RESOLVED , that pursuant to the authority granted to and vested in the Board of Directors of this Corporation (hereinafter called the “ Board of Directors ” or the “ Board ”) in accordance with the provisions of the Second Restated Certificate of Incorporation, the Board of Directors hereby creates a Series of Preferred Stock, par value $0.001 per share, of the Corporation (the “ Preferred Stock ”), and hereby states the designation and number of shares, and fixes the relative rights, preferences, and limitations thereof as follows:

Series A Junior Participating Preferred Stock:

Section 1. Designation and Amount . The shares of such Series shall be designated as “Series A Junior Participating Preferred Stock” (the “ Series A Preferred Stock ”) and the number of shares constituting the Series A Preferred Stock shall be 400,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Stock.

Section 2. Dividends and Distributions .

(a) Subject to the rights of the holders of any shares of any Series of Preferred Stock (or any similar stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common Stock, par value $0.001 per share (the “ Common Stock ”), of the Corporation, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being

referred to herein as a “ Quarterly Dividend Payment Date ”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (i) $10 or (ii) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (ii) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(b) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in Section 2(a) immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that , in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $10 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.

(c) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest.

(d) Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof.

Section 3. Voting Rights . The holders of shares of Series A Preferred Stock shall have the following voting rights:

(a) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(b) Except as otherwise provided herein, in any other Certificate of Designations creating a Series of Preferred Stock or any similar stock, or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.

(c) Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.

Section 4. Certain Restrictions .

(a) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not:

(i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock;

(ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or

(iv) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective Series and classes, shall determine in good faith will result in fair and equitable treatment among the respective Series or classes.

(b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under Section 4(a) , purchase or otherwise acquire such shares at such time and in such manner.

Section 5. Reacquired Shares . Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new Series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Certificate of Incorporation, or in any other Certificate of Designations creating a Series of Preferred Stock or any similar stock or as otherwise required by law.

Section 6. Liquidation, Dissolution or Winding Up . Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (a) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $1,000.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (b) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (a) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event

and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

Section 7. Consolidation, Merger, etc . In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

Section 8. No Redemption . The shares of Series A Preferred Stock shall not be redeemable.

Section 9. Rank . The Series A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporation’s Preferred Stock.

Section 10. Amendment . The Certificate of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single class.

IN WITNESS WHEREOF , this Certificate of Designations is executed on behalf of the Corporation by its Chief Financial Officer and attested by its Secretary this 13 th day of August, 2006.

		/s/ Marcel Martin
		Chief Financial Officer

Attest:

/s/ Jean C. Neel
Secretary

Exhibit 4.1

COMMON STOCK	HAYNES	COMMON STOCK
NUMBER	INTERNATIONAL	SHARES
HII

INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE		CUSIP 420877 20 1 SEE REVERSE FOR CERTAIN DEFINITIONS

HAYNES INTERNATIONAL, INC.

THIS CERTIFIES THAT

SPECIMEN

is the owner of

FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $0.001 PER SHARE OF

HAYNES INTERNATIONAL, INC. (hereinafter, the “Corporation”) transferable on the books of the Corporation in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Corporation’s Certificate of Incorporation and By-laws. This Certificate is not valid until countersigned and registered by the Transfer Agent and Registrar.

Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.

Dated

Countersigned and Registered:

Wells Fargo Bank, N.A.

Transfer Agent and Registrar

Authorized Signature

/s/ Jean C. Neel
Jean C. Neel	[SEAL]	/s/ Francis J. Petro
Vice President Corporate Affairs,		Francis J. Petro
and Corporate Secretary		President and Chief Executive Officer

HAYNES INTERNATIONAL, INC.

THE CORPORATION WILL FURNISH, WITHOUT CHARGE TO EACH SHAREHOLDER WHO SO REQUESTS, A FULL STATEMENT OF THE DESIGNATION, RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF EACH CLASS AUTHORIZED TO BE ISSUED, AND A FULL STATEMENT OF THE DESIGNATION, RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF EACH SERIES OF ANY CLASS OF PREFERRED SHARES AUTHORIZED TO BE ISSUED SO FAR AS THE SAME MAY HAVE BEEN FIXED AND THE AUTHORITY OF THE BOARD TO DESIGNATE AND FIX THE RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF OTHER SERIES. ANY SUCH REQUEST SHOULD BE ADDRESSED TO THE SECRETARY OF THE COMPANY, OR TO THE TRANSFER AGENT AND REGISTRAR NAMED ON THE FACE OF THIS CERTIFICATE.

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM	-	as tenants in common	UNIF GIFT MIN ACT Custodian
TEN ENT	-	as tenants by the entireties		(Cust)	(Minor)
JT TEN	-	as joint tenants with right		under Uniform Gifts to Minors
		of survivorship and not as	Act
		tenants in common		(State)

Additional abbreviations may also be used though not in the above list.

FOR VALUE RECEIVED, HEREBY SELL, ASSIGN AND TRANSFER UNTO

PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER OF
ASSIGNEE

PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE

OF THE STOCK REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY IRREVOCABLY

CONSTITUTE AND APPOINT

ATTORNEY TO TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN-NAMED CORPORATION WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.

DATED

		NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.

SIGNATURE(S) GUARANTEED:
	THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 174d-15.

EXHIBIT 4.4

Haynes International, Inc.

and

Wells Fargo Bank, N.A.

as Rights Agent

RIGHTS AGREEMENT

Dated as of August 13, 2006

TABLE OF CONTENTS

		Page Number
Section 1.	Definitions	2
Section 2.	Appointment of Rights Agent	14
Section 3.	Issue of Right Certificates	15
Section 4.	Form of Right Certificates	15
Section 5.	Countersignature and Registration	15
Section 6.	Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates	15
Section 7.	Exercise of Rights; Purchase Price; Expiration Date of Rights.	15
Section 8.	Cancellation and Destruction of Right Certificates	15
Section 9.	Availability of Preferred Shares	15
Section 10.	Preferred Shares Record Date	15
Section 11.	Adjustment of Purchase Price, Number of Shares or Number of Rights	15
Section 12.	Certificate of Adjusted Purchase Price or Number of Shares	15
Section 13.	Consolidation, Merger or Sale or Transfer of Assets or Earning Power	15
Section 14.	Fractional Rights and Fractional Shares	15
Section 15.	Rights of Action	15
Section 16.	Agreement of Right Holders	15
Section 17.	Right Certificate Holder Not Deemed a Stockholder	15
Section 18.	Concerning the Rights Agent	15
Section 19.	Merger or Consolidation or Change of Name of Rights Agent	15
Section 20.	Duties of Rights Agent	15
Section 21.	Change of Rights Agent	15
Section 22.	Issuance of New Right Certificates	15
Section 23.	Redemption	15
Section 24.	Exchange	15
Section 25.	Notice of Certain Events	15
Section 26.	Notices	15
Section 27.	Supplements and Amendments	15
Section 28.	Successors	15
Section 29.	Benefits of this Agreement	15

Section 30.	Severability	15
Section 31.	Determinations and Actions by the Board of Directors, etc	15
Section 32.	Governing Law	15
Section 33.	Counterparts	15
Section 34.	Descriptive Headings	15

LIST OF EXHIBITS
Exhibit A — Form of Certificate of Designations
Exhibit B — Form of Right Certificate
Exhibit C — Summary of Rights to Purchase Preferred Shares

RIGHTS AGREEMENT

RIGHTS AGREEMENT , dated as of August 13, 2006 (this “ Agreement ”) between Haynes International, Inc., a Delaware corporation (the “ Company ”), and Wells Fargo Bank, N.A., as rights agent (the “ Rights Agent ”).

R E C I T A L S:

The Board of Directors of the Company has authorized and declared a dividend of one preferred share purchase right (a “ Right ”) for each Common Share (as hereinafter defined) of the Company outstanding on August 25, 2006 (the “ Record Date ”), each Right representing the right to purchase one one-thousandth of a Preferred Share (as hereinafter defined), upon the terms and subject to the conditions herein set forth, and has further authorized and directed the issuance of one Right with respect to each Common Share that shall become outstanding between the Record Date and the earliest of the Distribution Date, the Redemption Date and the Final Expiration Date (as such terms are hereinafter defined); provided, however , that Rights may be issued with respect to Common Shares that shall become outstanding after the Distribution Date and prior to the Final Expiration Date in accordance with Section 22 hereof.

Accordingly, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:

Section 1. Definitions . For purposes of this Agreement, the following terms have the meanings indicated:

(a) “ Acquiring Person ” shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 15% or more of the Common Shares of the Company then outstanding, but shall not include (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee benefit plan of the Company or any Subsidiary of the Company or (iv) any entity holding Common Shares for or pursuant to the terms of any such plan. Notwithstanding the foregoing, (i) no Person shall become an “Acquiring Person” as the result of an acquisition of Common Shares by the Company which, by reducing the number of Common Shares of the Company outstanding, increases the proportionate number of Common Shares of the Company beneficially owned by such Person to 15% or more of the Common Shares of the Company then outstanding; provided, however , that, if a Person shall become the Beneficial Owner of 15% or more of the Common Shares of the Company then outstanding by reason of share purchases by the Company and shall, after such share purchases by the Company, become the Beneficial Owner of any additional Common Shares of the Company (other than pursuant to a dividend or distribution paid or made by the Company on the outstanding Common Shares or pursuant to a split or subdivision of the outstanding Common Shares) then such Person shall be deemed to be an “ Acquiring Person; ” (ii) if, as of the date hereof or at any time after the date hereof and prior to the first public announcement of the adoption of this Agreement, any Person is or becomes the Beneficial Owner of 15% or more of the Common Shares outstanding, such Person shall not be deemed to be or to become an “Acquiring Person” unless and until such time as such Person shall, after the first public announcement of the adoption of this Agreement, become the Beneficial Owner of additional Common Shares (other than pursuant to a dividend or distribution paid or made by the

Company on the outstanding Common Shares or pursuant to a split or subdivision of the outstanding Common Shares), unless, upon becoming the Beneficial Owner of such additional Common Shares, such Person is not then the Beneficial Owner of 15% or more of the Common Shares then outstanding; and (iii) if the Board of Directors of the Company determines in good faith that a Person who would otherwise be an “Acquiring Person,” as defined pursuant to the foregoing provisions of this paragraph (a), has become such inadvertently, and such Person as promptly as practicable (as determined in good faith by the Board of Directors of the Company) divests a sufficient number of Common Shares so that such Person would no longer be an “Acquiring Person,” as defined pursuant to the foregoing provisions of this paragraph (a), then such Person shall not be deemed to be an “Acquiring Person” for any purposes of this Agreement.

(b) “Affiliate” shall have the meaning ascribed to such term in Rule 12b-2 under the Exchange Act as in effect on the date of this Agreement.

(c) “ Associate ” shall have the meaning ascribed to such term in Rule 12b-2 under the Exchange Act as in effect on the date of this Agreement.

(d) A Person shall be deemed the “ Beneficial Owner ” of and shall be deemed to “beneficially own” any securities:

(i) which such Person or any of such Person’s Affiliates or Associates beneficially owns, directly or indirectly;

(ii) which such Person or any of such Person’s Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), or upon the exercise of conversion rights, exchange rights, rights (other than these Rights), warrants or options, or otherwise; provided, however , that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase or exchange; or (B) the right to vote pursuant to any agreement, arrangement or understanding; provided, however , that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security if the agreement, arrangement or understanding to vote such security (1) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations promulgated under the Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); or

(iii) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person’s Affiliates or Associates has any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities) for the purpose of acquiring, holding, voting (except to the extent

contemplated by the proviso to Section 1(d)(ii)(B) hereof) or disposing of any securities of the Company;

provided, however , that nothing in this Section 1(d) shall cause a Person engaged in business as an underwriter of securities to be the “Beneficial Owner” of, or to “beneficially own,” any securities acquired through such Person’s participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition, and then only if such securities continue to be owned by such Person at such expiration of forty days.

Notwithstanding anything in this definition of Beneficial Ownership to the contrary, the phrase “then outstanding,” when used with reference to a Person’s Beneficial Ownership of securities of the Company, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding which such Person would be deemed to beneficially own hereunder.

(e) “ Business Day ” shall mean any day other than a Saturday, a Sunday, or a day on which banking institutions in Minnesota are authorized or obligated by law or executive order to close.

(f) “ close of business ” on any given date shall mean 5:00 P.M., Minneapolis, Minnesota time, on such date; provided, however, that, if such date is not a Business Day, it shall mean 5:00 P.M., Minneapolis, Minnesota time, on the next succeeding Business Day.

(g) “ Common Shares ” when used with reference to the Company shall mean the shares of common stock, par value $0.001 per share, of the Company. “Common Shares” when used with reference to any Person other than the Company shall mean the capital stock (or equity interest) with the greatest voting power of such other Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person.

(h) “ Distribution Date ” shall have the meaning set forth in Section 3(a) hereof.

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

(j) “ Exchange Ratio ” shall have the meaning set forth in Section 24(a) hereof.

(k) “ Final Expiration Date ” shall have the meaning set forth in Section 7(a) hereof.

(l) “ NASDAQ ” shall mean the National Association of Securities Dealers, Inc. Automated Quotation System.

(m) “ Person ” shall mean any individual, firm, partnership, corporation, limited liability company or other entity, and shall include any successor (by merger or otherwise) of such entity.

(n) “ Preferred Shares ” shall mean shares of Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company having the rights and preferences set forth in the Form of Certificate of Designations attached to this Agreement as Exhibit A .

(o) “ Purchase Price ” shall have the meaning set forth in Section 4 hereof, as adjusted in accordance with this Agreement and as in effect from time to time.

(p) “ Record Date ” shall have the meaning set forth in the second paragraph hereof.

(q) “ Redemption Date ” shall have the meaning set forth in Section 7(a) hereof.

(r) “ Redemption Price ” shall have the meaning set forth in Section 23(a) hereof.

(s) “ Right ” shall have the meaning set forth in the second paragraph hereof.

(t) “ Right Certificate ” shall have the meaning set forth in Section 3(a) hereof.

(u) “ Securities Act ” shall mean the Securities Act of 1933, as amended.

(v) “ Shares Acquisition Date ” shall mean the first date of public announcement by the Company or an Acquiring Person that an Acquiring Person has become such.

(w) “ Subsidiary ” of any Person shall mean any corporation, partnership or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person.

(x) “ Summary of Rights ” shall have the meaning set forth in Section 3(a) hereof.

(y) “ Trading Day ” shall have the meaning set forth in Section 11(d) hereof.

Section 2. Appointment of Rights Agent . The Company hereby appoints the Rights Agent to act as agent for the Company and the holders of the Rights (who, in accordance with Section 3 hereof, shall, prior to the Distribution Date, also be the holders of the Common Shares of the Company) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-Rights Agents as it may deem necessary or desirable.

Section 3. Issue of Right Certificates .

(a) Until the earlier of (i) the close of business on the tenth day after the Shares Acquisition Date or, if the tenth day after the Shares Acquisition Date occurs before the Record Date, the close of business on the Record Date or (ii) the close of business on the tenth Business Day (or such later date as may be determined by action of the Board of Directors of the

Company prior to such time as any Person becomes an Acquiring Person) after the date of the commencement by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company or any entity holding Common Shares of the Company for or pursuant to the terms of any such plan) of a tender or exchange offer the consummation of which would result in any Person becoming an Acquiring Person (including any such date which is after the date of this Agreement and prior to the issuance of the Rights; the earlier of such dates being herein referred to as the “ Distribution Date ”), (x) the Rights will be evidenced (subject to the provisions of Section 3(b) hereof) by the certificates for Common Shares of the Company registered in the names of the holders thereof (which certificates, together with a Summary of Rights, shall also be deemed to be Right Certificates) and not by separate Right Certificates, and (y) the right to receive Right Certificates will be transferable only in connection with the transfer of Common Shares of the Company. As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign, and the Company will send or cause to be sent (and the Rights Agent will, if requested, send) by first-class, insured, postage-prepaid mail, to each record holder of Common Shares of the Company as of the close of business on the Distribution Date, at the address of such holder shown on the records of the Company, a Right Certificate, in substantially the form of Exhibit B hereto (a “ Right Certificate ”), evidencing one Right for each Common Share so held. As of and after the Distribution Date, the Rights will be evidenced solely by such Right Certificates. On the Record Date, or as soon as practicable thereafter, the Company will send a copy of a Summary of Rights to Purchase Preferred Shares, in substantially the form of Exhibit C hereto (the “ Summary of Rights ”), by first-class, postage-prepaid mail, to each record holder of Common Shares as of the close of business on the Record Date, at the address of such holder shown on the records of the Company. With respect to certificates for Common Shares of the Company outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates registered in the names of the holders thereof together with a copy of the Summary of Rights. Until the Distribution Date (or the earlier of the Redemption Date or the Final Expiration Date), the surrender for transfer of any Common Shares of the Company outstanding on the Record Date represented by certificates, with or without a copy of the Summary of Rights, shall also constitute the transfer of the Rights associated with the Common Shares of the Company represented thereby.

(b) Certificates for Rights shall, without any further action, be issued in respect of all Common Shares which become outstanding (whether originally issued or delivered from treasury and including, without limitation, reacquired Common Shares referred to in the last sentence of this paragraph (b)) after the Record Date but prior to the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date. Certificates representing Common Shares issued after the Record Date shall have impressed on, printed on, written on or otherwise affixed to them the following legend:

This certificate also evidences and entitles the holder hereof to certain rights as set forth in the Rights Agreement between Haynes International, Inc., a Delaware corporation (the “Company” ), and Wells Fargo Bank, N.A., dated as of August 13, 2006, as it may be amended from time to time (the “Rights Agreement” ), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of the Company. Under certain circumstances, as set forth in the Agreement, such Rights (as defined in the

Agreement) will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Rights are not exercisable prior to the occurrence of certain events specified in the Rights Agreement. Under certain circumstances, as set forth in the Rights Agreement, the securities or property for which the Rights may be exercised may be adjusted, and the Rights may be redeemed, may be exchanged, may expire, or may be amended. The Company will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. As set forth in the Rights Agreement, Rights beneficially owned by any Person (as defined in the Rights Agreement) who becomes an Acquiring Person or any Affiliate or Associate thereof (as such terms are defined in the Rights Agreement) become null and void.

After the Record Date but prior to the earliest of the Distribution Date, the Redemption Date, or the Final Expiration Date, if new certificate(s) representing Common Shares are issued in connection with the transfer, split up, combination, or exchange of certificate(s) representing Common Shares or if new certificate(s) representing Common Shares are issued to replace any certificate(s) that have been mutilated, destroyed, lost, or stolen, then such new certificate(s) shall bear the foregoing legend. With respect to all certificates containing the foregoing legend, until the Distribution Date, the Rights associated with the Common Shares of the Company represented by such certificates shall be evidenced by such certificates alone, and the surrender for transfer of any such certificate shall also constitute the transfer of the Rights associated with the Common Shares of the Company represented thereby. In the event that the Company purchases or acquires any Common Shares of the Company after the Record Date but prior to the Distribution Date, any Rights associated with such Common Shares of the Company shall be deemed cancelled and retired so that the Company shall not be entitled to exercise any Rights associated with the Common Shares of the Company which are no longer outstanding.

Section 4. Form of Right Certificates . The Right Certificates (and the forms of election to purchase Preferred Shares and of assignment to be printed on the reverse thereof) shall be substantially in the form set forth in Exhibit B hereto, and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any applicable rule or regulation made pursuant thereto or with any applicable rule or regulation of any stock exchange or the National Association of Securities Dealers, Inc., or to conform to usage. Subject to the provisions of Section 22 hereof, the Right Certificates shall entitle the holders thereof to purchase such number of one one-thousandths of a Preferred Share as shall be set forth therein at the price per one one-thousandth of a Preferred Share set forth therein (the “ Purchase Price ”), but the number of such one one-thousandths of a Preferred Share and the Purchase Price shall be subject to adjustment as provided herein.

Section 5. Countersignature and Registration . The Right Certificates shall be executed on behalf of the Company by its Chairman of the Board, its Chief Executive Officer, its President, any of its Vice Presidents or its Treasurer, either manually or by facsimile signature, shall have affixed thereto the Company’s seal or a facsimile thereof, and shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature.

The Right Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless countersigned. In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the individual who signed such Right Certificates had not ceased to be such officer of the Company; and any Right Certificate may be signed on behalf of the Company by any individual who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of the execution of this Agreement any such individual was not such an officer.

Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its principal office, books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right Certificates and the date of each of the Right Certificates.

Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates . Subject to the provisions of Section 14 hereof, at any time after the close of business on the Distribution Date, and at or prior to the close of business on the earlier of the Redemption Date or the Final Expiration Date, any Right Certificate or Right Certificates (other than Right Certificates representing Rights that have become void pursuant to Section 11(a)(ii) hereof or that have been exchanged pursuant to Section 24 hereof) may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates entitling the registered holder to purchase a like number of one one-thousandths of a Preferred Share as the Right Certificate or Right Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right Certificate or Right Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the principal office of the Rights Agent. Thereupon the Rights Agent shall countersign and deliver to the Person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates.

Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Company’s request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will make and deliver a new Right Certificate of like tenor to the Rights Agent for delivery to the registered holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.

Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights .

(a) The registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein), in whole or in part, at any time after the Distribution Date, upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the principal office of the Rights Agent, together with payment of the Purchase Price for each one one-thousandth of a Preferred Share as to which the Rights are exercised, at or prior to the earliest of (i) the close of business on August 13 , 2016 , (ii) the thirtieth (30 th ) day following the date of the 2007 Annual Meeting of Stockholders of the Company if at such meeting the stockholders, by the affirmative vote of a majority of the shares of capital stock of the Company present, in person or by proxy, at such meeting and entitled to vote on such matter, vote to terminate this Agreement (the earlier of (i) and (ii) being referred to as the “ Final Expiration Date ”), (iii ) the time at which the Rights are redeemed as provided in Section 23 hereof (the “ Redemption Date ”), or (iv) the time at which such Rights are exchanged as provided in Section 24 hereof.

(b) The Purchase Price for each one one-thousandth of a Preferred Share purchasable pursuant to the exercise of a Right shall initially be $135.00, and shall be subject to adjustment from time to time as provided in Section 11 or 13 hereof, and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below.

(c) Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase duly executed, accompanied by payment of the Purchase Price for the shares to be purchased and an amount equal to any applicable transfer tax required to be paid by the holder of such Right Certificate in accordance with Section 9 hereof by certified check, cashier’s check or money order payable to the order of the Company, the Rights Agent shall thereupon promptly (i) (A) requisition from any transfer agent of the Preferred Shares certificates for the number of Preferred Shares to be purchased and the Company hereby irrevocably authorizes any such transfer agent to comply with all such requests, or (B) if the Company shall have elected to deposit the total number of Preferred Shares issuable upon exercise of the Rights with a depositary agent, requisition from the depositary agent depositary receipts representing such number of one one-thousandths of a Preferred Share as are to be purchased (in which case certificates for the Preferred Shares represented by such receipts shall be deposited by the transfer agent of the Preferred Shares with such depositary agent) and the Company hereby directs such depositary agent to comply with all such requests; (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 14 hereof; (iii) promptly after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder; and (iv) when appropriate, after receipt, promptly deliver such cash to or upon the order of the registered holder of such Right Certificate.

(d) In case the registered holder of any Right Certificate shall exercise fewer than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to registered holder of such Right Certificate or to such holder’s duly authorized assigns, subject to the provisions of Section 14 hereof.

(e) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported transfer or exercise of Rights pursuant to Section 6 hereof or this Section 7 unless such registered holder shall have (i) completed and signed the certificate and the form of assignment or election to purchase set forth on the reverse side of the Right Certificate surrendered for such transfer or exercise, and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company or the Rights Agent shall reasonably request.

Section 8. Cancellation and Destruction of Right Certificates . All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. Subject to applicable law and regulation, the Rights Agent shall maintain in a retrievable database electronic records of all cancelled or destroyed Right Certificates which have been canceled or destroyed by the Rights Agent. The Rights Agent shall maintain such electronic records or physical records for the time period required by applicable law and regulation. Upon written request of the Company (and at the expense of the Company), the Rights Agent shall provide to the Company or its designee copies of such electronic records or physical records relating to Rights Certificates cancelled or destroyed by the Rights Agent.

Section 9. Availability of Preferred Shares .

(a) The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued Preferred Shares or any Preferred Shares held in its treasury the number of Preferred Shares that will be sufficient to permit the exercise in full of all outstanding Rights in accordance with Section 7 hereof. The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Preferred Shares delivered upon exercise of Rights shall, at the time of delivery of the certificates for such Preferred Shares (subject to payment of the Purchase Price), be duly authorized, validly issued, fully paid and nonassessable shares.

(b) If then required by law, the Company shall use its best efforts (i) as soon as practicable following an event described in Section 11(a)(ii) as to which the consideration to be delivered by the Company upon exercise of the Rights has been determined in accordance with this Agreement, or as soon as is required by law following the Distribution Date, as the case may be, to file a registration statement on an appropriate form under the Securities Act with respect to the securities purchasable upon exercise of the Rights, (ii) to cause such registration statement to become effective as soon as practicable after such filing, and (iii) to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the earlier of (A) the date as of which Rights are no longer exercisable for such securities and (B) the Final Expiration Date. If then required by law, the Company shall also use its best efforts to take such action as may be necessary or appropriate

under, or to ensure compliance with, the securities or “blue sky” laws of the various states in connection with the exercise of the Rights. The Company may temporarily suspend, for a period of time not to exceed one hundred and twenty (120) days after the first occurrence of an event described in Section 11(a)(ii) , the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon any such suspension, the Company shall issue a public announcement (and shall provide written notice to the Rights Agent) stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement, in each case with written notice to the Rights Agent, at such time as the suspension is no longer in effect. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction unless any requisite qualification in such jurisdiction shall have been obtained, the exercise of such Rights is permitted under applicable law, and if required by law a registration statement has been declared effective.

(c) The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Right Certificates or of any Preferred Shares upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Right Certificates to a Person other than, or the issuance or delivery of certificates or depositary receipts for the Preferred Shares in a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise or to issue or to deliver any certificates or depositary receipts for Preferred Shares upon the exercise of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Company’s reasonable satisfaction that no such tax is due.

Section 10. Preferred Shares Record Date . Each Person in whose name any certificate for Preferred Shares is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the Preferred Shares represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable transfer taxes) was made; provided, however , that, if the date of such surrender and payment is a date upon which the Preferred Shares transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which the Preferred Shares transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Right Certificate shall not be entitled to any rights of a holder of Preferred Shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.

Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights . The Purchase Price, the number of Preferred Shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11 .

(a) (i) In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the outstanding Preferred Shares

into a smaller number of Preferred Shares or (D) issue any shares of its capital stock in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a) , the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of capital stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock which, if such Right had been exercised immediately prior to such date and at a time when the Preferred Shares transfer books of the Company were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification; provided, however , that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. If an event occurs which would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof.

(ii) Subject to Section 24 hereof, in the event any Person becomes an Acquiring Person, each holder of a Right shall thereafter have a right to receive, upon exercise thereof at a price equal to the then current Purchase Price multiplied by the number of one one-thousandths of a Preferred Share for which a Right is then exercisable, in accordance with the terms of this Agreement and in lieu of Preferred Shares, such number of Common Shares of the Company as shall equal the result obtained by (A) multiplying the then current Purchase Price by the number of one one-thousandths of a Preferred Share for which a Right is then exercisable and (B) dividing that product by 50% of the then current per share market price of the Common Shares of the Company (determined pursuant to Section 11(d) hereof) on the date of the occurrence of such event. In the event that any Person shall become an Acquiring Person and the Rights shall then be outstanding, the Company shall not take any action, except as permitted by this Agreement, which if at the time such action is or would be taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights.

From and after the occurrence of such event, any Rights that are or were acquired or beneficially owned by any Acquiring Person (or any Associate or Affiliate of such Acquiring Person) shall be void, and any holder of such Rights shall thereafter have no right to exercise such Rights under any provision of this Agreement. No Right Certificate shall be issued pursuant to Section 3 hereof that represents Rights beneficially owned by an Acquiring Person whose Rights would be void pursuant to the preceding sentence or any Associate or Affiliate thereof; no Right Certificate shall be issued at any time upon the transfer of any Rights to an Acquiring Person whose Rights would be void pursuant to the preceding sentence or any Associate or Affiliate thereof or to any nominee of such Acquiring Person, Associate or Affiliate; and any Right Certificate delivered to the Rights Agent for transfer to an Acquiring Person whose Rights would be void pursuant to the preceding sentence shall be cancelled.

(iii) In the event that there shall not be sufficient Common Shares issued but not outstanding or authorized but unissued to permit the exercise in full of the Rights

in accordance with subparagraph (ii) above, the Company shall take all such action as may be necessary to authorize additional Common Shares for issuance upon exercise of the Rights. In the event the Company shall, after good faith effort, be unable to take all such action as may be necessary to authorize such additional Common Shares, the Company shall substitute, for each Common Share that would otherwise be issuable upon exercise of a Right, a number of Preferred Shares or fraction thereof such that the current per share market price of one Preferred Share multiplied by such number or fraction is equal to the current per share market price of one Common Share as of the date of issuance of such Preferred Shares or fraction thereof.

(b) In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Shares entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Preferred Shares (or shares having the same rights, privileges and preferences as the Preferred Shares (“equivalent preferred shares”)) or securities convertible into Preferred Shares or equivalent preferred shares at a price per Preferred Share or equivalent preferred share (or having a conversion price per share, if a security convertible into Preferred Shares or equivalent preferred shares) less than the then current per share market price of the Preferred Shares (as defined in Section 11(d) ) on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Preferred Shares outstanding on such record date plus the number of Preferred Shares which the aggregate offering price of the total number of Preferred Shares and/or equivalent preferred shares so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price and the denominator of which shall be the number of Preferred Shares outstanding on such record date plus the number of additional Preferred Shares and/or equivalent preferred shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); provided, however , that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and holders of the Rights. Preferred Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and, in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.

(c) In case the Company shall fix a record date for the making of a distribution to all holders of the Preferred Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness or assets (other than a regular quarterly cash dividend or a dividend payable in Preferred Shares) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the then-current per share market price of the

Preferred Shares on such record date, less the fair market value (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and holders of the Rights) of the portion of the assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to one Preferred Share and the denominator of which shall be such then-current per share market price of the Preferred Shares on such record date; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company to be issued upon exercise of one Right. Such adjustments shall be made successively whenever such a record date is fixed; and, in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.

(d) (i) For the purpose of any computation hereunder, the “current per share market price” of any security (a “ Security ” for the purpose of this Section 11(d)(i) ) on any date shall be deemed to be the average of the daily closing prices per share of such Security for the 30 consecutive Trading Days immediately prior to such date; provided , however , that, in the event that the current per share market price of the Security is determined during a period following the announcement by the issuer of such Security of (A) a dividend or distribution on such Security payable in shares of such Security or Securities convertible into such shares (other than the Rights), or (B) any subdivision, combination or reclassification of such Security and prior to the expiration of 30 Trading Days after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the current per share market price shall be appropriately adjusted to reflect the current market price per share equivalent of such Security. The closing price for each day shall be the last sale price, regular way, reported at or prior to 4:00 P.M. Eastern time or, in case no such sale takes place on such day, the average of the bid and asked prices, regular way, reported as of 4:00 P.M. Eastern time, in either case, as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Security is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is listed or admitted to trading or, if the Security is not listed or admitted to trading on any national securities exchange, the last quoted price reported at or prior to 4:00 P.M. Eastern time or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported as of 4:00 P.M. Eastern time by NASDAQ or such other system then in use, or, if on any such date the Security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board of Directors of the Company. The term “ Trading Day ” shall mean a day on which the principal national securities exchange on which the Security is listed or admitted to trading is open for the transaction of business, or, if the Security is not listed or admitted to trading on any national securities exchange, a Business Day.

(ii) For the purpose of any computation hereunder, the “current per share market price” of the Preferred Shares shall be determined in accordance with the method set forth in Section 11(d)(i) . If the Preferred Shares are not publicly traded, the “current per share market price” of the Preferred Shares shall be conclusively deemed to be the current per

share market price of the Common Shares as determined pursuant to Section 11(d)(i) hereof (appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof), multiplied by one thousand. If neither the Common Shares nor the Preferred Shares are publicly held or so listed or traded, “current per share market price” shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent.

(e) No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest one one-millionth of a Preferred Share or one ten-thousandth of any other share or security as the case may be. Notwithstanding the first sentence of this Section 11(e) , any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which requires such adjustment or (ii) the date of the expiration of the right to exercise any Rights.

(f) If, as a result of an adjustment made pursuant to Section 11(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than Preferred Shares, thereafter the number of such other shares so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Shares contained in Section 11(a) , (c) , (e) , (i) , (m) and (n) , inclusive, and the provisions of Sections 7 , 9 , 10 , 13 and 14 hereof with respect to the Preferred Shares shall apply on like terms to any such other shares.

(g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-thousandths of a Preferred Share purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.

(h) Unless the Company shall have exercised its election as provided in Section 11(i) hereof, upon each adjustment of the Purchase Price as a result of the calculations made in Section 11(b) and (c) hereof, each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-thousandths of a Preferred Share (calculated to the nearest one one-millionth of a Preferred Share) obtained by (A) multiplying (x) the number of one one-thousandths of a share covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (B) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price.

(i) The Company may elect, on or after the date of any adjustment of the Purchase Price, to adjust the number of Rights in substitution for any adjustment in the number of one one-thousandths of a Preferred Share purchasable upon the exercise of a Right. Each of

the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one one-thousandths of a Preferred Share for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at least 10 days later than the date of the public announcement. If Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i) , the Company shall, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date Right Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Right Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein, and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement.

(j) Irrespective of any adjustment or change in the Purchase Price or in the number of one one-thousandths of a Preferred Share issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price and the number of one one-thousandths of a Preferred Share which were expressed in the initial Right Certificates issued hereunder.

(k) Before taking any action that would cause an adjustment reducing the Purchase Price below one one-thousandth of the then par value, if any, of the Preferred Shares issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may duly authorize and validly issue fully paid and nonassessable Preferred Shares at such adjusted Purchase Price.

(l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuing to the holder of any Right exercised after such record date of the Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder’s right to receive such additional shares upon the occurrence of the event requiring such adjustment.

(m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments

expressly required by this Section 11 , as and to the extent that it, in its sole discretion, shall determine to be advisable in order that any consolidation or subdivision of the Preferred Shares, issuance wholly for cash of any Preferred Shares at less than the current market price, issuance wholly for cash of Preferred Shares or securities which by their terms are convertible into or exchangeable for Preferred Shares, dividends on Preferred Shares payable in Preferred Shares or issuance of rights, options or warrants referred to in Section 11(b) hereof, hereafter made by the Company to holders of the Preferred Shares shall not be taxable to such stockholders.

(n) In the event that, at any time after the date of this Agreement and prior to the Distribution Date, the Company shall (i) declare or pay any dividend on the Common Shares payable in Common Shares, or (ii) effect a subdivision, combination or consolidation of the Common Shares (by reclassification or otherwise than by payment of dividends in Common Shares) into a greater or lesser number of Common Shares, then, in any such case, (A) the number of one one-thousandths of a Preferred Share purchasable after such event upon proper exercise of each Right shall be determined by multiplying the number of one one-thousandths of a Preferred Share so purchasable immediately prior to such event by a fraction, the numerator of which is the number of Common Shares outstanding immediately before such event and the denominator of which is the number of Common Shares outstanding immediately after such event, and (B) each Common Share outstanding immediately after such event shall have issued with respect to it that number of Rights which each Common Share outstanding immediately prior to such event had issued with respect to it. The adjustments provided for in this Section 11(n) shall be made successively whenever such a dividend is declared or paid or such a subdivision, combination or consolidation is effected.

Section 12. Certificate of Adjusted Purchase Price or Number of Shares . Whenever an adjustment is made as provided in Section 11 or 13 hereof, the Company shall promptly (a) prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) file with the Rights Agent and with each transfer agent for the Common Shares or the Preferred Shares a copy of such certificate and (c) if such adjustment occurs at any time after the Distribution Date, mail a brief summary thereof to each holder of a Right Certificate in accordance with Section 25 hereof.

Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power . In the event, directly or indirectly, at any time after a Person has become an Acquiring Person, (a) the Company shall consolidate with, or merge with and into, any other Person, (b) any Person shall consolidate with the Company, or merge with and into the Company and the Company shall be the continuing or surviving corporation of such merger and, in connection with such merger, all or part of the Common Shares shall be changed into or exchanged for stock or other securities of any other Person (or the Company) or cash or any other property, or (c) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or more transactions, assets or earning power aggregating 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person other than the Company or one or more of its wholly-owned Subsidiaries, then, and in each such case, proper provision shall be made so that (i) each holder of a Right (except as otherwise provided herein) shall thereafter have the right to receive, upon the exercise thereof at a price equal to the then current Purchase Price multiplied by the number of one one-thousandths of a Preferred Share for which a Right is then exercisable, in accordance with the terms of this Agreement and

in lieu of Preferred Shares, such number of duly authorized, validly issued, fully paid and nonassessable Common Shares of such other Person (including the Company as successor thereto or as the surviving corporation) as shall equal the result obtained by (A) multiplying the then current Purchase Price by the number of one one-thousandths of a Preferred Share for which a Right is then exercisable and (B) dividing that product by 50% of the then current per share market price of the Common Shares of such other Person (determined pursuant to Section 11(d) hereof) on the date of consummation of such consolidation, merger, sale or transfer; (ii) the issuer of such Common Shares shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale or transfer, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term “ Company ” shall thereafter be deemed to refer to such issuer; and (iv) such issuer shall take such steps (including, but not limited to, the reservation of a sufficient number of its Common Shares in accordance with Section 9 hereof) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its Common Shares thereafter deliverable upon the exercise of the Rights. The Company shall not consummate any such consolidation, merger, sale or transfer unless, prior thereto, the Company and such issuer shall have executed and delivered to the Rights Agent a supplemental agreement so providing.

Section 14. Fractional Rights and Fractional Shares .

(a) The Company shall not be required to issue fractions of Rights or to distribute Right Certificates which evidence fractional Rights. In lieu of such fractional Rights, the Company shall pay to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14 (a) , the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case, as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Company. If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used.

(b) The Company shall not be required to issue fractions of Preferred Shares (other than fractions which are integral multiples of one one-thousandth of a Preferred Share) upon exercise of the Rights or to distribute certificates which evidence fractional Preferred Shares (other than fractions which are integral multiples of one one-thousandth of a Preferred

Share). Fractions of Preferred Shares in integral multiples of one one-thousandth of a Preferred Share may, at the election of the Company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it; provided that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of the Preferred Shares represented by such depositary receipts. In lieu of fractional Preferred Shares that are not integral multiples of one one-thousandth of a Preferred Share, the Company shall pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one Preferred Share. For the purposes of this Section 14 (b) , the current market value of a Preferred Share shall be the closing price of a Preferred Share (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise.

(c) The holder of a Right, by the acceptance of the Right, expressly waives such holder’s right to receive any fractional Rights or any fractional shares upon exercise of a Right (except as provided above).

Section 15. Rights of Action . All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent under Section 18 hereof, are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of the Common Shares); and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Shares), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, of the Common Shares), may, in such holder’s own behalf and for such holder’s own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, such holder’s right to exercise the Rights evidenced by such Right Certificate in the manner provided in such Right Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement, and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of the obligations of any Person subject to, this Agreement.

Section 16. Agreement of Right Holders . Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:

(a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the Common Shares;

(b) after the Distribution Date, the Right Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office of the Rights Agent, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates fully executed;

(c) the Company and the Rights Agent may deem and treat the person in whose name the Right Certificate (or, prior to the Distribution Date, the associated Common

Shares certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificate or the associated Common Shares certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary; and

(d) notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however, the Company must use its best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible.

Section 17. Right Certificate Holder Not Deemed a Stockholder . No holder, as such, of any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the Preferred Shares or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate shall have been exercised in accordance with the provisions hereof.

Section 18. Concerning the Rights Agent . The Company agrees to pay to the Rights Agent such reasonable compensation as shall be agreed to in writing by the Company and the Rights Agent for all services rendered by it hereunder, and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises.

The Rights Agent shall be protected and shall incur no liability for, or in respect of any action taken, suffered or omitted by it in connection with, its administration of this Agreement in reliance upon any Right Certificate or certificate for the Preferred Shares or Common Shares or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons.

Section 19. Merger or Consolidation or Change of Name of Rights Agent . Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the stock transfer or corporate trust powers of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and, in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and, in all such cases, such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.

In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and, in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and, in all such cases, such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.

Section 20. Duties of Rights Agent . The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Right Certificates, by their acceptance thereof, shall be bound:

(a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion.

(b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Treasurer or the Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate.

(c) The Rights Agent shall be liable hereunder to the Company and any other Person only for its own negligence, bad faith or willful misconduct.

(d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.

(e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due authorization and execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in the terms of the Rights (including the manner, method or amount thereof) provided for in Section 3 , 11 , 13 , 23 or 24 hereof, or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after actual notice that such change or adjustment is required); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares to be issued pursuant to this Agreement or any Right Certificate or as to whether any Preferred Shares will, when issued, be duly authorized, validly issued, fully paid and nonassessable.

(f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.

(g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Secretary or the Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered by it in good faith in accordance with instructions of any such officer or for any delay in acting while waiting for those instructions.

(h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may, to the extent not otherwise prohibited by applicable law, buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity.

(i) If, with respect to any Right Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company.

Section 21. Change of Rights Agent . The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days’ notice in writing mailed to the Company and to each transfer agent of the Common Shares or Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days’ notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Shares or Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (which holder shall, with such notice, submit such holder’s Right Certificate for inspection by the Company), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a corporation organized and doing business under the laws of the United States or of the State of Minnesota (or of any other state of the United States so long as such corporation is authorized to do business as a banking institution in the State of Minnesota ), in good standing, having an office in the State of Minnesota , which is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50 million. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Shares or Preferred Shares, and mail a notice thereof in writing to the registered holders of the Right Certificates. Failure to give any notice provided for in this Section 21 , however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.

Section 22. Issuance of New Right Certificates . Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by the Board of Directors of the Company to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Right Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of Common Shares following the Distribution Date and prior to the earlier of the Redemption Date and the Final Expiration Date, the Company (i) shall with respect to Common Shares so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement, granted or awarded prior to the Distribution Date, or upon the exercise, conversion or exchange of securities, notes or debentures issued by the Company prior to the Distribution Date, and (ii) may, in any other case, if deemed necessary or appropriate by the Board of Directors of the Company, issue Right Certificates representing the

appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) the Company shall not be obligated to issue any such Right Certificates if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Right Certificate would be issued, and (ii) no Right Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.

Section 23. Redemption .

(a) The Board of Directors of the Company may, at its option, at any time prior to such time as any Person becomes an Acquiring Person, redeem all but not less than all the then outstanding Rights at a redemption price of $.01 per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the “ Redemption Price ”). The redemption of the Rights by the Board of Directors of the Company may be made effective at such time, on such basis and with such conditions as the Board of Directors of the Company, in its sole discretion, may establish.

(b) Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights pursuant to Section 23(a) , and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. The Company shall promptly give public notice of any such redemption; provided, however , that the failure to give, or any defect in, any such notice shall not affect the validity of such redemption. Within 10 days after such action of the Board of Directors of the Company ordering the redemption of the Rights, the Company shall mail a notice of redemption to all the holders of the then outstanding Rights at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Shares. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made.

Section 24. Exchange .

(a) The Board of Directors of the Company may, at its option, at any time after any Person becomes an Acquiring Person, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 11(a)(ii) hereof) for Common Shares at an exchange ratio of one Common Share per Right, appropriately adjusted to reflect any adjustment in the number of Rights pursuant to Section 11(i) (such exchange ratio being hereinafter referred to as the “ Exchange Ratio ”). Notwithstanding the foregoing, the Board of Directors of the Company shall not be empowered to effect such exchange at any time after any Person who is an Acquiring Person, together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the Common Shares then outstanding.

(b) Immediately upon the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24 and without any

further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of Common Shares equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice of any such exchange; provided, however , that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Common Shares for Rights will be effected, and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.

(c) In the event that there shall not be sufficient Common Shares issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24 , the Company shall take all such action as may be necessary to authorize additional Common Shares for issuance upon exchange of the Rights. In the event the Company shall, after good faith effort, be unable to take all such action as may be necessary to authorize such additional Common Shares, the Company shall substitute, for each Common Share that would otherwise be issuable upon exchange of a Right, a number of Preferred Shares or fraction thereof such that the current per share market price of one Preferred Share multiplied by such number or fraction is equal to the current per share market price of one Common Share as of the date of issuance of such Preferred Shares or fraction thereof.

(d) The Company shall not be required to issue fractions of Common Shares or to distribute certificates which evidence fractional Common Shares. In lieu of such fractional Common Shares, the Company shall pay to the registered holders of the Right Certificates with regard to which such fractional Common Shares would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole Common Share. For the purposes of this paragraph (d), the current market value of a whole Common Share shall be the closing price of a Common Share (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24 .

Section 25. Notice of Certain Events .

(a) In case the Company shall, at any time after the Distribution Date, propose (i) to pay any dividend payable in stock of any class to the holders of the Preferred Shares or to make any other distribution to the holders of the Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer to the holders of the Preferred Shares rights or warrants to subscribe for or to purchase any additional Preferred Shares or shares of stock of any class or any other securities, rights or options, (iii) to effect any reclassification of the Preferred Shares (other than a reclassification involving only the subdivision of outstanding Preferred Shares), (iv) to effect any consolidation or merger into or with, or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one or more transactions, of 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a

whole) to, any other Person, (v) to effect the liquidation, dissolution or winding up of the Company, or (vi) to declare or pay any dividend on the Common Shares payable in Common Shares or to effect a subdivision, combination or consolidation of the Common Shares (by reclassification or otherwise than by payment of dividends in Common Shares), then, in each such case, the Company shall give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, or distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the Common Shares and/or Preferred Shares, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least 10 days prior to the record date for determining holders of the Preferred Shares for purposes of such action, and, in the case of any such other action, at least 10 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the Common Shares and/or Preferred Shares, whichever shall be the earlier.

(b) In case the event set forth in Section 11(a)(ii) hereof shall occur, then the Company shall, as soon as practicable thereafter, give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of the occurrence of such event, which notice shall describe such event and the consequences of such event to holders of Rights under Section 11(a)(ii) hereof.

Section 26. Notices . Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows:

Haynes International, Inc.
1020 West Park Avenue
Kokomo, Indiana 46904-9015

Attention: Corporate Secretary

Subject to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows:

Wells Fargo Bank, N.A.
161 N. Concord Exchange
South St. Paul, MN 55075
Attention: Account Management Department

Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Right Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company.

Section 27. Supplements and Amendments . The Company, by action of the Board of Directors, may from time to time supplement or amend this Agreement without the approval of any holders of Right Certificates in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, to shorten or lengthen any time period hereunder, or to make any other provisions with respect to the Rights which the Company may deem necessary or desirable, any such supplement or amendment to be evidenced by a writing signed by the Company and the Rights Agent; provided, however , that, from and after such time as any Person becomes an Acquiring Person, this Agreement shall not be amended in any manner which would adversely affect the interests of the holders of Rights (other than Rights that have become void pursuant to Section 11(a)(ii) hereof).

Section 28. Successors . All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.

Section 29. Benefits of this Agreement . Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares).

Section 30. Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

Section 31. Determinations and Actions by the Board of Directors, etc . For all purposes of this Agreement, any calculation of the number of shares of each class of Common Shares or of any other class of capital stock outstanding at any particular time, including for purposes of determining the particular percentage of the outstanding voting power or such outstanding shares of Common Stock of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) (as in effect on the date of this Agreement) under the Exchange Act. The Board of Directors of the Company shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board of Directors of the Company or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement, and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend the Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board of Directors of the Company in good faith shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties, and (y) not subject the Board of Directors

of the Company, or any of the directors on the Board of Directors of the Company, to any liability to the holders of the Rights.

Section 32. Governing Law . This Agreement and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such state applicable to contracts to be made and performed entirely within such state.

Section 33. Counterparts . This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

Section 34. Descriptive Headings . Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be duly executed and attested, all as of the day and year first above written.

Attest:			HAYNES INTERNATIONAL, INC.

By:	/s/ Stacy S. Kilian		By:	/s/ Francis Petro
	Name:	Stacy S. Kilian	Name:	Francis Petro
	Title:	Vice President - General Counsel	Title:	President and Chief Executive Officer


Attest:			WELLS FARGO BANK, N.A

By:	/s/ Suzanne M. Swits		By:	/s/ Becky Paulson
	Name:	Suzanne M. Swits	Name:	Becky Paulson
	Title:	Assistant Secretary	Title:	Officer

Exhibit A

FORM

CERTIFICATE OF DESIGNATIONS

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

HAYNES INTERNATIONAL, INC.

(Pursuant to Section 151 of the
Delaware General Corporation Law)

Series A Junior Participating Preferred Stock:

Section 2. Dividends and Distributions .

A- 1

Common Stock, par value $0.001 per share (the “ Common Stock ”), of the Corporation, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a “ Quarterly Dividend Payment Date ”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (i) $10 or (ii) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (ii) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

A- 2

Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof.

Section 3. Voting Rights . The holders of shares of Series A Preferred Stock shall have the following voting rights:

Section 4. Certain Restrictions .

A- 3

(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or

A- 4

Preferred Stock were entitled immediately prior to such event under the proviso in clause (a) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

Section 8. No Redemption . The shares of Series A Preferred Stock shall not be redeemable.

IN WITNESS WHEREOF , this Certificate of Designations is executed on behalf of the Corporation by its Chief Financial Officer and attested by its Secretary this 13 th day of August, 2006.


		Chief Financial Officer

Attest:

Secretary

A- 5

Exhibit B

Form of Right Certificate

Certificate No. R-

_____ Rights

NOT EXERCISABLE AFTER AUGUST 13, 2016 OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE AGREEMENT.

Right Certificate

Haynes International, Inc.

This certifies that , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Agreement, dated as of August 13, 2006 (the “ Agreement ”), between Haynes International, Inc., a Delaware corporation (the “ Company ”), and Wells Fargo Bank, N.A. (the “ Rights Agent ”), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Agreement) and prior to 5:00 P.M., Minneapolis, Minnesota time, on the earlier of (A) August 13, 2016 or (B) the thirtieth (30 th ) day following the date of the 2007 Annual Meeting of Stockholders of the Company if at such meeting the stockholders, by the affirmative vote of a majority of the shares of capital stock of the Company present, in person or by proxy, at such meeting and entitled to vote on such matter, vote to terminate the Agreement, at the principal office of the Rights Agent, or at the office of its successor as Rights Agent, one one-thousandth of a fully paid non-assessable share of Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company (the “ Preferred Shares ”), at a purchase price of $135.00 per one one-thousandth of a Preferred Share (the “ Purchase Price ”), upon presentation and surrender of this Right Certificate with the Form of Election to Purchase duly executed. The number of Rights evidenced by this Right Certificate (and the number of one one-thousandths of a Preferred Share which may be purchased upon exercise hereof) set forth above, and the Purchase Price set forth above, are the number and Purchase Price as of August 13, 2006, based on the Preferred Shares as constituted at such date. As provided in the Agreement, the Purchase Price and the number of one one-thousandths of a Preferred Share which may be purchased upon the exercise of the Rights evidenced by this Right Certificate are subject to modification and adjustment upon the happening of certain events.

This Right Certificate is subject to all of the terms, provisions and conditions of the Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Right Certificates. Copies of the Agreement are on file at the principal executive offices of the Company and the offices of the Rights Agent.

This Right Certificate, with or without other Right Certificates, upon surrender at the principal office of the Rights Agent, may be exchanged for another Right Certificate or Right

B- 1

Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of Preferred Shares as the Rights evidenced by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase. If this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Right Certificate or Right Certificates for the number of whole Rights not exercised.

Subject to the provisions of the Agreement, the Rights evidenced by this Right Certificate (i) may be redeemed by the Company at a redemption price of $.01 per Right or (ii) may be exchanged in whole or in part for Preferred Shares or shares of the Company’s Common Stock, par value $0.001 per share. No fractional Preferred Shares will be issued upon the exercise of any Right or Rights evidenced hereby (other than fractions which are integral multiples of one one-thousandth of a Preferred Share, which may, at the election of the Company, be evidenced by depositary receipts), but, in lieu thereof, a cash payment will be made, as provided in the Agreement.

No holder of this Right Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the Preferred Shares or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Right Certificate shall have been exercised as provided in the Agreement.

This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent.

WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of , .

ATTEST:		HAYNES INTERNATIONAL, INC.

By:		By:
	Name:	Name:
	Title:	Title:

B- 2

Countersigned:

WELLS FARGO BANK, N.A.

By:
Name:
Title:

B- 3

[Form of Reverse Side of Right Certificate]

FORM OF ASSIGNMENT

(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)

FOR VALUE RECEIVED hereby sells, assigns and transfers unto

(Please print name and address of transferee)

this Right Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint Attorney, to transfer the within Right Certificate on the books of the within-named Company, with full power of substitution.

Dated:


	Signature


Signature Medallion Guaranteed:

B- 4

CERTIFICATE

The undersigned hereby certifies by checking the appropriate boxes that:

(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not being assigned and transferred by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement); and

(2) after due inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.

Dated: , 200


	Signature


Signature Medallion Guaranteed:

B- 5

FORM OF ELECTION TO PURCHASE

(To be executed if holder desires to exercise
Rights represented by the Right Certificate.)

To: Haynes International, Inc.

The undersigned hereby irrevocably elects to exercise Rights represented by this Right Certificate to purchase the Preferred Shares issuable upon the exercise of such Rights and requests that certificates for such Preferred Shares be issued in the name of:

Please insert social security
or other identifying number

(Please print name and address)

If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance remaining of such Rights shall be registered in the name of and delivered to:

Please insert social security
or other identifying number

(Please print name and address)

Dated: , 200


	Signature


Signature Medallion Guaranteed:

B- 6

CERTIFICATE

The undersigned hereby certifies by checking the appropriate boxes that:

(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not being exercised by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement); and

Dated: , 200


	Signature


Signature Medallion Guaranteed:

B- 7

NOTICE

The signature in the Form of Assignment and Certificate or Form of Election to Purchase and Certificate, as the case may be, must conform to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever.

All Guarantees must be made by a financial institution (such as a bank or broker) which is a participant in the Securities Transfer Agents Medallion Program (“ STAMP ”), the New York Stock Exchange, Inc. Medallion Signature Program (“ MSP ”), or the Stock Exchanges Medallion Program (“ SEMP ”) and must not be dated. Guarantees by a notary public are not acceptable.

In the event the certification set forth above in the Form of Assignment or the Form of Election to Purchase, as the case may be, is not completed, the Company and the Rights Agent may deem the beneficial owner of the Rights evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Agreement) and not honor such Assignment or Election to Purchase.

B- 8

Exhibit C

SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES

Introduction

The Board of Directors of our Company, Haynes International, Inc., a Delaware corporation, has declared a dividend of one preferred share purchase right (a “Right” ) for each outstanding share of common stock, par value $0.001 per share. The dividend is payable on August 25, 2006 to the stockholders of record on such date.

Our Board has adopted this Rights Agreement to protect stockholders from coercive or otherwise unfair takeover tactics. In general terms, it works by imposing a significant penalty upon any person or group which acquires 15% or more of our outstanding common stock without the approval of our Board. The Rights Agreement should not interfere with any merger or other business combination approved by our Board. An exception has been included in the Rights Agreement to provide that any person or group who owns 15% or more of our outstanding common stock upon adoption of the Rights Agreement does not become an Acquiring Person unless such owner subsequently acquires additional shares of our common stock and after giving effect to such acquisition owns 15% or more of our outstanding common stock.

For those interested in the specific terms of the Rights Agreement as made between our Company and Wells Fargo Bank, N.A., as the Rights Agent, on August 13, 2006, we provide the following summary description. Please note, however, that this description is only a summary, is not complete, and should be read together with the entire Rights Agreement, which has been filed with the Securities and Exchange Commission as an Exhibit to a Form 8-K dated August 13, 2006. A copy of the Rights Agreement is available free of charge from our Company.

The Rights . Our Board authorized the issuance of a Right with respect to each share of common stock outstanding on August 25, 2006. The Rights will initially trade with, and will be inseparable from, the common stock. The Rights are evidenced only by certificates that represent shares of common stock. New Rights will accompany any new shares of common stock we issue after August 25 , 2006 until the Distribution Date described below.

Exercise Price . Each Right will allow its holder to purchase from our Company one one-thousandth of a share of Series A Junior Participating Preferred Stock (“Preferred Share”) for $135.00 per Right once the Rights become exercisable.

Exercisability . The Rights will not be exercisable until

· 10 days after the public announcement that a person or group has become an “Acquiring Person.” A person or group becomes an Acquiring Person by obtaining beneficial ownership of 15% or more of our outstanding common stock (or if a person or group was the beneficial owner of 15% or more of our outstanding common stock at the time of adoption of the Rights Agreement, by obtaining beneficial ownership of any additional shares of our common stock after the first public announcement of the adoption of the Rights Agreement),

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· 10 business days (or a later date determined by our Board before any person or group becomes an Acquiring Person) after a person or group begins a tender or exchange offer which, if completed, would result in that person or group becoming an Acquiring Person.

We refer to the date when the Rights become exercisable as the “Distribution Date.” Until that date, the common stock certificates will also evidence the Rights, and any transfer of shares of common stock will constitute a transfer of Rights. After that date, the Rights will separate from the common stock and be evidenced by Right certificates that we will mail to all eligible holders of common stock. Any Rights held by an Acquiring Person are void and may not be exercised.

Consequences of a Person or Group Becoming an Acquiring Person .

· Flip In . If a person or group becomes an Acquiring Person, all holders of Rights except the Acquiring Person may, upon exercise of a Right, for $135.00 per Right, purchase shares of our common stock with a market value of $270.00 per Right, based on the market price of the common stock prior to such acquisition.

· Flip Over . If our Company is acquired in a merger or similar transaction after an Acquiring Person becomes such, all holders of Rights except the Acquiring Person may, upon exercise of a Right, for $135.00 per Right, purchase shares of the acquiring corporation with a market value of $270.00 per Right based on the market price of the acquiring corporation’s stock, prior to such merger.

Preferred Share Provisions .

Each one one-thousandth of a Preferred Share, if issued:

· will not be redeemable.

· will entitle holders to quarterly dividend payments of $.01 per one one-thousandth of a Preferred Share, or an amount equal to the dividend paid on one share of common stock, whichever is greater.

· will entitle holders upon liquidation either to receive $1.00 per one one-thousandth of a Preferred Share or an amount equal to the payment made on one share of common stock, whichever is greater.

· will have the same voting power as one share of common stock.

· if shares of our common stock are exchanged via merger, consolidation, or a similar transaction, will entitle holders to a per share payment equal to the payment made on one share of common stock.

The value of one one-thousandth interest in a Preferred Share should approximate the value of one share of common stock.

Expiration . The Rights will expire at 5:00 P.M., Minneapolis, Minnesota time, on the earlier of (a) August 13, 2016 or (b) the thirtieth (30 th ) day following the date of the 2007 Annual Meeting of Stockholders of the Company if at such meeting the stockholders, by the affirmative vote of a

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majority of the shares of capital stock of the Company present, in person or by proxy, and entitled to vote on such matter, vote to terminate the Rights Agreement. The expiration date for the Rights may be advanced or extended by our Board, and the Rights may be redeemed or exchanged prior to the expiration date by our Board as described below.

Redemption . Our Board may redeem the Rights for $.01 per Right at any time before any person or group becomes an Acquiring Person. If our Board redeems any Rights, it must redeem all of the Rights. Once the Rights are redeemed, the only right of the holders of Rights will be to receive the redemption price of $.01 per Right. The redemption price will be adjusted if we have a stock split or stock dividends of our common stock.

Exchange . After a person or group becomes an Acquiring Person, but before an Acquiring Person owns 50% or more of our outstanding common stock, our Board may extinguish the Rights by exchanging one share of common stock or an equivalent security for each Right, other than Rights held by the Acquiring Person.

Anti-Dilution Provisions . Our Board may adjust the purchase price of the Preferred Shares, the number of Preferred Shares issuable and the number of outstanding Rights to prevent dilution that may occur from a stock dividend, a stock split, or a reclassification of the Preferred Shares or common stock. No adjustments to the Exercise Price of less than 1% will be made.

Amendments . The terms of the Rights Agreement may be amended by our Board without the consent of the holders of the Rights except that after a person or group becomes an Acquiring Person, our Board may not amend the agreement in a way that adversely affects holders of the Rights.

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EXHIBIT 4.5

Form of Right Certificate

Certificate No. R- Rights

NOT EXERCISABLE AFTER AUGUST 13, 2016 OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE AGREEMENT.

Right Certificate

Haynes International, Inc.

This certifies that , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Agreement, dated as of August 13, 2006 (the “ Agreement ”), between Haynes International, Inc., a Delaware corporation (the “ Company ”), and Wells Fargo Bank, N.A. (the “ Rights Agent ”), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Agreement) and prior to 5:00 P.M., Minneapolis, Minnesota time, on the earlier of (A) August 13, 2016 or (B) the thirtieth (30 th ) day following the date of the 2007 Annual Meeting of Stockholders of the Company if at such meeting the stockholders, by the affirmative vote of a majority of the shares of capital stock of the Company present, in person or by proxy, at such meeting and entitled to vote on such matter, vote to terminate the Agreement, at the principal office of the Rights Agent, or at the office of its successor as Rights Agent, one one-thousandth of a fully paid non-assessable share of Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company (the “ Preferred Shares ”), at a purchase price of $135.00 per one one-thousandth of a Preferred Share (the “ Purchase Price ”), upon presentation and surrender of this Right Certificate with the Form of Election to Purchase duly executed. The number of Rights evidenced by this Right Certificate (and the number of one one-thousandths of a Preferred Share which may be purchased upon exercise hereof) set forth above, and the Purchase Price set forth above, are the number and Purchase Price as of August 13, 2006, based on the Preferred Shares as constituted at such date. As provided in the Agreement, the Purchase Price and the number of one one-thousandths of a Preferred Share which may be purchased upon the exercise of the Rights evidenced by this Right Certificate are subject to modification and adjustment upon the happening of certain events.

This Right Certificate, with or without other Right Certificates, upon surrender at the principal office of the Rights Agent, may be exchanged for another Right Certificate or Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of Preferred Shares as the Rights evidenced by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase. If this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Right Certificate or Right Certificates for the number of whole Rights not exercised.

This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent.

WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of , .

ATTEST:		HAYNES INTERNATIONAL, INC.



By:		By:
	Name:	Name:
	Title:	Title:

Countersigned:

WELLS FARGO BANK, N.A.



By:
Name:
Title:

[Form of Reverse Side of Right Certificate]

FORM OF ASSIGNMENT

(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)

FOR VALUE RECEIVED hereby sells, assigns and transfers unto

(Please print name and address of transferee)

Dated:


				Signature


Signature Medallion Guaranteed:

CERTIFICATE

The undersigned hereby certifies by checking the appropriate boxes that:

Dated:	, 200
		Signature
Signature Medallion Guaranteed:

FORM OF ELECTION TO PURCHASE

(To be executed if holder desires to exercise
Rights represented by the Right Certificate.)

To: Haynes International, Inc.

Please insert social security
or other identifying number

(Please print name and address)

Please insert social security
or other identifying number

(Please print name and address)

Dated:	, 200
		Signature
Signature Medallion Guaranteed:

CERTIFICATE

The undersigned hereby certifies by checking the appropriate boxes that:

Dated:	, 200
		Signature
Signature Medallion Guaranteed:

NOTICE

EXHIBIT 10.1

FORM OF
TERMINATION BENEFITS AGREEMENT

THIS TERMINATION BENEFITS AGREEMENT (“AGREEMENT”) is executed as of the date set forth below to be effective as of ___________ (the “EFFECTIVE DATE”) (defined below) by and between Haynes International, Inc., a Delaware corporation (the “COMPANY”), and ____________, an individual residing in the State of Indiana (the “EMPLOYEE”).

WITNESSETH

WHEREAS, the Board of Directors of the Company (the “BOARD”) has determined that it is in the best interests of the Company and its shareholders for the Company to agree to provide benefits under circumstances described below to the Employee in connection with employment by the Company and due to Employee’s responsibility for policy-making functions within the Company and in exchange for the Employee’s agreements in Sections 6 and 7 hereof;

NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby recognized, the Company and the Employee agree as follows:

AGREEMENT

1. TERM OF AGREEMENT. This Agreement shall commence as of the Effective Date and shall continue in effect until September 30, 2007; provided, however, that commencing on October 1, 2007 (the “RENEWAL DATE”) and on each two-year anniversary thereafter, the term of this Agreement shall automatically be extended for two (2) years (until the two-year anniversary of the Renewal Date next following) unless either the Company or the Employee shall have given written notice to the other at least sixty (60) days prior thereto that the term of this Agreement shall not be so extended (the “TERM”).

2. TERMINATION BENEFITS.

a. If, during the Term of this Agreement, the Employee’s employment with the Company shall be terminated, the Employee shall be entitled to receive the following compensation and benefits (in addition to any compensation and benefits provided for under any of the Company’s employee benefit plans, policies and practices or as required by law):

i. TERMINATION WITHOUT CAUSE, FOR GOOD REASON, OR DUE TO DISABILITY OR DEATH. If the Employee’s employment with the Company shall be terminated by the

Company without Cause, by the Employee for Good Reason, or by reason of the Employee’s Disability or death:

1. the Employee or the Employee’s heirs, estate, personal representative or legal guardian, as appropriate, shall be entitled to receive a lump sum cash payment equal to the sum of:

a. the Employee’s accrued but unpaid Base Salary through the Date of Termination;

b. any accrued but unpaid compensation, including but not limited to any unpaid bonus compensation and reimbursement, in accordance with the then prevailing reimbursement practices of the Company, for all reasonable and customary business expenses incurred by the Employee in connection with his employment by the Company as of the Date of Termination; and

c. a bonus for the fiscal year in which the Date of Termination occurs in an amount equal to the Employee’s target bonus for such fiscal year under the bonus or incentive compensation plan maintained by the Company, calculated as if the Employee earned one hundred percent (100%) of such target bonus (the “SEVERANCE BONUS”), multiplied by a fraction, the numerator of which is the number of days the Employee worked in the fiscal year in which the Date of Termination occurs and the denominator of which is three hundred sixty five (365); and

2 a. on a termination of employment by the Company without Cause or by the Employee for Good Reason, any unvested stock options held by the Employee will terminate immediately and all vested stock options held by the Employee will remain exercisable for six (6) months following the Date of Termination, but in no event later than the expiration date of the stock options as specified in the applicable grant letter, and

b. upon a termination of employment by reason of the Employee’s Disability or death, any unvested stock options held by the Employee will vest immediately and all options held by the Employee will remain exercisable for six (6) months from the Date of Termination, but in

no event later than the expiration date of such stock options as specified in the applicable grant letter.

ii. TERMINATION FOR CAUSE, WITHOUT GOOD REASON, OR DUE TO RETIREMENT. If the Employee’s employment with the Company shall be terminated by the Company for Cause, by the Employee without Good Reason, or by reason of the Employee’s Retirement:

1. the Employee shall be entitled to receive a lump sum cash payment equal to the sum of:

a. the Employee’s accrued but unpaid Base Salary through the Date of Termination; and

a. upon a termination of employment by the Company for Cause or by the Employee without Good Reason, all vested and unvested stock options held by the Employee shall terminate immediately, and

b. upon the Employee’s Retirement, all unvested stock options held by the Employee shall terminate immediately and any vested stock options held by the Employee shall remain exercisable for six (6) months following the Date of Termination but in no event later than the expiration date of such stock options as specified in the applicable grant letter.

iii. TERMINATION WITHOUT CAUSE OR FOR GOOD REASON FOLLOWING A CHANGE IN CONTROL. If the Employee’s employment with the Company shall be terminated by the Company without Cause or by the Employee for Good Reason within twelve (12) months following a Change in Control and during the Term of this Agreement (including any extensions or deemed extensions thereof as provided in SECTION 1 above):

1. the Employee shall be entitled to receive a lump sum cash payment equal to the sum of:

a. the Employee’s accrued but unpaid Base Salary through the Date of Termination;

b. the Employee’s Base Salary that would be payable for the period from the Date of Termination through the first (1st) anniversary thereof (the “SEVERANCE PERIOD”);

c. any accrued but unpaid compensation, including but not limited to any unpaid bonus compensation and reimbursement, in accordance with the then prevailing reimbursement practices of the Company, for all reasonable and customary business expenses incurred by the Employee in connection with his employment by the Company as of the Date of Termination; and

d. the Severance Bonus;

2. any unvested stock options held by the Employee will vest immediately and all stock options held by the Employee will remain exercisable for one (1) year from the Date of Termination, but in no event later than the expiration date of the stock options as specified in the applicable grant letter; and

3. during the Severance Period, the Company shall provide to the Employee and Employee’s dependents any medical, hospitalization and life insurance benefits that the Employee received from the Company immediately prior to the Date of Termination; PROVIDED, HOWEVER, that any such benefits coverage shall cease to the extent that the Employee obtains comparable medical, hospitalization or life insurance benefits (as the case may be) from any other employer during such Severance Period.

b. The Employee shall not be required to mitigate the amount of any payment provided for in this SECTION 2 by seeking other employment or otherwise, nor, except as provided in SECTION 2(a)(iii)(3) above, shall the amount of any payment or benefit provided for in SECTION 2 be reduced by any compensation earned by the Employee or benefit made available to the Employee as the result of employment by another employer after the Date of Termination or otherwise.

c. For purposes of this Agreement, the following definitions shall apply:

i. “DISABILITY” means the Employee is totally and permanently disabled as defined in the Haynes International, Inc. Pension Plan.

ii. “RETIREMENT” means the voluntary retirement of the Employee after having reached age fifty-five (55) and having completed at least five (5) years of service with the Company, but in no event prior to September 1, 2009.

iii. A termination for “CAUSE” means a termination by reason of the good faith determination of the Company’s Board of Directors (the “BOARD”) that the Employee (1) continually failed to substantially perform his duties with the Company (other than a failure resulting from the Employee’s medically documented incapacity due to physical or mental illness), including, without limitation, repeated refusal to follow the reasonable directions of the Company’s Chief Executive Officer, knowing violation of the law in the course of performance of the Employee’s duties with the Company, repeated absences from work without a reasonable excuse, or intoxication with alcohol or illegal drugs while on the Company’s premises during regular business hours, (2) engaged in conduct which constituted a material breach of SECTION 6 or SECTION 7 of this Agreement, (3) 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, (4) 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 (5) 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 Employee 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. Notwithstanding the foregoing, the Employee shall not be deemed to have been terminated for Cause unless there shall have been delivered to the Employee a copy of a resolution duly adopted by the Board. If the Company has reasonable belief that the Employee has committed any of the acts described above, it may suspend the Employee (with or without pay) while it investigates whether it has or could have Cause to terminate the Employee. The Company may terminate the Employee for Cause prior to the completion of its investigation; provided, that, if it is ultimately determined that the Employee has not committed an act which would constitute Cause, the Employee shall be treated as if he were terminated without Cause.

iv. A “NOTICE OF TERMINATION” means a notice which shall indicate the specific termination provision in this Agreement which is applicable and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee’s employment under the provision so indicated. For purposes of this Agreement, no such purported termination shall be effective without such Notice of Termination. Any purported termination by the Company or by the Employee shall be communicated by written notice of termination to the other party hereto in accordance with SECTION 5 hereof.

v. “DATE OF TERMINATION” means (i) if the Employee’s employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Employee shall not have returned to the performance of his duties on a full-time basis during such thirty (30) day period), and (ii) if the Employee’s employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination without Cause shall not be less than thirty (30) days from the date such Notice of Termination is given); provided that if within thirty (30) days after any such Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, or by the final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been taken).

vi. “BASE SALARY” means the annual base salary of the Employee from the Company, but determined without regard to any salary reduction agreement of the Employee under Sections 401(k) and 125 of the Internal Revenue Code of 1986, as amended (the “CODE”), (or corresponding provisions of subsequent federal income tax laws) or any salary deferral agreement of the Employee under any non-qualified deferred compensation program that may be available to the Employee from time to time, and excludes (i) incentive or additional cash compensation; (ii) any amounts included in income because of Sections 79 or 89 of the Code; and (iii) any amounts paid to the Employee for reimbursement for expenses or discharging tax liabilities.

vii. “GOOD REASON” shall mean the occurrence, during the Term of this Agreement, of any of the following actions or failures to act, but in each case only if it is not consented to by the Employee in writing: (i) a material adverse change in the Employee’s duties, reporting responsibilities, titles or elected or appointed offices as in

effect immediately prior to the effective date of such change; or (ii) a material reduction by the Company in the Employee’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 Employee. For purposes of this definition, none of the actions described in clauses (i) and (ii) above shall constitute “Good Reason” with respect to the Employee 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 Employee (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 (i) and (ii) above on the sixtieth (60th) day following the later of the occurrence of such action or the Employee’s knowledge thereof, unless the Employee has given the Company written notice thereof prior to such date.

viii. “CHANGE IN CONTROL” shall mean the first to occur of the following: (i) any Person 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); (ii) 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; (iii) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation 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 (iv) 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, 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.

ix. “BENEFICIAL OWNER” shall have the meaning set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as amended.

x. “PERSON” shall, except for purposes of SECTION 7 of this Agreement, have the meaning given in Section 3(a)(9) of the Securities Exchange Act of 1934, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (1) the Company or any subsidiary of the Company, (2) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its affiliates, (3) an underwriter temporarily holding securities pursuant to an offering of such securities or (4) 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.

3. SUCCESSORS; BINDING AGREEMENT.

a. This Agreement shall be binding on the Company and any successor to all or substantially all of its business or assets. Without limiting the effect of the prior sentence, the Company will require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. As used in this Agreement, the “COMPANY” shall mean the Company as hereinbefore defined and any successor or assign to its business and/or assets as aforesaid which assumes and agrees to -perform this Agreement

or which is otherwise obligated under this Agreement by the first sentence of this SECTION 3, by operation of law or otherwise.

b. This Agreement shall inure to the benefit of and be enforceable by the Employee’s personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Employee should die while any amounts would still be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Employee’s devisee, legatee or other designee or if there is no such devisee, legatee or designee, to the Employee’s estate.

4. TIMING OF PAYMENT AND RELEASE.

a. As a condition of receiving from the Company the payments and benefits provided for hereunder, which the Employee otherwise would not be entitled to receive, the Employee understands and agrees that, on the Date of Termination, he will be required to execute a release of all claims against the Company in substantially the form attached hereto as EXHIBIT 1 (the “RELEASE”) as may be modified by the Company in good faith to reflect changes in law or its employment practices. The Employee acknowledges that he has been advised in writing to consult with an attorney prior to executing the Release. The Employee agrees that he will consult with his attorney prior to executing the Release. The Employee and the Company agree that the Employee has a period of seven (7) days following the execution of the Release within which to revoke the Release. The parties also acknowledge and agree that the Release shall not be effective or enforceable until the seven (7) day revocation period expires. The date on which this seven (7) day period expires shall be the effective date of the Release (the “RELEASE EFFECTIVE DATE”).

b. The Company shall make all payments required under this Agreement within five (5) business days following the Release Effective Date.

c. The Employee understands that as used in this SECTION 4, the “COMPANY” includes its past, present and future officers, directors, trustees, shareholders, employees, agents, subsidiaries, affiliates, distributors, successors, and assigns, any and all employee benefit plans (and any fiduciary of such plans) sponsored by the Company, and any other persons related to the Company.

d. Notwithstanding anything in this Agreement to the contrary, this Agreement shall not affect the Company’s right or ability to terminate the employment of the Employee, subject to any other written contract between the Company and the Employee to the contrary.

e. The Employee agrees that execution and delivery to the Company of any release or disclaimer agreement requested by the Company which is consistent with the provisions of this SECTION 4 and the passage of all necessary waiting periods in connection therewith shall be a condition to the receipt of any payment or benefits to be provided by the Company following the termination of the Employee’s employment with the Company.

5. NOTICES. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or sent by certified mail, return receipt requested, postage prepaid, or by expedited (overnight) courier with established national reputation, shipping prepaid or billed to sender, in either case addressed to the respective addresses last given by each party to the other (provided that all notices to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company) or to such other address as either party may have furnished to the other in writing in accordance herewith. All notices and communication shall be deemed to have been received on the date of delivery thereof, on the third business day after the mailing thereof, or on the second day after deposit thereof with an expedited courier service, except that notice of change of address shall be effective only upon receipt.

6. CONFIDENTIALITY. For purposes of this SECTION 6, the term “COMPANY” shall include, in addition to the Company, its affiliates, subsidiaries and any of their respective predecessors, successors and assigns. The term “COMPANY’S BUSINESS” shall mean the business of developing, manufacturing, selling or distributing high-performance alloys for service in severe corrosion and high temperature applications.

a. CONFIDENTIAL INFORMATION. As used in this Agreement, “CONFIDENTIAL INFORMATION” means any and all confidential, proprietary or other information, whether or not originated by the Employee or the Company, which is in any way related to the past or present Company’s Business and is either designated as confidential or not generally known by or available to the public. Confidential Information includes, but is not limited to (whether or not reduced to writing or designated as confidential) (i) information regarding the Company’s existing and potential customers and vendors; (ii) any contacts (including the existence and contents thereof and parties thereto) to which the Company is a party or is bound; (iii) information regarding products and services being purchased or leased by or provided to the Company; (iv) information received by the Company from third parties under an obligation of confidentiality, restricted, disclosure or restricted use; (v) personnel and financial information of the Company; (vi) information with respect to the Company’s products, services, facilities, business methods, systems, trade secrets, technical know-how, and other intellectual property; (vii) marketing and developmental plans and techniques, price and cost data, forecasts and forecast assumptions, and potential strategies

of the Company; and (viii) any other information relating to Company which was obtained by the Employee in connection with his employment by the Company, whether before, on or after the Effective Date.

b. NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION. The Employee acknowledges that the Confidential Information of the Company is a valuable, unique asset of the Company and the Employee’s unauthorized use or disclosure thereof could cause irreparable harm to the Company for which no remedy at law could be adequate. Accordingly, the Employee agrees that the Employee shall hold all Confidential Information of the Company in strict confidence and solely for the benefit of the Company, and that he shall not, directly or indirectly, disclose or use or authorize any third party to disclose or use any Confidential Information, except (i) as required for the performance of the Employee’s duties hereunder, (ii) with the express written consent of the Company, (iii) to the extent that any such information is in or becomes in the public domain other than as a result of the Employee’s breach of any of his obligations hereunder, or (iv) where required to be disclosed by court order, subpoena or other government process and in such event, the Employee shall cooperate with the Company in attempting to keep such information confidential. The Employee shall follow all Company policies and procedures to protect all Confidential Information and take any additional precautions necessary to preserve and protect the use or disclosure of any Confidential Information at all times.

c. OWNERSHIP OF CONFIDENTIAL INFORMATION. The Employee acknowledges and agrees that all Confidential Information is and shall remain the exclusive property of the Company, whether or not prepared in whole or in part by the Employee and whether or not disclosed to or entrusted to the custody of the Employee. Upon the termination or resignation of his employment by the Company, or at any other time at the request of the Company, the Employee shall promptly deliver to the Company all documents, tapes, disks, or other storage media and any other materials, and all copies thereof in whatever form, in the possession of the Employee pertaining to the Company’s Business, including, but not limited to, any containing Confidential Information.

d. SURVIVAL. The Employee’s obligations set forth in this SECTION 6, and the Company’s rights and remedies with respect hereto, shall indefinitely survive the termination of this Agreement and the Employee’s employment by the Company, regardless of the reason therefor.

7. RESTRICTIVE COVENANTS. For purposes of this SECTION 7, the term “COMPANY” shall include, in addition to the Company, its affiliates, subsidiaries and any of their respective predecessors, successors and assigns.

a. NON-COMPETITION. During the Restricted Period and within the Restricted Area (each as defined in subsection (c) below), the Employee shall not, directly or indirectly, perform on behalf of any Competitor (as defined in subsection (c) below) the same or similar services as those that the Employee performed for the Company during the Employee’s employment by the Company or otherwise. In addition, the Employee shall not, during the Restricted Period or within the Restricted Area, directly or indirectly engage in, own, manage, operate, join, control, tend money or other assistance to, or participate in or be connected with (as an officer, director, member, manager, partner, shareholder, consultant, employee, agent, or otherwise), any Competitor.

b. NON-SOLICITATION. During the Restricted Period, the Employee shall not, directly or indirectly, for himself or on behalf of any Person (as defined in subsection (c) below), (i) solicit or attempt to solicit any Customers (as defined in subsection (c) below) or prospective Customers with whom the Employee had contact at any time during the Employee’s employment by the Company; (ii) divert or attempt to divert any business of the Company to any other Person; (iii) solicit or attempt to solicit for employment, endeavor to entice away from the Company, recruit, hire, or otherwise interfere with the Company’s relationship with, any Person who is employed by or otherwise engaged to perform services for the Company (or was employed or otherwise engaged to perform services for the Company, as of any given time, within the immediately preceding twenty-four (24) month period); (iv) cause or assist, or attempt to cause or assist, any employee or other service provider to leave the Company; or (v) otherwise interfere in any manner with the employment or business relationships of the Company or the business or operations then being conducted by the Company.

c. DEFINITIONS. For purposes of this SECTION 7, the following definitions have the following meanings:

i. “COMPETITOR” means any Person that engages in a business that is the same as, or similar to, the Company’s Business.

ii. “CUSTOMER” means any Person which, as of any given date, used or purchased or contracted to use or purchase any services or products from the Company within the immediately preceding twenty-four (24) month period.

iii. “PERSON” means any individual, corporation, partnership, joint venture, association, limited liability company, joint-stock company, trust, or unincorporated organization, or any governmental agency, officer, department, commission, board, bureau, or instrumentality thereof,

iv. “RESTRICTED AREA” means, because the market for the Company’s Business is global, or has the potential of being global, and is not dependent upon the physical location or presence of the Company, the Employee, or any individual or entity that may be in violation of this Agreement, the broadest geographic region enforceable by law (excluding any location where this type of restriction is prohibited by law) as follows: (A) everywhere in the world that has access to the Company’s Business because of the availability of the Internet; (B) everywhere in the world that the Employee has the ability to compete with the Company’s Business through the Internet; (C) each state, commonwealth, territory, province and other political subdivision located in North America; (D) each state, commonwealth, territory and other political subdivision of the United States of America; (E) Indiana and any state in which the Employee has performed any services for the Company; (F) any geographical area in which the Company has performed any services or sold any products; (G) any geographical area in which the Company or any of its subsidiaries have engaged in the Company’s Business, which has resulted in aggregate sales revenues of at least $25,000 during any year in the five (5) year period immediately preceding the commencement of the Restricted Period; (H) any state or other jurisdiction where the Company had an office at any time during the Employee’s employment by the Company; (I) within one hundred (100) miles of any location in which the Company had an office at any time during the Employee’s employment by the Company; and (J) within one hundred (100) miles of any location in which the Employee provided services for the Company.

v. “RESTRICTED PERIOD” means the period of time during Employee’s employment by the Company plus a period of twelve (12) months from the Date of Termination. In the event of a breach of this Agreement by the Employee, the Restricted Period will be extended automatically by the period of the breach.

d. SURVIVAL. The Employee’s obligations set forth in this SECTION 7, and the Company’s rights and remedies with respect thereto, will remain in full force and effect during the Restricted Period and until full resolution of any dispute related to the performance of the Employee’s obligations during the Restricted Period.

e. PUBLIC COMPANY EXCEPTION. The prohibitions contained in this SECTION 7 do not prohibit the Employee’s ownership of stock which is publicly traded, provided that (1) the investment is passive, (2) the Employee has no other involvement with the company, (3) the Employee’s interest is less than five percent (5%) of the shares of the company, and (4)

the Employee makes full disclosure to the Company of the stock at the time that the Employee acquires the shares of stock.

8. ASSIGNMENT OF INVENTIONS. Any and all inventions, improvements, discoveries, designs, works of authorship, concepts or ideas, or expressions whereof, whether or not subject to patents, copyrights, trademarks or service mark protections, and whether or not reduced to practice, that are conceived or developed by the Employee while employed with the Company and which relate to or result from the actual or anticipated business, work, research or investigation of the Company (collectively, “INVENTIONS”), shall be the sole and exclusive property of the Company. The Employee shall do all things reasonably requested by the Company to assign to and vest in the Company the entire right, title and interest to any such Inventions and to obtain full protection therefor. Notwithstanding the foregoing, the provisions of this Agreement do not apply to an Invention for which no equipment, supplies, facility, or Confidential Information of the Company was used and which was developed entirely on the Employee’s own time, unless (a) the Invention relates (i) to the Company’s Business, or (ii) to the Company’s actual or demonstrably anticipated research or development, or (b) the Invention results from any work performed by the Employee for the Company.

9. REASONABLENESS. The Employee has carefully considered the nature, extent and duration of the restrictions and obligations contained in this Agreement, including, without limitation, the geographical coverage contained in SECTION 7 and the time periods contained in SECTION 6 and SECTION 7, and acknowledges and agrees that such restrictions are fair and reasonable in all respects to protect the legitimate interests of the Company and that these restrictions are designed for the reasonable protection of the Company’s Business.

10. REMEDIES. The Employee recognizes that any breach of this Agreement shall cause irreparable injury to the Company, inadequately compensable in monetary damages. Accordingly, in addition to any other legal or equitable remedies that may be available to the Company, the Employee agrees that the Company shall be able to seek and obtain injunctive relief in the form of a temporary restraining order, preliminary injunction, or permanent injunction, in each case without notice or bond, against the Employee to enforce this Agreement. The Company shall not be required to demonstrate actual injury or damage to obtain injunctive relief from the courts. To the extent that any damages are calculable resulting from the breach of this Agreement, the Company shall also be entitled to recover damages, including, but not limited to, any lost profits of the Company and/or its affiliates or subsidiaries. For purposes of this Agreement, lost profits of the Company shall be deemed to include all gross revenues resulting from any activity of the Employee in violation of this Agreement and all such revenues shall be held in trust for the benefit of the Company. Any recovery of damages by the Company shall be in addition to and not in lieu of the injunctive relief to which the Company is entitled. In no event will a damage recovery be considered a penalty in liquidated damages. In addition, in any action at law or in equity arising out of this Agreement, the prevailing party shall be entitled to recover, in addition to any damages caused by a breach of this Agreement, all costs and expenses, including, but not limited to, reasonable attorneys’ fees, expenses, and court costs incurred by such party in connection with such action or

proceeding. Without limiting the Company’s rights under this SECTION 10 or any other remedies of the Company, if a court of competent jurisdiction determines that the Employee breached any of the provisions of SECTIONS 6 or 7 of this Agreement, the Company will have the right to cease making any payments or providing any benefits otherwise due to the Employee under the terms and conditions of this Agreement.

11. CLAIMS BY THE EMPLOYEE. The Employee acknowledges and agrees that any claim or cause of action by the Employee against the Company shall not constitute a defense to the enforcement of the restrictions and covenants set forth in this Agreement and shall not be used to prohibit injunctive relief.

12. MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Employee and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, 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 agreement or representations, oral or otherwise, express or implied, with respect to the subject matter hereof may have been made by either party which are not expressly set forth in this Agreement.

13. APPLICABLE LAW AND FORUM. This Agreement has been entered into in the State of Indiana and shall be governed by and construed in accordance with the laws of the State of Indiana. The parties agree that any action in law or equity brought by either party arising from or in connection with this Agreement or arising from or in connection with the performance by either party of its obligations hereunder shall be brought only in the United States District Court for the Southern District of Indiana, Indianapolis Division or the Circuit Court of Howard County, Indiana, and the parties hereto consent to the jurisdiction of such forums.

14. SEVERABILITY. If a court having proper jurisdiction holds a particular provision of this Agreement unenforceable or invalid for any reason, that provision shall be modified only to the extent necessary in the opinion of such court to make it enforceable and valid and the remainder of this Agreement shall be deemed valid and enforceable and shall be enforced to the greatest extent possible under the then existing law. In the event the court determines such modification is not possible, the provision shall be deemed severable and deleted, and all other provisions of this Agreement shall remain unchanged and in full force and effect.

15. ENFORCEABILITY IN JURISDICTIONS. The parties hereto intend to and hereby confer jurisdiction to enforce the covenants contained in SECTIONS 6 and 7 above upon the courts of any state within the geographical scope of such covenants. If the courts of any one or more of such states shall hold any of the previous covenants unenforceable by reason of the breadth of such scope or otherwise, it is the intention of the parties hereto that such determination not bar or in any way affect the Company’s rights to the relief provided above in the courts of any other states within the

geographical scope of such covenants, as to breaches of such covenants in such other respective jurisdictions, the above covenants as they relate to each state being, for this purpose, severable into diverse and independent covenants.

16. FAIR DEALING. The Employee acknowledges that the Company has negotiated this Agreement in good faith and has been fair in its dealing with the Employee. The Employee shall not raise any defense and expressly waives any defense against the Company based upon any alleged breach of good faith or fair dealing by the Company in connection with this Agreement.

17. ENTIRE AGREEMENT; RELEASE. This Agreement constitutes the entire agreement between the parties hereto, and, effective as of the Effective Date, supersedes all prior agreements, understandings and arrangements, oral or written, between the parties hereto, with respect to the subject matter hereof.

18. OPPORTUNITY TO CONSULT COUNSEL. THE EMPLOYEE ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS AGREEMENT AND HAS BEEN GIVEN ADEQUATE OPPORTUNITY, AND HAS BEEN ENCOURAGED BY THE COMPANY, TO CONSULT WITH LEGAL COUNSEL OF HIS CHOICE CONCERNING THE TERMS HEREOF BEFORE EXECUTING THIS AGREEMENT.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duty authorized officer and the Employee has executed this Agreement, each as of the Effective Date.

		COMPANY

		HAYNES INTERNATIONAL, INC.



		By:
		Printed: Francis J. Petro
		Title: President and Chief Executive Officer


ATTEST:


Printed:
Title:


		EMPLOYEE




WITNESS

SCHEDULE OF EMPLOYEES PARTY TO THE TERMINATION BENEFITS AGREEMENT

Cijan, August A.
Douglas, Michael
Kilian, Anastacia S.
Laird, James A.
Losch, Marlin C.
Martin, Marcel
Maudlin, Dan W.
Neel, Jean C.
Pinkham, Scott R.
Spalding, Gregory M.
Sponaugle, Charles, J.
Young, Jeffrey L.

Exhibit 10.2

HAYNES INTERNATIONAL, INC.
DEATH BENEFIT PLAN
MASTER PLAN DOCUMENT
Effective January 1, 2003

ARTICLE 1
ESTABLISHMENT OF THE PLAN

1.1. ESTABLISHMENT OF THE PLAN. Haynes International, Inc. (the “Company”) hereby establishes a death benefit only plan for eligible employees of the Employer, effective as of January 1, 2003, to be known as the “Haynes International, Inc. Death Benefit Plan” (the “Plan”), as set forth in this document.

ARTICLE 2
ELIGIBILITY AND PARTICIPATION

2.1. ELIGIBILITY AND PARTICIPATION. Participation in the Plan shall be limited to only those employees of the Haynes International, Inc. Supplemental Executive Retirement Plan. From that group, the Haynes International, Inc. Retirement Committee shall select, in its sole discretion, employees to participate in the Plan. Any selected employee shall become a participant as of the date specified by the Committee. No employee has a right to be selected as a participant under this Plan, nor to continue as a participant under this Plan indefinitely. The Committee, however, shall comply with the terms of any employment agreement entered into by the Company with a particular employee in determining the eligibility of that employee to participate in this Plan. Subject solely to any individual employment agreement, eligibility and participation in this Plan shall cease automatically when a participant becomes totally and permanently disabled as determined by the Committee, when a participant first begins receiving a retirement benefit under any retirement benefit plan maintained by the Company for executives, or when otherwise determined by the Committee in its sole discretion.

ARTICLE 3
DEATH BENEFITS

3.1. DEATH BENEFITS. If a participant dies while employed by the Company, his or her designated beneficiary shall be entitled to receive a death benefit equal to the amount determined from time to time by the Committee and set forth in Exhibit A to this Plan.

3.2. DESIGNATION OF BENEFICIARY. Upon the commencement of participation in the Plan, each participant shall designate in writing on a form provided by the Committee and set forth in Exhibit B a beneficiary or beneficiaries to receive any death benefits payable under the terms of this Plan. A participant may revoke his or her beneficiary designation at any time and submit a new designation in writing. Upon the death of the participant, the

Committee shall pay the death benefit due under this Plan in accordance with the last written beneficiary designation received by the Committee prior to the date of the participant’s death. If no beneficiary is designated, the death benefit shall be paid to the participant’s spouse, or if none, per stirpes to the participant’s descendants living at the time of his or her death, or, if none, to the participant’s estate.

3.3. METHOD OF PAYMENT. Death benefits provided under this Plan shall be paid as set forth in Exhibit A.

ARTICLE 4
GENERAL PROVISIONS

4.1. FUNDING. No funds shall be segregated or earmarked for any participant or beneficiary. However, the Company may use any means to set aside or generate funds necessary to satisfy its obligations under the Plan, including the purchase of insurance or the establishment of one or more grantor trusts of the type referred to as a “rabbi trust.” Any such assets that are set aside in the discretion of the Company for purposes of this Plan shall at all times be subject to the claims of the Company’s general creditors in the event of insolvency, and no participant or beneficiary shall have any right, title or interest in any fund, any specific sum of money, any grantor trust, or any asset that may be acquired by the Company with respect to the Company’s obligations under this Plan (other than as a general creditor of the Company with an unsecured claim against the general assets), or in any other assets of the Company by virtue of participation in this Plan.

4.2. EMPLOYMENT RIGHTS. Establishment of this Plan shall not be construed to give any participant the right to be retained by the Company, or to any benefits not specifically provided by the Plan.

4.3. EFFECT ON OTHER BENEFIT PLANS. Amounts paid under this Plan shall not be considered to be compensation for the purposes of any qualified retirement plan maintained by the Company. The treatment of such amounts under other employee benefit plans shall be pursuant to the provisions of each plan.

4.4. APPLICABLE LAW. This Plan shall be construed under the laws of the State of Indiana, and shall be binding upon and inure to the benefit of the participant and’ the Company and any successor company of the Company by way of merger, reorganization, acquisition, or sale by the Company of substantially all of its assets.

ARTICLE 5
AMENDMENT AND TERMINATION,

5.1. AMENDMENT AND TERMINATION. The Company reserves the right to amend the Plan or terminate the Plan at any time. However, no such amendment or termination shall adversely affect the rights of a beneficiary already receiving payments under the Plan.

IN WITNESS WHEREOF, the Company has signed this Plan document as of January 1, 2003.

HAYNES INTERNATIONAL, INC., a Delaware corporation


By:	/s/ FRANCIS J. PETRO
Title:		PRESIDENT & CEO

[Exhibit A - Determination of Death Benefit Amount and Exhibit B - Beneficiary Form have been omitted from the Plan as filed with the Securities and Exchange Commission (the “SEC”). The omitted information is considered immaterial from an investor’s perspective. The Registrant will furnish supplementally a copy of any of the omitted exhibits to the SEC upon request from the SEC.]

Exhibit 10.3

AMENDMENT NUMBER ONE
TO THE
HAYNES INTERNATIONAL, INC. DEATH BENEFIT PLAN

The Haynes International, Inc. Death Benefit Plan (“Plan”) is hereby amended by Haynes International, Inc. (the “Corporation”) as hereinafter provided.

BACKGROUND

The Corporation reserved the right to amend the Plan pursuant to SECTION 5.1 of the Plan and now desires to amend the Plan to modify EXHIBIT A attached to the Plan in order to remove restrictions and further qualify certain death benefits payable by the Corporation under the Plan.

AMENDMENT

The Plan is hereby amended, effective as of the dates indicated herein, as follows:

1. The phrase “$1,600,000 payable from 10/01/03 to 9/30/04” set forth in EXHIBIT A attached to the Plan is hereby deleted in its entirety and replaced with the following language:

“$1,600,000 payable from 10/01/03 until such time as Frances Petro (“Petro”) shall retire from employment with the Company (“Retirement”); provided, however, that any death benefits to be provided to Petro under this Plan prior to Retirement shall be reduced by the SERP Benefit (as defined in the SERP Plan) Petro (or his beneficiary) has previously received or has become entitled to receive, whether in cash or otherwise, under the Haynes International, Inc. Supplemental Executive Retirement Plan, effective January 1, 2002 (the “SERP Plan”).”

2. The phrase “Agreement terminates 10/01/04 unless continued by mutual consent of the parties” set forth in EXHIBIT A attached to the Plan is hereby deleted in its entirety.

3. This Amendment may be executed in multiple counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. The validity, meaning and effect of this Amendment shall be determined in accordance with the laws of the State of Indiana applicable to contracts made and to be performed in that State.

4. This Amendment amends the Plan to the extent provided herein only and all other provisions thereof shall remain in full force and effect.

The Amendment Number One to the Haynes International, Inc. Death Benefit Plan is executed as of the 30th day of August, 2004.

“Corporation”

HAYNES INTERNATIONAL, INC.


By:	/s/ Jean C. Neel

Title:		Vice President , Corporate Affairs and Corporate Secretary

Exhibit 10.4

HAYNES INTERNATIONAL, INC.

Supplemental Executive Retirement Plan

PLAN DOCUMENT

EFFECTIVE JANUARY 1, 2002

TABLE OF CONTENTS

		PAGE

PURPOSE

ARTICLE I.	Definitions	4

ARTICLE II.	Eligibility	8

2.1.	Selection by Committee	8
2.2.	Enrollment Requirements	8
2.3.	Commencement of Participation	8

ARTICLE III.	Benefits	8

3.1.	Normal Benefit	8
3.2.	Change in Control Benefit	8
3.3.	Death Prior to the Commencement of Benefits	8
3.4.	Death After the Commencement of Benefits	9
3.5.	Limitation on Benefits	9
3.6.	Withholding and Payroll Taxes	9

ARTICLE IV.	Forms of Benefit Payment	9

4.1.	Normal Forms of Benefit	9
4.2.	Optional Forms of Benefit	9
4.3.	Automatic Lump Sum Benefit	9

ARTICLE V.	Termination, Amendment or Modification of the Plan	10

5.1.	Termination	10
5.2.	Amendment	10
5.3.	Plan Agreement	10
5.4.	Effect of Payment	10

ARTICLE VI.	Other Benefits and Agreements	10

6.1.	Coordination with Other Benefits	10

ARTICLE VII.	Administration of the Plan	11

7.1.	Committee Duties	11
7.2.	Agents	11
7.3.	Binding Effect of Decisions	11

7.4	Indemnity of Committee	11
7.5.	Employer Information	11

ARTICLE VIII.	Claims Procedures	11

8.1.	Presentation of Claim	11
8.2.	Notification of Decision	12
8.3.	Review of a Denied Claim	12
8.4.	Decision on Review	13
8.5.	Legal Action	13

ARTICLE IX.	Beneficiary Designation	14

9.1.	Beneficiary	14
9.2.	Beneficiary Designation; Change	14
9.3.	Acknowledgment	14
9.4.	No Beneficiary Designation	14
9.5.	Doubt as to Beneficiary	14
9.6.	Discharge of Obligations	14

ARTICLE X.	Trust	15

10.1.	Establishment of the Trust	15
10.2.	Interrelationship of the Plan and the Trust	15
10.3.	Distributions From the Trust	15

ARTICLE XI.	Miscellaneous	15

11.1.	Status of the Plan	15
11.2.	Unsecured General Creditor	15
11.3.	Employer’s Liability	15
11.4.	Nonassignability	15
11.5.	Not a Contract of Employment	16
11.6.	Furnishing Information	16
11.7.	Terms	16
11.8.	Captions	16
11.9.	Governing Law	16
11.10.	Notice	16
11.11.	Successors	17
11.12.	Spouse’s Interest	17
11.13.	Validity	17
11.14.	Incompetent	17
11.15.	Court Order	17

11.16

Distribution in the Event of Taxation

HAYNES INTERNATIONAL, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

EFFECTIVE JANUARY 1, 2002

PURPOSE

The purpose of this Plan, as hereinafter defined, is to provide specified benefits to a select group of management and highly compensated employees of Haynes International, Inc., a Delaware corporation, and its subsidiaries, if any, that sponsor this Plan. This Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA.

ARTICLE I.

DEFINITIONS

For purposes hereof, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings:

1.1 “Actuarial Equivalent” shall mean a benefit or benefits, or a payment or payments, which are of equal value to the benefits for which they are to be substituted. Equivalence of value is determined from actuarial calculations based on certain actuarial assumptions as to mortality, interest and return of assets, which will be determined by the most recent actuarial report of the Haynes International, Inc. Defined Pension Benefit Plan, applied with respect to the particular Form, as hereinafter defined, of payment under this Plan.

1.2 “Average Compensation” shall mean the average of a Participant’s, as hereinafter defined, Compensation, as hereinafter defined, for his or her last sixty (60) full calendar months of employment with an Employer, as hereinafter defined, (or, if the Participant has been employed for less than sixty (60) full calendar months, the actual number of the Participant’s full calendar months of employment) prior to the Determination Date, as hereinafter defined.

1.3 “Beneficiary” shall mean the individual designated in accordance with Article 9 that is entitled to receive benefits under this Plan upon the death of a Participant.

1.4 “Beneficiary Designation Form” shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to designate one or more Beneficiaries.

1.5 “Board” shall mean the board of directors of the Company, as hereinafter defined.

1.6 “Change in Control” shall mean the first to occur of any of the following events:

(a) Any “person” (as that term is used in Section 13 and 14(d)(2) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)) becomes the beneficial owner (as that term is used in Section 13(d) of the Exchange Act), directly or indirectly, of fifty percent (50%) or more of the Company’s capital stock entitled to vote in the election of directors;

(b) During any period of not more than two consecutive years, not including any period prior to the adoption of this Plan, individuals who, at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c), (d) or (e) of this Section 1.6) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least three-fourths (3/4ths) of the directors then still in office, who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof;

(c) The shareholders of the Company approve any consolidation or merger of the Company, other than a consolidation or merger of the Company in which the holders of the common stock of the Company immediately prior to the consolidation or merger hold more than fifty percent (50%) of the voting rights of the surviving corporation immediately after the consolidation or merger;

(d) The shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company; or

(e) The shareholders of the Company approve the sale or transfer of all or substantially all of the assets of the Company to parties that are not within a “controlled group of corporations” (as defined in Code, as hereinafter defined, Section 1563) in which the Company is a member.

1.7 “Change in Control Benefit” shall mean the benefits set forth in Section 3.2.

1.8 “Claimant” shall have the meaning set forth in Section 8.1.

1.9 “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

1.10 “Committee” shall mean the Committee described in Article 7.

1.11 “Company” shall mean Haynes International, Inc., a Delaware Corporation, and any successor to all or substantially all of the Company’s assets or business.

1.12 “Compensation” shall mean the annual base salary and bonus paid to a Participant under any Employer’s annual bonus or cash incentive plans, but excluding commissions,

overtime, fringe benefits, stock options, relocation expenses, non-monetary awards, director fees and other fees, and automobile and other allowances (whether or not such allowances are included in the Employee’s, as hereinafter defined, gross income). Annual base salary and bonus amounts shall be calculated before reduction for compensation deferred pursuant to all qualified, non-qualified and Code Section 125 plans of any Employer; provided, however, that all such amounts will be included in compensation only to the extent that had there been no such plan, the amount would have been payable in cash to the Employee.

1.13 “Death Benefit” shall mean the benefits due, if any, to the Participant’s Beneficiary pursuant to Article 3 upon the Participant’s death.

1.14 “Determination Date” shall mean, for purposes of calculating the SERP Benefit, as hereinafter defined, the earlier of (i) date on which a Change in Control occurs, (ii) the date on which the Participant dies while employed by an Employer, or (iii) the date on which the Participant experiences a Termination of Employment, as hereinafter defined.

1.15 “Election Form” shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to make an election under the Plan.

1.16 “Employee” shall mean any individual employed by an Employer.

1.17 “Employer(s)” shall mean the Company and/or any of its subsidiaries (now in existence or hereafter formed or acquired) that have been selected by the Board to participate in the Plan and have adopted the Plan as a sponsor.

1.18 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.

1.19 “Form” shall mean form of payment as described in Article 4.

1.20 “Life Annuity” shall mean a benefit that is payable monthly in the form of an annuity for the life of the Participant and that is equal to the Participant’s SERP Benefit.

1.21 “Lump Sum” shall mean a benefit that is payable in a lump sum and that is the Actuarial Equivalent of the Participant’s SERP Benefit.

1.22 “Normal Benefit” shall mean the benefits set forth in Section 3.1.

1.23 “Participant” shall mean any Employee (i) who is selected to participate in the Plan, (ii) who elects to participate in the Plan, (iii) who signs a Plan Agreement and a Beneficiary Designation Form, (iv) whose signed Plan Agreement and Beneficiary Designation Form

are accepted by the Committee, (v) who commences participation in the Plan, and (vi) whose Plan Agreement has not terminated.

1.24 “Plan” shall mean the Company’s Supplemental Executive Retirement Plan, which shall be evidenced by this instrument and by each Plan Agreement, as amended from time to time.

1.25 “Plan Agreement” shall mean a written agreement, as may be amended from time to time, which is entered into by and between an Employer and a Participant. Each Plan Agreement executed by a Participant shall provide for the entire benefit to which such Participant is entitled under the Plan; should there be more than one Plan Agreement, the Plan Agreement bearing the latest date of acceptance by the Employer shall supercede all previous Plan Agreements in their entirety and shall govern such entitlement. The terms of any Plan Agreement may be different for any Participant, and any Plan Agreement may provide additional benefits not set forth in the Plan or limit the benefits otherwise provided under the Plan; provided, however, that any such additional benefits or benefit limitations must be agreed to by both the Employer and the Participant.

1.26 “SERP Benefit” shall have the meaning set forth in each Participant’s Plan Agreement.

1.27 “Term Certain and Life Annuity” shall mean a benefit that is payable monthly in the form of an annuity for the greater of (i) ten (10) years, or (ii) the life of the Participant, and that is the Actuarial Equivalent of the Participant’s SERP Benefit. If the Participant dies prior to the receipt of the guaranteed monthly payments, then the balance of the guaranteed monthly payments shall be paid to the Participant’s designated Beneficiary and shall continue until the total guaranteed monthly payments have been made to the Participant and his or her Beneficiary.

1.28 “Termination of Employment” or “Terminates Employment” shall mean severance from employment with all Employers, voluntarily or involuntarily, for any reason, including retirement or disability, but excluding death.

1.29 “Trust” shall mean the trust, if any, established by the Company as set forth in Article 10.

1.30 “Year(s) of Service” shall mean the total number of full years plus whole calendar months in which a Participant has been employed by one or more Employers, computed as of the Determination Date. For purposes of this definition, a year of employment shall be a 365 day period (or 366 day period in the case of a leap year) that, for the first year of employment, commences on the Employee’s date of hiring and that, for any subsequent year, commences on an anniversary of that hiring date.

ARTICLE II.

ELIGIBILITY

2.1. SELECTION BY COMMITTEE. Participation in the Plan shall be limited to a select group of management and highly compensated Employees of the Employers, as determined by the Committee in its sole discretion. From that group, the Committee shall select, in its sole discretion, Employees to participate in the Plan.

2.2. ENROLLMENT REQUIREMENTS. As a condition to participation, each selected Employee shall complete, execute and return to the Committee a Plan Agreement and a Beneficiary Designation Form, all within the time period specified by the Committee. In addition, the Committee shall establish from time to time such other enrollment requirements as it determines in its sole discretion are necessary.

2.3. COMMENCEMENT OF PARTICIPATION. Provided an Employee selected to participate in the Plan has met all enrollment requirements set forth in this Plan and required by the Committee, including returning all required documents to the Committee within the specified time period, that Employee shall commence participation in the Plan on the date specified by the Committee. If a selected Employee fails to meet all such requirements within the period required, in accordance with Section 2.2 that Employee shall not be eligible to participate in the Plan until the completion of those requirements.

ARTICLE III.

BENEFITS

3.1. NORMAL BENEFIT. A Participant who experiences a Termination of Employment shall receive, as his or her Normal Benefit, a SERP Benefit which shall commence on the first day of the month following the date he or she Terminates Employment. The benefit shall be payable in the form set forth in Article 4.

3.2. CHANGE IN CONTROL BENEFIT. If a Change in Control occurs, the Participant shall receive, as his or her Change in Control Benefit, a SERP Benefit. The Participant will receive his or her Change in Control Benefit in the form of a Lump Sum. The Lump Sum payment will be made on the first day of the month coinciding with or next following the date on which the Change in Control occurs.

3.3. DEATH PRIOR TO THE COMMENCEMENT OF BENEFITS. If a Participant dies prior to the commencement of his or her benefits, then his or her Beneficiary shall receive, as a Death Benefit, a Lump Sum computed as if the Participant experienced a Termination of Employment on the date of his or her death. The Lump Sum payment shall be made to the Participant’s Beneficiary on the first day of the month coinciding with or next following the date of the Participant’s death.

3.4. DEATH AFTER THE COMMENCEMENT OF BENEFITS. Upon the death of a Participant after his or her SERP Benefits commence, the Form in which such Participant’s benefit is paid shall determine (i) the amount, if any; and (ii) the Form of the Death Benefit payable, to such Participant’s Beneficiary.

3.5. LIMITATION ON BENEFITS. Notwithstanding the foregoing provisions of this Article 3, in no event shall a Participant or his or her Beneficiary receive more than one Form of benefit under this Article 3.

3.6. WITHHOLDING AND PAYROLL TAXES. The Participant’s Employer shall withhold from any and all benefits made under this Article 3, all federal, state and local income, employment and other taxes required to be withheld by such Participant’s Employer in connection with the benefits hereunder, in amounts to be determined in the sole discretion of the Employer.

ARTICLE IV.

FORMS OF BENEFIT PAYMENT

4.1. NORMAL FORMS OF BENEFIT. A Participant who is entitled to receive a SERP Benefit as a Normal Benefit will receive such benefits in the Form of a Life Annuity.

4.2. OPTIONAL FORMS OF BENEFIT. A Participant may elect to receive his or her Normal Benefit in a form other than a Life Annuity or a Lump Sum, as the case may be. A Participant may elect to receive his or her Normal Benefit in the form of (i) a 10 Year Term Certain and Life Annuity, (ii) a Life Annuity, or (iii) a Lump Sum; provided, however, that if such form is other than a Life Annuity, the Participant’s SERP Benefit will be increased or decreased, as the case may be, to be a benefit which is the Actuarial Equivalent and which reflects the actual form of benefit payment elected by the Participant pursuant to this Section 4.2. A Participant may make such an election by submitting an Election Form to the Committee; provided, however, that in order for the Election Form to be valid, it must be both submitted to and accepted by the Committee in its sole discretion at least thirteen (13) months prior to the Participant’s Termination of Employment. The Election Form most recently accepted by the Committee shall govern the payout of the Participant’s Normal Benefit.

4.3. AUTOMATIC LUMP SUM BENEFIT. If a Participant or his or her Beneficiary becomes eligible to receive a distribution under this Plan or is currently receiving distributions from the Plan, and the value of the remaining unpaid benefit is less than $5,000 when expressed on an Actuarial Equivalent basis as a lump sum, the Committee, in its sole discretion, may pay the remaining unpaid benefit in a lump sum, despite any elections the Participant may have made regarding the form of benefit payments.

ARTICLE V.

TERMINATION, AMENDMENT OR MODIFICATION OF THE PLAN

5.1. TERMINATION. Each Employer reserves the right to terminate the Plan at any time with respect to its participating Employees by the actions of its Board. The termination of the Plan shall not adversely affect any Participant or his or her Beneficiary who has become entitled to the payment of any benefits under the Plan as of the date of termination; provided, however, that the Employer shall have the right to accelerate payments by paying the Actuarial Equivalent value of such payments. For all other Participants, upon the termination of the Plan, all Plan Agreements shall terminate and the Actuarial Equivalent of a Participant’s SERP Benefit shall be paid out in a Lump Sum. For this purpose, each covered Participant shall be deemed to have Terminated Employment on the date of the Plan’s Termination Date, and his or her SERP benefit shall be calculated as of such Termination Date.

5.2. AMENDMENT. Any Employer may, at any time, amend or modify the Plan in whole or in part with respect to its participating Employees by the actions of its board of directors; provided, however, that no amendment or modification shall be effective to decrease or restrict a Participant’s then SERP Benefit, determined on an Actuarial Equivalent basis. The amendment or modification of the Plan shall not affect any Participant or his or her Beneficiary who has become entitled to the payment of benefits under the Plan as of the date of the amendment or modification; provided, however, that the Employer shall have the right to accelerate payments by paying the Actuarial Equivalent value of such payments in a Lump Sum.

5.3. PLAN AGREEMENT. Despite the provisions of Sections 5.1 and 5.2 above, if a Participant’s Plan Agreement contains benefits or limitations that are not in this Plan document, the Employer may only amend or terminate such provisions with the written consent of the Participant.

5.4. EFFECT OF PAYMENT. Absent the earlier termination, modification or amendment of the Plan, the full payment of the applicable benefit as provided under Articles 3 and 4 of the Plan shall completely discharge all obligations to a Participant and his or her designated Beneficiaries under this Plan and the Participant’s Plan Agreement shall terminate.

ARTICLE VI.

OTHER BENEFITS AND AGREEMENTS

6.1. COORDINATION WITH OTHER BENEFITS. The benefits provided for a Participant under this Plan are in addition to any other benefits available to such Participant under any other plan or program for Employees. The Plan shall supplement and shall not supersede, modify or amend any other such plan or program except as may otherwise be expressly provided.

ARTICLE VII.

ADMINISTRATION OF THE PLAN

7.1. COMMITTEE DUTIES. This Plan shall be administered by the Compensation Committee of the Board, or such designees as the Board shall appoint. Members of the Committee may be Participants under this Plan. The Committee shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of the Plan and (ii) decide or resolve any and all questions including interpretations of the Plan, as may arise in connection with the Plan. Any individual serving on the Committee who is a Participant shall not vote or act on any matter relating solely to himself or herself. When making a determination or calculation, the Committee shall be entitled to rely on information furnished by a Participant or the Company.

7.2. AGENTS. In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel who may be counsel to any Employer.

7.3. BINDING EFFECT OF DECISIONS. The decision or action of the Committee with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder subject to the review of the Board, which shall then be final and conclusive and binding upon persons having any interest in the Plan.

7.4. INDEMNITY OF COMMITTEE. All Employers shall indemnify and hold harmless the members of the Committee against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Committee or any of its members.

7.5. EMPLOYER INFORMATION. To enable the Committee to perform its functions, each Employer shall supply full and timely information to the Committee on all matters relating to the compensation of its Participants, the date and circumstances of the death or Termination of Employment of its Participants and such other pertinent information as the Committee may reasonably require.

ARTICLE VIII.

CLAIMS PROCEDURES

8.1. PRESENTATION OF CLAIM. Any Participant or the Beneficiary of a deceased Participant (such Participant or Beneficiary being referred to below as a “Claimant”) may deliver to the Committee a written claim for a determination with respect to the amounts distributable to such Claimant from the Plan. If such a claim relates to the contents of a

notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant. All other claims must be made within 180 days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant.

8.2. NOTIFICATION OF DECISION. The Committee shall consider a Claimant’s claim within a reasonable time, but no later than ninety (90) days after receiving the claim. If the Committee determines that special circumstances require an extension of time for processing the claim, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial ninety (90) day period. In no event shall such extension exceed a period of ninety (90) days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render a benefit determination. The Committee shall notify the Claimant in writing:

(a) that the Claimant’s requested determination has been made, and that the claim has been allowed in full; or

(b) that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant’s requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant:

(i) the specific reason(s) for the denial of the claim, or any part of it;

(ii) specific reference(s) to pertinent provisions of the Plan upon which such denial was based;

(iii) a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary;

(iv) an explanation of the claim review procedure set forth in Section 8.3 below; and

(v) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

8.3. REVIEW OF A DENIED CLAIM. On or before sixty (60) days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant’s duly authorized representative) may file with the Committee a written request for a review of the denial of the claim. The Claimant (or the Claimant’s duly authorized representative):

(a) may, upon request and free of charge, have reasonable access to, and copies of, all documents, records and other information relevant to the claim for benefits;

(b) may submit written comments or other documents; and/or

8.4. DECISION ON REVIEW. The Committee shall render its decision on review promptly, and no later than sixty (60) days after the Committee receives the Claimant’s written request for a review of the denial of the claim. If the Committee determines that special circumstances require an extension of time for processing the claim, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial sixty (60) day period. In no event shall such extension exceed a period of sixty (60) days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the benefit determination. In rendering its decision, the Committee shall take into account all comments, documents, records and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. The decision must be written in a manner calculated to be understood by the Claimant, and it must contain:

(a) specific reasons for the decision;

(b) specific reference(s) to the pertinent Plan provisions upon which the decision was based;

(c) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits; and

(d) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a).

8.5. LEGAL ACTION. A Claimant’s compliance with the foregoing provisions of this Article 8 is a mandatory prerequisite to a Claimant’s right to commence any legal action with respect to any claim for benefits under this Plan. In any event, a Participant or his or her Beneficiary must bring a lawsuit within 180 days after final resolution of a claim or forfeit any and all rights with respect to such claim.

ARTICLE IX.

BENEFICIARY DESIGNATION

9.1. BENEFICIARY. Each Participant shall have the right, at any time, to designate his or her Beneficiary(ies) (both primary as well as contingent) to receive any Death Benefits payable under the Plan to the Participant’s Beneficiary upon the death of a Participant. The Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of an Employer in which the Participant has an interest .

9.2. BENEFICIARY DESIGNATION; CHANGE. A Participant shall designate his or her Beneficiary by completing and signing the Beneficiary Designation Form and returning it to the Committee or its designated agent. A Participant shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Committee’s rules and procedures, as in effect from time to time. Upon the acceptance by the Committee of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Committee shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the Committee prior to his or her death.

9.3. ACKNOWLEDGMENT. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Committee or its designated agent.

9.4. NO BENEFICIARY DESIGNATION. If a Participant fails to designate a Beneficiary as provided in Sections 9.1, 9.2, and 9.3 above, or if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant’s benefits, the benefits remaining under the Plan shall be payable to the executor or personal representative of the Participant’s estate.

9.5. DOUBT AS TO BENEFICIARY. If the Committee has any doubt as to the proper Beneficiary to receive payments pursuant to this Plan, the Committee shall have the right, exercisable in its discretion, to cause the Participant’s Employer to withhold such payments until this matter is resolved to the Committee’s satisfaction.

9.6. DISCHARGE OF OBLIGATIONS. The payment of benefits under the Plan to a Beneficiary shall fully and completely discharge all Employers and the Committee from all further obligations under the Plan with respect to the Participant, and that Participant’s Plan Agreement shall terminate upon such full payment of benefits.

ARTICLE X.

TRUST

10.1. ESTABLISHMENT OF THE TRUST. In order to provide assets from which to fulfill the obligations of the Participants and their Beneficiaries under the Plan, the Company may establish a Trust by a trust agreement with a third party. Each Employer may, in its discretion, contribute cash or other property, including securities issued by the Company, to the Trust in order to provide for the benefit payments under the Plan.

10.2. INTERRELATIONSHIP OF THE PLAN AND THE TRUST. The provisions of the Plan and the Plan Agreement shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust, if any, shall govern the rights of the Employers, Participants and the creditors of the Employers to the assets transferred to the Trust. Each Employer shall at all times remain liable to carry out its obligations under the Plan.

10.3. DISTRIBUTIONS FROM THE TRUST. Each Employer’s obligations under the Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust, if any, and any such distribution shall reduce the Employer’s obligations under this Agreement.

ARTICLE XI.

MISCELLANEOUS

11.1. STATUS OF THE PLAN. The Plan is intended to be a plan that is not qualified within the meaning of Code Section 401 (a) and that is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees within the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(1). The Plan shall be administered and interpreted to the extent possible in a manner consistent with that intent.

11.2. UNSECURED GENERAL CREDITOR. Participants, their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of an Employer. For purposes of the payment of benefits under this Plan, any and all of an Employer’s assets shall be, and remain, the general, unpledged unrestricted assets of the Employer. An Employer’s obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future.

11.3. EMPLOYER’S LIABILITY. An Employer’s liability for the payment of benefits shall be defined only by the Plan and the Plan Agreement, as entered into between the Employer and a Participant. An Employer shall have no obligation to a Participant under the Plan except as expressly provided in the Plan and his or her Plan Agreement.

11.4. NONASSIGNABILITY. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber,

transfer, hypothecate, alienate or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be, unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure, attachment, garnishment or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency or be transferable to a spouse as a result of a property settlement or otherwise.

11.5. NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between any Employer and the Participant. Such employment is hereby acknowledged to be an “at will” employment relationship that can be terminated at any time for any reason, or no reason, with or without cause, and with or without notice, unless expressly provided in a written employment agreement. Nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of any Employer or to interfere with the right of any Employer to discipline or discharge the Participant at any time.

11.6. FURNISHING INFORMATION. A Participant or his or her Beneficiary will cooperate with the Committee by furnishing any and all information requested by the Committee and take such other actions as may be requested in order to facilitate the administration of the Plan and the payments of benefits hereunder.

11.7. TERMS. Whenever any words are used herein in the masculine, they shall be construed as though they were in the feminine in all cases where they would so apply; and wherever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply.

11.8. CAPTIONS. The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions.

11.9. GOVERNING LAW. Subject to ERISA, the provisions of this Plan shall be construed and interpreted according to the internal laws of the State of Indiana without regard to its conflict of laws principles.

11.10. NOTICE. Any notice or filing required or permitted to be given to the Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to both of the addresses below:

Jean Neel		WITH A CARBON COPY TO:
Vice President, Corporate Affairs		Compensation Committee, Board of Directors
Haynes International, Inc.	Haynes International, Inc.
1020 Park Avenue	1020 Park Avenue
Kokomo, Indiana 46904	Kokomo, Indiana 46904

Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Participant.

11.11. SUCCESSORS. The provisions of this Plan shall bind and inure to the benefit of the Participant’s Employer and its successors and assigns and the Participant and the Participant’s Beneficiary.

11.12. SPOUSE’S INTEREST. The interest in the benefits hereunder of a spouse of a Participant who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by such spouse in any manner, including but not limited to such spouse’s will, nor shall such interest pass under the laws of intestate succession.

11.13. VALIDITY. In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal and invalid provision had never been inserted herein.

11.14. INCOMPETENT. If the Committee determines in its discretion that a benefit under this Plan is to be paid to a minor, a person declared incompetent or to a person incapable of handling the disposition of that person’s property, the Committee may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person. The Committee may require proof of minority, incompetency, incapacity or guardianship as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant’s Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount.

11.15. COURT ORDER. The Committee is authorized to make any payments directed by court order in any action in which the Plan or Committee has been named as a party. In addition, if a court determines that a spouse or former spouse of a Participant has an interest in the Participant’s benefits under the Plan in connection with a property settlement or otherwise, the Committee, in its sole discretion, shall have the right, notwithstanding any election made by a Participant, to immediately distribute the spouse’s or former spouse’s interest in the Participant’s benefits under the Plan to that spouse or former spouse.

11.16. DISTRIBUTION IN THE EVENT OF TAXATION. If, for any reason, all or any portion of a Participant’s benefit under this Plan becomes taxable to the Participant prior to receipt, a Participant may petition the Committee for a distribution of that portion of his or her benefit that has become taxable. Upon the grant of such a petition, which shall not be unreasonably withheld, a Participant’s Employer shall distribute to the Participant immediately available funds in an amount equal to the taxable portion of his or her benefit (which amount shall not exceed a Participant’s unpaid SERP Benefit under the Plan). If the petition is granted, the distribution shall be made within ninety (90) days of the date when the Participant’s petition is granted. Such a distribution shall affect and reduce the benefits to be paid under this Plan.

IN WITNESS WHEREOF, FRANCIS PETRO has signed this Plan document on December 13, 2002.

	“Company”

	Haynes International, Inc., a Delaware corporation

	By:	/s/ FRANCIS J. PETRO

	Title:	PRESIDENT & CEO

Exhibit 10.5

AMENDMENT NUMBER ONE

TO THE

HAYNES INTERNATIONAL, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

The Haynes International, Inc. Supplemental Executive Retirement Plan (“Plan”) is hereby amended by Haynes International, Inc. (the “Company”) as hereinafter provided.

BACKGROUND

The Company reserved the right to amend the Plan pursuant to SECTION 5.2 of the Plan and now desires to amend the Plan to (i) delete all provisions pertaining to a Change in Control Benefit (as defined in the Plan) such that a Change in Control Benefit shall no longer be available under the Plan, and (ii) modify the definition of “Compensation”. For the avoidance of doubt, the consummation of a plan of reorganization of the Company and the transactions contemplated thereby as approved by the U.S. Bankruptcy Court for the Southern District of Indiana on August 16, 2004 with respect to the filing of a voluntary petition for bankruptcy by the Company under Chapter 11 of Title 11 of the U.S. Code (11 USC Section 101, ET. SEQ.) in the U.S. Bankruptcy Court for the Southern District of Indiana shall not constitute a Change in Control for purposes of the Plan.

AMENDMENT

The Plan is hereby amended, effective as of August 30, 2004, as follows:

1. SECTION 1.6, SECTION 1.7 and SECTION 3.2 of the Plan are hereby deleted in their entirety.

2. The validity, meaning and effect of this Amendment shall be determined in accordance with the laws of the State of Indiana applicable to contracts made and to be performed in that State.

3. This Amendment amends the Plan to the extent provided herein only and all other provisions thereof shall remain in full force and effect.

This Amendment to the Plan is executed as of the 30th day of August, 2004.

“COMPANY”

HAYNES INTERNATIONAL, INC.


By:	/s/ Jean C. Neel

Printed:			Jean C. Neel

Title:		Vice President Corporate Affairs and Corporate Secretary

Exhibit 10.6

HAYNES INTERNATIONAL, INC.

Supplemental Executive Retirement Plan(s)

MASTER TRUST AGREEMENT

Effective January 1, 2003

TABLE OF CONTENTS

Article		Page
ARTICLE 1	Name, Intentions, Irrevocability, Deposit and Definitions.	1

1.1.	Name	1
1.2.	Intentions	1
1.3.	Irrevocability; Creditor Claims	1
1.4.	Initial Deposit	2
1.5.	Additional Definitions	2
1.6.	Grantor Trust	3

ARTICLE 2	General Administration	4

2.1.	Committee Directions and Administration Before Change in Control	4
2.2.	Administration Upon Change in Control	4
2.3.	Contributions	4
2.4.	Trust Fund	5
2.5.	Distribution of Excess Trust Fund to Employers	5

ARTICLE 3	Powers and Duties of Trustee	5

3.1.	Investment Directions	5
3.2.	Investment Upon Change in Control	5
3.3.	Management of Investments	6
3.4.	Securities	8
3.5.	Substitution	8
3.6.	Distributions	8
3.7.	Trustee Responsibility Regarding Payments on Insolvency	11
3.8.	Costs of Administration	13
3.9.	Trustee Compensation and Expenses	13
3.10.	Professional Advice	13
3.11.	Payment on Court Order	13
3.12.	Protective Provisions	14
3.13.	Indemnifications	14

ARTICLE 4	Insurance Contracts	15

4.1.	Types of Contracts	15

4.2.	Ownership	15
4.3.	Restrictions on Trustee’s Rights	15

ARTICLE 5	Trustee’s Accounts	15

5.1.	Records	15
5.2.	Annual Accounting; Final Accounting	16
5.3.	Valuation	16
5.4.	Delegation of Duties	17

ARTICLE 6	Resignation or Removal of Trustee	17

6.1.	Resignation; Removal	17
6.2.	Successor Trustee	17
6.3.	Settlement of Accounts	17

ARTICLE 7	Controversies, Legal Actions and Counsel	18

7.1.	Controversy	18
7.2.	Joinder of Parties	18
7.3.	Employment of Counsel	18

ARTICLE 8	Insurers	18

8.1.	Insurer Not a Party	18
8.2.	Authority of Trustee	18
8.3.	Contract Ownership	18
8.4.	Limitation of Liability	19
8.5.	Change of Trustee	19

ARTICLE 9	Amendment and Termination	19

9.1.	Amendment	19
9.2.	Final Termination	20

ARTICLE 10	Miscellaneous	20

10.1.	Directions Following Change in Control	20
10.2.	Taxes	21
10.3.	Third Persons	21
10.4.	Nonassignability; Nonalienation	21
10.5.	Applicable Law	21
10.6.	Notices and Directions	21
10.7.	Successors and Assigns	21

10.8.	Gender and Number	22
10.9.	Headings	22
10.10.	Counterparts	22
10.11.	Beneficial Interest	22
10.12.	The Trust and Plans	22
10.13.	Effective Date	22

Exhibit A	Plans	23

iii

MASTER TRUST AGREEMENT

FOR

HAYNES INTERNATIONAL, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN(S)

THIS MASTER TRUST AGREEMENT (“Master Trust Agreement”) is made and entered into as of January 13, 2003, between Haynes International, Inc., a Delaware corporation (the “Company”), and Legacy Trust Company, Inc., a Florida corporation (the “Trustee”), to evidence the master trust (the “Trust”) to be established, pursuant to those executive deferral plans or other arrangements of the Company listed in Exhibit A (the “Plans”) now or hereafter existing that require the establishment of a trust, for the benefit of a select group of management or highly compensated employees and/or Directors, as hereinafter defined, who contribute materially to the continued growth, development and business success of the Company and those subsidiaries of the Company, if any, that participate in the Plans (collectively, “Subsidiaries,” or singularly, “Subsidiary”).

ARTICLE 1

NAME, INTENTIONS, IRREVOCABILITY,

DEPOSIT AND DEFINITIONS

1.1. NAME. The name of the Trust created by this Agreement (the “Trust”) shall be:

MASTER TRUST AGREEMENT FOR

HAYNES NTERNATIONAL, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN(S)

1.2. INTENTIONS. The Company wishes to establish the Trust and to contribute to the Trust assets that shall be held therein, subject to the claims of the Company’s and the Subsidiaries’ creditors in the event of their Insolvency (as defined below) until paid to Participants, as hereinafter defined, and their Beneficiaries, as hereinafter defined, in such manner and at such times as specified in the Plans, as hereinafter defined. It is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plans as unfunded plans maintained for the purpose of providing supplemental compensation for a select group of management or highly compensated employees and/or Directors for purposes of Title I of ERISA (as defined below). In addition, it is the intention of the Company and the Subsidiaries to make contributions to the Trust to provide themselves with a source of funds to assist them in the meeting of their liabilities under the Plans.

1.3. IRREVOCABILITY; CREDITOR CLAIMS. The Trust hereby established shall be irrevocable. Except as otherwise provided in Sections 2.5 and 9.2, the principal of the Trust, and any earnings thereon,

shall be held separate and apart from other finds of the Company and the Subsidiaries and shall be used exclusively for the uses and purposes of the Participants and the general creditors of the Company and the Subsidiaries as herein set forth. The Participants and their Beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the Plans and this Master Trust Agreement shall be mere unsecured contractual rights of the Participants and their Beneficiaries against the Company and the Subsidiaries. Any assets held by the Trust will be subject to the claims of the Company’s and the Subsidiaries’ general creditors under federal and state law in the event of Insolvency.

1.4. INITIAL DEPOSIT. The Company hereby deposits with the Trustee in trust $100, which shall become the principal of the Trust to be held, administered and disposed of by the Trustee as provided in this Master Trust Agreement

1.5. ADDITIONAL DEFINITIONS. In addition to the definitions set forth above, for purposes hereof, unless otherwise clearly apparent from the context, the following terms have the following indicated meanings:

(a) “Beneficiary” shall mean one or more persons, trusts, estates or other entities, designated in accordance with a Plan, that are entitled to receive benefits under a Plan upon the death of a Participant.

(b) “Board” shall mean the board of directors of the Company.

(i) Any “person” (as that term is used in Section 13 and 14(d)(2) of the Securities Exchange Act of 1934 (“Exchange Act”)) becomes the beneficial owner (as that term is used in Section 13(d) of the Exchange Act), directly or indirectly, of fifty percent (50%) or more of the Company’s capital stock entitled to vote in the election of Directors;

(ii) During any period of not more than two consecutive years, not including any period prior to the adoption of this Plan, individuals who, at the beginning of such period constitute the Board, and any new Director (other than a Director designated by a person, who has entered into an agreement with the Company to effect a transaction described in clause (i), (iii), (iv) or (v) of this Section 1.5(c)) whose election by the board of directors or nomination for election by the Company’s stockholders was approved by a vote of at least three-fourths (3/4ths) of the Directors then still in office, who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof;

(iii) The shareholders of the Company approve any consolidation or merger of the Company, other than a consolidation or merger of the Company in which the holders of the common stock of the Company immediately prior to the

consolidation or merger hold more than fifty (50%) of the common stock of the surviving corporation immediately after the consolidation or merger;

(iv) The shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, or

(v) The shareholders of the Company approve the sale or transfer of all or substantially all of the assets of the Company to parties that are not within a “controlled group of corporations” (as defined in Code Section 1563) in which the Company is a member.

(d) “Committee” shall mean the Retirement Committee appointed by the Board to administer this Trust.

(e) “Director” shall mean any member of the Board of Directors of the Company or any Subsidiary.

(f) “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.

(g) “Insolvent” shall have the meaning set forth in Section 3.7(a) below.

(h) “Insolvent Entity” shall have the meaning set forth in Section 3.7(a) below.

(i) “IRS” shall mean the Internal Revenue Service.

(j) “Participant” shall mean a person who is a participant in one or more of the Plans in accordance with their terms and conditions.

(k) “Payment Schedule” shall have the meaning set forth in Section 3.6(b) below.

(l) “Plan(s)” shall mean those executive deferral plans or other arrangements of the Company listed in Exhibit A.

(m) “Plan Year” shall mean the Plan Year chosen for this Master Trust Agreement by the Board.

(n) “Trust Fund” shall mean the assets held by the Trustee pursuant to the terms of this Master Trust Agreement and for the purposes of the Plans.

1.6. GRANTOR TRUST. The Trust is intended to be a “grantor trust,” of which the Company and the Subsidiaries are the grantors, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and the Trust shall be construed accordingly.

ARTICLE 2

GENERAL ADMINISTRATION

2.1. COMMITTEE DIRECTIONS AND ADMINISTRATION BEFORE CHANGE IN CONTROL. Until a Change in Control has occurred, this Section 2.l shall be effective and the Committee shall direct the Trustee as to the administration of the Trust in accordance with the following provisions.

(a) The Committee shall be identified to the Trustee by a copy of the resolution of the Board appointing the Committee. In the absence thereof, the Board shall be the Committee. Persons authorized to give directions to the Trustee on behalf of the Committee shall be identified to the Trustee by written notice from the Committee, and such notice shall contain specimens of the authorized signatures. The Trustee shall be entitled to rely on such written notice as evidence of the identity and authority of the persons appointed until a written cancellation of the appointment, or the written appointment of a successor, is received by the Trustee.

(b) Directions by the Committee, or its delegate, to the Trustee shall be in writing and signed by the Committee or persons authorized by the Committee, or may be made by such other method as is acceptable to the Trustee.

(c) The Trustee may conclusively rely upon directions from the Committee in taking any action with respect to this Master Trust Agreement, including the making of payments from the Trust Fund and the investment of the Trust Fund pursuant to this Master Trust Agreement. The Trustee shall have no liability for actions taken, or for failure to act, on the direction of the Committee. The Trustee shall have no liability for failure to act in the absence of proper written directions.

(d) The Trustee may request instructions from the Committee and shall have no duty to act or liability for failure to act if such instructions are not forthcoming from the Committee. If requested instructions are not received within a reasonable time, the Trustee may, but is under no duty to, act on its own discretion to carry out the provisions of this Master Trust Agreement in accordance with this Master Trust Agreement and the Plans.

2.2. ADMINISTRATION UPON CHANGE IN CONTROL. In the event of a Change in Control, the authority of the Committee to administer the Trust and direct the Trustee, as set forth in Section 2.1 above, shall cease, and the Trustee shall have complete authority to administer the Trust.

2.3. CONTRIBUTIONS. Except as provided in any Plan, the Company and the Subsidiaries, in their sole discretion, may at any time, or from time to time, make additional deposits of cash, marketable securities, annuities or insurance policies in trust with the Trustee to augment the principal to be held, administered and disposed of by the Trustee as provided in this Master Trust Agreement. Neither the Trustee nor any Participant or Beneficiary shall have any right to compel such additional deposits. The Trustee shall have no duty to collect or enforce payment to it of any contributions or to require that any contributions be made, and shall have no duty to compute any

amount to be paid to it nor to determine whether amounts paid comply with the terms of the Plans; provided, however, that following a Change in Control, the Trustee shall have the right, in its sole and absolute discretion, to compel a contribution to the Trust from the Company to make up for any shortfall between (i) the anticipated benefit obligations and administrative expenses that are to be paid under the Plans and Trust and (ii) the assets of the Trust Fund.

2.4. TRUST FUND. The contributions received by the Trustee from the Company and the Subsidiaries shall be held and administered pursuant to the terms of this Master Trust Agreement as a single fund without distinction between income and principal and without liability for the payment of interest thereon except as expressly provided in this Master Trust Agreement. During the term of this Trust, all income received by the Trust, net of expenses and taxes, shall be accumulated and reinvested.

2.5. DISTRIBUTION OF EXCESS TRUST FUND TO EMPLOYERS. In the event that the Committee, prior to a Change in Control, or the Trustee in its sole and absolute discretion, after a Change in Control, determines that the Trust Fund exceeds 1125 percent of the anticipated benefit obligations and administrative expenses that are to be paid under the Plans, the Trustee, at the direction of the Committee prior to a Change in Control, or in its sole and absolute discretion after a Change in Control, shall distribute to the Company and the Subsidiaries such excess portion of the Trust Fund.

ARTICLE 3

POWERS AND DUTIES OF TRUSTEE

3.1. INVESTMENT DIRECTIONS. Except as provided in this Section and Section 3.2 below, the Committee shall provide the Trustee with all investment instructions in writing. The Trustee shall neither affect nor change investments of the Trust Fund, except as directed in writing by the Committee, and shall have no right, duty or responsibility to recommend investments or investment changes; provided, that the Trustee may (i) deposit cash on hand from time to time in any bank savings account, certificate of deposit, or other instrument creating a deposit liability for a bank, including the Trustee’s own banking department, if the Trustee is a bank, without such prior direction, or (ii) invest in government securities, bonds with specific ratings, equities, or mutual funds composed of such investments, all within broad investment guidelines established by the Committee from time to time.

3.2. INVESTMENT UPON CHANGE IN CONTROL. In the event of a Change in Control, the authority of the Committee to direct investments of the Trust Fund shall cease and the Trustee shall have complete authority to direct investments of the Trust Fund. The president of the Company shall notify the Trustee in writing when a Change in Control has occurred. The Trustee has no duty to inquire whether a Change in Control has occurred and may rely on notification by the president of the Company of a Change in Control; provided, however, that if any officer, former officer, Director or former Director of the Company or any Subsidiary (other than the president of the

Company), or any Participant notifies the Trustee that there has been or there may be a Change in Control, the Trustee shall have the duty to satisfy itself as to whether a Change in Control has in fact occurred. The Company and the Subsidiaries shall indemnify and hold harmless the Trustee for any damages or costs (including attorneys’ fees) that may be incurred because of reliance on the president’s notice or lack thereof.

3.3. MANAGEMENT OF INVESTMENTS. Subject to Section 3.1 above, the Trustee shall have, without exclusion, all powers conferred on the Trustee by applicable law, unless expressly provided otherwise herein, and all rights associated with assets of the Trust shall be exercised by the Trustee or the person designated. by the Trustee, and shall in no event be exercisable by or rest with Participants or their Beneficiaries. The Trustee shall have full power and authority to invest and reinvest the Trust Fund in any investment permitted by law, exercising the judgment and care that persons of prudence, discretion and intelligence would exercise under the circumstances then prevailing, considering the probable income and safety of their capital, including, without limiting the generality of the foregoing, the power:

(a) To invest and reinvest the Trust Fund, together with the income therefrom, in common stock, preferred stock, convertible preferred stock, mutual funds, bonds, debentures, convertible debentures and bonds, mortgages, notes, time certificates of deposit, commercial paper and other evidences of indebtedness (including those issued by the Trustee or any of its affiliates), other securities, policies of life insurance, annuity contracts, options to buy or sell securities or other assets, and other property of any kind (personal, real, or mixed, and tangible or intangible); provided, however, that in no event may the Trustee invest in securities (including stock or rights to acquire stock) or obligations issued by the Company or the Subsidiaries, other than a de minimis amount held in common investment vehicles in which the Trustee invests;

(b) To deposit or invest all or any part of the assets of the Trust Fund in savings accounts or certificates of deposit or other deposits which bear a reasonable interest rate in a bank, including the commercial department of the Trustee, if such bank is supervised by the United States or any State;

(c) To hold, manage, and control all financial assets, forming part of the Trust Fund and to sell, convey, transfer, exchange, partition, lease for any term, even extending beyond the duration of this Trust, and otherwise dispose of the same from time to time in such manner, for such consideration, and upon such terms and conditions as the Trustee shall determine;

(d) To have, respecting securities, all the rights, powers and privileges of an owner, including the power to give proxies, pay assessments and other sums deemed by the Trustee to be necessary for the protection of the Trust Fund, to vote any corporate stock either in person or by proxy, with or without power of substitution, for any purpose; to participate in voting trusts, pooling agreements, foreclosures, reorganizations, consolidations,

mergers and liquidations, and in connection therewith to deposit securities with and transfer title to any protective or other committee under such terms as the Trustee may deem advisable; to exercise or sell stock subscriptions or conversion rights; and, regardless of any limitation elsewhere in this instrument relative to investment by the Trustee, to accept and retain as an investment any securities or other property received through the exercise of any of the foregoing powers;

(e) To hold in cash, without liability for interest, such portion of the Trust Fund which, in its discretion, shall be reasonable under the circumstances, pending investments, or payment of expenses, or the distribution of benefits;

(f) To take such actions as may be necessary or desirable to protect the Trust Fund from loss due to the default on mortgages held in the Trust including the appointment of agents or trustees in such other jurisdictions as may seem desirable, to transfer property to such agents or trustees, to grant such powers as are necessary or desirable to protect the Trust or its assets, to direct such agents or trustees, or to delegate such power to direct, and to remove such agents or trustees;

(g) To employ such agents including custodians and counsel as may be reasonably necessary and to pay them reasonable compensation; to settle, compromise or abandon all claims and demands in favor of or against the Trust assets;

(h) To cause title to property of the Trust to be issued, held or registered in the individual name of the Trustee, or in the name of its nominee(es) or agents, or in such form that title will pass by delivery;

(i) To exercise all of the further rights, powers, options and privileges granted, provided for, or vested in trustees generally under the laws of the State whose laws are applicable to this Master Trust Agreement, as provided in Section 10.5 below, so that the powers conferred upon the Trustee herein shall not be in limitation of any authority conferred by law, but shall be in addition thereto;

(j) To borrow money from any source (including the Trustee) and to execute promissory notes, mortgages or other obligations and to pledge or mortgage any Trust assets as security; (k) To lend certificates representing stocks, bonds, or other securities to any brokerage or other firm selected by the Trustee;

(l) To institute, compromise and defend actions and proceedings; to pay or contest any claim; to settle a claim by or against the Trustee by compromise, arbitration, or otherwise; to release, in whole or in part, any claim belonging to the Trust to the extent that the claim is uncollectible;

(m) To use securities depositories or custodians and to allow such securities as may be held by a depository or custodian to be registered in the name of such depository or its nominee or in the name of such custodian or its nominee;

(n) To invest the Trust Fund from time to time in one or more investment funds, which funds shall be registered under the Investment Company Act of 1940; and

(o) To do all other acts necessary or desirable for the proper administration of the Trust Fund, as if the Trustee were the absolute owner thereof.

However, nothing in this section shall be construed to mean the Trustee assumes any responsibility for the performance of any investment made by the Trustee in its capacity as trustee under the operations of this Master Trust Agreement. Notwithstanding any powers granted to the Trustee pursuant to this Master Trust Agreement or to applicable law, the Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code of 1986, as amended.

3.4. SECURITIES. Voting or other rights in securities shall be exercised by the person or entity responsible for directing such investments, and the Trustee shall have no duty to exercise voting or proxy or other rights relating to any investment managed or directed by the Committee. If any foreign securities are purchased pursuant to the direction of the Committee, it shall be the responsibility of the person or entity responsible for directing such investments to advise the Trustee in writing of any laws or regulations, either foreign or domestic, that apply to such foreign securities or to the receipt of dividends or interest on such securities.

3.5. SUBSTITUTION. Notwithstanding any provision of any Plan or the Trust to the contrary, the Company and/or any Subsidiary shall at all times have the power to reacquire the Trust Fund by substituting readily marketable securities (other than stock, a debt obligation or other security issued by the Company or any Subsidiary) and/or cash of an equivalent value and such other property shall, following such substitution, constitute the Trust Fund. Notwithstanding the foregoing, after a Change in Control, any such substitution shall be subject to the approval of the Trustee.

3.6. DISTRIBUTIONS.

(a) The establishment of the Trust and the payment or delivery to the Trustee of money or other property shall not vest in any Participant or Beneficiary any right, title, or interest in and to any assets of the Trust. To the extent that any Participant or Beneficiary acquires the right to receive payments under any of the Plans, such right shall be no greater than the right of an unsecured general creditor of the Company and the Subsidiaries and such Participant or Beneficiary shall have only the unsecured promise of the Company and the Subsidiaries that such payments shall be made.

(b) Concurrent with the establishment of this Trust, the Company shall deliver to the Trustee a schedule (the “Payment Schedule”) that indicates the amounts payable in respect of each participant (and his or her Beneficiaries) on a Plan by Plan basis, provides a formula or formulas or other instructions acceptable to the Trustee for determining the amounts so payable, specifies the form in which such amount is to be paid (as provided for or available under the applicable Plans), and the time of commencement for payment of such amounts. The Payment Schedule shall be updated annually and upon a Change in Control and from time to time as is necessary thereafter. Except as otherwise provided herein, prior to a Change in Control, the Trustee shall make payments to the Participants and their Beneficiaries in accordance with such Payment Schedule. Despite the foregoing, after a Change in Control, the Trustee shall make payments in accordance with the terms and provisions of each of the Plans and related plan agreements. The Trustee, at the direction of the Committee or, after a Change in Control, on its own volition, may make any distribution required to be made by it hereunder by delivering:

(i) Its check payable to the person to whom such distribution is to be made, to the person, or, if prior to a Change in Control, to the Company for redelivery to such person; provided that before a Change in Control, the Committee may direct the Trustee to deliver one or more lump sum checks payable to the Company, and the Company shall prepare and deliver individual checks for each Participant or Beneficiary; or

(ii) Its check payable to an insurer for the benefit of such person, to the insurer, or, if prior to a Change in Control, to the Company for redelivery to the insurer; or

(iii) Contracts held on the life of the Participant to whom or with respect to whom the distribution is being made, to the Participant or Beneficiary, or, if prior to a Change in Control, to the Company for redelivery to the person to whom such distribution is to be made; or

(iv) If a distribution is being made, in whole or in part, of other assets, assignments or other appropriate documents or certificates necessary to effect a transfer of title, to the Participant or Beneficiary, or, if prior to a Change in Control, to the Company for redelivery to such person.

(c) If the principal of the Trust, and any earnings thereon, are not sufficient, determined on a Plan by Plan basis, to make payments of benefits in accordance with the terms of the Plans, the Company and the Subsidiaries shall make the balance of each such payment as it falls due. The Trustee shall notify the Company and the Subsidiaries when principal and earnings are not sufficient. To the extent that the total Trust assets available to make benefit payments to Participants or Beneficiaries who are currently entitled to payment are less than the liabilities of the Plans, the Trustee shall make benefit payments

proportionate to the ratio of assets available to pay benefits to the total values of the liabilities.

(d) The Company and the Subsidiaries may make payment of benefits directly to Participants or their Beneficiaries as they become due under the terms of the Plans. The Company and the Subsidiaries shall notify the Trustee of their decisions to make payment of benefits directly prior to the time amounts are payable to Participants or their Beneficiaries.

(e) Notwithstanding anything contained in this Master Trust Agreement to the contrary, if at any time the Trust is finally determined by the IRS not to be a “grantor trust” with the result that the income of the Trust Fund is not treated as income of the Company or the Subsidiaries pursuant to Sections 671 through 679 of the Internal Revenue Code of 1986, as amended, or if a tax is finally determined by the IRS to be payable by one or more Participants or Beneficiaries with respect to any interest in the Plans or the Trust Fund prior to payment of such interest to any such Participant or Beneficiary, the Trustee shall immediately determine each Participant’s share of the Trust Fund in accordance with the Plans, and the Trustee shall immediately distribute such share in a lump sum to each Participant or Beneficiary entitled thereto, regardless of whether such Participant’s employment has terminated (provided such Participant has a vested interest in his or her accrued benefits under the Plans) and regardless of form and time of payments specified in or pursuant to the Plans. Any remaining assets (less any expenses or costs due under Sections 3.8 and 3.9 of this Master Trust Agreement) shall then be paid by the Trustee to the Company and the Subsidiaries in such amounts, and in the manner instructed by the Committee. If the value of the Trust Fund is less than the benefit obligations under the Plans, the foregoing described distributions will be limited to a Participant’s share of the Trust Fund, determined by allocating assets to the Participant based on the ratio of the Participant’s benefit obligations under the Plans to the total benefit obligations under the Plans. Prior to a Change in Control, the Trustee shall rely solely on the written directions of the Committee with respect to the occurrence of the foregoing events and the resulting distributions to be made, and the Trustee shall not be responsible for any failure to act in the absence of such direction.

(f) The Trustee shall make provision for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits pursuant to the terms of the Plans and at the discretion of the Retirement Committee shall pay amounts withheld to the appropriate taxing authorities or determine that such amounts have been reported, withheld and paid by the Company and the Subsidiaries.

(g) Prior to a Change in Control, payments by the Trustee shall be delivered or mailed to addresses supplied by the Retirement Committee and the Trustee’s obligation to make such payments shall be satisfied upon such delivery or mailing. Prior to a Change in Control, the Trustee shall have no obligation to determine the identity of persons entitled to benefits or their mailing addresses. After a Change in Control, the Retirement

Committee shall provide written directions as to the identity of persons entitled to benefits and their mailing addresses.

(h) Prior to a Change in Control, the entitlement of a Participant or his or her Beneficiaries to benefits under the Plans shall be determined by the Company and the Subsidiaries or such party as they shall designate under the Plans, and any claim for such benefits shall be considered and reviewed under the procedures set out in the Plans.

(i) Notwithstanding Section 3.6(h), upon and after the occurrence of a Change in Control, the Plan shall be administered by (i) an independent third party (the “Administrator”) selected by the Trustee and approved by the individual who, immediately prior to such event, was the Company’s Chief Executive Officer or, if not so identified, the Company’s highest ranking officer (the “Ex-CEO”), or (ii) if an independent third party is not selected within ninety (90) days of a Change in Control, the Committee. The Administrator shall have the discretionary power to determine all questions arising in connection with the administration of the Plan and the interpretation of the Plan and Trust including, but not limited to benefit entitlement determinations; provided, however, upon and after the occurrence of a Change in Control, the Administrator shall have no power to direct the investment of Plan or Trust assets or select any investment manager or custodial firm for the Plan or Trust. Upon and after the occurrence of a Change in Control, the Company must: (1) pay all reasonable administrative expenses and fees of the Administrator; (2) indemnify the Administrator against any costs, expenses and liabilities including, without limitation, attorney’s fees and expenses arising in connection with the performance of the Administrator hereunder, except with respect to matters resulting from the gross negligence or willful misconduct of the Administrator or its employees or agents; and (3) supply full and timely information to the Administrator or all matters relating to the Plan, the Trust, the Participants and their Beneficiaries, the Account Balances of the Participants, the date of circumstances of the Retirement, Disability, death or Termination of Employment of the Participants, and such other pertinent information as the Administrator may reasonably require. Upon and after a Change in Control, the Administrator may be terminated (and a replacement appointed) by the Trustee only with the approval of the Ex-CEO. Upon and after a Change in Control, the Administrator may not be terminated by the Company.

3.7. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS ON INSOLVENCY.

(a) The Trustee shall cease payment of benefits to Participants and their Beneficiaries if the Company, or any Subsidiary, is Insolvent (the “Insolvent Entity”). The Insolvent Entity shall be considered “Insolvent” for purposes of this Master Trust Agreement if:

(i) the Insolvent Entity is unable to pay its debts as they become due, or

(ii) the Insolvent Entity is subject to a pending proceeding as a debtor under the United States Bankruptcy Code.

For purposes of this Section 3.7, if an entity is determined to be Insolvent, each Subsidiary in which such entity has an equity interest shall also be deemed to be an Insolvent Entity. However, the insolvency of a Subsidiary will not cause a parent corporation to be deemed Insolvent.

(b) At all times during the continuance of this Trust, as provided in Section 1.3 above, the principal and income of the Trust shall be subject to claims of the general creditors of the Company and its Subsidiaries under federal and state law as set forth below:

(i) The Board and the president of the Company shall have the duty to inform the Trustee in writing of the Company’s or any Subsidiary’s Insolvency. If a person claiming to be a creditor of the Company or my Subsidiary alleges in writing to the Trustee that the Company or any Subsidiary has become Insolvent, the Trustee shall determine whether the Company or any Subsidiary is Insolvent and, pending such determination, the Trustee shall discontinue payment of benefits to the Insolvent Entity’s Participants or their Beneficiaries. Prior to a Change in Control, the Trustee may conclusively rely on any determination it receives from the Board or the president of the Company with respect to the Insolvency of the Company or any Subsidiary.

(ii) Unless the Trustee bas actual knowledge of the Company’s or a Subsidiary’s Insolvency, or has received notice from the Company, a Subsidiary, or a person claiming to be a creditor alleging that the Company or a Subsidiary is Insolvent, the Trustee shall have no duty to inquire whether the Company or any Subsidiary is Insolvent. The Trustee may in all events rely on such evidence, concerning the Company’s or any Subsidiary’s solvency as may be furnished to the Trustee and that provides the Trustee with a reasonable basis for making. a determination concerning the Company’s or any Subsidiary’s solvency. In this regard, the Trustee may rely upon a letter from the Company’s or a Subsidiary’s auditors as to the Company’s or any Subsidiary’s financial status.

(iii) If at any time the Trustee has determined that the Company or any Subsidiary is Insolvent, the Trustee shall discontinue payments to the Insolvent Entity’s Participants or their Beneficiaries, and shall hold the portion of the assets of the Trust allocable to the Insolvent Entity for the benefit of the Insolvent Entity’s general creditors. Nothing in this Master Trust Agreement shall in any way diminish any rights of Participants or their Beneficiaries to pursue their rights as general creditors of the Insolvent Entity with respect to benefits due under the Plans or otherwise.

(iv) The Trustee shall resume the payment of benefits to Participants or their Beneficiaries in accordance with this Article 3 of this Master Trust Agreement

only after the Trustee has been provided proof that the alleged Insolvent Entity is not Insolvent (or is no longer Insolvent).

(c) Provided that there are sufficient assets, if the Trustee discontinues the payment of benefits from the Trust pursuant to Section 3.7(b) hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to Participants or their Beneficiaries under the terms of the Plans for the period of such discontinuance, less the aggregate amount of any payments made to Participants or their Beneficiaries by the Company or any Subsidiary in lieu of the payments provided for hereunder during any such period of discontinuance. Prior to a Change in Control, the Committee shall instruct the Trustee as to such amounts, and after a Change in Control, the Trustee shall determine such amounts in accordance with the terms and provisions of the Plans.

3.8. COSTS OF ADMINISTRATION. The Trustee is authorized to incur reasonable obligations in connection with the administration of the Trust, including attorneys’ fees, Administrator fees, other administrative fees and appraisal fees. Such obligations shall be paid by the Company and the Subsidiaries. The Trustee is authorized to pay such amounts from the Trust Fund if the Company or the Subsidiaries fail to pay them within 60 days of presentation of a statement of the amounts due.

3.9. TRUSTEE COMPENSATION AND EXPENSES. The Trustee shall be entitled to reasonable compensation for its services as from time to time agreed upon between the Trustee and the Company. If the Trustee and the Company fail to agree upon a compensation, or following a Change in Control, the Trustee shall be entitled to compensation at a rate equal to the rate charged by the Trustee for similar services rendered by it during the current fiscal year for other trusts similar to this Trust. The Trustee shall be entitled to reimbursement for expenses incurred by it in the performance of its duties as the Trustee, including reasonable fees for legal counsel. The Trustee’s compensation and expenses shall be paid by the Company and the Subsidiaries. The Trustee is authorized to withdraw such amounts from the Trust Fund if the Company or the Subsidiaries fail to pay them within 60 days of presentation of a statement of the amounts due.

3.10. PROFESSIONAL ADVICE. The Company and the Subsidiaries specifically acknowledge that the Trustee and/or the Administrator may find it desirable or expedient to retain legal counsel (who may also be legal counsel for the Company generally) or other professional advisors to advise it in connection with the exercise of any duty under this Master Trust Agreement, including, but not limited to, any matter relating to or following a Change in Control or the Insolvency of the Company or any Subsidiary. The Trustee and/or Administrator shall be fully protected in acting upon the advice of such legal counsel or advisors.

3.11. PAYMENT ON COURT ORDER. To the extent permitted by law, the Trustee is authorized to make any payments directed by court order in any action in which the Trustee has been named as a party. The Trustee is not obligated to defend actions in which the Trustee is named, but shall

notify the Company or Committee of any such action and may tender defense of the action to the Company, Committee, Participant or Beneficiary whose interest is affected. The Trustee may in its discretion defend any action in which the Trustee is named, and any expenses incurred by the Trustee shall be paid by the Company and the Subsidiaries. The Trustee is authorized to pay such amounts from the Trust Fund if the Company or the Subsidiaries fail to pay them within sixty (60) days of presentation of a statement of the amounts due.

3.12. PROTECTIVE PROVISIONS. Notwithstanding any other provision contained in this Master Trust Agreement to the contrary, the Trustee shall have no obligation to (i) determine the existence of any conversion, redemption, exchange, subscription or other right relating to any securities purchased of which notice was given prior to the purchase of such securities and shall have no obligation to exercise any such right unless the Trustee is advised in writing by the Committee both of the existence of the right and the desired exercise thereof within a reasonable time prior to the expiration of the right to exercise, or (ii) advance any funds to the Trust. Furthermore, the Trustee is not a party to the Plans.

3.13. INDEMNIFICATIONS.

(a) The Company and the Subsidiaries shall indemnify and hold the Trustee harmless from and against all loss or liability (including expenses and reasonable attorneys’ fees) to which it may be subject by reason of its execution of its duties under this Trust, or by reason of any acts taken in good faith in accordance with any directions, or acts omitted in good faith due to absence of directions, from the Company, the Committee or a Participant, unless such loss or liability is due to the Trustee’s gross negligence or willful misconduct. The indemnity described herein shall be provided by the Company and the Subsidiaries.

(b) In the event that the Trustee is named as a defendant in a lawsuit or proceeding involving one or more of the Plans or the Trust Fund, the Trustee shall be entitled to receive on a current basis the indemnity payments provided for in this Section, provided however that if the final judgment entered in the lawsuit or proceeding holds that the Trustee is guilty of gross negligence or willful misconduct with respect to the Trust Fund, the Trustee shall be required to refund the indemnity payments that it has received.

(c) The Company and the Subsidiaries shall indemnify and hold the Administrator harmless from and against all loss or liability (including expenses and reasonable attorneys’ fees) to which it may be subject by reason of its execution of its duties under this Trust, or by reason of any acts taken in good faith in accordance with any directions, or acts omitted in good faith due to absence of directions, from the Company, the Committee or a Participant, unless such loss or liability is due to the Administrator’s gross negligence or willful misconduct. The indemnity described herein shall be provided by the Company and the Subsidiaries.

(d) In the event that the Administrator is named as a defendant in a lawsuit or proceeding involving one or more of the Plans or the Trust Fund, the Administrator shall be entitled to receive on a current basis the indemnity payments provided for in this Section, provided however that if the final judgment entered in the lawsuit or proceeding holds that the Administrator is guilty of gross negligence or willful misconduct with respect to its duties under the Plans or the Trust, the Administrator shall be required to refund the indemnity payments that it has received.

(e) All releases and indemnities provided in this Master Trust Agreement shall survive the termination of this Master Trust Agreement.

ARTICLE 4

INSURANCE CONTRACTS

4.1. TYPES OF CONTRACTS. To the extent that the Trustee is directed by the Committee prior to a Change in Control to invest part or all of the Trust Fund in insurance contracts, the type and amount thereof shall be specified by the Committee. The Trustee shall be under no duty to make inquiry as to the propriety of the type or amount so specified.

4.2. OWNERSHIP. Each insurance contract issued shall provide that the Trustee shall be the owner thereof with, the power to exercise all rights, privileges, options and elections granted by or permitted under such contract or under the rules of the insurer. The exercise by the Trustee of any incidents of ownership under any contract shall, prior to a Change in Control, be subject to the direction of the Committee.

4.3. RESTRICTIONS ON TRUSTEE’S RIGHTS. The Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee, or to loan to any person the proceeds of any borrowing against such policy. Despite the foregoing, the Trustee may (i) loan to the Company or any Subsidiary the proceeds of any borrowing against an insurance policy held in the Trust Fund or (ii) assign all, or any portion, of a policy to the Company or any Subsidiary if under other provisions of this Master Trust Agreement the Company or any Subsidiary is entitled to receive assets from the Trust.

ARTICLE 5

TRUSTEE’S ACCOUNTS

5.1. RECORDS. The Trustee shall maintain accurate records and detailed accounts of all investments, receipts, disbursements and other transactions hereunder. Such records shall be available at all reasonable times for inspection by the Company and Subsidiaries or their authorized representative. The Trustee, at the direction of the Committee, shall submit to the Committee

and to any insurer such valuations, reports or other information as the Committee may reasonably require and, in the absence of fraud or bad faith, the valuation of the Trust Fund by the Trustee shall be conclusive.

5.2. ANNUAL ACCOUNTING; FINAL ACCOUNTING.

(a) Within 60 days following the end of each Plan Year and within 60 days after the removal or resignation of the Trustee or the termination of the Trust, the Trustee shall file with the Committee a written account setting forth a description of all properties purchased and sold, all receipts, disbursements and other transactions effected by it during the Plan Year or, in the case of removal, resignation or termination, since the close of the previous Plan Year, and listing the properties held in the Trust Fund as of the last day of the Plan Year or other period and indicating their values. Such values shall be either cost or market as directed by the Committee in accordance with the terms of the Plans.

(b) The Committee may approve such account either by written notice of approval delivered to the Trustee or by its failure to express written objection to such account delivered to the Trustee within 60 days after the date of which such account was delivered to the Committee.

(c) The approval by the Committee of an accounting shall be binding as to all matters embraced in such accounting on all parties to this Master Trust Agreement and on all Participants and Beneficiaries, to the same extent as if such accounting had been settled by a judgment or decree of a court of competent jurisdiction in which the Trustee, the Committee, the Company, the Subsidiaries and all persons having or claiming any interest in any Plan or the Trust Fund were made parties.

(d) Despite the foregoing, nothing contained in this Master Trust Agreement shall deprive the Trustee of the right to have an accounting judicially settled, if the Trustee, in the Trustee’s sole discretion, desires such a settlement.

5.3. VALUATION. The assets of the Trust Fund shall be valued at their respective fair market values on the date of valuation, as determined by the Trustee based upon such sources of information as it may deem reliable, including, but not limited to, stock market quotations, statistical valuation services, newspapers of general circulation, financial publications, advice from investment counselors, brokerage firms or insurance companies, or any combination of sources. Prior to a Change in Control, the Committee shall instruct the Trustee as to the value of assets for which market values are not readily obtainable by the Trustee. If the Committee fails to provide such values, the Trustee may take whatever action it deems reasonable, including employment of attorneys, appraisers, life insurance companies or other professionals, the expense of which shall be an expense of administration of the Trust Fund and payable by the Company and the Subsidiaries. The Trustee may rely upon information from the Company and the Subsidiaries, the Committee, appraisers or other sources and shall not incur any liability for an inaccurate valuation based in good faith upon such information.

5.4. DELEGATION OF DUTIES. The Company or the Committee, or both, may at any time employ the Trustee as their agent to perform any act, keep any records or accounts and make any computations that are required of the Company, any Subsidiary or the Committee by this Master Trust Agreement or the Plans. The Trustee may be compensated for such employment and such employment shall not be deemed to be contrary to the Trust. Nothing done by the Trustee as such agent shall change or increase its responsibility or liability as Trustee hereunder.

ARTICLE 6

RESIGNATION OR REMOVAL OF TRUSTEE

6.1. RESIGNATION; REMOVAL. The Trustee may resign at any time by written notice to the Company, which shall be effective 60 days after receipt of such notice unless the Company and the Trustee agree otherwise. Prior to a Change in Control, the Trustee may be removed by the Company on 60 days notice or upon shorter notice accepted by the Trustee. After a Change in Control, the Trustee may be removed by a majority vote of the Participants, and if a Participant is dead, his or her Beneficiaries (who collectively shall have one vote among them and shall vote in place of such deceased Participant), on 60 days notice or upon shorter notice accepted by the Trustee.

6.2. SUCCESSOR TRUSTEE. If the Trustee resigns or is removed, a successor shall be appointed by the Company, in accordance with this Section, by the effective date of the resignation or removal under Section 6.1 above. The successor shall be a bank, trust company, or similar independent third party that is granted corporate trustee powers under state or federal law. After the occurrence of a Change in Control, a successor Trustee may not be appointed without the consent of a majority of the Participants. If no such appointment has been made within six months, the Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All expenses of the Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust.

6.3. SETTLEMENT OF ACCOUNTS. Upon resignation or removal of the Trustee and appointment of a successor Trustee, all assets shall subsequently be transferred to the successor Trustee. The transfer shall be completed within 90 days after receipt of notice of resignation, removal or transfer, unless the Company extends the time limit. Upon the transfer of the assets, the successor Trustee shall succeed to all of the powers and duties given to the Trustee in this Master Trust Agreement. The resigning or removed Trustee shall render to the Committee an account in the form and manner and at the time prescribed in Section 5.2. The approval of such accounting and discharge of the Trustee shall be as provided in such Section.

ARTICLE 7

CONTROVERSIES,, LEGAL ACTIONS AND COUNSEL

7.1. CONTROVERSY. If any controversy arises with respect to the Trust, the Trustee shall take action as directed by the Committee or, in the absence of such direction or after a Change in Control, as it deems advisable, whether by legal proceedings, compromise or otherwise. The Trustee may retain the funds or property involved without liability pending settlement of the controversy. The Trustee shall be under no obligation to take any legal action of whatever nature unless there shall be sufficient property in the Trust to indemnify the Trustee with respect to any expenses or losses to which it may be subjected.

7.2. JOINDER OF PARTIES. In any action or other judicial proceedings affecting the Trust, it shall be necessary to join as parties the Trustee, the Committee, the Company and the Subsidiaries. No Participant or other person shall be entitled to any notice or service of process. Any judgment entered in such a proceeding or action shall be binding on all persons claiming under the Trust. Nothing in this Master Trust Agreement shall be construed as to deprive a Participant or Beneficiary of his or her right to seek adjudication of his or her rights by administrative process or by a court of competent jurisdiction.

7.3. EMPLOYMENT OF COUNSEL. The Trustee may consult with legal counsel (who, prior to a Change in Control, but not after a Change in Control, may be counsel for the Company or any Subsidiary) and bail be fully protected with respect to any action taken or omitted by it in good faith pursuant to the advice of counsel.

ARTICLE 8

INSURERS

8.1. INSURER NOT A PARTY. No insurer shall be deemed to be a party to the Trust and an insurer’s obligations shall be measured and determined solely by the terms of contracts and other agreements executed by it.

8.2. AUTHORITY OF TRUSTEE. An insurer shall accept the signature of the Trustee to any documents or papers executed in connection with such contracts. The signature of the Trustee shall be conclusive proof to the insurer that the person on whose life an application is being made is eligible to have a contract issued on his or her life and is eligible for a contract of the type and amount requested.

8.3. CONTRACT OWNERSHIP. An insurer shall deal with the Trustee as the sole and absolute owner of any insurance contracts and shall have no obligation to inquire whether any action or failure to act on the part of the Trustee is in accordance with or authorized by the terms of the Plans or this Master Trust Agreement.

8.4. LIMITATION OF LIABILITY. An insurer shall be fully discharged from any and all liability for any action taken or any amount paid in accordance with the direction of the Trustee and shall have no obligation to see to the proper application of the amounts so paid. An insurer shall have no liability for the operation of the Trust or the Plans, whether or not in accordance with their terms and provisions.

8.5. CHANGE OF TRUSTEE. An insurer shall be fully discharged from any and all liability for dealing with a party or parties indicated on its records to be the Trustee until such time as it shall receive at its home office written notice of the appointment and qualification of a successor Trustee.

ARTICLE 9

AMENDMENT AND TERMINATION

9.1. AMENDMENT. Subject to the limitations set forth in this Section 9.1, this Master Trust Agreement may be amended by a written instrument executed by the Trustee and the Company. Notwithstanding the foregoing, no such amendment shall conflict with the terms of the Plans or shall make the Trust revocable after it has become irrevocable in accordance with Section 1.3 above. Any amendment, change or modification shall be subject to the following rules:

(a) GENERAL RULE. Subject to Sections 9.1(b), (c) and (d) below, this Master Trust Agreement may be amended:

(i) By the Company and the Trustee, provided, however, that if an amendment would in any way adversely affect the rights accrued under the Plans in the Trust Fund by any Participant or Beneficiary, each and every Participant and Beneficiary whose rights in the Trust Fund would be adversely affected must consent to the amendment before this Master Trust Agreement may be so amended; and

(ii) By the Company and the Trustee as may be necessary to comply with laws which would otherwise render the Trust void, voidable or invalid in whole or in part.

(b) LIMITATION. Notwithstanding that an amendment may be permissible under Section 9.1(a) above, this Master Trust Agreement shall not be amended by an amendment that would:

(i) Cause any of the assets of the Trust to be used for or diverted to purposes other than for the exclusive benefit of Participants and Beneficiaries as set forth in the Plans, or payment of expenses of the Trust, except as is required to satisfy the claims of the Company’s or a Subsidiary’s general creditors; or

(ii) Be inconsistent with the tens of any Plan, including the terms of any Plan regarding termination, amendment or modification of the Plan.

(c) WRITING AND CONSENT. Any amendment to this Master Trust Agreement shall be set forth in writing and signed by the Company and the Trustee and, if consent of any Participant

or Beneficiary is required under Section 9.1(a), the Participant or Beneficiary whose consent is required. Any amendment may be current, retroactive or prospective, in each case as provided therein.

(d) THE COMPANY AND TRUSTEE. In connection with the exercise of the rights under this Section 9.1:

(i) prior to a Change in Control, the Trustee shall have no responsibility to determine whether any proposed amendment complies with the terms and conditions set forth in Sections 9.1(a) and (b) above and may conclusively rely on the directions of the Committee with respect thereto, unless the Trustee has knowledge of a proposed transaction or transactions that would result in a Change in Control; and

(ii) after a Change in Control, the power of the Company to amend this Master Trust Agreement shall cease, and the power to amend that was previously held by the Company shall, instead, be exercised by a majority of the Participants and, if a Participant is dead, his or her Beneficiaries (who collectively shall have one vote among them and shall vote in place of such deceased Participant), with the consent of the Trustee, provided that such amendment otherwise complies with the requirements of Sections 9.1(a), (b) and (c) above.

(e) TAXATION. This Master Trust Agreement shall not be amended, altered, changed or modified in a manner that would cause the Participants and/or Beneficiaries under any Plan to be taxed on the benefits under any Plan in a year other than the year of actual receipt of benefits.

9.2. FINAL TERMINATION. The Trust shall not terminate until the date on which Participants and their Beneficiaries are no longer entitled to benefits pursuant to the terms of the Plans and all of the expenses of the Trust have been paid, and on such date the Trust shall terminate. Upon termination of the Trust, any assets remaining in the Trust shall be returned to the Company and the Subsidiaries. Such remaining assets shall be paid by the Trustee to the Company and the Subsidiaries in such amounts and in the manner instructed by the Company, whereupon the Trustee shall be released and discharged from all obligations hereunder. From and after the date of termination and until final distribution of the Trust Fund, the Trustee shall continue to have all of the powers provided herein as are necessary or expedient for the orderly liquidation and distribution of the Trust Fund.

ARTICLE 10

MISCELLANEOUS

10.1. DIRECTIONS FOLLOWING CHANGE IN CONTROL. Despite any other provision of this Master Trust Agreement that may be construed to the contrary, following a Change in Control, all powers of the Committee, the Company and the Board to direct the Trustee under this Master Trust

Agreement shall terminate, and the Trustee shall act on its own discretion to carry out the terms of this Master Trust Agreement in accordance with the Plans and this Master Trust Agreement.

10.2. TAXES. The Company and the Subsidiaries shall from time to time pay taxes of any and all kinds whatsoever that at any time are lawfully levied or assessed upon or become payable in respect of the Trust Fund, the income or any property forming a part thereof, or any security transaction pertaining thereto. To the extent that any taxes lawfully levied or assessed upon the Trust Fund are not paid by the Company and the Subsidiaries, the Trustee shall have the power to pay such taxes out of the Trust Fund and shall seek reimbursement from the Company and the Subsidiaries. Prior to making any payment, the Trustee may require such releases or other documents from any lawful taxing authority as it shall deem necessary. The Trustee shall contest the validity of taxes in any manner deemed appropriate by the Company or its counsel, but at the Company’s and the Subsidiaries’ expense, and only if it has received an indemnity bond or other security satisfactory to it to pay any such expenses. Prior to a Change in Control, the Trustee (i) shall not be liable for any nonpayment of tax when it distributes an interest hereunder on directions from the Committee, and (ii) shall have no obligation to prepare or file any tax return on behalf of the Trust Fund, any such return being the sole responsibility of the Committee. The Trustee shall cooperate with the Committee in connection with the preparation and filing of any such return. After a Change in Control, the Trustee shall have such duties and obligations.

10.3. THIRD PERSONS. All persons dealing with the Trustee are released from inquiring into the decisions or authority of the Trustee and from seeing to the application of any moneys, securities or other property paid or delivered to the Trustee.

10.4. NONASSIGNABILITY; NONALIENATION. Benefits payable to Participants and their Beneficiaries under this Master Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process.

10.5. APPLICABLE LAW. Except to the extent, if any, preempted by ERISA, this Master Trust Agreement shall be governed by and construed in accordance with the internal laws of the State of Florida. Any provision of this Master Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof.

10.6. NOTICES AND DIRECTIONS. Whenever a notice or direction is given by the Committee to the Trustee, it shall be in the form required by Section 2.1. Actions by the Company shall be by the Board or a duly authorized officer, with such actions certified to the Trustee by an appropriately certified copy of the action taken. The Trustee shall be protected in acting upon any such notice, resolution, order, certificate or other communication believed by it to be genuine and to have been signed by the proper party or parties.

10.7. SUCCESSORS AND ASSIGNS. This Master Trust Agreement shall be binding upon and inure to the benefit of the Company, the Subsidiaries and the Trustee and their respective successors and assigns.

10.8. GENDER AND NUMBER. Words used in the masculine shall apply to the feminine where applicable, and when the context requires, the plural shall be read as the singular and the singular as the plural.

10.9. HEADINGS. Headings in this Master Trust Agreement are inserted for convenience of reference only and any conflict between such headings and the text shall be resolved in favor of the text.

10.10. COUNTERPARTS. This Master Trust Agreement may be executed in an original and any number of counterparts, each of which shall be deemed to be an original of one and the same instrument.

10.11. BENEFICIAL INTEREST. The Company and the Subsidiaries are the true beneficiaries hereunder in that the payment of benefits, directly or indirectly to or for a Participant or Beneficiary by the Trustee, is in satisfaction of the Company’s and the Subsidiaries’ liability therefore under the Plans. Nothing in this Master Trust Agreement shall establish any beneficial interest in any person other than the Company and the Subsidiaries.

10.12. THE TRUST AND PLANS. This Trust, the Plans and each Participant’s Plan Agreement are part of and constitute a single, integrated employee benefit plan and trust, shall be construed together as the entire agreement between the Company, the Trustee, the Participants and the Beneficiaries with regard to the subject matter thereof, and shall supersede all previous negotiations, agreements and commitments with respect thereto.

10.13. EFFECTIVE DATE. The effective date of this Master Trust Agreement shall be January 1, 2003.

IN WITNESS WHEREOF the Company and the Trustee have signed this Master Trust Agreement as of the date first written above.

TRUSTEE			THE COMPANY:

Legacy Trust Company, Inc.			Haynes International, Inc.
a Florida corporation,			a Delaware corporation,

By:	/s/ Mary B. Knauer		By:	/s/ Francis J. Petro

Title:		EVP	Title:		President and CEO

[Exhibit A -Executive Deferral Plans Covered by the Agreement has been omitted from the Agreement as filed with the Securities and Exchange Commission (the “SEC”). The omitted information is considered immaterial from an investor’s perspective. The Registrant will furnish supplementally a copy of any of the omitted exhibit to the SEC upon request from the SEC.]

Exhibit 10.7

AMENDMENT NUMBER ONE

TO THE

MASTER TRUST AGREEMENT

THIS AMENDMENT NUMBER ONE to the Master Trust Agreement (“AMENDMENT”) is made and entered into as of this 30th day of August, 2004 (the “EFFECTIVE DATE”), by and between Haynes International, Inc. (the “COMPANY”) and Legacy Trust Company, Inc. (the “TRUSTEE”).

WITNESSETH:

WHEREAS, the Company and the Trustee previously entered into that certain Master Trust Agreement for Haynes International, Inc. Supplemental Executive Retirement Plan(s), dated as of January 13, 2003, a copy of which is attached hereto and incorporated herein as EXHIBIT A (the “TRUST AGREEMENT”); and

WHEREAS, pursuant to SECTION 9.1 of the Trust Agreement, the Company and Trustee desire to amend the Trust Agreement upon the terms and subject to the conditions set forth in this Amendment;

NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

AMENDMENT

1. The following language is hereby inserted at the end of the definition of “Change in Control” in SECTION 1.5(c) of the Trust Agreement after the phrase “the Company is a member” in subsection (v):

“; provided, however, in no event shall the consummation of the plan of reorganization of the Company and the transactions contemplated thereby as approved by the Bankruptcy Court for the Southern District of Indiana with respect to that certain

voluntary petition for bankruptcy under Chapter 11 of Title 11 of the U.S. Code (11 USC Section 101, ET. SEQ.) in the U.S. Bankruptcy Court for the Southern District of Indiana on March 29, 2004 constitute a ‘Change in Control’ under this Master Trust Agreement.”

2. This Amendment may be executed in two (2) counterparts, each of which shall be deemed an original, but both of which shall constitute one and the same instrument. The validity, meaning, and effect of this Amendment shall be determined in accordance with the laws of the State of Indiana applicable to contracts made and to be performed in that State.

3. This Amendment amends the Trust Agreement to the extent provided herein only and all other provisions thereof shall remain in full force and effect.

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the Effective Date.

“TRUSTEE”			“COMPANY”

LEGACY TRUST COMPANY, INC.			HAYNES INTERNATIONAL, INC.


By:	/s/ Mary B. Knauer		By:	/s/ Francis J. Petro
Printed:		Mary B. Knauer		Francis J. Petro, President
Title:		EVP

[Exhibit A - Supplemental Executive Retirement Plan has been omitted from the Agreement as filed with the Securities and Exchange Commission (the “SEC”). The omitted information is considered immaterial from an investor’s perspective. The Registrant will furnish supplementally a copy of any of the omitted exhibit to the SEC upon request from the SEC.]

Exhibit 10.8

Haynes International, Inc.
Supplemental Executive Retirement Plan
Plan Agreement

Effective January 1, 2002

******************************************************************

THIS PLAN AGREEMENT (this “Agreement”) is entered into as of December 13, 2002, between Haynes International, Inc. (the “Company”), the Participant’s Employer and Francis J. Petro (the “Participant”).

Recital

A. The Participant is a key employee of the Employer, and the Employer desires to have the continued services and counsel of the Participant.

B. The Employer has adopted, effective January 1, 2002, the Haynes International, Inc. Supplemental Executive Retirement Plan (the “Plan”), as amended from time to time, and the Participant has been selected to participate in the Plan.

C. The Participant desires to participate in the Plan.

Agreement

NOW THEREFORE, it is mutually agreed that:

1. Definitions . Unless otherwise provided in this Agreement, the capitalized terms in this Agreement shall have the same meaning as under the Plan’s master plan document (the “Plan Document”).

2. Integrated Agreement: Parties Bound . The Plan Document, a copy of which has been made available to the Participant, is hereby incorporated into and made a part of this Agreement as though set forth in full in this Agreement. The parties to this Agreement agree to and shall be bound by, and have the benefit of, each and every provision of the Plan as set forth in the Plan Document. This Agreement and the Plan Document, collectively, shall be considered one complete contract between the parties.

3. Acknowledgment . The Participant hereby acknowledges that he or she has read and understands this Agreement and the Plan Document.

4. SERP Benefit . The Participant’s SERP Benefit shall be a monthly amount, payable for the life of the Participant and commencing as of the date determined in accordance with Article 3 of the Plan Document, equal to the product of:

(a) Three percent (3%); multiplied by

(b) The Participant’s Years of Service; multiplied by

(c) The Participant’s Average Compensation.

5. Conditions to Participation . As a condition to participation in the Plan, the Participant must complete, sign, date and return to the Committee an original copy of this Agreement.

6. Successors and Assigns . This Agreement shall inure to the benefit of, and be binding upon the Employer, its successors and assigns, and the Participant.

7. Governing Law . Subject to ERISA, this Agreement shall be governed by and construed according to the internal laws of the State of Indiana without regard “to its conflict of laws principles.

IN WITNESS WHEREOF, the Participant has signed and the Company has accepted this Plan.

Agreement, on its behalf of the Employer, as of the date first written above.

		PARTICIPANT

12/13/02		/s/ Francis J. Petro
Date		Signature of Participant

		Francis J. Petro
		Type or Print Name

AGREED AND ACCEPTED BY THE COMPANY
		COMPENSATION COMMITTEE

12/13/02		/s/ R.C. Lappin
Date		Signature of Committee Member

		R.C. Lappin
		Type or Print Name

******************************************************************

PETRO, FRANCIS J.		000-00-0000
Name (Last, First, Middle Initial)		Social Security Number

In the event of my death, I hereby designate the Beneficiary(ies) identified below to receive the balance of payments to be made under the Haynes International, Inc. Supplemental Executive Retirement Plan (the “Plan”). I reserve the full right to revoke or modify this designation at any time by a subsequent written designation.

PRIMARY BENEFICIARY. If one of my primary Beneficiaries dies before my death that person’s share will be allocated pro rata to my other surviving primary Beneficiaries.

Name	Relationship	Percent	Date of Birth	Social Security Number
1) JEAN R PETRO	WIFE	100	7/29/39	000-00-0000
2)
3)

If no Primary Beneficiary survives me, the following shall be the Beneficiary:

CONTINGENT BENEFICIARY. If one of my contingent Beneficiaries dies before my death that person’s share will be allocated pro rata to my other surviving contingent Beneficiaries.

Name		Relationship	Percent	Date of Birth	Social Security Number
1)	DAVID L PETRO	SON	20	3/16/58	000-00-0000
	DEBORAH J PARSONS	DAUGHTER	20	4/10/60	000-00-0000
2)	DANIEL J PETRO	SON	20	6/30/61	000-00-0000
3)	ELIZABETH J PETRO	DAUGHTER	20	1/5/66	000-00-0000
	ROBERT F PETRO	SON	20	12/26/73	000-00-0000

This Beneficiary Designation Form is effective until the Participant files another such designation and that Beneficiary Designation Form is acknowledged by the Corporate Secretary. Upon acknowledgment by the Corporate Secretary, all previous Beneficiary Designation Forms are hereby revoked .

The Participant acknowledges that any change of Beneficiary will not be effective until acknowledged and accepted in writing by the Corporate Secretary.

ACKNOWLEDGED AND AGREED:		ACKNOWLEDGED:

/s/ Francis J. Petro	12/3/02	/s/ Jean C. Neel	3/14/03
Signature of Participant	Date	Signature of Corporate Secretary	Date

Page 1 of 1

Petro, Francis, J .	000-00-0000
Name (Last, First, Middle Initial)	Social Security Number

You may use this form to:

• Change the form of Normal Benefit you may receive under the Plan.

• Change the form of Change in Control Benefit you may receive under the Plan.

*In order for the following elections to be effective, this form must be both submitted to and accepted by the Committee prior to (i) your termination of employment, if the election is made with respect to your Termination Benefit, or (b) the Change in Control, if the election is made with respect to your Change in Control Benefit.

Form of Normal Benefit Payments	Please select one option below.
I elect to receive my Normal Benefit, payable upon my Termination of Employment, in the following form:

o Life Annuity		o 10 Year Term Certain and Life Annuity

x Lump Sum

Form of Change in Control Benefit Payments	Please select one option below.
I elect to receive my Change in Control Benefit, payable upon a Change in Control, in the following form:

o Life Annuity		o 10 Year Term Certain and Life Annuity

x Lump Sum

ACKNOWLEDGED AND AGREED:		ACKNOWLEDGED:


/s/ Francis J. Petro	12/13/02	/s/ Calvin S. McKay	1/01/03
Signature of Participant	Date	Signature of Committee Member	Date

Page 1 of 1

Exhibit 10.9

AMENDMENT NUMBER ONE

TO THE

PLAN AGREEMENT

THIS AMENDMENT NUMBER ONE TO PLAN AGREEMENT (“AMENDMENT”) is made and entered into, as of this 30th day of August, 2004 (the “EFFECTIVE DATE”), by and between Haynes International, Inc. (the “COMPANY”) and Francis J. Petro (the “PARTICIPANT”).

WITNESSETH:

WHEREAS, the Company previously established the Haynes International, Inc. Supplemental Executive Retirement Plan, effective January 1, 2002 (the “PLAN”), whereby a select group of management and highly compensated employees of the Company are entitled to receive specified benefits under the Plan;

WHEREAS, the Participant was selected to participate in the Plan and as a result the Company and the Participant previously entered into that certain Plan Agreement, dated December 13, 2002, a copy of which is attached hereto and incorporated herein as EXHIBIT A (the “PLAN AGREEMENT”);

WHEREAS, the Company and the Participant previously entered into that certain Executive Employment Agreement, dated as of January 1, 2003 which shall be amended and restated by a certain Amended and Restated Executive Employment Agreement (the “EMPLOYMENT AGREEMENT”);

WHEREAS, the parties hereto desire to amend the Plan Agreement upon the terms and conditions set forth in this Amendment; and

WHEREAS, capitalized terms used herein but not defined herein shall have the meanings specified in the Plan;

AMENDMENTS

1. Paragraph 4 of the Plan Agreement is hereby deleted in its entirety and replaced with the following:

“4. SERP BENEFIT. The Participant’s SERP Benefit shall be a monthly amount, payable for the life of the Participant commencing as of the date determined in accordance with Article 3 of the Plan Document, equal to the product of:

(a) Three percent (3%), MULTIPLIED BY

(b) the product of (i) the Participant’s Years of Service, MULTIPLIED BY (ii) the Participant’s Average Compensation; and reduced by

(c) The Actuarial Equivalent value of any amounts that the Participant is entitled to under the Haynes International, Inc. Pension Plan or any successor defined benefit pension plan.

For the purposes of this Plan Agreement, the consummation of a plan of reorganization of the Company and the transactions contemplated thereby as approved by the Bankruptcy Court for the Southern District of Indiana with respect to the filing of a voluntary petition for bankruptcy by the Company under Chapter 11 of Title 11 of the U.S. Code (11 USC Section 101, ET. SEQ.) in the U.S. Bankruptcy Court for the Southern District of Indiana shall not constitute a Change in Control.

2. Paragraph 8 is hereby inserted as a new paragraph in the Plan Agreement immediately following Paragraph 7 and shall be as follows:

“8. ACKNOWLEDGEMENT AND AGREEMENT. The Participant hereby acknowledges and agrees that the provisions of this Agreement, and the Company’s obligations hereunder, fully satisfy the Company’s obligations under SECTION 1(e)(vii) of the Employment Agreement.

3. This Amendment may be executed in two (2) counterparts, each of which shall be deemed an original, but both of which shall constitute one and the same instrument. The validity,

meaning and effect of this Amendment shall be determined in accordance with the laws of the State of Indiana applicable to contracts made and to be performed in that State.

4. This Amendment amends the Plan Agreement to the extent provided herein only and all other provisions thereof shall remain in full force and effect.

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the Effective Date.

	“PARTICIPANT”


	/s/ Francis J. Petro
	Francis J. Petro


	“COMPANY”

	HAYNES INTERNATIONAL, INC.

	Compensation Committee

	/s/ Richard C. Lappin
	Signature of Committee Member

	Richard C. Lappin
	Type or Print Name

[Exhibit A - Plan Agreement under the Supplemental Executive Retirement Plan Agreement has been omitted from the Agreement as filed with the Securities and Exchange Commission (the “SEC”). The omitted information is filed as Exhibit 10.08 to the Registration Statement. The Registrant will furnish supplementally a copy of any of the omitted exhibit to the SEC upon request from the SEC.]

Exhibit 10.10

AMENDED AND RESTATED

EXECUTIVE EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this “AGREEMENT”) is entered into as of the date set forth below and effective as of the Effective Date (defined below), by and between Haynes International, Inc. (the “COMPANY”), a Delaware corporation, and Francis J. Petro (the “EXECUTIVE”).

PRELIMINARY STATEMENTS

WHEREAS, the Company and the Executive previously entered into that certain Executive Employment Agreement, dated as of January 1, 2003 (the “EMPLOYMENT AGREEMENT”);

WHEREAS, the Company and the Executive previously entered into that certain Severance Agreement (the “SEVERANCE AGREEMENT”) dated as of January 29, 2000 whereby the rights and obligations of the Executive in the event of a termination associated with a change in control of the Company were set forth;

WHEREAS, on March 29, 2004, the Company filed a voluntary petition for bankruptcy under Chapter 11 of Title 11 of the U.S. Code (11 USC Section 101, ET. SEQ.) in the U.S. Bankruptcy Court for the Southern District of Indiana (the “BANKRUPTCY”); and

WHEREAS, the Company and the Executive desire to amend and restate the Employment Agreement on the terms and conditions set forth herein such that this Agreement shall supersede and replace both the Employment Agreement and the Severance Agreement and shall address the Executive’s employment and termination of employment with the Company following the Company’s emergence from Bankruptcy.

AGREEMENT

SECTION 1. EMPLOYMENT.

(a) PRIOR AGREEMENTS. Effective as of the effective date of the Company’s plan of reorganization (the “PLAN OF REORGANIZATION”) as filed with the U.S. Bankruptcy Court for the Southern District of Indiana (the “EFFECTIVE DATE”), the Executive’s employment with the Company and benefits upon a termination of employment shall be governed by this Agreement, which restates and supersedes each of the Employment Agreement and the Severance Agreement.

(b) OFFER AND ACCEPTANCE. During the Employment Term (as defined in SECTION 1(d) below), the Company agrees to employ the Executive in the position of President and Chief Executive Officer of the Company upon the terms and subject to the conditions set forth herein, and the Executive agrees to remain in the employ of the Company on such terms and conditions.

(c) DUTIES. The Executive’s duties shall include those duties that are consistent with his position as President and Chief Executive Officer of the Company as well as those reasonably assigned to him from time to time, in good faith, by the Board of Directors of the Company (the “BOARD”). The Executive shall (i) devote his working hours, on a full-time basis, to his duties under this Agreement; (ii) faithfully, industriously and loyally serve the Company; (iii) comply in all material respects with the lawful and reasonable directions and instructions given to him by the Board; and (iv) use his reasonable best efforts to promote and serve the interests of the Company. The Executive shall comply in all material respects with all applicable laws, rules and regulations relating to the performance of the Executive’s duties and responsibilities hereunder. The Executive agrees to serve as (i) a member of the Board and on any of the board of directors of any subsidiary or affiliate of the Company, and (ii) as an officer of any subsidiary or affiliate of the Company, without any additional compensation while he is employed by the Company. Upon termination of the Executive’s employment by the Company for any reason, the Executive shall immediately resign from the Board and any other position as a member of the board of directors or as an officer of any such subsidiary or affiliate of the Company.

(d) EMPLOYMENT TERM. The Executive’s employment by the Company under this Agreement shall commence on the Effective Date and shall continue thereafter and shall terminate on September 30, 2007 (the “EMPLOYMENT TERM”), unless renewed by a subsequent written agreement of the parties. The Executive’s employment by the Company shall be subject to termination at any time during the Employment Term as provided in subsection (f) of this SECTION 1. As used herein, the term “EMPLOYMENT TERM” shall mean the actual period of time during which the Executive is employed by the Company under the terms and conditions of this Agreement.

(e) COMPENSATION AND BENEFITS. During the Employment Term, the Company shall pay and provide the following compensation and other benefits to the Executive as full compensation for all services rendered by the Executive as an employee of the Company under the terms and conditions of this Agreement. All payments made to the Executive hereunder shall be subject to appropriate payroll deductions and other withholdings required by law.

(i) ANNUAL SALARY. During the Employment Term, the Company shall pay to the Executive, in accordance with the then prevailing payroll practices of the Company, a base salary (the “ANNUAL SALARY”) at the annual rate of Four Hundred Eighty Thousand Dollars ($480,000) per year.

(ii) BONUSES. With respect to each full fiscal year during the Employment Term, the Executive shall be eligible to receive an annual bonus based upon the achievement by the Company of specific performance requirements (e.g. EBITDA benchmarks’ and/or working capital targets) which shall be determined by the Board in its sole and absolute discretion prior to or at the commencement of the applicable fiscal year (the “BONUS”). The actual amount of the Bonus shall be equal to a percentage of the Annual Salary in effect as

of September 30th of such fiscal year and shall be determined by the Board in its sole and absolute discretion prior to or at the commencement of the applicable fiscal year. Notwithstanding the foregoing, for the 2004 fiscal year only, the target amount for the Bonus shall be sixty percent (60%) of the Annual Salary in effect as of September 30, 2004; provided, however, Executive shall be eligible to receive a minimum Bonus in an amount equal to thirty-five percent (35%) of such Annual Salary and a maximum Bonus equal to one hundred twenty percent (120%) of such Annual Salary, based upon the achievement of the performance requirements, as determined by the Board in its sole and absolute discretion. The Bonus, if earned, shall be paid to the Executive by the Company no later than February 1 of the following calendar year.

(iii) BENEFITS. The Executive shall be eligible to participate in all employee health and welfare benefit plans in which senior executives of the Company are entitled to participate, but participation shall be subject to all of the terms and conditions) of such plans applicable to all such senior executives, including all waiting periods, eligibility requirements, contributions, exclusions and other similar conditions or limitations. In the case of any disability plan, the Company agrees that such plan will provide the benefits contemplated by SECTION 1(e)(iv) or in lieu of such plan participation, the Company will provide to the Executive the disability insurance coverage contemplated by SECTION 1(e)(iv).

(iv) INSURANCE. The Executive shall be entitled to receive long-term disability insurance coverage and the amount of the benefit payments under such insurance coverage shall be not less than sixty percent (60%) of the Annual Salary then in effect (the “DISABILITY INSURANCE”). The Company shall pay all premiums related to the Disability Insurance as long as the Executive is employed by Company hereunder. In addition, the Company shall provide the Executive with a life insurance policy in a face amount equal to five (5) times the Annual Salary then in effect (the “LIFE INSURANCE”), which policy shall be convertible to an individual policy at the election of the Executive upon termination of the Executive’s employment by the Company. The Company shall be the owner of the Life Insurance and shall pay all premiums related thereto prior to termination of the Executive’s employment by the Company.

(v) EXPENSES. The Company shall reimburse the Executive, in accordance with the then prevailing reimbursement practices of the Company, for all reasonable and customary business expenses incurred by the Executive in connection with his employment by the Company, including, but not limited to, all reasonable and customary travel-related expenses incurred in connection with periodic trips to Syracuse, New York, provided, in any case, that the Executive complies with the standard reporting and reimbursement policies as may be established by the Company from time to time.

(vi) VACATION. The Executive shall be entitled to five (5) weeks of vacation, measured on a calendar year basis. The Executive shall schedule vacation periods at reasonable times in accordance with the Company’s vacation policy for senior executives. The Executive shall accrue and receive full compensation and benefits during his vacation periods. Unused vacation leave time shall not entitle the Executive to any additional compensation and may not be carried over to a subsequent calendar year.

(vii) SERP. The Executive shall be entitled to participate in the Haynes International, Inc. Supplemental Executive Retirement Plan on the terms and conditions

as set forth in the Participation Agreement entered into by and between the Executive and the Company dated December 13, 2002 as amended as of the date hereof (the “SERP”).

(viii) COMPANY CAR. The Company shall provide the Executive with the use of an automobile owned or leased by the Company at its expense for Company-related purposes (the “COMPANY CAR”). The Company shall pay or reimburse the Executive for all expenses incurred in connection with the Executive’s use of the Company Car, including, but not limited to, insurance, gasoline, registration taxes and maintenance. The Company Car shall be a Buick Park Avenue or an automobile of a similar class. The Executive agrees that the use of the Company Car for personal-related matters will result in imputed income to the Executive and at the end of each calendar year, the Company and its accountants shall reasonably determine the amount of such income to be included in the Executive’s compensation in connection with the personal use of the Company Car and the Executive agrees that he shall be responsible for any and all taxes imposed on such imputed income.

(ix) COUNTRY CLUB MEMBERSHIP. The Company shall reimburse the Executive for all regular monthly membership dues and business-related charges incurred by the Executive in connection with his membership at a country club. The Executive agrees that he shall be responsible for any and all taxes imposed on the reimbursements made pursuant to the preceding sentence.

(x) OPTIONS. As of the Effective Date, the Company shall establish a long-term equity incentive plan in which the Executive is eligible to participate (the “LTIP”). During the Employment Term, the Executive shall remain eligible to participate in the LTIP pursuant to the terms and conditions set forth therein.

(xi) DEATH BENEFIT PLAN. The Executive shall be eligible to participate in the Haynes International, Inc. Death Benefit Plan, as amended, pursuant to the terms and conditions set forth in such plan.

(f) TERMINATION OF EMPLOYMENT. Subject to the terms of Section 1(g) below, the Executive’s employment by the Company may be terminated as follows:

(i) TERMINATION UPON THE EXPIRATION OF THE EMPLOYMENT TERM. Unless otherwise agreed to in writing by the Company and the Executive, the Executive’s employment shall terminate on September 30, 2007 unless terminated earlier pursuant to this SECTION 1(f). In the event that the Executive’s employment terminates upon the expiration of the Employment Term, then the Executive shall be entitled to receive the compensation and benefits set forth in SECTION 1(g)(i).

(ii) TERMINATION FOR CAUSE. The Company may immediately terminate, at any time, Executive’s employment by the Company for “Cause.” A termination for “Cause” means a termination by reason of the Board’s good faith determination that the Executive (i) continually failed to substantially perform his duties with the Company (other than a failure resulting from the Executive’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 Executive’s duties with the Company, repeated absences from work without a reasonable excuse, or intoxication with alcohol or illegal drugs while on the Company’s premises during regular business hours, (ii) engaged in conduct which constituted a material breach of SECTION 2 or SECTION 3 of this Agreement, (iii) 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 (iv) 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 (v) 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 Executive 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. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless there shall have been delivered to the Executive a copy of a resolution duly adopted by the Board. If the Company has reasonable belief that the Executive has committed any of the acts described above, it may suspend the Executive (with or without pay) while it investigates whether it has or could have Cause to terminate the Executive. The Company may terminate the Executive for Cause prior to the completion of its investigation; provided, that, if it is ultimately determined that the Executive has not committed an act which would constitute Cause, the Executive shall be treated as if he were terminated without Cause.

(iii) TERMINATION WITHOUT CAUSE. The Company may, at any time, terminate the Executive’s employment by Company without Cause by providing prior written notice thereof to the Executive.

(iv) RESIGNATION FOR GOOD REASON. The Executive may terminate his employment by the Company for Good Reason (as defined below) by providing written notice thereof to the Company (the “RESIGNATION NOTICE”) at least forty-five (45) days prior to the effective date of the resignation, which notice shall set forth in reasonable detail the nature of the facts and circumstances which constitute Good Reason and the Company shall have thirty (30) days after receipt of the Resignation Notice to cure in all material respects the facts and circumstances which constitute Good Reason. For purposes of this Agreement, “GOOD REASON” shall mean the occurrence, during the Employment Term, of any of the following actions or failures to act, but in each case only if it is not consented to by the Executive in writing: (a) a material adverse change in the Executive’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 Executive’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 Executive; or (c) any change of more than 50 miles in the location of the principal place of employment of the Executive 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 Executive 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 Executive (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) day following the later of the occurrence of such action or the Executive’s knowledge thereof, unless the Executive has given the Company written notice thereof prior to such date.

(v) RESIGNATION WITHOUT GOOD REASON. The Executive may, at any time, terminate the Executive’s employment by the Company without Good Reason by providing thirty (30) days’ prior written notice thereof to the Company.

(vi) DEATH; DISABILITY OR RETIREMENT. The Executive’s employment shall terminate immediately upon the Executive’s death, Disability, or Retirement (each as defined below). For purposes of this Agreement, “DISABILITY” means the Executive is totally and permanently disabled as defined in the Haynes International, Inc. Pension Plan and “RETIREMENT” means a resignation by the Executive after having reached age fifty-five (55), but in no event prior to September 30, 2007.

(g) EFFECT OF TERMINATION.

(i) TERMINATION UPON THE EXPIRATION OF THE EMPLOYMENT TERM. Upon the termination of the Executive’s employment pursuant to SECTION 1(f)(i), the Executive will be entitled to (A) payment of that portion of the Executive’s then effective) Annual Salary which has been earned but not yet paid through and including the last day of the Executive’s employment (the “TERMINATION DATE”); (B) payment of any Bonus earned by the Executive under the terms and conditions of this Agreement prior to the Termination Date that remains unpaid; (C) reimbursement of any reimbursable business expenses under SECTION 1(e)(v), which were incurred by the Executive through and including the Termination Date; (D) continuation of benefits to which the Executive is entitled under SECTION L(e)(iii) and SECTION 1(e)(iv) through and including the Termination Date and; (E) the SERP that the Executive is entitled to under SECTION 1(e)(vii). In addition, any unvested stock options held by the Executive shall terminate immediately and any vested stock options held by the Executive shall remain exercisable for ninety days (90) following the Termination Date, but in no event later than the expiration date of such stock option as specified in the applicable grant letter.

(ii) TERMINATION FOR CAUSE OR RESIGNATION WITHOUT GOOD REASON. Upon the Company’s termination of the Executive’s employment for Cause pursuant to SECTION 1(f)(ii) or the Executive’s resignation without Good Reason pursuant to SECTION L(f)(v), Executive will be entitled to (A) payment of that portion of the Executive’s then effective Annual Salary which has been earned but not yet paid through and including the Termination Date; (B) payment of any Bonus earned by the Executive under the terms and conditions of this Agreement prior to the Termination Date that remains unpaid; (C) reimbursement of any reimbursable business expenses under SECTION 1(e)(v), which were incurred by the Executive through and including the

Termination Date; (D) continuation of benefits to which the Executive is entitled under SECTION 1(e)(iii) and SECTION 1(e)(iv) through and including the Termination Date; and (E) the SERP that the Executive is entitled to under SECTION 1(e)(vii). In addition, (x) upon a termination by the Company pursuant to SECTION 1(f)(ii), any vested or unvested stock options held by the Executive shall terminate immediately and (y) upon the Executive’s resignation pursuant to SECTION 1(f)(v), any unvested stock options held by the Executive shall terminate immediately and any vested stock option held by the Executive shall remain exercisable for thirty (30) days following the Termination Date but in no event later than the expiration date of such stock option as specified in the applicable grant letter.

(iii) TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON. Upon the Company’s termination of the Executive’s employment without Cause, pursuant to SECTION 1(f)(iii) or the Executive’s resignation for Good Reason pursuant to SECTION L(f)(iv), the Executive shall be entitled to receive a lump sum payment equal to (A) payment of that portion of the Executive’s then effective Annual Salary which has been earned but not yet paid through and including the Termination Date; (B) payment of any Bonus earned by the Executive under the terms and conditions of this Agreement prior to the Termination Date that remains unpaid; and (C) payment of an amount based upon the following formula:

(A + ((B + C)/2)) x 2

Where: “A” equals the Annual Salary then in effect;

“B” equals the Bonus paid or payable to the Executive with respect to the fiscal year immediately preceding the fiscal year in which the Executive’s termination or resignation occurs (if no such Bonus was paid or payable with respect to such year, the Bonus amount used for this calculation shall be zero).

“C” equals the Bonus paid or payable to the Executive with respect to the second fiscal year preceding the fiscal year in which the Executive’s termination or resignation occurs (if no such Bonus was paid or payable with respect to such year, the Bonus amount used for this calculation shall be zero.)

The Executive shall also be entitled to receive (A) reimbursement of any reimbursable business expenses under SECTION 1(e)(v), which were incurred by the Executive through and including the Termination Date; (B) continuation of medical and hospitalization benefits to which the Executive is entitled under SECTION 1(e)(iii), Life Insurance and Disability Insurance to which the Executive is entitled under SECTION 1(e)(iv), in each case, until the second (2nd) anniversary of the Termination Date; provided, however, that such benefits shall terminate to the extent that the Executive obtains comparable benefits coverage from another employer during such two (2) year period and (C) the SERP that the Executive is entitled to under SECTION 1(e)(vii). In addition, any unvested stock options held by the Executive will vest immediately and all options held by the Executive will remain exercisable for one (1) year from the Termination Date, but in no event later than the expiration date of such stock option as specified in the applicable grant letter.

(iv) DEATH; DISABILITY OR RETIREMENT. Upon termination of the Executive’s employment pursuant to SECTION 1(f)(vi), the Executive or the Executive’s heirs, estate, personal representative or legal guardian, as appropriate, will be entitled to receive (A) payment of that portion of the Executive’s then effective Annual Salary which has been earned but not yet paid through and including the Termination Date; (B) payment of any Bonus earned by the Executive under the terms and conditions of this Agreement prior to the Termination Date that remains unpaid; (C) reimbursement of any reimbursable business expenses under SECTION 1(e)(v), which were incurred by the Executive through and including the Termination Date; (D) continuation of benefits to which the Executive is entitled under SECTION 1(e)(iii) and SECTION 1(e)(iv) through and including the Termination Date (including, without limitation, coverage under any Company disability plan then in effect); and (E) payment of the SERP that the Executive is entitled to under SECTION 1(e)(vii) in accordance with its terms. In addition, any unvested stock options held by the Executive will vest immediately and all options held by the Executive will remain exercisable for one (1) year in the event of death or Disability and six (6) months in the event of Retirement following the Termination Date, but in no event later than the expiration date of such stock option as specified in the applicable grant letter.

(v) TIMING OF PAYMENT AND RELEASE. As a condition of receiving from the Company the payments and benefits provided for under this SECTION 1(g) which the Executive otherwise would not be entitled to receive, the Executive understands and agrees that, on the Termination Date, he will be required to execute a release of all claims against the Company in substantially the form attached hereto as Exhibit I (the “RELEASE”) as may be modified by the Company in good faith to reflect changes in law or its employment practices. The Executive acknowledges that he has been advised in writing to consult with an attorney prior to executing the Release. The Executive agrees that he will consult with his attorney prior to executing the Release. The Executive and the Company agree that the Executive has a period of seven (7) days following the execution of the Release within which to revoke the Release. The parties also acknowledge and agree that the Release shall not be effective or enforceable until the seven (7) day revocation period expires. The date on which this seven (7) day period expires shall be the effective date of the Release (the “RELEASE EFFECTIVE DATE”). The Company shall make all payments required under this Agreement, except to the extent that such payments are to be made over time, within five (5) business days following the Release Effective Date. In the event of a termination for Cause or by reason of the Executive’s death, the Company shall make any payments under this SECTION 1(g) within five (5) business days of the Termination Date, except to the extent that such payments are to be made over time. The Executive understands that as used in this SECTION 1(g)(iv), the “Company” includes its past, present and future officers, directors, trustees, shareholders, employees, agents, subsidiaries, affiliates, distributors, successors, and assigns, any and all employee benefit plans (and any fiduciary of such plans) sponsored, by the Company, and any other person related to the Company.

Except as specifically provided in this SECTION 1(g) or required under applicable law, the Executive will not be eligible to receive any salary, bonus or other compensation or benefits described in SECTION 1(e) with respect to any future periods after the

Termination Date; provided, however, the Executive shall have the right to receive all compensation and benefits to which he is entitled under any benefit plans of the Company to the extent he is fully vested as of the effective date of the termination of the Executive’s employment by the Company pursuant to the terms and conditions of such employee benefit plans.

SECTION 2. CONFIDENTIALITY. For purposes of this Section 2, the term “Company” shall include, in addition to the Company, its affiliates, subsidiaries and any of their respective predecessors, successors and assigns. The term “Company’s Business” shall mean the business of developing, manufacturing, selling or distributing high-performance alloys for service in severe corrosion and high temperature applications.

(a) CONFIDENTIAL INFORMATION. As used in this Agreement, “CONFIDENTIAL INFORMATION” means any and all confidential, proprietary or other information, whether or not originated by the Executive or the Company, which is in any way related to the past or present Company’s Business and is either designated as confidential or not generally known by or available to the public. Confidential Information includes, but is not limited to (whether or not reduced to writing or designated as confidential) (i) information regarding the Company’s existing and potential customers and vendors; (ii) any contacts (including the existence and contents thereof and parties thereto) to which the Company is a party or is bound; (iii) information regarding products and services being purchased or leased by or provided to the Company; (iv) information received by the Company from third parties under an obligation of confidentiality, restricted, disclosure or restricted use; (v) personnel and financial information of the Company; (vi) information with respect to the Company’s products, services, facilities, business methods, systems, trade secrets, technical know-how, and other intellectual property; (vii) marketing and developmental plans and techniques, price and cost data, forecasts and forecast assumptions, and potential strategies of the Company; and (viii) any other information relating to the Company which was obtained by the Executive in connection with his employment by the Company, whether before, on or after the Effective Date.

(b) NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION. The Executive acknowledges that the Confidential Information of the Company is a valuable, unique asset of the Company and the Executive’s unauthorized use or disclosure thereof could cause irreparable harm to the Company for which no remedy at law could be adequate. Accordingly, the Executive agrees that he shall hold all Confidential Information of the Company in strict confidence and solely for the benefit of the Company, and that, he shall not, directly or indirectly, disclose or use or authorize any third party to disclose or use any Confidential Information except (i) as required for the performance of the Executive’s duties hereunder, (ii) with the express written consent of the Company, (iii) to the extent that any such information is in or becomes in the public domain other than as a result of the Executive’s breach of any of his obligations hereunder, or (iv) where required to be disclosed by court order, subpoena or other government process and in such event, the Executive shall cooperate with the Company in attempting to keep such information confidential. The Executive shall follow all Company policies and procedures to protect all Confidential Information and take any additional precautions necessary to preserve and protect the use or disclosure of any Confidential Information at all times. The Company shall reimburse the Executive for all reasonable

expenses and costs he may incur as a result of cooperating under this SECTION 2(b), upon receipt of proper documentation.

(c) OWNERSHIP OF CONFIDENTIAL INFORMATION. The Executive acknowledges and agrees that all Confidential Information is and shall remain the exclusive property of the Company, whether or not prepared in whole or in part by the Executive and whether or not disclosed to or entrusted to the custody of the Executive. Upon the termination or resignation of his employment by the Company, or at any other time at the request of the Company, the Executive shall promptly deliver to the Company all documents, tapes, disks, or other storage media and any other materials, and all copies thereof in whatever form, in the possession of the Executive pertaining to the Company’s Business, including, but not limited to, any containing Confidential Information.

(d) SURVIVAL. The Executive’s obligations set forth in this SECTION 2, and the Company’s rights and remedies with respect hereto, shall indefinitely survive the termination of this Agreement and the Executive’s employment by the Company, regardless of the reason therefor.

SECTION 3. RESTRICTIVE COVENANTS. For purposes of this SECTION 3, the term “Company” shall include, in addition to the Company, its affiliates, subsidiaries and any of their respective predecessors, successors and assigns.

(a) NON-COMPETITION. During the Restricted Period and within the Restricted Area (each as defined in subsection (c) below), the Executive shall not, directly or indirectly, perform on behalf of any Competitor (as defined in subsection (c) below) the same or similar services as those that the Executive performed for the Company during the Executive’s employment by the Company or otherwise. In addition, the Executive shall not, during the Restricted Period or within the Restricted Area, directly or indirectly engage in, own, manage, operate, join, control, tend money or other assistance to, or participate in or be connected with (as an officer, director, member, manager, partner, shareholder, consultant, employee, agent, or otherwise), any Competitor.

(b) NON-SOLICITATION. During the Restricted Period, the Executive shall not, directly or indirectly, for himself or on behalf of any Person (as defined in subsection (c) below), (i) solicit or attempt to solicit any Customers (as defined in subsection (c) below) or prospective Customers with whom the Executive had contact at any time during the Executive’s employment by the Company; (ii) divert or attempt to divert any business of the Company to any, other Person; (iii) solicit or attempt to solicit for employment, endeavor to entice away from the Company, recruit, hire, or otherwise interfere with the Company’s relationship with, any Person who is employed by or otherwise engaged to perform services for the Company (or was employed or otherwise engaged to perform services for the Company, as of any given time, within the immediately preceding twenty-four (24) month period); (iv) cause or assist, or attempt to cause or assist, any employee or other service provider to leave the Company; or (v) otherwise interfere in any manner with the employment or business relationships of the Company or the business or operations then being conducted by the Company.

(i) “COMPETITOR” means any Person that engages in a business that is the same as, or similar to, the Company’s Business.

(ii) “CUSTOMER” means any Person which, as of any given date, used or purchased or contracted to use or purchase any services or products from Company within the immediately preceding twenty-four (24) month period.

(iii) “PERSON” means any individual, corporation, partnership, joint venture, association, limited liability company, joint-stock company, trust, or unincorporated organization, or any governmental agency, officer, department, commission, board, bureau, or instrumentality thereof.

(iv) “RESTRICTED AREA” means, because the market for the Company’s Business is global, or has the potential of being global, and is not dependent upon the physical location or presence of the Company, the Executive, or any individual or entity that may be in violation of this Agreement, the broadest geographic region enforceable by law (excluding any location where this type of restriction is prohibited by law) as follows: (A) everywhere in the world that has access to the Company’s Business because of the availability of the Internet; (B) everywhere in the world that the Executive has the ability to compete with the Company’s Business through the Internet; (C) each state, commonwealth, territory, province and other political subdivision located in North America; (D) each state, commonwealth, territory and other political subdivision of the United States of America; (E) Indiana and any state in which the Executive has performed any services for the Company; (F) any geographical area in which the Company has performed any services or sold any products; (G) any geographical area in which the Company or any of its subsidiaries have engaged in the Company’s Business, which has resulted in aggregate sales revenues of at least $25,000 during any year in the five (5) year period immediately preceding the commencement of the Restricted Period; (H) any state or other jurisdiction where the Company had an office at any time during the Executive’s employment by the Company; (I) within one hundred (100) miles of any location in which the Company had an office at any time during the Executive’s employment by the Company; and (3) within one hundred (100) miles of any location in which the Executive provided services for the Company.

(v) “RESTRICTED PERIOD” means the period of time during the Executive’s employment by the Company plus a period of twenty-four (24) months from the Termination Date. In the event of a breach of this Agreement by the Executive, the Restricted Period will be extended automatically by the period of the breach.

(d) SURVIVAL. The Executive’s obligations set forth in this Section 3, and the Company’s rights and remedies with respect thereto, will remain in full force and effect during the Restricted Period and until full resolution of any dispute related to the performance of the Executive’s obligations during the Restricted Period.

(e) PUBLIC COMPANY EXCEPTION. The prohibitions contained in this SECTION 3 do not prohibit the Executive’s ownership of stock which is publicly traded, provided that (1) the investment is passive, (2) the Executive has no other involvement with the company, (3) the Executive’s interest is less than five percent (5%) of the shares of the company, and (4) the Executive makes full disclosure to the Company of the stock at the time that the Executive acquires the shares of stock.

SECTION 4. ASSIGNMENT OF INVENTIONS. Any and all inventions, improvements, discoveries, designs, works of authorship, concepts or ideas, or expressions thereof, whether or not subject to patents, copyrights, trademarks or service mark protections, and whether or not reduced to practice, that are conceived or developed by the Executive while employed with the Company and which relate to or result from the actual or anticipated business, work, research or, investigation of the Company (collectively, “INVENTIONS”), shall be the sole and exclusive property of the Company. The Executive shall do all things reasonably requested by the Company to assign to and vest in the Company the entire right, title and interest to any such Inventions and to obtain full protection therefor. Notwithstanding the foregoing, the provisions of this Agreement do not apply to an Invention for which no equipment, supplies, facility, or Confidential Information of the Company was used and which was developed entirely on the Executive’s own time, unless (a) the Invention relates (i) to the Company’s Business, or (ii) to the Company’s actual or demonstrably anticipated research or development, or (b) the Invention results from any work performed by the Executive for the Company.

SECTION 5. GENERAL.

(a) REASONABLENESS. The Executive has carefully considered the nature, extent and duration of the restrictions and obligations contained in this Agreement, including, without limitation, the geographical coverage contained in SECTION 3 and the time periods contained in SECTION 2 and SECTION 3, and acknowledges and agrees that such restrictions are fair and reasonable in all respects to protect the legitimate interests of the Company and that these restrictions are designed for the reasonable protection of the Company’s Business.

(b) REMEDIES. The Executive recognizes that any breach of this Agreement shall cause irreparable injury to the Company, inadequately compensable in monetary damages. Accordingly, in addition to any other legal or equitable remedies that may be available to the Company, the Executive agrees that the Company shall be able to seek and obtain injunctive relief in the form of a temporary restraining order, preliminary injunction, or permanent injunction, in each case without notice or bond, against the Executive to enforce this Agreement. The Company shall not be required to demonstrate actual injury or damage to obtain injunctive relief from the courts. To the extent that any damages are calculable resulting from the breach of this Agreement, the Company shall also be entitled to recover damages, including, but not limited to, any lost profits of the Company and/or its affiliates or subsidiaries. For purposes of this Agreement, lost profits of the Company shall be deemed to include all gross revenues resulting from any activity of the Executive in violation of this Agreement and all such revenues shall be held in trust for the benefit of the Company. Any recovery of damages by the Company shall be in addition to and not in lieu of the injunctive relief to which the Company is entitled. In no event will a damage recovery be considered a penalty in liquidated damages. In addition, in any action at law or in equity arising out of this Agreement, the prevailing party shall be entitled

to recover, in addition to any damages caused by a breach of this Agreement, all costs and expenses, including, but not limited to, reasonable attorneys’ fees, expenses, and court costs incurred by such party in connection with such action or proceeding. Without limiting the Company’s rights under this SECTION 5(b) or any other remedies of the Company, if a court of competent jurisdiction determines that the Executive breached any of the provisions of Section or SECTION 3, Company will have the right to cease making any payments or providing any benefits otherwise due to the Executive under the terms and conditions of this Agreement.

(c) CLAIMS BY EXECUTIVE. The Executive acknowledges and agrees that, any claim or cause of action by the Executive against the Company shall not constitute a defense to the enforcement of the restrictions and covenants set forth in this Agreement and shall not be used to prohibit injunctive relief.

(d) AMENDMENTS. This Agreement may not be modified, amended, or waived in any manner except by an instrument in writing signed by both parties to this Agreement.

(e) WAIVER. The waiver by either party of compliance by the other party with any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement (whether or not similar), or a continuing waiver, or a waiver of any subsequent breach by a party of any provision of this Agreement.

(f) GOVERNING LAW; JURISDICTION. The laws of the State of New York shall govern the validity, performance, enforcement, interpretation, and other aspects of this Agreement, notwithstanding any state’s choice of law provisions to the contrary. The parties intend the provisions of this Agreement to supplement, but not displace, their respective obligations and responsibilities under the New York and Indiana Uniform Trade Secrets Act. Any proceeding to enforce, interpret, challenge the validity of, or recover for the breach of any provision of, this Agreement may be filed in the courts of the State of Indiana or the United States District Court sitting in Indianapolis, Indiana, and the parties hereto expressly waive any and all objections to personal jurisdiction, service of processor venue in connection therewith.

(g) COMPLETE AGREEMENT; RELEASE. This Agreement constitutes a complete and total integration of the understanding of the parties with respect to the subject matter hereof and thereof and supersedes all prior or contemporaneous negotiations, commitments, agreements, writings, and discussions with respect to the subject matter of this Agreement, including but not limited to the Severance Agreement and the Employment Agreement. The Executive hereby unconditionally releases and discharges the Company from any and all claims, causes of action, demands, lawsuits or other charges whatsoever, known or unknown, directly or indirectly related to the Severance Agreement and the Employment } Agreement arising prior to the Effective Date.

(h) SEVERABILITY. If a court having proper jurisdiction holds a particular provision of this Agreement unenforceable or invalid for any reason, that provision shall be modified only to the extent necessary in the opinion of such court to make it enforceable and valid and the remainder of this Agreement shall be deemed valid and enforceable and shall be enforced to the greatest extent possible under the then existing law. In the event the court determines such

modification is not possible, the provision shall be deemed severable and deleted, and all other provisions of this Agreement shall remain unchanged and in full force and effect.

(i) ENFORCEABILITY IN JURISDICTIONS. The parties hereto intend to and hereby confer jurisdiction to enforce the covenants contained in SECTIONS 2 AND 3 above upon the courts of any state within the geographical scope of such covenants. If the courts of any one or more of such states shall hold any of the previous covenants unenforceable by reason of the breadth of such scope or otherwise, it is the intention of the parties hereto that such determination not bar or in any way affect the Company’s rights to the relief provided above in the courts of any other states within the geographical scope of such covenants, as to breaches of such covenants in such other respective jurisdictions, the above covenants as they relate to each state being, for this purpose, severable into diverse and independent covenants.

(j) FAIR DEALING. The Executive acknowledges that the Company has negotiated this Agreement in good faith and has been fair in its dealing with the Executive. The Executive shall not raise any defense and expressly waives any defense against the Company based upon any alleged breach of good faith or fair dealing by the Company in connection with this Agreement.

(k) COUNTERPARTS. This Agreement may be executed in two (2) counterparts, each of which shall be deemed an original but both of which together shall constitute one and the same Agreement. Facsimile transmission of the executed version of this Agreement or any counterpart hereof shall have the same force and effect as the original.

(l) EXECUTIVE WARRANTIES. The Executive warrants and represents to the Company that the execution and performance of this Agreement does not and shall not violate any express or implied obligations of the Executive to any other person and that the Executive shall inform any prospective employer about the existence of this Agreement before accepting employment by such employer.

(m) HEADINGS. The headings of the Sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction of this Agreement.

(n) THIRD PARTY BENEFICIARIES. The Company’s affiliates and subsidiaries are expressly made third party beneficiaries of this Agreement.

(o) NOTICES. Any notice required or permitted hereunder shall be personally delivered or mailed by certified mail, return receipt requested, to the addresses of the parties set out on the signature pages hereto, or as changed from time to time by notice as provided herein.

(p) SUCCESSORS AND ASSIGNS. The Executive shall not assign or transfer any of his rights or obligations under this Agreement to any individual or entity. The Company may assign its rights hereunder to any of its affiliates or to any individual or entity who or that shall acquire or succeed to, by operation of law or otherwise, all or substantially all of the assets of the Company or the Company’s Business. All provisions of this Agreement are binding upon, shall inure to the benefit of, and are enforceable by or against, the parties and their respective heirs, executors, administrators or other legal representatives and permitted successors and assigns.

(q) OPPORTUNITY TO CONSULT COUNSEL. THE EXECUTIVE ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS AGREEMENT AND HAS BEEN GIVEN ADEQUATE OPPORTUNITY, AND HAS BEEN ENCOURAGED BY THE COMPANY, TO CONSULT WITH LEGAL COUNSEL OF HIS CHOICE CONCERNING THE TERMS HEREOF BEFORE EXECUTING THIS AGREEMENT.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties have made this Agreement effective as of the Effective Date.

COMPANY

HAYNES INTERNATIONAL, INC.

By: :	/s/ Marcel Martin
Printed:			Marcel Martin
Title:		V.P. Finance, CFO

1020 W. Park Avenue
P.O. Box 9013
Kokomo, IN 46904-9013

EXECUTIVE

/s/ Francis J. Petro
Francis J. Petro
4957 Belrush Road
Syracuse, NY 13215

[Exhibit I - Form of Release of Claims has been omitted from the Agreement as filed with the Securities and Exchange Commission (the “SEC”). The omitted information is filed as Exhibit 10.08 to the Registration Statement. The Registrant will furnish supplementally a copy of any of the omitted exhibit to the SEC upon request from the SEC.]

Exhibit 10.11

REGISTRATION RIGHTS AGREEMENT

BY AND AMONG

HAYNES INTERNATIONAL, INC.

AND

THE PARTIES SPECIFIED ON

THE SIGNATURE PAGES HEREOF

DATED AS OF AUGUST 31, 2004

HAYNES INTERNATIONAL, INC.

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT dated as of 31, 2004 is made and entered into by and among Haynes International, Inc., a Delaware corporation (together with its successors and assigns, the “COMPANY”) and the initial holders of the common stock (the “HOLDERS”) specified on the signature pages hereof.

WHEREAS, on March 29, 2004, Haynes International, Inc. and certain of its subsidiaries and affiliates (the “DEBTORS”), filed a voluntary petition for reorganization under Chapter 11 of title 11 of the U.S. Code, 11 U.S.C. Sections 101 - 1330 (as amended, the “BANKRUPTCY CODE”), with the United States Bankruptcy Court for the Southern District of Indiana, Indianapolis Division (the “BANKRUPTCY COURT”), commencing Chapter 11 Case Nos. 04-05364 through 04-05367 (the “BANKRUPTCY CASE”);

WHEREAS, on May 26, 2004, the Debtors also filed that certain Plan of Reorganization (as amended and supplemented from time to time, the “PLAN”) with the Bankruptcy Court in the Bankruptcy Case;

WHEREAS, the Bankruptcy Court confirmed the Plan pursuant to the order under section 1129 of the Bankruptcy Code, dated August 31, 2004 (the “CONFIRMATION ORDER”); and

WHEREAS, pursuant to the Plan and the Confirmation Order, the Holders have received shares of common stock of the Company (the “SHARES”) and the Company is obligated to provide the Holders with certain registration rights with respect to such Shares.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. SHELF REGISTRATION.

(a) FILING OF SHELF REGISTRATION

(i) (x) Subject to clause (y) below, the Company shall comply with all the provisions of Sections 3(a) to 3(j) and shall use its reasonable best efforts to file with the Commission within 100 days of the Effective Date, and thereafter shall use its reasonable best efforts to cause to be declared effective within 180 days after the Effective Date, a Shelf Registration Statement, covering all of the Registrable Securities, and relating to the offer and sale of the Registrable Securities, by the holders of the Registrable Securities from time to time in accordance with the methods of distribution set forth in the Shelf Registration Statement.

(y) Following delivery of notice to all holders of Registrable Securities, the Company may postpone for up to 90 days the filing or effectiveness of the Shelf Registration Statement if in the good faith judgment of the Company, the filing or effectiveness of the Shelf Registration Statement (A) would reasonably be expected to have a material adverse effect on any proposed financing, reorganization or recapitalization of the Company or pending negotiations relating to a merger, consolidation, acquisition or similar transaction or (B) applicable securities laws would require the Company to disclose material non-public information (“NON-PUBLIC INFORMATION”) and the disclosure of such Non-Public Information would materially and adversely affect the business and operations of the Company; provided, however, that immediately following such postponement, the Company shall file or request effectiveness of the Shelf Registration Statement.

(ii) (x) Subject to clause (y) below, the Company shall use its reasonable best efforts to keep the Shelf Registration Statement continuously effective in order to permit any prospectus forming part thereof to be used by the holders of the Registrable Securities covered thereby for a period ending on the earlier of (A) the first date on which all the Registrable Securities covered by such Shelf Registration Statement have been sold pursuant thereto, (B) the first date on which all such Registrable Securities can immediately be sold within a ninety day period pursuant to Rule 144(e)(1)(i) under the Securities Act, (C) the first date upon which such holder (i) owns less than ten percent (10%) of the then issued and outstanding shares of Common Stock of the Company, (ii) is no longer an “affiliate” of the Company for purposes of Rule 144 of the Securities Act and (iii) no longer has a direct seat or a representative with a seat on the Company’s Board of Directors or (D) the date upon which such Registrable Securities cease to be outstanding (in any such case, such period being called the “SHELF REGISTRATION EFFECTIVENESS PERIOD”).

(y) The Company may, by notice given to all holders of Registrable Securities, require such holders not to make any sale of Registrable Securities pursuant to the Shelf Registration Statement if, in the good faith judgment of the Company, (A) securities laws applicable to such sale would require the Company to disclose Non-Public Information and (B) the disclosure of such Non-Public Information would materially and adversely affect the business or operations of the Company or any proposed financing, reorganization or recapitalization of the Company or pending negotiations relating to a merger, consolidation, acquisition or similar transaction. In the event that sales under the Shelf Registration Statement are suspended because of the obligation to disclose Non-Public Information, the Company will notify the holders of Registrable Securities promptly upon such Non-Public Information being included by the Company in a filing with the Commission, being

otherwise disclosed to the public (other than through the actions of a holder of Registrable Securities) or ceasing to be material to the Company, and upon such notice being given by the Company, the holders of Registrable Securities shall again be entitled to sell Registrable Securities pursuant to the Shelf Registration Statement. Notwithstanding the foregoing, the right of the Company pursuant to this clause (y) to require the holders to suspend sales under such Shelf Registration Statement shall not extend for more than 90 total days in any rolling period of twelve consecutive months during which the Registrable Securities are saleable pursuant to a Registration Statement.

(iii) Notwithstanding any other provisions hereof, the Company will use its reasonable best efforts to ensure that (A) any Shelf Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations of the Commission thereunder, (B) any Shelf Registration Statement and any amendment thereto, at the time each become effective (in either case, other than with respect to information included therein in reliance upon or in conformity with information furnished in writing or confirmed in writing to the Company by or on behalf of the holder of such Registrable Securities specifically for use therein (the “HOLDER INFORMATION”)), does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (C) any prospectus forming part of any Shelf Registration Statement, and any supplement to such prospectus (in either case, other than with respect to Holder Information), as of the date of each, does not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(iv) The Company will pay all Registration Expenses incurred in connection with the Shelf Registration Statement.

(b) REGISTRATION STATEMENT FORM. A Shelf Registration Statement shall be on such appropriate registration form promulgated by the Commission as shall be selected by the Company and shall permit the disposition of such Registrable Securities in accordance with the intended method or methods specified in their request for such registration. If, during the period in which the Company is obligated to maintain the Shelf Registration in effect, the Company becomes qualified for registration on Form S-3 or any comparable or successor form or forms for offers and sales by Holders, then, the Company may, in its discretion, terminate the Shelf Registration and concurrently register the Registrable Securities on such short-form registration statement. The obligations of the Company with respect to maintenance of such registration statement and prospectus included therein shall be subject to the terms of this Agreement and such

new registration statement shall be deemed to be a “Shelf Registration Statement” for purposes of this Agreement.

2. PIGGYBACK REGISTRATION RIGHTS.

(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If the Company at any time proposes after the date hereof to effect a registration, other than a Shelf Registration Statement, of equity securities or securities convertible into equity securities of the Company under the Securities Act whether for sale for the account of the Company or for the account of any holder of securities of the Company (other than Registrable Securities) (a “PIGGYBACK REGISTRATION”), it will each such time give prompt written notice (a “NOTICE OF PIGGYBACK REGISTRATION”), at least 10 Business Days prior to the anticipated filing date, to all holders of Registrable Securities stating (i) its intention to do so, (ii) whether the Piggyback Registration will be made pursuant to an underwritten offering and (iii) such holders’ rights under this Section 2, which Notice of Piggyback Registration shall include a description of the intended method of disposition of such securities.

Upon the written request of any such holder made within five days after receipt of a Notice of Piggyback Registration (which request shall specify the Registrable Securities intended to be disposed of by such holder), the Company will, subject to the other provisions of this Agreement, include in the registration statement relating to such Piggyback Registration all Registrable Securities which the Company has been so requested to register, all to the extent requisite to permit the disposition of such Registrable Securities in accordance with the intended method of disposition set forth in the Notice of Piggyback Registration. Notwithstanding the foregoing, if, at any time after giving a Notice of Piggyback Registration and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine in its good faith judgment to not register or to delay registration of such securities, the Company shall at its election, give written notice of such determination to each holder of Registrable Securities and, thereupon, in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith). Notwithstanding the foregoing, for purposes of this Agreement, Piggyback Registration shall not include any registration in respect of a dividend reinvestment or similar plan for stockholders of the Company or any registration on Form S-4 or on Form S-8.

(b) REGISTRATION EXPENSES. The Company will pay all Registration Expenses incurred in connection with each Piggyback Registration.

(c) PRIORITY IN CUTBACK REGISTRATIONS. If a Piggyback Registration becomes a Cutback Registration, the Company will include in such registration, to the extent of the amount or kind of securities which the Managing Underwriter advises the Company can be sold in such offering in the following order:

(i) First, the securities proposed by the Company to be sold for its own account,

(ii) Second, any Registrable Securities requested to be included in such registration by Requesting Holders, pro rata on the basis of the number of Registrable Securities requested to be included by such holders, and

(iii) Third, any other securities of the Company proposed to be included in such registration, allocated among the holders thereof in accordance with the priorities then existing among the Company and such holders;

and any securities so excluded shall be withdrawn from and shall not be included in such Piggyback Registration but are eligible to be included in any future Piggyback Registration(s).

3. REGISTRATION PROCEDURES.

If and whenever the Company is required to effect the registration of any Registrable Securities under the Securities Act pursuant to Section 1 or Section 2, the Company will use its reasonable best efforts to effect the registration and sale of such Registrable Securities in accordance with the intended method of disposition thereof. Without limiting the foregoing, the Company in each such case will:

(a) As far in advance as reasonably practical before filing a registration statement or any amendment thereto, the Company will furnish to the holders of the Registrable Securities included in such registration statement copies of reasonably complete drafts of all such documents proposed to be filed (including exhibits), and any such holder shall have three Business Days to object to any Holder Information contained therein and the Company will make the corrections reasonably requested by such Holder with respect to such information;

(b) Subject to Section 1(a)(ii) and paragraph (f) below, use its reasonable best efforts to prepare and file with the Commission such amendments and supplements to such registration statement and any prospectus used in connection therewith as may be necessary to maintain the effectiveness of such registration statement and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement, in accordance with the intended methods of disposition thereof, until the Shelf Registration Effectiveness Period has ended, or, with respect to a Piggyback Registration, until the Company shall determine in its good faith judgment otherwise;

(c) promptly notify each holder of Registrable Securities included on a registration statement (and the underwriters, if any):

(i) when such registration statement or any prospectus used in connection therewith, or any amendment or supplement

thereto, has been filed and, with respect to such registration statement or any post-effective amendment thereto, when the same has become effective;

(ii) of the notification to the Company by the Commission of the issuance of any stop order suspending the effectiveness of such registration statement, or of any order preventing or suspending the use of any preliminary prospectus; and

(iii) of the receipt by the Company of any notification with respect to the suspension of the qualification or the exemption from qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction or the initiation of any proceeding for such purpose;

(d) furnish to each holder of Registrable Securities covered by such registration statement, not later than two Business Days after filing with the Commission, such number of copies of the prospectus contained in such registration statement (including any summary prospectus and prospectus supplements) that has been declared effective and any other prospectus filed under Rule 424 promulgated under the Securities Act relating to such holder’s Registrable Securities as such seller may reasonably request to facilitate the disposition of its Registrable Securities;

(e) use its reasonable best efforts to register or qualify all Registrable Securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as each holder thereof shall reasonably request, to keep such registration or qualification in effect for so long as such registration statement remains in effect, and to take any other action which may be reasonably necessary or advisable to enable such holder to consummate the disposition in such jurisdictions of the Registrable Securities owned by such holder, except that the Company shall not for any such purpose be required (i) to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this paragraph (e) be obligated to be so qualified, (ii) to subject itself to taxation in any such jurisdiction or (iii) to consent to general service of process in any jurisdiction unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act or applicable rules or regulations thereunder;

(f) promptly notify each holder of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event, the existence of any condition or any information becoming known as a result of which any prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and at the request of any such holder promptly prepare and furnish to such holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the

purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, the Company shall not be required to furnish such supplement or amendment at any time that sales of Registrable Securities are suspended under the circumstances described in Section 1(a)(ii)(y) for as long as such sales are suspended;

(g) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make available to its securityholders, as soon as reasonably practicable, an earnings statement of the Company which complies with the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder;

(h) make available for inspection by any Requesting Holder and any attorney, accountant or other agent retained by any such Requesting Holder (collectively, the “INSPECTORS”), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the “RECORDS”) as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors, employees and its counsel and its subsidiaries to supply all information reasonably requested by any such Inspector in connection with such registration statement; provided that nothing in this Agreement shall require the waiver of any privilege or the disclosure of any information that would result in any such waiver. Records which the Company determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, or (ii) the information in such Records has been made generally available to the public, provided, however, that prior notice shall be provided as promptly as practicable to the Company of the potential disclosure of any information by such Inspector pursuant to clause (i) of this sentence in order to permit the Company to obtain a protective order (or to waive the provisions of this paragraph). The Company may request the Inspectors enter into a standard confidentiality agreement to this effect prior to furnishing any confidential information. The seller of Registrable Securities agrees that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at the Company’s expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential;

(i) provide a transfer agent and a registrar for all Registrable Securities covered by such registration statement not later than the effective date of such registration statement; and

(j) provide a CUSIP number for all Registrable Securities not later than the effective date of the Shelf Registration Statement or Piggyback Registration.

The Company may require each holder of Registrable Securities as to which any registration is being effected to, and each such holder, as a condition to including Registrable Securities in such registration, shall, furnish the Company with such information and affidavits regarding such holder and the distribution of such securities as the Company may from time to time reasonably request in writing in connection with such registration.

Each holder of Registrable Securities agrees that upon receipt of any notice from the Company of the happening of any event of the kind described in paragraph (f), such holder will forthwith discontinue such holder’s disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such holder’s receipt of the copies of the supplemented or amended prospectus contemplated by paragraph (f) and, if so directed by the Company, will deliver to the Company or destroy all copies, other than permanent file copies, then in such holder’s possession of the prospectus relating to such Registrable Securities current at the time of receipt of such notice.

4. UNDERWRITTEN OFFERINGS.

If the Company at any time proposes to register any of its securities in a registration pursuant to which any Holder has rights pursuant to Section 2(a) and such securities are to be distributed by or through one or more underwriters, the Company will, subject to the provisions of Section 2(c), use its reasonable best efforts, if requested by any holder of Registrable Securities, to arrange for such underwriters to include the Registrable Securities to be offered and sold by Requesting Holders among the securities to be distributed by such underwriters, and such holders shall be obligated to sell their Registrable Securities in such Piggyback Registration through such underwriters on the same terms and conditions as apply to the other Company securities to be sold by such underwriters in connection with such Piggyback Registration. The holders of Registrable Securities to be distributed by such underwriters shall be parties to a customary underwriting agreement between the Company and such underwriter or underwriters and shall make customary representations and warranties regarding such holder, its ownership of securities being registered on its behalf, its ability to consummate the transaction and any other representations required by law; provided, however that no holder of Registrable Securities shall be required to make any representations or warranties with respect to the Company or any other holder. No Requesting Holder may participate in any underwritten Piggyback Offering unless such holder (i) agrees to sell its Registrable Securities on the basis reasonably provided in any underwriting arrangements approved by the Company; and (ii) completes and executes all questionnaires, powers of attorney, indemnities, lock-up agreements and other documents reasonably required under the terms of such underwriting arrangements. If any Requesting Holder disapproves of the terms of an underwriting, such holder may elect to withdraw therefrom and from such registration by notice to the Company and the Managing Underwriter, and each of the remaining Requesting Holders shall be entitled to increase the number of Registrable Securities being registered to the extent of the Registrable Securities so withdrawn in the proportion which the number of Registrable Securities being registered by such

remaining Requesting Holder bears to the total number of Registrable Securities being registered by all such remaining Requesting Holders.

5. HOLDBACK AGREEMENTS.

If and to the extent requested by the Managing Underwriter (such request to be made at least five Business Days in advance of the beginning of the holdback period), each holder of Registrable Securities agrees, to the extent permitted by law, not to effect any public sale or distribution (including a sale under Rule 144) of Common Stock, or securities convertible into or exchangeable or exercisable for Common Stock, during the 90 days after the effective date of any registration statement filed by the Company in connection with a primary offering of Common Stock on behalf of the Company (or for such shorter period of time as is sufficient and appropriate, in the opinion of the Managing Underwriter, in order to complete the sale and distribution of the securities included in such registration), except as part of such registration statement, whether or not such holder participates in such registration and each such holder of Registrable Securities shall sign a customary agreement with the Managing Underwriter with respect to the matters set for above to the extent requested by the Managing Underwriter. The restrictions in this Section 5 shall only apply to the holders of Registrable Securities in connection with one registration statement filed by the Company in connection with a primary offering of Common Stock on behalf of the Company and only to the extent that all other holders of Registrable Securities, officers of the Company, directors of the Company and all other affiliates of the Company agree to the same restrictions.

6. INDEMNIFICATION.

(a) INDEMNIFICATION BY THE COMPANY. The Company shall, to the full extent permitted by law, indemnify and hold harmless each holder of Registrable Securities included in any registration statement filed in connection with a Shelf Registration Statement or a Piggyback Registration, its directors, officers, members and partners, and each other Person, if any, who controls any such holder within the meaning of the Securities Act, against any losses, claims, damages, expenses or liabilities (as actions or proceedings in respect thereof), joint or several (together, “LOSSES”), to which such holder or any such director, officer, member, partner or controlling Person may become subject under the Securities Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading and the Company will reimburse such holder and each such director, officer, member, partner and controlling Person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending against any such Loss (or action or proceeding in respect thereof); provided, however, that the Company shall not be liable in

any such case to the extent that any such Loss (or action or proceeding in respect thereof) (i) is caused by or contained in any information relating to such holder furnished in writing to the Company by such holder expressly for use in such registration statement, preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto, (ii) is caused by such holder’s failure to deliver a copy of the current prospectus simultaneously with or prior to such sale after the Company has furnished such holder with a sufficient number of copies of such prospectus correcting such material misstatement or omission, (iii) arises in respect of any offers to sell or sales made during any period when a holder is required to discontinue sales under Section 3(c)(ii) or (iii) (and after such holder has received notice as contemplated by Section 3(c)(ii) or (iii)), or (iv) is incurred as a result of such indemnitee’s bad faith, willful misconduct or gross negligence. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such holder or any such director, officer, member, partner or controlling Person, and shall survive the transfer of such securities by such holder to a Permitted Successor.

(b) INDEMNIFICATION BY THE HOLDERS. Each holder of Registrable Securities which are included or are to be included in any registration statement filed in connection with a Shelf Registration Statement or a Piggyback Registration, as a condition to including Registrable Securities in such registration statement, shall, to the full extent permitted by law, indemnify and hold harmless the Company, its directors and officers, and each other Person, if any, who controls the Company within the meaning of the Securities Act, against any Losses to which the Company or any such director or officer or controlling Person may become subject under the Securities Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading, if such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with information furnished or confirmed in writing to the Company; provided, however, that in no event shall any indemnity provided by a Holder under this Section 6(b) exceed the net proceeds from the offering received by such Holder. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any such director, officer, member, partner or controlling Person and shall survive the transfer of such securities by such holder to a Permitted Successor.

(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an Indemnified Party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding paragraph (a) or (b) of this Section 6, such Indemnified Party will, if a claim in respect thereof is to be made against an Indemnifying Party pursuant to such paragraphs, give written notice to the latter of the commencement of such action, provided that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under

the preceding paragraphs of this Section 6, except to the extent that the Indemnifying Party is actually prejudiced by such failure to give notice. In case any such action is brought against an Indemnified Party, the Indemnifying Party shall be entitled to participate in and to assume the defense thereof, jointly with any other Indemnifying Party similarly notified to the extent that it may wish, and after notice from the Indemnifying Party to such Indemnified Party of its election so to assume the defense thereof, the Indemnifying Party shall not be liable to such Indemnified Party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation; provided that the Indemnified Party may participate in such defense at the Indemnified Party’s expense; and provided further that the Indemnified Party (or Indemnified Parties) shall have the right to employ one counsel to represent it (or them, collectively) if, in the reasonable judgment of the Indemnified Party or Indemnified Parties, it is advisable for it (or them) to be represented by separate counsel by reason of having legal defenses which are different from or in addition to those available to the Indemnifying Party, and in that event the reasonable fees and expenses of such one counsel shall be paid by the Indemnifying Party. If the Indemnifying Party is not entitled to, or elects not to, assume the defense of a claim, it will not be obligated to pay the fees and expenses of more than one counsel for the Indemnified Parties with respect to such claim. No Indemnifying Party shall consent to entry of any judgment or enter into any settlement without the consent of the Indemnified Party which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect of such claim or litigation. No Indemnifying Party shall be subject to any liability for any settlement made without its consent, which consent shall not be unreasonably withheld.

(d) CONTRIBUTION. If the indemnity and reimbursement obligation provided for in any paragraph of this Section 6 is unavailable or insufficient to hold harmless an Indemnified Party in respect of any Losses (or actions or proceedings in respect thereof) referred to therein, then the Indemnifying Party shall contribute to the amount paid or payable by the Indemnified Party as a result of such Losses (or actions or proceedings in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and the Indemnified Party on the other hand in connection with the statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Indemnifying Party or the Indemnified Party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this paragraph were to be determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the first sentence of this paragraph. The amount paid by an Indemnified Party as a result of the Losses referred to in the first sentence of this paragraph shall be deemed to include any legal and other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any Loss which is the subject of this paragraph.

No Indemnified Party guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from the Indemnifying Party if the Indemnifying Party was not guilty of such fraudulent misrepresentation.

(e) INDEMNIFICATION PAYMENTS. The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Losses are incurred, provided that each Indemnified Party shall repay such payments if and to the extent it shall be determined by a court of competent jurisdiction that such recipient is not entitled to such payment.

7. LISTING REQUIREMENT.

The Company will use its commercially reasonable best efforts to list the Common Stock on a national securities exchange or to be quoted on a national automated interdealer quotation system within one year of the Effective Date unless the Board of Directors of the Company determines otherwise.

8. OTHER REGISTRATION RIGHTS.

The Company represents and warrants to the Holders that there is not in effect on the date hereof any agreement by the Company (other than this Agreement) pursuant to which any holders of securities of the Company have a right to cause the Company to register or qualify such securities under the Securities Act or any securities or blue sky laws of any jurisdiction. The Company agrees that, for so long as any holder is entitled to registration rights under this Agreement, the Company shall not enter into any agreement granting registration rights with respect to the Company’s capital stock equivalent or superior to the Company’s registration obligations to the holders under Section 2(c)(ii) of this Agreement.

9. DEFINITIONS.

Except as otherwise specifically indicated, the following terms will have the following meanings for all purposes of this Agreement:

“AGREEMENT” means this Registration Rights Agreement, as the same shall be amended from time to time.

“BANKRUPTCY CASE” has the meaning ascribed to it in the preamble.

“BANKRUPTCY CODE” has the meaning ascribed to it in the preamble.

“BANKRUPTCY COURT” has the meaning ascribed to it in the preamble.

“BUSINESS DAY” means a day other than Saturday, Sunday or any other day on which banks located in the State of New York are authorized or obligated to close.

“COMMISSION” means the United States Securities and Exchange Commission, or any successor governmental agency or authority.

“COMMON STOCK” means shares of Common Stock, par value $0.001 per share, of the Company, as constituted on the date hereof, and any stock into which such Common Stock shall have been changed or any stock resulting from any reclassification of such Common Stock.

“COMPANY” has the meaning ascribed to it in the preamble.

“CONFIRMATION ORDER” has the meaning ascribed to it in the preamble.

“CUTBACK REGISTRATION” means any registration to be effected as an underwritten Public Offering in which the Managing Underwriter with respect thereto advises the Company in writing that, in its opinion, the number of securities requested to be included in such registration (including securities of the Company which are not Registrable Securities) exceed the number which can be sold in such offering or which can be sold without a material reduction in the selling price anticipated to be received for the securities to be sold in such Public Offering, or which can be sold without otherwise adversely affecting the success of such offering.

“EFFECTIVE DATE” has the meaning ascribed to it in the Plan.

“EXCHANGE ACT” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“FORM S-4” means Form S-4 promulgated by the Commission under the Securities Act, or any successor or similar registration statement.

“FORM S-8” means Form S-8 promulgated by the Commission under the Securities Act, or any successor or similar registration statement.

“HOLDER” has the meaning ascribed to it in the preamble.

“HOLDER INFORMATION” has the meaning ascribed to it in Section 1(a)(iii).

“INDEMNIFIED PARTY” means a party entitled to indemnity in accordance with Section 6.

“INDEMNIFYING PARTY” means a party obligated to provide indemnity in accordance with Section 6.

“INSPECTORS” has the meaning ascribed to it in Section 3(h).

“LOSSES” has the meaning ascribed to it in Section 6(a).

“MANAGING UNDERWRITER” means, with respect to any Public Offering, the underwriter or underwriters managing such Public Offering.

“NASD” means the National Association of Securities Dealers, Inc.

“NOTICE OF PIGGYBACK REGISTRATION” has the meaning ascribed to it in Section 2(a).

“PERMITTED SUCCESSORS” has the meaning ascribed to it in Section 10(f).

“PERSON” means any natural person, corporation, general partnership, limited partnership, limited liability company, proprietorship, other business organization, trust, union or association.

“PIGGYBACK REGISTRATION” has the meaning ascribed to it in Section 2(a).

“PLAN” has the meaning ascribed to it in the preamble.

“PUBLIC OFFERING” means any offering of Common Stock to the public, either on behalf of the Company or any of its securityholders, pursuant to an effective registration statement under the Securities Act.

“RECORDS” has the meaning ascribed to it in Section 3(h).

“REGISTRABLE SECURITIES” means (i) the Shares held by Holders (or their successors, assignees or transferees as contemplated by Section 10(g)), and (ii) any additional shares of Common Stock issued or distributed to the Holders (or their successors, assignees or transferees as contemplated by Section 10(g)) by way of a dividend, stock split, conversion, or other distribution in respect of the Shares, or acquired by way of any rights offering or similar offering made in respect of the Shares. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (i) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such Registrable Securities shall have been disposed of in accordance with such registration statement, (ii) they shall have been sold pursuant to Rule 144, or (iii) they shall have ceased to be outstanding.

“REGISTRATION EXPENSES” means all expenses incident to the Company’s performance of or compliance with its obligations under this Agreement to effect and maintain the registration of Registrable Securities in any Shelf Registration Statement or a Piggyback Registration, including, without limitation, all registration, filing, securities exchange listing and NASD fees (including Nasdaq fees, if applicable), all registration, filing, qualification and other fees and expenses of complying with securities or blue sky laws (including fees of a single counsel retained by the holders of a majority of Registrable Securities being registered to advise the holders with respect to all of the foregoing matters), all word processing, duplicating and printing expenses, messenger and delivery expenses, the fees and disbursements of counsel for the Company

and of its independent public accountants, including the expenses of any special audits or “cold comfort” letters required by or incident to such performance and compliance in connection with an underwritten offering and any fees and disbursements of underwriters customarily paid by issuers or holders of securities, but excluding underwriting discounts and commissions and transfer taxes, if any, in respect of Registrable Securities, which shall be payable by each holder thereof.

“REQUESTING HOLDERS” means, with respect to any Piggyback Registration, the holders of Registrable Securities requesting to have Registrable Securities included in such registration in accordance with this Agreement.

“RULE 144” means Rule 144 promulgated by the Commission under the Securities Act, and any successor provision thereto.

“SECURITIES ACT” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“SHARES” has the meaning ascribed to it in the preamble.

“SHELF REGISTRATION EFFECTIVENESS PERIOD” has the meaning ascribed to it in Section 1(a).

“SHELF REGISTRATION STATEMENT” means a registration statement of the Company in compliance with the provisions of Section 1(a)(i) and Section 1(b) of this Agreement which registers the continuous offer and sale of all of the Registrable Securities on an appropriate form under Rule 415 under the Securities Act or any similar or successor rule that may be adopted by the Commission, and all amendments to such registration statement, including post-effective amendments, in each case including any prospectus contained therein and any supplement to any such prospectus, all exhibits thereto and all information incorporated by reference therein.

10. MISCELLANEOUS.

(a) NOTICES. All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally or by facsimile transmission or mailed (registered or certified mail, postage prepaid) to the parties at the following addresses or facsimile numbers:

If to Holder, to the addresses set forth on the signature pages hereof.

If to the Company, to:

Haynes International, Inc.

1020 West Park Ave

Kokomo IN 46904-9013

Attn: Chief Financial Officer

Telephone No.:

Facsimile No.:

With respect to any other holder of Registrable Securities, such notices, requests and other communications shall be sent to the addresses set forth in the stock transfer records regularly maintained by the Company. All such notices, requests and other communications will (i) if delivered personally to the address as provided in this Section, be deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided in this Section, be deemed given when sent by confirmed facsimile if sent during normal business hours of the recipient, if not, then on the next Business Day, and (iii) if delivered by mail in the manner described above to the address as provided in this Section, be deemed given five days after deposit with the United States Post Office (in each case regardless of whether such notice, request or other communication is received by any other Person to whom a copy of such notice is to be delivered pursuant to this Section). Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other parties hereto.

(b) ENTIRE AGREEMENT. This Agreement supersedes all prior discussions and agreements between the parties with respect to the subject matter hereof, and contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof.

(c) AMENDMENT. This Agreement may be amended, supplemented or modified only by a written instrument (which may be executed in any number of counterparts) duly executed by or on behalf of each of the Company and Holders owning more than fifty percent (50%) of the Registrable Securities.

(d) WAIVER. Subject to paragraph (e) of this Section, any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or condition. No waiver by any party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same term or condition of this Agreement on any future occasion.

(e) CONSENTS AND WAIVERS BY HOLDERS OF REGISTRABLE SECURITIES. Any consent of the holders of Registrable Securities pursuant to this Agreement, and any waiver by such holders of any provision of this Agreement, shall be in writing (which may be executed in any number of counterparts) and may be given or taken by Holders owning more than fifty percent (50%) of the Registrable Securities and any such consent or waiver so given or taken will be binding on all the holders of Registrable Securities.

(f) NO THIRD PARTY BENEFICIARY. The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and their respective successors or assigns, but only to the extent that such successor or assign has acquired from the Holder shares of Common Stock representing at least 10% of the then issued

and outstanding Common Stock of the Company as contemplated by Section 10(g) (“PERMITTED SUCCESSOR”). It is not the intention of the parties to confer third-party beneficiary rights upon any other Person other than any Person entitled to indemnity under Section 6.

(g) SUCCESSORS AND ASSIGNS. This Agreement is binding upon, inures to the benefit of and is enforceable by the Company and the Holders (or the Person or Persons for which a Holder is acting as fiduciary or agent, as the case may be) and their respective Permitted Successors; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a Permitted Successor unless and except to the extent such Permitted Successor holds Registrable Securities; provided, further, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms hereof, the Securities Act or any securities or blue sky laws of any jurisdiction.

(h) HEADINGS. The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof.

(i) INVALID PROVISIONS. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future law, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby, (i) such provision will be fully severable, (ii) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof and (iii) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom.

(j) REMEDIES. Except as otherwise expressly provided for herein, no remedy conferred by any of the specific provisions of this Agreement is intended to be exclusive of any other remedy, and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise. The election of any one or more remedies by any party hereto shall not constitute a waiver by any such party of the right to pursue any other available remedies.

Damages in the event of breach of this Agreement by a party hereto or any other holder of Registrable Securities would be difficult, if not impossible, to ascertain, and it is therefore agreed that each such Person, in addition to and without limiting any other remedy or right it may have, will have the right to an injunction or other equitable relief in any court of competent jurisdiction, enjoining any such breach, and enforcing specifically the terms and provisions hereof and the Company and each holder of Registrable Securities, by its acquisition of such Registrable Securities, hereby waives any and all defenses it may have on the ground of lack of jurisdiction or competence of the court to grant such an injunction or other equitable relief. The existence of this right will not preclude any such Person from pursuing any other rights and remedies at law or in equity which such Person may have.

(k) GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

(l) COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

[Signatures on next page.]

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officer of each party hereto as of the date first above written.

“COMPANY”

HAYNES INTERNATIONAL, INC.


By:		/s/ Marcel Martin
Name:			Marcel Martin
Title:			Vice President, Finance, CFO


“HOLDERS”

FIDELITY SUMMER STREET TRUST:
FIDELITY CAPITAL & INCOME FUND

By:		/s/ Mark Osterheld
	Name: Mark Osterheld
	Title: Assistant Treasurer

FIDELITY ADVISOR SERIES II:
FIDELITY HIGH INCOME ADVANTAGE
FUND

By:		/s/ Mark Osterheld
	Name: Mark Osterheld
	Title: Assistant Treasurer

PENSION INVESTMENT COMMITTEE
OF GENERAL MOTORS FOR GENERAL
MOTORS EMPLOYEES DOMESTIC
GROUP PENSION TRUST

By:		Fidelity Management and Trust
Company, its investment advisor

By:		/s/ John P. O’Reilly Jr.
	Name: John P. O’Reilly Jr.
	Title: Executive Vice President

COMMONWEALTH OF
MASSACHUSETTS PENSION
RESERVES INVESTMENT
MANAGEMENT BOARD

By:		Fidelity Management and Trust
Company, its investment advisor

By:		/s/ John P. O’Reilly Jr.
	Name: John P. O’Reilly Jr.
	Title: Executive Vice President


FIDELITY SECURITIES FUND:
FIDELITY LEVERAGED COMPANY
STOCK FUND

By:		/s/ Mark Osterheld
	Name: Mark Osterheld
	Title: Assistant Treasurer


FIDELITY ADVISOR SERIES I:
FIDELITY ADVISOR LEVERAGED
COMPANY STOCK FUND

By:		/s/ Mark Osterheld
	Name: Mark Osterheld
	Title: Assistant Treasurer

Exhibit 10.12

[Execution]

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

by and among

HAYNES INTERNATIONAL, INC.,

as Borrower

and

CONGRESS FINANCIAL CORPORATION (CENTRAL),

as Agent

BANK ONE, NA

as Documentation Agent

and

THE LENDERS FROM TIME TO TIME PARTY HERETO

as Lenders

Dated: August 31, 2004

TABLE OF CONTENTS

		Page

SECTION 1.	DEFINITIONS	6

SECTION 2.	CREDIT FACILITIES	36

2.1	LOANS	36
2.2	LETTER OF CREDIT ACCOMMODATIONS	38
2.3	EQUIPMENT PURCHASE LOANS	42
2.4	COMMITMENTS	45

SECTION 3.	INTEREST AND FEES	45

3.1	INTEREST	45
3.2	FEES	46
3.3	CHANGES IN LAWS AND INCREASED COSTS OF LOANS	46

SECTION 4.	CONDITIONS PRECEDENT	48

4.1	CONDITIONS PRECEDENT TO INITIAL LOANS AND LETTER OF CREDIT ACCOMMODATIONS	48
4.2	CONDITIONS PRECEDENT TO ALL LOANS AND LETTER OF CREDIT ACCOMMODATIONS	51

SECTION 5.	GRANT AND PERFECTION OF SECURITY INTEREST	51

5.1	GRANT OF SECURITY INTEREST	51
5.2	PERFECTION OF SECURITY INTERESTS	53

SECTION 6.	COLLECTION AND ADMINISTRATION	58

6.1	BORROWER’S LOAN ACCOUNTS	58
6.2	STATEMENTS	58
6.3	COLLECTION OF ACCOUNTS	58
6.4	PAYMENTS	59
6.5	TAXES	61
6.6	AUTHORIZATION TO MAKE LOANS	64
6.7	USE OF PROCEEDS	64
6.8	ILLEGALITY	64
6.9	PRO RATA TREATMENT	65
6.10	SHARING OF PAYMENTS, ETC	65
6.11	SETTLEMENT PROCEDURES	66
6.12	OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS’ RIGHTS	68

SECTION 7.	COLLATERAL REPORTING AND COVENANTS	68

7.1	COLLATERAL REPORTING	68
7.2	ACCOUNTS COVENANTS	69
7.3	INVENTORY COVENANTS	70
7.4	EQUIPMENT AND REAL PROPERTY COVENANTS	71
7.5	POWER OF ATTORNEY	72
7.6	RIGHT TO CURE	73
7.7	ACCESS TO PREMISES	73

SECTION 8.	REPRESENTATIONS AND WARRANTIES	73

8.1	CORPORATE EXISTENCE, POWER AND AUTHORITY	73
8.2	NAME; STATE OF ORGANIZATION; CHIEF EXECUTIVE OFFICE; COLLATERAL LOCATIONS	74
8.3	FINANCIAL STATEMENTS; NO MATERIAL ADVERSE CHANGE	74
8.4	PRIORITY OF LIENS; TITLE TO PROPERTIES	75
8.5	TAX RETURNS	75
8.6	LITIGATION	75
8.7	COMPLIANCE WITH OTHER AGREEMENTS AND APPLICABLE LAWS	76
8.8	ENVIRONMENTAL COMPLIANCE	76
8.9	EMPLOYEE BENEFITS	77
8.10	BANK ACCOUNTS	77
8.11	INTELLECTUAL PROPERTY	77
8.12	SUBSIDIARIES; AFFILIATES; CAPITALIZATION	78
8.13	LABOR DISPUTES	78
8.14	RESTRICTIONS ON SUBSIDIARIES	79
8.15	MATERIAL CONTRACTS	79
8.16	CONFIRMATION ORDER	80
8.17	PAYABLE PRACTICES; RETENTION OF TITLE	80
8.18	ACCURACY AND COMPLETENESS OF INFORMATION	80
8.19	SURVIVAL OF WARRANTIES; CUMULATIVE	80

SECTION 9.	AFFIRMATIVE AND NEGATIVE COVENANTS	81

9.1	MAINTENANCE OF EXISTENCE	81
9.2	NEW COLLATERAL LOCATIONS	81
9.3	COMPLIANCE WITH LAWS, REGULATIONS, ETC	81
9.4	PAYMENT OF TAXES AND CLAIMS	83
9.5	INSURANCE	83
9.6	FINANCIAL STATEMENTS AND OTHER INFORMATION	83
9.7	SALE OF ASSETS, CONSOLIDATION, MERGER, DISSOLUTION, ETC	85
9.8	ENCUMBRANCES	88
9.9	INDEBTEDNESS	90
9.10	LOANS, INVESTMENTS, ETC	92
9.11	DIVIDENDS AND REDEMPTIONS	94
9.12	TRANSACTIONS WITH AFFILIATES	95
9.13	COMPLIANCE WITH ERISA	95
9.14	END OF FISCAL YEARS; FISCAL QUARTERS	95
9.15	CHANGE IN BUSINESS	96
9.16	LIMITATION OF RESTRICTIONS AFFECTING SUBSIDIARIES	96
9.17	MINIMUM EBITDA	96
9.18	FIXED CHARGE COVERAGE RATIO. At any time that Excess Availability is less than $20,000,000,
the Fixed Charge Coverage Ratio of Borrower and its Subsidiaries (on a consolidated basis) for each period set forth on Schedule 9.18 hereto for which financial statements of Borrower and its Subsidiaries have been received by Agent shall be not less than amounts set forth on Schedule 9.18 hereto with respect to such period		96
9.19	AFTER ACQUIRED REAL PROPERTY	97
9.20	EFFECT OF INDEBTEDNESS OF FOREIGN SUBSIDIARIES	97

9.21	COSTS AND EXPENSES	97
9.22	FURTHER ASSURANCES	98

SECTION 10.	EVENTS OF DEFAULT AND REMEDIES	98

10.1	EVENTS OF DEFAULT	98
10.2	REMEDIES	100

SECTION 11.	JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW	103

11.1	GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS; JURY TRIAL WAIVER	103
11.2	WAIVER OF NOTICES	104
11.3	AMENDMENTS AND WAIVERS	105
11.4	WAIVER OF COUNTERCLAIMS	106
11.5	INDEMNIFICATION	106
11.6	CURRENCY INDEMNITY	107

SECTION 12.	THE AGENT	108

12.1	APPOINTMENT, POWERS AND IMMUNITIES	108
12.2	RELIANCE BY AGENT	108
12.3	EVENTS OF DEFAULT	108
12.4	CONGRESS IN ITS INDIVIDUAL CAPACITY	109
12.5	INDEMNIFICATION	109
12.6	NON-RELIANCE ON AGENT AND OTHER LENDERS	110
12.7	FAILURE TO ACT	110
12.8	ADDITIONAL LOANS	110
12.9	CONCERNING THE COLLATERAL AND THE RELATED FINANCING AGREEMENTS	111
12.10	FIELD AUDIT, EXAMINATION REPORTS AND OTHER INFORMATION; DISCLAIMER BY LENDERS	111
12.11	COLLATERAL MATTERS	111
12.12	AGENCY FOR PERFECTION	113
12.13	SUCCESSOR AGENT	113

SECTION 13.	TERM OF AGREEMENT; MISCELLANEOUS	114

13.1	TERM	114
13.2	INTERPRETATIVE PROVISIONS	115
13.3	NOTICES	117
13.4	PARTIAL INVALIDITY	117
13.5	CONFIDENTIALITY	117
13.6	SUCCESSORS	118
13.7	ASSIGNMENTS; PARTICIPATIONS	118
13.8	USA PATRIOT ACT	120
13.9	ENTIRE AGREEMENT	121
13.10	COUNTERPARTS, ETC	121
13.11	CODE SECTION 956 OVERRIDE	121
13.12	BANK PRODUCTS OVERRIDE	121

SECTION 14.	ACKNOWLEDGMENT AND RESTATEMENT	122

14.1	EXISTING OBLIGATIONS	122

14.2	ACKNOWLEDGMENT OF SECURITY INTERESTS	122
14.3	EXISTING AGREEMENTS	122
14.4	RESTATEMENT	123

AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

This Amended and Restated Loan and Security Agreement (this “Agreement” as hereinafter further defined), dated August 31, 2004, is entered into by and among Haynes International, Inc., a Delaware corporation (“Borrower” as hereinafter further defined), the parties hereto from time to time as lenders, whether by execution of this Agreement or an Assignment and Acceptance (each individually, a “Lender” and collectively, “Lenders” as hereinafter further defined), Bank One, NA, a national banking association, in its capacity as documentation agent (in such capacity, “Documentation Agent” as hereinafter further defined), and Congress Financial Corporation (Central), an Illinois corporation, in its capacity as agent for Lenders (in such capacity, “Agent” as hereinafter further defined).

W I T N E S S E T H:

WHEREAS, Borrower filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code with the United States Bankruptcy Court for the Southern District of Indiana (Indianapolis Division);

WHEREAS, Agent and Lenders have provided a secured revolving credit facility in the Chapter 11 Case (as hereinafter defined) to Borrower pursuant to the Existing Agreements (as hereinafter defined) and the Final Financing Order (as hereinafter defined); and

WHEREAS, in the Chapter 11 Case of Borrower and Haynes Holdings, Inc., a Delaware corporation (which is being merged with and into Borrower on the Effective Date (as hereinafter defined)), the First Amended Joint Plan of Reorganization of Haynes International Inc. and its affiliates (the “Plan” as hereinafter further defined) has been confirmed pursuant to the Confirmation Order (as hereinafter defined), and concurrently with the making of the initial loans or issuance of letters of credit hereunder, the effective date with respect to such Plan has occurred; and

WHEREAS, each Lender is willing to agree (severally and not jointly) to continue to make loans and provide such financial accommodations to Borrower on a pro rata basis according to its Commitment (as defined below) on the terms and conditions set forth herein and Agent is willing to act as agent for Lenders on the terms and conditions set forth herein and the other Financing Agreements; and

NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

SECTION 1. DEFINITIONS

For purposes of this Agreement, the following terms shall have the respective meanings given to them below:

1.1 “Accounts” shall mean, as to Borrower, all present and future rights of Borrower to payment of a monetary obligation, whether or not earned by performance, which is not evidenced by chattel paper or an instrument, (a) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, (c) for a secondary obligation incurred or to be incurred, or (d) arising out of the use of a credit or charge card or information contained on or for use with the card.

1.2 “Adjusted Eurodollar Rate” shall mean, with respect to each Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if necessary, to the next one thousandth (1/1000) of one (1%) percent) determined by dividing (a) the Eurodollar Rate for such Interest Period by (b) a percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof, “Reserve Percentage” shall mean the reserve percentage, expressed as a decimal, prescribed by any United States banking authority for determining the reserve requirement which is or would be applicable to deposits of United States dollars in a non-United States or an international banking office of Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan made with the proceeds of such deposit, whether or not the Reference Bank actually holds or has made any such deposits or loans. The Adjusted Eurodollar Rate shall be adjusted on and as of the effective day of any change in the Reserve Percentage.

1.3 “Affiliate” shall mean, with respect to a specified Person, any other Person which directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with such Person, and without limiting the generality of the foregoing, includes (a) any Person which beneficially owns or holds ten (10%) percent or more of any class of Voting Stock of such Person or other equity interests in such Person, (b) any Person of which such Person beneficially owns or holds ten (10%) percent or more of any class of Voting Stock or in which such Person beneficially owns or holds ten (10%) percent or more of the equity interests and (c) any director or executive officer of such Person. For the purposes of this definition, the term “control” (including with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by agreement or otherwise.

1.4 “Agent” shall mean Congress Financial Corporation (Central), in its capacity as agent on behalf of Lenders pursuant to the terms hereof and any replacement or successor agent hereunder.

1.5 “Agent Payment Account” shall mean account no. 5000000030266 of Agent at Wachovia Bank, National Association, or such other account of Agent as Agent may from time to time designate to Borrower as the Agent Payment Account for purposes of this Agreement and the other Financing Agreements.

1.6 “Applicable Margin” shall mean, at any time, as to the interest rate for Prime Rate Loans, the interest rate for Prime Rate Fixed Asset Loans, the interest rate for Eurodollar Rate Loans, the interest rate for Eurodollar Rate Fixed Asset Loans, the interest rate for Prime Rate Equipment Purchase Loans, the interest rate for Eurodollar Rate Equipment Purchase Loans and the Letter of Credit Fee, the applicable percentage (on a per annum basis) set forth below

indicated for the Monthly Average Excess Availability for the immediately preceding month is at or within the amounts indicated for such percentage:

					Loans based on Fixed Asset
	Loans Based on				Availability and Equipment
	Accounts and Inventory				Purchase Loans
	Applicable		Applicable		Applicable		Applicable
Monthly Average	Prime Rate		Eurodollar		Prime Rate		Eurodollar
Excess Availability	Margin		Margin		Margin		Margin		L/C Rate
1. $20,000,000 or more	1.00	%	2.50	%	1.50	%	3.00	%	1.75	%

2. Greater than or equal to $10,000,000 and less than $20,000,000	1.25	%	2.75	%	1.75	%	3.25	%	2.00	%

3. Less than $10,000,000	1.50	%	3.00	%	2.00	%	3.50	%	2.25	%

PROVIDED, THAT, the Applicable Margin shall be calculated and established on the first day of each month (commencing on March 1, 2005) and shall remain in effect until adjusted thereafter at the beginning of the next month.

1.7 “Arcadia Facility Inventory Availability” shall mean, with respect to Eligible Arcadia Inventory, the lesser of:

(a) the sum of (i) seventy (70%) percent multiplied by the Value of the Eligible Arcadia Inventory consisting of finished goods, plus (ii) thirty (30%) percent multiplied by the Value of the Eligible Arcadia Inventory consisting of work-in-process, plus (iii) sixty (60%) percent multiplied by the Value of the Eligible Arcadia Inventory consisting of raw materials; or

(b) the amount equal to the sum of the following for each category of Eligible Arcadia Inventory (such categories being finished goods, work-in-process and raw materials as described above): (i) eighty-five (85%) percent of the Net Recovery Percentage for each category of such Eligible Arcadia Inventory multiplied by (ii) the Value of such category of Eligible Arcadia Inventory; or

(c) forty-five (45%) percent multiplied by the sum of the Value of all of the above categories of such Eligible Arcadia Inventory.

1.8 “Assignment and Acceptance” shall mean an Assignment and Acceptance Agreement substantially in the form of Exhibit A attached hereto (with blanks appropriately completed) delivered to Agent in connection with an assignment of a Lender’s interest hereunder in accordance with the provisions of Section 13.7 hereof.

1.9 “Bank One” shall mean Bank One, NA, in its individual capacity, and its successors and assigns.

1.10 “Bank Product Obligations” shall mean all obligations, liabilities and indebtedness owing by the Borrower to any Bank Product Provider arising in connection with Bank Products.

1.11 “Bank Product Provider” shall mean Agent, any Affiliate of Agent, any Lender, any Affiliate of any Lender or any other financial institution designated by Borrower in a writing to the Agent as a “Bank Product Provider” and which, in each case, is acceptable to Agent and is approved by Bank One in the case of any Bank Product Provider that is not a Lender or an Affiliate of a Lender or an Affiliate of Agent, which approval by Bank One shall not be unreasonably withheld or delayed. So long as Bank One is a Lender, Bank One and its Affiliates shall be a Bank Product Provider.

1.12 “Bank Products” shall mean any one or more of the following types of services or facilities provided to Borrower by a Bank Product Provider (a) credit cards or stored value cards, (b) cash management or related services, including (i) the automated clearinghouse transfer of funds for the account of Borrower pursuant to agreement or overdraft for any accounts of Borrower maintained at such Bank Product Provider, and (ii) controlled disbursement services.

1.13 “Bankruptcy Code” shall mean the United States Bankruptcy Code, being Title 11 of the United States Code (11 U.S.C. Sections 101-1330), as the same now exists or may from time to time hereafter be amended, modified, recodified or supplemented, together with all official rules, regulations and interpretations thereunder or related thereto.

1.14 “Bankruptcy Court” shall mean the United States Bankruptcy Court for the Southern District of Indiana (Indianapolis Division).

1.15 “Benefit Plan” shall mean an employee benefit plan (as defined in Section 3(3) of ERISA) which Borrower sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a Multiemployer Plan has made contributions at any time during the immediately preceding six (6) plan years and to which Borrower could have any liability.

1.16 “Blocked Accounts” shall have the meaning set forth in Section 6.3 hereof.

1.17 “Borrower” shall mean Haynes International, Inc., a Delaware corporation, and its successors and assigns.

1.18 “Borrowing Base” shall mean, at any time, the amount equal to:

(a) eighty-five (85%) percent of the Eligible Accounts, plus

(b) the lesser of: (i) the sum of (A) the Kokomo Facility Inventory Availability, plus (B) the Arcadia Facility Inventory Availability, plus (C) the Service Center Inventory Availability or (ii) the Inventory Loan Limit, plus

(d) Reserves.

For purposes only of applying the Inventory Loan Limit, Agent may treat the then undrawn amounts of outstanding Letter of Credit Accommodations issued for the purpose of purchasing Eligible Inventory as Loans to the extent Agent is in effect basing the issuance of the Letter of Credit Accommodations on the Value of the Eligible Inventory being purchased with such Letter of Credit Accommodations. In determining the actual amounts of such Letter of Credit Accommodations to be so treated for purposes of the sublimit, the outstanding Loans and Reserves shall be attributed first to any components of the lending formulas set forth above that are not subject to such sublimit, before being attributed to the components of the lending formulas subject to such sublimit. The amounts of Eligible Inventory of Borrower shall, at Agent’s option, be determined based on the lesser of the amount of Inventory set forth in the general ledger of Borrower or the perpetual inventory record maintained by Borrower.

1.19 “Borrowing Base Certificate” shall mean a certificate substantially in the form of Exhibit B hereto, as such form may from time to time be modified by Agent in good faith with the consent of Borrower (which consent shall not be unreasonably withheld, conditioned or delayed), which is duly completed (including all schedules thereto) and executed by the vice-president-finance, chief financial officer, treasurer, assistant treasurer, controller or other financial or senior officer of Borrower and delivered to Agent.

1.20 “Business Day” shall mean any day other than a Saturday, Sunday, or other day on which commercial banks are authorized or required to close under the laws of the State of Illinois, or the State of North Carolina, and a day on which Agent is open for the transaction of business, except that if a determination of a Business Day shall relate to any Eurodollar Rate Loans, the term Business Day shall also exclude any day on which banks are closed for dealings in dollar deposits in the London interbank market or other applicable Eurodollar Rate market.

1.21 “Capital Expenditures” shall mean, with respect to any Person, all expenditures made and liabilities incurred for the acquisition of assets which are not, in accordance with GAAP, treated as expense items for such Person in the year made or incurred or as a prepaid expense applicable to a future year or years; PROVIDED, THAT, Capital Expenditures shall not include expenditures that would otherwise constitute Capital Expenditures to the extent made with proceeds from insurance for an insured loss or proceeds of an award of compensation from a condemnation or eminent domain proceeding to replace or restore the assets that were the subject of the loss giving rise to the payment of such insurance proceeds or the subject of such condemnation or eminent domain proceeding giving rise to the payment of such award.

1.22 “Capital Leases” shall mean, as applied to any Person, any lease of (or any agreement conveying the right to use) any property (whether real, personal or mixed) by such Person as lessee which in accordance with GAAP, is required to be reflected as a liability on the balance sheet of such Person.

1.23 “Capital Stock” shall mean, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person’s capital stock or partnership, limited liability company or other equity interests at any time outstanding, and any and all rights, warrants or options exchangeable for or convertible into such capital stock or other interests (but excluding any debt security that is exchangeable for or convertible into such capital stock).

1.24 “Cash Equivalents” shall mean any of the following: (a) any evidence of Indebtedness with a maturity date of ninety (90) days or less issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof or any agency or instrumentality thereof; PROVIDED, THAT, the full faith and credit of the United States of America is pledged in support thereof; (b) certificates of deposit or bankers’ acceptances with a maturity of ninety (90) days or less (after the date of the purchase thereof) of any financial institution that is a member of the Federal Reserve System, in any case having combined capital and surplus and undivided profits of not less than $250,000,000; (c) commercial paper (including variable rate demand notes) with a maturity of ninety (90) days or less (after the date of the purchase thereof) issued or guaranteed by a corporation (except an Affiliate of Borrower) organized under the laws of any State of the United States of America, the District of Columbia or a bank organized under the laws of any State of the United States of America or constituting a national banking association under the laws of the United States of America, in each case having a rating of at least A 1 by Standard & Poor’s Ratings Service, a division of The McGraw Hill Companies, Inc. or at least P 1 by Moody’s Investors Service, Inc.; (d) repurchase obligations with a term of not more than thirty (30) days (after the date of the purchase thereof) for underlying securities of the types described in clause (a) above entered into with any financial institution having combined capital and surplus and undivided profits of not less than $250,000,000; (e) repurchase agreements and reverse repurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the United States of America or issued by any governmental agency thereof and backed by the full faith and credit of the United States of America in each case maturing within ninety (90) days or less from the date of acquisition; PROVIDED, THAT, the terms of such agreements comply with the guidelines set forth in the Federal Financial Agreements of Depository Institutions with Securities Dealers and Others, as adopted by the Comptroller of the Currency on October 31, 1985; and (f) investments in money market funds and mutual funds which invest substantially all of their assets in securities of the types described in clauses (a) through (e) above.

1.25 “Change of Control” shall mean (a) the transfer (in one transaction or a series of transactions) of all or substantially all of the assets of Borrower to any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act); (b) the liquidation or dissolution of Borrower; (c) the acquisition by any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act) of beneficial ownership, directly or indirectly, of more than fifty (50%) percent of the voting power of the total outstanding Voting Stock of Borrower; (d) during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors of Borrower (together with any new directors whose nomination for election by the stockholders of Borrower was approved by a vote of at least sixty six and two thirds (66 2/3%) percent of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of Borrower then still in office.

1.26 “Chapter 11 Case” shall mean the Chapter 11 Cases of Borrower and its affiliated debtors under the Bankruptcy Code currently pending in the Bankruptcy Court.

1.27 “Code” shall mean the Internal Revenue Code of 1986, as the same now exists or may from time to time hereafter be amended, modified, recodified or supplemented, together with all governmental rules, regulations and interpretations thereunder or related thereto.

1.28 “Collateral” shall have the meaning set forth in Section 5 hereof.

1.29 “Collateral Access Agreement” shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent, from any lessor of premises to Borrower, or any other person to whom any Collateral is consigned or who has custody, control or possession of any Collateral or is otherwise the owner or operator of any premises on which any Collateral is located, in favor of Agent with respect to the Collateral at such premises or otherwise in the custody, control or possession of such lessor, consignee or other person.

1.30 “Commitment” shall mean, at any time, as to each Lender, the amount equal to the sum of such Lender’s Tranche A Commitments and Tranche B Commitments; sometimes being collectively referred to herein as “Commitments”.

1.31 “Confirmation Order” shall mean the order captioned “Findings of Fact, Conclusions of Law and Order under 11 U.S.C. Sections 1129(a) and (b) and Fed. R. Bankr. P. 3020 Confirming the First Amended Joint Plan of Reorganization of Haynes International, Inc. and its Affiliated Debtors and Debtors in Possession” as modified entered by the Bankruptcy Court on August 16, 2004 in the Chapter 11 Case.

1.32 “Congress” shall mean Congress Financial Corporation (Central), an Illinois corporation, in its individual capacity, and its successors and assigns.

1.33 “Consolidated Adjusted Net Income” shall mean, with respect to any Person for any period, the aggregate of the net income (loss) of such Person and its Subsidiaries, on a consolidated basis, for such period (excluding to the extent included therein any extraordinary or non recurring gains and non cash charges, including non-cash pension and other non-cash post-employment benefit charges and non-cash restructuring charges and expenses and in the case of Borrower and its Subsidiaries, such cash charges and non-cash charges in each case in amounts acceptable to Agent in its determination and arising pursuant to events or circumstances beyond the control of Borrower), after deducting all charges which should be deducted before arriving at the net income (loss) for such period, and after deducting the Provision for Taxes for such period, all as determined in accordance with GAAP; PROVIDED, THAT, (a) the net income of any Person that is not a wholly owned Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid or payable to such Person or a wholly owned Subsidiary of such Person; (b) except to the extent included pursuant to the foregoing clause, the net income of any Person accrued prior to the date it becomes a wholly owned Subsidiary of such Person or is merged into or consolidated with such Person or any of its wholly owned Subsidiaries or that Person’s assets are acquired by such Person or by any of its wholly owned Subsidiaries shall be excluded; and (c) the effect of any change in accounting principles adopted by such Person or its Subsidiaries after the date hereof shall be excluded. For the purposes of this definition, net income excludes any gain and non cash loss (but not any cash loss) together with any related Provision for Taxes for such gain and non cash loss (but not any cash loss) realized upon the sale or other disposition of any assets that

are not sold in the ordinary course of business (including, without limitation, dispositions pursuant to sale and leaseback transactions) or of any capital stock of such Person or a Subsidiary of such Person and any net income realized as a result of changes in accounting principles or the application thereof to such Person.

1.34 “Credit Facility” shall mean the Loans and Letter of Credit Accommodations provided to or for the benefit of Borrower pursuant to Sections 2.1 and 2.2 hereof.

1.35 “Default” shall mean an act, condition or event which with notice or passage of time or both would constitute an Event of Default.

1.36 “Defaulting Lender” shall have the meaning set forth in Section 6.11(d) hereof.

1.37 “Deposit Account Control Agreement” shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent, by and among Agent and Borrower with a deposit account at any bank and the bank at which such deposit account is at any time maintained which provides that such bank will comply with instructions originated by Agent directing disposition of the funds in the deposit account without further consent by Borrower and has such other terms and conditions as Agent may reasonably require.

1.38 “EBITDA” shall mean, as to any Person, with respect to any period, an amount equal to: (a) the Consolidated Adjusted Net Income of such Person and its Subsidiaries for such period, plus (b) depreciation and amortization and other non-cash charges including imputed interest and deferred compensation for such period (to the extent deducted in the computation of Consolidated Adjusted Net Income of such Person), all in accordance with GAAP, plus (c) Interest Expense for such period (to the extent deducted in the computation of Consolidated Adjusted Net Income of such Person), plus (d) the Provision for Taxes for such period (to the extent deducted in the computation of Consolidated Adjusted Net Income of such Person), plus (e) Restructuring Expenses for such period (to the extent deducted in the computation of Consolidated Adjusted Net Income for such period), plus (f) non-recurring cash charges for such period, including any payments made to unionized employees pursuant to Collective Bargaining Agreement between Haynes International, Inc. and United Steelworkers of America, for itself and on behalf of its Local No. 2958, dated as of July 2, 2002, as modified by the Tentative Agreement, dated as of February 5, 2004 and ratified by the United Steel Workers of America Local No. 2958 on February 13, 2004 as to all of such non-recurring cash charges to the extent deducted in the computation of Consolidated Adjusted Net Income of such Person), PROVIDED, THAT, in no event shall the amount of non-recurring cash charges added pursuant to this clause (f) exceed in the aggregate (i) $2,000,000 for the fiscal year ending September 30, 2005, (ii) $1,000,000 for the fiscal year ending September 30, 2006, and (iii) $1,000,000 for the fiscal year ending September 30, 2007, plus (g) non-cash charges related to “fresh-start” accounting taken in such period.

1.39 “Effective Date” shall mean the date after which the Confirmation Order shall have become a Final Order and that all of the conditions precedent to the effectiveness of the Plan shall have been satisfied, or with the consent of Agent, waived in accordance with the terms thereof.

1.40 “Eligible Accounts” shall mean Accounts created by Borrower that at the time of determination satisfy the criteria set forth below. Accounts shall be Eligible Accounts if:

(a) such Accounts arise from the actual and bona fide sale and delivery of goods by Borrower or rendition of services by Borrower in the ordinary course of its business which transactions are completed in accordance with the terms and provisions contained in any documents related thereto;

(b) such Accounts are not unpaid more than sixty (60) days after the original due date thereof or more than one hundred twenty (120) days after the date of the original invoice for them;

(d) such Accounts do not arise from sales on consignment, guaranteed sale, sale and return, sale on approval, or other terms under which payment by the account debtor may be conditional or contingent;

(e) the chief executive office of the account debtor with respect to such Accounts is located in the United States of America or Canada (PROVIDED, THAT, in order for such Account to continue to be an Eligible Account, at any time promptly upon Agent’s request in good faith, Borrower shall execute and deliver, or cause to be executed and delivered, such other agreements, documents and instruments as may be required by Agent to perfect the security interests of Agent in those Accounts of an account debtor with its chief executive office or principal place of business in Canada in accordance with the applicable laws of the applicable Province of Canada in which such chief executive office or principal place of business is located and take or cause to be taken such other and further actions as Agent may reasonably request to enable Agent as secured party with respect thereto to collect such Accounts under the applicable Federal or Provincial laws of Canada) or, at Agent’s option, if the chief executive office and principal place of business of the account debtor with respect to such Accounts is located other than in the United States of America or Canada, then if either: (i) the account debtor has delivered to Borrower an irrevocable letter of credit issued or confirmed by a bank satisfactory to Agent and payable only in the United States of America and in U.S. Dollars, sufficient to cover such Account, in form and substance satisfactory to Agent in good faith and if required by Agent, the original of such letter of credit has been delivered to Agent or Agent’s agent and the issuer thereof, and Borrower has complied with the terms of Section 5.2(f) hereof with respect to the assignment of the proceeds of such letter of credit to Agent or naming Agent as transferee beneficiary thereunder, as Agent may specify, or (ii) such Account is subject to credit insurance payable to Agent issued by an insurer and on terms and in an amount acceptable to Agent, or (iii) such Account is otherwise acceptable in all respects to Agent (subject to such lending formula with respect thereto as Agent may determine);

(f) such Accounts do not consist of progress billings (such that the obligation of the account debtors with respect to such Accounts is conditioned upon Borrower’s satisfactory completion of any further performance under the agreement giving rise thereto), bill and hold invoices or retainage invoices, except as to bill and hold invoices, if Agent shall have received an

agreement in writing from the account debtor, in form and substance reasonably satisfactory to Agent, confirming the unconditional obligation of the account debtor to take the goods related thereto and pay such invoice;

(g) the account debtor with respect to such Accounts has not asserted a counterclaim, defense or dispute and is not owed or does not claim to be owed any amounts that may give rise to any right of setoff or recoupment against such Accounts (but the portion of the Accounts of such account debtor in excess of the amount at any time and from time to time owed by Borrower to such account debtor or claimed owed by such account debtor that otherwise satisfy the criteria for Eligible Accounts shall be deemed Eligible Accounts);

(h) there are no facts, events or occurrences which would impair the validity, enforceability or collectability of such Accounts or reduce the amount payable (other than to the extent of sales credits in favor of account debtors consistent with the practices of Borrower with respect thereto as of the date hereof) or delay in any material respect payment thereunder;

(i) except for security interests or liens therein in favor of a person with whom Agent has entered into a satisfactory intercreditor agreement or as Agent may otherwise specifically agree, such Accounts are subject to the first priority, valid and perfected security interest of Agent and any goods giving rise thereto are not, and were not at the time of the sale thereof, subject to any claims, liens, security interest interests, charges or other encumbrances other than in favor of Agent, or those that have been released and terminated on or before the date hereof, or are otherwise permitted under Section 9.8 hereof, PROVIDED, THAT, any of such claims, liens, security interest interests, charges or other encumbrances with respect to such goods do not extend to such Accounts;

(j) the account debtor is not an Affiliate of Borrower;

(k) the account debtors with respect to such Accounts are not any foreign government, the United States of America, any State, political subdivision, department, agency or instrumentality thereof, unless, if the account debtor is the United States of America, any State, political subdivision, department, agency or instrumentality thereof, upon Agent’s request, the Federal Assignment of Claims Act of 1940, as amended or any similar State or local law, if applicable, has been complied with in a manner satisfactory to Agent; PROVIDED, THAT, so long as no Default or Event of Default shall exist or have occurred and be continuing, and the aggregate amount of such Accounts is less than $500,000, Agent shall not request that Borrower comply with such laws;

(l) there are no proceedings or actions which are threatened or pending against the account debtors with respect to such Accounts that Agent determines in good faith could reasonably be expected to result in any material adverse change in any such account debtor’s financial condition (including, without limitation, any bankruptcy, dissolution, liquidation, reorganization or similar proceeding);

(m) the aggregate amount of such Accounts owing by a single account debtor do not constitute more than fifteen (15%) percent of the aggregate amount of all otherwise Eligible

Accounts (but the portion of the Accounts not in excess of the applicable percentages may be deemed Eligible Accounts);

(n) such Accounts are not owed by an account debtor who has Accounts unpaid more than sixty (60) days after the original due date for them or one hundred twenty (120) days after the date of the original invoice for them, in either case which constitute more than fifty (50%) percent of the total Accounts of such account debtor;

(o) the account debtor is not located in a State requiring the filing of a Notice of Business Activities Report or similar report in order to permit Borrower to seek judicial enforcement in such State of payment of such Account, unless Borrower has qualified to do business in such state or has filed a Notice of Business Activities Report or equivalent report for the then current year or such failure to file and inability to seek judicial enforcement is capable of being remedied without any material delay or material cost;

(p) such Accounts are owed by account debtors whose total indebtedness to Borrower does not exceed the credit limit with respect to such account debtors as determined by Borrower from time to time, to the extent such credit limit as to any account debtor is established consistent with the current practices of Borrower as of the date hereof and such credit limit is acceptable to Agent in good faith (but the portion of the Accounts not in excess of such credit limit that otherwise satisfy the criteria for Eligible Accounts shall be deemed Eligible Accounts); and

(q) such Accounts are owed by account debtors deemed creditworthy at all times by Agent in good faith.

The criteria for Eligible Accounts set forth above may only be changed and any new criteria for Eligible Accounts may only be established by Agent in good faith based on either: (i) an event, condition or other circumstance arising after the date hereof, or (ii) an event, condition or other circumstance existing on the date hereof to the extent Agent has no written notice thereof from Borrower prior to the date hereof, in either case under clause (i) or (ii) which adversely affects or could reasonably be expected to adversely affect the Accounts in the good faith determination of Agent. Any Accounts that are not Eligible Accounts shall nevertheless be part of the Collateral.

1.41 “Eligible Arcadia Inventory” shall mean Eligible Inventory (a) located at Borrower’s Arcadia, Louisiana facility; or (b) located at third-party processors of Borrower’s Inventory used by Borrower in connection with the Arcadia, Louisiana facility and from which processors Agent shall have received a Collateral Access Agreement (except as Agent may otherwise agree); or (c) in transit between Borrower’s Arcadia, Louisiana facility and such processor’s location; or (d) in transit from another of Borrower’s facilities referred to herein to Borrower’s Arcadia, Louisiana facility.

1.42 “Eligible Inventory” shall mean Inventory owned by Borrower consisting of finished goods held for resale in the ordinary course of the business of Borrower, raw materials for such finished goods and work-in-process and semi-finished Inventory, in each case that at all times satisfies the criteria set forth below. In general, Eligible Inventory shall not include

(a) spare parts for equipment; (b) packaging and shipping materials; (c) supplies used or consumed in Borrower’s business; (d) Inventory at premises other than those permitted hereunder and which are either (i) owned and operated by Borrower or (ii) leased and operated by Borrower or (iii) owned and operated by a third person, PROVIDED, THAT, except as Agent may otherwise agree, as to locations leased and operated by Borrower or locations owned and operated by a third person, Agent shall have received a Collateral Access Agreement duly executed and delivered by the lessor and owner of such leased locations or by such third person, as the case may be; (e) Inventory subject to a security interest, lien, charge or other encumbrance in favor of any Person other than Agent except those permitted in this Agreement that are subject to an intercreditor agreement in form and substance satisfactory to Agent between the holder of such security interest or lien and Agent or as Agent may otherwise specifically agree; (f) bill and hold goods; (g) unserviceable, obsolete or slow moving Inventory; (h) Inventory that is not subject to the first priority, valid and perfected security interests and liens of Agent; (i) returned, damaged and/or defective Inventory; (j) Inventory purchased or sold on consignment and (k) Inventory of Borrower located outside the United States of America. The criteria for Eligible Inventory set forth above may only be changed and any new criteria for Eligible Inventory may only be established by Agent in good faith based on either: (i) an event, condition or other circumstance arising after the date hereof, or (ii) an event, condition or other circumstance existing on the date hereof to the extent Agent has no written notice thereof from Borrower prior to the date hereof, in either case under clause (i) or (ii) which adversely affects or could reasonably be expected to adversely affect the Inventory in the good faith determination of Agent. Any Inventory that is not Eligible Inventory shall nevertheless be part of the Collateral.

1.43 “Eligible Kokomo Inventory” shall mean Eligible Inventory (a) located at Borrower’s Kokomo, Indiana facility; or (b) located at third-party processors of Borrower’s Inventory used by Borrower in connection with the Kokomo, Indiana facility and from which processors Agent shall have received a Collateral Access Agreement (except as Agent may otherwise agree); or (c) in transit between Borrower’s Kokomo, Indiana facility and such processor’s location; or (d) in transit from another of Borrower’s facilities referred to herein to Borrower’s Kokomo, Indiana facility.

1.44 “Eligible New Equipment” shall mean all new Equipment owned by Borrower which is acquired after April 12, 2004 and is in good order, repair, running and marketable condition that at all times satisfies the criteria set forth below. In general, Eligible New Equipment shall not include: (a) Equipment at premises other than those permitted hereunder and which are either (i) owned and operated by Borrower, or (ii) leased and operated by Borrower or (iii) owned and operated by a third person, PROVIDED, THAT, except as Agent may otherwise agree, Agent shall have received a Collateral Access Agreement duly executed and delivered by such third person; (b) Equipment subject to a security interest, lien, charge or other encumbrance in favor of any Person other than Agent except those permitted in this Agreement that are subject to an intercreditor agreement, in form and substance satisfactory to Agent, between the holder of such security interest or lien and Agent or as Agent may otherwise specifically agree; (c) Equipment located outside the continental United States of America; (d) Equipment that is not subject to the first priority, valid and perfected security interests and liens of Agent; (e) worn-out, obsolete, damaged or defective Equipment or Equipment not used or usable in the ordinary course of Borrower’s business as presently conducted; (f) computer hardware; or (g) Equipment that is or becomes a fixture. The criteria for Eligible New

Equipment set forth above may only be changed and any new criteria for Eligible New Equipment may only be established by Agent in good faith based on either: (i) an event, condition or other circumstance arising after the date hereof, or (ii) an event, condition or other circumstance existing on the date hereof to the extent Agent has no written notice thereof from Borrower prior to the date hereof, in either case under clause (i) or (ii) which adversely affects or could reasonably be expected to adversely affect such Equipment in the good faith determination of Agent. Any Equipment that is not Eligible New Equipment shall nevertheless be part of the Collateral.

1.45 “Eligible Service Center Inventory” shall mean Eligible Inventory (a) located at Borrower’s existing leased service center locations as of the date hereof in Windsor, Connecticut, Anaheim, California, Houston, Texas and Lebanon, Indiana; or (b) at any new service center location used by Borrower after the date hereof, so long as Agent has received prior written notice of the use of such location, a Collateral Access Agreement from the owner and lessor of such location (except as Agent may otherwise agree) and such new service center is operating with Inventory and in a manner substantially consistent with the existing service center locations of Borrower as of the date hereof; or (d) in transit from one of Borrower’s facilities referred to herein to any of such service center locations.

1.46 “Eligible Transferee” shall mean (a) any Lender; (b) the parent company of any Lender and/or any Affiliate of such Lender which is at least fifty (50%) percent owned by such Lender or its parent company; (c) any person (whether a corporation, partnership, trust or otherwise) that is engaged in the business of making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor, and in each case is approved by Agent; (d) any other commercial bank approved by Agent; and (e) any other financial institution or “accredited investor” (as defined in Regulation D under the Securities Act of 1933) approved by Agent that makes loans and provides similar extensions of credit in the ordinary course of its business and is capable of funding revolving loans; PROVIDED, THAT, (i) neither Borrower nor any Affiliate of Borrower shall qualify as an Eligible Transferee and (ii) no Person to whom any Indebtedness which is in any way subordinated in right of payment to any other Indebtedness of Borrower shall qualify as an Eligible Transferee, except as Agent may otherwise specifically agree.

1.47 “Environmental Laws” shall mean all foreign, Federal, State and local laws, legislation, rules, codes, licenses, permits (including any conditions imposed therein), authorizations, judicial or administrative decisions, injunctions or agreements between Borrower and any Governmental Authority, (a) relating to pollution and the protection, preservation or restoration of the environment (including air, water vapor, surface water, ground water, drinking water, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or to human health or safety, (b) relating to the exposure to, or the use, storage, recycling, treatment, generation, manufacture, processing, distribution, transportation, handling, labeling, production, release or disposal, or threatened release, of Hazardous Materials, or (c) relating to all laws with regard to recordkeeping, notification, disclosure and reporting requirements respecting Hazardous Materials.

1.48 “Equipment” shall mean all of Borrower’s now owned and hereafter acquired equipment, wherever located, including machinery, data processing and computer equipment (whether owned or licensed and including embedded software), vehicles, tools, furniture, fixtures, all attachments, accessions and property now or hereafter affixed thereto or used in connection therewith, and substitutions and replacements thereof, wherever located.

1.49 “Equipment Purchase Loan Limit” shall mean at any time the lesser of (a) $10,000,000 or (b) the amount equal to: (i) the Maximum Credit minus (ii) the sum of (A) the Tranche A Loans then outstanding, plus (B) the Tranche B Loans then outstanding, plus (C) the undrawn amount of Letter of Credit Accommodations then outstanding, plus (D) the aggregate amount of loans and letter of credit accommodations outstanding (and as to such letter of credit accommodations, without regard to the reserves established with respect thereto), to or for the benefit of Haynes UK or any other obligor under the UK Financing Agreements.

1.50 “Equipment Purchase Loan Request” shall have the meaning set forth in Section 2.3(d) hereof.

1.51 “Equipment Purchase Loans” shall mean the secured term loans made by Lenders to Borrower after the date hereof as provided for in Section 2.3; such term loans being from time to time referred to herein individually as an “Equipment Purchase Loan”.

1.52 “Equipment Purchase Notes” shall mean, collectively, the Equipment Purchase Notes which may at any time hereafter be issued by Borrower to Lenders pursuant to Section 2.3 hereof to evidence an Equipment Purchase Loan; such notes being from time to time referred to herein individually as an “Equipment Purchase Note”.

1.53 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, together with all rules, regulations and interpretations thereunder or related thereto.

1.54 “ERISA Affiliate” shall mean any person required to be aggregated with Borrower or any of their respective Subsidiaries under Sections 414(b), 414(c), 414(m) or 414(o) of the Code.

1.55 “ERISA Event” shall mean (a) any “reportable event” described in Section 4043(b) or 4043(c)(1), (2), (5), (6), (8) or (9) of ERISA or the regulations issued thereunder, with respect to a Pension Plan or a Multiemployer Plan; (b) the adoption of any amendment to a Benefit Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) the existence with respect to any Pension Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (d) the filing pursuant to Section 412 of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Pension Plan; (e) the occurrence of a “prohibited transaction” with respect to which Borrower or any of its Subsidiaries is a “disqualified person” (within the meaning of Section 4975 of the Code) or with respect to which Borrower or any of its Subsidiaries could otherwise be liable; (f) a complete or partial withdrawal by Borrower or any ERISA Affiliate from a Multiemployer Plan that results in or has a reasonable likelihood of resulting in any liability of Borrower; (g) the receipt by or on behalf of Borrower or any ERISA Affiliate of a notice that

either: (i) any Multiemployer Plan is in reorganization or insolvent (each within the meaning of ERISA) or (ii) any Multiemployer Plan is or will or is likely to be entering reorganization or becoming insolvent or (iii) any Multiemployer Plan intends to terminate or has been terminated, in the case of each of clauses (g)(i), (ii) or (iii) that result in or has a reasonable likelihood of resulting in any liability of Borrower; (h) the filing of a notice of intent to terminate, the treatment of a Benefit Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the Pension Benefit Guaranty Corporation to terminate a Pension Plan or Borrower receiving a notice of or otherwise obtaining knowledge of the commencement of proceedings by the Pension Benefit Guaranty Corporation to terminate a Multiemployer Plan; (i) the occurrence of an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Borrower receiving a notice of or otherwise obtaining knowledge of any such event or condition as to a Multiemployer Plan; (j) the imposition of any liability under Title IV of ERISA, other than the Pension Benefit Guaranty Corporation premiums due but not delinquent under Section 4007 of ERISA, upon Borrower or any ERISA Affiliate in excess of $250,000.

1.56 “Eurodollar Rate” shall mean with respect to the Interest Period for a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic average of the rates of interest per annum (rounded upwards, if necessary, to the next one thousandth (1/1000th) of one (1%) percent) at which Reference Bank is offered deposits of United States dollars in the London interbank market (or other Eurodollar Rate market selected by Borrower and approved by Agent) on or about 9:00 a.m. (New York time) two (2) Business Days prior to the commencement of such Interest Period in amounts substantially equal to the principal amount of the Eurodollar Rate Loans requested by and available to Borrower in accordance with this Agreement, with a maturity of comparable duration to the Interest Period selected by or on behalf of Borrower.

1.57 “Eurodollar Rate Loans” shall mean any Loans or portion thereof on which interest is payable based on the Adjusted Eurodollar Rate in accordance with the terms hereof (including Eurodollar Rate Fixed Asset Loans and Eurodollar Rate Equipment Purchase Loans).

1.58 “Eurodollar Rate Equipment Purchase Loans” shall mean Equipment Purchase Loans outstanding from time to time that are Eurodollar Rate Loans.

1.59 “Eurodollar Rate Fixed Asset Loans” shall mean Eurodollar Rate Loans outstanding from time to time based on Fixed Asset Availability.

1.60 “Excess Availability” shall mean at any time and without duplication, the sum of:

(a) the amount calculated at such time equal to: (i) the lesser of: (A) the Borrowing Base and (B) the Maximum Credit (in each case under (A) or (B) after giving effect to any applicable Reserves), minus (ii) the sum of: (A) the amount of the then outstanding and unpaid principal amount of the Loans (other than Equipment Purchase Loans) and the undrawn amount of Letter of Credit Accommodations, plus (B) the aggregate amount of all payables or other obligations outstanding more than forty-five (45) days after the due date therefor as of such time (and for this purpose the due date for payables incurred prior to the commencement of the Chapter 11 Case (or during the course thereof) will be the date for payment of such payables as

established pursuant to the Plan and the claims administration process provided for in the Chapter 11 Case and as to those payables or other obligations that are subject to a dispute or are not otherwise allowed, prior to the establishment of the due date for such payables or other obligations pursuant to the Plan and the claims administration process, such payables and other obligations shall not be deemed outstanding more than forty-five (45) days after the due date therefor for purposes of this definition), plus (C) the amount of checks issued by Borrower to pay payables and other obligations which are more than such number of days past due, but not yet sent (without duplication of amounts included in clause (a)(ii)(B) herein); plus

(b) the amount calculated at such time equal to the total amount available for Utilisation (as such term is defined in the UK Financing Agreements), subject to the limitations contained in Sections 5.3 and 5.5 of the Facility Agreement referred to in the definition of the UK Financing Agreements, after giving effect to all then outstanding Utilisations and net of the aggregate of all Past Due Payables (as such term is defined in the UK Financing Agreements).

1.61 “Exchange Act” shall mean the Securities Exchange Act of 1934, together with all rules, regulations and interpretations thereunder or related thereto.

1.62 “Exchange Rate” shall mean the prevailing spot rate of exchange of such bank as Agent may reasonably select for the purpose of conversion of one currency to another, at or around 11:00 a.m. Chicago time, on the date on which any such conversion of currency is to be made under this Agreement.

1.63 “Excluded Taxes” shall have the meaning set forth in Section 6.5 hereof.

1.64 “Existing Agreements” shall mean, collectively, the following (each as amended, modified or supplemented prior to the date hereof); (a) the Loan and Security Agreement, dated April 12, 2004, by and among Lender and Borrower, and (b) the other agreements listed on Schedule 1.64 hereto.

1.65 “Fee Letter” shall mean the letter agreement, dated of even date herewith, by and between Borrower and Agent, setting forth certain fees payable by Borrower to Agent for the benefit of itself and Lenders, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

1.66 “Final Financing Order” shall mean Final Order Pursuant to Sections 361, 363 and 364(c) of The Bankruptcy Code and Rule 4001 of The Federal Rules of Bankruptcy Procedure (i) Authorizing Debtors to Obtain Post-Petition Financing, Granting Senior Liens and Priority Administrative Expense Status, Modifying the Automatic Stay, Authorizing Debtors to Enter into Agreements with Congress Financial Corporation (Central), as Agent for Itself and Certain Other Lenders, and (ii) Authorizing Debtors to Pay in Full the Secured Claims of Fleet Capital Corporation, as Agent for Itself and Certain Other Lenders entered on April 22, 2004 by the Bankruptcy Court in the Chapter 11 Case.

1.67 “Final Order” shall mean an order or judgment of the Bankruptcy Court duly entered on the docket of the Bankruptcy Court that (a) has not been modified or amended without the consent of the Agent, or vacated, reversed, revoked, rescinded, stayed or appealed from, except as Agent may otherwise specifically agree in good faith, (b) with respect to which

the time to appeal, petition for certiorari, application or motion for reversal, rehearing, reargument, stay, or modification has expired, (c) no petition, application or motion for reversal, rehearing, reargument, stay or modification thereof or for a writ of certiorari with respect thereto has been filed or granted or the order or judgment of the Bankruptcy Court has been affirmed by the highest court to which the order or judgment was appealed and (d) is no longer subject to any or further appeal or petition, application or motion for reversal, rehearing, reargument, stay or modification thereof or for any writ of certiorari with respect thereto or further judicial review in any form.

1.68 “Financing Agreements” shall mean, collectively, this Agreement and all notes, guarantees, security agreements, Deposit Account Control Agreements, Investment Property Control Agreements, intercreditor agreements and all other agreements, documents and instruments now or at any time hereafter executed and/or delivered by Borrower in connection with this Agreement.

1.69 “Fixed Asset Availability” shall mean $15,949,276; PROVIDED, THAT, effective on the first day of each month after the date hereof the Fixed Asset Availability shall be reduced by the amount equal to $231,681 on the first day of each such month.

1.70 “Fixed Charges” shall mean, as to any Person and its Subsidiaries with respect to any period, the sum of, without duplication, (a) all cash Interest Expense (which for purposes of this definition shall not include amortizing payments of deferred financing charges that do not constitute interest), plus (b) net cash costs under any Hedge Agreement (in each case as to such Person and its Subsidiaries for such period and to the extent not included in the calculation of EBITDA of such Person and its Subsidiaries for such period), plus (c) all regularly scheduled (as determined at the beginning of the respective period) principal payments of Indebtedness for borrowed money and Indebtedness with respect to Capital Leases (and without duplicating in items (a) and (c) of this definition, the interest component with respect to Indebtedness under Capital Leases), plus (d) all Capital Expenditures, plus (e) the cash portion of any Provision for Taxes paid in such period and unpaid amounts of any Provision for Taxes the last date for payment of which before becoming past due occurs during such period, plus (f) all scheduled reductions in the Fixed Asset Availability occurring during such period, plus (g) cash payments in respect of US pension obligations made during such period.

1.71 “Fixed Charge Coverage Ratio” shall mean, as to any Person, with respect to any period, the ratio of (a) the amount equal to EBITDA of such Person and its Subsidiaries for such period to (b) the Fixed Charges of such Person and its Subsidiaries for such period.

1.72 “Foreign Subsidiaries” shall mean the Subsidiaries of Borrower organized or incorporated under the laws of a jurisdiction outside of the United States of America or which have substantially all of their respective assets and operations outside the United States of America; sometimes being referred to herein individually as a “Foreign Subsidiary”.

1.73 “GAAP” shall mean generally accepted accounting principles in the United States of America as in effect from time to time as set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board which are

applicable to the circumstances as of the date of determination consistently applied; PROVIDED, THAT, for purposes of Sections 9.17 and 9.18 hereof, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements delivered to Agent prior to the date hereof.

1.74 “Governmental Authority” shall mean any nation or government, any state, province, or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

1.75 “Hard Costs” shall mean, with respect to the purchase by Borrower of an item of Eligible New Equipment, the net cash amount actually paid to acquire title to such item, net of all incentives, trade-in allowances, discounts and rebates, and exclusive of freight, delivery charges, installation costs and charges, software costs, charges and fees, warranty costs, taxes, insurance and other incidental costs or expenses and all indirect costs or expenses of any kind.

1.76 “Haynes UK” shall mean Haynes International Ltd., a company organized under the laws of England and Wales, and its successors and assigns.

1.77 “Haynes UK Pension Trustees” shall mean, collectively, Haynes UK, John Raymond Woolnough and Jynette Rutherford, and their respective successors and assigns in their respective capacities as trustees for the Haynes Pension Plan established by Haynes UK.

1.78 “Hazardous Materials” shall mean any hazardous, toxic or dangerous substances, materials and wastes, including hydrocarbons (including naturally occurring or man-made petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, polychlorinated biphenyls, pesticides, herbicides and any other kind and/or type of pollutants or contaminants (including materials which include hazardous constituents), and including any other substances, materials, or wastes that are classified as hazardous or toxic under any Environmental Law).

1.79 “Hedge Agreement” shall mean an agreement that is a rate swap agreement, basis swap, forward rate agreement, commodity swap, interest rate option, forward foreign exchange agreement, spot foreign exchange agreement, rate cap agreement rate, floor agreement, rate collar agreement, currency swap agreement, cross currency rate swap agreement, currency option, any other similar agreement (including any option to enter into any of the foregoing or a master agreement for any the foregoing together with all supplements thereto) for the purpose of protecting against or managing exposure to fluctuations in interest or exchange rates, currency valuations or commodity prices; sometimes being collectively referred to herein as “Hedge Agreements”.

1.80 “Indebtedness” shall mean, with respect to any Person, whether or not contingent, (a) all indebtedness for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof) or evidenced by bonds, notes, debentures or similar instruments; (b) the balance deferred and unpaid of the purchase price of any property or services (except any such balance that constitutes an account payable to a trade creditor (whether or not an Affiliate) created, incurred, assumed or guaranteed by such Person in

the ordinary course of business of such Person in connection with obtaining goods, materials or services that is not overdue by more than one hundred twenty (120) days (unless the trade payable is being contested in good faith and for this purpose the due date for payables incurred prior to the commencement of the Chapter 11 Case (or during the course thereof) will be the date for payment of such payables as established pursuant to the Plan and the claims administration process provided for in the Chapter 11 Case and as to those payables or other obligations that are subject to a dispute or are not otherwise allowed, prior to the establishment of the due date for such payables or other obligations pursuant to the Plan and the claims administration process, such payables and other obligations shall not be deemed overdue by more than one hundred twenty (120) days for purposes of this definition); (c) the principal component of all leases to which it is a lessee which have been, or should be, in accordance with GAAP recorded as Capital Leases; (d) any contractual obligation, contingent or otherwise, of such Person to pay or be liable for the payment of any indebtedness described in this definition of another Person, including, without limitation, any such indebtedness, directly or indirectly guaranteed, or any agreement to purchase, repurchase, or otherwise acquire such indebtedness, obligation or liability or any security therefor, or to provide funds for the payment or discharge thereof, or to maintain solvency, assets, level of income, or other financial condition; (e) all obligations with respect to redeemable stock and redemption or repurchase obligations under any Capital Stock or other equity securities issued by such Person; (f) all reimbursement obligations and other liabilities of such Person with respect to surety bonds (whether bid, performance or otherwise), letters of credit, banker’s acceptances, drafts or similar documents or instruments issued for such Person’s account; (g) all indebtedness of such Person in respect of indebtedness of another Person for borrowed money or indebtedness of another Person otherwise described in this definition which is secured by any consensual lien, security interest, collateral assignment, conditional sale, mortgage, deed of trust, or other encumbrance on any asset of such Person, whether or not such obligations, liabilities or indebtedness are assumed by or are a personal liability of such Person, all as of such time; (h) all obligations, liabilities and indebtedness of such Person arising under any Hedge Agreements; and (i) the principal and interest portions of all rental obligations of such Person under any synthetic lease or similar off balance sheet financing where such transaction is considered to be borrowed money for tax purposes but is classified as an operating lease in accordance with GAAP.

1.81 “Information Certificate” shall mean, collectively, the Information Certificate of Borrower constituting Exhibit C hereto containing material information with respect to Borrower, its business and assets provided by or on behalf of Borrower to Agent in connection with the preparation of this Agreement and the other Financing Agreements and the financing arrangements provided for herein.

1.82 “Intellectual Property” shall mean Borrower’s now owned and hereafter arising or acquired: patents, patent rights, patent applications, copyrights, works which are the subject matter of copyrights, copyright applications, copyright registrations, trademarks, servicemarks, trade names, trade styles, trademark and service mark applications, and licenses and rights to use any of the foregoing and all applications, registrations and recordings relating to the foregoing as may be filed in the United States Copyright Office, the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof, any political subdivision thereof or in any other country, together with all rights and privileges arising under applicable law with respect to Borrower’s use of any of the foregoing; all extensions, renewals,

reissues, divisions, continuations, and continuations-in-part of any of the foregoing; all rights to sue for past, present and future infringement of any of the foregoing; inventions, trade secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys, reports, manuals, and operating standards; goodwill (including any goodwill associated with any trademark or servicemark or the license of any trademark or servicemark); customer and other lists in whatever form maintained; trade secret rights, copyright rights, rights in works of authorship, domain names and domain name registrations; software and contract rights relating to computer software programs, in whatever form created or maintained.

1.83 “Interest Expense” shall mean, for any period, as to any Person, as determined in accordance with GAAP, the total interest expense of such Person, whether paid or accrued during such period but without duplication (including the interest component of Capital Leases for such period), including, without limitation, discounts in connection with the sale of any Accounts that are sold for purposes other than collection, but excluding interest paid in property other than cash and any other interest expense not payable in cash.

1.84 “Interest Period” shall mean for any Eurodollar Rate Loan, a period of approximately one (1), two (2), or three (3) months duration as Borrower may elect, the exact duration to be determined in accordance with the customary practice in the applicable Eurodollar Rate market; PROVIDED, THAT, Borrower may not elect an Interest Period which will end after the last day of the then current term of this Agreement.

1.85 “Interest Rate” shall mean,

(a) Subject to clause (b) and (c) below, (i) as to Prime Rate Loans (other than Prime Rate Fixed Asset Loans and Prime Rate Equipment Purchase Loans), a rate equal to one and one-quarter (1 1/4%) percent per annum in excess of the Prime Rate, (ii) as to Prime Rate Fixed Asset Loans and Prime Rate Equipment Purchase Loans, a rate of equal to one and three quarters (1 3/4%) percent per annum in excess of the Prime Rate, (iii) as to Eurodollar Rate Loans (other than Eurodollar Rate Fixed Asset Loans and Eurodollar Rate Equipment Purchase Loans), a rate of two and three quarters (2 3/4%) percent per annum in excess of the Adjusted Eurodollar Rate and (iv) as to Eurodollar Rate Fixed Asset Loans and Eurodollar Rate Equipment Purchase Loans, a rate of three and one quarter (3 1/4%) percent per annum in excess of the Adjusted Eurodollar Rate; in the case of each of clause (iii) and (iv) hereof based on the Eurodollar Rate applicable for the Interest Period selected by Borrower as in effect three (3) Business Days after the date of receipt by Agent of the request of Borrower for such Eurodollar Rate Loans in accordance with the terms hereof, whether such rate is higher or lower than any rate previously quoted to Borrower.

(b) Subject to clause (c) of this definition below, effective as of the first day of each month (commencing on March 1, 2005), the Interest Rate payable by Borrower shall be increased or decreased, as the case may be, (i) as to Prime Rate Loans, to the rate equal to the Applicable Margin on a per annum basis in excess of the Prime Rate, and (ii) as to Eurodollar Rate Loans, to the rate equal to the Applicable Margin on a per annum basis in excess of the Adjusted Eurodollar Rate.

(c) Notwithstanding anything to the contrary contained in clause (a) of this definition, the Applicable Margin otherwise used to calculate the Interest Rate for Prime Rate Loans and Eurodollar Rate Loans, shall be the highest percentage in the definition of Applicable Margin (with respect to Loans of the applicable type) plus (in each case) two (2%) percent per annum (without regard to Monthly Excess Availability), at Agent’s option, without notice, (i) either (A) for the period on and after the date of termination or non-renewal hereof until such time as all Obligations are indefeasibly paid and satisfied in full in immediately available funds (or in the case of contingent Obligations, Agent shall have received cash collateral or a letter of credit, at its option, all in accordance with Section 13.1(c)), or (B) for the period from and after the date of the occurrence of any Event of Default, and for so long as such Event of Default is continuing as determined by Agent and (ii) on the Loans to Borrower at any time outstanding in excess of the Borrowing Base of Borrower or the Loan Limit of Borrower (whether or not such excess(es) arise or are made with or without Agent’s or any Lender’s knowledge or consent and whether made before or after an Event of Default).

1.86 “Inventory” shall mean all of Borrower’s now owned and hereafter existing or acquired goods, wherever located, which (a) are leased by Borrower as lessor; (b) are held by Borrower for sale or lease or to be furnished under a contract of service; (c) are furnished by Borrower under a contract of service; or (d) consist of raw materials, work-in-process, finished goods or materials used or consumed in its business.

1.87 “Inventory Loan Limit” shall mean at any time, the amount equal to (a) $60,000,000 minus (b) the US Dollar Equivalent of the then outstanding amount of loans to Haynes UK (and including letter of credit accommodations to the extent provided in its borrowing base as such term is defined in the UK Financing Agreements) based on eligible inventory (as such term is defined in the UK Financing Agreements) of Haynes UK.

1.88 “Investment Property Control Agreement” shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent in good faith, by and among Agent, Borrower and any securities intermediary, commodity intermediary or other person who has custody, control or possession of any investment property of Borrower acknowledging that will comply with entitlement orders originated by Agent with respect to such investment property, or other instructions of Agent, and has such other terms and conditions as Agent may reasonably require.

1.89 “Kokomo Facility Inventory Availability” shall mean, with respect to Eligible Kokomo Inventory, the lesser of:

(a) the sum of (i) seventy (70%) percent multiplied by the Value of the Eligible Kokomo Inventory consisting of finished goods, plus (ii) fifty-five (55%) percent multiplied by the Value of the Eligible Kokomo Inventory consisting of work-in-process, plus (iii) eighty-five (85%) percent multiplied by the Value of the Eligible Kokomo Inventory consisting of raw materials; or

(b) the amount equal to the sum of the following for each category of Eligible Kokomo Inventory (such categories being finished goods, work-in-process and raw materials as described above): (i) eighty-five (85%) percent of the Net Recovery Percentage for each

category of such Eligible Kokomo Inventory multiplied by (ii) the Value of such category of Eligible Kokomo Inventory; or

(c) sixty (60%) percent multiplied by the sum of the Value of all of the above categories of such Eligible Kokomo Inventory.

1.90 “Lenders” shall mean the financial institutions who are signatories hereto as Lenders (other than UK Lender) and other persons made a party to this Agreement as a Lender in accordance with Section 13.7 hereof, and their respective successors and assigns; each sometimes being referred to herein individually as a “Lender”.

1.91 “Letter of Credit Accommodations” shall mean, collectively, the letters of credit, merchandise purchase or other guaranties which are from time to time either (a) issued or opened by Agent or any Lender for the account of Borrower or (b) with respect to which Agent or Lenders have agreed to indemnify the issuer or guaranteed to the issuer the performance by Borrower of its obligations to such issuer; sometimes being referred to herein individually as “Letter of Credit Accommodation”.

1.92 “Letter of Credit Fee” shall have the meaning set forth in Section 2.2(b) hereof.

1.93 “License Agreements” shall have the meaning set forth in Section 8.11 hereof.

1.94 “Loans” shall mean, collectively, the Tranche A Loans, the Tranche B Loans and the Equipment Purchase Loans.

1.95 “Material Adverse Effect” shall mean a material adverse effect on (a) the financial condition, business, performance or operations of Borrower and its Subsidiaries (taken as a whole); (b) the legality, validity or enforceability of this Agreement or any of the other Financing Agreements; (c) the legality, validity, enforceability, perfection or priority of the security interests and liens of Agent upon the Collateral; (d) the Collateral or its value; (e) the ability of Borrower to repay the Obligations or perform its obligations under this Agreement or any of the other Financing Agreements; or (f) the ability of Agent or any Lender to enforce the Obligations or realize upon the Collateral.

1.96 “Material Contract” shall mean (a) any contract or other agreement (other than the Financing Agreements), of Borrower involving monetary liability of or to any Person in an amount in excess of $2,000,000 in any fiscal year and (b) any other contract or other agreement (other than the Financing Agreements), to which Borrower is a party, as to which the breach, nonperformance, cancellation or failure to renew by any party thereto would have a Material Adverse Effect. For purposes hereof, the breach, non-performance, cancellation or failure to renew by any party will not constitute a Material Adverse Effect if Borrower is readily able to promptly obtain substitute performance from a third party on terms (taken as a whole) that are not less favorable in any material respect to Borrower.

1.97 “Maturity Date” shall have the meaning set forth in Section 13.1 hereof.

1.98 “Maximum Credit” shall mean $100,000,000.

1.99 “Monthly Average Excess Availability” shall mean, at any time, the daily average of the aggregate amount of the Excess Availability for the immediately preceding month as calculated by Agent in good faith, with Excess Availability calculated for this purpose without regard to the Maximum Credit.

1.100 “Mortgages” shall mean, individually and collectively, each of the following (as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced): (a) the Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated of even date herewith, by Borrower in favor of Agent with respect to the Real Property and related assets of Borrower located in Kokomo, Indiana, and (b) the Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated of even date herewith, by Borrower in favor of Agent with respect to the Real Property and related assets of Borrower located in Arcadia, Louisiana.

1.101 “Multiemployer Plan” shall mean a “multi employer plan” as defined in Section 4001(a)(3) of ERISA which is or was at any time during the current year or the immediately preceding six (6) years contributed to by Borrower or any ERISA Affiliate.

1.102 “Net Recovery Percentage” shall mean the fraction, expressed as a percentage, (a) the numerator of which is the amount equal to the amount of the recovery in respect of the Inventory at such time determined on a “net orderly liquidation value” basis pursuant to the most recent acceptable appraisal of Inventory received by Agent in accordance with Section 7.3, net of operating expenses, liquidation expenses and commissions (without duplication) likely to be incurred in connection with the liquidation of such Inventory as set forth in such appraisal, and (b) the denominator of which is the applicable standard cost of the aggregate amount of the Inventory subject to such appraisal.

1.103 “Non-U.S. Person” means a Person that is not a “United States person” within the meaning of Section 7701(a)(30) of the Code.

1.104 “Obligations” shall mean collectively, the Pre-Effective Date Obligations and the Post-Effective Date Obligations.

1.105 “Other Taxes” shall mean any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any of the other Financing Agreements.

1.106 “Participant” shall mean any financial institution that acquires and holds a participation in the interest of any Lender in any of the Loans and Letter of Credit Accommodations in conformity with the provisions of Section 13.7 of this Agreement governing participations.

1.107 “Pension Plan” shall mean a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA which Borrower sponsors, maintains, or to which Borrower or ERISA Affiliate makes, is making, or is obligated to make contributions, other than a Multiemployer Plan.

1.108 “Permits” shall have the meaning set forth in Section 8.7 hereof.

1.109 “Person” or “person” shall mean any individual, sole proprietorship, partnership, corporation (including any corporation which elects subchapter S status under the Code), limited liability company, limited liability partnership, business trust, unincorporated association, joint stock corporation, trust, joint venture or other entity or any government or any agency or instrumentality or political subdivision thereof.

1.110 “Plan” shall mean the First Amended Joint Plan of Reorganization of Haynes International, Inc. and certain of its affiliates, dated June 29, 2004, as modified, as confirmed by the Confirmation Order.

1.111 “Post-Effective Date Obligations” shall mean (a) any and all Loans, Letter of Credit Accommodations and all other obligations, liabilities and indebtedness of every kind, nature and description owing by Borrower to Agent or any Lender and/or any of their Affiliates arising on and after the Effective Date, including principal, interest, charges, fees, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, in each case arising under this Agreement or any of the other Financing Agreements, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of this Agreement or after the commencement of any case with respect to Borrower under the Bankruptcy Code or any similar statute (and including any principal, interest, fees, costs, expenses and other amounts owed to Agent or any Lender which would accrue and become due but for the commencement of such a case, whether or not such amounts are allowed or allowable in whole or in part in such a case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or unsecured, and however acquired by Agent or any Lender and (b) for purposes only of Section 5.1 hereof and subject to the priority in right of payment set forth in Section 6.4 hereof, all obligations of Borrower arising under or pursuant to a Hedge Agreement with a party acceptable to Agent; PROVIDED, THAT, (i) upon Agent’s request, Agent shall have entered into an agreement, in form and substance satisfactory to Agent, with such Person that is a counterparty to such Hedge Agreement, as acknowledged and agreed to by Borrower, providing for the delivery to Agent by such counterparty of information with respect to the amount of such obligations and providing for the other rights of Agent and such Lender, Affiliate or other Person, as the case may be, in connection with such arrangements and (ii) in no event shall the party to such Hedge Agreement to whom such obligations are owed be deemed a Lender for purposes hereof to the extent of and as to such obligations other than for purposes of Section 5.1 hereof and other than for purposes of Sections 12.1, 12.2, 12.3(b), 12.6, 12.7, 12.9 and 12.12 hereof. Without limiting the generality of the foregoing, the term “Obligations” shall include, without limitation, all Bank Product Obligations; PROVIDED, THAT, any Bank Product Provider to whom such obligations, liabilities and indebtedness are owing be deemed a Lender for purposes hereof to the extent of and as to such Bank Product Obligations other than for purposes of Section 5.1 hereof and other than for purposes of Section 12.1, 12.2, 12.3(b), 12.6, 12.7, 12.9 and 12.12 hereof .

1.112 “Pre-Effective Date Obligations” shall mean any and all Loans, Letter of Credit Accommodations and all other obligations, liabilities and indebtedness of every kind, nature and description owing by Borrower to Agent or any Lender and/or any of their Affiliates arising prior to the Effective Date, including principal, interest, charges, fees, costs and expenses, however

evidenced, whether as principal, surety, endorser, guarantor or otherwise, in each case arising under the Existing Agreements, now existing, whether arising before, during the term of the Existing Agreements or during the Chapter 11 Case, or before, during or after the confirmation of any plan of reorganization in the Chapter 11 Case (and including any principal, interest, fees, costs, expenses and other amounts owed to Agent or any Lender by Borrower in the Chapter 11 Case or any similar case or proceeding), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or unsecured, and however acquired by Agent or any Lender.

1.113 “Prime Rate” shall mean the rate from time to time publicly announced by Wachovia Bank, National Association, or its successors, as its prime rate, whether or not such announced rate is the best rate available at such bank.

1.114 “Prime Rate Equipment Purchase Loans” shall mean Prime Rate Loans outstanding from time to time that are Equipment Purchase Loans.

1.115 “Prime Rate Fixed Asset Loans” shall mean Prime Rate Loans outstanding from time to time based on Fixed Asset Availability.

1.116 “Prime Rate Loans” shall mean any Loans or portion thereof on which interest is payable based on the Prime Rate in accordance with the terms thereof (including Prime Rate Fixed Asset Loans and Prime Rate Equipment Purchase Loans).

1.117 “Pro Rata Share” shall mean, subject to Section 2.1(e) hereof:

(a) with respect to a Lender’s obligation to make Tranche A Loans and to acquire interests in Letter of Credit Accommodations and receive payments of interest and principal with respect thereto, the fraction (expressed as a percentage) the numerator of which is such Lender’s Tranche A Commitment and the denominator of which is the aggregate amount of all of the Tranche A Commitments, as adjusted from time to time in accordance with the provisions of Section 13.7 hereof; PROVIDED, THAT, if the Tranche A Commitments have been terminated, the numerator shall be the unpaid amount of such Lender’s Tranche A Loans and its interest in the Letter of Credit Accommodations and the denominator shall be the aggregate amount of all unpaid Tranche A Loans and Letter of Credit Accommodations;

(b) with respect to a Lender’s obligation to make Tranche B Loans and to acquire interests in Letter of Credit Accommodations and receive payments of interest and principal with respect thereto, the fraction (expressed as a percentage) the numerator of which is such Lender’s Tranche B Commitment and the denominator of which is the aggregate amount of all of the Tranche B Commitments, as adjusted from time to time in accordance with the provisions of Section 13.7 hereof; PROVIDED, THAT, if the Tranche B Commitments have been terminated, the numerator shall be the unpaid amount of such Lender’s Tranche B Loans and its interest in the Letter of Credit Accommodations and the denominator shall be the aggregate amount of all unpaid Tranche B Loans and Letter of Credit Accommodations;

(c) with respect to all other matters (including the indemnification obligations arising under Section 11.5 hereof, the voting rights set forth in Section 11.3 hereof and the payment of any fees for the account of Lenders), at any time, as to any Lender, except as Agent

and Lenders may otherwise agree, the fraction (expressed as a percentage) the numerator of which is such Lender’s Commitment (PROVIDED, THAT, if the Commitments have been terminated, the numerator shall be the unpaid amount of such Lender’s Loans and its interest in the Letter of Credit Accommodations) and the denominator of which shall be the amount equal to the aggregate amount of all Commitments of Lenders, as adjusted from time to time in accordance with the provisions of Section 13.7 hereof.

1.118 “Provision for Taxes” shall mean an amount equal to all taxes imposed on or measured by net income, whether Federal, State, county or local, and whether foreign or domestic, that are paid or payable by any Person in respect of any period in accordance with GAAP.

1.119 “Real Property” shall mean all now owned and hereafter acquired real property of Borrower together with all buildings, structures, and other improvements located thereon and all licenses, easements and appurtenances relating thereto, wherever located, including the real property and related assets more particularly described in the Mortgages.

1.120 “Receivables” shall mean all of the following now owned or hereafter arising or acquired property of Borrower: (a) all Accounts; (b) all interest, fees, late charges, penalties, collection fees and other amounts due or to become due or otherwise payable in connection with any Account; (c) all payment intangibles of Borrower; (d) letters of credit, indemnities, guarantees, security or other deposits and proceeds thereof issued payable to Borrower or otherwise in favor of or delivered to Borrower in connection with any Account; or (e) all other accounts, contract rights, chattel paper, instruments, notes, general intangibles and other forms of obligations owing to Borrower, whether from the sale and lease of goods or other property, licensing of any property (including Intellectual Property or other general intangibles), rendition of services or from loans or advances by Borrower or to or for the benefit of any third person (including loans or advances to any Affiliates or Subsidiaries of Borrower) or otherwise associated with any Accounts, Inventory or general intangibles of Borrower (including, without limitation, choses in action, causes of action, tax refunds, tax refund claims, any funds which may become payable to Borrower in connection with the termination of any Benefit Plan or other employee benefit plan and any other amounts payable to Borrower from any Benefit Plan or other employee benefit plan, rights and claims against carriers and shippers, rights to indemnification, business interruption insurance and proceeds thereof, casualty or any similar types of insurance and any proceeds thereof and proceeds of insurance covering the lives of employees on which Borrower is a beneficiary).

1.121 “Records” shall mean all of Borrower’s present and future books of account of every kind or nature, purchase and sale agreements, invoices, ledger cards, bills of lading and other shipping evidence, statements, correspondence, memoranda, credit files and other data relating to the Collateral or any account debtor, together with the tapes, disks, diskettes and other data and software storage media and devices, file cabinets or containers in or on which the foregoing are stored (including any rights of Borrower with respect to the foregoing maintained with or by any other person).

1.122 “Reference Bank” shall mean Wachovia Bank, National Association, or such other major U.S. Bank as Agent may from time to time designate. For purposes hereof, a “major

U.S. Bank” shall be any commercial bank organized under the laws of the United States, or any State thereof, or the District of Columbia that is a member of the Federal Reserve System and has combined capital and surplus and undivided profits of not less than $500,000,000.

1.123 “Register” shall have the meaning set forth in Section 13.7 hereof.

1.124 “Required Lenders” shall mean, at any time, those Lenders whose Pro Rata Shares aggregate fifty-one (51%) percent or more of the aggregate of the Commitments of all Lenders, or if the Commitments shall have been terminated, Lenders to whom at least fifty-one (51%) percent of the principal amount of the then outstanding Obligations are owing.

1.125 “Reserves” shall mean as of any date of determination, such amounts as Agent may from time to time establish and revise in good faith reducing the amount of Loans and Letter of Credit Accommodations that would otherwise be available to Borrower under the lending formula(s) provided for herein: (a) to reflect events, conditions, contingencies or risks which, as determined by Agent in good faith, have adversely affected, or are reasonably likely to adversely affect, either (i) the Collateral, its value or the amount that might be received by Agent from the sale or other disposition thereof, or (ii) the business or operations of Borrower or (iii) the security interests and other rights of Agent or any Lender in the Collateral (including the enforceability, perfection and priority thereof), including, without limitation, the maximum amount of any indebtedness or claim which may have a lien or administrative claim upon property of the estate of Borrower superior to or on a parity with the lien and security interest or administrative claim of Agent or any Lender therein or thereon or (b) to reflect Agent’s good faith belief that any collateral report or financial information furnished by or on behalf of Borrower to Agent is or may have been incomplete, inaccurate or misleading in any material respect or (c) to reflect outstanding Letter of Credit Accommodations as provided in Section 2.2 hereof. Without limiting the generality of the foregoing, Reserves may, at Agent’s option, be established to reflect: (i) dilution with respect to the Accounts (based on the ratio of the aggregate amount of non-cash reductions in Accounts for any period to the aggregate dollar amount of the sales of Borrower for such period) as calculated by Agent for any period is or is reasonably anticipated to be greater than five (5%) percent; or (ii) that the fair market value of Real Property subject to a Mortgage, or the net orderly liquidation value of the Equipment, as set forth in any appraisals received by Agent with respect thereto after the date hereof (in each case net of operating expenses, liquidation expenses and commissions (without duplication estimated to be incurred in connection with the liquidation thereof), that are acceptable to Agent for such purpose, has declined so that the Fixed Asset Availability is greater than (A) the percentages with respect to the value of Real Property or Equipment used in establishing the original amounts of the Fixed Asset Availability multiplied by (B) the applicable values set forth in such subsequent appraisals; or (iii) the net orderly liquidation value of any Eligible New Equipment as set forth in any appraisals thereof received by Agent with respect thereto after the date hereof (net of operating expenses, liquidation expenses and commissions without duplication estimated to be incurred in connection with the liquidation thereof) that are acceptable to Agent, for such purpose, has declined so that the Equipment Purchase Loan based on such Eligible New Equipment is greater than the then outstanding principal amount of such Equipment Purchase Loan; or (iv) variances between the Inventory records of Borrower and the results of test counts or physical counts of Inventory with respect thereto; or (v) variances between the stock ledger Inventory report and general ledger; or (vi) returns, discounts, claims, credits and allowances of

any nature that are not paid pursuant to the reduction of Accounts; or (vii) amounts due or to become due in respect of sales, excise, use and/or withholding taxes; or (viii) to the extent that a change in the turnover, age or mix of the categories of Inventory adversely affects the aggregate value of all Inventory or to reflect that the commodity prices of raw materials have decreased; or (ix) any rental payments or other amounts due or to become due to owners and lessors of real property or owners and operators of premises to the extent Inventory, Equipment or Records are located in or on such property or premises and Agent has not received a satisfactory Collateral Access Agreement from the owner or lessor of such real property or owner and operator of such property or premises in possession of such assets (PROVIDED, THAT, such Reserves will not exceed the aggregate of the amounts payable to such owners and lessors or owners and operators for the next three (3) months from any such time and including in each case amounts, if any, then outstanding and unpaid owed by Borrower to such owners and lessors or owners and operators, but such limitations will only apply so long as no Event of Default exists or has occurred and is continuing); or (x) obligations (contingent or otherwise) of Borrower to any Affiliate of Agent or a Lender or any other Person arising under or in connection with any Hedge Agreement of Borrower with such Affiliate or Person or as such Affiliate or Person may otherwise require in connection therewith to the extent that such obligations constitute Obligations as such term is defined herein or otherwise receive the benefit of the security interest of Agent in any Collateral; PROVIDED, THAT, the amount of the Reserves in respect of such obligations shall be based on the amount of the liability of Borrower as agreed by the other party or parties to the Hedge Agreements and reported by such other party or parties to Agent in a form and substance satisfactory to Agent; or (xi) Bank Product Obligations (PROVIDED, THAT, without limiting any other rights of Agent with respect to the establishment or modification of Reserves, the establishment of such Reserve is at the option of Agent, without any obligation to do so and that so long as no Default or Event of Default exists or has occurred and is continuing Agent shall not establish such Reserve to the extent that such obligations are only to be paid after all other Obligations or pro rata with obligations arising under Hedge Agreements that are greater than any Reserves established with respect to Hedge Agreements). To the extent Agent may revise the lending formulas used to determine the Borrowing Base or establish new criteria or revise existing criteria for Eligible Accounts or Eligible Inventory so as to address any circumstances, condition, event or contingency in a manner satisfactory to Agent, Agent shall not establish a Reserve for the same purpose. The amount of any Reserve established by Agent shall have a reasonable relationship to the event, condition or other matter which is the basis for such reserve as determined by Agent in good faith. In the event that the event, condition or other matter giving rise to the establishment of any Reserve shall cease to exist for a period of thirty (30) consecutive days (unless there is a reasonable prospect that such event, condition or other matter will occur again within a reasonable period of time thereafter), the Reserve established pursuant to such event, condition or other matter, shall be discontinued. The term “Reserves” as used herein shall include in addition, and not in limitation, the Special Availability Reserve.

1.126 “Restructuring Expenses” shall mean with respect to Borrower and its Subsidiaries, for any period, fees and expenses of (a) professionals whose retention was approved by the Bankruptcy Court during the Chapter 11 Case pursuant to Section 327 and 1103 of the Bankruptcy Code and (b) any statutory committees appointed in the Chapter 11 Case (and, prior to such appointment, the ad hoc committee of the holders of Borrower’s pre-petition senior notes), in each case, paid by Borrower during such period.

1.127 “Secured Obligations” shall mean, collectively, the Obligations and UK Obligations.

1.128 “Secured Parties” shall mean, collectively, Agent, Lenders, the UK Lender and Bank Product Providers; sometimes being referred to herein individually as a “Secured Party”.

1.129 “Service Center Availability” shall mean, with respect to Eligible Service Center Inventory, the lesser of (a) seventy (70%) percent multiplied by the Value of such Eligible Service Center Inventory or (b) eighty-five (85%) percent of the Net Recovery Percentage multiplied by the Value of such Eligible Service Center Inventory.

1.130 “Special Agent Advances” shall have the meaning set forth in Section 12.11 hereof.

1.131 “Special Availability Reserve” shall mean, at any time, $1,500,000.

1.132 “Subsidiary” or “subsidiary” shall mean, with respect to any Person, any corporation, limited liability company, limited liability partnership or other limited or general partnership, trust, association or other business entity of which an aggregate of at least a majority of the outstanding Capital Stock or other interests entitled to vote in the election of the board of directors of such corporation (irrespective of whether, at the time, Capital Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency), managers, trustees or other controlling persons, or an equivalent controlling interest therein, of such Person is, at the time, directly or indirectly, owned by such Person and/or one or more subsidiaries of such Person.

1.133 “Taxes” shall mean any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto imposed by Governmental Authority.

1.134 “Tranche A Commitment” shall mean, with respect to each Lender, the principal amount set forth below such Lender’s signature on the signature pages hereto and designated “Tranche A Commitment” or on Schedule 1 to the Assignment and Acceptance Agreement pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 13.7 hereof, as the same may be adjusted in accordance with the terms hereof; sometimes being collectively referred to as “Tranche A Commitments”.

1.135 “Tranche A Lender” shall mean a Lender with a Tranche A Commitment.

1.136 “Tranche A Loan Limit” shall mean at any time the amount equal to the lesser of: (a) $85,000,000 or (b) the Borrowing Base at such time.

1.137 “Tranche A Loans” shall mean the loans now or hereafter made by or on behalf of any Lender or by Agent for the account of any Lender, on a revolving basis pursuant to the Credit Facility (including advances, repayments and readvances), as set forth in Section 2.1(a) hereof.

1.138 “Tranche B Borrowing Base” shall mean, at any time, the amount equal to: (a) the Borrowing Base at such time minus (b) the aggregate amount of the Tranche A Loans then outstanding.

1.139 “Tranche B Commitment” shall mean, with respect to each Lender, the principal amount set forth below such Lender’s signature on the signature pages hereto and designated “Tranche B Commitment” or on Schedule 1 to the Assignment and Acceptance Agreement pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 13.7 hereof, as the same may be adjusted in accordance with the terms hereof; sometimes being collectively referred to as “Tranche B Commitments”.

1.140 “Tranche B Lender” shall mean a Lender with a Tranche B Commitment.

1.141 “Tranche B Loan Limit” shall mean, at any time, the lesser of: (a) the amount equal to: (i) $15,000,000 minus (ii) the sum of (A) the aggregate amount of loans and letter of credit accommodations outstanding (and as to such letter of credit accommodations, without regard to the reserves established with respect thereto), to or for the benefit of Haynes UK or any other obligor under the UK Financing Agreements plus (B) the aggregate amount of the then outstanding principal amount of Equipment Purchase Loans and (b) the Tranche B Borrowing Base.

1.142 “Tranche B Loans” shall mean the loans now or hereafter made by or on behalf of any Lender or by Agent for the account of any Lender, on a revolving basis pursuant to the Credit Facility (including advances, repayments and readvances), as set forth in Section 2.1(b) hereof.

1.143 “UCC” shall mean the Uniform Commercial Code as in effect in the State of Illinois, and any successor statute, as in effect from time to time (except that terms used herein which are defined in the Uniform Commercial Code as in effect in the State of Illinois on the date hereof shall continue to have the same meaning notwithstanding any replacement or amendment of such statute).

1.144 “UK Financing Agreements” shall mean, collectively, the following (as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced): (a) the Facility Agreement, dated April 2, 2004, by and among Haynes UK and UK Lender; (b) the Guarantee, dated April 2, 2004, by Borrower in favor of UK Lender; and (c) all agreements, documents and instruments executed and/or delivered in connection with any of the foregoing.

1.145 “UK Lender” shall mean Burdale Financial Limited, a company organized under the laws of England and Wales, and its successors and assigns.

1.146 “UK Obligations” shall mean all obligations, liabilities and indebtedness of every kind, nature and description owing by Borrower to UK Lender, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of this Agreement or the UK Financing Agreements arising under or pursuant to any of the UK Financing Agreements, whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or unsecured.

1.147 “US Dollar Equivalent” shall mean at any time (a) as to any amount denominated in US Dollars, the amount thereof at such time, and (b) as to any amount denominated in any other currency, the equivalent amount in US Dollars calculated by Agent at such time using the Exchange Rate in effect on the Business Day of determination.

1.148 “US Dollars”, “US$” and “$” shall each mean lawful currency of the United States of America.

1.149 “Value” shall mean the US Dollar Equivalent with respect to Inventory, equal to the lower of (a) cost computed on a first-in-first-out basis in accordance with GAAP using “standard” costs or (b) market value; PROVIDED, THAT, for purposes of the calculation of the Borrowing Base, (i) the Value of the Inventory shall not include: (A) the portion of the value of Inventory equal to the profit earned by any Affiliate on the sale thereof to Borrower to the extent the same is reflected in the cost of such Inventory or (B) write ups or write downs in value with respect to currency exchange rates and (ii) notwithstanding anything to the contrary contained herein, the cost of the Inventory shall be computed in the same manner and consistent with the most recent appraisal of the Inventory received and accepted by Agent prior to the date hereof, if any.

1.150 “Voting Stock” shall mean with respect to any Person, (a) one (1) or more classes of Capital Stock of such Person having general voting powers to elect at least a majority of the board of directors, managers or trustees of such Person, irrespective of whether at the time Capital Stock of any other class or classes have or might have voting power by reason of the happening of any contingency, and (b) any Capital Stock of such Person convertible or exchangeable without restriction at the option of the holder thereof into Capital Stock of such Person described in clause (a) of this definition.

SECTION 2. CREDIT FACILITIES

2.1 LOANS.

(a) Subject to and upon the terms and conditions contained herein, each Tranche A Lender severally (and not jointly) agrees to make its Pro Rata Share of Tranche A Loans to Borrower from time to time in amounts requested by Borrower in the aggregate amount for the Tranche A Loans of all Tranche A Lenders of up to the lesser of (i) the Borrowing Base at such time or (ii) the Tranche A Commitments.

(b) Subject to and upon the terms and conditions contained herein, each Tranche B Lender severally (and not jointly) agrees to make its Pro Rata Share of Tranche B Loans to Borrower from time to time in amounts requested by Borrower in the aggregate amount for the Tranche B Loans of all Tranche B Lenders of up to the lesser of (i) the Tranche B Borrowing Base at such time and (ii) the Tranche B Commitments; PROVIDED, THAT, Tranche B Loans will only be made at such time as the then outstanding principal amount of the Tranche A Loans equals or exceeds the Tranche A Loan Limit.

(c) Except in Agent’s discretion, with the consent of all Lenders, or as otherwise provided herein, (i) the aggregate amount of the Loans and the Letter of Credit Accommodations outstanding at any time shall not exceed the Maximum Credit, (ii) the aggregate principal

amount of the Tranche A Loans and the Tranche B Loans outstanding at any time shall not exceed the Borrowing Base, (iii) the aggregate principal amount of all Tranche A Loans and Letter of Credit Accommodations outstanding at any time shall not exceed the Tranche A Loan Limit, (iv) the aggregate principal amount of all Tranche B Loans outstanding at any time shall not exceed the Tranche B Loan Limit, (v) the aggregate principal amount of the Loans outstanding at any time based on Eligible Inventory shall not exceed the Inventory Loan Limit, and (vi) the aggregate principal amount of the Loans outstanding at any time based on Eligible Inventory consisting of work-in-process shall not exceed $30,000,000.

(d) In the event that the aggregate principal amount of the Loans and Letter of Credit Accommodations outstanding at any time exceeds the Maximum Credit, or the aggregate principal amount of the Tranche A Loans and the Tranche B Loans exceeds the Borrowing Base, or the aggregate principal amount of outstanding Tranche A Loans exceeds the Tranche A Loan Limit, or the aggregate principal amount of outstanding Tranche B Loans exceeds the Tranche B Loan Limit, or the aggregate principal amount of Loans and Letter of Credit Accommodations based on the Eligible Inventory exceed the Inventory Loan Limit, or the aggregate amount of the outstanding Letter of Credit Accommodations exceed the sublimit for Letter of Credit Accommodations set forth in Section 2.2(e), such event shall not limit, waive or otherwise affect any rights of Agent or Lenders in such circumstances or on any future occasions and Borrower shall, upon demand by Agent, which may be made at any time or from time to time, immediately repay to Agent the entire amount of any such excess(es) for which payment is demanded.

(e) In the event that at any time Borrower may request Tranche B Loans in accordance with the terms hereof and such Tranche B Loans are made or in the event that there are any Loans outstanding in excess of the Borrowing Base (other than Equipment Purchase Loans and Special Agent Advances), or in the event that at any time the aggregate principal amount of the Loans exceeds $85,000,000, thereafter and for so long as any such Tranche B Loans or Loans are outstanding, notwithstanding anything to the contrary contained in Sections 1.117(a) and 1.117(b) hereof, for purposes of such sections, the amount of the Pro Rata Share of each Lender shall be calculated based on the fraction, expressed as a percentage,

(i) the numerator of which shall be the sum of (A) the Tranche A Commitment of such Lender plus (B) the amount equal to (1) the Tranche B Commitment of such Lender minus (2) the amount equal to (aa) such Lender’s percentage share of the total of the Tranche B Commitments of all Lenders as then in effect (with such share calculated based on the fraction, expressed as a percentage, the numerator of which is the Tranche B Commitment of such Lender and denominator is the total of all Tranche B Commitments) multiplied by (bb) the maximum amount of the loans then available to Haynes UK under the UK Financing Agreements (determined after giving effect to the reduction thereto as a result of the Tranche B Loans then outstanding, but without regard to the UK borrowing base at such time or the amount of the loans or other financial accommodations to Haynes UK outstanding at such time under the UK Financing Agreements), and

(ii) the denominator of which shall be the sum of the principal amount of the Tranche A Loans then outstanding plus the principal amount of the Tranche B Loans then outstanding.

(f) The method for calculating the Pro Rata Shares of each Lender as set forth in Section 2.1(e) above shall apply as to each Lender whether or not such Lender has only a Tranche A Commitment, only a Tranche B Commitment or both and shall apply as to such Lender’s obligation to make Loans and receive payments in respect of such Loans in the circumstances when Section 2.1(e) hereof is applicable regardless of whether such Loans would be deemed to constitute Tranche A Loans or Tranche B Loans and regardless of whether any such payments would otherwise be allocated to Tranche A Loans or Tranche B Loans for purposes of Section 6.4(a) hereof and, for purposes of this Section 2.1, regardless of whether such Lender is a Tranche A Lender and/or a Tranche B Lender. Nothing contained herein shall be construed to mean that any Lender that has only a Tranche A Commitment also has a Tranche B Commitment for purposes of the Loan Agreement or that any Lender that has only a Tranche A Commitment is a Tranche B Lender for purposes of the Loan Agreement.

2.2 LETTER OF CREDIT ACCOMMODATIONS.

(a) Subject to and upon the terms and conditions contained herein, at the request of Borrower, Agent agrees, for the ratable risk of each Lender according to its Pro Rata Share, to provide or arrange for Letter of Credit Accommodations for the account of Borrower containing terms and conditions acceptable to Agent and the issuer thereof. Any payments made by or on behalf of Agent or any Lender to any issuer thereof and/or related parties in connection with the Letter of Credit Accommodations provided to or for the benefit of Borrower shall first constitute additional Tranche A Loans to Borrower pursuant to this Section 2 and thereafter Tranche B Loans (or in any event Special Agent Advances as the case may be).

(b) In addition to any charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations, Borrower shall pay to Agent, for the benefit of Lenders based on their respective Pro Rata Shares, a letter of credit fee (the “Letter of Credit Fee”) at a rate equal to two (2%) percent per annum, on the daily outstanding balance of the Letter of Credit Accommodations for the immediately preceding month (or part thereof), payable in arrears as of the first day of each succeeding month; PROVIDED, THAT, effective as of the first day of each month (commencing on March 1, 2005) the Letter of Credit Fee payable by Borrower shall be the rate equal to the Applicable Margin on a per annum basis; except that Agent may, and upon the written direction of Required Lenders shall, require Borrower to pay to Agent for the benefit of Lenders based on their respective Pro Rata Shares such Letter of Credit Fee, at a rate equal to four (4%) percent per annum on such daily outstanding balance for: (i) the period from and after the date of termination hereof until Agent and Lenders have received full and final payment of all Obligations (notwithstanding entry of a judgment against Borrower) and (ii) the period from and after the date of the occurrence of an Event of Default for so long as such Event of Default is continuing. Such Letter of Credit Fee shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed and the obligation of Borrower to pay such fee shall survive the termination of this Agreement.

(c) Borrower shall give Agent two (2) Business Days’ prior written notice of Borrower’s request for the issuance of a Letter of Credit Accommodation. Such notice shall be irrevocable and shall specify the original face amount of the Letter of Credit Accommodation requested, the effective date (which date shall be a Business Day and in no event shall be a date less than ten (10) days prior to the end of the then current term of this Agreement) of issuance of

such requested Letter of Credit Accommodation, whether such Letter of Credit Accommodations may be drawn in a single or in partial draws, the date on which such requested Letter of Credit Accommodation is to expire (which date shall be a Business Day), the purpose for which such Letter of Credit Accommodation is to be issued, and the beneficiary of the requested Letter of Credit Accommodation. Borrower shall attach to such notice the proposed terms of the Letter of Credit Accommodation.

(d) In addition to being subject to the satisfaction of the applicable conditions precedent contained in Section 4 hereof and the other terms and conditions contained herein, no Letter of Credit Accommodations shall be available unless each of the following conditions precedent have been satisfied in a manner satisfactory to Agent: (i) Borrower shall have delivered to the proposed issuer of such Letter of Credit Accommodation at such times and in such manner as such proposed issuer may require, an application, in form and substance satisfactory to such proposed issuer and Agent, for the issuance of the Letter of Credit Accommodation and such other documents as may be required pursuant to the terms thereof, and the form and terms of the proposed Letter of Credit Accommodation shall be satisfactory to Agent and such proposed issuer, (ii) as of the date of issuance, no order of any court, arbitrator or other Governmental Authority shall purport by its terms to enjoin or restrain money center banks generally from issuing letters of credit of the type and in the amount of the proposed Letter of Credit Accommodation, and no law, rule or regulation applicable to money center banks generally and no request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over money center banks generally shall prohibit, or request that the proposed issuer of such Letter of Credit Accommodation refrain from, the issuance of letters of credit generally or the issuance of such Letters of Credit Accommodation; and (iii) Excess Availability prior to giving effect to any Reserves with respect to such Letter of Credit Accommodations, on the date of the proposed issuance of any Letter of Credit Accommodations, shall be equal to or greater than: (A) if the proposed Letter of Credit Accommodation is for the purpose of purchasing Eligible Inventory and the documents of title with respect thereto are consigned to the issuer (or subject to such other arrangements as are acceptable to Agent), the sum of (1) the percentage equal to one hundred (100%) percent minus the then applicable percentage with respect to Eligible Inventory set forth in the definition of the term Borrowing Base multiplied by the Value of such Eligible Inventory, plus (2) freight, taxes, duty and other amounts which Agent estimates must be paid in connection with such Inventory upon arrival and for delivery to one of Borrower’s locations for Eligible Inventory within the United States of America and (B) if the proposed Letter of Credit Accommodation is for any other purpose or the documents of title are not consigned to the issuer (or subject to such other arrangements as are acceptable to Agent) in connection with a Letter of Credit Accommodation for the purpose of purchasing Inventory, an amount equal to one hundred (100%) percent of the face amount thereof and all other commitments and obligations made or incurred by Agent with respect thereto. Effective on the issuance of each Letter of Credit Accommodation, a Reserve shall be established in the applicable amount set forth in Section 2.2(d)(iii)(A) or Section 2.2(d)(iii)(B).

(e) Except in Agent’s discretion, with the consent of all Lenders, the amount of all outstanding Letter of Credit Accommodations and all other commitments and obligations made or incurred by Agent or any Lender in connection therewith shall not at any time exceed $10,000,000 minus the US Dollar Equivalent of the amount of the then outstanding letters of

credit provided or arranged for under the UK Financing Agreements and all other commitments made or incurred under the UK Financing Agreements in connection therewith).

(f) Subject to Section 6.5 hereof, Borrower shall indemnify and hold Agent and Lenders harmless from and against any and all losses, claims, damages, liabilities, costs and expenses which Agent or any Lender may suffer or incur in connection with any Letter of Credit Accommodations and any documents, drafts or acceptances relating thereto, including any losses, claims, damages, liabilities, costs and expenses due to any action taken by any issuer or correspondent with respect to any Letter of Credit Accommodation, except for such losses, claims, damages, liabilities, costs or expenses that are a direct result of the gross negligence or willful misconduct of Agent or any Lender as determined pursuant to a final non-appealable order of a court of competent jurisdiction. Borrower assumes all risks with respect to the acts or omissions of the drawer under or beneficiary of any Letter of Credit Accommodation and for such purposes the drawer or beneficiary shall be deemed Borrower’s agent. Subject to Section 6.5 hereof, Borrower assumes all risks for, and agrees to pay, all foreign, Federal, State and local taxes, duties and levies relating to any goods subject to any Letter of Credit Accommodations or any documents, drafts or acceptances thereunder. Borrower hereby releases and holds Agent and Lenders harmless from and against any acts, waivers, errors, delays or omissions, whether caused by Borrower, by any issuer or correspondent or otherwise with respect to or relating to any Letter of Credit Accommodation, except for the gross negligence or willful misconduct of Agent or such Lender, as the case may be, as determined pursuant to a final, non-appealable order of a court of competent jurisdiction. The provisions of this Section 2.2(f) shall survive the payment of Obligations and the termination of this Agreement.

(g) In connection with Inventory purchased pursuant to Letter of Credit Accommodations, Borrower shall, at Agent’s request, instruct all suppliers, carriers, forwarders, customs brokers, warehouses or others receiving or holding cash, checks, Inventory, documents or instruments in which Agent holds a security interest to deliver them to Agent and/or subject to Agent’s order, and if they shall come into Borrower’s possession, to deliver them, upon Agent’s request, to Agent in their original form; PROVIDED, THAT, Agent shall not exercise its rights under this clause (g) to have such persons deliver any cash, checks, documents or instruments (so long as such documents or instruments are held by a customs broker that has executed and delivered a Collateral Access Agreement) or Inventory to Agent unless a Default or Event of Default exists or has occurred and is continuing. At any time that a Default or Event of Default exists or has occurred and is continuing, Borrower shall also, at Agent’s request, designate Agent (or the issuer of the Letter of Credit Accommodation with respect thereto as Agent may specify) as the consignee on all bills of lading and other negotiable and non-negotiable documents.

(h) Borrower hereby irrevocably authorizes and directs any issuer of a Letter of Credit Accommodation to name Borrower as the account party therein and to deliver to Agent all instruments, documents and other writings and property received by issuer pursuant to the Letter of Credit Accommodations and to accept and rely upon Agent’s instructions and agreements with respect to all matters arising in connection with the Letter of Credit Accommodations or the applications therefor (PROVIDED, THAT, such rights of Agent to provide such instructions and agreements shall be subject to the rights of Borrower to provide instructions and agreements with respect to certain matters arising in connection therewith as set forth below). Nothing contained herein shall be deemed or construed to grant Borrower any right or authority to pledge the credit

of Agent or any Lender in any manner. Agent and Lenders shall have no liability of any kind with respect to any Letter of Credit Accommodation provided by an issuer other than Agent or any Lender unless Agent has duly executed and delivered to such issuer the application or a guarantee or indemnification in writing with respect to such Letter of Credit Accommodation. Borrower shall be bound by any reasonable interpretation made in good faith by Agent, or any other issuer or correspondent under or in connection with any Letter of Credit Accommodation or any documents, drafts or acceptances thereunder, notwithstanding that such interpretation may be inconsistent with any instructions of Borrower.

(i) So long as no Event of Default exists or has occurred and is continuing, Borrower may (i) approve or resolve any questions of non-compliance of documents, (ii) give any instructions as to acceptance or rejection of any documents or goods, (iii) execute any and all applications for steamship or airway guaranties, indemnities or delivery orders, and (iv) with Agent’s consent, grant any extensions of the maturity of, time of payment for, or time of presentation of, any drafts, acceptances, or documents, and agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, Letter of Credit Accommodations, or documents, drafts or acceptances thereunder or any letters of credit included in the Collateral.

(j) At any time an Event of Default exists or has occurred and is continuing, Agent shall have the right and authority to, and on and after written notice from Agent to Borrower, Borrower shall not, without the prior written consent of Agent, (i) approve or resolve any questions of non-compliance of documents, (ii) give any instructions as to acceptance or rejection of any documents or goods, (iii) execute any and all applications for steamship or airway guaranties, indemnities or delivery orders, (iv) grant any extensions of the maturity of, time of payments for, or time of presentation of, any drafts, acceptances, or documents, and (v) agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, Letter of Credit Accommodations, or documents, drafts or acceptances thereunder or any letters of credit included in the Collateral. Agent may take such actions either in its own name or in Borrower’s name.

(k) Any rights, remedies, duties or obligations granted or undertaken by Borrower to any issuer or correspondent in any application for any Letter of Credit Accommodation, or any other agreement in favor of any issuer or correspondent relating to any Letter of Credit Accommodation, shall be deemed to have been granted or undertaken by Borrower to Agent for the ratable benefit of Lenders. Any duties or obligations undertaken by Agent to any issuer or correspondent in any application for any Letter of Credit Accommodation, or any other agreement by Agent in favor of any issuer or correspondent to the extent relating to any Letter of Credit Accommodation, shall be deemed to have been undertaken by Borrower to Agent for the ratable benefit of Lenders and to apply in all respects to Borrower.

(l) Immediately upon the issuance or amendment of any Letter of Credit Accommodation, each Lender shall be deemed to have irrevocably and unconditionally purchased and received, without recourse or warranty, an undivided interest and participation to the extent of such Lender’s Pro Rata Share of the liability with respect to such Letter of Credit Accommodation (including, without limitation, all Obligations with respect thereto).

(m) Borrower is irrevocably and unconditionally obligated, without presentment, demand or protest, to pay to Agent any amounts paid by an issuer of a Letter of Credit Accommodation with respect to such Letter of Credit Accommodation (whether through the borrowing of Loans in accordance with Section 2.2(a) or otherwise). In the event that Borrower fails to pay Agent on the date of any payment under a Letter of Credit Accommodation in an amount equal to the amount of such payment, Agent (to the extent it has actual notice thereof) shall promptly notify each Lender of the unreimbursed amount of such payment and each Lender agrees, upon one (1) Business Day’s notice, to fund to Agent the purchase of its participation in such Letter of Credit Accommodation in an amount equal to its Pro Rata Share of the unpaid amount. The obligation of each Lender to deliver to Agent an amount equal to its respective participation pursuant to the foregoing sentence is absolute and unconditional and such remittance shall be made notwithstanding the occurrence or continuance of any Event of Default, the failure to satisfy any other condition set forth in Section 4 or any other event or circumstance. If such amount is not made available by a Lender when due, Agent shall be entitled to recover such amount on demand from such Lender with interest thereon, for each day from the date such amount was due until the date such amount is paid to Agent at the interest rate then payable by Borrower in respect of Loans that are Prime Rate Loans as set forth in Section 3.1(a) hereof.

2.3 EQUIPMENT PURCHASE LOANS.

(a) Subject to and upon the terms and conditions contained herein, at any time and from to time on or after the date hereof, each Lender severally (and not jointly) shall make its Pro Rata Share of Equipment Purchase Loans to Borrower, at the request of Borrower, of seventy five (75%) percent of the Hard Costs of Eligible New Equipment purchased or to be purchased by Borrower after April 12, 2004, or such lesser amount as to any Equipment Purchase Loan as Borrower may request. The proceeds of each Equipment Purchase Loan shall be used solely for the payment of the purchase price, or to reimburse Borrower for the cash previously paid by Borrower for the purchase price, for the Eligible New Equipment specified in the Equipment Purchase Loan Request applicable to such Equipment Purchase Loan; PROVIDED, THAT, (i) as to any Eligible New Equipment purchased after April 12, 2004 and prior to the date hereof, such Equipment Purchase Loan Request shall be received within thirty (30) days after the date hereof, (ii) as to any Equipment Purchase Loans based on Eligible New Equipment purchased after April 12, 2004 and prior to the date hereof, the aggregate amount of all such Equipment Purchase Loans shall not exceed $2,000,000, (iii) to the extent that the proceeds of any Equipment Purchase Loan are used to reimburse Borrower for the cash paid by Borrower for the purchase price of any Eligible New Equipment purchased after the date hereof, Borrower shall have taken possession of such Eligible New Equipment within ninety (90) days prior to the date of the Equipment Purchase Loan, and (iv) no Equipment Purchase Loan Request shall include any Eligible New Equipment that has been included in any other Equipment Purchase Loan Request. Each Equipment Purchase Loan shall be in an amount of not less than $500,000. A single Equipment Purchase Loan may be used for the purchase price of one or more items constituting Eligible New Equipment specified in the Equipment Purchase Loan Request required to be delivered to Lender pursuant to Section 2.3(d)(i) below and the minimum amount of such Equipment Purchase Loan applies to such Equipment Purchase Loan, not to the purchase price of any individual item of Eligible New Equipment.

(b) The outstanding aggregate principal amount of the Equipment Purchase Loans made by Lenders shall not exceed $10,000,000; PROVIDED, THAT, in no event shall the aggregate principal amount of the Equipment Purchase Loans exceed the aggregate amount of seventy-five (75%) percent of the Hard Costs of all Eligible New Equipment purchased by Borrower pursuant hereto. If at any time the outstanding aggregate principal amount of all Equipment Purchase Loans exceeds eighty (80%) percent of the net orderly liquidation value of all of the Eligible New Equipment (net of liquidation expenses) as set forth in the most recent acceptable appraisal with respect thereto received by Agent, Agent may, at its option, or shall upon the request of the Required Lenders, establish a Reserve in the amount equal to the entire amount of such excess or Agent may instead, at its option, demand and Borrower shall, upon demand by Agent, which may be made at any time and from time to time, repay to Agent the entire amount of such excess.

(c) Each Equipment Purchase Loan to Borrower shall be (i) evidenced by an Equipment Purchase Note executed and delivered by Borrower to Agent concurrently with each Equipment Purchase Loan, (ii) repaid, together with interest and other amounts payable thereunder, in accordance with the provisions of the applicable Equipment Purchase Note, this Agreement and the other Financing Agreements, and (iii) secured by all of the Collateral.

(d) In addition to the other conditions precedent to any Loan or Letter of Credit Accommodation set forth in this Agreement, the making of each Equipment Purchase Loan shall be subject to the satisfaction of each of the following additional conditions precedent, as determined by Agent:

(i) Agent shall have received from Borrower not less than five (5) Business Days and not more than ten (10) Business Days prior written notice of the proposed Equipment Purchase Loan (each such notice being an “Equipment Purchase Loan Request”), which notice shall specify the following: (A) the proposed date and amount of the Equipment Purchase Loan, (B) a list and description of the Eligible New Equipment (by model, make, manufacturer, serial number and/or such other identifying information as may be requested by Agent), (C) whether any of such Eligible New Equipment has been purchased prior to the date of the proposed Equipment Purchase Loan and if so, the date of such purchase and identifying the specific Eligible New Equipment that has been so purchased, (D) the Hard Costs and total purchase price for the Eligible New Equipment to be purchased with the proceeds of such Equipment Purchase Loan (and the terms of payment of such purchase price), or for which Borrower is being reimbursed, as the case may be and (E) such other information and documents as Agent may from time to time reasonably request with respect thereto;

(ii) Agent shall have a valid and perfected first priority security interest in and lien upon the Eligible New Equipment to be purchased with the proceeds of the Equipment Purchase Loan and the Eligible New Equipment shall be free and clear of all other liens, security interests, claims or other encumbrances (except for those permitted in this Agreement that are subject to an intercreditor agreement, in form and substance satisfactory to Agent, between the holder of such security interest and Agent or as Agent may otherwise specifically agree), and Borrower shall have delivered to Agent such evidence thereof, as Agent may from time to time require;

(iii) the amount of each Equipment Purchase Loan shall not exceed seventy five (75%) percent of the Hard Costs of the Eligible New Equipment to be purchased by Borrower with the proceeds of such Equipment Purchase Loan;

(iv) Agent shall have received (A) copies, or upon Agent’s request, originals, of all agreements, documents and instruments relating to the sale of the Eligible New Equipment to Borrower, including, without limitation, any purchase orders, invoices, bills of sale or similar documents (provided, that, to the extent that Agent may receive any originals, it will return such originals to Borrower after Agent has finished its use of them) and (B) evidence reasonably satisfactory to Agent that the Eligible New Equipment has been received and installed by Borrower and is in good working order and operating for its intended purpose;

(v) as of the date of such Equipment Purchase Loan, and after giving effect thereto, the aggregate amount of all Equipment Purchase Loans shall not exceed the Equipment Purchase Loan Limit;

(vi) as of the date of such Equipment Purchase Loan, and after giving effect thereto, the aggregate amount of the Loans and the Letter of Credit Accommodations shall not exceed the Maximum Credit minus the sum of (A) the aggregate amount of the Tranche A Loans then outstanding, (B) the aggregate amount of Tranche B Loans then outstanding, (C) the aggregate amount of the undrawn Letter of Credit Accommodations then outstanding and (D) the aggregate amount of loans and letter of credit accommodations (and as to such letter of credit accommodations without regards to the reserve established with respect thereto), to or for the benefit of Haynes UK or any other obligor under the UK Financing Agreements;

(vii) Borrower shall duly authorize, execute and deliver to Agent a single original Equipment Purchase Note in the form annexed hereto as Exhibit D, as completed to reflect the date and amount of each such Equipment Purchase Loan and with the number of monthly installments of principal payable thereunder and the amount of each such monthly installment completed in accordance with Sections 2.3(e) and 2.3(f) below, as the case may be, which note shall evidence a valid and legally enforceable indebtedness of Borrower unconditionally owing to Lenders, without offset, defense or counterclaim of any kind, nature or description whatsoever; and

(viii) as of the date of such Equipment Purchase Loan and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing.

(e) The principal amount of each Equipment Purchase Loan shall be payable (subject to earlier payment as provided herein or in such Equipment Purchase Note) in seventy-two (72) equal, consecutive monthly installments of principal, each in an amount calculated below, commencing on the first day of the second month after the date of the making of such Equipment Purchase Loan, together with interest and other amounts as provided herein and in the Equipment Purchase Note with respect to such Equipment Purchase Loan.

(f) The amount of each monthly installment of principal in respect of each Equipment Purchase Loan (other than the last installment which shall be in an amount equal to

the entire unpaid balance of the Equipment Purchase Note) shall equal: (i) the original principal amount of the proposed Equipment Purchase Loan divided by (ii) seventy-two (72).

2.4 COMMITMENTS. The aggregate amount of each Lender’s Pro Rata Share of the Loans and Letter of Credit Accommodations shall not exceed the amount of such Lender’s Commitment, as the same may from time to time be amended in accordance with the provisions hereof.

SECTION 3. INTEREST AND FEES

3.1 INTEREST.

(a) Borrower shall pay to Agent, for the benefit of Lenders, interest on the outstanding principal amount of the Loans at the Interest Rate. All interest accruing hereunder on and after the date of any Event of Default or termination hereof shall be payable on demand.

(b) Borrower may from time to time request Eurodollar Rate Loans or may request that Prime Rate Loans be converted to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans continue for an additional Interest Period. Such request from Borrower shall specify the amount of the Eurodollar Rate Loans or the amount of the Prime Rate Loans to be converted to Eurodollar Rate Loans or the amount of the Eurodollar Rate Loans to be continued (subject to the limits set forth below) and the Interest Period to be applicable to such Eurodollar Rate Loans. Subject to the terms and conditions contained herein, three (3) Business Days after receipt by Agent of such a request from Borrower , such Eurodollar Rate Loans shall be made or Prime Rate Loans shall be converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the case may be; PROVIDED, THAT, (i) no Default or Event of Default shall exist or have occurred and be continuing, (ii) Borrower shall have complied with such customary procedures as are established by Agent and specified by Agent to Borrower from time to time for requests by Borrower for Eurodollar Rate Loans, (iii) no more than eight (8) Interest Periods may be in effect at any one time, (iv) the aggregate amount of the Eurodollar Rate Loans must be in an amount not less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof, and (v) Agent and each Lender shall have determined that the Interest Period or Adjusted Eurodollar Rate is available to Agent and such Lender and can be readily determined as of the date of the request for such Eurodollar Rate Loan by Borrower. Any request by or on behalf of Borrower for Eurodollar Rate Loans or to convert Prime Rate Loans to Eurodollar Rate Loans or to continue any existing Eurodollar Rate Loans shall be irrevocable. Notwithstanding anything to the contrary contained herein, Agent and Lenders shall not be required to purchase United States Dollar deposits in the London interbank market or other applicable Eurodollar Rate market to fund any Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply as if Agent and Lenders had purchased such deposits to fund the Eurodollar Rate Loans.

(c) Any Eurodollar Rate Loans shall automatically convert to Prime Rate Loans upon the last day of the applicable Interest Period, unless Agent has received and approved a request to continue such Eurodollar Rate Loan at least three (3) Business Days prior to such last day in accordance with the terms hereof. Any Eurodollar Rate Loans shall, at Agent’s option, upon notice by Agent to Borrower, be subsequently converted to Prime Rate Loans in the event that this Agreement shall terminate or not be renewed. Borrower shall pay to Agent, for the

benefit of Lenders, upon demand by Agent (or Agent may, at its option, charge any loan account of Borrower) any amounts required to compensate any Lender or Participant for any loss (including loss of anticipated profits), cost or expense incurred by such person, as a result of the conversion of Eurodollar Rate Loans to Prime Rate Loans (other than at the end of an Interest Period) pursuant to any of the foregoing.

(d) Interest shall be payable by Borrower to Agent, for the account of Lenders, monthly in arrears not later than the first day of each calendar month and shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed. The interest rate on non-contingent Obligations (other than Eurodollar Rate Loans) shall increase or decrease by an amount equal to each increase or decrease in the Prime Rate effective on the first day of the month after any change in such Prime Rate is announced based on the Prime Rate in effect on the last day of the month in which any such change occurs. In no event shall charges constituting interest payable by Borrower to Agent and Lenders exceed the maximum amount or the rate permitted under any applicable law or regulation, and if any such part or provision of this Agreement is in contravention of any such law or regulation, such part or provision shall be deemed amended to conform thereto.

3.2 FEES.

(a) Borrower shall pay to Agent, for the account of Lenders, monthly an unused line fee at a rate equal to three-eighths (3/8%) percent per annum calculated upon the amount by which the Maximum Credit exceeds the average daily principal balance of the outstanding Loans and Letter of Credit Accommodations during the immediately preceding month (or part thereof) while this Agreement is in effect and for so long thereafter as any of the Obligations are outstanding, which fee shall be payable on the first day of each month in arrears.

(b) Borrower agree to pay to Agent the other fees and amounts set forth in the Fee Letter in the amounts and at the times specified therein.

3.3 CHANGES IN LAWS AND INCREASED COSTS OF LOANS.

(a) Subject to Section 6.5 hereof, if after the date hereof, either (i) any change in, or in the interpretation of, any law or regulation is introduced, including, without limitation, with respect to reserve requirements, applicable to Lender or any banking or financial institution from whom any Lender borrows funds or obtains credit (a “Funding Bank”), which Funding Bank is a commercial bank or other financial institution having combined capital and surplus and undivided profits of not less than $500,000,000 or (ii) a Funding Bank or any Lender complies with any future guideline or request from any central bank or other Governmental Authority or (iii) a Funding Bank or any Lender determines that the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof has or would have the effect described below, or a Funding Bank or any Lender complies with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, and in the case of any event set forth in this clause (iii), such adoption, change or compliance has or would have the direct or indirect effect of reducing the rate of

return on any Lender’s capital as a consequence of its obligations hereunder to a level below that which Lender could have achieved but for such adoption, change or compliance (taking into consideration the Funding Bank’s or Lender’s policies with respect to capital adequacy) by an amount deemed by such Lender to be material, and the result of any of the foregoing events described in clauses (i), (ii) or (iii) is or results in an increase in the cost to any Lender of funding or maintaining the Loans, the Letter of Credit Accommodations or its Commitment, then Borrower shall from time to time upon demand by Agent pay to Agent additional amounts sufficient to indemnify Lenders against such increased cost (after taking into account applicable deductions and credits in respect of the amount indemnified). A certificate as to the amount of such increased cost setting forth in reasonable detail the basis for such increased cost and calculation of the amount thereof shall be submitted to Borrower by or on behalf of the Lender seeking indemnification therefor or by Agent on its behalf and shall be conclusive, absent manifest error.

(b) If prior to the first day of any Interest Period, (i) Agent shall have determined in good faith (which determination shall be conclusive and binding upon Borrower ) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, (ii) Agent has received notice from the Required Lenders that Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to Lenders of making or maintaining Eurodollar Rate Loans during such Interest Period, or (iii) Dollar deposits in the principal amounts of the Eurodollar Rate Loans to which such Interest Period is to be applicable are not generally available in the London interbank market, Agent shall give telecopy or telephonic notice thereof to Borrower as soon as practicable thereafter, and will also give prompt written notice to Borrower when such conditions no longer exist. If such notice is given (A) any Eurodollar Rate Loans requested to be made on the first day of such Interest Period shall be made as Prime Rate Loans, (B) any Loans that were to have been converted on the first day of such Interest Period to or continued as Eurodollar Rate Loans shall be converted to or continued as Prime Rate Loans and (C) each outstanding Eurodollar Rate Loan shall be converted, on the last day of the then current Interest Period thereof, to Prime Rate Loans. Until such notice has been withdrawn by Agent, no further Eurodollar Rate Loans shall be made or continued as such, nor shall Borrower have the right to convert Prime Rate Loans to Eurodollar Rate Loans.

(c) Notwithstanding any other provision herein, if the adoption of or any change in any law, treaty, rule or regulation or final, non-appealable determination of an arbitrator or a court or other Governmental Authority or in the interpretation or application thereof occurring after the date hereof shall make it unlawful for Agent or any Lender to make or maintain Eurodollar Rate Loans as contemplated by this Agreement, (i) Agent or such Lender shall promptly give written notice of such circumstances to Borrower (which notice shall be withdrawn whenever such circumstances no longer exist), (ii) the commitment of such Lender hereunder to make Eurodollar Rate Loans, continue Eurodollar Rate Loans as such and convert Prime Rate Loans to Eurodollar Rate Loans shall forthwith be canceled and, until such time as it shall no longer be unlawful for such Lender to make or maintain Eurodollar Rate Loans, such Lender shall then have a commitment only to make a Prime Rate Loan when a Eurodollar Rate Loan is requested and (iii) such Lender’s Loans then outstanding as Eurodollar Rate Loans, if any, shall be converted automatically to Prime Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by

law. If any such conversion of a Eurodollar Rate Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to Section 3.3(d) below.

(d) Subject to Section 6.5 hereof, Borrower shall indemnify Agent and each Lender and to hold Agent and each Lender harmless from any loss or expense which Agent or such Lender may sustain or incur as a consequence of (i) default by Borrower in making a borrowing of, conversion into or extension of Eurodollar Rate Loans after Borrower has given a notice requesting the same in accordance with the provisions of this Loan Agreement, (ii) default by Borrower in making any prepayment of a Eurodollar Rate Loan after Borrower has given a notice thereof in accordance with the provisions of this Agreement, and (iii) the making of a prepayment of Eurodollar Rate Loans on a day which is not the last day of an Interest Period with respect thereto. With respect to Eurodollar Rate Loans, such indemnification may include an amount equal to the excess, if any, of (A) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or extended, for the period from the date of such prepayment or of such failure to borrow, convert or extend to the last day of the applicable Interest Period (or, in the case of a failure to borrow, convert or extend, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Eurodollar Rate Loans provided for herein over (B) the amount of interest (as determined by such Agent or such Lender) which would have accrued to Agent or such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurodollar market as set forth in a certificate from or on behalf of Agent or such Lender to Borrower setting forth the calculation of such amounts. This covenant shall survive the termination or non-renewal of this Loan Agreement and the payment of the Obligations.

SECTION 4. CONDITIONS PRECEDENT

4.1 CONDITIONS PRECEDENT TO INITIAL LOANS AND LETTER OF CREDIT ACCOMMODATIONS. Each of the following is a condition precedent to Agent and Lenders making the initial Loans and providing the initial Letter of Credit Accommodations hereunder:

(a) no court of competent jurisdiction shall have issued any injunction, restraining order or other order with respect to the Confirmation Order which otherwise prohibits the consummation of the transactions described herein, or (except for changes consented to by Agent) modifies such transactions, and no governmental or other action or proceeding shall have been commenced, seeking any injunction, restraining order or other order which seeks to void or otherwise modify the transactions described herein;

(b) no motion, action or proceeding shall be pending against Borrower by any creditor or other party-in-interest in the Bankruptcy Court or in any other court of competent jurisdiction which if successful could reasonably be expected to have a Material Adverse Effect;

(c) Agent shall have received a certified copy of the Confirmation Order as duly entered by the Bankruptcy Court and entered on the docket of the Clerk of the Bankruptcy Court in the Chapter 11 Case, following due notice to such creditors and other parties-in-interest as required by the Bankruptcy Court, which order shall be in form and substance acceptable to Agent, providing, among other things, that (i) the Existing Agreements and the Final Financing

Order shall continue in full force and effect through the Effective Date, (ii) as of and after the Effective Date, all loans, advances, financial accommodations, borrowing and obligations outstanding under the Existing Agreements shall continue in effect on and after the Effective Date and be deemed loans, advances, financial accommodations and borrowing of or to be assumed by Borrower, (iii) the security interests and liens in favor of Agent granted by the Final Financing Order and the Existing Agreements shall continue in effect in favor of Agent on and after the Effective Date and shall not be discharged, released or terminated, and (iv) Borrower is authorized to enter into this Agreement and the other Financing Agreements and perform all of their obligations hereunder and thereunder;

(d) Agent shall have received evidence, in form and substance satisfactory to Agent, that prior to the date hereof or concurrently herewith, (i) the Effective Date shall have occurred, the Confirmation Order shall be valid, subsisting and continuing and, unless otherwise agreed by Agent, a Final Order which Agent may waive the requirement thereof, and all conditions precedent to the consummation of the Plan shall have been fulfilled, or validly waived (but not including conditions consisting of the effectiveness of this Agreement), and (ii) no motion, action or proceeding shall be pending or filed by any creditor or other party-in-interest in the Chapter 11 Case that could adversely affect the Plan, the consummation of the Plan, the business or operations of Borrower in each case in any material respect, and the transactions contemplated by the Financing Agreements, as determined by Agent in good faith, PROVIDED, THAT, Borrower hereby represents that the general claims administration and resolution of cure claims arising under the Chapter 11 Case pursuant to the Plan will not adversely affect any of such matters in any material respect;

(e) all requisite corporate action and proceedings in connection with this Agreement and the other Financing Agreements shall be reasonably satisfactory in form and substance to Agent, and Agent shall have received all information and copies of all documents, including records of requisite corporate action and proceedings which Agent may have reasonably requested in connection therewith, such documents where requested by Agent or its counsel to be certified by appropriate corporate officers or Governmental Authority (and including a copy of the certificate of incorporation of Borrower certified by the Secretary of State (or equivalent Governmental Authority) which shall set forth the same complete corporate name of Borrower as is set forth herein and such document as shall set forth the organizational identification number of Borrower, if one is issued in its jurisdiction of incorporation;

(f) no act, condition or event shall have occurred since the date of Agent’s latest field examination (not including for this purpose the field review referred to in clause (g) below) that has or is reasonably likely to have Material Adverse Effect;

(g) Agent shall have completed a field review of the Records and such other information with respect to the Collateral as Agent may require to determine the amount of Loans available to Borrower (including, without limitation, current perpetual inventory records and/or roll forwards of Accounts and Inventory through the date of closing and test counts of the Inventory in a manner satisfactory to Agent, together with such supporting documentation as may be necessary or appropriate, and other documents and information that will enable Agent to accurately identify and verify the Collateral), the results of which in each case shall be satisfactory to Agent, not more than seven (7) Business Days prior to the date hereof;

(h) Agent shall have received, in form and substance satisfactory to Agent, all consents, waivers, acknowledgments and other agreements from third persons which Agent may deem necessary or desirable in good faith in order to permit, protect and perfect its security interests in and liens upon the Collateral or to effectuate the provisions or purposes of this Agreement and the other Financing Agreements, including, without limitation, Collateral Access Agreements; PROVIDED, THAT, the failure to deliver Collateral Access Agreements as to specific locations shall not be a condition of closing, so long as all other conditions are met after giving effect to any Reserves established by Agent in respect of amounts due or to become due to the owner, lessor or operator thereof as provided for in the definition of Reserves;

(i) the Excess Availability as of the date hereof shall be not less than $7,500,000 after giving effect to the initial Loans made or to be made and Letter of Credit Accommodations issued or to be issued in connection with the initial transactions hereunder;

(j) Agent shall have received a Borrowing Base Certificate setting forth the Borrowing Base as at the date set forth therein and completed in a manner reasonably satisfactory to Agent and duly authorized, executed and delivered on behalf of Borrower;

(k) Agent shall have received, in form and substance satisfactory to Agent in good faith, Deposit Account Control Agreements by and among Agent, Borrower, and each bank where Borrower has a deposit account (other than as to those deposit accounts for which Agent is not requiring a Deposit Account Control Agreement as of the date hereof), in each case, duly authorized, executed and delivered by such bank and Borrower, as the case may be;

(l) Agent shall have received evidence, in form and substance satisfactory to Agent in good faith, that Agent has a valid perfected first priority security interest in all of the Collateral in which Borrower has granted a security interest pursuant to this Agreement or any of the other Financing Agreements, and as to priority subject only to the security interests permitted herein or in the other Financing Agreements that have priority under applicable law (and in each case other than as to those specific assets for which Agent has not required that its security interests and/or liens be perfected as of the date hereof);

(m) Agent shall have received and reviewed lien and judgment search results for the jurisdiction of organization of Borrower , the jurisdiction of the chief executive office of Borrower and all jurisdictions in which assets of Borrower are located, which search results shall be in form and substance satisfactory to Agent;

(n) Agent shall have received, in form and substance satisfactory to Agent, an endorsement to existing title insurance policies with respect to the Mortgages to cover the amendments thereto dated of even date herewith;

(o) Agent shall have received evidence of insurance and loss payee endorsements required hereunder and under the other Financing Agreements, in form and substance satisfactory to Agent, and certificates of insurance policies and/or endorsements naming Agent as loss payee;

(p) Agent shall have received, in form and substance reasonably satisfactory to Agent, such opinion letters of counsel to Borrower with respect to the Financing Agreements and such other matters as Agent may reasonably request; and

(q) the other Financing Agreements and all instruments and documents required to be delivered hereunder and thereunder prior to the date hereof shall have been duly executed and delivered to Agent, in form and substance reasonably satisfactory to Agent.

4.2 CONDITIONS PRECEDENT TO ALL LOANS AND LETTER OF CREDIT ACCOMMODATIONS. Each of the following is an additional condition precedent to the Loans and/or providing Letter of Credit Accommodations to Borrower, including the initial Loans and Letter of Credit Accommodations and any future Loans and Letter of Credit Accommodations:

(a) all representations and warranties contained herein and in the other Financing Agreements that are qualified as to materiality or Material Adverse Effect shall be true and correct and the representations and warranties that are not so qualified shall be true and correct in all material respects, in each case with the same effect as though such representations and warranties had been made on and as of the date of the making of each such Loan or providing each such Letter of Credit Accommodation and after giving effect thereto, except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and correct to the extent required hereunder or under the other Financing Agreements on and as of such earlier date);

(b) no law, regulation, order, judgment or decree of any Governmental Authority shall exist, and no action, suit, investigation, litigation or proceeding shall be pending or threatened in any court or before any arbitrator or Governmental Authority, which (i) purports to enjoin, prohibit, restrain or otherwise adversely affect (A) the making of the Loans or providing the Letter of Credit Accommodations, or (B) the consummation of the transactions contemplated pursuant to the terms hereof or the other Financing Agreements or (ii) has or has a reasonable likelihood of having a Material Adverse Effect;

(c) no Default or Event of Default shall exist or have occurred and be continuing on and as of the date of the making of such Loan or providing each such Letter of Credit Accommodation and after giving effect thereto.

SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST

5.1 GRANT OF SECURITY INTEREST.

(a) To secure payment and performance of all Secured Obligations, Borrower hereby grants to Agent, for the benefit of Secured Parties, a continuing security interest in, a lien upon, and a right of set off against, all personal and real property and fixtures, and interests in property and fixtures, of Borrower , whether now owned or hereafter acquired or existing, and wherever located (together with all other collateral security for the Secured Obligations at any time granted to or held or acquired by Agent or any Secured Party, collectively, the “Collateral”), including:

(i) all Accounts;

(ii) all general intangibles, including, without limitation, all Intellectual Property;

(iii) all goods, including, without limitation, Inventory and Equipment;

(iv) all Real Property and fixtures;

(v) all chattel paper, including, without limitation, all tangible and electronic chattel paper;

(vi) all instruments, including, without limitation, all promissory notes;

(vii) all documents;

(viii) all deposit accounts;

(ix) all letters of credit, banker’s acceptances and similar instruments and including all letter of credit rights;

(x) all supporting obligations and all present and future liens, security interests, rights, remedies, title and interest in, to and in respect of Receivables and other Collateral, including (A) rights and remedies under or relating to guaranties, contracts of suretyship, letters of credit and credit and other insurance related to the Collateral, (B) rights of stoppage in transit, replevin, repossession, reclamation and other rights and remedies of an unpaid vendor, lienor or secured party, (C) goods described in invoices, documents, contracts or instruments with respect to, or otherwise representing or evidencing, Receivables or other Collateral, including returned, repossessed and reclaimed goods, and (D) deposits by and property of account debtors or other persons securing the obligations of account debtors;

(xi) all (A) investment property (including securities, whether certificated or uncertificated, securities accounts, security entitlements, commodity contracts or commodity accounts), except as otherwise provided in Section 5.2(e) below and (B) monies, credit balances, deposits and other property of Borrower now or hereafter held or received by or in transit to Agent or any Lender or its Affiliates or at any other depository or other institution from or for the account of Borrower, whether for safekeeping, pledge, custody, transmission, collection or otherwise;

(xii) all commercial tort claims listed on Schedule 5.1 hereto;

(xiii) to the extent not otherwise described above, all Receivables and all present and future claims, rights, interests, assets and properties recovered by or on behalf of Borrower or any trustee of Borrower (including in the Chapter 11 Case), including, without limitation, all such property recovered as a result of transfers or obligations avoided or actions maintained or taken pursuant to, inter alia, Sections 542, 545, 547, 548, 549, 550, 552 and 553 of the Bankruptcy Code;

(xiv) all Records; and

(xv) all products and proceeds of the foregoing, in any form, including insurance proceeds (other than business interruption insurance) and all claims against third parties for loss or damage to or destruction of or other involuntary conversion of any kind or nature of any or all of the other Collateral or damages and payments or claims by Borrower for past or future infringements of any Intellectual Property.

(b) Notwithstanding anything to the contrary set forth in Section 5.1(a) above, the types or items of Collateral described in such Section shall not include:

(i) any rights or interests in any contract, lease, permit, license, charter or license agreement covering real or personal property, as such, if under the terms of such contract, lease, permit, license, charter or license agreement, or applicable law with respect thereto, the valid grant of a security interest or lien therein to Agent is prohibited and such prohibition has not been or is not waived or the consent of the other party to such contract, lease, permit, license, charter or license agreement has not been or is not otherwise obtained or under applicable law such prohibition cannot be waived; PROVIDED, THAT, the foregoing exclusion shall in no way be construed (A) to apply if any such prohibition is unenforceable under Sections 9 406, 9 407, 9 408, or 9-409 of the UCC or other applicable law or (B) so as to limit, impair or otherwise affect Agent’s unconditional continuing security interests in and liens upon any rights or interests of Borrower in or to monies due or to become due under any such contract, lease, permit, license, charter or license agreement (including any Receivables);

(ii) the Capital Stock in excess of 65% of any Foreign Subsidiary that is (a) organized under the laws of a jurisdiction outside of the United States and (b) directly owned by Borrower (without regard to any indirect ownership attributed to the Borrower); and

(iii) trademark or servicemark applications that have been filed with the U.S. Patent and Trademark Office on the basis of an “intent-to-use” with respect to such marks, unless and until a statement of use or amendment to allege use is filed or any other filing is made or circumstances otherwise change so that the interests of Borrower in such marks is no longer on an “intent-to-use” basis, at which time such marks shall automatically and without further action by the parties be subject to the security interests and liens granted by Borrower to Agent hereunder.

5.2 PERFECTION OF SECURITY INTERESTS.

(a) Borrower irrevocably and unconditionally authorizes Agent (or its agent) to file at any time and from time to time such financing statements with respect to the Collateral naming Agent as the secured party and Borrower as debtor, as Agent may require, and including any other information with respect to Borrower or otherwise required by part 5 of Article 9 of the Uniform Commercial Code of such jurisdiction as Agent may determine, together with any amendment and continuations with respect thereto, which authorization shall apply to all financing statements filed on, prior to or after the date hereof. Such financing statements may describe the Collateral in the same manner as described herein or in any security agreement or pledge agreement entered into by the parties in connection herewith or may contain an indication or description of collateral that describes such property in any other manner as the Agent may determine, in its sole discretion, is necessary, advisable or prudent to ensure the perfection of the

security interest in the Collateral granted to the Agent in connection herewith or therewith. Borrower hereby ratifies and approves all financing statements naming Agent or its designee as secured party and Borrower, as debtor with respect to the Collateral (and any amendments with respect to such financing statements) filed by or on behalf of Agent prior to the date hereof and ratifies and confirms the authorization of Agent to file such financing statements (and amendments, if any). Borrower hereby authorizes Agent to adopt on behalf of Borrower any symbol required for authenticating any electronic filing. In the event that the description of the collateral in any financing statement naming Agent or its designee as the secured party and Borrower as debtor includes assets and properties of Borrower that do not at any time constitute Collateral, whether hereunder, under any of the other Financing Agreements or otherwise, the filing of such financing statement shall nonetheless be deemed authorized by Borrower to the extent of the Collateral included in such description and it shall not render the financing statement ineffective as to any of the Collateral or otherwise affect the financing statement as it applies to any of the Collateral. In no event shall Borrower at any time file, or permit or cause to be filed, any correction statement or termination statement with respect to any financing statement (or amendment or continuation with respect thereto) naming Agent or its designee as secured party and Borrower as debtor, without the express prior written consent of Agent.

(b) Borrower does not have any chattel paper (whether tangible or electronic) or instruments as of the date hereof, except as set forth in the Information Certificate and except for checks deposited or to be deposited in the ordinary course of business. In the event that Borrower shall receive any chattel paper or instrument in excess of $50,000 after the date hereof (except for checks deposited or to be deposited for collection in the ordinary course of business), Borrower shall promptly notify Agent thereof in writing. Promptly upon the receipt thereof by or on behalf of Borrower, Borrower shall deliver, or cause to be delivered to Agent, all tangible chattel paper and instruments (except for checks deposited or to be deposited for collection in the ordinary course of business) that either Borrower has or may at any time acquire, accompanied by such instruments of transfer or assignment duly executed in blank as Agent may from time to time specify, in each case except as Agent may otherwise agree; PROVIDED, THAT, so long as no Default or Event of Default shall exist or have occurred and be continuing, Borrower shall not be required to deliver to Agent any tangible chattel paper or instrument received after the date hereof until the aggregate amount of the monetary obligations evidenced thereby exceed $50,000. At Agent’s option, Borrower shall, or Agent may at any time on behalf of Borrower, cause the original of any such instrument or chattel paper to be conspicuously marked in a form and manner acceptable to Agent with the following legend referring to chattel paper or instruments as applicable: “This [chattel paper][instrument] is subject to the security interest of Congress Financial Corporation (Central), as Agent and any sale, transfer, assignment or encumbrance of this [chattel paper][instrument] violates the rights of such secured party.”

(c) In the event that Borrower shall at any time hold or acquire an interest in any electronic chattel paper or any “transferable record” (as such term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction), Borrower shall promptly notify Agent thereof in writing. Promptly upon Agent’s request, Borrower shall take, or cause to be taken, such actions as Agent may reasonably request to give Agent control of such electronic chattel paper under Section 9-105 of the UCC and control of such transferable record under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or,

as the case may be, Section 16 of the Uniform Electronic Transactions Act, as in effect in such jurisdiction.

(d) Borrower does not have deposit accounts as of the date hereof having or reasonably anticipated to have a balance in excess of $12,500 (or the US Dollar Equivalent thereof), except as set forth in the Information Certificate (PROVIDED, THAT, the aggregate amount of the balances in all of those deposit accounts having a balance of less than $12,500 (or the US Dollar Equivalent thereof) does not, and shall not, exceed $65,000 or the US Dollar Equivalent thereof). Borrower shall not, directly or indirectly, after the date hereof open, establish or maintain any deposit account unless each of the following conditions is satisfied: (i) Agent shall have received not less than five (5) Business Days prior written notice of the intention of Borrower to open or establish such account which notice shall specify in reasonable detail and specificity acceptable to Agent the name of the account, the owner of the account, the name and address of the bank at which such account is to be opened or established, the individual at such bank with whom Borrower is dealing and the purpose of the account, (ii) the bank where such account is opened or maintained shall be reasonably acceptable to Agent, and (iii) on or before the opening of such deposit account or so long as no Default or Event of Default shall exist or have occurred and be continuing, promptly after the opening of such deposit account, Borrower shall deliver to Agent a Deposit Account Control Agreement with respect to such deposit account duly authorized, executed and delivered by Borrower and the bank at which such deposit account is opened and maintained, except, that, Borrower shall not be required to comply with clauses (i), (ii) or (iii) of this subsection (d) as to any deposit account which at all times has a balance of less than $12,500 so long as the aggregate amount of all deposits in all such accounts is less than $65,000 and no Default of Event of Default shall exist or have occurred and be continuing. In addition, Borrower shall not be required to provide a Deposit Account Control Agreement with respect to the existing deposit account of Borrower maintained at Community First Bank (account number 08001031) so long as such account is used only in connection with the cashing of checks or similar items for employees of Borrower and the aggregate amount of the funds in such account does not exceed $60,000. If the purpose of such account shall change or the aggregate amount of such funds at any time exceed $60,000 for five (5) consecutive days or shall exceed $60,000 more than two (2) times, promptly upon the request of Agent, Borrower shall deliver or cause to be delivered to Agent a Deposit Account Control Agreement with respect to such deposit account. The terms of this subsection (d) shall not apply to deposit accounts specifically and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower’s employees.

(e) Borrower does not own or hold, directly or indirectly, beneficially or as record owner or both, any investment property, as of the date hereof, or has any investment account, securities account, commodity account or other similar account with any bank or other financial institution or other securities intermediary or commodity intermediary as of the date hereof, in each case except as set forth in the Information Certificate.

(i) In the event that Borrower shall be entitled to or shall at any time after the date hereof hold or acquire any certificated securities, Borrower shall promptly endorse, assign and deliver the same to Agent, accompanied by such instruments of transfer or assignment duly executed in blank as Agent may from time to time specify; PROVIDED, THAT, if such certificated securities constitute shares of Capital Stock of a Foreign Subsidiary constituting a “controlled

foreign corporation” (as such term is defined in Section 957(a) of the Code or a successor provision thereof), then Borrower shall not be required to endorse, assign or deliver to Agent those certificates representing the number of shares of the issuer thereof exceeding sixty-five (65%) percent of the voting power of all classes of Capital Stock of such issuer entitled to vote. If any securities, now or hereafter acquired by Borrower are uncertificated and are issued to Borrower or its nominee directly by the issuer thereof, Borrower shall immediately notify Agent thereof and shall subject to the proviso contained in the immediately preceding sentence, as Agent may specify, either (A) cause the issuer to agree to comply with instructions from Agent as to such securities, without further consent of Borrower or such nominee, or (B) arrange for Agent to become the registered owner of the securities. Nothing contained in this Section 5 shall be construed to require that the Collateral include the portion of the Capital Stock of any Foreign Subsidiary that is a “controlled foreign corporation”, as defined in Section 957 of the Code, in excess of sixty-five (65%) percent of the issued and outstanding Capital Stock thereof entitled to vote (within the meaning of Treasury Regulation Section 1.956-2).

(ii) Borrower shall not, directly or indirectly, after the date hereof open, establish or maintain any investment account, securities account, commodity account or any other similar account (other than a deposit account) with any securities intermediary or commodity intermediary unless each of the following conditions is satisfied: (A) Agent shall have received not less than five (5) Business Days prior written notice of the intention of Borrower to open or establish such account which notice shall specify in reasonable detail and specificity acceptable to Agent the name of the account, the owner of the account, the name and address of the securities intermediary or commodity intermediary at which such account is to be opened or established, the individual at such intermediary with whom Borrower is dealing and the purpose of the account, (B) the securities intermediary or commodity intermediary (as the case may be) where such account is opened or maintained shall be reasonably acceptable to Agent, and (C) on or before the opening of such investment account, securities account or other similar account with a securities intermediary or commodity intermediary, Borrower shall as Agent may specify either (1) execute and deliver, and cause to be executed and delivered to Agent, an Investment Property Control Agreement with respect thereto duly authorized, executed and delivered by Borrower and such securities intermediary or commodity intermediary or (2) arrange for Agent to become the entitlement holder with respect to such investment property on terms and conditions acceptable to Agent.

(f) Borrower is not the beneficiary or otherwise entitled to any right to payment under any letter of credit, banker’s acceptance or similar instrument as of the date hereof, except as set forth in the Information Certificate. In the event that Borrower shall receive any right to payment under any letter of credit, banker’s acceptance or any similar instrument having a face amount of excess of $25,000 in any one case or $100,000 in the aggregate (or after notice by Agent to Borrower, at any time after a Default or Event of Default shall exist or have occurred and for so long as the same is continuing, regardless of the amount thereof), whether as beneficiary thereof or otherwise after the date hereof, Borrower shall promptly notify Agent thereof in writing. At any time that Excess Availability is less than $5,000,000, or a Default or an Event of Default exists or has occurred and is continuing, or the aggregate amount of such letters of credit, banker’s acceptance or similar instruments outstanding at any time shall exceed $3,500,000, or as to any such letter of credit, banker’s acceptance or similar instrument outstanding at any time that is more than $1,000,000, Borrower shall promptly, as Agent may

specify and upon Agent’s request, either (i) use all commercially reasonable efforts (including the payment of reasonable attorneys’ fees and expenses of any person in connection therewith) to deliver, or cause to be delivered to Agent, with respect to any such letter of credit, banker’s acceptance or similar instrument, the written agreement of the issuer and any other nominated person obligated to make any payment in respect thereof (including any confirming or negotiating bank), in form and substance reasonably satisfactory to Agent, consenting to the assignment of the proceeds of the letter of credit to Agent by Borrower and agreeing to make all payments thereon directly to Agent or as Agent may otherwise direct or (ii) cause Agent to become, at Borrower’s expense, the transferee beneficiary of the letter of credit, banker’s acceptance or similar instrument (as the case may be); PROVIDED, THAT, upon Agent’s request, Borrower shall use their commercially reasonable efforts (without having to pay more than the customary fees of the applicable bank but including the payment of reasonable attorneys’ fees and expenses of any person in connection therewith) to have such letter of credit, banker’s acceptance or similar instrument be transferable.

(g) Borrower does not have any commercial tort claims as of the date hereof, except as set forth in the Information Certificate. In the event that Borrower shall at any time after the date hereof have any commercial tort claims in excess of $50,000, Borrower shall promptly notify Agent thereof in writing, which notice shall (i) set forth in reasonable detail the basis for and nature of such commercial tort claim and (ii) include the express grant by Borrower to Agent of a security interest in such commercial tort claim (and the proceeds thereof). In the event that such notice does not include such grant of a security interest, the sending thereof by Borrower to Agent shall be deemed to constitute such grant to Agent. Upon the sending of such notice, any commercial tort claim described therein shall constitute part of the Collateral and shall be deemed included therein. Without limiting the authorization of Agent provided in Section 5.2(a) hereof or otherwise arising by the execution by Borrower of this Agreement or any of the other Financing Agreements, Agent is hereby irrevocably authorized from time to time and at any time to file such financing statements naming Agent or its designee as secured party and Borrower, as debtor, or any amendments to any financing statements, covering any such commercial tort claim as Collateral. In addition, Borrower shall promptly upon Agent’s request, execute and deliver, or cause to be executed and delivered, to Agent such other agreements, documents and instruments as Agent may require in order to perfect its security interest in such commercial tort claim.

(h) Borrower does not have any goods, documents of title or other Collateral in the custody, control or possession of a third party as of the date hereof, except as set forth in the Information Certificate and except for goods located in the United States in transit to a location of Borrower permitted herein in the ordinary course of business of Borrower in the possession of the carrier transporting such goods. In the event that any goods, documents of title or other Collateral are at any time after the date hereof in the custody, control or possession of any other person not referred to in the Information Certificate or such carriers, Borrower shall promptly notify Agent thereof in writing. Promptly upon Agent’s request, Borrower shall use commercially reasonable efforts to deliver to Agent a Collateral Access Agreement duly authorized, executed and delivered by such person and Borrower as owner of such Collateral.

(i) Borrower shall take any other actions reasonably requested by Agent from time to time to cause the attachment, perfection and (subject to liens permitted hereunder) first priority of, and the ability of Agent to enforce, the security interest of Agent in any and all of the

Collateral, including, without limitation, (i) executing, delivering and, where appropriate, filing financing statements and amendments relating thereto under the UCC or other applicable law, to the extent, if any, that Borrower’s signature thereon is required therefor, (ii) complying with any provision of any statute, regulation or treaty as to any Collateral if compliance with such provision is a condition to attachment, perfection or priority of, or ability of Agent to enforce, the security interest of Agent in such Collateral, (iii) using its commercially reasonable efforts (but excluding the payment of reasonable attorneys’ fees and expenses of any person in connection therewith) to obtain the consents and approvals of any Governmental Authority or third party, including, without limitation, any consent of any licensor, lessor or other person obligated on Collateral, and (iv) taking all actions required by any law, as applicable in any relevant jurisdiction.

SECTION 6. COLLECTION AND ADMINISTRATION

6.1 BORROWER’S LOAN ACCOUNTS. Agent shall maintain one or more loan account(s) on its books in which shall be recorded (a) all Loans, Letter of Credit Accommodations and other Obligations and the Collateral, (b) all payments made by or on behalf of Borrower and (c) all other appropriate debits and credits as provided in this Agreement, including fees, charges, costs, expenses and interest. All entries in the loan account(s) shall be made in accordance with Agent’s customary practices as in effect from time to time.

6.2 STATEMENTS. Agent shall render to Borrower each month a statement setting forth the balance in the Borrower’s loan account(s) maintained by Agent for Borrower pursuant to the provisions of this Agreement, including principal, interest, fees, costs and expenses. Each such statement shall be subject to subsequent adjustment by Agent but shall, absent manifest errors or omissions, be considered correct and deemed accepted by Borrower and conclusively binding upon Borrower as an account stated except to the extent that Agent receives a written notice from Borrower of any specific exceptions of Borrower thereto within thirty (30) days after the date such statement has been received by Borrower. Until such time as Agent shall have rendered to Borrower a written statement as provided above, the balance in Borrower’s loan account(s) shall be presumptive evidence of the amounts due and owing to Agent and Lenders by Borrower.

6.3 COLLECTION OF ACCOUNTS.

(a) Borrower shall establish and maintain, at its expense, lockboxes and related blocked accounts with such banks as are acceptable to Agent in good faith (such account or accounts being referred to herein, collectively, as the “Blocked Accounts”, and individually as a “Blocked Account”). Borrower shall promptly deposit and direct its account debtors to directly remit all payments on Receivables and all payments constituting proceeds of Inventory or other Collateral in the identical form in which such payments are made, whether by cash, check or other manner, to the Blocked Account. Borrower shall deliver, or cause to be delivered to Agent a Deposit Account Control Agreement duly authorized, executed and delivered by each bank where a Blocked Account is maintained as provided in Section 5.2(d) hereof. Promptly upon Agent’s request, Borrower shall execute and deliver such agreements and documents as Agent may require in connection therewith. Borrower agrees that all payments made to any Blocked Account or other funds received and collected by Agent or any Lender, whether in respect of the Receivables, as proceeds of Inventory or other Collateral of Borrower or otherwise shall be

treated as payments to Agent and Lenders in respect of the Obligations of Borrower and therefore shall constitute the property of Agent and Lenders to the extent of the then outstanding Obligations of Borrower.

(b) The Deposit Account Control Agreements with the depository banks at which the Blocked Accounts are maintained shall provide that the items received for deposit therein, or the available funds from time to time on deposit therein, will be transferred daily, only to the Agent Payment Account.

(c) For purposes of calculating the amount of the Loans available to Borrower, such payments will be applied (conditional upon final collection) to the Obligations of the applicable Borrower on the Business Day of receipt by Agent of immediately available funds in the Agent Payment Account provided such payments and notice thereof are received in accordance with Agent’s usual and customary practices as in effect from time to time and within sufficient time to credit Borrower’s loan account on such day, and if not, then on the next Business Day. For the purposes of calculating interest on the Obligations, such payments or other funds received will be applied (conditional upon final collection) to the Obligations one (1) Business Day following the date of receipt of immediately available funds by Agent in the Agent Payment Account provided such payments or other funds and notice thereof are received in accordance with Agent’s usual and customary practices as in effect from time to time and within sufficient time to credit Borrower’s loan account on such day, and if not, then on the next Business Day. In the event that at any time or from time to time there are no Loans to Borrower outstanding. Agent shall be entitled to an administrative fee payable by Borrower in an amount calculated based on the Interest Rate for Prime Rate Loans (on a per annum basis) multiplied by the amount of the funds received in the Blocked Account for such day as calculated by Agent in accordance with its customary practice. The economic benefit of the timing in the application of payments (and the administrative charge with respect thereto, if applicable) shall be for the sole benefit of Agent.

(d) Subject to Section 6.3(b) above, Borrower and its Subsidiaries or other Affiliates shall, acting as trustee for Agent, receive, as the property of Agent, any monies, checks, notes, drafts or any other payment relating to and/or proceeds of Accounts or other Collateral which come into their possession or under their control and immediately upon receipt thereof, shall deposit or cause the same to be deposited in the Blocked Accounts, or remit the same or cause the same to be remitted, in kind, to Agent. In no event shall the same be commingled with Borrower’s own funds. Borrower agrees to reimburse Agent and Lenders on demand for any amounts owed or paid to any bank at which a Blocked Account is established for it or any other bank or person involved in the transfer of funds to or from its Blocked Accounts arising out of payments by Agent or any Lender to or indemnification of such bank or person in connection with such Blocked Account or any amounts received therein or transferred therefrom. The obligations of Borrower to reimburse Agent for such amounts pursuant to this Section 6.3 shall survive the termination of this Agreement.

6.4 PAYMENTS.

(a) All Obligations shall be payable to the Agent Payment Account as provided in Section 6.3 or such other place as Agent may designate from time to time. The foregoing shall

not apply to payments with proceeds of Loans to a Bank Product Provider for Obligations to such Bank Product Provider in connection with checks or other items issued by Borrower drawn on such Bank Product Provider. Subject to the other terms and conditions contained herein, Agent shall apply payments received or collected from Borrower or for the account of Borrower (including the monetary proceeds of collections or of realization upon any Collateral) as follows: FIRST, to pay any fees, indemnities or expense reimbursements then due to Agent and Lenders from Borrower; SECOND, to pay interest due in respect of any Loans (and including any Special Agent Advances); THIRD, to pay or prepay principal in respect of Special Agent Advances; FOURTH, to pay or prepay principal in respect of Tranche B Loans; FIFTH, to pay principal due in respect of the Tranche A Loans or to pay or prepay Obligations arising under or pursuant to any Hedge Agreement of Borrower that has been approved in writing by Agent (up to the amount of any then effective Reserve established in respect of such Obligations) on a pro rata basis; SIXTH, to pay or prepay any other Obligations whether or not then due, in such order and manner as Agent reasonably determines or to be held as cash collateral in connection with any Letter of Credit Accommodations or other contingent Obligations (but not including for purposes of this clause “sixth” any Obligations arising under or pursuant to any Hedge Agreement or in connection with any Bank Products); SEVENTH, to pay or prepay any of the UK Obligations after demand for payment under the Guarantee by Borrower in favor of UK Lender; PROVIDED, THAT, any such amounts received for application to the UK Obligations shall not be applied to such UK Obligations for a period of sixty (60) days (or such longer period as UK Lender may agree) after the date of such demand and shall be held as cash collateral in connection with the UK Obligations until the end of such sixty (60) day period (or such longer period as UK Lender may agree); and EIGHTH, to pay or prepay any Obligations arising under or pursuant to Hedge Agreements that have been approved in writing by Agent (other than to the extent provided for above) and any Obligations then due to any Bank Provider arising from or in connection with any Bank Products, as to all of such Obligations on a pro rata basis.

(b) Notwithstanding anything to the contrary contained in this Agreement, (i) unless so directed by Borrower, or unless a Default or an Event of Default shall exist or have occurred and be continuing, Agent shall not apply any payments which it receives to any Eurodollar Rate Loans, except (A) on the expiration date of the Interest Period applicable to any such Eurodollar Rate Loans or (B) in the event that there are no outstanding Prime Rate Loans, and (ii) to the extent Borrower uses any proceeds of the Loans or Letter of Credit Accommodations to acquire rights in or the use of any Collateral or to repay any Indebtedness used to acquire rights in or the use of any Collateral, payments in respect of the Obligations shall be deemed applied first to the Obligations arising from Loans and Letter of Credit Accommodations that were not used for such purposes and second to the Obligations arising from Loans and Letter of Credit Accommodations the proceeds of which were used to acquire rights in or the use of any Collateral in the chronological order in which Borrower acquired such rights in or the use of such Collateral, and (iii) except as Agent may otherwise determine (A) payments shall be applied to Obligations other than the Eurodollar Rate Fixed Asset Loans and Prime Rate Fixed Asset Loans before being applied to the Eurodollar Rate Fixed Asset Loans and the Prime Rate Fixed Asset Loans, except at such time as any payments in respect of the Eurodollar Rate Fixed Asset Loans or Prime Rate Fixed Asset Loans may be then due and payable and (B) the first Loans outstanding shall be deemed to be Eurodollar Rate Fixed Asset Loans.

(c) At Agent’s option, all principal, interest, fees, costs, expenses and other charges provided for in this Agreement or the other Financing Agreements may be charged directly to the loan account(s) of Borrower maintained by Agent. Except as otherwise specifically provided in Section 6.5 hereof, Borrower shall make all payments to Agent and Lenders on the Obligations free and clear of, and without deduction or withholding for or on account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts, fees, deductions, withholding, restrictions or conditions of any kind. To the extent Agent or any Lender receives any payments or collections in respect of the Obligations in a currency other than US Dollars, Agent may, at its option (but is not obligated to), convert such other currency to US Dollars at the Exchange Rate within a reasonable time thereafter or if Agent elects not to convert such currency, Agent shall promptly notify Borrower and provide such currency to Borrower for Borrower to arrange for the conversion on such date (and then payment thereof to Agent). Borrower shall pay the costs of such conversion (or Agent may, at its option, charge such costs to the loan account of Borrower maintained by Agent). Payments and collections received in any currency other than the currency in which any outstanding Obligations are denominated will be accepted and/or applied at the discretion of Agent.

(d) If after receipt of any payment of, or proceeds of Collateral applied to the payment of, any of the Obligations, Agent or any Lender is required to surrender or return such payment or proceeds to any Person for any reason, then the Obligations intended to be satisfied by such payment or proceeds shall be reinstated and continue and this Agreement shall continue in full force and effect as if such payment or proceeds had not been received by Agent or such Lender. Borrower shall be liable to pay to Agent, and do hereby indemnify and hold Agent and Lenders harmless for the amount of any payments or proceeds surrendered or returned. This Section 6.4 shall remain effective notwithstanding any contrary action which may be taken by Agent or any Lender in reliance upon such payment or proceeds. This Section 6.4 shall survive the payment of the Obligations and the termination of this Agreement.

6.5 TAXES.

(a) Subject to Section 6.5(f) hereof, any and all payments by or on behalf of Borrower hereunder and under any other Financing Agreement shall be made, in accordance with Section 6.4, free and clear of and without deduction for any and all Taxes, excluding the following (collectively, “Excluded Taxes”): (i) taxes imposed on the net income or net profit of Agent or any Lender (or any transferee or assignee of such Lender, including any Participant, any such transferee or assignee being referred to as a “Transferee”) and (ii) franchise or similar taxes imposed on or determined by reference to the net income or net profit of Agent or any Lender (or Transferee), in each case by the United States of America or by the jurisdiction under the laws of which such Lender (or Transferee), in each case as to clause (i) or (ii) of this Section 6.5(a), (A) is organized or any political subdivision thereof, (B) has its applicable lending office located, or (C) in a jurisdiction as a result of a present or former connection between the Agent or such Lender (or Transferee) and such jurisdiction or (D) any political subdivision of the jurisdictions described in clauses (A) through (C) hereof. In addition, Borrower agrees to pay to the relevant Governmental Authority in accordance with applicable law any Other Taxes.

(b) If Borrower shall be required by law to deduct or withhold in respect of any Taxes or Other Taxes (other than Excluded Taxes) from or in respect of any sum payable hereunder to Agent or any Lender, then:

(i) the sum payable shall be increased as necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section) such Lender (or Agent on behalf of such Lender or itself, as the case may be) receives an amount equal to the sum it would have received had no such deductions or withholdings been made;

(ii) Borrower shall make such deductions and withholdings;

(iii) Borrower shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law; and

(iv) to the extent not paid to Agent and Lenders pursuant to clause (i) above, Borrower shall also pay to Agent or any Lender, at the time interest is paid, all additional amounts which Agent or any Lender specifies as necessary to preserve the after tax yield such Lender would have received if such Taxes (other than Excluded Taxes) or Other Taxes had not been imposed.

(c) Within thirty (30) days after the date of any payment by Borrower of Taxes (other than Excluded Taxes) or Other Taxes, upon Agent’s request, Borrower shall furnish to Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment reasonably satisfactory to Agent.

(d) Subject to Section 6.5(f) hereof, Borrower will indemnify Agent and each Lender (or Transferee) for the full amount of Taxes (other than Excluded Taxes) and Other Taxes paid by Agent or such Lender (or Transferee, as the case may be) promptly upon written demand. If Agent or such Lender (or Transferee) receives a refund in respect of any Taxes or Other Taxes for which Agent or such Lender (or Transferee) has received payment from Borrower hereunder, so long as no Event of Default shall exist or have occurred and be continuing, Agent or such Lender (as the case may be) shall credit to the loan account of Borrower the amount of such refund plus any interest received (but only to the extent of indemnity payments made, or additional amounts paid, by or on behalf of Borrower under this Section 6.5 with respect to the Taxes or Other Taxes giving rise to such refund). If a Lender (or any Transferee) claims a tax credit in respect of any Taxes for which it has been indemnified by Borrower pursuant to this Section 6.5, such Lender will apply the amount of the actual dollar benefit received by such Lender as a result thereof, as reasonably calculated by such Lender and net of all expenses related thereto, to the Loans made by such Lender. If Taxes or Other Taxes were not correctly or legally asserted, Agent or such Lender shall, upon Borrower’s request and at the expense of Borrower, provide such documents to Borrower in form and substance satisfactory to Agent, as Borrower may reasonably request, to enable Borrower to contest such Taxes or Other Taxes pursuant to appropriate proceedings then available to Borrower (so long as providing such documents shall not, in the good faith determination of Agent or the Lender, have a reasonable likelihood of resulting in any liability of Agent or such Lender for which Agent has not established a Reserve). The indemnity provided for herein shall survive the payment of the

Obligations and the termination of this Agreement but shall not survive the statute of limitations applicable to any liability for the relevant Taxes, except to the extent that Agent or any Lender is subject to a claim for which it is entitled for indemnification by Borrower, notwithstanding that the statute of limitations has expired. A certificate as to the amount of such payment or liability and setting forth in reasonable detail the calculation and basis for such payment or liability delivered to Borrower by a Lender or by Agent on its own behalf or on behalf of a Lender, shall be conclusive, absent manifest error.

(e) Each Lender (or Transferee) and Agent that is a Non-U.S. Person shall deliver to Borrower two (2) copies of the applicable United States Internal Revenue Service Form W-8 and/or other applicable form wherein such Person claims entitlement to a complete exemption from, or reduction in the rate of, U.S. federal income withholding tax on all payments by or on behalf of Borrower under this Agreement and the other Financing Agreements. Such forms shall be delivered by any Non-U.S. Person receiving payments by or on behalf of Borrower on or before the date it becomes a party to this Agreement (or, in the case of a Transferee that is a Participant, on or before the date such Participant becomes a Transferee hereunder) and on or before the date, if any, such Non-U.S. Person changes its applicable lending office by designating a different lending office (a "New Lending Office"). In addition, a Non-U.S. Person shall upon written notice from Borrower promptly deliver such new forms as are required by the relevant Governmental Authority to claim exemption from, or reduction in the rate of, U.S. Federal withholding tax upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Person. Each Lender (or Transferee) and Agent that is a "United States Person" within the meaning of Section 7701(a)(30) of the Code (other than a Lender or Agent that is a corporation or otherwise exempt from United States backup withholding) shall deliver at the time(s) and in the manner(s) required under applicable law, to Borrower and Agent (as applicable), a properly completed and duly executed United States Internal Revenue From W-9 or any successor form, certifying that such Person is exempt from United States backup withholding Tax on payments made by or on behalf of Borrower hereunder. Notwithstanding any other provision of this Section 6.5(e), no Non-U.S. Person, Agent or any Lender shall be required to deliver any form pursuant to this Section 6.5(e) that such Non-U.S. Person, Agent or Lender is not legally able to deliver.

(f) Borrower shall not be required to indemnify any Person or to pay any additional amounts to any Person pursuant to subsections (a) or (d) above to the extent that (i) the Tax was applicable on the date such Person became a party to this Agreement (or, in the case of a Transferee that is a Participant, on the date such Participant became a Transferee hereunder) or, with respect to payments to a New Lending Office, the date such Person designated such New Lending Office with respect to a Loan; PROVIDED, THAT, this subsection (f) shall not apply (A) to any Transferee or New Lending Office that becomes a Transferee or New Lending Office as a result of an assignment, participation, transfer or designation made at the request of Borrower and (B) to the extent the indemnity payment or additional amounts any Transferee, acting through a New Lending Office, would be entitled to receive (without regard to this subsection (f)) do not exceed the indemnity payment or additional amounts that the person making the assignment, participation or transfer to such Transferee making the designation of such New Lending Office, would have been entitled to receive in the absence of such assignment, participation, transfer or designation or (ii) the obligation to pay such additional amounts would not have arisen but for a failure by such Person to comply with the provisions of subsection (e)

above or the gross negligence or wilful misconduct of such Person as determined pursuant to a final, non appealable order of a court of competent jurisdiction.

6.6 AUTHORIZATION TO MAKE LOANS.

(a) Agent and Lenders are authorized to make the Loans and provide the Letter of Credit Accommodations based upon telephonic or other instructions received from anyone purporting to be (and believed by Agent to be) an officer of Borrower or other authorized person or, at the discretion of Agent, if such Loans are necessary to satisfy any Obligations. All requests for Loans or Letter of Credit Accommodations hereunder shall specify the date on which the requested advance is to be made or Letter of Credit Accommodations established (which day shall be a Business Day) and the amount of the requested Loan. Requests received after 12:00 noon Chicago time on any day shall be deemed to have been made as of the opening of business on the immediately following Business Day. All Loans and Letter of Credit Accommodations under this Agreement shall be conclusively presumed to have been made to, and at the request of and for the benefit of, Borrower when deposited to the credit of Borrower or otherwise disbursed or established in accordance with the instructions of Borrower or in accordance with the terms and conditions of this Agreement.

(b) All Loans shall be in or denominated in US Dollars and shall be disbursed only to bank accounts in the United States of America. Set forth on Schedule 6.6(b) hereof are the bank accounts of Borrower used by Borrower for making payments of its Indebtedness and other obligations to which, as of the date hereof, proceeds of Loans may be disbursed.

6.7 USE OF PROCEEDS. Borrower shall use the initial proceeds of the Loans provided by Agent to Borrower hereunder only for: (a) payments to each of the persons listed in the disbursement direction letter furnished by Borrower to Agent on or about the date hereof, (b) costs, expenses and fees in connection with the preparation, negotiation, execution and delivery of this Agreement and the other Financing Agreements, (c) for payments permitted to be made in the Plan and the Confirmation Order, and (d) for Borrower’s working capital (including, without limitation, the payment of allowable administrative expenses) and other proper corporate purposes. All other Loans made or Letter of Credit Accommodations provided to or for the benefit of Borrower pursuant to the provisions hereof shall be used by Borrower only for general operating, working capital and other proper corporate purposes of Borrower not otherwise prohibited by the terms hereof. None of the proceeds will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security or for the purposes of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Loans to be considered a "purpose credit" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, as amended.

6.8 ILLEGALITY. In the event that any change in or introduction of or change after the date hereof in the interpretation or application of any law, regulation, treaty, or official directive or official request (whether or not having the force of law but, if not, being of a type with which Agent or any Lender is accustomed to comply) makes it unlawful (or contrary to such directive or request) in any jurisdiction applicable to Agent or such Lender for Agent or such Lender to make available or maintain the financing arrangements provided for herein (or any of them) or to

give effect to its obligations under the Financing Agreements, Agent or such Lender may give seven (7) Business Days written notice to that effect to Borrower and upon such notice this Agreement shall terminate. Agent or such Lender will use reasonable efforts (including reasonable efforts to change its lending office) to avoid the making or maintaining of such financing arrangements from being unlawful or contrary to such directive or request; PROVIDED, THAT, such efforts shall not cause the imposition on Agent or such Lender of any additional costs or legal or regulatory burdens deemed by Agent or such Lender to be material in good faith.

6.9 PRO RATA TREATMENT. Except to the extent otherwise provided in this Agreement: (a) the making and conversion of Loans shall be made among the Lenders based on their respective Pro Rata Shares as to the applicable type of Loans and (b) each payment on account of any Obligations to or for the account of one or more of Lenders in respect of any Obligations due on a particular day shall be allocated among the Lenders entitled to such payments based on their respective Pro Rata Shares applicable thereto and shall be distributed accordingly.

6.10 SHARING OF PAYMENTS, ETC.

(a) Borrower agrees that, in addition to (and without limitation of) any right of setoff, banker’s lien or counterclaim Agent or any Lender may otherwise have, each Lender shall be entitled, at its option (but subject, as among Agent and Lenders, to the provisions of Section 12.3(b) hereof), to offset balances held by it for the account of Borrower at any of its offices, in dollars or in any other currency, against any principal of or interest on any Loans owed to such Lender or any other amount payable to such Lender hereunder, that is not paid when due (regardless of whether such balances are then due to Borrower), in which case it shall promptly notify Borrower and Agent thereof; PROVIDED, THAT, such Lender’s failure to give such notice shall not affect the validity thereof.

(b) If any Lender (including Agent) shall obtain from Borrower payment of any principal of or interest on any Loan owing to it or payment of any other amount under this Agreement or any of the other Financing Agreements through the exercise of any right of setoff, banker’s lien or counterclaim or similar right or otherwise (other than from Agent as provided herein), and, as a result of such payment, such Lender shall have received more than its Pro Rata Share of the principal of the Loans or more than its share of such other amounts then due hereunder or thereunder by Borrower to such Lender than the percentage thereof received by any other Lender, it shall promptly pay to Agent, for the benefit of Lenders, the amount of such excess and simultaneously purchase from such other Lenders a participation in the Loans or such other amounts, respectively, owing to such other Lenders (or such interest due thereon, as the case may be) in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all Lenders shall share the benefit of such excess payment (net of any expenses that may be incurred by such Lender in obtaining or preserving such excess payment) in accordance with their respective Pro Rata Shares or as otherwise agreed by Lenders. To such end all Lenders shall make appropriate adjustments among themselves (by the resale of participation sold or otherwise) if such payment is rescinded or must otherwise be restored.

(c) Borrower agrees that any Lender purchasing a participation (or direct interest) as provided in this Section may exercise, in a manner consistent with this Section, all rights of setoff, banker’s lien, counterclaim or similar rights with respect to such participation as fully as if

such Lender were a direct holder of Loans or other amounts (as the case may be) owing to such Lender in the amount of such participation.

(d) Nothing contained herein shall require any Lender to exercise any right of setoff, banker’s lien, counterclaims or similar rights or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other Indebtedness or obligation of Borrower. If, under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section applies, such Lender shall, to the extent practicable, assign such rights to Agent for the benefit of Lenders and, in any event, exercise its rights in respect of such secured claim in a manner consistent with the rights of Lenders entitled under this Section to share in the benefits of any recovery on such secured claim.

6.11 SETTLEMENT PROCEDURES.

(a) In order to administer the Credit Facility in an efficient manner and to minimize the transfer of funds between Agent and Lenders, Agent may, at its option, subject to the terms of this Section, make available, on behalf of Lenders, the full amount of the Loans requested or charged to Borrower’s loan account(s) or otherwise to be advanced by Lenders pursuant to the terms hereof, without requirement of prior notice to Lenders of the proposed Loans.

(b) With respect to all Loans made by Agent on behalf of Lenders as provided in this Section, the amount of each Lender’s Pro Rata Share of the outstanding Loans shall be computed weekly, and shall be adjusted upward or downward on the basis of the amount of the outstanding Loans as of 5:00 p.m. Chicago time on the Business Day immediately preceding the date of each settlement computation; PROVIDED, THAT, Agent retains the absolute right at any time or from time to time to make the above described adjustments at intervals more frequent than weekly, but in no event more than twice in any week. Agent shall deliver to each of the Lenders after the end of each week, or at such lesser period or periods as Agent shall determine, a summary statement of the amount of outstanding Loans for such period (such week or lesser period or periods being hereinafter referred to as a "Settlement Period"). If the summary statement is sent by Agent and received by a Lender prior to 12:00 noon Chicago time, then such Lender shall make the settlement transfer described in this Section by no later than 3:00 p.m. Chicago time on the same Business Day and if received by a Lender after 12:00 noon Chicago time, then such Lender shall make the settlement transfer by not later than 3:00 p.m. Chicago time on the next Business Day following the date of receipt. If, as of the end of any Settlement Period, the amount of a Lender’s Pro Rata Share of the outstanding Loans is more than such Lender’s Pro Rata Share of the outstanding Loans as of the end of the previous Settlement Period, then such Lender shall forthwith (but in no event later than the time set forth in the preceding sentence) transfer to Agent by wire transfer in immediately available funds the amount of the increase. Alternatively, if the amount of a Lender’s Pro Rata Share of the outstanding Loans in any Settlement Period is less than the amount of such Lender’s Pro Rata Share of the outstanding Loans for the previous Settlement Period, Agent shall forthwith transfer to such Lender by wire transfer in immediately available funds the amount of the decrease. The obligation of each of the Lenders to transfer such funds and effect such settlement shall be irrevocable and unconditional and without recourse to or warranty by Agent. Agent and each Lender agrees to mark its books and records at the end of each Settlement Period to show at all

times the dollar amount of its Pro Rata Share of the outstanding Loans and Letter of Credit Accommodations. Each Lender shall only be entitled to receive interest on its Pro Rata Share of the Loans to the extent such Loans have been funded by such Lender. Because the Agent on behalf of Lenders may be advancing and/or may be repaid Loans prior to the time when Lenders will actually advance and/or be repaid such Loans, interest with respect to Loans shall be allocated by Agent in accordance with the amount of Loans actually advanced by and repaid to each Lender and the Agent and shall accrue from and including the date such Loans are so advanced to but excluding the date such Loans are either repaid by Borrower or actually settled with the applicable Lender as described in this Section.

(c) To the extent that Agent has made any such amounts available and the settlement described above shall not yet have occurred, upon repayment of any Loans by Borrower, Agent may apply such amounts repaid directly to any amounts made available by Agent pursuant to this Section. In lieu of weekly or more frequent settlements, Agent may, at its option, at any time require each Lender to provide Agent with immediately available funds representing its Pro Rata Share of each Loan, prior to Agent’s disbursement of such Loan to Borrower. In such event, all Loans under this Agreement shall be made by the Lenders simultaneously and proportionately to their Pro Rata Shares. No Lender shall be responsible for any default by any other Lender in the other Lender’s obligation to make a Loan requested hereunder nor shall the Commitment of any Lender be increased or decreased as a result of the default by any other Lender in the other Lender’s obligation to make a Loan hereunder.

(d) If Agent is not funding a particular Loan to Borrower pursuant to this Section, Agent may assume that each Lender will make available to Agent such Lender’s Pro Rata Share of the Loan requested or otherwise made on such day and Agent may, in its discretion, but shall not be obligated to, cause a corresponding amount to be made available to or for the benefit of Borrower on such day. If Agent makes such corresponding amount available to Borrower and such corresponding amount is not in fact made available to Agent by such Lender, Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon for each day from the date such payment was due until the date such amount is paid to Agent at the Federal Funds Rate for each day during such period (as published by the Federal Reserve Bank of New York or at Agent’s option based on the arithmetic mean determined by Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of the three leading brokers of Federal funds transactions in New York City selected by Agent) and if such amounts are not paid within three (3) days of Agent’s demand, at the highest Interest Rate provided for in Section 3.1 hereof applicable to Prime Rate Loans. During the period in which such Lender has not paid such corresponding amount to Agent, notwithstanding anything to the contrary contained in this Agreement or any of the other Financing Agreements, the amount so advanced by Agent to or for the benefit of Borrower shall, for all purposes hereof, be a Loan made by Agent for its own account. Upon any such failure by a Lender to pay Agent, Agent shall promptly thereafter notify Borrower of such failure and Borrower shall pay such corresponding amount to Agent for its own account within five (5) Business Days of Borrower’s receipt of such notice. A Lender who fails to pay Agent its Pro Rata Share of any Loans made available by the Agent on such Lender’s behalf, or any Lender who fails to pay any other amount owing by it to Agent, is a "Defaulting Lender". Agent shall not be obligated to transfer to a Defaulting Lender any payments received by Agent for the Defaulting Lender’s benefit, nor shall a Defaulting Lender be entitled to the

sharing of any payments hereunder (including any principal, interest or fees). Amounts payable to a Defaulting Lender shall instead be paid to or retained by Agent. Agent may hold and, in its discretion, relend to Borrower the amount of all such payments received or retained by it for the account of such Defaulting Lender. For purposes of voting or consenting to matters with respect to this Agreement and the other Financing Agreements and determining Pro Rata Shares, such Defaulting Lender shall be deemed not to be a "Lender" and such Lender’s Commitment shall be deemed to be zero (0). This Section shall remain effective with respect to a Defaulting Lender until such default is cured. The operation of this Section shall not be construed to increase or otherwise affect the Commitment of any Lender, or relieve or excuse the performance by Borrower of their duties and obligations hereunder.

(e) Nothing in this Section or elsewhere in this Agreement or the other Financing Agreements shall be deemed to require Agent to advance funds on behalf of any Lender or to relieve any Lender from its obligation to fulfill its Commitment hereunder or to prejudice any rights that Borrower may have against any Lender as a result of any default by any Lender hereunder in fulfilling its Commitment.

6.12 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS’ RIGHTS. The obligation of each Lender hereunder is several, and no Lender shall be responsible for the obligation or commitment of any other Lender hereunder. Nothing contained in this Agreement or any of the other Financing Agreements and no action taken by the Lenders pursuant hereto or thereto shall be deemed to constitute the Lenders to be a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and subject to Section 12.3 hereof, each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose.

SECTION 7. COLLATERAL REPORTING AND COVENANTS

7.1 COLLATERAL REPORTING.

(a) Borrower shall provide Agent with the following documents in a form satisfactory to Agent in good faith:

(i) as soon as possible after the end of each week (but in any event by the close of business on the fourth (4th) Business Day after the end hereof), on a weekly basis or more frequently as Agent may request at any time that Excess Availability is less than $7,500,000 or a Default or Event of Default exists or has occurred and is continuing, a Borrowing Base Certificate setting forth the calculation of the Borrowing Base as of the last Business Day of the immediately preceding period, duly completed and executed by the vice president-finance, chief financial officer, treasurer, assistant treasurer, controller or other financial or senior officer of Borrower, together with all schedules required pursuant to the terms of the Borrowing Base Certificate duly completed (including a schedule of all Accounts created, collections received and credit memos issued for each day of the immediately preceding period);

(ii) as soon as possible after the end of each month (but in any event within twelve (12) Business Days after the end thereof), on a monthly basis or more frequently as Agent

may reasonably request, (A) perpetual inventory reports, (B) inventory reports by location and category (and including the amounts of Inventory and the value thereof at any leased locations and at premises of warehouses, processors or other third parties), (C) agings of accounts receivable (including an aging by due date and together with a reconciliation to the previous month’s aging and general ledger), and (D) agings of accounts payable (and including information indicating the amounts owing to owners and lessors of leased premises, warehouses, processors and other third parties from time to time in possession of any Collateral);

(iii) upon Agent’s reasonable request, (A) copies of customer statements, purchase orders, sales invoices, credit memos, remittance advices and reports, and copies of deposit slips and bank statements, (B) copies of shipping and delivery documents, and (C) copies of purchase orders, invoices and delivery documents for Inventory and Equipment acquired by Borrower;

(iv) such other reports as to the Collateral as Agent shall reasonably request from time to time.

(b) Nothing contained in any Borrowing Base Certificate shall be deemed to limit, impair or otherwise affect the rights of Agent or any Lender contained herein and in the event of any conflict or inconsistency between the calculation of a Borrowing Base as set forth in any Borrowing Base Certificate and as determined by Agent in good faith, the reasonable determination of Agent shall govern and be conclusive and binding upon Borrowers, absent manifest error. Without limiting the foregoing, Borrowers shall furnish to Agent any information which Agent may reasonably request regarding the determination and calculation of any of the amounts set forth in any Borrowing Base Certificate.

(c) If Borrower’s records or reports of the Collateral are prepared or maintained by an accounting service, contractor, shipper or other agent, Borrower hereby irrevocably authorizes such service, contractor, shipper or agent to deliver such records, reports, and related documents to Agent and to follow Agent’s instructions with respect to further services at any time that an Event of Default exists or has occurred and is continuing.

7.2 ACCOUNTS COVENANTS.

(a) Borrower shall notify Agent promptly of: (i) any material delay in Borrower’s performance of any of its material obligations to any account debtor or the assertion of any material claims, offsets, defenses or counterclaims by any account debtor, or any material disputes with account debtors, or any settlement, adjustment or compromise thereof, (ii) all material adverse information known to Borrower relating to the financial condition of any significant account debtor and (iii) any event or circumstance which, to the best of Borrower’s knowledge, would result in any then existing Accounts as no longer constituting Eligible Accounts (other than as a result of the aging of accounts which shall be reported to Agent in accordance with Section 7.1 above). No credit, discount, allowance or extension or agreement for any of the foregoing shall be granted to any account debtor without Agent’s consent, except in the ordinary course of Borrower’s business in accordance with practices and policies previously disclosed in writing to Agent and except as set forth in the schedules delivered to Agent pursuant to Section 7.1(a) above. So long as no Event of Default exists or has occurred

and is continuing, Borrower may settle, adjust or compromise any claim, offset, counterclaim or dispute with any account debtor. At any time that an Event of Default exists or has occurred and is continuing, Agent may, at its option, notify Borrower that Agent intends to have the exclusive right to settle, adjust or compromise any claim, offset, counterclaim or dispute with account debtors or grant any credits, discounts or allowances and on and after such notice from Agent to Borrower, Agent shall have such exclusive right, until the earlier of such time as Agent may notify Borrower otherwise or no Event of Default shall exist or be continuing.

(b) With respect to each Account: (i) the amounts shown on any invoice delivered to Agent from time to time shall be true and complete (other than for de minimis errors that occur in the ordinary course) and any schedule thereof from time to time delivered to Agent pursuant to the terms hereof shall be true and complete (with errors of no more than one (1%) percent of the aggregate amount of the Accounts shown on any such schedule), (ii) no payments shall be made thereon except payments immediately delivered to Agent pursuant to the terms of this Agreement, (iii) no credit, discount, allowance or extension or agreement for any of the foregoing shall be granted to any account debtor except as reported to Agent in accordance with this Agreement and except for credits, discounts, allowances or extensions made or given in the ordinary course of Borrower’s business in accordance with practices and policies previously disclosed to Agent, (iv) there shall be no setoffs, deductions, contras, defenses, counterclaims or disputes existing or asserted with respect thereto except as reported to Agent in accordance with the terms of this Agreement and (v) none of the transactions giving rise thereto will violate any applicable foreign, Federal, State or local laws or regulations in any material respect, all documentation relating thereto will be legally sufficient under such laws and regulations and all such documentation will be legally enforceable in accordance with its terms.

(c) Agent shall have the right at any time or times but subject to reasonable intervals consistent with Agent’s customary practices, in Agent’s name or in the name of a nominee of Agent, to verify the validity, amount or any other matter relating to any Receivables or other Collateral, by mail, telephone, facsimile transmission or otherwise.

7.3 INVENTORY COVENANTS. With respect to the Inventory: (a) Borrower shall at all times maintain inventory records, consistent with the current practices of Borrower as of the date hereof, keeping correct and accurate records itemizing and describing the kind, type, quality and quantity of Inventory, Borrower’s cost therefor and daily withdrawals therefrom and additions thereto; (b) Borrower shall conduct a physical count of the Inventory at least once each year but at any time or times as Agent may request on or after an Event of Default and for so long as the same is continuing, and promptly following such physical inventory shall supply Agent with a report in the form and with such specificity as may be reasonably satisfactory to Agent concerning such physical count; (c) Borrower shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales of Inventory in the ordinary course of its business and except to move Inventory directly from one location set forth or permitted herein to another such location and except for Inventory shipped from the manufacturer thereof to Borrower which is in transit to the locations set forth or permitted herein, PROVIDED, THAT, Borrower may remove Inventory to any locations not otherwise permitted hereunder so long as the aggregate amount of all of such Inventory at such other locations does not have a Value in excess of $10,000; (d) upon Agent’s request, Borrower shall, at its expense, no more than one (1) time in any twelve (12) month period, but at any time or

times as Agent may request on or after an Event of Default and for so long as the same is continuing or at any time on or after any change in the calculation of standard costs of Inventory, deliver or cause to be delivered to Agent written appraisals as to the Inventory in form, scope and methodology acceptable to Agent in good faith and by an appraiser acceptable to Agent (which includes Hilco Appraisal Services, LLC), addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely (PROVIDED, THAT, any appraisal requested at such time as an Event of Default exists or has occurred and is continuing or on and after a change in the calculation of standard costs shall not be considered for purposes of the limitation on the number of appraisals provided for herein); (e) Borrower shall produce, use, store and maintain the Inventory with all reasonable care and caution and in accordance with applicable standards of any insurance in all material respects and in conformity with applicable laws in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) none of the Inventory or other Collateral constitutes farm products or the proceeds thereof; (g) Borrower assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory; (h) Borrower shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate Borrower to repurchase such Inventory other than the right of customers to return defective or non-conforming goods in the ordinary course of business; (i) Borrower shall give Agent not less than thirty (30) days’ written notice prior to the effectiveness of any change in the method of calculation of the standard costs of Inventory; (j) Borrower shall keep the Inventory generally in good and marketable condition; and (k) Borrower shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

7.4 EQUIPMENT AND REAL PROPERTY COVENANTS. With respect to the Equipment and Real Property: (a) upon Agent’s request, Borrower shall, at its expense, no more than one (1) time in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default exists or has occurred and is continuing, deliver or cause to be delivered to Agent written appraisals as to the Equipment and/or the Real Property in form, scope and methodology reasonably acceptable to Agent and by an appraiser reasonably acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely (PROVIDED, THAT, any appraisal requested at such time as an Event of Default exists or has occurred and is continuing shall not be considered for purposes of the limitation on the number of appraisals provided for herein); (b) Borrower shall keep the Equipment in good order, repair, running and marketable condition (ordinary wear and tear excepted and except for worn-out or obsolete Equipment or Equipment no longer used or useful in the business of Borrower); (c) Borrower shall use the Equipment and Real Property with all reasonable care and caution and in accordance with applicable standards of any insurance in all material respects and in conformity with all applicable laws in all material respects; (d) the Equipment is and shall be used in the business of Borrower and not for personal, family, household or farming use; (e) Borrower shall not remove any Equipment from the locations set forth or permitted herein, except that Borrower may remove Equipment from the locations set forth or permitted herein: (i) to the extent necessary to have any Equipment repaired or maintained in the ordinary course of its business or (ii) to move Equipment directly from one location set forth or permitted herein to another such location or (iii) to the extent such Equipment are motor vehicles and trailers used by or for the

benefit of Borrower in the ordinary course of business or (iv) other Equipment so long as the aggregate amount of all of such Equipment at such other locations does not have a value in excess of $25,000; (f) the Equipment (other than Equipment that is a fixture) is now and shall remain personal property and Borrower shall not permit any of the Equipment (other than Equipment that is a fixture) to be or become a part of or affixed to real property other than Real Property owned by Borrower and subject to a Mortgage (unless the Real Property has a value of less than $100,000); and (v) neither Agent nor any Lender shall have any responsibility or liability arising from the use of the Equipment and Real Property.

7.5 POWER OF ATTORNEY. Borrower hereby irrevocably designates and appoints Agent (and all persons designated by Agent) as Borrower’s true and lawful attorney in fact, and authorizes Agent, in Borrower’s or Agent’s name, to: (a) at any time an Event of Default exists or has occurred and is continuing (i) demand payment on Receivables or other Collateral, (ii) enforce payment of Receivables by legal proceedings or otherwise, (iii) exercise all of Borrower’s rights and remedies to collect any Receivable or other Collateral, (iv) sell or assign any Receivable upon such terms, for such amount and at such time or times as the Agent deems advisable, (v) settle, adjust, compromise, extend or renew any Account, (vi) discharge and release any Receivable, (vii) prepare, file and sign Borrower’s name on any proof of claim in bankruptcy or other similar document against an account debtor or other obligor in respect of any Receivables or other Collateral, (viii) notify the post office authorities to change the address for delivery of remittances from account debtors or other obligors in respect of Receivables or other proceeds of Collateral to an address designated by Agent, and open and dispose of all mail addressed to Borrower and handle and store all mail relating to the Collateral; and (ix) do all acts and things which are necessary, in Agent’s determination, to fulfill Borrower’s obligations under this Agreement and the other Financing Agreements and (b) at any time to (i) take control in any manner of any item of payment in respect of Receivables or constituting Collateral or otherwise received in or for deposit in the Blocked Accounts or otherwise received by Agent or any Lender, (ii) have access to any lockbox or postal box into which remittances from account debtors or other obligors in respect of Receivables or other proceeds of Collateral are sent or received, (iii) endorse Borrower’s name upon any items of payment in respect of Receivables or constituting Collateral or otherwise received by Agent and any Lender and deposit the same in Agent’s account for application to the Obligations, (iv) endorse Borrower’s name upon any chattel paper, document, instrument, invoice, or similar document or agreement relating to any Receivable or any goods pertaining thereto or any other Collateral, including any warehouse or other receipts, or bills of lading and other negotiable or non-negotiable documents, (v) clear Inventory the purchase of which was financed with Letter of Credit Accommodations through U.S. Customs or Customs and Excise or other foreign export control authorities in Borrower’s name, Agent’s name or the name of Agent’s designee, and to sign and deliver to customs officials powers of attorney in Borrower’s name for such purpose, and to complete in Borrower’s or Agent’s name, any order, sale or transaction, obtain the necessary documents in connection therewith and collect the proceeds thereof, and (vi) sign Borrower’s name on any verification of Receivables and notices thereof to account debtors or any secondary obligors or other obligors in respect thereof. Borrower hereby releases Agent and Lenders and their respective officers, employees and designees from any liabilities arising from any act or acts under this power of attorney and in furtherance thereof, whether of omission or commission, except as a result of Agent’s or any Lender’s own gross negligence or willful misconduct as determined pursuant to a final non-appealable order of a court of competent jurisdiction.

7.6 RIGHT TO CURE. Agent may, at its option, upon notice to Borrower, (a) cure any default by Borrower under any material agreement with a third party that affects the Collateral, its value or the ability of Agent to collect, sell or otherwise dispose of the Collateral or the rights and remedies of Agent or any Lender therein or the ability of Borrower to perform its obligations hereunder or under any of the other Financing Agreements, at any time on or after a Default or Event of Default exists or has occurred and is continuing, or if after giving effect to any Reserve in respect of such default Excess Availability is or would be less than $5,000,000; (b) pay or bond on appeal any judgment entered against Borrower, at any time on or after a Default or Event of Default exists or has occurred and is continuing, or if after giving effect to any Reserve in respect of such judgment Excess Availability is or would be less than $5,000,000; (c) discharge taxes, liens, security interests or other encumbrances at any time levied on or existing with respect to the Collateral and pay any amount, incur any expense or perform any act which, in Agent’s judgment, is necessary or appropriate to preserve, protect, insure or maintain the Collateral and the rights of Agent and Lenders with respect thereto; PROVIDED, THAT, Agent shall not exercise its right pursuant to this Section 7.6(c) to discharge such taxes, liens, security interest or other encumbrances that are permitted under Section 9.8 hereof, unless either (i) a Default or Event of Default shall exist or have occurred and be continuing, or (ii) with respect to liens, security interests or other encumbrances, the beneficiary or holder of such lien, security interest or other encumbrance has the right to take action against or with respect to the Collateral which right is not subject to an effective stay pursuant to applicable law. Agent may add any amounts so expended to the Obligations and charge Borrower’s account therefor, such amounts to be repayable by Borrower on demand. Agent and Lenders shall be under no obligation to effect such cure, payment or bonding and shall not, by doing so, be deemed to have assumed any obligation or liability of Borrower. Any payment made or other action taken by Agent under this Section shall be without prejudice to any right to assert an Event of Default hereunder and to proceed accordingly.

7.7 ACCESS TO PREMISES. From time to time as requested by Agent, at the cost and expense of Borrower, (a) Agent or its designee shall have complete access to all of Borrower’s premises during normal business hours and after notice to Borrower, or at any time and without notice to Borrower if an Event of Default exists or has occurred and is continuing, for the purposes of inspecting, verifying and auditing the Collateral and all of Borrower’s books and records, including the Records, and (b) Borrower shall promptly furnish to Agent such copies of such books and records or extracts therefrom as Agent may reasonably request, and (c) Agent or any Lender or Agent’s designee may use during normal business hours such of Borrower’s personnel, equipment, supplies and premises as may be reasonably necessary for the foregoing and if an Event of Default exists or has occurred and is continuing for the collection of Receivables and realization of other Collateral.

SECTION 8. REPRESENTATIONS AND WARRANTIES

Borrower hereby represents and warrants to Agent and Lenders the following (which shall survive the execution and delivery of this Agreement):

8.1 CORPORATE EXISTENCE, POWER AND AUTHORITY. Borrower is a corporation duly organized and in good standing under the laws of its State or country of incorporation or organization and is duly qualified as a foreign corporation and in good standing in all States or other jurisdictions

(domestic or foreign) where the nature and extent of the business transacted by it or the ownership of assets makes such qualification necessary, except for those jurisdictions in which the failure to so qualify would not have a Material Adverse Effect and except to the extent required in connection with a transaction permitted under Section 9.7 hereof. The execution, delivery and performance of this Agreement, the other Financing Agreements and the transactions contemplated hereunder and thereunder (a) are all within Borrower’s corporate powers, (b) have been duly authorized, (c) are not in contravention of law or the terms of Borrower’s certificate of incorporation, by-laws, or other organizational documentation, or any indenture, agreement or undertaking to which Borrower is a party or by which Borrower or its property are bound, and (d) will not result in the creation or imposition of, or require or give rise to any obligation to grant, any lien, security interest, charge or other encumbrance upon any property of Borrower except in favor of Agent pursuant to this Agreement and the other Financing Agreements. This Agreement and the other Financing Agreements to which Borrower is a party constitute legal, valid and binding obligations of Borrower enforceable in accordance with their respective terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium, or similar law affecting creditors’ rights generally and by general principles of equity.

8.2 NAME; STATE OF ORGANIZATION; CHIEF EXECUTIVE OFFICE; COLLATERAL LOCATIONS.

(a) The exact legal name of Borrower on the date hereof is as set forth on the signature page of this Agreement and in the Information Certificate. Borrower has, during the five years prior to the date of this Agreement, been known by or used any other corporate or fictitious name or been a party to any merger or consolidation, except as set forth in the Information Certificate.

(b) Borrower is on the date hereof an organization of the type and organized in the jurisdiction set forth in the Information Certificate. As of the date hereof, the Information Certificate accurately sets forth the organizational identification number of Borrower or accurately states that Borrower has none and accurately sets forth the federal employer identification number of Borrower.

(c) The chief executive office and mailing address of Borrower and Borrower’s Records concerning Accounts are located only at the addresses identified as such in Schedule 8.2 to the Information Certificate and its only other places of business and the only other locations of Collateral, if any, are the addresses set forth in Schedule 8.2 to the Information Certificate, subject to the rights of Borrower to establish new locations in accordance with Section 9.2 below. As of the date hereof, the Information Certificate correctly identifies any of such locations which are not owned by Borrower and sets forth the owners and/or operators thereof.

8.3 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE CHANGE. All financial statements relating to Borrower which have been or may hereafter be delivered by Borrower to Agent and Lenders have been prepared in accordance with GAAP (except as to any interim financial statements, to the extent such statements are subject to normal year end adjustments and do not include any notes) and fairly present in all material respects the financial condition and the results of operation of Borrower as at the dates and for the periods set forth therein. Except as disclosed in any interim financial statements furnished by Borrower to Agent or otherwise disclosed by

Borrower to Agent in writing, in each case prior to the date of this Agreement, there has been no act, condition or event which has had or is reasonably likely to have a Material Adverse Effect since the date of the most recent audited financial statements of Borrower furnished by Borrower to Agent prior to the date of this Agreement.

8.4 PRIORITY OF LIENS; TITLE TO PROPERTIES. The security interests and liens granted to Agent under this Agreement and the other Financing Agreements constitute valid and perfected first priority liens and security interests in and upon the Collateral subject as to priority only to the liens indicated on Schedule 8.4 to the Information Certificate and the other liens permitted under Section 9.8 hereof to the extent such liens may have priority under applicable law and except to the extent that Agent does not require such perfection or priority. Borrower has good and marketable fee simple title to or valid leasehold interests in all of its Real Property (subject to the effects on such title being marketable of a Mortgage on such Real Property) and good, valid and merchantable title to all of its other properties and assets subject to no liens, mortgages, pledges, security interests, encumbrances or charges of any kind, except those granted to Agent and such others as are specifically listed on Schedule 8.4 to the Information Certificate or permitted under Section 9.8 hereof.

8.5 TAX RETURNS. Borrower has filed, or caused to be filed, in a timely manner all Federal and other material tax returns, reports and declarations which are required to be filed by it. All information in such tax returns, reports and declarations is complete and accurate in all material respects. Borrower has paid or caused to be paid all material taxes due and payable or claimed due and payable in any assessment received by it, except (a) taxes the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to Borrower and with respect to which adequate reserves have been set aside on its books to the extent required by GAAP and (b) tax obligations the terms of payment for which are provided for in the Plan; PROVIDED, THAT, Borrower shall pay or cause to be paid such taxes in accordance with the Plan and as otherwise required under the terms of its arrangements with the taxing authority to whom such taxes are owed or other Governmental Authority responsible for the administration of the collection of such taxes. Adequate provision has been made for the payment of all material accrued and unpaid Federal, State, county, local, foreign and other taxes whether or not yet due and payable and whether or not disputed. Borrower has collected and remitted to the appropriate tax authority all material excise taxes and sales and/or use taxes applicable to its business required to be collected and remitted under the laws of the United States and each political subdivision thereof, and each of their respective political subdivisions, including any such jurisdiction in which Borrower owns any Inventory or owns or leases any other property, EXCEPT such taxes the terms of payment for which are provided for in the Plan; PROVIDED, THAT, Borrower shall pay or cause to be paid such taxes in accordance with the Plan and as otherwise required under the terms of its arrangements with the taxing authority to whom such taxes are owed or other Governmental Authority responsible for the administration of the collection of such taxes.

8.6 LITIGATION. Except as set forth on Schedule 8.6 to the Information Certificate, (a) there is no investigation by any Governmental Authority pending, or to the best of Borrower’s knowledge threatened, against or affecting Borrower, or its assets or business and (b) there is no action, suit, proceeding or claim by any Person pending, or to the best of Borrower’s knowledge threatened, against Borrower or its assets, or against or affecting any transactions contemplated

by this Agreement, in each case as to clauses (a) and (b), which has or could reasonably be expected to have a Material Adverse Effect.

8.7 COMPLIANCE WITH OTHER AGREEMENTS AND APPLICABLE LAWS.

(a) Borrower is not in default in any respect under, or in violation in any respect of the terms of, any agreement, contract, instrument, lease or other commitment to which it is a party or by which it or any of its assets are bound where such default or violation has or could reasonably be expected to have a Material Adverse Effect. Borrower is in compliance with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority relating to their respective businesses, where the failure to so comply has or could reasonably be expected to have a Material Adverse Effect.

(b) Borrower has obtained all material permits, licenses, approvals, consents, certificates, orders or authorizations of any Governmental Authority required for the lawful conduct of its business (the "Permits"). All of the Permits are valid and subsisting and in full force and effect where the failure to have any such Permit has or could reasonably be expected to have a Material Adverse Effect. There are no actions, claims or proceedings pending or to the best of Borrower’s knowledge, threatened that seek the revocation, cancellation, suspension or modification of any of the Permits which has or could reasonably be expected to have a Material Adverse Effect.

8.8 ENVIRONMENTAL COMPLIANCE.

(a) Except as set forth on Schedule 8.8 to the Information Certificate, neither Borrower nor any Subsidiary of Borrower has generated, used, stored, treated, transported, manufactured, handled, produced or disposed of any Hazardous Materials, on or off its premises (whether or not owned by it) in any manner which violates in any material respect any applicable Environmental Law or Permit, and the operations of Borrower and each Subsidiary of Borrower complies in all material respects with all Environmental Laws and all Permits.

(b) Except as set forth on Schedule 8.8 to the Information Certificate, there is no pending, active, or to the best of Borrower’s knowledge, threatened investigation, proceeding, complaint, order, directive, claim, citation or notice by any Governmental Authority or any other person with respect to any non-compliance with or violation of the requirements of any Environmental Law or the release, spill or discharge, threatened or actual, of any Hazardous Material or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials by Borrower or any Subsidiary of Borrower and there are no other environmental, health or safety matters, which in any case could reasonably be expected to have a Material Adverse Effect.

(c) Except as set forth on Schedule 8.8 to the Information Certificate, none of Borrower and or any Subsidiary of Borrower has any material liability (contingent or otherwise) in connection with a release, spill or discharge, threatened or actual, of any Hazardous Materials or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials.

(d) Borrower and each Subsidiary of Borrower has all Permits required to be obtained or filed in connection with the operations of Borrower and such Subsidiaries under any Environmental Law and all of such licenses, certificates, approvals or similar authorizations and other Permits are valid and in full force and effect where the failure to have such license, certificate, approval or similar authorization would have a Material Adverse Effect.

8.9 EMPLOYEE BENEFITS.

(a) Each Benefit Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or State law. Each Benefit Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service and to the best of Borrower’s knowledge, nothing has occurred which would cause the loss of such qualification. Borrower and its ERISA Affiliates have made all required contributions to any Benefit Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Benefit Plan.

(b) There are no pending, or to the best of Borrower’s knowledge, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Benefit Plan. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Benefit Plan.

(c) No ERISA Event has occurred or is reasonably expected to occur; (i) the current value of each Benefit Plan’s assets (determined in accordance with the assumptions used for funding such Benefit Plan pursuant to Section 412 of the Code) are not less than such Benefit Plan’s liabilities under Section 4001(a)(16) of ERISA; (ii) Borrower and its ERISA Affiliates have not incurred and do not reasonably expect to incur, any liability under Title IV of ERISA with respect to any Benefit Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iii) Borrower and its ERISA Affiliates have not incurred and do not reasonably expect to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (iv) Borrower and its ERISA Affiliates have not engaged in a transaction that would be subject to Section 4069 or 4212(c) of ERISA.

8.10 BANK ACCOUNTS. All of the deposit accounts, investment accounts or other accounts in the name of or used by Borrower maintained at any bank or other financial institution are set forth on Schedule 8.10 to the Information Certificate, subject to the right of Borrower to establish new accounts in accordance with Section 5.2 hereof.

8.11 INTELLECTUAL PROPERTY. Borrower owns or licenses or otherwise has the right to use all Intellectual Property necessary in all material respects for the operation of its business. As of the date hereof, Borrower does not have any Intellectual Property registered, or subject to pending applications, in the United States Patent and Trademark Office or any similar office or agency in the United States, any State thereof, any political subdivision thereof or in any other country, other than those described in Schedule 8.11 to the Information Certificate and has not granted any material licenses with respect thereto other than as set forth in Schedule 8.11 to the Information Certificate. Borrower has not received any written notice within the immediately

preceding three (3) years prior to the date hereof that any slogan or other advertising device or other Intellectual Property or product bearing or embodying any Intellectual Property presently contemplated to be sold by or employed by Borrower infringes any patent, trademark, servicemark, tradename, copyright, license or other intellectual property owned by any other Person presently where the matter set forth in such written notice has not been settled by an agreement of the parties or the written withdrawal or waiver of any claim or allegation set forth in any such written notice and as of the date hereof, no claim or litigation is pending or to the best of Borrower’s knowledge, threatened against Borrower contesting its right to sell any such product or use any such Intellectual Property. Schedule 8.11 to the Information Certificate sets forth all of the agreements or other arrangements of Borrower pursuant to which Borrower has obtained a license or other right to use any trademarks or other intellectual property owned by another person that is material to the business of Borrower or affixed to or used in connection with the Inventory or any of the other Collateral (excluding licenses for standard "off-the-shelf" commercial software that is generally available having a replacement value of less than $25,000) as in effect on the date hereof and the dates of the expiration of such agreements of Borrower as in effect on the date hereof (collectively, together with such agreements or other arrangements as may be entered into by Borrower after the date hereof, collectively, the "License Agreements" and individually, a "License Agreement"). All trademarks and other Intellectual Property used by Borrower that are owned by another person are being used all material respects in accordance with the terms of the License Agreement applicable thereto.

8.12 SUBSIDIARIES; AFFILIATES; CAPITALIZATION.

(a) As of the date hereof, Borrower does not have any direct or indirect Subsidiaries and is not engaged in any joint venture or partnership, except as set forth in Schedule 8.12 to the Information Certificate.

(b) As of the date hereof, Borrower is the record and beneficial owner of all of the issued and outstanding shares of Capital Stock of each of the Subsidiaries listed on Schedule 8.12 to the Information Certificate as being owned by Borrower and there are no proxies, irrevocable or otherwise, with respect to such shares and no equity securities of any of the Subsidiaries are or may become required to be issued by reason of any options, warrants, rights to subscribe to, calls or commitments of any kind or nature and there are no contracts, commitments, understandings or arrangements by which any Subsidiary is or may become bound to issue additional shares of it Capital Stock or securities convertible into or exchangeable for such shares.

(c) Each of the direct or indirect Subsidiaries of Borrower listed on Schedule 8.12 hereto is inactive or dissolved and (i) does not and will not engage in any commercial or business activity and (ii) does not own assets having a book value of more than the US Dollar Equivalent of US$10,000, and (iii) is not directly or indirectly, contingently or otherwise, liable in respect of any Indebtedness or other obligations, other than (A) obligations for franchise taxes and other customary obligations in the ordinary course directly related to the maintenance of its existence and continued good standing as a legal entity and (B) Indebtedness and other obligations owed to Borrower.

8.13 LABOR DISPUTES.

(a) Set forth on Schedule 8.13 to the Information Certificate is a list (including dates of termination) of all collective bargaining or similar agreements between or applicable to Borrower and any union, labor organization or other bargaining agent in respect of the employees of Borrower on the date hereof.

(b) There is (i) no significant unfair labor practice complaint pending against Borrower or, to the best of Borrower’s knowledge, threatened against it, before the National Labor Relations Board (or similar Governmental Authority), and no significant grievance or significant arbitration proceeding arising out of or under any collective bargaining agreement is pending on the date hereof against Borrower or, to best of Borrower’s knowledge, threatened against it which has or could reasonably be expected to have a Material Adverse Effect, and (ii) no significant strike, labor dispute, slowdown or stoppage is pending against Borrower or, to the best of Borrower’s knowledge, threatened against Borrower which has or could reasonably be expected to have a Material Adverse Effect.

8.14 RESTRICTIONS ON SUBSIDIARIES. Except for restrictions contained in this Agreement or any other agreement with respect to Indebtedness of Borrower permitted hereunder as in effect on the date hereof, there are no contractual or consensual restrictions on Borrower or any of its Subsidiaries, binding on Borrower, any of its Subsidiaries or any of their respective assets, in effect on the date hereof which prohibit or otherwise restrict (a) the transfer of cash or other assets (i) between Borrower and any of its Subsidiaries or (ii) between any Subsidiaries of Borrower or (b) the ability of Borrower or any of its Subsidiaries to incur Indebtedness or grant security interests to Agent or any Lender in the Collateral, except:

(i) restrictions pursuant to customary provisions restricting subletting or assignment of any lease governing any leasehold interest of Borrower or any Subsidiary and pursuant to anti-assignment provisions contained in contracts;

(ii) restrictions contained in agreements governing or relating to any lien or security interest permitted hereunder or the obligations secured thereby, provided that such restriction, condition or prohibition relates solely to the assets or property subject to such lien or security interest;

(iii) pursuant to customary provisions contained in license agreements for Intellectual Property licensed by third parties to Borrower or any of its Subsidiaries which restrict the sublicensing, pledge, transfer or assignment of the licensee’s rights thereunder;

(iv) customary restrictions on asset transfers and liens under asset sale agreements relating solely to the assets subject to such sale or other disposition pending such sale or other disposition; and

(v) restrictions contained in agreements relating to any Indebtedness of Foreign Subsidiaries permitted hereunder; provided, that such restriction or prohibition shall only apply to the Foreign Subsidiary incurring such Indebtedness and such Foreign Subsidiary’s assets.

8.15 MATERIAL CONTRACTS. Schedule 8.15 to the Information Certificate sets forth all Material Contracts to which Borrower is a party or is bound as of the date hereof. Borrower has delivered true, correct and complete copies of such Material Contracts to Agent on or before the

date hereof. Borrower is not in breach or in default in any material respect of or under any Material Contract, except to the extent set forth on Schedule 8.15 to the Information Certificate. Except as set forth on Schedule 8.15 to the Information Certificate, as of the date hereof, no notice of the intention of any other party thereto to terminate any Material Contract has been received by or on behalf of Borrower.

8.16 CONFIRMATION ORDER. Borrower has delivered to Agent a complete and correct copy of the Plan and the Confirmation Order (including all schedules, exhibits, amendments, supplements, modifications, assignments and all other documents delivered pursuant thereto or in connection therewith). Borrower is not in default in the performance of or compliance with any provisions of the Plan. The Plan is in full force and effect as of the date hereof and has not been terminated, rescinded or withdrawn. The Confirmation Order is a Final Order and is in full force and effect, and has not been amended, modified or stayed and no appeal therefrom or request for hearing with respect thereto is pending. All conditions to confirmation and consummation of the Plan have been satisfied or validly waived pursuant to the Plan (other than conditions consisting of the effectiveness of this Agreement) and the Effective Date (as defined in the Plan) has occurred. Set forth on Schedule 8.16 hereto is a true and correct (a) list of the uses with respect to all cash amounts payable by Borrower on the Effective Date pursuant to the Plan and (b) list of all claims which may be required to be paid by Borrower pursuant to the Plan after the Effective Date and whether such claims are or purport to be secured claims. No court of competent jurisdiction has issued any injunction, restraining order or other order prior to the date hereof which prohibits consummation of the transactions described in the Confirmation Order and no governmental or other action or proceeding has been commenced, seeking any injunction, restraining order or other order which seeks to void or otherwise modify the transactions described in the Confirmation Order.

8.17 PAYABLE PRACTICES; RETENTION OF TITLE. Borrower has not made any material change in its historical accounts payable practices from those in effect immediately prior to the date hereof.

8.18 ACCURACY AND COMPLETENESS OF INFORMATION. All information furnished by or on behalf of Borrower in writing to Agent or any Lender in connection with this Agreement or any of the other Financing Agreements or any transaction contemplated hereby or thereby, including all information on the Information Certificate is true and correct in all material respects on the date as of which such information is dated or certified and does not omit any material fact necessary in order to make such information not misleading (it being understood that any forward-looking statement or projection shall be judged in light of circumstances then known to, or which reasonably should have been known to a person making such statement or projection and having the information reasonably available to a person so situated). No event or circumstance has occurred which has had or could reasonably be expected to have a Material Adverse Effect, which has not been fully and accurately disclosed to Agent in writing prior to the date hereof.

8.19 SURVIVAL OF WARRANTIES; CUMULATIVE. All representations and warranties contained in this Agreement or any of the other Financing Agreements shall survive the execution and delivery of this Agreement and shall be deemed to have been made again to Agent and Lenders on the date of each additional borrowing or other credit accommodation hereunder and shall be

conclusively presumed to have been relied on by Agent and Lenders regardless of any investigation made or information possessed by Agent or any Lender. The representations and warranties set forth herein shall be cumulative and in addition to any other representations or warranties which Borrower shall now or hereafter give, or cause to be given, to Agent or any Lender.

SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS

9.1 MAINTENANCE OF EXISTENCE.

(a) Borrower shall at all times preserve, renew and keep in full force and effect its corporate existence and rights and franchises with respect thereto and maintain in full force and effect all licenses, trademarks, tradenames, approvals, authorizations, leases, contracts and Permits necessary to carry on the business as presently conducted, except to the extent that the failure to maintain the same has or could reasonably be expected to have a Material Adverse Effect.

(b) Borrower shall not change its name unless each of the following conditions is satisfied: (i) Agent shall have received not less than ten (10) Business Days’ prior written notice from Borrower of such proposed change in its corporate name, which notice shall accurately set forth the new name and (ii) Agent shall have received a copy of the amendment to the Certificate of Incorporation of Borrower, providing for the name change certified by the Secretary of State of the jurisdiction of incorporation or organization of Borrower as soon as it is available.

(c) Borrower shall not change its chief executive office or its mailing address or organizational identification number, if any, unless Agent shall have received not less than ten (10) Business Days’ prior written notice from Borrower of such proposed change, which notice shall set forth such information with respect thereto as Agent may reasonably require and Agent shall have received such agreements as Agent may reasonably require in connection therewith. Borrower shall not change its type of organization, jurisdiction of organization or other legal structure unless Agent shall have received not less than ten (10) Business Days’ prior written notice from Borrower of such proposed change, which notice shall set forth such information with respect thereto as Agent may require and Agent shall have received such agreements as Agent may reasonably require in connection therewith; PROVIDED, THAT, in no event shall Borrower change its type of organization so that it is other than a registered organization or change its jurisdiction to a jurisdiction outside the United States of America.

9.2 NEW COLLATERAL LOCATIONS. Borrower may open any new location within the United States, provided Borrower (a) gives Agent ten (10) Business Days’ prior written notice of the intended opening of any such new location and (b) executes and delivers, or causes to be executed and delivered, to Agent such agreements, documents, and instruments as Agent may deem reasonably necessary or desirable to protect its interests in the Collateral at such location.

9.3 COMPLIANCE WITH LAWS, REGULATIONS, ETC.

(a) Borrower shall, and shall cause any Subsidiary to, at all times, comply in all material respects with all laws, rules, regulations, licenses, approvals, orders and other Permits applicable to it and duly observe all requirements of any foreign, Federal, State or local

Governmental Authority where the failure to so comply or observe has or could reasonably be expected to have a Material Adverse Effect.

(b) Borrower shall give written notice to Agent immediately upon Borrower’s receipt of any notice of, or Borrower otherwise obtaining knowledge of, (i) the occurrence of any event involving the release, spill or discharge, threatened or actual, of any Hazardous Material in violation of any applicable Environmental Law or (ii) any investigation, proceeding, complaint, order, directive, claims, citation or notice with respect to: (A) any material non-compliance with or violation of any Environmental Law by Borrower or (B) any material spill or discharge, threatened or actual, of any Hazardous Material other than in the ordinary course of business and other than as permitted under any applicable Environmental Law. Unless otherwise agreed by Borrower and Agent, copies of all environmental surveys, audits, assessments, feasibility studies and results of remedial investigations shall be promptly furnished, or caused to be furnished, by Borrower to Agent. Borrower shall take prompt action to respond to any material non-compliance with any of the Environmental Laws and shall regularly report to Agent on such response.

(c) Without limiting the generality of the foregoing, whenever Agent reasonably determines that there is material non-compliance, or any condition which requires any action by or on behalf of Borrower in order to avoid any material non-compliance, with any Environmental Law, Borrower shall, at Agent’s reasonable request and Borrower’s expense: (i) cause an independent environmental engineer reasonably acceptable to Agent to conduct such tests of the site where such material non-compliance or alleged material non-compliance with such Environmental Laws has occurred as to such material non-compliance and prepare and deliver to Agent a report as to such material non-compliance setting forth the results of such tests, a proposed plan for responding to any environmental problems described therein, and an estimate of the costs thereof and (ii) provide to Agent a supplemental report of such engineer whenever the scope of such material non-compliance, or Borrower’s response thereto or the estimated costs thereof, shall change in any material respect.

(d) Borrower shall indemnify and hold harmless Agent and Lenders and their respective directors, officers, employees, agents, invitees, representatives, successors and assigns, from and against any and all losses, claims, damages, liabilities, costs, and expenses (including reasonable attorneys’ fees and expenses) directly or indirectly arising out of or attributable to the use, generation, manufacture, reproduction, storage, release, threatened release, spill, discharge, disposal or presence of a Hazardous Material, including the costs of any required or necessary repair, cleanup or other remedial work with respect to any property of Borrower and the preparation and implementation of any closure, remedial or other required plans, except that Borrower shall not have any obligation under this Section 9.3(d) to indemnify a person otherwise to be indemnified pursuant to the terms hereof with respect to a matter covered hereby resulting solely from the gross negligence or wilful misconduct of such indemnitee as determined pursuant to a final, non appealable order of a court of competent jurisdiction (but without limiting the obligations of Borrower as to any other person hereunder). All representations, warranties, covenants and indemnifications in this Section 9.3 shall survive the payment of the Obligations and the termination of this Agreement.

9.4 PAYMENT OF TAXES AND CLAIMS. Borrower shall, and shall cause any Subsidiary to, duly pay and discharge all material taxes, assessments, contributions and governmental charges upon or against it or its properties or assets when due, except for taxes, assessments, contributions and governmental changes the validity of which are being contested in good faith by appropriate proceedings, including, but not limited to, claim objection proceedings in the Bankruptcy Court as provided for in the Plan, diligently pursued and available to Borrower or any Subsidiary, as the case may be, and with respect to which adequate reserves have been set aside on its books to the extent required by GAAP and except for other taxes, assessments, contributions and damages arising prior to the date hereof that are subject to, and paid in the ordinary course under, the claims administration process provided for in the Chapter 11 Case.

9.5 INSURANCE. Borrower shall, and shall cause any Subsidiary to, at all times, maintain with financially sound and reputable insurers insurance with respect to the Collateral against loss or damage and all other insurance of the kinds and in the amounts customarily insured against or carried by corporations of established reputation engaged in the same or similar businesses and similarly situated. Said policies of insurance shall be reasonably satisfactory to Agent as to form, amount and insurer. Borrower shall furnish certificates, policies or endorsements to Agent as Agent shall reasonably require as proof of such insurance, and, if Borrower fails to do so, Agent is authorized, but not required, to obtain such insurance at the expense of Borrower. All policies shall provide for at least thirty (30) days prior written notice to Agent of any cancellation or reduction of coverage and that Agent may act as attorney for Borrower in obtaining, and at any time an Event of Default exists or has occurred and is continuing, adjusting, settling, amending and canceling such insurance. Borrower shall cause Agent to be named as a loss payee and an additional insured (but without any liability for any premiums) as applicable under such insurance policies (other than business interruption insurance) and Borrower shall obtain non-contributory lender’s loss payable endorsements to all insurance policies in form and substance reasonably satisfactory to Agent. Such lender’s loss payable endorsements shall specify that the proceeds of such insurance shall be payable to Agent as its interests may appear and further specify that Agent and Lenders shall be paid regardless of any act or omission by Borrower or any of its Affiliates. Without limiting any other rights of Agent or Lenders, any insurance proceeds received by Agent at any time may be applied to payment of the Obligations in accordance with the terms of Section 6.4 hereof. Upon application of such proceeds to the Obligations, nothing contained in this Section 9.5 shall be construed to limit the use of any subsequent Loans for the costs of repair or replacement of the Collateral lost or damaged resulting in the payment of such insurance proceeds.

9.6 FINANCIAL STATEMENTS AND OTHER INFORMATION.

(a) Borrower shall, and shall cause any Subsidiary to, keep proper books and records in which true and complete entries shall be made of all dealings or transactions of or in relation to the Collateral and the business of Borrower and its Subsidiaries in accordance with GAAP. Borrower shall promptly furnish to Agent and Lenders all such financial and other information as Agent shall reasonably request relating to the Collateral and the assets, business and operations of Borrower, and Borrower shall notify the auditors and accountants of Borrower that Agent is authorized to obtain such information directly from them, PROVIDED THAT, so long as no Default or Event of Default shall exist or have occurred and be continuing, and Agent shall have otherwise received such information hereunder as it may have requested, Agent shall not

exercise its right under this Section 9.6 to contact the accountants and auditors directly to obtain information from them not relating to the Collateral without the prior approval of Borrower, which approval shall not be unreasonably withheld, conditioned or delayed. Without limiting the foregoing, Borrower shall furnish or cause to be furnished to Agent, the following: (i) within thirty (30) days after the end of each fiscal month, monthly unaudited consolidated financial statements, and unaudited consolidating financial statements (including in each case balance sheets, statements of income and loss, statements of cash flow, and statements of shareholders’ equity), all in reasonable detail, fairly presenting in all material respects the financial position and the results of the operations of Borrower and its Subsidiaries as of the end of and through such fiscal month, certified to be correct by the vice-president-finance, chief financial officer, controller, treasurer, assistant treasurer or other appropriate financial or senior officer of Borrower, subject to normal year end adjustments and no footnotes and accompanied by a compliance certificate substantially in the form of Exhibit E hereto, along with a schedule in a form reasonably satisfactory to Agent of the calculations used in determining, as of the end of such month, whether Borrower is in compliance with the covenants set forth in Sections 9.17 and 9.18 of this Agreement for such month and (ii) within ninety (90) days after the end of each fiscal year, audited consolidated financial statements and unaudited consolidating financial statements of Borrower and its Subsidiaries (including in each case balance sheets, statements of income and loss, statements of cash flow, and statements of shareholders’ equity), and the accompanying notes thereto, all in reasonable detail, fairly presenting in all material respects the financial position and the results of the operations of Borrower and its Subsidiaries as of the end of and for such fiscal year, together with the unqualified opinion of independent certified public accountants with respect to the audited consolidated financial statements, which accountants shall be an independent accounting firm selected by Borrower and reasonably acceptable to Agent, that such audited consolidated financial statements have been prepared in accordance with GAAP, and present fairly in all material respects the results of operations and financial condition of Borrower and its Subsidiaries as of the end of and for the fiscal year then ended.

(b) Borrower shall promptly notify Agent in writing of the details of (i) any loss, damage, investigation, action, suit, proceeding or claim relating to Collateral having a value of more than $50,000 or which could reasonably be expect to result in a Material Adverse Effect, (ii) any Material Contract being terminated or amended or any new Material Contract entered into (in which event Borrower shall provide Agent with a copy of such Material Contract), (iii) any order, judgment or decree in excess of $100,000 shall have been entered against Borrower or any of its or their properties or assets, (iv) any notification of a material violation of laws or regulations received by Borrower, (v) any ERISA Event, and (vi) the occurrence of any Default or Event of Default.

(c) Promptly after the sending or filing thereof, Borrower shall send to Agent copies of (i) all public information which Borrower or any of its Subsidiaries sends to its security holders generally, (ii) all Form 10-K, Form 10-Q, Form 8-K, proxy statements, all amendments and supplements thereto or equivalent reports and registration statements which Borrower or any of its Subsidiaries files with the Securities Exchange Commission, any national or foreign securities exchange or the National Association of Securities Dealers, Inc., and such other reports as Agent may hereafter specifically identify to Borrower that Agent will require be provided to Agent, (iii) all press releases and (iv) all other statements concerning material changes or developments in the business of Borrower made available by Borrower to the public.

(d) Borrower shall furnish or cause to be furnished to Agent such budgets, forecasts and projections with respect to the businesses of Borrower as Agent may from time to time reasonably request prepared on a basis consistent with such budgets, forecasts and projections as are currently prepared by Borrower, together with such other information respecting the Collateral, as Agent may, from time to time, reasonably request, or such other budgets, forecasts and projections with respect to the businesses of Borrower as Agent may otherwise require at any time that Excess Availability is less than $5,000,000 or either a Default or Event of Default shall exist or have occurred and be continuing or in connection with any amendment, waiver or consent hereunder or under any of the other Financing Agreements. Agent is hereby authorized to deliver a copy of any financial statement or any other information relating to the business of Borrower to any court or other Governmental Authority or to any Lender or Participant or prospective Lender or Participant or any Affiliate of any Lender or Participant, subject to Section 13.5 hereof. Borrower hereby irrevocably authorizes and directs all accountants or auditors to deliver to Agent, at Borrower’s expense, copies of the financial statements of Borrower and any reports or management letters prepared by such accountants or auditors on behalf of Borrower and to disclose to Agent and Lenders such information as they may have regarding the business of Borrower. Any documents, schedules, invoices or other papers delivered to Agent or any Lender may be destroyed or otherwise disposed of, subject to Section 13.5 hereof, by Agent or such Lender one (1) year after the same are delivered to Agent or such Lender, except as otherwise designated by Administrative Borrower to Agent or such Lender in writing.

9.7 SALE OF ASSETS, CONSOLIDATION, MERGER, DISSOLUTION, ETC. Borrower shall not, and shall not permit any Subsidiary to, directly or indirectly,

(a) merge into or with or consolidate with any other Person or permit any other Person to merge into or with or consolidate with it except that any Subsidiary of Borrower may merge with and into or consolidate with Borrower or any other Subsidiary of Borrower; PROVIDED, THAT, each of the following conditions is satisfied: (i) Agent shall have received not less than ten (10) Business Days’ prior written notice of the intention of Borrower or such Subsidiaries to so merge or consolidate, which notice shall set forth in reasonable detail, the persons that are merging or consolidating, which person will be the surviving entity, the locations of the assets of the persons that are merging or consolidating, together with such other information with respect to such merger or consolidation as Agent may reasonably request, (ii) as of the effective date of the merger or consolidation and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, (iii) Agent shall have received, true, correct and complete copies of all material agreements, documents and instruments relating to such merger or consolidation, including, when available, the certificate or certificates of merger to be filed with each appropriate Secretary of State or similar Governmental Authority, foreign or domestic (with a copy as filed promptly after such filing), (iv) the surviving corporation shall expressly confirm, ratify and assume the Obligations and the Financing Agreements to which it is a party in writing, in form and substance reasonably satisfactory to Agent, and Borrower shall execute and deliver such other agreements, documents and instruments as Agent may reasonably request in connection therewith, (v) in no event shall Borrower merge with or into or consolidate with, or enter into any similar transaction with, any Foreign Subsidiary, and (vi) in the case of any such merger or consolidation to which Borrower is a party, (A) Borrower shall be the surviving corporation, and (B) in no event shall Borrower

become liable for any Indebtedness or other obligations (contingent or otherwise) as a result of all such mergers or consolidations in an aggregate amount in excess of $150,000;

(b) sell, issue, assign, lease, license, transfer, abandon or otherwise dispose of any Capital Stock or Indebtedness to any other Person or any of its assets to any other Person, except for:

(i) sales of Inventory in the ordinary course of business,

(ii) Indebtedness permitted under Section 9.9,

(iii) the sale or other disposition of Equipment (including worn out or obsolete Equipment or Equipment no longer used or useful in the business of Borrower or any of Subsidiary of Borrower) so long as such sales or other dispositions do not involve Equipment having an aggregate fair market value in excess of $500,000 for all such Equipment disposed of in any fiscal year of Borrower or as Agent may otherwise agree,

(iv) the sale or other disposition of the real property and equipment of Haynes UK currently owned by Haynes UK located in Openshaw, England to the extent permitted under the UK Financing Agreements,

(v) the issuance and sale by Borrower or any of Subsidiary of Borrower of Capital Stock of such Borrower or any of Subsidiary of Borrower after the date hereof; PROVIDED, THAT, as to any such issuance and sale to Persons other than the Permitted Holders as of the date hereof, each of the following conditions is satisfied: (A) Agent shall have received not less than ten (10) Business Days’ prior written notice of such issuance and sale by Borrower or such Subsidiary of Borrower, as the case may be, which notice shall specify the parties to whom such shares are to be sold, the terms of such sale, the number of shares to be issued and sold, the total amount which it is anticipated will be realized from the issuance and sale of such stock, the net cash proceeds which it is anticipated will be received by Borrower or any of Subsidiary of Borrower, as the case may be from such sale, together with such other information with respect thereto as Agent may in good faith request, (B) none of Borrower or any of Subsidiary of Borrower shall be required to pay any cash dividends or repurchase or redeem such Capital Stock or make any other payments in respect thereof, except as otherwise permitted in Section 9.11 hereof, (C) the terms of such Capital Stock, and the terms and conditions of the purchase and sale thereof, shall not include any terms that include any limitation on the right of Borrower to request or receive Loans or Letter of Credit Accommodations or the right of Borrower to amend or modify any of the terms and conditions of this Agreement or any of the other Financing Agreements or are more restrictive or burdensome to Borrower than the terms of any Capital Stock in effect on the date hereof, (D) except as Agent may otherwise agree in writing, all of the proceeds of the sale and issuance of such Capital Stock shall be remitted to Agent for application to the principal amount of the Obligations and such other Obligations then due and payable, in such order and manner as Agent may determine (without any permanent reduction in the Commitments, but without limitation of any rights of Agent or Lenders at any time that a Default or Event of Default shall exist or have occurred and be continuing) and (E) as of the date of such issuance and sale and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing,

(vi) the issuance of Capital Stock of Borrower consisting of common stock pursuant to an employee stock option, restricted stock award or grant or similar equity plan or 401(k) plans of Borrower for the benefit of its employees, directors and consultants; PROVIDED, THAT, in no event shall Borrower be required to issue, or shall Borrower issue, Capital Stock pursuant to such stock plans or 401(k) plans which would result in a Change of Control or other Event of Default,

(vii) the licensing by Borrower of Intellectual Property owned by it to a Subsidiary of Borrower that is wholly-owned by it or by it and its subsidiaries other than for director qualifying shares of up to two (2%) percent thereof; PROVIDED, THAT, as to any such license: (A) any rights of such Subsidiary shall be subject to the rights of Agent in such Intellectual Property (including the rights of Agent to use such Intellectual Property upon an Event of Default) under this Agreement and as a matter of law, and (B) such license shall not impair, hinder or otherwise adversely affect the rights of Agent,

(viii) the grant by any Borrower after the date hereof of a non-exclusive license or an exclusive license to any Person for the use of any Intellectual Property owned by such Borrower in the ordinary course of business consistent with the current practices of Borrower as of the date hereof; PROVIDED, THAT, as to any such license, each of the following conditions is satisfied, (A) such license is only for the use of Intellectual Property for the manufacture, distribution or sale of products that Borrower do not manufacture, distribute or sell, (B) such licenses shall be on commercially reasonable prices and terms in a bona fide arms’ length transactions, (C) in the case of a non-exclusive license, the rights of the licensee shall be subject to the rights of Agent, and in the case of any license, shall not adversely affect, limit or restrict the rights of Agent to use any Intellectual Property of a Borrower to sell or otherwise dispose of any Inventory or other Collateral, (D) Agent shall have received, true, correct and complete copies of the executed license agreement, promptly upon the execution thereof and (E) as of the date of the grant of any such license, and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing,

(ix) the abandonment or cancellation of Intellectual Property that is not material, is no longer used or useful in any material respect in the business of Borrower or its Subsidiaries, and which it is not commercially reasonable to maintain, PROVIDED, THAT, (A) such abandonment or cancellation shall not adversely affect the right or ability of Agent to exercise its rights or remedies with respect to any of the Collateral or reduce the value of the Collateral in any material respect and (B) Borrower shall provide prior written notice to Agent of the intention of Borrower to abandon or cancel such Intellectual Property,

(c) wind up, liquidate or dissolve, except that any Subsidiary listed on Schedule 8.12 hereto may wind up, liquidate and dissolve; PROVIDED, THAT, each of the following conditions is satisfied, (i) the winding up, liquidation and dissolution of such Subsidiary shall not violate any law or any order or decree of any court or other Governmental Authority in any material respect and shall not conflict with or result in the breach of, or constitute a default under, any indenture, mortgage, deed of trust, or any other agreement or instrument to which Borrower is a party or may be bound, (ii) such winding up, liquidation or dissolution shall be done in accordance with the requirements of all applicable laws and regulations, (iii) effective upon such winding up, liquidation or dissolution, all of the assets and properties of such Subsidiary shall be

duly and validly transferred and assigned to Borrower, free and clear of any liens, restrictions or encumbrances other than the security interest and liens of Agent (and Agent shall have received such evidence thereof as Agent may require) and Agent shall have received such deeds, assignments or other agreements as Agent may request to evidence and confirm the transfer of such assets of such Subsidiary to Borrower, (iv) Agent shall have received all documents and agreements that Borrower has filed with any Governmental Authority or as are otherwise required to effectuate such winding up, liquidation or dissolution, (v) Borrower shall not assume any Indebtedness, obligations or liabilities as a result of such winding up, liquidation or dissolution, or otherwise become liable in respect of any obligations or liabilities of the entity that is winding up, liquidating or dissolving, unless such Indebtedness is otherwise expressly permitted hereunder, (vi) Agent shall have received not less than ten (10) Business Days prior written notice of the intention of such Subsidiary to wind up, liquidate or dissolve, and (vii) as of the date of such winding up, liquidation or dissolution and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing; or

(d) agree to do any of the foregoing, except to the extent that such agreement is part of the Plan as in effect on the date hereof (PROVIDED, THAT, nothing contained herein shall be construed to affect any of the rights or obligations of Agent and Lenders with respect to any such plan of reorganization hereunder or under the commitment letter with respect to providing financing to Borrower upon confirmation of a plan of reorganization).

9.8 ENCUMBRANCES. Borrower shall not, and shall not permit any Subsidiary to, create, incur, assume or suffer to exist any security interest, mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on any of its assets or properties, including the Collateral, except:

(a) the security interests and liens of Agent for the benefit of Secured Parties;

(b) liens securing the payment of taxes, either (i) not yet overdue (it being understood that taxes owing for periods prior to the date hereof shall not be considered to be overdue unless the same are not paid by the date established by the Plan and the claims administration process provided for in the Chapter 11 Case) or the validity of which are being contested in good faith by appropriate proceedings, including, but not limited to claim objection proceedings in the Bankruptcy Court as provided for in the Plan, diligently pursued and available to Borrower or such Subsidiary and with respect to which adequate reserves have been set aside on its books or (ii) identified on Schedule 9.8 hereto;

(c) non-consensual statutory liens (other than liens securing the payment of taxes) arising in the ordinary course of Borrower’s or Subsidiary’s business (including such liens in favor of landlords, warehousemen and mechanics and similar liens) to the extent such liens secure Indebtedness or other obligations relating to claims or liabilities which are being contested in good faith by appropriate proceedings diligently pursued and available to Borrower or such Subsidiary, in each case prior to the commencement of foreclosure or other similar proceedings and with respect to which adequate reserves have been set aside on its books in accordance with GAAP and other than liens identified on Schedule 9.8 hereof;

(d) zoning restrictions, easements, licenses, covenants and other restrictions affecting the use of Real Property which do not interfere in any material respect with the use of such Real Property or ordinary conduct of the business of Borrower or such Subsidiary as presently conducted thereon or materially impair the value of the Real Property which may be subject thereto;

(e) purchase money security interests in Equipment (including Capital Leases) and purchase money mortgages on Real Property (including Capital Leases) to secure Indebtedness permitted under Section 9.9(b) hereof;

(f) pledges and deposits of cash by Borrower or any Subsidiary in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security benefits consistent with the current practices of Borrower as of the date hereof;

(g) pledges and deposits of cash by Borrower or any Subsidiary in the ordinary course of business with any financial institution at which a deposit account of Borrower or such Subsidiary is maintained to secure obligations of Borrower to such financial institution in connection with such deposit account and the cash management services provided by such financial institution for which such deposit account is used consistent with the current practices of Borrower or such Subsidiary as of the date hereof;

(h) pledges and deposits of cash by Borrower or any of Subsidiary of Borrower to secure the performance of tenders, bids, leases, trade contracts (other than for the repayment of Indebtedness), statutory obligations, appeals and other similar obligations in each case in the ordinary course of business of Borrower; PROVIDED, THAT, in connection with any performance bonds issued by a surety or other person, the issuer of such bond shall not have any rights in or to, or other interest in (whether contingent or otherwise), any of the Collateral other than the pledges or deposits of cash and as to any pledges in respect of an appeal, after giving effect thereto, Excess Availability is not less than $5,000,000;

(i) liens or other security interests arising from (i) operating leases and the precautionary UCC financing statement filings in respect thereof and (ii) equipment or other materials which are not owned by Borrower or any Subsidiary located on the premises of Borrower or such Subsidiary (but not in connection with, or as part of, the financing thereof) from time to time in the ordinary course of business and consistent with current practices of Borrower or any of Subsidiary of Borrower and the precautionary UCC financing statement filings in respect thereof;

(j) judgments and other similar liens arising in connection with court proceedings that do not constitute an Event of Default; PROVIDED, THAT, (i) such liens are being contested in good faith and by appropriate proceedings diligently pursued, (ii) adequate reserves or other appropriate provision, if any, as are required by GAAP have been made therefor, (iii) a stay of enforcement of any such liens is in effect;

(k) the security interests and liens on assets of any Foreign Subsidiary to secure Indebtedness of such Subsidiary permitted under Section 9.9 hereof, including the fixed and

floating charges with respect to the assets of Haynes UK securing the Indebtedness of Haynes UK under the UK Financing Agreements;

(l) the mortgage on the real property of Haynes UK located in Openshaw, England as of the date hereof in favor of the Haynes UK Pension Trustees to secure the obligations of Haynes UK to make certain payments to the pension plan established by Haynes UK as set forth therein;

(m) security interests and liens granted by Borrower or any Subsidiary to secure Indebtedness and other obligations otherwise permitted hereunder not to exceed $50,000 so long as in the case of security interests and liens on any assets of Borrower, such security interests and liens are subordinate to the security interests and liens of Agent and are otherwise permitted under any other agreement to which such Borrower or Subsidiary is a party or by which its assets or properties are bound;

(n) the pledge, mortgage and charge over the share of Haynes UK granted by Borrower to UK Lender pursuant to the UK Financing Agreements to secure the Indebtedness and other obligations of Borrower to UK Lender permitted under Section 9.9(g) hereof; and

(o) the security interests and liens set forth on Schedule 8.4 to the Information Certificate.

9.9 INDEBTEDNESS. Borrower shall not, and shall not permit any Subsidiary to, incur, create, assume, become or be liable in any manner with respect to, or permit to exist, any Indebtedness, or guarantee, assume, endorse, or otherwise become responsible for (directly or indirectly), the Indebtedness, performance, obligations or dividends of any other Person, except:

(a) the Secured Obligations;

(b) purchase money Indebtedness (including purchase money Capital Leases) arising after the date hereof to the extent secured by purchase money security interests in Equipment (including Capital Leases) and purchase money mortgages on Real Property not to exceed $1,500,000 in the aggregate at any time outstanding so long as such security interests and mortgages do not apply to any property of Borrower or Subsidiary other than the Equipment or Real Property so acquired, and the Indebtedness secured thereby does not exceed the cost of the Equipment or Real Property so acquired, as the case may be;

(c) Indebtedness of Borrower or its Subsidiaries entered into in the ordinary course of business consistent with the current practices of Borrower or such Subsidiary as of the date hereof pursuant to Hedge Agreements with a party acceptable to Agent; PROVIDED, THAT, (i) such arrangements are with banks or other financial institutions that have combined capital and surplus and undivided profits of not less than $250,000,000 and are acceptable to Agent, (ii) are not for speculative purposes and (iii) such Indebtedness shall be unsecured, except as to obligations under Hedge Agreements with a party acceptable to Agent, in each case approved by Agent, to the extent of the security interest of Agent in the Collateral as provided herein;

(d) contingent Indebtedness of Borrower or any Subsidiary arising after the date hereof to reimburse the issuer of a surety bond issued in the ordinary course of the business of

Borrower or such Subsidiary consistent with the current practices of Borrower or such Subsidiary as of the date hereof required for the performance of tenders, bids, leases, trade contracts (other than for the repayment of Indebtedness), appeals statutory obligations and other similar obligations; PROVIDED, THAT, (i) the aggregate amount of such contingent Indebtedness outstanding at any time shall not exceed $100,000 and (ii) no such Indebtedness shall be incurred at any time that a Default or Event of Default shall exist or have occurred and be continuing;

(e) Indebtedness created, incurred, assumed or guaranteed by Borrower or any Subsidiary in the ordinary course of the business of Borrower or such Subsidiary in connection with obtaining goods, materials or services that is overdue by more than one hundred twenty (120) days; PROVIDED, THAT, the aggregate amount thereof at any time outstanding shall not exceed $100,000;

(f) the Indebtedness of Borrower or any of Subsidiary of Borrower arising pursuant to loans and advances permitted under Sections 9.10(g), 9.10(h), 9.10(i) and 9.10(j) hereof;

(g) Indebtedness of Borrower pursuant to the guarantee by Borrower of the Indebtedness and other obligations of Haynes UK under the UK Financing Agreements;

(h) Indebtedness of any Foreign Subsidiary arising after the date hereof, PROVIDED, THAT, (i) as to any such Indebtedness, Borrower shall not be directly or indirectly liable (by virtue of Borrower being the primary obligor on, guarantor of, or otherwise liable in any respect of such Indebtedness), and (ii) such Indebtedness is permitted under Section 9.9 hereof;

(i) Indebtedness of Haynes UK to the Haynes UK Pension Trustees in respect of the payment of L 300,000 as a contribution to the Haynes Pension Plan established by Haynes UK as required under the terms of the Agreement, dated April 2, 2004, by and among Haynes UK and the Haynes UK Pension Trustees, which Indebtedness is secured by the mortgage permitted under Section 9.8 hereof;

(j) unsecured Indebtedness of Borrower or any Subsidiary arising after the date hereof to any third person (but not to any Affiliate) pursuant to loans in cash by such person to Borrower or Subsidiary not to exceed $500,000 in the aggregate as to all such Indebtedness outstanding at any time;

(k) the Indebtedness set forth on Schedule 9.9 to the Information Certificate; PROVIDED, THAT, (i) Borrower or such Subsidiary may not make payments in respect of such Indebtedness other than regularly scheduled payments of principal and interest in accordance with the terms of the agreement or instrument evidencing or giving rise to such Indebtedness as in effect on the date hereof, (ii) Borrower and such Subsidiary shall not, directly or indirectly, (A) amend, modify, alter or change the terms of such Indebtedness or any agreement, document or instrument related thereto as in effect on the date hereof except, that, Borrower and such Subsidiary may, after prior written notice to Agent, amend, modify, alter or change the terms thereof so as to extend the maturity thereof, or defer the timing of any payments in respect thereof, or to forgive or cancel any portion of such Indebtedness (other than pursuant to payments thereof), or to reduce the interest rate or any fees in connection therewith, or to make any covenant less restrictive, or (B) redeem, retire, defease, purchase or otherwise acquire such

Indebtedness, or set aside or otherwise deposit or invest any sums for such purpose (other than required prepayments of Indebtedness incurred in single asset financings in connection with the sale or other disposition of the assets so financed provided such sale or other disposition is otherwise permitted hereunder), and (iii) Borrower shall furnish to Agent all notices or demands in connection with such Indebtedness either received by Borrower or on its behalf, promptly after the receipt thereof, or sent by Borrower or on its behalf, concurrently with the sending thereof, as the case may be.

9.10 LOANS, INVESTMENTS, ETC. Borrower shall not, and shall not permit any Subsidiary to, directly or indirectly, make any loans or advance money or property to any person (which shall not be deemed to include Accounts arising from the sale of goods and services in the ordinary course of business), or invest in (by capital contribution, dividend or otherwise) or purchase or repurchase the Capital Stock or Indebtedness or all or a substantial part of the assets or property of any person, or form or acquire any Subsidiaries, or agree to do any of the foregoing, except:

(a) the endorsement of instruments for collection or deposit in the ordinary course of business;

(b) investments in cash or Cash Equivalents; PROVIDED, THAT, with respect to investments in Cash Equivalents by the Borrower, (i) no Loans are then outstanding, except that notwithstanding that any Loans are outstanding, Borrower may from time to time in the ordinary course of business consistent with current practices as of the date hereof (A) make deposits of cash or other immediately available funds in operating demand deposit accounts used for disbursements to the extent required to provide funds for amounts drawn or anticipated to be drawn shortly on such accounts (but not more than one (1) Business Days after the date of deposit therein), (B) cause amounts to be deposited in the Blocked Accounts in accordance with the terms of Section 6.3 hereof and (C) make deposits in those deposit accounts having balances of less than $12,500 up to an aggregate amount for all such accounts of $65,000 (and in the case of the deposit account number 08001031 at Community First Bank having a balance of not more than $60,000 for more than five (5) consecutive days) as described in Section 5.2(d) hereof, and (ii) the terms and conditions of Section 5.2 hereof shall have been satisfied with respect to the deposit account, investment account or other account in which such cash or Cash Equivalents are held to the extent required thereunder;

(c) the existing equity investments of Borrower and the Subsidiaries of Borrower as of the date hereof in its Subsidiaries; PROVIDED, THAT, no Borrower shall have any further obligations or liabilities to make any capital contributions or other additional investments or other payments to or in or for the benefit of any of such Subsidiaries;

(d) loans and advances by Borrower or any of its Subsidiaries to employees of Borrower or such Subsidiary not to exceed the principal amount of $100,000 in the aggregate at any time outstanding for: (i) reasonably and necessary work-related travel or other ordinary business expenses to be incurred by such employees in connection with their work for Borrower or such Subsidiary and (ii) reasonable and necessary relocation expenses of such employees (including home mortgage financing for relocated employees);

(e) stock or obligations issued to Borrower or any other Person liable in respect of the Obligations by any Person (or the representative of such Person) in respect of indebtedness of such Person owing to Borrower or such obligor in connection with the insolvency, bankruptcy, receivership or reorganization of such Person or a composition or readjustment of the debts of such Person or in connection with the settlement of disputes or trade payables; PROVIDED, THAT, to the extent that the original of any such stock or instrument evidencing such obligations (if any) is issued or payable to Borrower or any other Person liable in respect of the Obligations, it shall be promptly delivered to Agent, upon Agent’s request, together with such stock power, assignment or endorsement by Borrower or such other Person as Agent may request;

(f) obligations of account debtors to Borrower or any of its Subsidiaries arising from Accounts which are past due whether or not evidenced by a promissory note made by such account debtor payable to Borrower or such Subsidiary; PROVIDED, THAT, promptly upon the receipt of the original of any such promissory note by Borrower or any Person liable in respect of the Obligations, such promissory note shall be endorsed to the order of Agent by Borrower or such Person and promptly delivered to Agent as so endorsed;

(g) loans from time to time by Haynes UK to Borrower to the extent permitted under the UK Financing Agreements; PROVIDED, THAT, (i) the Indebtedness of Borrower to Haynes UK arising pursuant to such loans shall be subject to, and subordinate in right of payment to, the right of Agent and Lenders to receive the prior final payment and satisfaction in full of all of the Obligations on terms and conditions acceptable to Agent, (ii) the terms and conditions of such Indebtedness are set forth in the Memorandum of Agreement between Haynes UK and Borrower dated as of April 2, 2004 as in effect on the date hereof, (iii) promptly upon Agent’s request, Agent shall have received a subordination agreement, in form and substance satisfactory to Agent, providing for the terms of the subordination in right of payment of such Indebtedness of Borrower to the prior final payment and satisfaction in full of all of the Obligations, duly authorized, executed and delivered by Haynes UK and Borrower, (iv) promptly upon Agent’s request, Agent shall have received a promissory note in form and substance satisfactory to Agent evidencing the terms and conditions of such Indebtedness, and (v) Borrower shall not, directly or indirectly make, or be required to make, any payments in respect of such Indebtedness prior to the end of the then current term of this Agreement, except (A) for payments of regularly scheduled interest in respect thereof at the rate set forth in the Memorandum of Agreement referred to above as in effect on the date hereof and (B) for payments of principal in respect of the Indebtedness arising pursuant to such loans, PROVIDED, THAT, as to any such payment, each of the following conditions is satisfied: (1) Agent shall have received not less than two (2) Business Days’ prior written notice with respect to any such payment, (2) as of the date of any such payment and after giving effect thereto, Excess Availability for each of the immediately preceding ten (10) consecutive days shall have been not less than $5,000,000 and as of the date of any such payment and after giving effect thereto, Excess Availability shall be not less than $5,000,000 and (3) as of the date of any such payment and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

(h) loans or advances of money or property by any Foreign Subsidiary to any person (including to Borrower or any of its Subsidiaries) after the date hereof (except for loans or advances by Haynes UK which shall be subject to clause (g) above), or the investment by any such Subsidiary in any person (by capital contribution, dividend or otherwise) or in any Cash

Equivalents or similar instruments in any foreign jurisdiction after the date hereof, or the purchase or repurchase by any such Subsidiary of the Capital Stock or Indebtedness or all or a substantial part of the assets or property of any person after the date hereof, or the formation or acquisition by any such Subsidiary of any Subsidiaries after the date hereof or the agreement of any such Subsidiary to do any of the foregoing after the date hereof; PROVIDED, THAT, (i) as of the date of such loan or advance (other than any loan or advance to Borrower), or investment or purchase or repurchase (other than investments in cash or Cash Equivalents or similar instruments in any foreign jurisdiction), or the formation or acquisition of any such Subsidiary and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, (ii) in no event shall Borrower make, or be required to make, any payment or incur any obligation or liability (contingent or otherwise) in connection with any such loan or advance, or investment or purchase or repurchase, or the formation or acquisition of such Subsidiary or take any other action otherwise prohibited hereunder, (iii) in the case of any loans or advances to Borrower, (A) the Indebtedness arising pursuant to such loans shall be subject to, and subordinate in right of payment to, the right of Agent and Lenders to receive the prior final payment and satisfaction in full of all of the Obligations on terms and condition acceptable to Agent, (B) promptly upon Agent’s request, Agent shall have received a subordination agreement, in form and substance satisfactory to Agent, providing for the terms of the terms of the subordination in right of payment of such Indebtedness of Borrower to the prior final payment and satisfaction in full of all of the Obligations, duly authorized, executed and delivered by such Subsidiary and Borrower, and (C) Borrower shall not, directly or indirectly make, or be required to make, any payments in respect of such Indebtedness and (iv) in the case of any such loan or advance, or investment or purchase or repurchase or the formation or acquisition of a Subsidiary by Haynes UK, it shall be permitted under the UK Financing Agreements; and (i) the investments, loans and advances set forth on Schedule 9.10 to the Information Certificate; PROVIDED, THAT, as to such loans and advances, Borrower shall not, directly or indirectly, amend, modify, alter or change the terms of such loans and advances or any agreement, document or instrument related thereto and Borrower shall furnish to Agent all notices or demands in connection with such loans and advances either received by Borrower or on its behalf, promptly after the receipt thereof, or sent by Borrower or on its behalf, concurrently with the sending thereof, as the case may be.

9.11 DIVIDENDS AND REDEMPTIONS. Borrower shall not, directly or indirectly, declare or pay any dividends on account of any shares of class of any Capital Stock of Borrower now or hereafter outstanding, or set aside or otherwise deposit or invest any sums for such purpose, or redeem, retire, defease, purchase or otherwise acquire any shares of any class of Capital Stock (or set aside or otherwise deposit or invest any sums for such purpose) for any consideration or apply or set apart any sum, or make any other distribution (by reduction of capital or otherwise) in respect of any such shares or agree to do any of the foregoing, except that:

(a) Borrower may declare and pay such dividends or redeem, retire, defease, purchase or otherwise acquire any shares of any class of Capital Stock for consideration in the form of shares of common stock (so long as after giving effect thereto no Change of Control or other Default or Event of Default shall exist or occur and be continuing);

(b) Borrower may pay dividends to the extent permitted in Section 9.12 below; and

9.12 TRANSACTIONS WITH AFFILIATES. Borrower shall not, directly or indirectly:

(a) purchase, acquire or lease any property from, or sell, transfer or lease any property to, any officer, director or other Affiliate of Borrower, except in the ordinary course of and pursuant to the reasonable requirements of Borrower’s business and upon fair and reasonable terms no less favorable to Borrower than Borrower would obtain in a comparable arm’s length transaction with a person that is not an Affiliate and except as to (i) loans and advances to Borrower permitted under Section 9.10(g) and 9.10(h) above and (ii) licenses of Intellectual Property by Borrower to its Subsidiaries otherwise permitted hereunder; or

(b) make any payments (whether by dividend, loan or otherwise) of management, consulting or other fees for management or similar services, or of any Indebtedness owing to any officer, employee, shareholder, director or any other Affiliate of Borrower, except (i) reasonable compensation and reimbursement of expenses to officers, employees and directors in each case for or in connection with services rendered to Borrower in the ordinary course of business (including existing management incentive plans, the Long Term Incentive Plan (as defined in the Plan as in effect on the date hereof) and other management and director compensation, retention, benefit, bonus and severance plans entered into in the ordinary course of business), and (ii) payments in respect of any such Indebtedness to the extent permitted under Section 9.10 hereof.

9.13 COMPLIANCE WITH ERISA. Borrower shall, and shall cause each of its ERISA Affiliates, to: (a) maintain each Benefit Plan in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal and State law; (b) cause each Benefit Plan which is intended to be qualified under Section 401(a) of the Code to maintain such qualification; (c) not terminate any Pension Plan so as to incur any material liability to the Pension Benefit Guaranty Corporation; (d) not allow or suffer to exist any prohibited transaction involving any Pension Plan or any trust created thereunder which would subject Borrower or such ERISA Affiliate to a material tax or penalty or other material liability on prohibited transactions imposed under Section 4975 of the Code or ERISA; (e) make all required contributions to any Pension Plan which it is obligated to pay under Section 302 of ERISA, Section 412 of the Code or the terms of such Pension Plan and make all required contributions to any other Benefit Plan to the extent that the failure to do so may result in liability of more than $250,000; (f) not allow or suffer to exist any accumulated funding deficiency, whether or not waived, with respect to any such Benefit Plan; or (g) not allow or suffer to exist any occurrence of a reportable event or any other event or condition that presents a material risk of an ERISA Event that results in or has a reasonable likelihood of resulting in any liability in excess of $250,000.

9.14 END OF FISCAL YEARS; FISCAL QUARTERS. Borrower shall, for financial reporting purposes, cause its, and each of its Subsidiaries’ (a) fiscal years to end on September 30 of each year and (b) fiscal quarters to end on December 31, March 31, June 30 and September 30 of each year.

9.15 CHANGE IN BUSINESS. Borrower shall not engage in any business other than the business of Borrower on the date hereof and any business reasonably related, ancillary or complimentary to the business in which Borrower is engaged on the date hereof.

9.16 LIMITATION OF RESTRICTIONS AFFECTING SUBSIDIARIES. Borrower shall not, directly, or indirectly, create or otherwise cause or suffer to exist any encumbrance or restriction which prohibits or limits the ability of any Subsidiary of Borrower to (a) pay dividends or make other distributions or pay any Indebtedness owed to Borrower or any Subsidiary of Borrower; (b) make loans or advances to Borrower or any Subsidiary of Borrower, (c) transfer any of its properties or assets to Borrower or any Subsidiary of Borrower; or (d) create, incur, assume or suffer to exist any lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than encumbrances and restrictions arising under (i) applicable law, (ii) this Agreement, (iii) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of Borrower or any Subsidiary of Borrower, (iv) customary restrictions on dispositions of real property interests found in reciprocal easement agreements of Borrower or any Subsidiary of Borrower, (v) customary restrictions in agreements for the sale of assets (to the extent such sale is permitted hereunder) on the transfer or encumbrance of such assets during an interim period prior to the closing of the sale of such assets, (vi) customary restrictions in contracts that prohibit the assignment of such contract, (vii) customary restrictions in agreements relating to purchase money financing arrangements of Borrower or contained in security agreements providing for the grant of a security interest to secure other Indebtedness owing to a person that is not an Affiliate (in each case to the extent such purchase money financing or other Indebtedness is permitted hereunder) to the extent such restrictions restrict the transfer of, or the granting of liens on, the property subject to such purchase money financing arrangements or security agreements, (viii) any agreement relating to permitted Indebtedness incurred by a Subsidiary of Borrower prior to the date on which such Subsidiary was acquired by Borrower and outstanding on such acquisition date, (ix) the UK Financing Agreements, (x) customary restrictions in license agreements with respect to Intellectual Property which restrict the sublicensing, pledge, transfer or assignment of the licensee’s rights thereunder, (xi) restrictions in agreements in existence prior to the date hereof and the extension or continuation of contractual obligations in existence on the date hereof; PROVIDED, THAT, any such encumbrances or restrictions contained in such extension or continuation are no less favorable to Agent and Lenders than those encumbrances and restrictions under or pursuant to the contractual obligations so extended or continued.

9.17 MINIMUM EBITDA. At any time that Excess Availability is less than $20,000,000, the EBITDA of Borrower and its Subsidiaries (on a consolidated basis) for each period set forth on Schedule 9.17 hereto for which financial statements of Borrower and its Subsidiaries have been received by Agent shall be not less than amounts set forth on Schedule 9.17 hereto with respect to such period.

9.18 FIXED CHARGE COVERAGE RATIO. At any time that Excess Availability is less than $20,000,000, the Fixed Charge Coverage Ratio of Borrower and its Subsidiaries (on a consolidated basis) for each period set forth on Schedule 9.18 hereto for which financial statements of Borrower and its Subsidiaries have been received by Agent shall be not less than amounts set forth on Schedule 9.18 hereto with respect to such period.

9.19 AFTER ACQUIRED REAL PROPERTY. If Borrower hereafter acquires a fee interest in Real Property and such Real Property is adjacent to, contiguous with or necessary or related to or used in connection with any Real Property then subject to a Mortgage, or if such Real Property is not adjacent to, contiguous with or related to or used in connection with such Real Property, then if such Real Property at any location (or series of adjacent, contiguous or related locations, and regardless of the number of parcels) has a fair market value in an amount equal to or greater than $100,000 (or if a Default or Event of Default exists, then regardless of the fair market value of such assets), without limiting any other rights of Agent or any Lender, or duties or obligations of Borrower, promptly upon Agent’s request, Borrower shall execute and deliver to Agent a mortgage, deed of trust or deed to secure debt, as Agent may determine, in form and substance substantially similar to the Mortgages and as to any provisions relating to specific State or foreign laws reasonably satisfactory to Agent and in form appropriate for recording in the real estate records of the jurisdiction in which such Real Property or other property is located granting to Agent a first and only lien and mortgage on and security interest in such Real Property, fixtures or other property (except as Borrower would otherwise be permitted to incur hereunder or under the Mortgages or as otherwise consented to in writing by Agent) and such other agreements, documents and instruments as Agent may reasonably require in connection therewith; PROVIDED, THAT, as to any such Real Property that is not adjacent, contiguous or related to Real Property then subject to a Mortgage, if the purchase price for such Real Property is paid with the initial proceeds of a loan from a financial institution giving rise to Indebtedness permitted under Section 9.9(b) hereof, then Borrower shall not be required to execute and deliver such mortgage, deed of trust or deed to secure debt in favor of Agent with respect to such Real Property.

9.20 EFFECT OF INDEBTEDNESS OF FOREIGN SUBSIDIARIES. Borrower shall not incur, create, assume, become or be liable in any manner with respect to, or permit to exist, any Indebtedness if under the terms thereof the occurrence of a default under or with respect to Indebtedness of a Foreign Subsidiary shall result in, or permit any holder of any Indebtedness of Borrower to declare, a default under or with respect to Indebtedness of Borrower or cause the payment of such Indebtedness of Borrower to be accelerated or payable prior to its stated maturity.

9.21 COSTS AND EXPENSES. Borrower jointly and severally agree to pay to Agent on demand all costs, expenses, filing fees and taxes (except to the extent Taxes may be subject to the terms of Section 6.5 hereof) paid or payable in connection with the preparation, negotiation, execution, delivery, recording, syndication, administration, collection, liquidation, enforcement and defense of the Obligations, Agent’s rights in the Collateral, this Agreement, the other Financing Agreements and all other documents related hereto or thereto, including any amendments, supplements or consents which may hereafter be contemplated (whether or not executed) or entered into in respect hereof and thereof, including: (a) all out-of-pocket costs and expenses of filing or recording (including Uniform Commercial Code financing statement filing taxes and fees, documentary taxes, intangibles taxes and mortgage recording taxes and fees, if applicable); (b) all reasonable out-of-pocket costs and expenses and fees for insurance premiums, environmental audits, title insurance premiums, surveys, assessments, engineering reports and inspections, appraisal fees and search fees, out-of-pocket costs and expenses of remitting loan proceeds, collecting checks and other items of payment, and establishing and maintaining the Blocked Accounts, together with Agent’s customary charges and fees with respect thereto; (c) charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit

Accommodations; (d) out-of-pocket costs and expenses of preserving and protecting the Collateral; (e) costs and expenses paid or incurred in connection with obtaining payment of the Obligations, enforcing the security interests and liens of Agent, selling or otherwise realizing upon the Collateral, and otherwise enforcing the provisions of this Agreement and the other Financing Agreements or defending any claims made or threatened against Agent or any Lender arising out of the transactions contemplated hereby and thereby (including preparations for and consultations concerning any such matters); (f) all reasonable out-of-pocket expenses and costs heretofore and from time to time hereafter incurred by Agent during the course of periodic field examinations of the Collateral and Borrower’s operations (it being understood that unless an Event of Default shall exist or have occurred and be continuing, only four (4) such field examinations shall be conducted at the expense of Borrower in any calendar year), plus a per diem charge at Agent’s then standard rate for Agent’s examiners in the field and office (which rate as of the date hereof is $1,000 per person per day); and (g) the reasonable fees and disbursements of counsel (including legal assistants) to Agent in connection with any of the foregoing.

9.22 FURTHER ASSURANCES. Upon the reasonable request of Agent at any time and from time to time, Borrower shall promptly, at their expense, duly execute and deliver, or cause to be duly executed and delivered, such further agreements, documents and instruments, and do or cause to be done such further acts as may be necessary or proper to evidence, perfect, maintain and enforce the security interests and the priority thereof in the Collateral and to otherwise effectuate the provisions or purposes of this Agreement or any of the other Financing Agreements.

SECTION 10. EVENTS OF DEFAULT AND REMEDIES

10.1 EVENTS OF DEFAULT. The occurrence or existence of any one or more of the following events are referred to herein individually as an “Event of Default”, and collectively as “Events of Default”:

(a) (i) Borrower fails to pay any of the Obligations when due and such failure shall continue for three (3) Business Days or (ii) Borrower fails to perform any of the covenants contained in Sections 9.3, 9.4, 9.13, 9.14, 9.15, 9.16 and 9.19 of this Agreement or provisions of the other Financing Agreements covering the same matters and such failure shall continue for ten (10) Business Days; PROVIDED, THAT, such ten (10) Business Day period shall not apply in the case of any failure to observe any such covenant which is not capable of being cured at all or (iii) Borrower fails to perform any of the terms, covenants, conditions or provisions contained in this Agreement or any of the other Financing Agreements other than those described in Sections 10.1(a)(i) and 10.1(a)(ii) above;

(b) any representation, warranty or statement of fact made by Borrower to Agent in this Agreement, the other Financing Agreements or any other written agreement, schedule, confirmatory assignment or otherwise shall when made or deemed made be false or misleading in any material respect;

(c) any judgment for the payment of money is rendered against Borrower in excess of $1,000,000 in any one case or in excess of $2,500,000 in the aggregate (to the extent not

covered by insurance where the insurer has assumed responsibility in writing for such judgment) and shall remain undischarged or unvacated for a period in excess of thirty (30) days or execution shall at any time not be effectively stayed, or any judgment other than for the payment of money, or injunction, attachment, garnishment or execution is rendered against Borrower or any of the Collateral having a value in excess of $1,000,000;

(d) Borrower dissolves or suspends or discontinues doing business;

(e) a case or proceeding under the bankruptcy laws of the United States of America now or hereafter in effect or under any insolvency, reorganization, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at law or in equity) is filed against Borrower or all or any part of its properties and such petition or application is not dismissed within forty-five (45) days after the date of its filing or Borrower shall file any answer admitting or not contesting such petition or application or indicates its consent to, acquiescence in or approval of, any such action or proceeding or the relief requested is granted sooner;

(f) a case or proceeding under the bankruptcy laws of the United States of America now or hereafter in effect or under any insolvency, reorganization, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at a law or equity) is filed by Borrower or for all or any part of its property;

(g) any failure by Borrower to observe or perform any of the material terms or conditions of any material order, stipulation or other arrangements entered by or with the Bankruptcy Court in the Chapter 11 Case or otherwise under the Plan;

(h) any default by Borrower under any agreement, document or instrument relating to any Indebtedness for borrowed money owing to any person other than Agent and Lenders, or any Capital Lease, contingent Indebtedness in connection with any guarantee, letter of credit, indemnity or similar type of instrument in favor of any person other than Agent and Lenders, except for disputed claims or unallowed claims that Borrower is not then required to pay under the Plan, in any case in an amount in excess of $500,000 which default continues for more than the applicable cure period, if any, with respect thereto, or any default by Borrower under any Material Contract, which default continues for more than the applicable cure period, if any, with respect thereto;

(i) any material provision hereof or of any of the other Financing Agreements shall for any reason cease to be valid, binding and enforceable with respect to any party hereto or thereto (other than Agent) in accordance with its terms, or any such party shall challenge the enforceability hereof or thereof, or shall assert in writing, or take any action or fail to take any action based on the assertion that any provision hereof or of any of the other Financing Agreements has ceased to be or is otherwise not valid, binding or enforceable in accordance with its terms, or any security interest provided for herein or in any of the other Financing Agreements shall cease to be a valid and perfected first priority security interest in any of the Collateral purported to be subject thereto (except as otherwise permitted herein or therein);

(j) an ERISA Event shall occur which results in or could reasonably be expected to result in liability of Borrower in an aggregate amount in excess of $250,000;

(k) any Change of Control;

(l) the indictment by any Governmental Authority, or as Agent may reasonably and in good faith determine, the threatened indictment by any Governmental Authority of Borrower of which Borrower or Agent receives notice, in either case, as to which there is a reasonable possibility of an adverse determination, in the good faith determination of Agent, under any criminal statute, or commencement or threatened commencement of criminal or civil proceedings against Borrower, pursuant to which statute or proceedings the penalties or remedies sought or available include forfeiture of (i) any of the Collateral having a value in excess of $1,000,000 or (ii) any other property of Borrower which is necessary or material to the conduct of its business;

(m) there shall be an act, condition or event that has a Material Adverse Effect after the date hereof; or

(n) there shall be an event of default under any of the other Financing Agreements or any event of default under the UK Financing Agreements.

10.2 REMEDIES.

(a) At any time an Event of Default exists or has occurred and is continuing, Agent and Lenders shall have all rights and remedies provided in this Agreement, the other Financing Agreements, the UCC and other applicable law, all of which rights and remedies may be exercised without notice to or consent by Borrower, except as such notice or consent is expressly provided for hereunder or required by applicable law. All rights, remedies and powers granted to Agent and Lenders hereunder, under any of the other Financing Agreements, the UCC or other applicable law, are cumulative, not exclusive and enforceable, in Agent’s discretion, alternatively, successively, or concurrently on any one or more occasions, and shall include, without limitation, the right to apply to a court of equity for an injunction to restrain a breach or threatened breach by Borrower of this Agreement or any of the other Financing Agreements. Subject to Section 12 hereof, Agent may, and at the direction of the Required Lenders shall, at any time or times, proceed directly against Borrower to collect the Obligations without prior recourse to the Collateral.

(b) Without limiting the generality of the foregoing, at any time an Event of Default exists or has occurred and is continuing, Agent may, at its option and shall upon the direction of the Required Lenders, (i) upon notice to Borrower, accelerate the payment of all Obligations and demand immediate payment thereof to Agent for itself and the benefit of Lenders; and (ii) terminate the Commitments and this Agreement.

(c) Without limiting the generality of the foregoing, at any time an Event of Default exists or has occurred and is continuing, Agent may, in its discretion (i) with or without judicial process or the aid or assistance of others, enter upon any premises on or in which any of the Collateral may be located and take possession of the Collateral or complete processing, manufacturing and repair of all or any portion of the Collateral, to the extent permitted by law,

(ii) require Borrower, at Borrower’s expense, to assemble and make available to Agent any part or all of the Collateral at any place and time designated by Agent, (iii) collect, foreclose, receive, appropriate, setoff and realize upon any and all Collateral, (iv) remove any or all of the Collateral from any premises on or in which the same may be located for the purpose of effecting the sale, foreclosure or other disposition thereof or for any other purpose, (v) sell, lease, transfer, assign, deliver or otherwise dispose of any and all Collateral (including entering into contracts with respect thereto, public or private sales at any exchange, broker’s board, at any office of Agent or elsewhere) at such prices or terms as Agent may deem reasonable, for cash, upon credit or for future delivery, with the Agent having the right to purchase the whole or any part of the Collateral at any such public sale, all of the foregoing being free from any right or equity of redemption of Borrower, which right or equity of redemption is hereby expressly waived and released by Borrower and/or (vi) terminate this Agreement. If any of the Collateral is sold or leased by Agent upon credit terms or for future delivery, the Obligations shall not be reduced as a result thereof until payment therefor is finally collected by Agent. If notice of disposition of Collateral is required by law, ten (10) days prior notice by Agent to Borrower designating the time and place of any public sale or the time after which any private sale or other intended disposition of Collateral is to be made, shall be deemed to be reasonable notice thereof and Borrower waives any other notice. In the event Agent institutes an action to recover any Collateral or seeks recovery of any Collateral by way of prejudgment remedy, Borrower waives the posting of any bond which might otherwise be required. At any time an Event of Default exists or has occurred and is continuing, upon Agent’s request, Borrower will either, as Agent shall specify, furnish cash collateral to the issuer to be used to secure and fund Agent’s reimbursement obligations to the issuer in connection with any Letter of Credit Accommodations or furnish cash collateral to Agent for the Letter of Credit Accommodations. Such cash collateral shall be in the amount equal to one hundred five (105%) percent of the amount of the Letter of Credit Accommodations plus the amount of any fees and expenses payable in connection therewith through the end of the latest expiration date of such Letter of Credit Accommodations.

(d) At any time or times that an Event of Default exists or has occurred and is continuing, Agent may, in its discretion, enforce the rights of Borrower against any account debtor, secondary obligor or other obligor in respect of any of the Accounts or other Receivables. Without limiting the generality of the foregoing, at any time or times that an Event of Default exists or has occurred and is continuing, Agent may, in its discretion, at such time or times (i) notify any or all account debtors, secondary obligors or other obligors in respect thereof that the Receivables have been assigned to Agent and that Agent has a security interest therein and Agent may direct any or all accounts debtors, secondary obligors and other obligors to make payment of Receivables directly to Agent, (ii) extend the time of payment of, compromise, settle or adjust for cash, credit, return of merchandise or otherwise, and upon any terms or conditions, any and all Receivables or other obligations included in the Collateral and thereby discharge or release the account debtor or any secondary obligors or other obligors in respect thereof without affecting any of the Obligations, (iii) demand, collect or enforce payment of any Receivables or such other obligations, but without any duty to do so, and Agent and Lenders shall not be liable for any failure to collect or enforce the payment thereof nor for the negligence of its agents or attorneys with respect thereto and (iv) take whatever other action Agent may deem necessary or desirable for the protection of its interests and the interests of Lenders. At any time that an Event of Default exists or has occurred and is continuing, at Agent’s request, all invoices and

statements sent to any account debtor shall state that the Accounts and such other obligations have been assigned to Agent and are payable directly and only to Agent and Borrower shall deliver to Agent such originals of documents evidencing the sale and delivery of goods or the performance of services giving rise to any Accounts as Agent may require. In the event any account debtor returns Inventory when an Event of Default exists or has occurred and is continuing, Borrower shall, upon Agent’s request, hold the returned Inventory in trust for Agent, segregate all returned Inventory from all of its other property, dispose of the returned Inventory solely according to Agent’s instructions, and not issue any credits, discounts or allowances with respect thereto without Agent’s prior written consent.

(e) To the extent that applicable law imposes duties on Agent or any Lender to exercise remedies in a commercially reasonable manner (which duties cannot be waived under such law), Borrower acknowledges and agrees that it is not commercially unreasonable for Agent or any Lender (i) to fail to incur expenses reasonably deemed significant by Agent or any Lender to prepare Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition, (ii) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain consents of any Governmental Authority or other third party for the collection or disposition of Collateral to be collected or disposed of, (iii) to fail to exercise collection remedies against account debtors, secondary obligors or other persons obligated on Collateral or to remove liens or encumbrances on or any adverse claims against Collateral, (iv) to exercise collection remedies against account debtors and other persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (v) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (vi) to contact other persons, whether or not in the same business as Borrower, for expressions of interest in acquiring all or any portion of the Collateral, (vii) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the collateral is of a specialized nature, (viii) to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets, (ix) to dispose of assets in wholesale rather than retail markets, (x) to disclaim disposition warranties, (xi) to purchase insurance or credit enhancements to insure Agent or Lenders against risks of loss, collection or disposition of Collateral or to provide to Agent or Lenders a guaranteed return from the collection or disposition of Collateral, or (xii) to the extent deemed appropriate by Agent, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist Agent in the collection or disposition of any of the Collateral. Borrower acknowledges that the purpose of this Section is to provide non-exhaustive indications of what actions or omissions by Agent or any Lender would not be commercially unreasonable in the exercise by Agent or any Lender of remedies against the Collateral and that other actions or omissions by Agent or any Lender shall not be deemed commercially unreasonable solely on account of not being indicated in this Section. Without limitation of the foregoing, nothing contained in this Section shall be construed to grant any rights to Borrower or to impose any duties on Agent or Lenders that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section.

(f) For the purpose of enabling Agent to exercise the rights and remedies hereunder, Borrower hereby grants to Agent, to the extent assignable, an irrevocable, non-exclusive license

(exercisable at any time an Event of Default shall exist or have occurred and for so long as the same is continuing) without payment of royalty or other compensation to Borrower, to use, assign, license or sublicense any of the trademarks, service-marks, trade names, business names, trade styles, designs, logos and other source of business identifiers and other Intellectual Property and general intangibles now owned or hereafter acquired by Borrower, wherever the same maybe located, including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout thereof.

(g) At any time an Event of Default exists or has occurred and is continuing, Agent may apply the cash proceeds of Collateral actually received by Agent from any sale, lease, foreclosure or other disposition of the Collateral to payment of the Obligations, in whole or in part and in accordance with the terms hereof, whether or not then due or may hold such proceeds as cash collateral for the Obligations. Borrower shall remain liable to Agent and Lenders for the payment of any deficiency with interest at the highest rate provided for herein and all costs and expenses of collection or enforcement, including attorneys’ fees and expenses.

(h) Without limiting the foregoing, upon the occurrence of a Default or an Event of Default and for so long as the same is continuing, (i) Agent and Lenders may, at Agent’s option, and upon the occurrence of an Event of Default at the direction of the Required Lenders, Agent and Lenders shall, without notice, (A) cease making Loans or arranging for Letter of Credit Accommodations or reduce the lending formulas or amounts of Loans and Letter of Credit Accommodations available to Borrower and/or (B) terminate any provision of this Agreement providing for any future Loans or Letter of Credit Accommodations to be made by Agent and Lenders to Borrower and (ii) Agent may, at its option, establish such Reserves as Agent determines, without limitation or restriction, notwithstanding anything to the contrary contained herein.

SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

11.1 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS; JURY TRIAL WAIVER.

(a) The validity, interpretation and enforcement of this Agreement and the other Financing Agreements (except as otherwise provided therein) and any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of Illinois but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of Illinois.

(b) Borrower and Secured Parties each irrevocably consent and submit to the non-exclusive jurisdiction of the Circuit Court of Cook County, Illinois and the United States District Court for the Northern District of Illinois, whichever Agent may elect, and waive any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Agreement or any of the other Financing Agreements or in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Agreement or any of the other Financing Agreements or the transactions related hereto or thereto, in each case

whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agree that any dispute with respect to any such matters shall be heard only in the courts described above (except that Agent and Lenders shall have the right to bring any action or proceeding against Borrower or its property in the courts of any other jurisdiction which Agent deems necessary or appropriate in order to realize on the Collateral or to otherwise enforce its rights against Borrower or its property).

(c) Borrower hereby waives personal service of any and all process upon it and consents that all such service of process may be made by registered or certified mail (return receipt requested) directed to its address set forth herein and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U.S. mails, or, at Agent’s option, by service upon Borrower in any other manner provided under the rules of any such courts.

(d) BORROWER AND SECURED PARTIES EACH HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND SECURED PARTIES EACH HEREBY AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER OR ANY SECURED PARTY MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

(e) Agent and Lenders shall not have any liability to Borrower (whether in tort, contract, equity or otherwise) for losses suffered by Borrower in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Agreement or any of the other Financing Agreements, or any act, omission or event occurring in connection herewith, unless it is determined by a final and non-appealable judgment or court order binding on Agent and such Lender, that the losses were the result of acts or omissions constituting gross negligence or willful misconduct. Borrower: (i) certifies that neither Agent, any Lender nor any representative, agent or attorney acting for or on behalf of Agent or any Lender has represented, expressly or otherwise, that Agent and Lenders would not, in the event of litigation, seek to enforce any of the waivers provided for in this Agreement or any of the other Financing Agreements and (ii) acknowledges that in entering into this Agreement and the other Financing Agreements, Agent and Lenders are relying upon, among other things, the waivers and certifications set forth in this Section 11.1 and elsewhere herein and therein.

11.2 WAIVER OF NOTICES. Borrower hereby expressly waives demand, presentment, protest and notice of protest and notice of dishonor with respect to any and all instruments and chattel paper, included in or evidencing any of the Obligations or the Collateral, and any and all other demands and notices of any kind or nature whatsoever with respect to the Obligations, the

Collateral and this Agreement, except such as are expressly provided for herein. No notice to or demand on Borrower which Agent or any Lender may elect to give shall entitle Borrower to any other or further notice or demand in the same, similar or other circumstances.

11.3 AMENDMENTS AND WAIVERS.

(a) Neither this Agreement nor any other Financing Agreement nor any terms hereof or thereof may be amended, waived, discharged or terminated unless such amendment, waiver, discharge or termination is in writing signed by Agent and the Required Lenders or at Agent’s option, by Agent with the authorization of the Required Lenders, and as to amendments to any of the Financing Agreements (other than with respect to any provision of Section 12 hereof), by Borrower against which enforcement is sought; except, that, no such amendment, waiver, discharge or termination shall:

(i) reduce the interest rate or any fees or extend the time of payment of principal, interest or any fees or reduce the principal amount of any Loan or Letter of Credit Accommodations, in each case without the consent of each Lender directly affected thereby,

(ii) increase the Commitment of any Lender over the amount thereof then in effect or provided hereunder, in each case without the consent of the Lender directly affected thereby,

(iii) release any Collateral (except as expressly required or permitted hereunder or under any of the other Financing Agreements or applicable law and except as permitted under Section 12.11(b) hereof), without the consent of Agent and all of Lenders,

(iv) reduce any percentage specified in the definition of Required Lenders, without the consent of Agent and all of Lenders,

(v) consent to the assignment or transfer by Borrower of any of its rights and obligations under this Agreement, without the consent of Agent and all of Lenders,

(vi) amend, modify or waive any terms of this Section 11.3, without the consent of Agent and all of Lenders, or

(vii) increase the advance rates constituting part of the Borrowing Base or increase the sublimits with respect to Loans based on Eligible Inventory or for Letter of Credit Accommodations, without the consent of Agent and all of Lenders.

(b) Agent and Lenders shall not, by any act, delay, omission or otherwise be deemed to have expressly or impliedly waived any of its or their rights, powers and/or remedies unless such waiver shall be in writing and signed as provided herein. Any such waiver shall be enforceable only to the extent specifically set forth therein. A waiver by Agent or any Lender of any right, power and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power and/or remedy which Agent or any Lender would otherwise have on any future occasion, whether similar in kind or otherwise.

(c) Notwithstanding anything to the contrary contained in Section 11.3(a) above, in connection with any amendment, waiver, discharge or termination, in the event that any Lender whose consent thereto is required shall fail to consent or fail to consent in a timely manner (such Lender being referred to herein as a “Non-Consenting Lender”), but the consent of any other Lenders to such amendment, waiver, discharge or termination that is required are obtained, if any, then Congress shall have the right, but not the obligation, to purchase at any time thereafter, and upon the exercise by Congress of such right, such Non-Consenting Lender shall have the obligation, to sell, assign and transfer to Congress or such Eligible Transferee as Congress may specify, the Commitment of such Non-Consenting Lender and all rights and interests of such Non-Consenting Lender pursuant thereto. Congress shall provide the Non-Consenting Lender with prior written notice of its intent to exercise its right under this Section, which notice shall specify on date on which such purchase and sale shall occur. Such purchase and sale shall be pursuant to the terms of an Assignment and Acceptance (whether or not executed by the Non-Consenting Lender), except that on the date of such purchase and sale, Congress, or such Eligible Transferee specified by Congress, shall pay to the Non-Consenting Lender (except as Congress and such Non-Consenting Lender may otherwise agree) the amount equal to: (i) the principal balance of the Loans held by the Non-Consenting Lender outstanding as for the close of business on the business day immediately preceding the effective date of such purchase and sale, plus (ii) amounts accrued and unpaid in respect of interest and fees payable to the Non-Consenting Lender to the effective date of the purchase (but in no event shall the Non-Consenting Lender be deemed entitled to any early termination fee), minus (iii) the amount of the closing fee received by the Non-Consenting Lender pursuant to the terms hereof or of any of the other Financing Agreements multiplied by the fraction, the numerator of which is the number of months remaining in the then current term of the Credit Facility and the denominator of which is the number of months in the then current term thereof. Such purchase and sale shall be effective on the date of the payment of such amount to the Non-Consenting Lender and the Commitment of the Non-Consenting Lender shall terminate on such date.

(d) The consent of Agent shall be required for any amendment, waiver or consent affecting the rights or duties of Agent hereunder or under any of the other Financing Agreements, in addition to the consent of the Lenders otherwise required by this Section and the exercise by Agent of any of its rights hereunder with respect to Reserves or Eligible Accounts or Eligible Inventory shall not be deemed an amendment to the advance rates provided for in this Section 11.3.

11.4 WAIVER OF COUNTERCLAIMS. Borrower waives all rights to interpose any claims, deductions, setoffs or counterclaims of any nature (other then compulsory counterclaims) in any action or proceeding with respect to this Agreement, the Obligations, the Collateral or any matter arising therefrom or relating hereto or thereto.

11.5 INDEMNIFICATION. Other than with respect to Taxes (for which the indemnification obligations of Borrower to Agent and Lenders are subject to Section 6.5 hereof) Borrower shall, jointly and severally, indemnify and hold Agent and each Lender, and its officers, directors, agents, employees, advisors and counsel and their respective Affiliates (each such person being an “Indemnitee”), harmless from and against any and all losses, claims, damages, liabilities, costs or expenses (including reasonable attorneys’ fees and expenses) imposed on, incurred by or asserted against any of them in connection with any litigation, investigation, claim or proceeding

commenced or threatened related to the negotiation, preparation, execution, delivery, enforcement, performance or administration of this Agreement, any other Financing Agreements, or any undertaking or proceeding related to any of the transactions contemplated hereby or any act, omission, event or transaction related or attendant thereto, including amounts paid in settlement, court costs, and the reasonable fees and expenses of counsel except that Borrower shall not have any obligation under this Section 11.5 to indemnify an Indemnitee with respect to a matter covered hereby resulting from the gross negligence or willful misconduct of such Indemnitee as determined pursuant to a final, non-appealable judgment of a court of competent jurisdiction (but without limiting the obligations of Borrower as to any other Indemnitee). To the extent that the undertaking to indemnify, pay and hold harmless set forth in this Section may be unenforceable because it violates any law or public policy, Borrower shall pay the maximum portion which it is permitted to pay under applicable law to Agent and Lenders in satisfaction of indemnified matters under this Section. To the extent permitted by applicable law, Borrower shall not assert, and Borrower hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any of the other Financing Agreements or any undertaking or transaction contemplated hereby. All amounts due under this Section shall be payable upon demand. The foregoing indemnity shall survive the payment of the Obligations and the termination or non-renewal of this Agreement.

11.6 CURRENCY INDEMNITY. If, for the purposes of obtaining judgment in any court in any jurisdiction with respect to this Agreement or any of the other Financing Agreements, it becomes necessary to convert into the currency of such jurisdiction (the “Judgment Currency”) any amount due under this Agreement or under any of the other Financing Agreements in any currency other than the Judgment Currency (the “Currency Due”), then conversion shall be made at the Exchange Rate prevailing on the Business Day before the day on which judgment is given for the purchase of the Currency Due with the Judgment Currency. In the event that there is a change in the Exchange Rate prevailing between the Business Day before the day on which the judgment is given and the date of receipt by Agent of the amount due, Borrower will, on the date of receipt by Agent, pay such additional amounts, if any, or be entitled to receive reimbursement of such amount, if any, as may be necessary to ensure that the amount received by Agent and Lenders on such date is the amount in the Judgment Currency which when converted at the Exchange Rate prevailing on the date of receipt by Agent is the amount then due under this Agreement or such other of the Financing Agreements in the Currency Due. If the amount of the Currency Due which Agent is able to purchase is less than the amount of the Currency Due originally due to it, Borrower shall indemnify and save Agent and Lenders harmless from and against loss or damage arising as a result of such deficiency. The indemnity contained herein shall constitute an obligation separate and independent from the other obligations contained in this Agreement and the other Financing Agreements, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by Agent from time to time and shall continue in full force and effect notwithstanding any judgment or order for a liquidated sum in respect of an amount due under this Agreement or any of the other Financing Agreements or under any judgment or order.

SECTION 12. THE AGENT

12.1 APPOINTMENT, POWERS AND IMMUNITIES. Each Secured Party irrevocably designates, appoints and authorizes Congress to act as Agent hereunder and under the other Financing Agreements with such powers as are specifically delegated to Agent by the terms of this Agreement and of the other Financing Agreements, together with such other powers as are reasonably incidental thereto. Agent (a) shall have no duties or responsibilities except those expressly set forth in this Agreement and in the other Financing Agreements, and shall not by reason of this Agreement or any other Financing Agreement be a trustee or fiduciary for any Secured Party; (b) shall not be responsible to Secured Parties for any recitals, statements, representations or warranties contained in this Agreement or in any of the other Financing Agreements, or in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement or any other Financing Agreement, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Financing Agreement or any other document referred to or provided for herein or therein or for any failure by Borrower or any other Person to perform any of its obligations hereunder or thereunder; and (c) shall not be responsible to Secured Parties for any action taken or omitted to be taken by it hereunder or under any other Financing Agreement or under any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or willful misconduct as determined by a final non-appealable judgment of a court of competent jurisdiction. Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. Agent may deem and treat the payee of any note as the holder thereof for all purposes hereof unless and until the assignment thereof pursuant to an agreement (if and to the extent permitted herein) in form and substance satisfactory to Agent shall have been delivered to and acknowledged by Agent. The designation of any Person as Documentation Agent under the Loan Agreement shall not create any rights in favor of it in such capacity nor subject it to any duties or obligations in such capacity.

12.2 RELIANCE BY AGENT. Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telecopy, telex, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by Agent. As to any matters not expressly provided for by this Agreement or any other Financing Agreement, Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or thereunder in accordance with instructions given by the Required Lenders or all of Secured Parties as is required in such circumstance, and such instructions of such Agents and any action taken or failure to act pursuant thereto shall be binding on all Secured Parties.

12.3 EVENTS OF DEFAULT.

(a) Agent shall not be deemed to have knowledge or notice of the occurrence of a Default or an Event of Default or other failure of a condition precedent to the Loans and Letter of Credit Accommodations hereunder, unless and until Agent has received written notice from a Lender or Borrower specifying such Event of Default or any unfulfilled condition precedent, and stating that such notice is a “Notice of Default or Failure of Condition”. In the event that Agent

receives such a Notice of Default or Failure of Condition, Agent shall give prompt notice thereof to the Lenders. Agent shall (subject to Section 12.7) take such action with respect to any such Event of Default or failure of condition precedent as shall be directed by the Required Lenders to the extent provided for herein; PROVIDED, THAT, unless and until Agent shall have received such directions, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to or by reason of such Event of Default or failure of condition precedent, as it shall deem advisable in the best interest of Lenders. Without limiting the foregoing, and notwithstanding the existence or occurrence and continuance of an Event of Default or any other failure to satisfy any of the conditions precedent set forth in Section 4 of this Agreement to the contrary, unless and until otherwise directed by the Required Lenders, Agent may, but shall have no obligation to, continue to make Loans and issue or cause to be issued Letter of Credit Accommodations for the ratable account and risk of Lenders from time to time if Agent believes making such Loans or issuing or causing to be issued such Letter of Credit Accommodations is in the best interests of Lenders.

(b) Except with the prior written consent of Agent, no Secured Party may assert or exercise any enforcement right or remedy in respect of the Loans, Letter of Credit Accommodations or other Obligations, as against Borrower or any of the Collateral or other property of Borrower.

12.4 CONGRESS IN ITS INDIVIDUAL CAPACITY. With respect to its Commitment and the Loans made and Letter of Credit Accommodations issued or caused to be issued by it (and any successor acting as Agent), so long as Congress shall be a Lender hereunder, it shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as Agent, and the term “Lender” or “Lenders” shall, unless the context otherwise indicates, include Congress in its individual capacity as Lender hereunder. Congress (and any successor acting as Agent) and its Affiliates may (without having to account therefor to any Lender) lend money to, make investments in and generally engage in any kind of business with Borrower (and any of its Subsidiaries or Affiliates) as if it were not acting as Agent, and Congress and its Affiliates may accept fees and other consideration from Borrower and any of its Subsidiaries and Affiliates for services in connection with this Agreement or otherwise without having to account for the same to Lenders.

12.5 INDEMNIFICATION. Secured Parties agree to indemnify Agent (to the extent not reimbursed by Borrower hereunder and without limiting any obligations of Borrower hereunder) ratably, in accordance with their Pro Rata Shares, for any and all claims of any kind and nature whatsoever that may be imposed on, incurred by or asserted against Agent (including by any Secured Party) arising out of or by reason of any investigation in or in any way relating to or arising out of this Agreement or any other Financing Agreement or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (including the costs and expenses that Agent is obligated to pay hereunder) or the enforcement of any of the terms hereof or thereof or of any such other documents; PROVIDED, THAT, no Lender shall be liable for any of the foregoing to the extent it arises from the gross negligence or willful misconduct of the party to be indemnified as determined by a final non-appealable judgment of a court of competent jurisdiction. The foregoing indemnity shall survive the payment of the Obligations and the termination or non-renewal of this Agreement.

12.6 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Secured Party agrees that it has, independently and without reliance on Agent or other Secured Party, and based on such documents and information as it has deemed appropriate, made its own credit analysis of Borrower and has made its own decision to enter into this Agreement and that it will, independently and without reliance upon Agent or any other Secured Party, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any of the other Financing Agreements. Agent shall not be required to keep itself informed as to the performance or observance by Borrower of any term or provision of this Agreement or any of the other Financing Agreements or any other document referred to or provided for herein or therein or to inspect the properties or books of Borrower. Agent will use reasonable efforts to provide Lenders with any information received by Agent from Borrower which is required to be provided to Lenders or deemed to be requested by Lenders hereunder and with a copy of any Notice of Default or Failure of Condition received by Agent from Borrower or any Lender; PROVIDED, THAT, Agent shall not be liable to any Lender for any failure to do so, except to the extent that such failure is attributable to Agent’s own gross negligence or willful misconduct as determined by a final non-appealable judgment of a court of competent jurisdiction. Except for notices, reports and other documents expressly required to be furnished to Lenders by Agent or deemed requested by Lenders hereunder, Agent shall not have any duty or responsibility to provide any Lender with any other credit or other information concerning the affairs, financial condition or business of Borrower that may come into the possession of Agent.

12.7 FAILURE TO ACT. Except for action expressly required of Agent hereunder and under the other Financing Agreements, Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction from Secured Parties of their indemnification obligations under Section 12.5 hereof against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action.

12.8 ADDITIONAL LOANS. Agent shall not make any Loans or provide any Letter of Credit Accommodations to Borrower on behalf of Lenders intentionally and with actual knowledge that such Loans or Letter of Credit Accommodations would cause the aggregate amount of the total outstanding Loans and Letter of Credit Accommodations to Borrower to exceed the Borrowing Base of Borrower, without the prior consent of all Lenders, except, that, Agent may make such additional Loans or provide such additional Letter of Credit Accommodations on behalf of Lenders, intentionally and with actual knowledge that such Loans or Letter of Credit Accommodations will cause the total outstanding Loans and Letter of Credit Accommodations to Borrower to exceed the Borrowing Base, as Agent may deem necessary or advisable in its discretion; provided, that: (a) the total principal amount of the additional Loans or additional Letter of Credit Accommodations to Borrower which Agent may make or provide after obtaining such actual knowledge that the aggregate principal amount of the Loans equal or exceed the Borrowing Base, plus the amount of Special Agent Advances made pursuant to Section 12.11(a)(ii) hereof then outstanding, shall not exceed the aggregate amount equal to $7,500,000 and shall not cause the total principal amount of the Loans and Letter of Credit Accommodations to exceed the Maximum Credit and (b) no such additional Loan or Letter of Credit Accommodation shall be outstanding more than ninety (90) days after the date such additional Loan or Letter of Credit Accommodation is made or issued (as the case may be),

except as the Required Lenders may otherwise agree. Each Lender shall be obligated to pay Agent the amount of its Pro Rata Share of any such additional Loans or Letter of Credit Accommodations.

12.9 CONCERNING THE COLLATERAL AND THE RELATED FINANCING AGREEMENTS. Each Secured Party authorizes and directs Agent to enter into this Agreement and the other Financing Agreements. Each Secured Party agrees that any action taken by Agent or Required Lenders in accordance with the terms of this Agreement or the other Financing Agreements and the exercise by Agent or Required Lenders of their respective powers set forth therein or herein, together with such other powers that are reasonably incidental thereto, shall be binding upon all of the Secured Parties.

12.10 FIELD AUDIT, EXAMINATION REPORTS AND OTHER INFORMATION; DISCLAIMER BY LENDERS. By signing this Agreement, each Lender:

(a) is deemed to have requested that Agent furnish such Lender, promptly after it becomes available, a copy of each field audit or examination report and report with respect to the Borrowing Base prepared or received by Agent (each field audit or examination report and report with respect to the Borrowing Base being referred to herein as a “Report” and collectively, “Reports”), appraisals with respect to the Collateral and financial statements with respect to Borrower and its Subsidiaries received by Agent;

(b) expressly agrees and acknowledges that Agent (i) does not make any representation or warranty as to the accuracy of any Report, appraisal or financial statement or (ii) shall not be liable for any information contained in any Report, appraisal or financial statement;

(c) expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that Agent or any other party performing any audit or examination will inspect only specific information regarding Borrower and will rely significantly upon Borrower’s books and records, as well as on representations of Borrower’s personnel; and

(d) agrees to keep all Reports confidential and strictly for its internal use in accordance with the terms of Section 13.5 hereof, and not to distribute or use any Report in any other manner.

12.11 COLLATERAL MATTERS.

(a) Agent may, at its option, from time to time, at any time on or after an Event of Default and for so long as the same is continuing or upon any other failure of a condition precedent to the Loans and Letter of Credit Accommodations hereunder, make such disbursements and advances (“Special Agent Advances”) which Agent, in its sole discretion, (i) deems necessary or desirable either to preserve or protect the Collateral or any portion thereof or (ii) to enhance the likelihood or maximize the amount of repayment by Borrower of the Loans and other Obligations; PROVIDED, THAT, the aggregate principal amount of the Special Agent Advances pursuant to this clause (ii), plus the then outstanding principal amount of the additional Loans and Letter of Credit Accommodations which Agent may make or provide as set forth in Section 12.8 hereof, shall not exceed the aggregate amount of $7,500,000 or (iii) to pay any other

amount chargeable to Borrower pursuant to the terms of this Agreement or any of the other Financing Agreements consisting of (A) costs, fees and expenses and (B) payments to any issuer of Letter of Credit Accommodations. Special Agent Advances shall be repayable on demand and together with all interest thereon shall constitute Obligations secured by the Collateral. Special Agent Advances shall not constitute Loans but shall otherwise constitute Obligations hereunder. Interest on Special Agent Advances shall be payable at the Interest Rate then applicable to Prime Rate Loans and shall be payable on demand. Without limitation of its obligations pursuant to Section 6.10, each Lender agrees that it shall make available to Agent, upon Agent’s demand, in immediately available funds, the amount equal to such Lender’s Pro Rata Share of each such Special Agent Advance. If such funds are not made available to Agent by such Lender, such Lender shall be deemed a Defaulting Lender and Agent shall be entitled to recover such funds, on demand from such Lender together with interest thereon for each day from the date such payment was due until the date such amount is paid to Agent at the Federal Funds Rate for each day during such period (as published by the Federal Reserve Bank of New York or at Agent’s option based on the arithmetic mean determined by Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of the three leading brokers of Federal funds transactions in New York City selected by Agent) and if such amounts are not paid within three (3) days of Agent’s demand, at the highest Interest Rate provided for in Section 3.1 hereof applicable to Prime Rate Loans.

(b) Lenders hereby irrevocably authorize Agent, at its option and in its discretion to release any security interest in, mortgage or lien upon, any of the Collateral (i) upon termination of the Commitments and payment and satisfaction of all of the Obligations and delivery of cash collateral to the extent required under Section 13.1 below, or (ii) constituting property being sold or disposed of if Borrower certifies to Agent that the sale or disposition is made in compliance with Section 9.7 hereof (and Agent may rely conclusively on any such certificate, without further inquiry), or (iii) constituting property in which Borrower did not own an interest at the time the security interest, mortgage or lien was granted or at any time thereafter, or (iv) having a value in the aggregate in any twelve (12) month period of less than $2,500,000, and to the extent Agent may release its security interest in and lien upon any such Collateral pursuant to the sale or other disposition thereof, such sale or other disposition shall be deemed consented to by Lenders, or (v) if required or permitted under the terms of any of the other Financing Agreements, including any intercreditor agreement, or (vi) approved, authorized or ratified in writing by all of Lenders. Except as provided above, Agent will not release any security interest in, mortgage or lien upon, any of the Collateral without the prior written authorization of all of Lenders. Upon request by Agent at any time, Lenders will promptly confirm in writing Agent’s authority to release particular types or items of Collateral pursuant to this Section. Nothing contained herein shall be construed to require the consent of UK Lender or any party providing a Hedge Agreement or any Bank Product Provider to any release of any Collateral or termination of security interests in any Collateral.

(c) Without any manner limiting Agent’s authority to act without any specific or further authorization or consent by the Required Lenders, each Lender agrees to confirm in writing, upon request by Agent, the authority to release Collateral conferred upon Agent under this Section. Agent shall (and is hereby irrevocably authorized by Lenders to) execute such documents as may be necessary to evidence the release of the security interest, mortgage or liens granted to Agent upon any Collateral to the extent set forth above; PROVIDED, THAT, (i) Agent shall

not be required to execute any such document on terms which, in Agent’s opinion, would expose Agent to liability or create any obligations or entail any consequence other than the release of such security interest, mortgage or liens without recourse or warranty and (ii) such release shall not in any manner discharge, affect or impair the Obligations or any security interest, mortgage or lien upon (or obligations of Borrower in respect of) the Collateral retained by Borrower.

(d) Agent shall have no obligation whatsoever to any Lender or any other Person to investigate, confirm or assure that the Collateral exists or is owned by Borrower or is cared for, protected or insured or has been encumbered, or that any particular items of Collateral meet the eligibility criteria applicable in respect of the Loans or Letter of Credit Accommodations hereunder, or whether any particular reserves are appropriate, or that the liens and security interests granted to Agent pursuant hereto or any of the Financing Agreements or otherwise have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Agent in this Agreement or in any of the other Financing Agreements, it being understood and agreed that in respect of the Collateral, or any act, omission or event related thereto, subject to the other terms and conditions contained herein, Agent may act in any manner it may deem appropriate, in its discretion, given Agent’s own interest in the Collateral as a Lender and that Agent shall have no duty or liability whatsoever to any other Lender.

12.12 AGENCY FOR PERFECTION. Each Secured Party hereby appoints Agent and each other Secured Party as agent and bailee for the purpose of perfecting the security interests in and liens upon the Collateral of Agent in assets which, in accordance with Article 9 of the UCC can be perfected only by possession (or where the security interest of a secured party with possession has priority over the security interest of another secured party) and Agent and each Secured Party hereby acknowledges that it holds possession of any such Collateral for the benefit of Agent as secured party. Should any Secured Party obtain possession of any such Collateral, such Secured Party shall notify Agent thereof, and, promptly upon Agent’s request therefor shall deliver such Collateral to Agent or in accordance with Agent’s instructions.

12.13 SUCCESSOR AGENT. Agent may resign as Agent upon thirty (30) days’ notice to Lenders and Borrower. If Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor agent for Lenders. If no successor agent is appointed prior to the effective date of the resignation of Agent, Agent may appoint, after consulting with Lenders and Borrower, a successor agent from among Lenders. Upon the acceptance by the Lender so selected of its appointment as successor agent hereunder, such successor agent shall succeed to all of the rights, powers and duties of the retiring Agent and the term “Agent” as used herein and in the other Financing Agreements shall mean such successor agent and the retiring Agent’s appointment, powers and duties as Agent shall be terminated. After any retiring Agent’s resignation hereunder as Agent, the provisions of this Section 12 shall inure to its benefit as to any actions taken or omitted by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is thirty (30) days after the date of a retiring Agent’s notice of resignation, the retiring Agent’s resignation shall nonetheless thereupon become effective and Lenders shall perform all of the duties of Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above.

SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS

13.1 TERM.

(a) This Agreement and the other Financing Agreements shall become effective as of the date set forth on the first page hereof and shall continue in full force and effect for a term ending on April 12, 2007 (the “Maturity Date”), unless sooner terminated pursuant to the terms hereof. In addition, Borrower may terminate this Agreement at any time upon ten (10) days prior written notice to Agent (which notice shall be irrevocable) and, Agent may, at its option, and shall at the direction of Required Lenders, terminate this Agreement at any time (after giving notice to Borrower) on or after an Event of Default. Upon the Maturity Date or any other effective date of termination of the Financing Agreements, Borrower shall pay to Agent all outstanding and unpaid Obligations and shall furnish cash collateral to Agent (or at Agent’s option, a letter of credit issued for the account of Borrower and at Borrower’s expense, in form and substance satisfactory to Agent, by an issuer acceptable to Agent and payable to Agent as beneficiary) in such amounts as Agent determines are reasonably necessary to secure Agent and Lenders from loss, cost, damage or expense, including attorneys’ fees and expenses, in connection with any contingent Obligations, including issued and outstanding Letter of Credit Accommodations and checks or other payments provisionally credited to the Obligations and/or as to which Agent or any Lender has not yet received and indefeasible payment and any continuing obligations of Agent or any Lender pursuant to any Deposit Account Control Agreement. The amount of such cash collateral (or letter of credit, as Agent may determine) as to any Letter of Credit Accommodations shall be in the amount equal to one hundred five (105%) percent of the amount of the Letter of Credit Accommodations plus the amount of any fees and expenses payable in connection therewith through the end of the latest expiration date of such Letter of Credit Accommodations. Such payments in respect of the Obligations and cash collateral shall be remitted by wire transfer in Federal funds to the Agent Payment Account or such other bank account of Agent, as Agent may, in its discretion, designate in writing to Borrower for such purpose. Interest shall be due until and including the next Business Day, if the amounts so paid by Borrower to the Agent Payment Account or other bank account designated by Agent are received in such bank account later than 12:00 noon, Chicago time.

(b) If for any reason this Agreement is terminated prior to the Maturity Date, in view of the impracticality and extreme difficulty of ascertaining actual damages and by mutual agreement of the parties as to a reasonable calculation of Agent’s and each Lender’s lost profits as a result thereof, Borrower shall pay to Agent, for the account of Lenders (in accordance with the arrangements by and among the Lenders), upon the effective date of such termination, an early termination fee in the amount equal to one (1%) percent of the Maximum Credit as then in effect. Notwithstanding anything to contrary contained in this Section, in the event of the termination of this Agreement by Borrower prior to the Maturity Date and the full and final repayment in cash of all of the Obligations and receipt by Agent of cash collateral or at its option a letter of credit for contingent obligations in accordance with the terms hereof with the proceeds of initial loans and advances or other financial accommodations to Borrower pursuant to a credit facility provided by Wachovia Bank, National Association or its affiliates (or for which Wachovia Bank, National Association or any of its affiliates is acting as agent), Borrower shall not be required to pay the early termination fee provided for above.

(c) No termination of this Agreement or the other Financing Agreements shall relieve or discharge Borrower of its duties, obligations and covenants under this Agreement or the other Financing Agreements until all Obligations have been fully and finally discharged and paid in cash (other than contingent Obligations as to which Agent shall have received such cash collateral, or letter of credit, as Agent may determine, as is required pursuant to the terms hereof), and Agent’s continuing security interest in the Collateral and the rights and remedies of Agent and Lenders hereunder, under the other Financing Agreements and applicable law, shall remain in effect until all such Obligations have been fully and finally discharged and paid in cash (other than contingent Obligations as to which Agent shall have received such cash collateral, or letter of credit, as Agent may determine, as is required pursuant to the terms hereof). Accordingly, Borrower waives any rights it may have under the UCC to demand the filing of termination statements with respect to the Collateral and Agent shall not be required to send such termination statements to Borrower, or to file them with any filing office, unless and until this Agreement shall have been terminated in accordance with its terms and all Obligations are paid and satisfied in full in immediately available funds (other than contingent Obligations as to which Agent shall have received such cash collateral, or letter of credit, as Agent may determine, as is required pursuant to the terms hereof).

13.2 INTERPRETATIVE PROVISIONS.

(a) All terms used herein which are defined in Article 1, Article 8 or Article 9 of the UCC shall have the meanings given therein unless otherwise defined in this Agreement.

(b) All references to the plural herein shall also mean the singular and to the singular shall also mean the plural unless the context otherwise requires.

(c) All references to Borrower pursuant to the definitions set forth in the recitals hereto shall include its successors and assigns. All references to Agent or Lender pursuant to the definitions set forth in the recitals hereto, or to any other person herein, shall include their respective successors and assigns.

(d) The words “hereof”, “herein”, “hereunder”, “this Agreement” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not any particular provision of this Agreement and as this Agreement now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

(e) The word “including” when used in this Agreement shall mean “including, without limitation” and the word “will” when used in this Agreement shall be construed to have the same meaning and effect as the word “shall”.

(f) An Event of Default shall exist or continue or be continuing until such Event of Default is waived in accordance with Section 11.3 or is cured. Reference herein to a Default or Event of Default that “exists” shall only include a Default or Event of Default, as the case may be, that has not been cured or waived in accordance with the terms hereof, so that such Default or Event of Default, as the case may be, shall cease to exist and shall not be deemed to be continuing if it has been so cured or waived.

(g) All references to the term “good faith” used herein when applicable to Agent or any Lender shall mean, notwithstanding anything to the contrary contained herein or in the UCC, honesty-in-fact in the conduct or transaction concerned and observance of reasonable commercial standards of fair dealing based on how an asset-based lender with similar rights providing a credit facility of the type set forth herein would act in similar circumstances at the time with the information then available to it. All references to the term “reasonably” as applied to any conduct or determination by Agent shall be based on how an asset-based lender with similar rights providing a credit facility of the type set forth herein would act in similar circumstances.

(h) Any accounting term used in this Agreement shall have, unless otherwise specifically provided herein, the meaning customarily given in accordance with GAAP, and all financial computations hereunder shall be computed unless otherwise specifically provided herein, in accordance with GAAP as consistently applied and using the same method for inventory valuation as used in the preparation of the financial statements of Borrower most recently received by Agent prior to the date hereof. Notwithstanding anything to the contrary contained in GAAP or any interpretations or other pronouncements by the Financial Accounting Standards Board or otherwise, the term “unqualified opinion” as used herein to refer to opinions or reports provided by accountants shall mean an opinion or report that is not only unqualified but also does not include any explanation, supplemental comment or other comment concerning the ability of the applicable person to continue as a going concern or the scope of the audit.

(i) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”, the words “to” and “until” each mean “to but excluding” and the word “through” means “to and including”.

(j) Unless otherwise expressly provided herein, (i) references herein to any agreement, document or instrument shall be deemed to include all subsequent amendments, modifications, supplements, extensions, renewals, restatements or replacements with respect thereto, but only to the extent the same are not prohibited by the terms hereof or of any other Financing Agreement, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, recodifying, supplementing or interpreting the statute or regulation.

(k) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement.

(l) This Agreement and other Financing Agreements may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms.

(m) This Agreement and the other Financing Agreements are the result of negotiations among and have been reviewed by counsel to Agent and the other parties, and are the products of all parties. Accordingly, this Agreement and the other Financing Agreements shall not be construed against Agent or Lenders merely because of Agent’s or any Lender’s involvement in their preparation.

13.3 NOTICES. All notices, requests and demands hereunder shall be in writing and deemed to have been given or made: if delivered in person, immediately upon delivery; if by telex, telegram or facsimile transmission, immediately upon sending and upon confirmation of receipt; if by nationally recognized overnight courier service with instructions to deliver the next Business Day, one (1) Business Day after sending; and if by certified mail, return receipt requested, five (5) days after mailing. All notices, requests and demands upon the parties are to be given to the following addresses (or to such other address as any party may designate by notice in accordance with this Section):

If to Borrower:		Haynes International, Inc.
		1020 West Park Avenue
		Kokomo, Indiana 46904
		Attention: Mr. Marcel Martin
		VP Finance and CFO
		Telephone No.: 765-456-6000
		Telecopy No.: 765-456-6985

with a copy to:		Skadden, Arps, Slate, Meagher & Flom LLP
		333 West Wacker Drive
		Chicago, Illinois 60606
		Attention: John Wm. Butler, Jr., Esq.
		Telephone No.:312-407-0700
		Telecopy No.:312-407-0411

If to Agent:		Congress Financial Corporation (Central)
		150 South Wacker Drive
		Chicago, Illinois 60606
		Attention: Portfolio Manager
		Telephone No.: 312-332-0420
		Telecopy No.: 312-332-0424

13.4 PARTIAL INVALIDITY. If any provision of this Agreement is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Agreement as a whole, but this Agreement shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law.

13.5 CONFIDENTIALITY.

(a) Agent and each Lender shall keep confidential, in accordance with its customary procedures for handling confidential information and safe and sound lending practices and consistent with its practices with respect to its own confidential information, any non-public written information supplied to it by Borrower pursuant to this Agreement; PROVIDED, THAT, nothing contained herein shall limit the disclosure of any such information: (i) to the extent required by statute, rule, regulation, subpoena or court order, (ii) to bank examiners and other regulators, auditors and/or accountants, in connection with any litigation to which Agent or such Lender is a party, (iii) to any Lender or Participant (or prospective Lender or Participant) or to

any Affiliate of any Lender so long as such information has been delivered to such Lender or Participant (or prospective Lender or Participant) or Affiliate subject to the written condition that such information shall be treated as confidential or such Lender or Participant (or prospective Lender or Participant) shall have otherwise agreed to treat such information as confidential in accordance with this Section 13.5, or (iv) to counsel for Agent or any Lender or Participant (or prospective Lender or Participant).

(b) In the event that Agent or any Lender receives a request or demand to disclose any confidential information pursuant to any subpoena or court order, Agent or such Lender, as the case may be, agrees (i) to the extent permitted by applicable law, Agent or such Lender will promptly notify Borrower of such request so that Borrower may seek a protective order or other appropriate relief or remedy and (ii) if disclosure of such information is required, disclose such information and, subject to reimbursement by Borrower of Agent’s or such Lender’s expenses, cooperate with Borrower in the reasonable efforts to obtain an order or other reliable assurance that confidential treatment will be accorded to such portion of the disclosed information which Borrower so designates.

(c) In no event shall this Section 13.5 or any other provision of this Agreement, any of the other Financing Agreements or applicable law be deemed: (i) to apply to or restrict disclosure of information that has been or is made public by Borrower or any third party or otherwise becomes generally available to the public other than as a result of a disclosure in violation hereof, (ii) to apply to or restrict disclosure of information that was or becomes available to Agent or any Lender (or any Affiliate of any Lender) on a non-confidential basis from a person other than Borrower or a person Agent or Lender has actual knowledge has provided such information to Agent or such Lender, as the case may be, in violation of a binding agreement upon such person known to such Agent or Lender to have obtained such information on a confidential basis from Borrower, and (iii) to require Agent or any Lender to return any materials furnished by Borrower to Agent or a Lender. The obligations of Agent and Lenders under this Section 13.5 shall supersede and replace the obligations of Agent and Lenders under any confidentiality letter signed prior to the date hereof.

13.6 SUCCESSORS. This Agreement, the other Financing Agreements and any other document referred to herein or therein shall be binding upon and inure to the benefit of and be enforceable by Agent, Lenders, Borrower and their respective successors and assigns, except that Borrower may not assign its rights under this Agreement, the other Financing Agreements and any other document referred to herein or therein without the prior written consent of Agent and Lenders. Any such purported assignment without such express prior written consent shall be void. No Lender may assign its rights and obligations under this Agreement without the prior written consent of Agent, except as provided in Section 13.7 below. The terms and provisions of this Agreement and the other Financing Agreements are for the purpose of defining the relative rights and obligations of Borrower, Agent and Lenders with respect to the transactions contemplated hereby and there shall be no third party beneficiaries of any of the terms and provisions of this Agreement or any of the other Financing Agreements.

13.7 ASSIGNMENTS; PARTICIPATIONS.

(a) Each Lender may, with the prior written consent of Agent, assign all or, if less than all, a portion equal to at least $10,000,000 in the aggregate for the assigning Lender, of such rights and obligations under this Agreement to one or more Eligible Transferees (but not including for this purpose any assignments in the form of a participation), each of which assignees shall become a party to this Agreement as a Lender by execution of an Assignment and Acceptance; PROVIDED, THAT, (i) such transfer or assignment will not be effective until recorded by Agent on the Register and (ii) Agent shall have received for its sole account payment of a processing fee from the assigning Lender or the assignee in the amount of $5,000.

(b) Agent shall maintain a register of the names and addresses of Lenders, their Commitments and the principal amount and interest of their Loans (the “Register”). Agent shall also maintain a copy of each Assignment and Acceptance delivered to and accepted by it and shall modify the Register to give effect to each Assignment and Acceptance. The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and Borrower, Agent and Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by Borrower and any Lender at any reasonable time and from time to time upon reasonable prior notice. This Section 13.7 shall be construed so that the Obligations are at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code and regulations thereunder.

(c) Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, the assignee thereunder shall be a party hereto and to the other Financing Agreements and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations (including, without limitation, the obligation to participate in Letter of Credit Accommodations) of a Lender hereunder and thereunder and the assigning Lender shall, to the extent that rights and obligations hereunder have been assigned by it to an Eligible Transferee pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement.

(d) By execution and delivery of an Assignment and Acceptance, the assignor and assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, the assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any of the other Financing Agreements or the execution, legality, enforceability, genuineness, sufficiency or value of this Agreement or any of the other Financing Agreements furnished pursuant hereto, (ii) the assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower or any of its Subsidiaries or the performance or observance by Borrower of any of the Obligations; (iii) such assignee confirms that it has received a copy of this Agreement and the other Financing Agreements, together with such other documents and information it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance, (iv) such assignee will, independently and without reliance upon the assigning Lender, Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Financing Agreements, (v) such

assignee appoints and authorizes Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Financing Agreements as are delegated to Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto, and (vi) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement and the other Financing Agreements are required to be performed by it as a Lender. Subject to Section 13.5 hereof, Agent and Lenders may furnish any information concerning Borrower in the possession of Agent or any Lender from time to time to assignees and Participants.

(e) Each Lender may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement and the other Financing Agreements (including, without limitation, all or a portion of its Commitments and the Loans owing to it and its participation in the Letter of Credit Accommodations, without the consent of Agent or the other Lenders); PROVIDED, THAT, (i) such Lender’s obligations under this Agreement (including, without limitation, its Commitment hereunder) and the other Financing Agreements shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, and Borrower, the other Lenders and Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and the other Financing Agreements, and (iii) the Participant shall not have any rights under this Agreement or any of the other Financing Agreements (the Participant’s rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the Participant relating thereto) and all amounts payable by Borrower hereunder shall be determined as if such Lender had not sold such participation.

(f) Nothing in this Agreement shall prevent or prohibit any Lender from pledging its Loans hereunder to a Federal Reserve Bank in support of borrowings made by such Lenders from such Federal Reserve Bank; PROVIDED, THAT, no such pledge shall release such Lender from any of its obligations hereunder or substitute any such pledgee for such Lender as a party hereto.

(g) Borrower shall assist Agent or any Lender permitted to sell assignments or participations under this Section 13.7 in whatever manner reasonably necessary in order to enable or effect any such assignment or participation, including (but not limited to) the execution and delivery of any and all agreements, notes and other documents and instruments as shall be requested and the delivery of informational materials, appraisals or other documents for, and the participation of relevant management in meetings and conference calls with, potential Lenders or Participants. Borrower shall certify the correctness, completeness and accuracy, in all material respects, of all descriptions of Borrower and its affairs provided, prepared or reviewed by Borrower that are contained in any selling materials and all other information provided by it and included in such materials.

(h) The Lenders signatory hereto that have executed and delivered Assignment and Acceptances with respect to the credit facility under the Existing Agreements hereby confirm that such Assignment and Acceptances are replaced and superseded by the terms hereof.

13.8 USA PATRIOT ACT. Each Lender hereby notifies Borrower that pursuant to the requirements of the USA Patriot Act, it is required to obtain, verify and record information that

identifies Borrower, which information includes the name and address of Borrower and other information that will allow such Lender to identify Borrower in accordance with the requirements of such Act and any other applicable law.

13.9 ENTIRE AGREEMENT. This Agreement, the other Financing Agreements, any supplements hereto or thereto, and any instruments or documents delivered or to be delivered in connection herewith or therewith represents the entire agreement and understanding concerning the subject matter hereof and thereof between the parties hereto, and supersede all other prior agreements, understandings, negotiations and discussions, representations, warranties, commitments, proposals, offers and contracts concerning the subject matter hereof, whether oral or written. In the event of any inconsistency between the terms of this Agreement and any schedule or exhibit hereto, the terms of this Agreement shall govern.

13.10 COUNTERPARTS, ETC. This Agreement or any of the other Financing Agreements may be executed in any number of counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Agreement or any of the other Financing Agreements by telefacsimile shall have the same force and effect as the delivery of an original executed counterpart of this Agreement or any of such other Financing Agreements. Any party delivering an executed counterpart of any such agreement by telefacsimile shall also deliver an original executed counterpart, but the failure to do so shall not affect the validity, enforceability or binding effect of such agreement.

13.11 CODE SECTION 956 OVERRIDE. Notwithstanding anything to the contrary contained herein or in any of the other Financing Agreements (including any provision that provides that it applies notwithstanding contrary provisions), in no event shall any provision hereof or of any of the other Financing Agreements be construed to provide that (a) any Foreign Subsidiary of Borrower incorporated under the laws of a jurisdiction outside the United States of America that is a “controlled foreign corporation” (as such term is defined in Section 957(a) of the Code), referred to herein as a “non US Subsidiary”, has any obligation to make any payments for or on behalf of Borrower to the extent that any such obligation would increase the amount of taxes otherwise payable by Borrower pursuant to the Code; (b) more than sixty five (65%) percent of the voting power of all classes of Capital Stock of a non US Subsidiary are pledged or hypothecated to support any Obligations of Borrower hereunder or under any of the other Financing Agreements; (c) a security interest or lien upon any assets of a non US Subsidiary have been granted to Agent under this Agreement or any of the other Financing Agreements to secure any Obligations of Borrower and (d) any non US subsidiary has entered into any agreement to guarantee or support the Obligations of Borrower hereunder or under any of the other Financing Agreements.

13.12 BANK PRODUCTS OVERRIDE. Notwithstanding anything to the contrary contained herein or in any of the other Financing Agreements to the contrary, if all of the Obligations have been paid in full and all Commitments terminated, (other than Bank Product Obligations), it shall not be a condition to the release of all or any portion of the Collateral or a requirement to the termination of this Loan Agreement or any of the other Financing Agreements or the exercise of any rights created hereunder that any Bank Product Obligations be paid or cash collateralized;

PROVIDED THAT, this Section 13.12 shall in no way be deemed to amend, supplement or otherwise modify any agreement or document evidencing or governing any Bank Product.

SECTION 14. ACKNOWLEDGMENT AND RESTATEMENT

14.1 EXISTING OBLIGATIONS. Borrower hereby acknowledges, confirms and agrees that Borrower is indebted to Lenders for loans and advances to Borrower under the Existing Agreements, as of the close of business on August 27, 2004, in the aggregate principal amount of $80,161,509 and the aggregate amount of $1,105,825 in respect of Letter of Credit Accommodations (as defined in the Existing Agreements), together with all interest accrued and accruing thereon (to the extent applicable), and all fees, costs, expenses and other charges relating thereto, all of which are unconditionally owing by Borrower to Lenders, without offset, defense or counterclaim of any kind, nature or description whatsoever.

14.2 ACKNOWLEDGMENT OF SECURITY INTERESTS.

(a) Borrower hereby acknowledges, confirms and agrees that Agent for the benefit of Secured Parties has and shall continue to have a security interest in and lien upon the Collateral heretofore granted to Agent for the benefit of Secured Parties pursuant to the Existing Agreements to secure the Obligations, as well as any Collateral granted under this Agreement or under any of the other Financing Agreements or otherwise granted to or held by Agent or Secured Parties.

(b) The liens and security interests of Agent in the Collateral shall be deemed to be continuously granted and perfected from the earliest date of the granting and perfection of such liens and security interests to Agent and Secured Parties, whether under the Existing Agreements, this Agreement or any of the other Financing Agreements.

14.3 EXISTING AGREEMENTS. Borrower hereby acknowledges, confirms and agrees that: (a) the Existing Agreements have been duly executed and delivered by Borrower, (b) the Existing Agreements listed in Section B of Schedule 1.64 are and shall continue to be in full force and effect, and as of the moment immediately prior to the effectiveness of this Agreement, the Existing Agreements listed in Section A of Schedule 1.64 are in full force and effect as of the date hereof, (c) as to the Existing Agreements listed in Section A of Schedule 1.64, as of the moment immediately prior to the effectiveness of this Agreement: (i) the agreements and obligations of Borrower contained in such Existing Agreements constitute the legal, valid and binding obligations of Borrower enforceable against it in accordance with their respective terms and (ii) Borrower has no valid defense to the enforcement of such obligations and (iii) Agent and Lenders are entitled to all of the rights and remedies provided for in such Existing Agreements and (d) as to the Existing Agreements listed in Section B of Schedule 1.64: (i) the agreements and obligations of Borrower contained in such Existing Agreements constitute the legal, valid and binding obligations of Borrower enforceable against it in accordance with their respective terms and (ii) Borrower has no valid defense to the enforcement of such obligations and (iii) Agent and Lenders are entitled to all of the rights and remedies provided for in such Existing Agreements. The acknowledgements contained herein shall not be construed to limit or affect any of the terms of any other agreements of Borrower with, to or in favor of Agent or any of the Secured Parties.

14.4 RESTATEMENT.

(a) Except as otherwise stated in Section 14.2 hereof and this Section 14.4, as of the date hereof, the terms, conditions, agreements, covenants, representations and warranties set forth in the Existing Agreements listed in Section A of the Schedule 1.64 are hereby amended and restated in their entirety, and as so amended and restated, replaced and superseded, by the terms, conditions, agreements, covenants, representations and warranties set forth in this Agreement and the other Financing Agreements, except that nothing herein or in the other Financing Agreements shall impair or adversely affect the continuation of the liability of Borrower for the Obligations heretofore incurred during the Chapter 11 Case (as predecessors to Borrower) and the security interests, liens and other interests in the Collateral heretofore granted, pledged and/or assigned by Borrower (including during the Chapter 11 Case), as predecessors to Borrower or otherwise, to Agent. The amendment and restatement contained herein shall not, in any manner, be construed to constitute payment of, or impair, limit, cancel or extinguish, or constitute a novation in respect of, the Indebtedness and other obligations and liabilities of Borrower evidenced by or arising under the Existing Agreements, and the liens and security interests of Agent securing such Indebtedness and other obligations and liabilities, which shall not in any manner be impaired, limited, terminated, waived or released, but shall continue in full force and effect in favor of Agent for the benefit of Lenders.

(b) The principal amount of the Loans and the amount of the Letters of Credit Accommodations outstanding as of the date hereof under the Existing Agreements shall be allocated to the Loans and Letter of Credit Accommodations hereunder in such manner and in such amounts as Agent shall determine consistent with the terms hereof.

IN WITNESS WHEREOF, Agent, Lenders, Borrower have caused these presents to be duly executed as of the day and year first above written.

					BORROWER:

					HAYNES INTERNATIONAL, INC.,

					By:	/s/ Marcel Martin

					Title:		Vice President, Finance and CFO


AGENT:

CONGRESS FINANCIAL CORPORATION (CENTRAL), as Agent

By:		/s/ Vicky Geist

Title:			Vice President

LENDERS:

CONGRESS FINANCIAL CORPORATION (CENTRAL)

By:	/s/ Vicky Geist

Title:				Vice President

Tranche A Commitment: US $25,000,000

Tranche B Commitment: US$15,000,000

[SIGNATURES CONTINUED ON NEXT PAGE]

BANK ONE, NA (Main Office Chicago)

By:	/s/ Elizabeth Manning

Title:			Managing Director


Tranche A Commitment: US $40,000,000


Tranche B Commitment: US$0


WESTERNBANK PUERTO RICO BUSINESS CREDIT DIVISION

By:	/s/ Miguel A. Vazquez

Title:		President, Westernbank Business Credit Division


Tranche A Commitment: US$20,000,000


Tranche B Commitment: US$0

[Exhibit A - Form of Assignment and Acceptance Agreement, Exhibit B - Form of Borrowing Base Certificate, Exhibit C - Information Certificate, Exhibit D - Form of Equipment Purchase Note, Exhibit E - Form of Compliance Certificate and the Disclosure Schedules have been omitted from the Agreement as filed with the Securities and Exchange Commission (the “SEC”). The omitted information is considered immaterial from an investor’s perspective. The Registrant will furnish supplementally a copy of any of the omitted exhibits and schedules to the SEC upon request from the SEC.]

Exhibit 10.13

[Execution]

AMENDMENT NO. 1 TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

AMENDMENT NO. 1 TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT dated as of November 5, 2004 by and among Haynes International, Inc., a Delaware corporation (“Haynes Parent”), Haynes Wire Company, a Delaware corporation (“Haynes Wire” and together with Haynes Parent, each individually, a “Borrower” and collectively, “Borrowers”), the parties from time to time to the Loan Agreement (as hereinafter defined) as lenders (each individually, a “Lender” and collectively, “Lenders”) and Congress Financial Corporation (Central), an Illinois corporation, in its capacity as agent for Lenders pursuant to the Loan Agreement (in such capacity, “Agent”).

W I T N E S S E T H

WHEREAS, Haynes Parent has entered into financing arrangements with Agent and Lenders pursuant to which Lenders (or Agent on behalf of Lenders) have made and may make loans and advances and provide other financial accommodations to Haynes Parent as set forth in, and subject to the terms and conditions of, the Amended and Restated Loan and Security Agreement, dated August 31, 2004, by and among Agent, Lenders, Bank One, NA, in its capacity as documentation agent for Lenders, and Haynes Parent ( as amended and supplemented hereby and as the same may hereafter be further amended, modified, supplemented, extended, renewed, restated or replaced, the “Loan Agreement”) and the other Financing Agreements (as defined therein); and

WHEREAS, Haynes Parent has formed Haynes Wire, which is a wholly-owned subsidiary of Haynes Parent; and

WHEREAS, Haynes Parent and Haynes Wire have requested that Agent and Lenders consent to the acquisition by Haynes Wire of certain assets of the Sellers (as hereinafter defined) pursuant to the Branford Purchase Documents (as hereinafter defined) and enter into certain amendments to the Financing Agreements in connection therewith; and

WHEREAS, Haynes Parent and Haynes Wire have requested that Agent and Lenders provide certain consents and agree to certain amendments to the Loan Agreement in connection with the formation of Haynes Wire, the addition of Haynes Wire as an additional party to the Loan Agreement as a Borrower and certain of the other Financing Agreements and certain related matters, and Agent and Lenders are willing to provide such consents and agree to such amendments, subject to the terms and conditions herein; and

WHEREAS, by this Amendment No. 1, Haynes Parent, Haynes Wire, Agent and Lenders desire and intend to evidence such consents and amendments;

NOW, THEREFORE, in consideration of the foregoing, the mutual conditions and agreements and covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1. DEFINITIONS.

1.1 DEFINED TERMS. For purposes of this Amendment No. 1, unless otherwise defined herein, all capitalized terms used herein shall have the meanings assigned thereto in the Loan Agreement.

1.2 ADDITIONAL DEFINITIONS. As used herein, the following terms shall have the meanings given to them below, and the Loan Agreement is hereby amended to include the following definitions:

(a) “Amendment No. 1” shall mean Amendment No. 1 to Amended and Restated Loan and Security Agreement by and among Haynes Parent, Haynes Wire, Agent and Lenders, as it now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

(b) “Branford Purchase Agreement” shall mean the Asset Purchase Agreement, dated as of October 28, 2004, by and among Haynes Wire, Sellers and Richard Harcke, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

(c) “Branford Purchased Assets” shall mean, collectively, the “Acquired Assets”, as such term is defined in the Branford Purchase Agreement as in effect on the date hereof.

(d) “Branford Purchase Documents” shall mean, collectively, the following (as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced): (i) the Branford Purchase Agreement, (ii) all bills of sale, deeds, and such instruments of transfer as are referred to therein, and (iii) all side letters with respect thereto and all other agreements, documents and instruments executed and/or delivered by Sellers, Richard Harcke or Borrowers in connection therewith; PROVIDED, THAT, the term “Branford Purchase Documents” shall not include this Amendment No. 1 or any of the other Financing Agreements.

(e) “Haynes Parent” shall mean Haynes International, Inc., a Delaware corporation, and its successors and assigns.

(f) “Haynes Parent Borrowing Base” shall mean, at any time, the amount equal to:

(i) eighty-five (85%) percent of the Eligible Accounts of Haynes Parent, plus

(ii) the lesser of: (A) the sum of (1) the Kokomo Facility Inventory Availability, plus (2) the Arcadia Facility Inventory Availability, plus (3) the Service Center Inventory Availability or (B) the Inventory Loan

Limit applicable to Haynes Parent, plus

(iii) Haynes Parent Fixed Asset Availability, less

(iv) Reserves attributable to Haynes Parent.

For purposes only of applying the Inventory Loan Limit as to Haynes Parent, Agent may treat the then undrawn amounts of outstanding Letter of Credit Accommodations issued for the purpose of purchasing Eligible Inventory of Haynes Parent as Loans to Haynes Parent to the extent Agent is in effect basing the issuance of the Letter of Credit Accommodations on the Value of the Eligible Inventory of Haynes Parent being purchased with such Letter of Credit Accommodations. In determining the actual amounts of such Letter of Credit Accommodations to be so treated for purposes of the sublimit, the outstanding Loans and Reserves shall be attributed first to any components of the lending formulas set forth above that are not subject to such sublimit, before being attributed to the components of the lending formulas subject to such sublimit. The amounts of Eligible Inventory of Haynes Parent shall, at Agent’s option, be determined based on the lesser of the amount of Inventory set forth in the general ledger of Haynes Parent or the perpetual inventory record maintained by Haynes Parent.

(g) “Haynes Parent Excess Availability” shall mean at any time and without duplication, the sum of:

(i) the amount calculated at such time equal to: (A) the lesser of: (1) the Haynes Parent Borrowing Base and (2) the Maximum Credit minus the then outstanding Loans to Haynes Wire (in each case under (1) or (2) after giving effect to any applicable Reserves), minus (B) the sum of: (1) the amount of the then outstanding and unpaid principal amount of the Loans to Haynes Parent (other than Equipment Purchase Loans) and the undrawn amount of Letter of Credit Accommodations issued on behalf or for the benefit of Haynes Parent, plus (2) the aggregate amount of all payables or other obligations of Haynes Parent outstanding more than forty-five (45) days after the due date therefor as of such time (and for this purpose the due date for payables incurred prior to the commencement of the Chapter 11 Case (or during the course thereof) will be the date for payment of such payables as established pursuant to the Plan and the claims administration process provided for in the Chapter 11 Case and as to those payables or other obligations that are subject to a dispute or are not otherwise allowed, prior to the establishment of the due date for such payables or other obligations pursuant to the Plan and the claims administration process, such payables and other obligations shall not be deemed outstanding more than forty-five (45) days after the due date therefor for purposes of this definition), plus (3) the amount of checks issued by Haynes Parent to pay payables and other obligations which are more than such number of days past due, but not yet sent (without duplication of amounts included in clause (i)(B)(2) herein); plus

(ii) the amount calculated at such time equal to the total amount available for Utilisation (as such term is defined in the UK Financing Agreements), subject to the limitations contained in Sections 5.3 and 5.5 of the Facility Agreement referred to in the definition of the UK Financing Agreements, after giving effect to all then outstanding Utilisations and net of the aggregate of all Past Due Payables (as such term is defined in the UK Financing Agreements).

(h) “Haynes Parent Fixed Asset Availability” shall mean $15,949,276; PROVIDED, THAT, effective on the first day of each month after the date hereof the Haynes Parent Fixed Asset Availability shall be reduced by the amount equal to $231,681 on the first day of each such month.

(i) “Haynes Wire” shall mean Haynes Wire Company, a Delaware corporation, and its successors and assigns.

(j) “Haynes Wire Borrowing Base” shall mean, at any time, the amount equal to:

(i) eighty-five (85%) percent of the Eligible Accounts of Haynes Wire, plus

(ii) the lesser of: (A) sixty (60%) percent multiplied by the Value of the Eligible Inventory of Haynes Wire, (B) eighty-five (85%) percent of the Net Recovery Percentage of Eligible Inventory of Haynes Wire or (C)the Inventory Loan Limit applicable to Haynes Wire, plus

(iii) the Haynes Wire Fixed Asset Availability, less

(iv) Reserves attributable to Haynes Wire.

For purposes only of applying the Inventory Loan Limit as to Haynes Wire, Agent may treat the then undrawn amounts of outstanding Letter of Credit Accommodations issued for the purpose of purchasing Eligible Inventory of Haynes Wire as Loans to Haynes Wire to the extent Agent is in effect basing the issuance of the Letter of Credit Accommodations on the Value of the Eligible Inventory of Haynes Wire being purchased with such Letter of Credit Accommodations. In determining the actual amounts of such Letter of Credit Accommodations to be so treated for purposes of the sublimit, the outstanding Loans and Reserves shall be attributed first to any components of the lending formulas set forth above that are not subject to such sublimit, before being attributed to the components of the lending formulas subject to such sublimit. The amounts of Eligible Inventory of Haynes Wire shall, at Agent’s option, be determined based on the lesser of the amount of Inventory set forth in the general ledger of Haynes Wire or the perpetual inventory record maintained by Haynes Wire.

(k) “Haynes Wire Excess Availability” shall mean at any time and without duplication, the amount calculated at such time equal to:

(i) the lesser of: (A) the Haynes Wire Borrowing Base and (B) the amount equal to the Maximum Credit minus the then outstanding Loans to Haynes Parent (in each case under (A) or (B) after giving effect to any applicable Reserves), minus

(ii) the sum of: (A) the amount of the then outstanding and unpaid principal amount of the Loans to Haynes Wire (other than Equipment Purchase Loans) and the undrawn amount of Letter of Credit Accommodations issued on behalf or for the benefit of Haynes Wire, plus (B) the aggregate amount of all payables or other obligations of Haynes Wire outstanding more than forty-five (45) days after the due date therefor as of such time, plus (C) the amount of checks issued by Haynes Wire to pay payables and other obligations which are more than such number of days past due, but not yet sent (without duplication of amounts included in clause (i)(B)(2) herein).

(l) “Haynes Wire Fixed Asset Availability” shall mean shall mean $2,165,000; PROVIDED, THAT, effective on the first day of each month after December 31, 2004 the Haynes Wire

Fixed Asset Availability shall be reduced by the amount equal to $30,069 on the first day of each such month.

(m) “Sellers” shall mean, collectively, the following (together with their respective successors and assigns): (i) Branford Wire and Manufacturing Company, a Connecticut corporation and (ii) Carolina Industries, Inc., a Connecticut corporation; sometimes being referred to herein individually as a “Seller”.

1.3 AMENDMENTS TO DEFINITIONS. Each of the defined terms below shall be deemed to be amended and restated in their entirety to have the meaning as to such term set forth below.

(a) “Borrower” and “Borrowers” shall mean Haynes Parent and Haynes Wire, individually and collectively, and jointly and severally, except for purposes of Sections 1.25, 1.33, 1.41, 1.43, 1.45, 1.65, 1.95(a), 1.112, 2.1(b), 8.16, 9.6(a) (but only to the extent of the financial statements referenced therein), 9.17 and 9.18, where the references to Borrower shall mean only Haynes Parent.

(b) “Borrowing Base” shall mean, at any time, collectively, the Haynes Parent Borrowing Base and the Haynes Wire Borrowing Base at such time.

(c) “Collateral” shall mean, collectively, “Collateral” as defined in Section 5 hereof and “Collateral” as described in Section 4 of Amendment No. 1.

(d) “Financing Agreements” shall mean, collectively, this Agreement, Amendment No. 1 and all notes, guarantees, security agreements, Deposit Account Control Agreements, Investment Property Control Agreements, intercreditor agreements and all other agreements, documents and instruments now or at any time hereafter executed and/or delivered by Borrower in connection with this Agreement.

(e) “Fixed Asset Availability” shall mean, at any time, collectively, the Haynes Parent Fixed Asset Availability and the Haynes Wire Fixed Asset Availability at such time.

(f) “Information Certificate” shall mean, collectively, the Information Certificate of Parent constituting Exhibit C hereto and the Information Certificate of Haynes Wire constituting Exhibit B to Amendment No. 1. each containing material information with respect to Borrower, its business and assets provided by or on behalf of Borrower to Agent in connection with the preparation of this Agreement and the other Financing Agreements and the financing arrangements provided for herein.

(g) “Inventory Loan Limit” shall mean at any time, (i) as to Haynes Parent, the amount equal to (A) $70,000,000 minus (B) the sum of (1) the US Dollar Equivalent of the then outstanding amount of loans to Haynes UK (and including letter of credit accommodations to the extent provided in its borrowing base as such term is defined in the UK Financing Agreements) based on eligible inventory (as such term is defined in the UK Financing Agreements) of Haynes UK and (2) the then outstanding amount of Loans to Haynes Wire (and including Letter of Credit Accommodations to the extent provided in Haynes Wire Borrowing Base) based on Eligible Inventory of Haynes Wire and (ii) as to Haynes Wire, the amount equal to (A) $70,000,000 minus (B) the sum of (1) the US Dollar Equivalent of the then outstanding amount of loans to

Haynes UK (and including letter of credit accommodations to the extent provided in its borrowing base as such term is defined in the UK Financing Agreements ) based on eligible inventory (as such term is defined in the UK Financing Agreements) of Haynes UK plus (2) the then outstanding amount of Loans to Haynes Parent (and including Letter of Credit Accommodations to the extent provided in Haynes Parent Borrowing Base) based on Eligible Inventory of Haynes Parent.

(h) “Maximum Credit” shall mean $110,000,000.

(i) “Mortgages” shall mean, individually and collectively, each of the following (as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced): (a) the Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated of even date herewith, by Haynes Parent in favor of Agent with respect to the Real Property and related assets of Haynes Parent located in Kokomo, Indiana, (b) the Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated of even date herewith, by Haynes Parent in favor of Agent with respect to the Real Property and related assets of Haynes Parent located in Arcadia, Louisiana, and (c) the Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated the date of Amendment No. 1, by Haynes Wire in favor of Agent with respect to the Real Property of Haynes Wire located in Mountain Home, North Carolina.

(j) “Tranche A Commitment” shall mean, with respect to each Lender, the principal amount set forth opposite such Lender’s name on Schedule 1.134 hereto and designated “Tranche A Commitment” or on Schedule 1 to the Assignment and Acceptance Agreement pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 13.7 hereof, as the same may be adjusted in accordance with the terms hereof; sometimes being collectively referred to as “Tranche A Commitments”.

(k) “Tranche A Loan Limit” shall mean at any time the amount equal to the lesser of: (i) $95,000,000 or (ii) the aggregate amount of the Borrowing Base of Borrowers at such time.

(l) “Tranche B Borrowing Base” shall mean, as to each Borrower, the amount equal to (i) such Borrower’s Borrowing Base minus (ii) the Tranche A Loans then outstanding to such Borrower.

Section 2. CONSENTS. Subject to the terms and conditions contained herein, to the extent such consents are or may be required under the Loan Agreement, Agent and Lenders hereby consent to:

2.1 the formation by Haynes Parent of Haynes Wire, as a wholly-owned subsidiary of Haynes Parent, and the investments made by Haynes Parent in Haynes Wire in connection with the initial capitalization of Haynes Wire and the purchase of the Branford Purchased Assets; and

2.2 the purchase by Haynes Wire of the Branford Purchased Assets pursuant to the terms of the Branford Purchase Documents as in effect on the date hereof.

Section 3. ASSUMPTION OF OBLIGATIONS AND ACKNOWLEDGEMENT OF FINANCING AGREEMENTS. Haynes Wire hereby expressly:

3.1 assumes and agrees to be directly liable to Agent and Lenders, jointly and severally, with Haynes Parent, for all Obligations under, contained in, or arising pursuant to the Loan Agreement or any of the other Financing Agreements;

3.2 agrees to perform, comply with and be bound by all terms, conditions and covenants of the Loan Agreement and the other Financing Agreements applicable to Borrower; and

3.3 agrees that Agent and Lenders shall have all rights, remedies and interests, including security interests in and to the Collateral granted pursuant to Section 4 hereof, the Loan Agreement and the other Financing Agreements, with respect to Haynes Wire and its properties and assets with the same force and effect as Agent and Lenders have with respect to Haynes Parent and its assets and properties.

Section 4. GRANT OF SECURITY INTEREST.

4.1 Without limiting the provisions of Section 3 hereof, the Loan Agreement and the other Financing Agreements, to secure payment and performance of its Secured Obligations, Haynes Wire hereby grants to Agent, for the benefit of Secured Parties, a continuing security interest in, a lien upon, and a right of set off against, all personal property and fixtures, and interests in personal property and fixtures, of Haynes Wire, whether now owned or hereafter acquired or existing, and wherever located, including without limitation, the following:

(a) all Accounts;

(b) all general intangibles, including, without limitation, all Intellectual Property;

(d) all chattel paper, including, without limitation, all tangible and electronic chattel paper;

(e) all instruments, including, without limitation, all promissory notes;

(f) all documents;

(g) all deposit accounts;

(h) all letters of credit, banker’s acceptances and similar instruments and including all letter-of-credit rights;

(i) all supporting obligations and all present and future liens, security interests, rights, remedies, title and interest in, to and in respect of Receivables and other Collateral, including (i) rights and remedies under or relating to guaranties, contracts of suretyship, letters of credit and credit and other insurance related to the Collateral, (ii) rights of stoppage in transit, replevin, repossession, reclamation and other rights and remedies of an unpaid vendor, lienor or

secured party, (iii) goods described in invoices, documents, contracts or instruments with respect to, or otherwise representing or evidencing, Receivables or other Collateral, including returned, repossessed and reclaimed goods, and (iv) deposits by and property of account debtors or other persons securing the obligations of account debtors;

(j) all (i) investment property (including securities, whether certificated or uncertificated, securities accounts, security entitlements, commodity contracts or commodity accounts) and (ii) monies, credit balances, deposits and other property of Haynes Wire now or hereafter held or received by or in transit to Agent, any Lender or its Affiliates or at any other depository or other institution from or for the account of Haynes Wire, whether for safekeeping, pledge, custody, transmission, collection or otherwise;

(k) all commercial tort claims listed on Schedule 4.1 hereto;

(l) to the extent not otherwise described above, all Receivables;

(m) all Records; and

(n) all products and proceeds of the foregoing, in any form, including insurance proceeds (other than business interruption insurance proceeds) and all claims against third parties for loss or damage to or destruction of or other involuntary conversion of any kind or nature of any or all of the other Collateral described above, it being understood and agreed that for the purposes of this grant, the term “Borrower” as the same appears in the definitions of Accounts, Intellectual Property, Inventory, Equipment, Receivables and Records which are incorporated herein by reference to the Loan Agreement shall mean Haynes Wire.

4.2 Without limiting the generality of the foregoing, the Collateral shall include, and Haynes Wire hereby grants (and Haynes Parent hereby confirms its grant of) a security interest in and lien upon, to Agent, for the benefit of the Secured Parties, to secure payment in full of all of the Secured Obligations, all of such Borrower’s now existing or hereafter arising right, title and interest in and to each of the Branford Purchase Documents and all proceeds thereunder, including, but not limited to, (a) all rights of such Borrower to receive monies due to become due to it thereunder or in connection therewith; (b) all rights of such Borrower to indemnification and claims for damages or other relief pursuant to or in respect of the Branford Purchase Documents; (c) all rights of such Borrower to perform and exercise all remedies thereunder and to require performance by the other parties to the Branford Purchase Documents of its obligations thereunder; and (d) all proceeds, collections, recoveries and rights of subrogation with respect to the foregoing. The grant of security interest and lien is provided only as security for the Secured Obligations and, therefore shall not subject Agent or any Lender to, or transfer or pass to Agent or any Lender, or in any way affect or modify, the liability of a Borrower under any of the Branford Purchase Documents. In no event shall the grant of the security interest and lien provided for herein or the exercise by Agent or any Lender of any rights hereunder or assigned hereby, constitute an assumption of any liability or obligation of Agent or any Lender to any of the other parties to the Branford Purchase Documents or any other persons.

4.3 Notwithstanding anything to the contrary set forth in Section 4.1 above, the types or items of Collateral described in such Section shall not include:

(a) any rights or interests in any contract, lease, permit, license, charter or license agreement covering real or personal property, as such, if under the terms of such contract, lease, permit, license, charter or license agreement, or applicable law with respect thereto, the valid grant of a security interest or lien therein to Agent is prohibited and such prohibition has not been or is not waived or the consent of the other party to such contract, lease, permit, license, charter or license agreement has not been or is not otherwise obtained or under applicable law such prohibition cannot be waived; provided, that, the foregoing exclusion shall in no way be construed (A) to apply if any such prohibition is unenforceable under Sections 9-406, 9-407 or 9-408 of the UCC or other applicable law or (B) so as to limit, impair or otherwise affect Agent’s unconditional continuing security interests in and liens upon any rights or interests of a Borrower in or to monies due or to become due under any such contract, lease, permit, license, charter or license agreement (including any Receivables);

(b) trademark or servicemark applications that have been filed with the U.S. Patent and Trademark Office on the basis of an “intent-to-use” with respect to such marks, unless and until a statement of use or amendment to allege use is filed or any other filing is made or circumstances otherwise change so that the interests of Haynes Wire in such marks is no longer on an “intent-to-use” basis, at which time such marks shall automatically and without further action by the parties be subject to the security interests and liens granted by Haynes Wire to Agent hereunder.

4.4 Each Borrower irrevocably and unconditionally authorizes Agent (or its agent) to file at any time and from time to time such financing statements with respect to the Collateral naming Agent as the secured party and such Borrower as Debtor, as Agent may require, and including any other information with respect to such Borrower or otherwise required by Part 5 of Article 9 of the Uniform Commercial Code of such jurisdiction as Agent may determine, together with any amendment and continuations with respect thereto, which authorization shall apply to all financing statements filed on, prior to or after the date hereof. Such financing statements may describe the Collateral in the same manner as described herein or in any security agreement or pledge agreement entered into by the parties in connection herewith or may contain an indication or description of collateral that describes such property in any other manner as the Agent may determine, in its sole discretion, is necessary, advisable or prudent to ensure the perfection of the security interest in the Collateral granted to the Agent in connection herewith or therewith. Each Borrower hereby ratifies and approves all financing statements naming Agent or its designee as secured party and such Borrower, as debtor with respect to the Collateral (and any amendments with respect to such financing statements) filed by or on behalf of Agent prior to the date hereof and ratifies and confirms the authorization of Agent to file such financing statements (and amendments, if any). Each Borrower hereby authorizes Agent to adopt on behalf of such Borrower any symbol required for authenticating any electronic filing. In the event that the description of the collateral in any financing statement naming Agent or its designee as the secured party and any Borrower as debtor includes assets and properties of such Borrower that do not at any time constitute Collateral, whether hereunder, under any of the other Financing Agreements or otherwise, the filing of such financing statement shall nonetheless be deemed authorized by such Borrower to the extent of the Collateral included in such description and it shall not render the financing statement ineffective as to any of the Collateral or otherwise affect the financing statement as it applies to any of the Collateral.

Section 5. AMENDMENTS TO LOAN AGREEMENT.

5.1 Section 2.1(a) of the Loan Agreement is hereby deleted in its entirety and the following substituted therefor:

“(a) Subject to and upon the terms and conditions contained herein, each Tranche A Lender severally (and not jointly) agrees to make its Pro Rata Share of Tranche A Loans to: (i) Haynes Parent from time to time in amounts requested by Haynes Parent in the aggregate amount for the Tranche A Loans of all Tranche A Lenders of up to the lesser of (A) the Borrowing Base of Haynes Parent at such time or (B) the Tranche A Commitments minus the then outstanding Tranche A Loans to Haynes Wire and (ii) Haynes Wire from time to time in amounts requested by or on behalf of Haynes Wire in the aggregate amount for the Tranche A Loans of all Tranche A Lenders of up to the lesser of: (A) the Borrowing Base of Haynes Wire at such time or (B) the Tranche A Commitments minus the then outstanding Tranche A Loans to Haynes Parent.”

5.2 Section 2.1(b) of the Loan Agreement is hereby deleted in its entirety and the following is substituted therefor:

“(b) Subject to and upon the terms and conditions contained herein, each Tranche B Lender severally (and not jointly) agrees to make its Pro Rata Share of Tranche B Loans to: (i) Haynes Parent from time to time in amounts requested by Haynes Parent in the aggregate amount for the Tranche B Loans of all Tranche B Lenders of up to the lesser of (A) the Tranche B Borrowing Base of Haynes Parent at such time and (B) the Tranche B Commitments minus the then outstanding Tranche B Loans to Haynes Wire and (ii) Haynes Wire in amounts requested by or on behalf of Haynes Wire in the aggregate amount for the Tranche B Loans of all Tranche B Lenders up to the lesser of (A) the Tranche B Borrowing Base of Haynes Wire at such time and (B) the Tranche B Commitments minus the then outstanding Tranche B Loans to Haynes Parent; PROVIDED, THAT, Tranche B Loans will only be made at such time as the then outstanding amount of Trache A Loans equals or exceeds the Tranche A Loan Limit .”

5.3 Section 2.1(c) of the Loan Agreement is hereby amended by adding new clauses (vii), (viii), (ix) and (x) at the end thereof as follows:

“(vii) the aggregate principal amount of the Tranche A Loans and Tranche B Loans to Haynes Parent outstanding at any time shall not exceed the Haynes Parent Borrowing Base, (viii) the aggregate principal amount of Tranche A Loans and Tranche B Loans to Haynes Wire outstanding at any time shall not exceed the Haynes Wire Borrowing Base, (ix) the aggregate principal amount of the Loans to Haynes Parent outstanding at any time based on Eligible Inventory of Haynes Parent shall not exceed the Inventory Loan Limit applicable to Haynes Parent, and (x) the aggregate principal amount of the Loans to Haynes Wire

outstanding at any time based on Eligible Inventory of Haynes Wire shall not exceed the Inventory Loan Limit applicable to Haynes Wire.”

5.4 Section 2.1(d) of the Loan Agreement is hereby deleted in its entirety and the following substituted therefor:

“(d) In the event that the aggregate principal amount of the Loans and Letter of Credit Accommodations outstanding at any time exceeds the Maximum Credit, or the aggregate principal amount of the Tranche A Loans and the Tranche B Loans exceeds the Borrowing Base, or the aggregate principal amount of outstanding Tranche A Loans exceeds the Tranche A Loan Limit, or the aggregate principal amount of outstanding Tranche B Loans exceeds the Tranche B Loan Limit, or the aggregate principal amount of Loans and Letter of Credit Accommodations based on the Eligible Inventory exceed the Inventory Loan Limit, or the aggregate amount of the outstanding Letter of Credit Accommodations exceed the sublimit for Letter of Credit Accommodations set forth in Section 2.2(e), or the aggregate principal amount of the Tranche A Loans and Tranche B Loans applicable to Haynes Parent outstanding at any time exceed the Haynes Parent Borrowing Base, or the aggregate principal amount of Tranche A Loans to Haynes Wire outstanding at any time exceed the Haynes Wire Borrowing Base, or the aggregate principal amount of the Loans to Haynes Parent outstanding at any time based on Eligible Inventory of Haynes Parent exceed the Inventory Loan Limit applicable to Haynes Parent, or the aggregate principal amount of the Loans to Haynes Wire outstanding at any time based on Eligible Inventory of Haynes Wire exceed the Inventory Loan Limit applicable to Haynes Wire, in any case such event shall not limit, waive or otherwise affect any rights of Agent or Lenders in such circumstances or on any future occasions and Borrower shall, upon demand by Agent, which may be made at any time or from time to time, immediately repay to Agent the entire amount of any such excess(es) for which payment is demanded.”

5.5 Section 2.1(e) of the Loan Agreement is hereby amended (a) to delete the reference to the figure “$85,000,000” contained therein and substitute the following therefor: “$95,000,000” and (b) to delete the reference to “and 1.117(b)” and substitute the following therefor: “1.117(b) and 6.4(a)”

5.6 Section 2.1(f) of the Loan Agreement is hereby deleted in its entirety and the following substituted therefor:

“(f) The method for calculating the Pro Rata Shares of each Lender as set forth in Section 2.1(e) above shall apply as to each Lender whether or not such Lender has only a Tranche A Commitment, only a Tranche B Commitment or both and shall apply as to such Lender’s obligation to make Loans and receive payments (pursuant to any section of this Agreement, including Section 6.4(a)) in respect of such Loans in the circumstances when Section 2.1(e) hereof is applicable regardless of whether any such loans would be deemed to constitute Tranche A Loans

or Tranche B Loans and regardless of whether any such payments would otherwise be allocated to Tranche A Loans or Tranche B Loans for purposes of Section 6.4(a) hereof and, for purposes of this Section 2.1, regardless of whether such Lender is a Tranche A Lender and/or a Tranche B Lender. Nothing contained herein shall be construed to mean that any Lender that has only a Tranche A Commitment also has a Tranche B Commitment for purposes of the Loan Agreement or that any Lender has only a Tranche A Commitment is a Tranche B Lender for purposes of the Loan Agreement.”

5.7 Section 6.4(a) of the Loan Agreement is hereby amended to add the following at the end thereof: “Notwithstanding anything to the contrary contained in this Agreement, payments with proceeds of Collateral of Haynes Parent shall be applied to the payment of the Obligations of Haynes Parent and payments with proceeds of Collateral of Haynes Wire shall be applied to the payment of the Obligations of Haynes Wire, except (at any time an Event of Default exists or has occurred and is continuing) as Agent may from time to time otherwise determine.”

5.8 Section 9.7(b)(i) of the Loan Agreement is hereby amended by adding the following words thereto at the end thereof: “and transfers of Inventory by Haynes Wire to the Sellers pursuant to the post-closing adjustment contemplated under the Branford Purchase Agreement as in effect on the date of Amendment No. 1.”

5.9 Section 9.10 of the Loan Agreement is hereby amended to add a new Section 9.10(j) at the end thereof as follows:

“(j) loans by Haynes Parent to Haynes Wire from time to time on and after the date of Amendment No. 1, PROVIDED, THAT, (i) the Indebtedness arising pursuant to any such loan shall not be evidenced by a promissory note or other instrument, unless the single original of such note or other instrument is promptly delivered to Agent upon its request to hold as part of the Collateral, with such endorsement and/or assignment by the payee of such note or other instrument as Agent may require, (ii) as of the date of any such loan and after giving effect thereto, the Haynes Parent Excess Availability shall be not less than $500,000, (iii) except as Agent may from time to time otherwise agree, Haynes shall not make, and shall not be required to make, any payments in respect of the Indebtedness of Haynes Wire to Haynes Parent arising pursuant to such loans, unless as of the date of any such payments, and after giving effect thereto, the Haynes Wire Excess Availability shall be not less than $250,000, and (iv) except as Agent may from time to time otherwise agree, as of the date of any such loan, or the repayment of any Indebtedness arising pursuant to such loan, and in each case after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing.”

5.10 Section 9.12(a) of the Loan Agreement is hereby amended to delete the reference to “Sections 9.10(g) and 9.10(h)” contained therein and substitute the following therefor: “Sections 9.10(g), 9.10(h) and 9.10(j).

5.11 Section 9.16(d)(ii) of the Loan Agreement is hereby amended by adding the following words thereto at the end thereof: “and the other Financing Agreements”.

5.12 Section 13.2 of the Loan Agreement is hereby amended by adding a new clause (n) at the end thereof as follows:

“(n) From and after the effective date of Amendment No. 1 (i) all payment and indemnity obligations of the “Borrower” contained herein shall constitute the joint and several obligations of each Borrower, and all other obligations of the “Borrower” contained herein shall constitute obligations of each Borrower and (ii) all references to information contained on the “Information Certificate” shall, with respect to each Borrower, be a reference to the Information Certificate delivered by such Borrower.”

Section 6. APPOINTMENT OF HAYNES PARENT AS AGENT FOR REQUESTING LOANS AND RECEIPTS OF LOANS AND STATEMENTS.

6.1 Haynes Wire hereby irrevocably appoints and constitutes Haynes Parent as its agent to request Loans and Letter of Credit Accommodations pursuant to the Loan Agreement and the other Financing Agreements from Agent or any Lender in the name or on behalf of such Borrower. Agent and Lenders shall disburse the Loans to such bank account of Haynes Parent or Haynes Wire or otherwise make such Loans and provide such Letter of Credit Accommodations to a Borrower as Haynes Parent may designate or direct. Notwithstanding anything to the contrary contained herein, Agent may at any time and from time to time require that Loans to or for the account of any Borrower be disbursed directly to an operating account of such Borrower.

6.2 Haynes Parent hereby accepts the appointment by Haynes Wire to act as the agent of Haynes Wire pursuant to this Section 6. Haynes Parent shall ensure that the disbursement of any Loans to each Borrower requested by or paid to or for the account of such Borrower, or the issuance of any Letter of Credit Accommodations for a Borrower hereunder, shall be paid to or for the account of such Borrower.

6.3 Haynes Wire hereby irrevocably appoints and constitutes Haynes Parent as its agent to receive statements on account and all other notices from Agent and Lenders with respect to the Obligations or otherwise under or in connection with this Agreement and the other Financing Agreements.

6.4 Any notice or election, (and any representation, warranty, agreement or undertaking made in connection therewith) by or on behalf of Haynes Wire by Haynes Parent shall be deemed for all purposes to have been made by Haynes Wire, and shall be binding upon and enforceable against Haynes Wire to the same extent as if made directly by Haynes Wire.

6.5 No purported termination of the appointment of Haynes Parent as agent as aforesaid shall be effective, except after ten (10) days’ prior written notice to Agent.

Section 7. SCHEDULES.

7.1 Each of Schedule 6.6(b) of the Loan Agreement is hereby amended and restated in its entirety by Amended and Restated Schedule 6.6(b) to this Amendment No. 1.

7.2 Schedule 1.134 hereto is hereby added to the Loan Agreement as Schedule 1.134 and made a part thereof.

7.3 AMENDMENT FEE. In addition to all the other fees, charges, interest and expenses payable to Borrowers to Agent and Lenders under the Loan Agreement and the other Financing Agreements, Borrowers shall pay to Agent for the account of Lenders, contemporaneously with the effectiveness of this Agreement, an amendment fee in the amount of $50,000, which fee shall be fully earned and payable on the effective date hereof and may be charged to any loan account of Borrowers.

Section 8. REPRESENTATIONS AND WARRANTIES. Each Borrower (including Haynes Wire) hereby represents and warrants to Agent and Lenders the following (which shall survive the execution and delivery of this Amendment No. 1), the truth and accuracy of which on the date hereof are a continuing condition of the making of Loans and providing Letter of Credit Accommodations to Borrowers:

8.1 This Amendment No. 1 and each other Agreement or instrument to be executed and delivered by Haynes Parent or Haynes Wire pursuant hereto have been duly authorized, executed and delivered by it, and has been authorized by all necessary action on the part of such Borrower which is a party hereto and thereto (and, if necessary, their respective stockholders) and each such agreement is in full force and effect as of the date hereof, and the agreements and obligations of Haynes Parent and Haynes Wire, as the case may be, contained herein and therein, constitute the legal, valid and binding obligations of such Borrower, enforceable against it in accordance with their respective terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity.

8.2 The execution, delivery and performance of this Amendment No. 1 (a) are all within the corporate powers of Haynes Parent and Haynes Wire and (b) are not in contravention of law or the terms of such Borrower’s certificate of incorporation, by-laws, or other organizational documentation, or any indenture, agreement or undertaking to which such Borrower is a party or by which such Borrower or its property are bound.

8.3 Haynes Wire is a Delaware corporation, duly organized and validly existing in good standing under the laws of the State of Delaware and has all requisite power and authority to own, lease and operate its properties, if any, and to carry on its business as it is now being conducted.

8.4 All of the outstanding shares of Capital Stock of Haynes Wire have been duly authorized, validly issued and are fully paid and non-assessable, free and clear of all claims, liens, pledges and encumbrances of any kind. Haynes Parent is the beneficial and direct owner of record of one hundred (100%) percent of the issued and outstanding shares of Capital Stock of Haynes Wire. There is no debt outstanding that is convertible into Capital Stock of Haynes

Wire, and there are no outstanding rights, options or warrants to acquire any Capital Stock or debt convertible into capital stock of Haynes Wire.

8.5 After giving effect to this Amendment, no Default or Event of Default exists or has occurred and is continuing.

8.6 Haynes Wire has acquired all of the Sellers’ rights, title and interest in and to the Branford Purchased Assets, free and clear of all liens, claims, charges and encumbrances in accordance with the Branford Purchase Documents.

8.7 Neither the execution and delivery of the Branford Purchase Documents, nor the consummation of the transactions contemplated by the Branford Purchase Documents, nor compliance with the provisions of the Branford Purchase Documents or instruments thereunder shall result in (a) the creation or imposition of any lien, claim, charge or encumbrance upon any of the Collateral, except in favor of Agent, for the benefit of the Secured Parties, or as expressly permitted by Section 9.8 of the Loan Agreement and by the other Financing Agreements or (b) the incurrence, creation or assumption of any Indebtedness of a Borrower, except as expressly permitted under Section 9.9 of the Loan Agreement.

8.8 All actions and proceedings required by the Branford Purchase Documents, applicable law or regulation have been duly and validly taken and consummated.

8.9 No court of competent jurisdiction has issued any injunction, restraining order or other order which prohibits consummation of the transactions contemplated in respect of the Branford Purchase Documents and no governmental or other action or proceeding has been threatened or commenced in the United States of America, seeking any injunction, restraining order or other order which seeks to void or otherwise modify the transactions described in the Branford Purchase Documents, nor compliance with the provisions thereof, has violated or shall violate any Federal or State securities laws or any other law or regulation or any order or decree of any court or governmental instrumentality in respect or does or shall conflict with or result in the breach of, or constitute a default in any respect under, any indenture, mortgage, deed of trust, security agreement or other agreement or instrument to which a Borrower is a party or may be bound, or violate any provision of the organizational documents of a Borrower.

8.10 Agent has, on or before the date hereof, received from Haynes Wire, true and complete copies of the Branford Purchase Documents and all notices, consents, instruments, documents and agreements relating thereto, including all exhibits and schedules thereto, all as duly executed and delivered by the parties thereto.

8.11 Borrowers shall take such steps and execute and deliver, such further agreements, documents and instruments as Agent may require in order to more fully evidence, perfect and protect Agent’s security interest in, among other Collateral, the Branford Purchased Assets.

8.12 Each of the Branford Purchase Documents has been duly authorized, executed and delivered by Haynes Wire, and each is in full force and effect as of the date hereof. No material default by Haynes Wire under or with respect to the Branford Purchase Documents exists or has occurred. To the best of the knowledge of Borrowers, no default by any party (other than Haynes Wire) under or with respect to any material agreement contained in the Branford

Purchase Documents exists or has occurred. Borrowers have obtained all consents required for the valid and binding assignment of, and grant to Agent of a security interest in, the Branford Purchase Documents and such consents are in full force and effect.

Section 9. COVENANTS.

9.1 Borrowers will not consent to or enter into any modification, alteration, amendment or cancellation of the Branford Purchase Documents or any agreement or instrument related thereto, or waive or release any rights, remedies or benefits of a Borrower under the Branford Purchase Documents or any agreement or instrument related thereto, without the prior written consent of Agent in each case. Borrowers will give prompt notice to Agent of any notice of default or any other notice under any of the Branford Purchase Documents at any time received by a Borrower promptly upon receipt thereof or sent by a Borrower or on its behalf concurrently with the sending thereof, in each case together with a complete copy of such notice. Borrowers shall promptly and faithfully abide by, perform and discharge in all material respects the obligations, covenants, conditions and duties which the Branford Purchase Documents provide are to be performed by a Borrower.

9.2 Borrowers shall: (a) promptly notify Agent of any amounts required to be paid by or to a Borrower (or for its benefit) in connection with the Branford Purchase Documents, including as part of any purchase price adjustment, (b) promptly notify Agent of each and every dispute with, proceeding or claim against, cause of action or litigation involving any Person for which a Borrower has or may have any right to indemnification or claim for damages or other relief or remedies, whether at law or in equity, arising under or in connection with the Branford Purchase Documents, (c) diligently enforce all rights to indemnification or claim for damages or other relief or remedies, whether at law or in equity, arising under or in connection with the Branford Purchase Documents, (d) promptly provide Agent with copies of all notices, demands, requests or other communications sent or received by, or on behalf of, a Borrower pursuant to the Branford Purchase Documents, as well as prior written notice of a Borrower’s intention to exercise any power, right or remedy pursuant to the Branford Purchase Documents and (e) not take any action that adversely affects, in the good faith judgment of Agent, the rights of a Borrower under the Branford Purchase Documents in any material respect.

9.3 In no event shall a Borrower, without the prior written consent of Agent, waive, release or discharge any of its rights or any of the obligations, duties or liabilities of any other party to any of the Branford Purchase Documents or compromise or settle any right or any claim or dispute with respect to any of its rights or any of the obligations, duties or liabilities of any other party to any of the Branford Purchase Documents. No such waiver, release, discharge, compromise or settlement shall be effective without the prior written consent of Agent.

9.4 At any time an Event of Default exists or has occurred and is continuing, without limiting any other rights or remedies of Agent or Lenders, Agent shall have all rights and remedies under the Loan Agreement and the other Financing Agreements, the Uniform Commercial Code and other applicable law, and shall have the absolute right to enforce, in its name, any and all rights to indemnification or claim for damages or other relief or remedies, whether at law or in equity, arising under or in connection with the Branford Purchase Documents, or otherwise and apply the proceeds thereof to the Obligations in such order or

manner as Agent shall determine. In order to effectuate the foregoing, each Borrower, for itself and its respective successors and assigns, hereby constitutes and appoints Agent and each officer and employee thereof (effective at any time an Event of Default exists or has occurred and is continuing) as its attorney-in-fact with power to assert claims and commence and prosecute suit against any Person or to settle or compromise any such claim or suit relating to any such right, claim, relief or remedy, and to sign and file any and all papers required in connection therewith and to take any and all other action which Agent may, in its good faith discretion, deem appropriate. Each Borrower hereby ratifies and approves all acts which Agent or any officer or employee thereof as attorney may do and this power of attorney, being coupled with an interest, is irrevocable as long as any of the Obligations remain outstanding.

Section 10. CONDITIONS PRECEDENT. The consents and amendments contained herein shall only be effective upon the receipt by Agent of each of the following, in each case in form and substance reasonably satisfactory to Agent:

10.1 an executed original or executed original counterparts of this Amendment No. 1 (as the case may be), duly authorized, executed and delivered by the respective party or parties hereto;

10.2 all consents, waivers, acknowledgments and other agreements from third persons (other than Deposit Account Control Agreements and Collateral Access Agreements relating to those accounts and premises not identified on Schedule 10.2 hereto) which Agent may deem necessary or desirable in order to permit, protect and perfect its security interests in and liens upon the Collateral of Haynes Wire, including, without limitation, the Branford Purchased Assets, in favor of Agent or to effectuate the provisions or purposes of this Amendment No. 1 and the other Financing Agreements;

10.3 Deposit Account Control Agreements by and among Agent, Haynes Wire and each bank where Haynes Wire has a deposit account identified on Schedule 10.3 hereto, in each case, duly authorized, executed and delivered by such bank and Haynes Wire;

10.4 the properly completed Information Certificate of Haynes Wire duly authorized, executed and delivered by Haynes Wire;

10.5 (a) a copy of the Certificate of Incorporation of Haynes Wire, and all amendments thereto, certified by the Secretary of State of its jurisdiction of incorporation as of the most recent practicable date certifying that each of the foregoing documents remains in full force and effect and has not been modified or amended, except as described therein, (b) a copy of the By-Laws of Haynes Wire, certified by the Secretary of Haynes Wire, and (c) a certificate from the Secretary of Haynes Wire dated the date hereof certifying that each of the foregoing documents remains in full force and effect and has not been modified or amended, except as described therein;

10.6 Secretary’s Certificates of Directors’ Resolutions evidencing the adoption and subsistence of corporate resolutions approving the execution, delivery and performance by Borrowers of this Amendment No. 1 and the agreements, documents and instruments to be delivered pursuant to this Amendment No. 1;

10.7 original good standing certificates (or its equivalent) from the Secretary of State (or equivalent Governmental Authority) from each jurisdiction where Haynes Wire conducts business;

10.8 a true and correct copy of any consent, waiver or approval (if any) to or of this Amendment No. 1, which any Borrower is required to obtain from any other Person;

10.9 such opinion letter(s) of counsel to Borrowers with respect to the matters contemplated by this Amendment No. 1 and such other matters as Agent may reasonably request;

10.10 lien and judgment search results for the jurisdiction of incorporation of Haynes Wire and each Seller, the jurisdiction of the chief executive office of Haynes Wire and each Seller and all jurisdictions in which assets of Haynes Wire and each Seller are located, which search results shall be in form and substance satisfactory to Agent;

10.11 evidence of insurance and loss payee endorsement required hereunder and under the other Financing Agreements with respect to Haynes Wire and certificates of insurance policies and/or endorsement naming Agent as loss payee;

10.12 a Pledge and Security Agreement by Haynes Parent in favor of Agent for the benefit of the Secured Parties, with respect to the pledge of all of the issued and outstanding shares of capital stock of Haynes Wire by Haynes Parent to Agent for the benefit of Secured Parties, duly authorized, executed and delivered by Haynes Parent;

10.13 a Mortgage by Haynes Wire in favor of Agent, for the benefit of the Secured Parties, with respect to the Real Property of Haynes Wire acquired from Sellers, duly authorized, executed and delivered by Haynes Wire;

10.14 Agent shall have received environmental audits of the Real Property of Haynes Wire to be subject to the Mortgage by Haynes Wire in favor of Agent conducted by an independent environmental engineering firm acceptable to Agent, and in form, scope and methodology satisfactory to Agent, confirming that (i) Haynes Wire (and its predecessor owner) is in compliance with all material applicable Environmental Laws and (ii) the absence of any material environmental problems;

10.15 Agent shall have received, in form and substance satisfactory to Agent, a valid and effective title insurance policy issued by a company and agent acceptable to Agent: (i) insuring the priority, amount and sufficiency of the Mortgages, (ii) insuring against matters that would be disclosed by surveys and (iii) containing any legally available endorsements, assurances or affirmative coverage requested by Agent for protection of its interests;

10.16 all releases, terminations and such other documents as Agent may request to evidence and effectuate the termination or the release by any party of any interest in and to any of the Branford Purchased Assets, including, without limitation, a termination agreement duly authorized, executed and delivered by First-Citizens Bank and Trust Company and UCC termination statements for all UCC financing statements previously filed by any such person against a Seller, as debtor;

10.17 evidence that the Branford Purchase Documents have been duly authorized, executed and delivered by and to the appropriate parties thereto and that the transactions contemplated under the terms and conditions of the Branford Purchase Documents have been consummated prior to or contemplated with the execution of this Amendment No. 1;

10.18 true and complete copies of the Branford Purchase Documents and all notices, consents, instruments, documents and agreements relating thereto, including all exhibits and schedules thereto, all as duly executed and delivered by the parties thereto; and

10.19 a Seller Acknowledgment Letter by Sellers in favor of Agent with respect to the Branford Purchase Documents, duly authorized, executed and delivered by Sellers.

Section 11. ADDITIONAL EVENTS OF DEFAULT. The parties hereto acknowledge, confirm and agree that the failure of a Borrower to comply with the covenants, conditions and agreements contained herein shall constitute an Event of Default under the Loan Agreement and the other Financing Agreements (subject to the applicable cure period, if any, with respect thereto provided for in the Loan Agreement as in effect on the date hereof).

Section 12. PROVISIONS OF GENERAL APPLICATION.

12.1 EFFECT OF THIS AMENDMENT. Except as expressly amended pursuant hereto and except for the consents expressly granted herein, no other changes or modifications to the Financing Agreements are intended or implied and, in all other respects, the Financing Agreements are hereby specifically ratified, restated and confirmed by all parties hereto as of the effective date hereof. To the extent that any provision of the Loan Agreement or any of the other Financing Agreements are inconsistent with the provisions of this Amendment No. 1, the provisions of this Amendment No. 1 shall control. The Loan Agreement and this Amendment No. 1 shall be read and construed as one Agreement.

12.2 GOVERNING LAW. The validity, interpretation and enforcement of this Amendment No. 1 and the other Financing Agreements (except as otherwise provided therein) and any dispute arising out of the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of Illinois, but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of Illinois.

12.3 BINDING EFFECT. This Amendment No. 1 shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns. Any acknowledgments or consents contained herein shall not be construed to constitute a consent to any other or further action by a Borrower or to entitle such Borrower to any other consent.

12.4 FURTHER ASSURANCES. Each Borrower shall execute and deliver such additional documents and take such additional action as may be reasonably requested by Agent and Lenders to effectuate the provisions and purposes of this Amendment No. 1.

12.5 HEADINGS. The headings listed herein are for convenience only and do not constitute matters to be construed in interpreting this Amendment No. 1.

12.6 COUNTERPARTS. This Amendment No. 1 may be executed in any number of counterparts, each of which shall be an original but all of which taken together shall constitute one and the same Agreement. Delivery of an executed counterpart of this Amendment No. 1 by telefacsimile shall have the same force and effect as the delivery of an original executed counterpart of this Amendment No. 1. Any party delivering an executed counterpart of this Amendment No. 1 by telefacsimile shall also deliver an originally executed counterpart of this Amendment No. 1, but the failure to do so shall not affect the validity, enforceability or binding effect of this Amendment No. 1.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be duly executed and delivered by their authorized officers as of the date and year first above written.

				CONGRESS FINANCIAL CORPORATION
				(CENTRAL), as Agent and as Lender

				By:	/s/ Vicky Geist

				Title:		Vice President


				HAYNES INTERNATIONAL, INC.

				By:	/s/ MARCEL MARTIN


				Title:			Vice President, Finance and CFO



				HAYNES WIRE COMPANY

				By:	/s/ Marcel Martin


				Title:			Vice President, Finance and CFO

BANK ONE, NA (Main Office Chicago)

By:	/s/ James Gurgone

Title:		Director

WESTERNBANK PUERTO RICO
BUSINESS CREDIT DIVISION

By:	/s/ Miguel A. Vazquez

Title:			President, Westernbank Business Credit Division

[The Disclosure Schedules have been omitted from the Agreement as filed with the Securities and Exchange Commission (the “SEC”). The omitted information is considered immaterial from an investor’s perspective. The Registrant will furnish supplementally a copy of any of the schedules to the SEC upon request from the SEC.]

EXHIBIT 10.14

CONSULTING, NON-COMPETITION AND

CONFIDENTIALITY AGREEMENT

This Consulting, Non-Competition and Confidentiality Agreement (the “AGREEMENT”) is made as of the 5th day of November 2004 (the “EFFECTIVE DATE”), by and between Richard Harcke (“HARCKE”) and Haynes Wire Company, a Delaware corporation (“BUYER”).

PRELIMINARY STATEMENT

Prior to the date hereof, Sellers have engaged in the business of owning and operating a wire manufacturing business (the “BUSINESS”). This Agreement is made in connection with and as a condition to consummation of the transactions contemplated by a certain Asset Purchase Agreement dated October 28, 2004, by and among Harcke, The Branford Wire and Manufacturing Company, a Connecticut corporation (“BRANFORD”), Carolina Industries, Inc. a Connecticut corporation (“CAROLINA INDUSTRIES”) (Branford and Carolina Industries together, “SELLERS”) and Buyer (the “ASSET PURCHASE AGREEMENT”). Under the terms of the Asset Purchase Agreement, Buyer has agreed to purchase, and Sellers have agreed to sell, the assets used in Sellers’ operation of the Business. Harcke has acquired extensive knowledge about the conduct of the Business as the owner and operator of Sellers. This Agreement is entered into between Buyer and Harcke to protect the goodwill of the Business that is being sold to Buyer by Sellers and to protect against unfair competition by Harcke. All capitalized terms not herein defined have the meaning ascribed to them in the Asset Purchase Agreement.

AGREEMENT

In consideration of the premises and mutual covenants contained in this Agreement and as an inducement to Buyer to enter into the Asset Purchase Agreement, the parties hereby agree as follows:

I. CONSULTING

A. SERVICES. For a period of six (6) months from the Effective Date, Harcke will, at the request of the officers of Buyer from time to time, provide consulting services to Buyer or any affiliate of Buyer with respect to all aspects of the Business, including without limitation the provision of advice on business strategy and operations for the Business and management advice and consultation to the officers of Buyer (collectively, the “SERVICES”). Harcke shall provide the Services at such times as may be reasonably requested by Buyer.

II. NON-COMPETITION

A. AGREEMENT NOT TO COMPETE. To protect Buyer’s interest in the goodwill acquired by Buyer from Sellers and to prevent unfair competition, for a period of seven (7) years from the Effective Date (the “RESTRICTED PERIOD”), except as provided in SECTION II(A) and subject to the geographical limitations set forth in SECTION II(B), Harcke shall not:

1. Engage in any activity directly or indirectly, as an owner, consultant, independent contractor or otherwise in the Business or any related business that is competitive with Buyer, including without limitation any activity that is necessary or incident to the conduct of the Business or any related business in a manner similar to any of the business practices engaged in by either Seller during Harcke’s ownership and operation of such Seller; provided, however, nothing contained in this Agreement shall prevent either Seller from continuing to sell the Excess Inventory (as such term is defined in the Asset Purchase Agreement);

2. Perform, on behalf of himself or any person or entity, the same or similar services as those performed by Harcke for either Seller prior to the date of this Agreement;

3. Hire or employ or attempt to hire or employ any person who on or after the date hereof, is an employee, manager, or officer of Buyer (each, an “EMPLOYEE”), or in any way cause or assist or attempt to cause or assist, or, directly or indirectly, seek to solicit, induce, bring about, influence, promote, facilitate, cause, assist or encourage any Employee to leave Buyer’s employ or to accept employment with or otherwise perform services for on or on behalf of any person or entity that engages in, or otherwise competes with, the Business or any related business (“COMPETITOR”); or

4. Contact any customers or suppliers of Buyer, either directly or indirectly, for himself or for others, so as to (i) directly or indirectly divert or influence or attempt to divert or influence any business of Buyer to a Competitor, or (ii) directly or indirectly solicit or provide services similar to those provided by Buyer, or (iii) otherwise directly or indirectly interfere in any fashion with Buyer’s relationship with such customers or suppliers, or with the business or operations then being conducted by Buyer.

B. GEOGRAPHICAL LIMITATIONS. The restrictions set forth in SECTION II(A) in this Agreement shall be applicable to the following geographic areas that can be enforced against Harcke during the Restricted Period:

1. In North America;

2. In the United States of America;

3. In each State in which Sellers previously had operations and/or conducted significant activities relating to the Business, and all contiguous states;

4. In the State of North Carolina;

5. In Henderson County, North Carolina, and all contiguous counties; and

6. Within a fifty (50) mile radius of any location at which Sellers conducted the Business.

III. CONFIDENTIALITY

A. CONFIDENTIAL INFORMATION DEFINED. “CONFIDENTIAL INFORMATION” as used in this Agreement shall mean, collectively, any and all data and information about Buyer’s or Sellers’ businesses including, but not limited to (i) all information relating to selling or financing processes, specifications and procedures relating to the Business; (ii) customer lists and other customer-related information including names, addresses, specifications or requirements, purchase or delivery quantities, lines of credit, and delivery, financing, and auction schedules; (iii) supplier lists; (iv) marketing plans and concepts; and (v) sales, costs, profits, profit margins, salaries and other financial information pertaining to Buyer or either Seller; provided, however, that “Confidential Information” shall in no event include data or information that (a) was available to the public prior to the date hereof or (b) becomes available to the public other than as a result of disclosure by Harcke in violation hereof.

B. USE OR DISCLOSURE OF CONFIDENTIAL INFORMATION. Throughout the Restricted Period, Harcke agrees to (i) keep confidential and not to disclose to anyone except the authorized representatives of Buyer all Confidential Information; and (ii) refrain from using such Confidential Information in any manner adverse to the interests of Buyer.

C. RECORDS AND COPIES. Any and all records and copies of records pertaining to the Confidential Information that were or are made or received by either Seller or Harcke shall be kept confidential and Harcke shall not disclose any such records or copies of records to anyone except Buyer and its authorized representatives. All records and copies of records of Buyer are and shall remain the property of Buyer and shall be subject to Buyer’s custody and control.

IV. COMPENSATION

A. COMPENSATION. In full payment and satisfaction for the Services and Harcke’s agreements and understandings in SECTIONS I and II and subject to the terms and conditions of this Agreement, Buyer shall compensate Harcke as follows:

1. Buyer shall pay Harcke seven (7) equal annual installments of $110,000.00 each. The first installment shall be paid on the Effective Date and one (1) additional installment shall be paid on each of the first six (6) anniversaries of the Effective Date; provided that Buyer shall not be required to make any payment due on any anniversary following a breach by Harcke of his obligations under SECTIONS I or II of this Agreement. At any time on or after April 1, 2005, Buyer shall, upon three (3) Business Days written request from Harcke, escrow the remaining $660,000 of installments to be paid in exchange for Harcke’s performance under this Agreement with Investors Bank and Trust Company. In the event that Harcke requests that Buyer provide the escrow as set forth above and Buyer does not provide such escrow, this Agreement shall automatically terminate, including all obligations of Harcke not to compete under ARTICLE II and of Buyer to make payments to Harcke under this ARTICLE IV.

2. For a period of three (3) years following the Effective Date, Buyer shall provide Harcke with office space at the facilities of Buyer located at 158 N. Egerton Road, Mountain Home, North Carolina 28758, as the parties shall mutually agree.

3. During the Restricted Period, Buyer shall provide Harcke and his spouse with medical benefits comparable to those previously provided to Harcke and his spouse by Sellers.

V. GENERAL PROVISIONS

A. REMEDIES. Harcke acknowledges and agrees that any violation by Harcke of this Agreement will cause Buyer to suffer irreparable harm for which Buyer will not have any adequate remedy at law. Therefore, if Harcke threatens to violate or violates any provision of this Agreement, Buyer shall be entitled to injunctive relief without bond, including, but not limited to, temporary restraining orders and/or preliminary or permanent injunctions, to restrain or enjoin any violation or threatened violation of this Agreement. Buyer’s right to injunctive relief shall be in addition to, and not in lieu of, any other legal or equitable remedies that may be available to Buyer, including but not limited to monetary damages to the extent they are calculable, including lost profits.

B. CLAIMS BY HARCKE. Any claim or cause of action by Harcke against Buyer shall not constitute a defense to the enforcement of the restrictions and covenants set forth in this Agreement and shall not be used to prohibit injunctive relief.

C. GOVERNING LAW; JURISDICTION AND VENUE. This Agreement shall be construed and enforced in accordance with, and governed by, the Laws of the State of Indiana (without giving effect to the principles of conflicts of Laws thereof). The parties hereto irrevocably agree and consent to the non-exclusive jurisdiction of the courts of the State of Indiana and the federal courts of the United States, sitting in Indianapolis, Indiana for the adjudication of any matters arising under or in connection with this Agreement.

D. COSTS AND ATTORNEYS’ FEES. In the event any party brings suit to construe or enforce the terms hereof, or raises this Agreement as a defense in a suit brought by another party, the prevailing party shall be entitled to recover its reasonable costs and expenses, including, without limitation, reasonable attorneys’ fees incurred by that party in enforcing the terms and conditions of this Agreement.

E. SEVERABILITY. Harcke acknowledges and agrees that the restrictions contained in this Agreement are reasonable and necessary to safeguard the protectable interests of Buyer. If, notwithstanding such acknowledgement and agreement, any clause, portion, section, restriction or paragraph of this Agreement is determined to be unreasonable, unenforceable or invalid for any reason, such determination shall not affect the enforceability or validity of the remainder of this Agreement, and the unreasonable, unenforceable or invalid provision shall be deemed amended and modified and shall be given effect and enforced to the maximum extent that is determined to be reasonable and enforceable.

F. ENTIRE AGREEMENT, MODIFICATIONS, INTERPRETATION. This Agreement constitutes the entire agreement by and between Buyer and Harcke with respect to the matters addressed herein and shall supersede all prior and contemporaneous agreements, representations, and understandings whether written or oral, with respect to such obligations. No amendment to or modification of this Agreement shall be effective unless the amendment or modification is in writing and signed by the parties. This Agreement shall be construed as a whole, according to its fair meaning, and not strictly construed for or against either party.

G. SUCCESSORS AND ASSIGNS. Neither party hereto shall assign or delegate this Agreement or any rights or obligations hereunder without the prior written consent of the other party hereto, and any attempted assignment or delegation without prior written consent shall be void and of no force or effect; provided, however, Buyer may without consent assign this Agreement and all of its rights and delegate its obligations hereunder to an affiliate of Buyer or to any person or entity who shall acquire all or substantially all of the assets of Buyer. This Agreement shall inure to the benefit of and shall be binding upon the successors and permitted assigns of the parties hereto.

H. NON-WAIVER. No act or omission by Buyer shall be deemed a waiver by Buyer of any of Buyer’s rights under this Agreement. Therefore, the failure of Buyer to enforce any restriction against Harcke or to seek a different remedy shall not be construed as a waiver or estoppel to the enforcement of the restrictions against Harcke.

I. NOTICES. All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally or by facsimile transmission, with confirmation of successful transmission, and mailed (first class postage prepaid) to the parties at the following addresses or facsimile numbers:

If to Buyer:	Haynes Wire Company
	1020 West Park Avenue
	P.O. Box 9013
	Kokomo, IN 46904-9013
	Tel. No. (765) 456-6000
	Fax. No. (765) 456-6125
	Attn: Francis J. Petro, President and CEO

With a copy to:	Ice Miller
	One American Square, Box 82001
	Indianapolis, IN 46282-0200
	Facsimile No.: (317) 592-4666
	Attn: Stephen J. Hackman

If to Harcke:	Richard Harcke
	420 Vanderbilt Road
	Asheville, NC 28803
	Tel. No. 828-692-5791
	Fax No. 828-697-9818

J. COUNTERPARTS. This Agreement may be executed in one or more counterparts, any one of which need not contain the signatures of more than one party, and all such counterparts taken together shall constitute one and the same instrument. Signatures on this Agreement may be communicated by facsimile transmission and shall be binding upon the parties transmitting the same by facsimile transmission. Counterparts with original signatures shall be mailed to the other parties within three (3) calendar days of the applicable facsimile transmission; PROVIDED, that the failure to provide the original counterpart shall have no effect on the validity or the binding nature of this Agreement.

[SIGNATURES ON FOLLOWING PAGE]

THE PARTIES HERETO ACKNOWLEDGE THAT THEY HAVE READ THIS AGREEMENT, UNDERSTAND IT, AND AGREE TO BE BOUND BY ITS TERMS. They further acknowledge that they have exercised due diligence in reviewing this Agreement, and that each has had adequate opportunity to consult with legal counsel or other advisors to the extent that each deemed such consultation necessary.

IN WITNESS WHEREOF, Buyer and Harcke have executed this Agreement effective for all purposes as of the Effective Date.

“BUYER”		“HARCKE”

HAYNES WIRE COMPANY

By:	/s/Marcel Martin	By:	/s/Richard Harcke
	Marcel Martin, Vice President-Finance,		Richard Harcke
	Chief Financial Officer and Treasurer

EXHIBIT 10.15

FACILITY AGREEMENT

DATED 2nd APRIL 2004

HAYNES INTERNATIONAL LIMITED

BURDALE FINANCIAL LIMITED

CONTENTS

1	INTERPRETATION	1

2	FACILITIES	11

3	PURPOSE	11

4	CONDITIONS PRECEDENT	12

5	RESTRICTIONS ON UTILISATION	12

6	UTILISATION OF FACILITIES	14

7	REPAYMENT AND PREPAYMENT	17

8	INTEREST AND COMMISSION	19

9	COLLECTION OF RECEIVABLES	20

10	TAX	21

11	INCREASED COSTS	22

12	REPRESENTATIONS AND WARRANTIES	23

13	GENERAL UNDERTAKINGS	25

14	INFORMATION AND ASSET UNDERTAKINGS	31

15	GUARANTEE AND INDEMNITY	35

16	EVENTS OF DEFAULT	37

17	COSTS, EXPENSES AND FEES	40

18	INDEMNITIES	41

19	NOTICES	42

20	MISCELLANEOUS PROVISIONS	42

21	GOODS AND DOCUMENTS	43

22	CHANGES TO PARTIES	44

23	GOVERNING LAW AND JURISDICTION	45

SCHEDULE 1 - THE OBLIGORS

SCHEDULE 2 - CONDITIONS PRECEDENT

SCHEDULE 3 - FORMS OF REQUEST

SCHEDULE 4 - FORMS OF REPORT

SCHEDULE 5 - FORM OF ACCESSION LETTER

FACILITY AGREEMENT

DATED

BETWEEN

(1) HAYNES INTERNATIONAL LIMITED (the COMPANY) registered in England with number 01209891;

(2) THE COMPANIES (if any) identified in Part I of Schedule 1 as Facility Companies;

(3) THE COMPANIES (if any) identified in Part I of Schedule 1 as Guarantors;

(4) BURDALE FINANCIAL LIMITED (BURDALE) registered in England with number 2656007.

IT IS AGREED:

1 INTERPRETATION

1.1 DEFINITIONS

In this Agreement:

ACCESSION LETTER means a document substantially in the form set out in Schedule 5.

ACTUAL DAY OF PAYMENT in relation to a Purchased Receivable means the date on which full payment in respect of that Purchased Receivable is made into a Blocked Account by the relevant account debtor or the relevant Facility Company.

ADDITIONAL FACILITY COMPANY means each company which becomes an Additional Facility Company in accordance with Clause 22.2.

ADDITIONAL GUARANTOR means each company which becomes an Additional Guarantor in accordance with Clause 22.3.

ADDITIONAL OBLIGOR means each Additional Facility Company and each Additional Guarantor.

AFFILIATE means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company.

AVAILABILITY LIMITS means the restrictions on Utilisations set out in Clause 5.

AVAILABILITY PERIOD means the period from the opening of business in London on today’s date until close of business in London on the date falling five Business Days prior to the Final Repayment Date or such later date as Burdale may agree.

BLOCKED ACCOUNTS means the following accounts of the Facility Companies with The Royal Bank of Scotland, Manchester Mosely Street branch:

(a) the Company’s Sterling account number 20469010, sort code 16-00-01;

(b) the Company’s euro account number HAYEINTE-EUR1;

(d) any bank accounts of an Additional Facility Company specified as Blocked Accounts in the relevant Accession Letter;

in each case, (as the same may be redesignated, renumbered or renamed from time to time), or such other account(s) as previously approved by Burdale.

BUSINESS DAY means any day not being a Saturday, Sunday or Bank holiday when banks are open for business in London.

CASH REQUEST means a request for Burdale to pay to a Facility Company an amount of unpaid Purchase Price and/or the proceeds of a Loan in substantially the form set out in Part II of Schedule 3.

CHARGED ACCOUNTS means the Blocked Accounts and the Other Accounts.

CONGRESS means Congress Financial Corporation (Central) an Illinois corporation.

CONSOLIDATED PROFIT means, for any period, the consolidated profit of the Company on ordinary trading activities before tax, adding back depreciation and amortisation but after deducting any exceptional or extraordinary profit and after adding back any non-cash exceptional write-offs during such period as all such terms are defined in accordance with GAAP (applied consistently with the accounting principles of the Obligors as at today’s date) and all as determined from the most recent consolidated monthly management accounts of the Company delivered to Burdale pursuant to Clause 14.1(b).

CONSOLIDATED TANGIBLE NET WORTH means the aggregate amount from time to time paid up or credited as paid up on the share capital of the Company and the amount standing to the credit of its consolidated capital and reserves (including any share premium account or capital redemption reserve, but excluding any goodwill (whether positive or negative) and/or any intangible assets) plus or minus the amount standing to the credit or debit of the consolidated profit or loss account of the Company all as determined from the most recent consolidated monthly management accounts of the Company delivered to Burdale pursuant to Clause 14.1(b).

DEBENTURE means the debenture executed or to be executed by the Company in favour of Burdale.

DEED OF PRIORITIES means the deed of priorities dated on or about the date of this Agreement between the Company, Burdale and the Trustees of the Haynes International Limited Pension Scheme.

DEFAULT means any Event of Default and any event which with the giving of notice and/or lapse of time and/or as a result of any Utilisation and/or determination of materiality and/or fulfilment of any condition (or any combination of the foregoing) would constitute an Event of Default.

DEFAULT RATE means the rate determined by Burdale to be 2% above the Interest Rate from time to time.

DILUTION RATE means the monthly value of credit notes and non-cash credits issued by a Facility Company as a percentage of the monthly value of sales.

DIP FINANCING DATE means the first date on which Congress makes funding available to Haynes US pursuant to a debtor-in-possession facility provided to it upon its commencement of a case under Chapter 11 of the United States Bankruptcy Code and Burdale has received (in a form and substance satisfactory to it) the documents, evidence and other items specified in Part II of Schedule 2.

DOCUMENTS means any and all documents which represent or relate to any Goods and/or the carriage of and/or possession of and/or ownership of and/or title to and/or insurance of and/or warehousing of and/or any other dealing in or with any Goods.

DOLLARS and $ means the lawful currency for the time being of the United States of America.

ELIGIBLE RECEIVABLES means, at any time, any Receivables at such time which are evidenced by an invoice rendered by a Facility Company to the relevant account debtors save for any Receivable:

(a) which does not arise from the actual and bona fide sale and delivery of goods by the relevant Facility Company or rendering of services by the relevant Facility Company in the ordinary course of its business which transactions are completed in accordance with the terms and provisions contained in any documents relating to such transactions;

(b) which remains fully or partly unpaid after its Maturity Date or such longer period as may be agreed by Burdale;

(c) owing by a single account debtor if Receivables representing 50% or more of the aggregate balance owing by such account debtor to the Facility Companies are not Eligible Receivables by reason of the operation of paragraph (b) above;

(d) with respect to which the account debtor is a director, officer, employee or Affiliate of any Obligor;

(e) with respect to which the account debtor has or has asserted a counterclaim or has a right of set off, to the extent of such counterclaim or set off;

(f) as to which performance has not been completed by the relevant Facility Company or as to which all goods and services in connection with such Receivable have not been delivered to or performed for the account debtor or which has not been invoiced or is not fully assignable;

(g) with respect to which the account debtor is the subject of any bankruptcy or insolvency proceeding in any jurisdiction or has made an assignment for the benefit of creditors or whose assets have been conveyed to a receiver, administrator, trustee or other insolvency official;

(h) with respect to which the account debtor’s obligation to pay the Receivable is conditional upon the account debtor’s approval or is otherwise subject to any repurchase obligation or right of return, as with sales made on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval (except with respect to Receivables in connection with which account debtors are entitled to return goods on the basis of the quality of those goods) or consignment basis;

(i) owed by an account debtor incorporated or resident outside the United Kingdom, unless Burdale otherwise agrees and such Receivable is subject to valid and enforceable credit insurance payable to Burdale issued by an insurer on terms and in an amount acceptable to Burdale as determined by it in good faith and the aggregate invoice values owed by that relevant account debtor are within the insured limit;

(j) owed by an account debtor whose total indebtedness to the Facility Companies exceeds any credit limit set by Burdale from time to time with respect to that account debtor to the extent such Receivable breaches that credit limit provided that any reduction in the credit limit as to a particular account debtor will not cause any Receivables owing by

that account debtor as of the date of such reduction not to qualify as Eligible Receivables;

(k) where there are proceedings or actions which are threatened or pending against the account debtors with respect to such Receivables which would result in any material adverse change in any such account debtor’s financial condition;

(l) where there are facts, events or occurrences which would impair the validity, enforceability or collectability of that Receivable or of reducing the amount payable or delaying payment of that Receivable.

ELIGIBLE STOCK means all Stock save for any Stock which, at any time:

(a) is obsolete, slow-moving, not in good condition or not currently usable or saleable in the ordinary course of a Facility Company’s business;

(b) is held at third party premises but not held subject to Warehouseman Association standard agreement;

(c) constitutes materials over which Burdale does not have a valid first ranking fixed or floating charge under the Security Documents;

(d) constitutes consumables used in a Facility Company’s business or constitutes packaging or shipping materials;

(e) constitutes returned, damaged or defective materials;

(f) is held by a Facility Company as consignee for a third party;

(g) is not the property of the relevant Facility Company by virtue of retention of title or Romalpa provisions in favour of any person;

(h) is spare parts or scrap or is only semi-finished or otherwise constitutes work-in-progress;

(i) is in transit outside property which is owned and controlled by any Obligor except in cases where they are (i) in transit by a Facility Company or by a courier on its behalf between such property and the aggregate value of such Stock does not at any time exceed the sum of $15,000 or (ii) in transit to a Facility Company and Burdale has in its possession all originals of the bills of lading or other documents of title with respect to such Stock and has received all such agreements as Burdale requires in order to perfect first ranking fixed or floating security in such Stock and to obtain possession of such Stock from any third party having possession of the same; or

(j) is determined in good faith by Burdale as being unsuitable for forming the basis of a lending decision as a result of any change in or introduction of or change in the interpretation or application of any law, regulation, treaty or official directive or official request having the force of law.

END DATE in relation to an L/C means the earlier of the expiry date of such L/C and the date on which the L/C is drawn in full.

EQUIPMENT means equipment, machinery, computers and computer hardware and software (whether owned or licensed), vehicles, tools, furniture and fixtures and all attachments, accessories and property now or in future relating to them or used in connection with them and replacements and substitutions for them.

EURO or EURO means the single currency of the Participating Member States.

EVENT OF DEFAULT means any of the events specified in Clause 16.1.

EXCHANGE RATE means the prevailing spot rate of exchange of such bank as Burdale may select for the purpose, at or around 11.00 a.m. on the date on which any conversion of currency is to be made under this Agreement. FACILITIES means the Receivables Finance Facility and the Revolving Credit Facility.

FACILITY COMPANY means each company (if any) identified as a Facility Company in Part I of Schedule 1 and each Additional Facility Company.

FACILITY LIMIT means $10,000,000 until the occurrence of the DIP Financing Date and thereafter $15,000,000.

FINAL REPAYMENT DATE means the third anniversary of today’s date.

FINANCE DOCUMENTS means this Agreement, the Deed of Priorities, the Security Documents, all other agreements, documents and instruments at any time executed in favour of and/or delivered by any Obligor to Burdale and/or designated as a Finance Document by Burdale and the Company.

FINANCIAL INDEBTEDNESS means any indebtedness for or in respect of:

(a) moneys borrowed;

(b) any amount raised by acceptance under any acceptance credit facility;

(c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;

(d) the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with GAAP, be treated as a finance or capital lease;

(e) receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis);

(f) any amount raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing;

(g) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value shall be taken into account);

(h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; and

(i) the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (a) to (h) above.

FOREIGN CURRENCY means any currency other than Sterling which is freely available and transferable.

FOREX EXPOSURE in relation to any unmatured Forex Transaction means the Forex Percentage of such transaction.

FOREX LIMIT means $nil.

FOREX PERCENTAGE means:

(a) 10% in relation to euros and United States Dollars; and

(b) 20% in relation to all other currencies,

or in each case, such higher percentage determined by Burdale having regard to the nature of the currencies involved in any Forex Transaction.

FOREX REQUEST means a request for a Utilisation of the Revolving Credit Facility for the sale or purchase of a Foreign Currency substantially in the form set out in Part IV of Schedule 3.

FOREX TRANSACTION means a foreign exchange transaction entered into as a Utilisation of the Revolving Credit Facility.

GAAP means generally accepted accounting principles in the United Kingdom.

GOODS means all Stock, produce, inventory and/or other goods which are the subject of a purchase by a Facility Company and in respect of which any L/C has been issued.

GROUP means the Company and its Subsidiaries.

GUARANTOR means each company (if any) identified as a Guarantor in Part II of Schedule 1 and each Additional Guarantor.

HAYNES US means Haynes International, Inc, a Delaware corporation.

HOLDING COMPANY means, in relation to a company or a corporation, any other company or corporation in respect of which it is a Subsidiary.

INTEREST RATE means the aggregate of LIBOR, MLA Cost and the Margin.

L/Cs means letters of credit, merchandise purchase or other guarantees which are from time to time either (a) issued or opened by Burdale for the account of a Facility Company or (b) with respect to which Burdale has agreed to indemnify the issuer or guaranteed to the issuer the performance by a Facility Company of its obligations to such issuer.

L/C EXPOSURE in relation to any L/C means:

(a) if the proposed L/C is by way of a letter of credit and for the purpose of purchasing Eligible Stock:

(i) the face amount of the L/C; LESS

(ii) the Stock Percentage TIMES the cost of such Eligible Stock for which such L/C was drawn; PLUS

(iii) freight, taxes, duty and other amounts which Burdale estimates must be paid in connection with such Stock upon arrival and for delivery to one of the relevant Facility Company’s locations for Eligible Stock within the United Kingdom; and

(b) if the proposed L/C is for any other purpose an amount equal to 100% of the face amount of such L/C and all other commitments and obligations made or incurred by Burdale with respect to such L/C.

L/C LIMIT means $1,000,000.

L/C REQUEST means a request for a Utilisation of the Revolving Credit Facility by way of the issue of an L/C in substantially the form set out in Part III of Schedule 3.

LIBOR means:

(a) in relation to an amount denominated in euro, the thirty day LIBOR euro rate quoted on the first Business Day of each month in the Financial Times, London edition as conclusively determined by Burdale;

(b) in relation to an amount denominated in Sterling, the thirty day LIBOR Sterling rate quoted on the first Business Day of each month in the Financial Times, London edition as conclusively determined by Burdale;

(c) in relation to an amount denominated in Dollars, the thirty day LIBOR Dollar rate quoted on the first Business Day of each month in the Financial Times, London edition as conclusively determined by Burdale; or

(d) (if for any reason the Financial Times, London edition ceases or fails to quote such a rate) Burdale’s cost of funds from whatever source it may reasonably request.

LOAN means the principal amount of each borrowing under this Agreement from the Revolving Credit Facility (including any deemed borrowing pursuant to Clause 6.6) as reduced by repayment or prepayment from time to time.

MARGIN means 3% per annum.

MATERIAL ADVERSE EFFECT means an effect that results in or causes, or has a reasonable likelihood of resulting in or causing, a material adverse change in any of:

(a) the business, performance, operations or properties of the Obligors taken either individually or as a whole; and/or

(b) the legality, validity or enforceability of any Finance Document; and/or

(d) the ability of any Obligor to perform its respective obligations under any of the Finance Documents; and/or

(e) the rights and remedies of Burdale under any Finance Document.

MATURITY DATE means in respect of any Receivable the Business Day which is, or immediately succeeds the date which is the earlier of:

(a) 120 days after the date of the invoice in respect of such Receivable; and

(b) 60 days after the due date for payment of such invoice.

MLA COST means the cost (expressed as a rate per annum) of the London branch of Wachovia N.A. (or any other bank from which Burdale obtains funding for its provision of the Facilities) of complying with the requirements of the Bank of England and/or the Financial Services Authority and/or any other applicable regulatory authority in respect of monetary control, liquidity or otherwise.

NET STOCK VALUE means the net value of Stock as determined by the relevant Facility Company in accordance with its customary practices and procedures (as disclosed to Burdale prior to today’s date and as the same may be varied from time to time with Burdale’s written consent) and advised to Burdale from time to time.

OBLIGORS means the Facility Companies and the Guarantors.

OTHER ACCOUNTS means the bank accounts of the Obligors specified as Other Accounts in the Debenture and/or such other bank accounts of the Obligors as Burdale may permit.

OUTSTANDING PURCHASE PRICE means the aggregate from time to time of the Purchase Prices of Receivables paid to the Facility Companies (including any deemed payment of Purchase Price pursuant to Clause 6.6) in respect of which Burdale has not received payment from the relevant account debtor or the relevant Facility Company.

PARENT GUARANTEE means the guarantee of the obligations of the Company to Burdale executed and delivered by Haynes US and Haynes Holdings, Inc. on or about today’s date.

PARENT SECURITY means any document or documents by which Haynes US grants a Security Interest over its assets (other than the Share Mortgage) in favour of Burdale.

PARTICIPATING MEMBER STATE means a member state of the European Community which has adopted or adopts the single currency in accordance with legislation of the European Community relating to Economic and Monetary Union.

PAST DUE PAYABLE means any trade payable of any Obligor which remains outstanding more than 60 days after its original due date for payment.

PERMITTED CURRENCY means euro, Sterling or Dollars.

PURCHASE COMMISSION is defined in Clause 8.2.

PURCHASE DATE in relation to a Purchased Receivable means the date of delivery of a Purchase Request by a Facility Company with respect to such Purchased Receivable.

PURCHASE PRICE means the purchase price to be paid by Burdale for Purchased Receivables being 85% of the face value of each Eligible Receivable to be purchased under the Receivables Finance Facility less maximum discounts, credits and allowances of any nature which may be taken by or granted to any account debtor or other person in connection with such Eligible Receivable (all as determined by Burdale in accordance with Clause 6.1.3).

PURCHASE REQUEST means a Request for a Utilisation of the Receivables Finance Facility in substantially the form set out in Part I of Schedule 3.

PURCHASED RECEIVABLE means a Receivable purchased by Burdale from a Facility Company in accordance with the terms of this Agreement.

RECEIVABLE means, at any time, the aggregate present and future obligations of an account debtor of a Facility Company for the payment of money to such Facility Company at such time together with all connected rights, claims, deposits and payments.

RECEIVABLES FINANCE FACILITY is defined in Clause 2(a).

RECEIVABLES LIMIT means $10,000,000 until the occurrence of the DIP Financing Date and thereafter $15,000,000.

REQUEST means a request substantially in the form set out in the relevant Part of Schedule 3 for a Utilisation of one of the Facilities.

RESERVES is defined in Clause 5.5.

REVOLVING CREDIT FACILITY is defined in Clause 2(b).

REVOLVING CREDIT LIMIT means $5,000,000 until the occurrence of the DIP Financing Date and thereafter $7,500,000.

SECURITY DOCUMENTS means the Debenture, the Share Mortgage, the Parent Guarantee, the Parent Security and any other guarantee or security documents executed in favour of Burdale from time to time in relation to the obligations or indebtedness of the Obligors (or any of them).

SECURITY INTEREST means a mortgage, charge, pledge, lien or other security interest securing any obligation of any person, or any other agreement or arrangement having similar effect.

SHARE MORTGAGE means the mortgage of the entire issued share capital of the Company to be executed and delivered by Haynes US on the DIP Financing Date.

STERLING and L means the lawful currency for the time being of the United Kingdom.

STOCK means each Facility Company’s stock and inventory at any time.

STOCK PERCENTAGE means 68%.

SUBSIDIARY means a subsidiary within the meaning of Section 736 of the Companies Act 1985.

TAX means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or delay in paying the same).

TAX CREDIT means a credit against, relief or remission for, or repayment of any Tax.

TAX DEDUCTION means a deduction or withholding for or on account of Tax from a payment under the Finance Documents.

TAX PAYMENT means an increased payment made by an Obligor to Burdale under Clause 10.1.3 or 10.2.1.

TOTAL RECEIVABLES AVAILABILITY means, at any time, 85% of the face value of the Eligible Receivables less maximum discounts, credits and allowances of any nature which may be taken by or granted to any account debtor or any other person in connection with the Eligible Receivables at such time.

TOTAL STOCK AVAILABILITY means, at any time, the Stock Percentage of the Net Stock Value of Eligible Stock at such time.

TRADING CASHFLOW means, for any period, the Consolidated Profit during such period but after deducting all amounts of capital expenditure by any member of the Group as all such terms are defined in accordance with GAAP (applied consistently with the accounting principles of the

Obligors as at today’s date) and all as determined from the most recent consolidated monthly management accounts of the Company delivered to Burdale pursuant to Clause 14.1(b).

TRUSTEES is defined in the Deed of Priorities.

TRUSTEE AGREEMENT is defined in the Deed of Priorities.

TRUSTEE MORTGAGE is defined in the Deed of Priorities.

UTILISATION means a utilisation of a Facility under this Agreement (with the delivery of a Purchase Request and the payment of Purchase Price by Burdale pursuant to a Cash Request constituting separate Utilisations of the Receivables Finance Facility).

UTILISATION DATE in relation to a Utilisation means the date on which such Utilisation is made (being in relation to any Utilisation of the Receivables Finance Facility, both the Purchase Date and the date on which any payment of Purchase Price is made to a Facility Company pursuant to a Cash Request).

VAT means value added tax as provided for in the Value Added Tax Act 1994 and any other tax of a similar nature.

1.2 CONSTRUCTION

1.2.1 Any reference in this Agreement to:

(a) ASSETS includes present and future properties, revenues and rights of every description;

(b) an AUTHORISATION means an authorisation, consent, approval, licence, resolution, filing or registration;

(c) a FINANCE DOCUMENT or any other agreement or instrument is a reference to that Finance Document or other agreement or instrument as amended or novated;

(d) INDEBTEDNESS includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;

(e) a PERSON includes any person, firm, company, corporation, government, state or agency of a state or any association, trust or partnership (whether or not having separate legal personality) or two or more of the foregoing;

(f) a REGULATION includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;

(g) a provision of law is a reference to that provision as amended or re-enacted;

(h) words importing the singular shall include the plural and vice versa; and

(i) unless a contrary indication appears, a time of day is a reference to London time.

1.2.2 Clause and Schedule headings are for ease of reference only.

1.2.3 A Default (other than an Event of Default) is CONTINUING if it has not been remedied or waived and an Event of Default is CONTINUING if it has not been waived.

1.2.4 If at any time there are no persons who are Guarantors, the term OBLIGORS shall be construed, whilst such circumstance is continuing, as a reference solely to the Facility Companies and if at any time the Company is the only Facility Company the references in this Agreement to FACILITY COMPANY shall, whilst such circumstance is continuing, be construed accordingly.

1.2.5 A person who is not party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement but this does not affect any right or remedy of a third party which exists or is available apart from the Contracts (Rights of Third Parties) Act 1999.

1.2.6 Where there is a reference in this Agreement to any amount, limit or threshold specified in Dollars, in ascertaining whether or not that amount, limit or threshold has been attained, broken or achieved, an amount denominated in a currency other then Dollars shall be counted on the basis of the equivalent in Dollars of that amount using the Exchange Rate.

2 FACILITIES

Subject to the terms of this Agreement Burdale agrees to make available the following facilities:

(a) to the Facility Companies, a Receivables Finance Facility pursuant to which Burdale will from time to time during the Availability Period purchase Receivables from the Facility Companies (the RECEIVABLES FINANCE FACILITY);

(b) to the Facility Companies, a revolving credit facility pursuant to which Burdale will during the Availability Period (i) make Loans to the Facility Companies (ii) issue, or procure the issue of, L/Cs for the account of the Facility Companies and (iii) buy or sell Foreign Currency spot and/or for delivery at a future date on behalf of the Facility Companies (the REVOLVING CREDIT FACILITY).

3 PURPOSE

3.1 GENERAL

3.1.1 The Company will use the Facilities:

(a) in making a loan to Haynes US in an amount not exceeding $5,600,000 out of the initial Utilisations, and

(b) otherwise only for its general operating, working capital and other proper corporate purposes and always in a manner which is not inconsistent with the Finance Documents.

3.1.2 Each other Facility Company will use the Facilities only for its general operating, working capital and other proper corporate purposes and always in a manner which is not inconsistent with the Finance Documents.

3.2 NO OBLIGATION

Without affecting the obligations of the Facility Companies in any way, Burdale is not obliged to monitor or verify the application of the Facilities.

4 CONDITIONS PRECEDENT

4.1 INITIAL CONDITIONS

No Request may be delivered unless Burdale shall have received all of the documents and evidence specified in Part I of Schedule 2 in a form and substance satisfactory to it.

4.2 FURTHER CONDITIONS

The obligations of Burdale in respect of any Utilisation are subject to the further conditions precedent that both on the date of the relevant Request and the proposed Utilisation Date:

(a) the representations and warranties set out in Clause 12 to be repeated on such dates are true and correct; and

(b) no Default has occurred and is continuing or would result from the making of such Utilisation.

5 RESTRICTIONS ON UTILISATION

5.1 LOANS

No Cash Request may be delivered which would involve the drawing of a Loan unless at the time of delivery either (a) the Receivables Finance Facility is or would be following the delivery of such Cash Request being utilised up to the Receivables Limit or (b) the Facility Companies have no Receivables with which to utilise the Receivables Finance Facility.

5.2 LETTERS OF CREDIT

No Request may be delivered for an L/C to be issued pursuant to the Revolving Credit Facility unless and until the form of L/C has been approved by Burdale, the relevant issuer and the proposed beneficiary of such L/C.

5.3 OVERALL LIMIT

The aggregate amount of:

(a) all Loans;

(b) Outstanding Purchase Price;

(d) all Forex Exposures,

shall not at any time exceed the Facility Limit.

5.4 SPECIFIC LIMITS

5.4.1 RECEIVABLES FINANCE FACILITY: The Outstanding Purchase Price shall not at any time exceed the Receivables Limit.

5.4.2 REVOLVING CREDIT FACILITY: The aggregate amount of:

(a) all Loans;

(b) all L/C Exposures; and

shall not at any time exceed the Revolving Credit Limit.

5.4.3 L/C UTILISATIONS: The aggregate amount of all L/C Exposures shall not at any time exceed the L/C Limit.

5.4.4 FOREIGN EXCHANGE UTILISATIONS: The aggregate amount of all Forex Exposures shall not at any time exceed the Forex Limit.

5.5 AVAILABILITY

The aggregate amount of:

(a) Outstanding Purchase Price;

(b) all Loans;

(d) all Forex Exposures,

shall not at any time exceed the sum of:

(i) the Total Receivables Availability; PLUS

(ii) the Total Stock Availability; LESS

(iii) the amount of Reserves,

at such time.

For the purposes of this Clause 5.5, RESERVES means reserves established by Burdale from time to time:

(a) to reflect the full amount of the liabilities at such time which have a right imposed to provide for payment ranking or capable of ranking senior to or pari passu with the liabilities of the Obligors under the Finance Documents and/or having the benefit of any Security Interest over the assets of any Obligor ranking or capable of ranking senior to or pari passu with the Security Interests granted to Burdale under the Finance Documents;

(b) to reflect Burdale’s good faith belief that any report or financial information provided by or on behalf of any Obligor under the Finance Documents is or may have been incomplete, inaccurate or misleading in any material respect; and

5.6 PROHIBITION

No Utilisation may be made which would cause the provisions of this Clause 5 to be breached.

5.7 PERCENTAGES

Burdale may from time to time, following prior consultation with the Company:

(a) reduce the Purchase Price and/or the Total Receivables Availability to the extent that the Dilution Rate has increased;

(b) reduce the Total Stock Availability (or any component of it) to the extent that:

(i) the number of days of the turnover of the Stock for any period has changed in any material respect; or

(ii) the liquidation value of the Eligible Stock, or any category of Eligible Stock, has decreased; or

(iii) the nature and quality of the Stock has deteriorated; and

(iv) there is any change in seasonality with respect to Stock and patterns of sales after today’s date; or

(v) there is any reduction in the Facility Limit pursuant to Clause 7.7.

6 UTILISATION OF FACILITIES

6.1 AVAILABILITY OF RECEIVABLES FINANCE FACILITY

6.1.1 Subject to the terms of this Agreement, each Facility Company shall offer to sell its Receivables to Burdale by delivering to Burdale from time to time duly completed Purchase Requests (together with all deeds and documents referred to in such Purchase Request), delivery of which shall oblige such Facility Company to sell the Receivables stated in such Purchase Request upon the terms and subject to the conditions of this Agreement.

6.1.2 A Purchase Request will not be regarded as having been duly completed unless it is in substantially the form set out in Part I of Schedule 3.

6.1.3 As soon as reasonably practicable following delivery of a Purchase Request, Burdale shall determine the Purchase Price for the Receivables specified in such Purchase Request and will, upon being requested by the relevant Facility Company, advise such Facility Company of such determination.

6.2 UTILISATION OF RECEIVABLES FINANCE FACILITY AND REVOLVING CREDIT FACILITY

6.2.1 Subject to the terms of this Agreement, each Facility Company may from time to time request that Burdale pay sums in a Permitted Currency to such Facility Company of up to the aggregate of (i) the amount of any unpaid Purchase Price and (ii) the amount available for drawing by way of Loan, by delivering a duly completed Cash Request to Burdale not later than 11.00 a.m. on the proposed Utilisation Date for such payment.

6.2.2 A Cash Request will not be regarded as having been duly completed unless it is in substantially the form set out in Part II of Schedule 3 and, in particular, specifies:

(a) the proposed Utilisation Date, being a Business Day falling during the Availability Period;

(b) the amount and the currency of the sum to be paid by Burdale which must be less than or equal to the aggregate of the amounts specified in Clause 6.2.1; and

(c) if not already notified to Burdale, the details of the Other Account into which the payment is to be made on the Utilisation Date.

6.2.3 Payments made by Burdale pursuant to a Cash Request shall be deemed to be first payments of any unpaid Purchase Price to the full extent of such unpaid Purchase Price and second, to the extent of any surplus, to be the drawing of a Loan.

6.2.4 Burdale’s obligation to pay the Purchase Price of any Receivable (or any unpaid portion of it as the case may be) shall be terminated on the earlier of the Actual Day of Payment and the Maturity Date of such Receivable.

6.2.5 To the extent that any payments made by Burdale pursuant to a Cash Request to a Facility Company (the DEBTOR COMPANY) represent payment of Purchase Price in relation to the Purchased Receivables of another Facility Company (the CREDITOR COMPANY) then (without double counting with the provisions of Clause 7.2(e)(ii)) the Creditor Company shall be deemed to have made a loan to the Debtor Company in an amount equal to the amount of such payment by Burdale and in the same currency as such payment (an INTERCOMPANY LOAN). All Intercompany Loans shall bear interest at such rates as the relevant Creditor Companies may agree with the relevant Debtor Companies and all principal and interest on any Intercompany Loan shall be payable on demand.

6.3 L/C UTILISATIONS

6.3.1 Subject to the terms of this Agreement, a Facility Company may request the issue of an L/C by delivering a duly completed L/C Request to Burdale not later than 11.00 a.m. on the proposed Utilisation Date for that L/C.

6.3.2 An L/C Request will not be regarded as having been duly completed unless it is substantially in the form attached in Part III of Schedule 3 and, in particular, specifies:

(a) the proposed Utilisation Date, being a Business Day falling during the Availability Period;

(b) the amount of the L/C required, the L/C Exposure of which must be equal to or less than the undrawn/unutilised amount of the Revolving Credit Facility and within the relevant Availability Limits as at the proposed Utilisation Date;

6.4 GENERAL PROVISIONS REGARDING L/Cs

6.4.1 Nothing in this Agreement shall be deemed or construed to grant any Facility Company any right or authority to pledge the credit of Burdale in any manner. Burdale shall have no liability of any kind with respect to any L/C provided by an issuer other than Burdale unless Burdale has duly executed and delivered to such issuer the application or a guarantee or indemnification in writing with respect to such L/C. Each Facility Company shall be bound by an interpretation made in good faith by Burdale, or any other issuer or correspondent under or in connection with any L/C or any documents, drafts or acceptances in relation to any L/C, notwithstanding that such interpretation may be inconsistent with any instructions of any Facility Company. Burdale shall have the sole and exclusive right and authority to, and no Facility Company shall:

(a) at any time an Event of Default exists or has occurred and is continuing:

(i) approve or resolve any questions of non-compliance of documents;

(ii) give any instructions as to acceptance or rejection of any documents or goods; or

(iii) execute any and all applications for steamship or airway guarantees, indemnities or delivery orders;

(b) at any time:

(i) grant any extensions of the maturity of, time of payment for, or time of presentation of, any drafts, acceptances, or documents; and

(ii) agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, L/Cs, or documents, drafts or acceptances in relation to any L/C or any letters of credit provided as security to Burdale. Burdale may take such actions either in its own name or in the relevant Facility Company’s name.

6.4.2 Any rights, remedies, duties or obligations granted or undertaken by any Facility Company to any issuer or correspondent in any application for any L/C, or any other agreement in favour of any issuer or correspondence relating to any L/C, shall be deemed to have been granted or undertaken by such Facility Company to Burdale. Any duties or obligations undertaken by Burdale to any issuer or correspondence in any application for any L/C, or any other agreement by Burdale in favour of any issuer or correspondence relating to any L/C, shall be deemed to have been undertaken by the relevant Facility Company to Burdale and to apply in all respects to such Facility Company.

6.4.3 None of Burdale, any L/C issuer (or any of their respective correspondents) or any advising, negotiating or paying bank with respect to any L/C shall be responsible in any way for:

(a) the performance by any beneficiary under any L/C of that beneficiary’s obligations to the relevant Facility Company; or

(b) the form, sufficiency, correctness, genuineness, authority of any person signing or the legal effect of any documents called for under any L/C if such documents appear on their face to be in order.

6.5 FOREX UTILISATIONS

6.5.1 Subject to the terms of this Agreement, a Facility Company may request a Utilisation of the Revolving Credit Facility by way of the sale or purchase of Foreign Currency by delivering a duly completed Forex Request to Burdale not later than 11.00 a.m. on the proposed date of the contract for the sale or purchase of Foreign Currency.

6.5.2 A Forex Request will not be regarded as having been duly completed unless it is in substantially the form set out in Part IV of Schedule 3 and, in particular, specifies:

(a) the proposed date of effect of the sale or purchase of Foreign Currency being a Business Day falling during the Availability Period; and

(b) the value of the contract for the sale or purchase of Foreign Currency required and the Foreign Currency required to be purchased which must be such that the Forex Exposure with respect to such Utilisation when aggregated with all other Forex Exposures is equal to or less than the Forex Limit as at the proposed Utilisation Date.

6.6 DEEMED UTILISATIONS

All payments made by Burdale:

(a) in accordance with the terms of any L/C or any guarantee or indemnity given by Burdale to the issuer of any L/C (as the case may be); and

(b) on the maturity of any Forex Transaction,

shall be deemed to be a payment to the relevant Facility Company in an amount equal to such payment, as if such Facility Company had lodged a Cash Request for such amount and subject to the provisions of this Agreement with respect to Utilisations of the Receivables Finance Facility and/or the Revolving Credit Facility (including, without limitation, as to interest, purchase commission and repayment).

7 REPAYMENT AND PREPAYMENT

7.1 RECEIVABLES FINANCE FACILITY

7.1.1 If in relation to a Purchased Receivable Burdale determines on the Maturity Date in respect of such Purchased Receivable that it has not received payment in accordance with Clause 9.1 of the full amount of such Purchased Receivable, the relevant Facility Company shall, on demand by Burdale pay to Burdale an amount equal to the Outstanding Purchase Price of such Purchased Receivable for which payment has not been received PROVIDED THAT this provision shall not restrict (nor oblige) Burdale in any way in or from pursuing and obtaining payment in respect of such Purchased Receivable from the account debtors or otherwise (which payment shall be made into a Blocked Account) and each Facility Company undertakes that it will do all such reasonable acts or things necessary or desirable to help Burdale in pursuing and obtaining such payment.

7.1.2 Burdale shall be entitled to deduct from payments made by account debtors and/or the Facility Companies into a Blocked Account in respect of Purchased Receivables the then Outstanding Purchase Price in respect of such Purchased Receivables and the balance remaining after such deduction shall be applied in accordance with Clause 7.2.

7.2 OTHER UTILISATIONS

Subject as provided below all amounts standing to the credit of the Blocked Accounts from time to time following the deductions referred to in Clause 7.1.2 shall be applied as follows:

(a) FIRST in repayment of the outstanding principal amount of any Loans;

(b) SECOND in payment of any fees, costs and expenses due from any Obligor to Burdale under the Finance Documents;

(c) THIRD in payment of (i) all amounts of interest due on the Loans (including any deemed borrowing pursuant to Clause 6.6) and (ii) all Purchase Commission (or in making provision for Purchase Commission which will fall due for payment on the last Business Day of the current calendar month);

(d) FOURTH in or towards satisfaction of any other payment obligation of any Obligor under the Finance Documents; and

(e) FIFTH to the relevant Facility Company by way of payment into such Other Account as the relevant Facility Company may specify to Burdale in writing from time to time.

PROVIDED THAT:

(i) notwithstanding the above, at all times whilst an Event of Default is continuing, amounts standing to the credit of a Blocked Account shall be applied to such of the liabilities of the Obligors under the Finance Documents and in such order as Burdale may in its absolute discretion determine; and

(ii) to the extent that any amount standing to the credit of one Facility Company’s Blocked Account is applied to discharge the liabilities of another Obligor pursuant to Clause 7.1.2 or this Clause 7.2 then (without double counting) the provisions of Clause 6.2.5 shall apply to such application mutatis mutandis.

7.3 CURRENCY

7.3.1 Any amount deducted by Burdale pursuant to Clause 7.1.2 shall first be used by Burdale in or towards paying the then Outstanding Purchase Price denominated in the same Permitted Currency as the payment from which such deduction was made and then (at Burdale’s discretion) the remainder of any such deduction may be converted by Burdale at the Exchange Rate and used in or towards paying the then Outstanding Purchase Price denominated in any Permitted Currency (unless Burdale otherwise agrees).

7.3.2 Any amount applied pursuant to Clauses 7.2(a) to 7.2(d) (inclusive) above shall first be applied by Burdale in or towards satisfying the obligations of the Obligors under the Finance Documents denominated in the same Permitted Currency as the Permitted Currency of the funds so applied and then (at Burdale’s discretion) the remainder of any such amount may be converted by Burdale at the Exchange Rate and used in or towards satisfying any such obligations denominated in any Permitted Currency (unless Burdale otherwise agrees).

7.4 REUTILISATION

7.4.1 RECEIVABLES FINANCE FACILITY: Subject to the terms of this Agreement, all amounts of Outstanding Purchase Price recovered and paid to Burdale, may be reutilised as Utilisations of the Receivables Finance Facility.

7.4.2 REVOLVING CREDIT FACILITY: Subject to the terms of this Agreement, all Loans repaid and all amounts recovered and paid to Burdale in relation to L/Cs and Forex Transactions, may be redrawn or reutilised as Utilisations of the Revolving Credit Facility.

7.5 PREPAYMENT

If at any time the outstanding Utilisations or any part of them cause any Availability Limit to be exceeded then the Company will immediately repay or procure repayment of such amount of the Loans together with cash collateral in respect of Outstanding Purchase Price and/or any contingent obligation of Burdale in relation to any L/C or other Utilisation together with interest on the Loans, to the extent required to ensure compliance with that Availability Limit and, until such time as that Availability Limit is no longer breached, no further Utilisations may be requested (including, for the avoidance of doubt, pursuant to a Cash Request) or will, at Burdale’s option, be made or issued.

7.6 ILLEGALITY

If it becomes unlawful in any jurisdiction for Burdale to make available or maintain the Facilities (or any of them) or to give effect to its obligations under the Finance Documents, Burdale may give seven Business Days written notice to that effect to the Company whereupon the Facilities will be cancelled and all the provisions of this Agreement will apply as if the

cancellations or terminations had been a reduction of the Facility Limit to zero pursuant to Clause 7.7.

7.7 REDUCTION OF FACILITY LIMIT

7.7.1 At the request of the Company by giving not less than ten Business Day’s prior written notice to Burdale, the Facility Limit may from time to time be reduced provided that on or before the effective date for such reduction the Company shall pay (or procure payment) to Burdale of:

(a) such amount as may be necessary in prepayment of the Loans and/or as cash collateral for Outstanding Purchase Price and/or Burdale’s contingent obligations under any issued L/C or unmatured Forex Transaction to ensure that the Facility Companies remain in compliance with the Availability Limits (as adjusted to take account of such amendments pursuant to Clause 5.7); and

(b) a fee of 1% of the amount of the reduction of the Facility Limit.

7.7.2 Any exercise by Burdale of its rights under Clause 16.2(b) and/or 16.3 and/or the operation of Clause 7.6 shall be deemed for the purposes of paragraph 7.7.1(b) above to be a reduction in the Facility Limit in an amount equal to the amount of the Facility or Facilities so cancelled.

7.8 FINAL REPAYMENT

The Company will, on the Final Repayment Date, pay (or procure payment) to Burdale in full all outstanding and unpaid liabilities under the Finance Documents (whether by way of principal, interest, commission, fees, costs, expenses or otherwise) and shall pay to Burdale such amount as is necessary to provide full cash collateral for Outstanding Purchase Price and any contingent obligations which Burdale may have in respect of any L/C, Forex Transaction or other outstanding Utilisation. If the amounts so paid are received by Burdale later than 1.00 p.m. on the Final Repayment Date then the Company will pay interest on such amounts to Burdale at the Default Rate until payment has been made in full.

7.9 CASH COLLATERAL

If under this Agreement any Facility Company is required to provide and does provide cash collateral for any contingent liability, such cash collateral shall be held by Burdale in an interest bearing account for application against such contingent liability, provided that any sum remaining after settling such payments shall be applied first in settlement of any other amounts then due and payable to Burdale under the Finance Documents and any balance shall be promptly repaid to the relevant Facility Company or other person entitled to the balance.

8 INTEREST AND COMMISSION

8.1 INTEREST

8.1.1 Each Facility Company will pay Burdale interest on each Loan made to it by Burdale at the Interest Rate.

8.1.2 Except as otherwise provided in this Agreement, accrued interest on each Loan shall be paid by the relevant Facility Company in arrear on the last Business Day of each month and on the Final Repayment Date. All interest accruing on or after the date of any Event of Default or the Final Repayment Date shall be payable on demand.

8.1.3 Interest will be calculated on the basis of a 365 day year and actual days elapsed and will accrue and be calculated on a daily basis.

8.2 PURCHASE COMMISSION

Each Facility Company shall pay to Burdale commission in respect of each of its Purchased Receivables at a rate equivalent to the Interest Rate applied to the Outstanding Purchase Price for such Receivable from the date on which Burdale paid such Purchase Price to a Facility Company down to the Actual Day of Payment (the PURCHASE COMMISSION). Burdale shall calculate the Purchase Commission on a daily basis and it shall be paid by the relevant Facility Company monthly in arrears on the last Business Day of each month.

8.3 DEFAULT INTEREST

8.3.1 Upon the occurrence of an Event of Default and whilst the same is continuing, all amounts outstanding under this Agreement shall bear interest (both before and after judgment) at the Default Rate.

8.3.2 Interest at the Default Rate will be compounded at the end of each period designated by Burdale and will be determined by Burdale on the first Business Day of each such period.

9 COLLECTION OF RECEIVABLES

9.1 FLOW OF FUNDS

Subject to Clause 9.2, each Facility Company undertakes that during the period commencing on the date of this Agreement and ending when all its liabilities under the Finance Documents have been discharged in full and Burdale is under no further obligation under any of the Finance Documents:

(a) such Facility Company will collect as agent and trustee for Burdale all Receivables and immediately pay (or procure that payment is made) all amounts due in respect of each Receivable into a Blocked Account, provided however that until payment into a Blocked Account it will hold all money so received upon trust for Burdale and will not commingle in any Charged Account any monies which are not Receivables or which are not payable to Burdale;

(b) without prejudice to its obligations under Clause 13.14, in the event that any account debtor makes a payment in respect of Receivables into another Charged Account or other account which is not a Blocked Account, such Facility Company will ensure that the amounts representing such payment are promptly transferred into a Blocked Account and will immediately direct the relevant account debtor to make all future payments to a Blocked Account; and

(c) all the transfers and collections referred to in paragraphs (a) and (b) above shall be carried out daily prior to the occurrence of any Default and thereafter at such intervals as Burdale may, at its discretion, specify to the Company.

9.2 FAILURE OF DEBENTURE

In the event that the Debenture is not, at any time, effective or is not in full force and effect in respect of any Charged Account, each Facility Company will (unless otherwise directed by Burdale and without prejudice to Burdale’s rights and remedies under the Finance Documents), for so long as the Debenture is ineffective or not in full force and effect and ending on the date when all of its liabilities under the Finance Documents have been repaid or discharged in full and Burdale is under no further obligation under any of the Finance Documents, collect as agent and trustee for Burdale all Receivables which would otherwise have been payable into a

Blocked Account and immediately pay (or procure the payment of) all amounts due in respect of those Receivables directly to such bank account of Burdale as it may specify for this purpose.

9.3 DECLARATION OF TRUST

If for any reason (including, without limitation, any prohibition or restriction on assignment contained in any agreement between a Facility Company and the relevant account debtor), title to any Receivable which is purchased by Burdale under this Agreement does not pass to Burdale then the relevant Facility Company shall hold such Receivable on trust for Burdale and shall collect and deal with such Receivable in accordance with the terms of Clauses 9.1 and 9.2.

9.4 REIMBURSEMENT

Each Facility Company agrees to reimburse Burdale on demand for any liability of Burdale to any bank or other person involved in the transfer of funds to or from any Blocked Account arising out of Burdale’s payments to or indemnification of that bank or person, and this obligation to reimburse shall survive the termination or non-renewal of this Agreement.

9.5 APPLICATION

For the purposes of calculating the amount of the Loans available to the Facility Companies, the Receivables Limit and the Forex Limit such payments will be applied (conditional upon final collection) in satisfaction or reduction of the relevant Facility Company’s liabilities under the Finance Documents on the Business Day of receipt by Burdale. For the purposes of calculating interest in respect of the Loans and for calculating any Purchase Commission or commission in respect of the Forex Transactions, payments or other funds received by Burdale will be applied (conditional upon final collection) in satisfaction or reduction of the relevant Facility Company’s liabilities under the Finance Documents one Business Day following the date of receipt of funds by Burdale.

9.6 BUSINESS DAYS

If any payment under the Finance Documents would otherwise be due on a day which is not a Business Day, it will be due on the next succeeding Business Day or, if that Business Day falls in the following month, on the preceding Business Day.

10 TAX

10.1 TAX GROSS-UP

10.1.1 Each Obligor shall make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law.

10.1.2 The Company shall promptly upon becoming aware that an Obligor must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify Burdale accordingly.

10.1.3 If a Tax Deduction is required by law to be made by an Obligor the amount of the payment due from that Obligor shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.

10.1.4 If an Obligor is required to make a Tax Deduction, that Obligor shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.

10.1.5 Within thirty days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Obligor making that Tax Deduction shall deliver to Burdale evidence reasonably satisfactory to Burdale that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.

10.2 TAX INDEMNITY

10.2.1 The Company shall (within three Business Days of demand by Burdale) pay to Burdale an amount equal to the loss, liability or cost which Burdale determines will be or has been (directly or indirectly) suffered for or on account of Tax.

10.2.2 Paragraph 10.2.1 above shall not apply with respect to any Tax assessed on Burdale if that Tax is imposed on or calculated by reference to the net income received or receivable (but not any sum deemed to be received or receivable) by Burdale.

10.3 TAX CREDIT

If an Obligor makes a Tax Payment and Burdale determines that:

(a) a Tax Credit is attributable to that Tax Payment; and

(b) it has obtained, utilised and retained that Tax Credit,

Burdale shall pay an amount to the Obligor which Burdale determines will leave it (after that payment) in the same after-Tax position as it would have been in had the Tax Payment not been made by the Obligor.

10.4 STAMP TAXES

The Company shall pay and, within three Business Days of demand, indemnify Burdale against any cost, loss or liability that Burdale incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document.

10.5 VALUE ADDED TAX

10.5.1 All consideration payable under a Finance Document by an Obligor to Burdale shall be deemed to be exclusive of any VAT. If VAT is chargeable, the Obligor shall pay to Burdale (in addition to and at the same time as paying the consideration) an amount equal to the amount of the VAT.

10.5.2 Where a Finance Document requires an Obligor to reimburse Burdale for any costs or expenses, that Obligor shall also at the same time pay and indemnify Burdale against all VAT incurred by Burdale in respect of the costs or expenses save to the extent that Burdale is entitled to repayment or credit in respect of the VAT.

11 INCREASED COSTS

11.1 INCREASED COSTS

11.1.1 Subject to Clause 11.3 the Company shall, within three Business Days of a demand by Burdale, pay to Burdale the amount of any Increased Costs incurred by Burdale or any of its Affiliates as a result of (i) the introduction of or any change in (or in the interpretation or application of) any law or regulation or (ii) compliance with any law or regulation made after the date of this Agreement.

11.1.2 In this Agreement INCREASED COSTS means:

(a) a reduction in the rate of return from the Facilities (or any of them) or on Burdale’s (or its Affiliate’s) overall capital;

(b) an additional or increased cost; or

which is incurred or suffered by Burdale or any of its Affiliates to the extent that it is attributable to Burdale having entered into this Agreement or funding or performing its obligations under any Finance Document.

11.2 INCREASED COST CLAIMS

If Burdale intends to make a claim pursuant to Clause 11.1 it shall notify the Company of the event giving rise to the claim, and shall, as soon as practicable after a demand by the Company, provide a certificate confirming the amount of its Increased Costs.

11.3 EXCEPTIONS

Clause 11.1 does not apply to the extent any Increased Cost is:

(a) attributable to a Tax Deduction required by law to be made by an Obligor;

(b) compensated for by Clause 10.2 (or would have been compensated for under Clause 10.2 but was not so compensated solely because the exclusion in Clause 10.2.2 applied);

(d) attributable to the wilful breach by Burdale or its Affiliates of any law or regulation.

12 REPRESENTATIONS AND WARRANTIES

12.1 WARRANTIES

Each Obligor makes the representations and warranties in this Clause 12 to Burdale on today’s date and such representations and warranties will be deemed repeated by the Obligors on each date:

(a) on which a Request is submitted;

(b) which is a Utilisation Date;

as if made with reference to the facts and circumstances existing on such date.

12.2 STATUS

12.2.1 It is a corporation, duly incorporated and validly existing under the law of its jurisdiction of incorporation.

12.2.2 It has the power to own its assets and carry on its business as it is being conducted.

12.3 BINDING OBLIGATIONS

The obligations expressed to be assumed by it in each Finance Document are, subject to any principles of law affecting creditors’ rights generally, legal, valid, binding and enforceable obligations.

12.4 NON-CONFLICT WITH OTHER OBLIGATIONS

The entry into and performance by it of, and the transactions contemplated by, the Finance Documents do not and will not conflict with:

(a) any law or regulation applicable to it;

(b) its constitutional documents; or

12.5 POWER AND AUTHORITY

It has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, the Finance Documents to which it is a party and the transactions contemplated by those Finance Documents.

12.6 VALIDITY AND ADMISSIBILITY IN EVIDENCE

All authorisations required or desirable:

(a) to enable it lawfully to enter into, exercise its rights and comply with its obligations in the Finance Documents to which it is a party; and

(b) to make the Finance Documents to which it is a party admissible in evidence in its jurisdiction of incorporation, have been obtained or effected and are in full force and effect.

12.7 NO FILING OR STAMP TAXES

Under the law of its jurisdiction of incorporation it is not necessary that the Finance Documents be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar tax be paid on or in relation to the Finance Documents or the transactions contemplated by the Finance Documents.

12.8 NO DEFAULT

12.8.1 No Event of Default is continuing or might reasonably be expected to result from the making of any Utilisation.

12.8.2 No other event or circumstance is outstanding which constitutes a default under any other agreement or instrument which is binding on it or to which its assets are subject which might have a Material Adverse Effect.

12.9 PARI PASSU RANKING

Its payment obligations under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.

12.10 NO PROCEEDINGS PENDING OR THREATENED

No litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency which, if adversely determined, might reasonably be expected to have a Material Adverse Effect have (to the best of its knowledge and belief) been started or threatened against it or any of its Subsidiaries.

12.11 MATERIAL DISCLOSURES

All information furnished by or on behalf of any Obligor in writing to Burdale in connection with the Finance Documents is true and correct in all material respects as of the date such information is dated or certified and does not omit any material information and is not misleading. No event or circumstance has occurred which has or could reasonably be expected to have a Material Adverse Effect which has not been fully and accurately disclosed to Burdale.

12.12 FINANCIAL STATEMENTS

Its latest audited financial statements (i) have been reported upon by its auditors without qualification, (ii) have been prepared in accordance with GAAP and give a true and fair view of the results of its operations and its assets and liabilities for the relevant period and of the state of its affairs at the relevant date, and (iii) in particular, accurately disclose or reserve against all liabilities (actual or contingent), and there has been no change in its assets, financial condition or prospects since the date of those financial statements such that it may reasonably be expected to be unable to perform and comply with any one or more of its material obligations under any of the Finance Documents.

12.13 BANK ACCOUNTS

All the accounts maintained or used by any Obligor at any bank or financial institution as at the date of this Agreement have been included within the definition of Charged Accounts.

13 GENERAL UNDERTAKINGS

13.1 DURATION

The undertakings in this Clause 13 and in Clause 14 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or Burdale is under any obligation under any Finance Document.

13.2 AUTHORISATIONS

Each Obligor shall promptly:

(a) obtain, comply with and do all that is necessary to maintain in full force and effect; and

(b) supply certified copies to Burdale of,

any authorisation required under any law or regulation of its jurisdiction of incorporation to enable it to perform its obligations under the Finance Documents and to ensure the legality, validity, enforceability or admissibility in evidence in its jurisdiction of incorporation of any Finance Document.

13.3 COMPLIANCE WITH LAWS

Each Obligor shall comply in all respects with all laws to which it may be subject, if failure so to comply would materially impair its ability to perform its obligations under the Finance Documents.

13.4 NEGATIVE PLEDGE

13.4.1 No Obligor shall create or permit to subsist any Security Interest over any of its assets.

13.4.2 No Obligor shall:

(a) sell, transfer or otherwise dispose of any of its assets on terms whereby they are or may be leased to or re-acquired by an Obligor;

(b) sell, transfer or otherwise dispose of any of its receivables on recourse terms otherwise than pursuant to the Finance Documents;

(c) enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts; or

(d) enter into any other preferential arrangement having a similar effect,

in circumstances where the arrangement or transaction is entered into primarily as a method of raising Financial Indebtedness or of financing the acquisition of an asset.

13.4.3 Paragraphs 13.4.1 and 13.4.2 above do not apply to:

(a) any lien arising by operation of law and in the ordinary course of trading;

(b) any Security Interest in favour of Burdale.

13.5 MERGER

No Obligor shall enter into any amalgamation, demerger, merger or corporate reconstruction.

13.6 CHANGE OF BUSINESS

The Company shall procure that no substantial change is made to the general nature of the business of the Company or any Obligor from that carried on at the date of this Agreement.

13.7 DEFAULT

Each Obligor will notify Burdale forthwith upon becoming aware of the occurrence of any Default and will provide Burdale with full details of any steps which it is taking, or is considering taking, in order to remedy or mitigate the effect of the Default.

13.8 DISPOSALS

No Obligor shall enter into a single transaction or series of transactions (whether related or not) and whether voluntary or involuntary to sell, lease, transfer or otherwise dispose of any asset save for:

(a) the disposal of Stock in the ordinary course of trading; or

(b) the application of cash in the purchase or acquisition of goods and services in the ordinary course of trading or in any manner not prohibited by any of the Finance Documents; or

(d) any disposal in respect of which Burdale has given its prior written consent; or

(e) a disposal of the real property owned by the Company at Openshaw, Manchester provided that:

(i) any such disposal is on arm’s length commercial terms to an unrelated third party;

(ii) no Default is continuing at the time of any such disposal; and

(iii) all proceeds of sale arising on any such disposal (less the L 300,000 payable to the Trustees under the Trustee Agreement) are paid into a Blocked Account; or

(f) the disposal of any asset where the higher of market value or consideration receivable (when aggregated with the higher of market value or consideration receivable for any other sale, lease, transfer or other disposal (other than any permitted under paragraphs (a) to (e) above)) does not exceed $15,000 (or its equivalent in another currency or currencies) in any financial year and the proceeds of sale are paid into a Blocked Account.

13.9 ACQUISITIONS

No Obligor will, except in the ordinary course of its trade acquire any business, undertaking or assets of any kind whatsoever.

13.10 INTRA-GROUP ARRANGEMENTS

No Obligor will, without obtaining Burdale’s prior written consent:

(a) pay any dividend or make any other distribution of any of its assets to its shareholders or any of them; or

(b) pay any other moneys, whether by way of interest, management fees or otherwise howsoever, to any affiliate, subsidiary or any shareholder, director or employee except for payments in the ordinary course of, and pursuant to the reasonable requirements of, trading and on arms length commercial terms unless immediately following the making of any such payment the amount available for Utilisation (less the aggregate amount of Past Due Payables) would be at least $1,000,000.; or

13.11 AUDITS BY BURDALE

Each Obligor will permit Burdale or its appointed representatives or agents at the relevant Obligor’s expense to conduct an audit of its financial records, systems and forecasts on a quarterly basis or, following a Default at more frequent intervals as Burdale may stipulate and will afford all co-operation to Burdale and its representatives or agents to enable such audit to take place.

13.12 FINANCIAL INDEBTEDNESS

No Obligor will incur any Financial Indebtedness other than:

(a) under the Finance Documents;

(b) under the Trustee Agreement and the Trustee Mortgage for such time as the Deed of Priorities is in full force and effect;

(d) equipment, vehicle and operating leases and hire purchase transactions entered into in the ordinary course of business where the total annual Financial Indebtedness for such leases and transactions for the Obligors as a whole does not exceed $50,000 at any one time; or

(e) with respect to loans made to it by another Obligor which is a Chargor under the Debenture.

13.13 MAKING LOANS

No Obligor will be a creditor with respect to any Financial Indebtedness except for:

(a) the grant of normal trade credit in the ordinary course of its trade;

(b) loans made by it to another Obligor which is a Chargor under the Debenture; and

(i) in an amount not exceeding $5,600,000 out of the first Utilisations; and

(ii) thereafter, provided that:

(aa) for the period of 30 days immediately preceding the making of any such loan the minimum amount available for Utilisation was; and

(bb) following the making of any such loan the amount available for Utilisation would be,

(in each case, less the aggregate of all Past Due Payables) at least $1,000,000.

13.14 BANK ACCOUNTS

No Obligor will, open or maintain any account of any type with any bank or financial institution providing like services other than the Charged Accounts.

13.15 INSURANCE

Each Obligor will:

(a) as regards all its assets and property of any kind and businesses arrange and maintain in full force and effect insurances (including consequential loss, business interruption and public liability and damage and other insurances usually maintained by companies carrying on the same type of business as its own business) with such insurers as Burdale approves and on such terms and in such amounts as Burdale may reasonably require and

is customary for an enterprise engaged in the same or similar business and in the same or similar localities and against such risks as Burdale shall reasonably request;

(b) procure that Burdale’s interest is noted on all policies relating to insurances so arranged in such manner as Burdale may in its absolute discretion require and will use all reasonable endeavours to ensure that Burdale is named as sole loss payee (but without having any obligation for premiums);

(c) ensure that every policy of insurance contains a standard mortgagee clause, whereby such insurance will not be invalidated, vitiated or avoided as against a mortgagee in the event of any misrepresentation, act, neglect or failure to disclose on the part of the insured provided that where the insurers will not agree such terms, terms acceptable to Burdale in Burdale’s absolute discretion are agreed; and

(d) will supply to Burdale copies of all such policies of insurance and all endorsements and renewals of such policies;

(e) duly and punctually pay all premiums in respect of its insurances and not do or omit to do any act, matter or thing whereby any such insurance may be or becomes void or voidable at the option of the insurers or settle any claim in respect of those insurances without the prior written consent of Burdale, such consent not to be unreasonably withheld or delayed;

(f) it shall comply with, enforce and not waive, release, terminate or vary (or agree so to do) any obligations arising under all policies of insurance and in particular, but without limitation, it shall notify Burdale immediately upon receiving notice from any insurer that the details of any insurance policy are to change in any way and upon receiving notice from any insurer terminating any insurance policies;

(g) in the event that it receives from any insurer notice that such insurer is terminating any insurance policy, it shall use all reasonable endeavours to enter into an agreement on substantially the same terms as those contained in the original insurance policy with such other insurer as approved by Burdale and to the extent that the same terms or substantially the same terms are not available from the insurer, such terms as are acceptable to Burdale in its absolute discretion, to take effect on or before the expiry of such notice and shall use all reasonable endeavours to procure that such insurer gives to Burdale such acknowledgements and undertakings in relation to this Agreement as Burdale may in its absolute discretion require;

(h) produce to Burdale on request copies of all policies and all receipts for the current premiums with respect to the insurance; and

(i) immediately give notice to Burdale of any occurrence which gives rise, or might give rise, to a claim under any policy of insurance.

If any Obligor at any time fails to perform any of its obligations contained in this Clause, Burdale may effect or renew such insurance as Burdale thinks fit and such Obligor shall reimburse Burdale for the costs thereby incurred on demand.

13.16 FINANCIAL YEAR END AND CHANGE OF AUDITORS

Except with the prior written consent of Burdale (not to be unreasonably withheld or delayed), no Obligor will alter its financial year end from that applicable at the date of this Agreement and each Obligor will procure that it has at all times appointed as its auditors a firm of auditors which is acceptable to Burdale.

13.17 TAXES

Each Obligor will promptly pay all Taxes as and when they fall due (other than in circumstances where such Taxes are the subject of a dispute being carried on properly and in good faith by the relevant Obligor where written details of such dispute have been supplied to Burdale (if requested, Burdale having been notified of the dispute) or, in the case of PAYE and National Insurance contributions, within any permitted grace period or, in the case of any other taxes, in accordance with any other arrangements agreed with the Inland Revenue or other taxing authority.

13.18 CHANGE OF NAME

No Obligor will change its name without giving Burdale 30 days’ prior written notice of the proposed new name and will supply a copy of the relevant certificate of incorporation on change of name to Burdale as soon as it becomes available.

13.19 NEW LOCATIONS

No Obligor will move any of its assets to any new location without giving Burdale 30 days’ prior written notice of the new location and executing and delivering to Burdale such access agreements, landlord waivers and other documents as Burdale may reasonably require in order to protect its interest in such assets.

13.20 STAMP DUTY

Each Obligor will promptly pay any liability incurred in respect of any stamp, registration and similar Tax which is or becomes payable in connection with the entry into, registration, performance, enforcement or admissibility in evidence of any Finance Document and/or any amendment, supplement or waiver of any Finance Document. In the event of any breach of this undertaking the relevant Obligor shall immediately pay to Burdale by way of liquidated damages the amount of any liability that Burdale may incur as a result of or by reference to such Obligor’s delay in paying or omission to pay any such Tax.

13.21 FINANCIAL COVENANTS

13.21.1 The Company shall procure that Consolidated Tangible Net Worth is at all times at least equal to $17,500,000.

13.21.2 The Company shall procure that, as at the end of each month (each a TEST DATE), Trading Cashflow for the period of 12 months ending on such Test Date (but ignoring any period prior to the date of this Agreement) is not less than $nil.

13.22 ADDITIONAL SECURITY DOCUMENTS

The Company shall procure that the documents, evidence and other items specified in Part II of Schedule 2 are delivered to Burdale (in a form and substance satisfactory to Burdale) on the DIP Financing Date.

13.23 ROT SUPPLIERS

The Company shall within 10 Business Days deliver to Burdale a list of all suppliers to the Obligors whose terms of business include retention of title provisions.

14 INFORMATION AND ASSET UNDERTAKINGS

14.1 FINANCIAL INFORMATION

The Company shall supply to Burdale:

(a) as soon as the same become available, but in any event within 120 days after the end of each of its financial years:

(i) its audited consolidated financial statements for that financial year; and

(ii) the audited financial statements of each Obligor for that financial year; and

(b) as soon as practicable and in any event within 30 days from the end of each monthly management accounting period and in each case in a format satisfactory to Burdale, full individual and, if applicable, consolidated accounts in each case prepared in Sterling in respect of that period for itself and each other Obligor including Stock figures and valuations for that month, a breakdown of the value and identity of preferential creditors for that month (in substantially the form set out in Part II of Schedule 4) and details of all input and output VAT together with such calculations as may be necessary to establish whether the Company is in compliance with Clause 13.21;

(c) copies of all notices, circulars, reports and statements sent to any Obligor’s shareholders or creditors generally (or any class of them) at the same time as they are made available to such shareholders or creditors; and

(d) such further information relating to the financial condition or operations of it or any Obligor which Burdale may reasonably require at such time as Burdale may reasonably require it.

14.2 REQUIREMENTS AS TO FINANCIAL STATEMENTS

Each set of financial statements delivered by the Company pursuant to Clause 14.1 shall be certified by a director of the relevant company as fairly representing its financial condition as at the date as at which those financial statements were drawn up and the Company shall procure that each set of financial statements delivered pursuant to Clause 14.1 is prepared using GAAP and consistently with the policies and practices adopted by the relevant company for the preparation of such accounts as at today’s date.

14.3 REPORTING REGARDING RECEIVABLES, STOCK AND EQUIPMENT

Each Facility Company will provide Burdale with the following documents with all amounts expressed in Sterling and otherwise in a form satisfactory to Burdale:

(a) on a daily basis with a schedule of Receivables, collections received and credits issued and on a weekly basis with a stock report substantially in the form set out in Part I of Schedule 4 and on an annual basis with an Equipment report together with such further information reports and copies of documents regarding Receivables, Stock and Equipment as Burdale may from time to time reasonably request;

(b) as soon as practicable and in any event within 15 days of the end of each month or more frequently as Burdale may reasonably request:

(i) ageings of creditors and Receivables with details of all dated invoices;

(ii) full details of all Stock by category, location and supplier; and

(iii) reconciliations of Stock and Receivables listings to the nominal ledger and the management accounts,

all in a format to be agreed with Burdale (acting reasonably).

(c) on a daily basis, details of any Receivables which have become or are purported to be, by the relevant account debtor or otherwise, subject to any prohibitions or restriction on charge or assignment; and

(d) immediately upon becoming aware of the same, details of any creditor of any Obligor whose ordinary terms of business include title retention provisions which have not already been notified to Burdale.

14.4 REPORTING REGARDING ACCOUNT DEBTORS

14.4.1 NOTIFICATION: Each Facility Company will notify Burdale promptly of:

(a) any material delay in such Facility Company’s performance of any of its obligations to any account debtor or the assertion of any claims, offsets, defences or counterclaims by any account debtor, or any material disputes with account debtors, or any settlement, adjustment or compromise of any such matter;

(b) all material adverse information known to such Facility Company relating to the financial condition of any account debtor; and

(c) any event or circumstance which, to such Facility Company’s knowledge, would cause Burdale to consider any then existing Receivables as no longer constituting Eligible Receivables.

14.4.2 DISPUTES AND SETTLEMENTS WITH ACCOUNT DEBTORS: No credit, discount, allowance or extension or agreement for any of the foregoing will be granted to any account debtor without Burdale’s consent, except in the ordinary course of the relevant Facility Company’s business in accordance with proper practices and policies operated by the relevant Facility Company prior to the date of this Agreement. At any time while an Event of Default is continuing, Burdale will, at its option, have the exclusive right to settle, adjust or compromise any claim, offset, counterclaim or dispute with any account debtor and to grant any credits, discounts or allowances in relation to such matters.

14.4.3 RETURN OF STOCK: Each Facility Company will promptly report to Burdale any return of Stock by an account debtor where that Stock has a value in excess of $75,000. At any time that any Stock (irrespective of its value) is returned, reclaimed or repossessed, the related Receivable will be deemed not to be an Eligible Receivable. In the event any account debtor returns Stock when an Event of Default has occurred and is continuing, such Facility Company will, upon Burdale’s request:

(a) hold the returned Stock on trust for Burdale;

(b) segregate all returned Stock from all of its other property;

(d) not issue any credits, discounts or allowances with respect to such returned stock without Burdale’s prior written consent.

14.5 VERIFICATION

Burdale will have the right from time to time, in the name of any nominee, to verify the validity, amount or any other matter relating to any Receivable or other asset of any Obligor, by mail, telephone, facsimile or otherwise.

14.6 RIGHTS AFTER A DEFAULT

14.6.1 DEALING WITH ASSETS: Burdale may, at any time that a Default has occurred and is continuing and without prejudice to any of its rights under Clause 16.2 or otherwise under this Agreement or any other Finance Document:

(a) extend the time of payment of, compromise, settle or adjust for cash, credit, return of merchandise or otherwise, and upon any terms or conditions, any and all Receivables and thereby discharge or release any account debtor or any other party or parties in any way liable for payment of any Receivable without affecting any of the Receivables, demand or enforce payment of any Receivables, but without any duty to do so, and Burdale will not be liable for its failure to enforce the payment of any Receivable nor for the negligence of its agents or attorneys with respect to any Receivable; and

(b) take, whatever other action Burdale may deem necessary for the protection of its interests in any assets subject to a Security Interest under the Security Documents.

14.6.2 NOTICE TO DEBTORS: At any time that a Default is continuing, Burdale or its nominee may, at Burdale’s discretion as the case may be do any of the following:

(a) having given prior notification to the Company, notify any or all account debtors that the Receivables have been assigned to Burdale and that payments in respect of Receivables are to be redirected to such account as is specified by Burdale;

(b) request the relevant Facility Company to give the notification referred to in Clause 14.6.2(a) above and/or to ensure that all invoices and statements in respect of Receivables issued to the account debtors state the information referred to in Clause 14.6.2(a); and

(c) direct any or all relevant account debtors to make all payments in respect of Receivables direct to Burdale at such account as Burdale may specify.

14.6.3 ORIGINALS: At any time that an Event of Default is continuing, each Facility Company will deliver to Burdale the originals of all documents evidencing the sale and delivery of goods or the performance of services giving rise to any Receivables as Burdale may require.

14.7 UNDERTAKINGS REGARDING STOCK

With respect to the Stock:

(a) each Facility Company will at all times maintain perpetual stock records reasonably satisfactory to Burdale, keeping correct and accurate records itemising and describing the kind, type, quality and quantity of Stock, such Facility Company’s cost in relation to such Stock and daily withdrawals from and additions to the Stock;

(b) each Facility Company will conduct a physical count of the Stock at least once each year and at any time or times as Burdale may request while an Event of Default is continuing, and promptly following such physical count will supply Burdale with a report in a form and containing such specific information as may be reasonably satisfactory to Burdale concerning such physical count;

(c) no Facility Company will remove any Stock from property which is owned and controlled by it or any other Obligor or to or from a public warehouse without the prior written consent of Burdale, except for sales of Stock in the ordinary course of the relevant Facility Company’s trade and except to move Stock directly from such property to another location previously agreed to by Burdale;

(d) upon Burdale’s request, each Facility Company will, at its expense, not more than once in any twelve month period, but at any time or times as Burdale may request while an Event of Default is continuing, deliver or cause to be delivered to Burdale written reports or appraisals regarding the Stock in form and substance acceptable to Burdale and by an appraiser acceptable to Burdale, addressed to Burdale and upon which Burdale is expressly permitted to rely;

(e) each Facility Company will produce, use, store and maintain the Stock with all reasonable care and caution and in accordance with applicable standards relating to any insurance and in conformity with applicable laws and regulations;

(f) each Facility Company assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Stock;

(g) in respect of Stock exceeding $15,000, no Facility Company will, without prior notice to Burdale, sell such Stock to any customer on sale or return, or on any other basis which entitles the customer to return or may oblige such Facility Company or any other Obligor to repurchase such Stock; and

(h) each Facility Company will keep the Stock in good and marketable condition and will not, without the prior written consent of Burdale, acquire or accept any consignment Stock.

14.8 BURDALE’S RIGHT TO CURE

Burdale may, at its option:

(a) after giving five days notice to the Company, cure any default by any Facility Company under any agreement with an account debtor in respect of a Receivable (other than bona fide disputes in the ordinary course of the relevant Facility Company’s business where no Event of Default has occurred and is continuing) or under any other agreement with a third party as may be required by Burdale in good faith to facilitate the collection of the Receivables or to enable Burdale to have access to any assets subject to a Security Interest under the Security Documents;

(b) after giving five days notice to the Company, pay or make a bond in respect of or appeal any judgment entered into against any Facility Company which, upon execution, attachment or the exercise of any similar remedy in respect of such judgment, would result in a Security Interest being imposed on the assets of any Obligor or would impair Burdale’s ability to obtain possession of, realise or collect any assets subject to a Security Interest under the Security Documents;

(c) discharge taxes, Security Interests or other encumbrances at any time levied on or existing with respect to any assets of any Obligor; and

(d) pay any amount, incur any expense or perform any act including without limitation the payment to any creditors in respect of plant and/or machinery, which, in Burdale’s judgment, is necessary or appropriate to reserve, protect, insure or maintain the assets

subject to a Security Interest under the Security Documents and the rights of Burdale with respect to them.

Any monies so expended or costs so incurred by Burdale shall be repayable by the relevant Obligor on demand. Burdale will be under no obligation to effect any such cure or payment or incur any such cost and will not, by doing so, be deemed to have assumed any obligation or liability of the Facility Company. Any payment made or other action taken by Burdale under this Clause will be without prejudice to any right it may have to assert an Event of Default under this Agreement and to proceed accordingly.

14.9 ACCESS TO PROPERTY

From time to time as requested by Burdale on one Business Day’s notice except in the case of emergency as determined by Burdale (but subject to Clause 17.1(d) regarding daily charge rates), at the cost and expense of the Company:

(a) Burdale or its nominee will have complete access to all of each Obligor’s premises during normal business hours and having given prior notice to the Company, or at any time and without notice to the Company if an Event of Default is continuing, for the purposes of inspecting, verifying and auditing the Obligors’ books, records and assets;

(b) each Obligor will promptly furnish to Burdale or any such nominee such copies of or extracts from such books and records as may be reasonably requested from any Obligor.

15 GUARANTEE AND INDEMNITY

15.1 GUARANTEE AND INDEMNITY

Each Guarantor irrevocably and unconditionally jointly and severally:

(a) guarantees to Burdale punctual performance by each Facility Company of all that Facility Company’s obligations under the Finance Documents;

(b) undertakes with Burdale that whenever a Facility Company does not pay any amount when due under or in connection with any Finance Document, that Guarantor shall immediately on demand pay that amount as if it was the principal obligor; and

(c) indemnifies Burdale immediately on demand against any cost, loss or liability suffered by Burdale if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal. The amount of the cost, loss or liability shall be equal to the amount which Burdale would otherwise have been entitled to recover.

15.2 CONTINUING GUARANTEE

This guarantee is a continuing guarantee and will extend to the ultimate balance of sums payable by any Obligor under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part.

15.3 REINSTATEMENT

If any payment by an Obligor or any discharge given by Burdale (whether in respect of the obligations of any Obligor or any security for those obligations or otherwise) is avoided or reduced as a result of insolvency or any similar event:

(a) the liability of each Obligor shall continue as if the payment, discharge, avoidance or reduction had not occurred; and

(b) Burdale shall be entitled to recover the value or amount of that security or payment from each Obligor, as if the payment, discharge, avoidance or reduction had not occurred.

15.4 WAIVER OF DEFENCES

The obligations of each Guarantor under this Clause 15 will not be affected by an act, omission, matter or thing which, but for this Clause, would reduce, release or prejudice any of its obligations under this Clause 15 (without limitation and whether or not known to it or Burdale) including:

(a) any time, waiver or consent granted to, or composition with, any Obligor or other person;

(b) the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor of any Obligor or any other person;

(c) the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any Obligor or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;

(d) any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor or any other person;

(e) any amendment (however fundamental) or replacement of a Finance Document or any other document or security;

(f) any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or security; or

(g) any insolvency or similar proceedings.

15.5 IMMEDIATE RECOURSE

Each Guarantor waives any right it may have of first requiring Burdale to proceed against or enforce any other rights or security or claim payment from any person before claiming from that Guarantor under this Clause 15. This waiver applies irrespective of any law or any provision of a Finance Document to the contrary.

15.6 APPROPRIATIONS

Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full, Burdale may:

(a) refrain from applying or enforcing any other moneys, security or rights held or received by Burdale in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and no Guarantor shall be entitled to the benefit of the same; and

(b) hold in an interest-bearing suspense account any moneys received from any Guarantor or on account of any Guarantor’s liability under this Clause 15.

15.7 DEFERRAL OF GUARANTORS’ RIGHTS

Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full and unless Burdale otherwise directs, no Guarantor will exercise any rights which it may have by reason of performance by it of its obligations under the Finance Documents:

(a) to be indemnified by an Obligor;

(b) to claim any contribution from any other guarantor of any Obligor’s obligations under the Finance Documents; and/or

(c) to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any of Burdale’s rights under the Finance Documents or of any other guarantee or security taken pursuant to, or in connection with, the Finance Documents by Burdale.

15.8 ADDITIONAL SECURITY

This guarantee is in addition to and is not in any way prejudiced by any other guarantee or security now or subsequently held by Burdale.

16 EVENTS OF DEFAULT

16.1 DEFAULT

Each of the events or circumstances specified below constitutes an Event of Default:

(a) PAYMENT DEFAULT: Any Obligor does not pay on its due date any amount payable by it under the Finance Documents at the place and in the currency in which it is expressed to be payable or, where such failure is due to a technical or administrative failure within the banking system (which is not attributable to the relevant Obligor), within two Business Days of such due date.

(b) Breach of Other Obligations:

(i) Any Obligor does not comply with its obligations or undertakings under, or there is a breach of any of Clauses 13.4, 13.8, 13.12, 13.15, 13.21 or 13.22.

(ii) Any Obligor does not comply with any of its obligations or undertakings under any of the Finance Documents (other than those referred to in Clause 16.1(a) or 16.1(b)(i)) and, where such failure is capable of remedy, such Obligor fails to remedy the same within ten Business Days of the relevant Obligor becoming aware of the failure to comply.

(c) MISREPRESENTATION: Any representation or warranty made or repeated in connection with any Finance Document or any other document delivered by or on behalf of any Obligor under or in connection with any Finance Document is or proves to have been incorrect or misleading in any material respect when made or deemed to be made.

(d) INVALIDITY: Any provision of any of the Finance Documents is not, or is alleged by any Obligor not to be binding on or enforceable against any Obligor or effective to create any security intended to be created by it.

(e) CROSS-DEFAULT:

(i) Any Financial Indebtedness of any Obligor exceeding $75,000 (or its equivalent in other currencies) in aggregate is not paid when due.

(ii) An event of default howsoever described occurs under any document relating to Financial Indebtedness of any Obligor exceeding $75,000 (or its equivalent in other currencies).

(iii) Any Security Interest securing Financial Indebtedness over any asset of any Obligor becomes enforceable.

(iv) An amount exceeding $75,000 in aggregate owed to trade creditors of any Obligor remains outstanding following the expiry of any relevant customary trade credit period.

(f) CREDITORS’ PROCESS: Any attachment, sequestration, distress or execution affects any asset of any Obligor and is not discharged within 14 days.

(g) INSOLVENCY:

(i) Any Obligor is unable or admits inability to pay its debts as they fall due, suspends making payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness.

(ii) The value of the assets of any Obligor is less than its liabilities (taking into account contingent and prospective liabilities).

(iii) A moratorium is declared in respect of any indebtedness of any Obligor.

(h) INSOLVENCY PROCEEDINGS:

(i) Any corporate action, legal proceedings or other procedure or step is taken in relation to:

(ii) the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of any Obligor;

(iii) a composition, assignment or arrangement with any creditor of any Obligor;

(iv) the appointment of a liquidator, receiver, administrator, administrative receiver, compulsory manager or other similar officer in respect of any Obligor or any of its assets; or

(v) enforcement of any Security Interest over any assets of any Obligor,

or any analogous procedure or step is taken in any jurisdiction.

(i) CESSATION OF BUSINESS: Any Obligor ceases, or threatens to cease, to carry on all or a substantial part of its business.

(j) AUTHORISATIONS: Any authorisation or other requirement necessary to enable any Obligor to comply with any of its obligations under the Finance Documents or for Burdale to enter into this Agreement and make available and/or maintain the Facilities

or any of them is revoked or withheld or does not remain in full force and effect or is materially and adversely modified.

(k) UNLAWFULNESS: It is or becomes unlawful for any Obligor to perform any of its obligations under the Finance Documents.

(l) CHANGE OF CONTROL: Any single person or group of persons acting in concert (as defined in the City Code on Takeovers and Mergers) not having control of the Company directly or indirectly as at today’s date, acquires or agrees to acquire control (as defined in Section 416 of the Income and Corporation Taxes Act 1988) of the Company.

(m) CHARGED ACCOUNT ARRANGEMENTS: Any bank repudiates or purports to terminate the arrangements set out in the Debenture in relation to any Charged Account or a cash-sweep or payment required to be made under any Finance Document from a Charged Account is not made in the amount and manner required.

(n) MATERIAL ADVERSE EFFECT: An event or series of events occurs which in Burdale’s reasonable opinion constitutes or could reasonably be expected to constitute a Material Adverse Effect.

16.2 ACTION ON DEFAULT

Upon the occurrence of any Event of Default and whilst the same is continuing, and without prejudice to any of Burdale’s rights under this Agreement, Burdale may, by notice to the Company:

(a) declare that an Event of Default has occurred; and/or

(b) declare that the Facilities or any of them shall be cancelled, whereupon the Facilities or such of them (as the case may be) shall be so cancelled and all fees (including without limitation pursuant to Clause 7.7.1(b)) payable in relation to the Facilities or such of them (as the case may be) shall become immediately due and payable; and/or

(c) declare that some or all of the Loans, together with accrued interest and all other amounts accrued, be immediately due and payable, whereupon they shall become immediately due and payable; and/or

(d) declare that some or all of the Loans, together with accrued interest and all other amounts accrued, be payable on demand, whereupon they shall immediately become payable on demand (and in the event of any such demand those Loans, such interest and such other amounts shall be immediately due and payable); and/or

(e) declare that the Company shall forthwith pay or procure the payment to Burdale of a sufficient sum to cover the amount of all Outstanding Purchase Price and/or any contingent obligations of Burdale under any outstanding L/Cs and/or any contingent obligation of Burdale under any Forex Transaction, whereupon the same shall become immediately due and payable.

16.3 APPOINTMENT OF INSOLVENCY OFFICER

If any liquidator, trustee in bankruptcy, judicial custodian, compulsory manager, receiver, administrative receiver, administrator or any other insolvency officer is appointed in respect of any Obligor or any part of its assets (whether on the application or with the consent of Burdale or otherwise) then Burdale may (with or without it first having exercised any of its other rights under the Finance Documents), by notice to the Company, declare that the fee specified in Clause 7.7.1(b) be immediately due and payable or, at Burdale’s option, payable upon demand

as if the Facility Limit at such time had been reduced to zero, whereupon such fee shall become immediately due and payable or payable on demand (as the case may be).

17 COSTS, EXPENSES AND FEES

17.1 INITIAL AND GENERAL COSTS

The Company shall pay to Burdale on demand the amount of all costs and expenses (including legal fees) incurred by it:

(a) in the negotiation, preparation, printing and execution of the Finance Documents (including any Finance Documents executed after today’s date);

(b) in relation to any amendment, waiver, consent or suspension of rights requested by or on behalf of any Obligor relating to a Finance Document;

(c) in remitting loan proceeds, collecting cheques and other items of payment, and establishing and maintaining the Charged Accounts, together with Burdale’s associated and customary charges and fees;

(d) as out-of-pocket expenses and costs from time to time (including prior to today’s date) during the course of periodic field examinations of the Obligors’ assets and operations, plus a daily charge at the rate of $1,000 for Burdale’s examiners in the field and office for up to four such periodic field examinations in any 12 month period prior to a Default and for any other or additional field examinations on and after the occurrence of a Default.

17.2 ENFORCEMENT COSTS

The Company shall pay to Burdale on demand the amount of all costs and expenses (including legal fees and VAT) incurred by it in:

(a) the enforcement of, or the preservation of any rights under, any Finance Document; or

(b) investigating any Default.

17.3 FEES

17.3.1 FACILITY FEE: The Company will pay to Burdale today a facility fee of $100,000 and on the DIP Financing Date a further facility fee of $25,000.

17.3.2 COMMITMENT FEE: The Company will pay to Burdale a commitment fee computed at the rate of 0.375% on the daily undrawn/unutilised balance of the Facility Limit. Accrued Commitment Fee shall be payable monthly in arrears from today’s date and also on the date on which all the Facilities are terminated. Commitment fee shall accrue from day to day and be calculated on the basis of a 365 day year and for the actual number of days elapsed.

17.3.3 MONITORING FEE: The Company will pay to Burdale a monitoring fee of $2,500 quarterly in advance with the first payment to be made on today’s date.

17.3.4 L/C FEE: Each Facility Company will pay to Burdale a fee equal to 2.25% per annum on the face amount of each L/C issued at such Facility Company’s request in respect of the period between the date of issue of the L/C and the End Date of such L/C. The fee shall be calculated on the basis of a 365 day year and shall be paid monthly in arrears and on the End Date of such L/C.

18 INDEMNITIES

18.1 CURRENCY INDEMNITY

If any amount payable by any Obligor under or in connection with any of the Finance Documents is received by Burdale in a currency other than that agreed to be payable under the Finance Documents, whether as a result of any judgment or order or other enforcement, the liquidation or bankruptcy of any Obligor or otherwise howsoever and the amount produced by converting the currency so received into the agreed currency is less than the relevant amount of the agreed currency, then the relevant Obligor will as an independent obligation indemnify Burdale for the deficiency and any loss sustained as a result. Such conversion will be made at the Exchange Rate, on such date and in such market as is determined by Burdale as being most favourable for such conversion. The relevant Obligor will in addition pay the costs of such conversion.

18.2 FOREIGN EXCHANGE INDEMNITY

Each Facility Company will indemnify and hold Burdale harmless from and against any and all losses, claims, damages, liabilities, costs and expenses which Burdale may suffer or incur in connection with any Forex Transaction and any documents, drafts or financial information relating to such Forex Transaction, including, but not limited to, any losses, claims, damages, liabilities, costs and expenses due to any action taken by any counterparty with respect to any Forex Transaction, except for any such losses, claims, damages, liabilities, costs and expenses suffered or incurred by Burdale as a result of its gross negligence or wilful misconduct. Each Facility Company assumes all risks with respect to the acts or omissions of any counterparty to any Forex Transaction and for such purposes the counterparty will be deemed such Facility Company’s agent. Each Facility Company assumes all risks for, and agrees to pay, all foreign and local taxes, duties and levies relating to any transaction pursuant to the Forex Transactions or any documents, drafts or financial information relating to such Forex Transaction. Each Facility Company releases and holds Burdale harmless from and against any acts, waivers, errors, delays or omissions, whether caused by such Facility Company, by any counterparty or otherwise with respect to or relating to any Forex Transaction.

18.3 OTHER INDEMNITIES

The Company will (or will procure that an Obligor will) indemnify Burdale on demand against any loss or liability which Burdale incurs as a result of:

(a) the occurrence of any Default;

(b) any payment of principal or other amount being received from any source otherwise than on its due date under this Agreement;

(c) any Utilisation not being effected after a Facility Company has delivered a Request in respect of such Utilisation other than as a result of Burdale’s negligence or default;

(d) any prepayment or provision of cash collateral by any Obligor not being made in accordance with the terms of this Agreement.

In each case the Company’s liability includes (without limitation) any loss of margin or anticipated profits or other loss or expense on account of funds borrowed, contracted for or utilised to fund any amount payable under any Finance Document and on account of any security given by Burdale in relation to those funds and in relation to any amount repaid or prepaid in relation to any Finance Document.

19 NOTICES

19.1 DELIVERY AND RECEIPT

19.1.1 Any communications to be made under or in connection with the Finance Documents shall be made in writing, may be made by letter or facsimile and shall be deemed to be given as follows:

(a) if by way of letter, when it has been left at the relevant address or two Business Days after being deposited in the post with postage prepaid in an envelope addressed to it at that address; and

(b) if by facsimile, when received in legible form,

save that any notice delivered or received on a non-Business Day or after business hours shall be deemed to be given on the next Business Day at the place of delivery or receipt.

19.1.2 Any communication or document made or delivered to the Company in accordance with this Clause will be deemed to have been made or delivered to each of the Obligors.

19.2 ADDRESSES

19.2.1 The Company’s and each other Obligor’s address and facsimile number for notices are:

Parkhouse Street
Openshaw
Manchester

Facsimile no: 0161 223 2412

For the attention of: Managing Director

or such as the Company may notify to Burdale by not less than 10 days’ notice.

19.2.2 Burdale’s address and facsimile number for notices are:

53 Queen Anne Street
London W1G 9HP

Facsimile no: 020 7935 5445

For the attention of: Company Secretary

or such as Burdale may notify to the Company by not less than 10 days’ notice.

20 MISCELLANEOUS PROVISIONS

20.1 REMEDIES AND WAIVERS

The rights of Burdale under the Finance Documents:

(a) may be exercised as often as necessary;

(b) are cumulative and not exclusive of its rights under the general law; and

Delay in exercising or non-exercise of any right shall not be deemed to be a waiver of that right.

20.2 INVALIDITY

If, at any time, any provision of any Finance Document is or becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired.

20.3 CHANGE OF CURRENCY

20.3.1 Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognised by the central bank of any country as the lawful currency of that country, then:

(a) any reference in the Finance Documents to, and any obligations arising under the Finance Documents in, the currency of that country shall be translated into, or paid in, the currency or currency unit of that country designated by Burdale (after consultation with the Facility Companies); and

(b) any translation from one currency or currency unit to another shall be at the official rate of exchange recognised by the central bank for the conversion of that currency or currency unit into the other, rounded up or down by Burdale (acting reasonably).

20.3.2 If a change in any currency of a country occurs, this Agreement will, to the extent Burdale (acting reasonably and after consultation with the Facility Companies) specifies to be necessary, be amended to comply with any generally accepted conventions and market practice in the London interbank market and otherwise to reflect the change in currency.

20.4 ACCOUNTS

In any litigation or arbitration proceedings arising out of or in connection with a Finance Document, the entries made in the accounts maintained by Burdale are prima facie evidence of the matters to which they relate.

20.5 CERTIFICATES AND DETERMINATIONS

Any certification or determination by Burdale of a rate or amount under any Finance Document is, in the absence of manifest error, conclusive evidence of the matters to which it relates.

20.6 DISCLOSURE OF INFORMATION

Burdale may disclose to any person with whom it is proposing to enter into (or has entered into) any kind of assignment or transfer in relation to this Agreement any information concerning the Obligors as Burdale may in its discretion think fit, and may advertise or publicise in such publications and to such persons as Burdale may in its discretion think fit such particulars of this transaction as Burdale may in its absolute discretion deem appropriate.

20.7 COUNTERPARTS

This Agreement may be executed in any number of counterparts and all of such counterparts taken together will be deemed to constitute one and the same instrument.

21 GOODS AND DOCUMENTS

21.1 PLEDGE

All Goods and Documents are hereby and shall upon despatch from the supplier of any Goods be deemed to be pledged by the relevant Facility Company to Burdale and the Goods and the

proceeds of all insurances in relation to them and all sales of them and all of the relevant Facility Company’s rights as unpaid seller of them shall be a continuing security for the payment and discharge in full of all of the obligations of the relevant Facility Company under the Finance Documents.

21.2 PERFECTION OF PLEDGE

Burdale shall be entitled at its option to obtain possession of the Goods in order to perfect the pledge made by Clause 21.1 and in this regard the relevant Facility Company assigns to Burdale its right, title and interest in and to the Documents and all claims and rights arising from them and the relevant Facility Company irrevocably and unconditionally authorises Burdale to do all such things as may be necessary to clear the Goods, take possession of them and realise the Goods in reduction of the relevant Facility Company’s indebtedness to Burdale and in this regard the relevant Facility Company irrevocably appoints Burdale acting through any one of Burdale’s directors as the relevant Facility Company’s agent to sign all such documents and do all such things on the relevant Facility Company’s behalf as may be necessary to give effect to the provisions of this Clause 21.2.

21.3 TRUST RECEIPTS

The Goods and the Documents shall only be released to the relevant Facility Company by Burdale against receipt by Burdale of a duly executed trust receipt from the relevant Facility Company in Burdale’s standard form (from time to time) and if, for any reason, no such trust receipt is executed by the relevant Facility Company in respect of any Goods or Documents, such Goods or Documents shall be deemed to be subject to a trust receipt in such form.

21.4 SEPARATION

Each Facility Company undertakes to keep the Documents and the Goods separate and distinct from any other bills of lading, documents of title or goods.

22 CHANGES TO PARTIES

22.1 ASSIGNMENTS AND TRANSFER BY OBLIGORS

No Obligor may assign any of its rights or transfer any of its rights or obligations under the Finance Documents.

22.2 ADDITIONAL FACILITY COMPANIES

The Company may request that any of its Subsidiaries becomes an Additional Facility Company. That Subsidiary shall become an Additional Facility Company if:

(a) Burdale approves the addition of that Subsidiary as an Additional Facility Company;

(b) the Company delivers to Burdale a duly completed and executed Accession Letter;

(c) the Company confirms that no Default is continuing or would occur as a result of that Subsidiary becoming an Additional Facility Company; and

(d) Burdale has received all of the documents and other evidence listed in Part III of Schedule 2 in relation to that Additional Facility Company, each in form and substance satisfactory to Burdale.

22.3 ADDITIONAL GUARANTORS

The Company shall procure that each of its Subsidiaries is a Guarantor. With respect to any company which becomes a Subsidiary of the Company after today’s date, the Company shall procure that such Subsidiary becomes an Additional Guarantor by delivering to Burdale (promptly upon such company becoming a Subsidiary):

(a) a duly completed and executed Accession Letter; and

(b) all of the documents and other evidence listed in Part III of Schedule 2 in relation to that Additional Guarantor, each in form and substance satisfactory to Burdale.

22.4 REPETITION OF REPRESENTATIONS

Delivery of an Accession Letter constitutes confirmation by the relevant Subsidiary that the representations and warranties in Clause 12 are true and correct in relation to it as at the date of delivery as if made by reference to the facts and circumstances then existing.

22.5 TRANSFER BY BURDALE

Burdale may at any time assign, transfer, delegate or offer participations in all or a proportion of all its rights and obligations under the Finance Documents to any other bank or financial institution.

23 GOVERNING LAW AND JURISDICTION

23.1 GOVERNING LAW

This Agreement is governed by English law.

23.2 JURISDICTION

23.2.1 The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement) (a DISPUTE).

23.2.2 The parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no party will argue to the contrary.

23.2.3 This Clause 23.2 is for the benefit of Burdale only. As a result, Burdale shall not be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, Burdale may take concurrent proceedings in any number of jurisdictions.

23.3 SERVICE OF PROCESS

Without prejudice to any other mode of service allowed under any relevant law, each Obligor (other than an Obligor incorporated in England and Wales):

(a) irrevocably appoints the Company as its agent for service of process in relation to any proceedings before the English courts in connection with any Finance Document; and

(b) agrees that failure by a process agent to notify the relevant Obligor of the process will not invalidate the proceedings concerned.

For the benefit of Burdale the Company expressly agrees and consents to its irrevocable appointment as process agent pursuant to this Clause 23.3.

This Agreement has been entered into on the date stated at the beginning of this Agreement.

SIGNATORIES

THE COMPANY

HAYNES INTERNATIONAL LIMITED

By:	/s/ P.J. Crawshaw

BURDALE

BURDALE FINANCIAL LIMITED

By:	/s/ S.J. Chait

By:	/s/ Brian Gitlin

[The exhibits and schedules have been omitted from this Agreement as filed with the Securities and Exchange Commission (the “SEC”). The omitted information is considered immaterial from an investor’s perspective. The Registrant will furnish supplementally a copy of any of the omitted exhibits or schedules to the SEC upon request from the SEC.]

EXHIBIT 10.16

COMPENSATION OF NAMED EXECUTIVE OFFICERS AND DIRECTORS

CURRENT SALARIES OF NAMED EXECUTIVE OFFICERS:

The following table sets forth certain information concerning compensation paid by Haynes during fiscal 2006 to the Named Executive Officers:

		Annual compensation(1)				Long-term compensation
Name and principal position	Fiscal year	Salary		Bonus		Securities underlying options(2)	All other compensation(3)
Francis J. Petro(4)	2006	$	480,000	$	288,000	—	$	269,749
President & Chief	2005	$	480,000	$	460,000	—	$	343,526
Executive Officer	2004	$	473,077	$	0	200,000	$	317,084


Marcel Martin	2006	$	196,923	$	85,500	—	$	6,543
Vice President, Finance	2005	$	190,000	$	140,000	—	$	8,021
& Chief Financial	2004	$	163,992	$	0	100,000	$	3,678
Officer, Treasurer

August A. Cijan	2006	$	192,308	$	85,500	—	$	6,471
Vice President,	2005	$	190,000	$	106,000	—	$	8,167
Operations	2004	$	178,051	$	0	100,000	$	4,171


James A. Laird	2006	$	192,308	$	85,500	—	$	5,798
Vice President,	2005	$	190,000	$	106,000	—	$	6,903
Marketing, Research	2004	$	157,115	$	0	100,000	$	5,388
& European Sales

Gregory M. Spalding	2006	$	162,308	$	40,000	—	$	5,561
Vice President, Haynes	2005	$	160,000	$	65,000	—	$	5,555
Wire & Chief	2004	$	149,335	$	0	50,000	$	2,925
Operating Officer

(2) The options set forth in the table were granted on August 31, 2004 pursuant to the plan of reorganization.

(3) Premium payments to the group term life insurance plan, gain sharing payments and relocation reimbursements which were made by Haynes, 401(k) match, executive disability, and 401(m) match.

Position	Salary
President & Chief Executive Officer	$	480,000
Vice President, Finance & Chief Financial Officer, Treasurer	$	196,923
Vice President, Marketing, Research & European Sales	$	192,308
Vice President, Operations	$	192,308
Vice President, Haynes Wire & Chief Operating Officer	$	162,308

MANAGEMENT INCENTIVE PLAN:

Under the 2007 Management Incentive Plan, certain Haynes employees are eligible for cash awards based on Company performance, including, but not limited to, the Named Executive Officers. If Haynes meets certain specific financial targets established by the Compensation Committee for fiscal 2007 (the “Financial Targets”), each Named Executive Officer is eligible for a cash payment under the Plan based on fiscal 2007 base salary. The target cash payments under the Plan are 60% of fiscal 2007 base salary for Mr. Petro, 45% of fiscal 2007 base salary for Mr. Martin, Mr. Cijan and Mr. Laird, and 25% of fiscal 2007 base salary for Mr. Spalding. The Named Executive Officer are also eligible for a cash payment under the Plan if the Company’s performance is equal to at least 85% of the Financial Targets. Those cash payments would be 35% of fiscal 2007 base salary for Mr. Petro, 25% of fiscal 2007 base salary for Mr. Martin, Mr. Cijan and Mr. Laird, and 12.5% of fiscal 2007 base salary for Mr. Spalding. If the Company’s performance exceeds the Financial Targets by at least 15%, the Named Executive Officer would be eligible for cash payments of 90% of fiscal 2007 base salary for Mr. Petro, 67.5% of fiscal 2007 base salary for Mr. Cijan and Mr. Laird, and 37.5% of fiscal 2007 base salary for Mr. Spalding.

Individual awards may be made at the discretion of the Board of Directors even if the Company’s performance is below the Financial Targets, provided that liquidity goals for fiscal 2007 established by the Compensation Committee are met. In addition, a discretionary bonus pool is available for grants by the Board of Directors, provided that in no case will total cash bonuses pursuant to the Plan exceed $2.2 million. The Board of Directors has full discretion to eliminate, delay or change any awards or payouts and may choose to pay awards at any level of performance.

SCHEDULE OF DIRECTOR FEES:

Annual Retainer:	$	40,000
Offering and Pricing Committee One-time Fee:	$	10,000
Attendance Fee per Meeting of Board or Committee:	$	2,000
Audit Committee Chairman (separate retainer):	$	15,000
Chairman of the Board	$	20,000
All other Committee Chairmen:	$	10,000

Exhibit 10.17

[Execution]

AMENDMENT NO. 2 TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

AMENDMENT NO. 2 TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT dated as of January 27, 2005 by and among Haynes International, Inc., a Delaware corporation (“Haynes Parent”), Haynes Wire Company, a Delaware corporation (“Haynes Wire” and together with Haynes Parent, each individually, a “Borrower” and collectively, “Borrowers”), the parties from time to time to the Loan Agreement (as hereinafter defined) as lenders (each individually, a “Lender” and collectively, “Lenders”) and Congress Financial Corporation (Central), an Illinois corporation, in its capacity as agent for Lenders pursuant to the Loan Agreement (in such capacity, “Agent”).

WITNESSETH

WHEREAS, Borrowers have entered into financing arrangements with Agent and Lenders pursuant to which Lenders (or Agent on behalf of Lenders) have made and may make loans and advances and provide other financial accommodations to Borrowers as set forth in, and subject to the terms and conditions of, the Amended and Restated Loan and Security Agreement, dated August 31, 2004, by and among Agent, Lenders, JPMorgan Chase Bank N.A., successor by merger to Bank One, NA, in its capacity as documentation agent for Lenders, and Haynes Parent, as amended by Amendment No. 1 to Amended and Restated Loan and Security Agreement, dated November 5, 2004, by and among Borrowers, Lenders and Agent (as amended and supplemented hereby and as the same may hereafter be further amended, modified, supplemented, extended, renewed, restated or replaced, the “Loan Agreement”) and the other Financing Agreements (as defined therein); and

WHEREAS, Borrowers, Agent and Lenders have agreed to certain amendments to the Loan Agreement, subject to the terms and conditions herein; and

WHEREAS, by this Amendment No. 2, Borrowers, Agent and Lenders desire and intend to evidence such consents and amendments;

Section 1. Definitions .

1.1 Defined Terms . For purposes of this Amendment No. 2, unless otherwise defined herein, all capitalized terms used herein shall have the meanings assigned thereto in the Loan Agreement.

1.2 Additional Definitions . As used herein, the following terms shall have the meanings given to them below, and the Loan Agreement is hereby amended to include the following definitions:

(a) “Amendment No. 2” shall mean Amendment No. 2 to Amended and Restated Loan and Security Agreement by and among Borrowers, Agent and Lenders, as it now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

(b) “Revolving Loan Limit” shall mean the amount equal to: (i) the Maximum Credit minus (ii) the then outstanding aggregate principal amount of the Equipment Purchase Loans.

(c) “Revolving Loans” shall mean the loans now or hereafter made by or on behalf of any Lender or by Agent for the account of any Lender, on a revolving basis pursuant to the Credit Facility (including advances, repayments and readvances), as set forth in Section 2.1(a) hereof.

1.3 Amendments to Definitions . Each of the defined terms below shall be deemed to be amended and restated in their entirety to have the meaning as to such term set forth below:

(a) “Commitment” shall mean, with respect to each Lender, the principal amount set forth on Schedule 1.134 hereto for such Lender or for any party becoming a Lender after the date hereof the amount of such Lender’s Commitment as set forth on Schedule 1 to the Assignment and Acceptance Agreement pursuant to which such Lender may become a Lender hereunder in accordance with the provisions of Section 13.7 hereof; as the same may be adjusted in accordance with the terms hereof; sometimes being collectively referred to as “Commitments”.

(b) “Equipment Purchase Loan Limit” shall mean at any time the lesser of (i) $10,000,000 or (ii) the amount equal to: (A) the Maximum Credit minus (B) the sum of (1) the Revolving Loans then outstanding, plus (2) the undrawn amount of Letter of Credit Accommodations then outstanding.

(c) “Excess Availability” shall mean at any time and without duplication, (i) the lesser of: (A) the Borrowing Base and (B) the Revolving Loan Limit (in each case under (A) or (B) after giving effect to any applicable Reserves), minus (ii) the sum of: (A) the amount of the then outstanding and unpaid principal amount of the Revolving Loans and the undrawn amount of Letter of Credit Accommodations, plus (B) the aggregate amount of all payables or other obligations outstanding more than forty-five (45) days after the due date therefor as of such time (and for this purpose the due date for payables incurred prior to the commencement of the Chapter 11 Case (or during the course thereof) will be the date for payment of such payables as established pursuant to the Plan and the claims administration process provided for in the Chapter 11 Case and as to those payables or other obligations that are subject to a dispute or are not otherwise allowed, prior to the establishment of the due date for such payables or other obligations pursuant to the Plan and the claims administration process, such payables and other obligations shall not be deemed outstanding more than forty-five (45) days after the due date therefor for purposes of this definition), plus (C) the amount of checks issued by Borrower to pay payables and other obligations which are more than such number of days past due, but not yet sent (without duplication of amounts included in clause (ii)(B) herein).

(d) “Haynes Parent Excess Availability” shall mean at any time and without duplication, the amount calculated at such time equal to:

(i) the lesser of: (A) the Haynes Parent Borrowing Base and (B) the amount equal to the Revolving Loan Limit minus the then outstanding Loans to Haynes Wire (in each case under (A) or (B) after giving effect to any applicable Reserves), minus

(ii) the sum of: (A) the amount of the then outstanding and unpaid principal amount of the Revolving Loans to Haynes Parent and the undrawn amount of Letter of Credit Accommodations issued on behalf or for the benefit of Haynes Parent, plus (B) the aggregate amount of all payables or other obligations of Haynes Parent outstanding more than forty-five (45) days after the due date therefor as of such time (and for this purpose the due date for payables incurred prior to the commencement of the Chapter 11 Case (or during the course thereof) will be the date for payment of such payables as established pursuant to the Plan and the claims administration process provided for in the Chapter 11 Case and as to those payables or other obligations that are subject to a dispute or are not otherwise allowed, prior to the establishment of the due date for such payables or other obligations pursuant to the Plan and the claims administration process, such payables and other obligations shall not be deemed outstanding more than forty-five (45) days after the due date therefor for purposes of this definition), plus (C) the amount of checks issued by Haynes Parent to pay payables and other obligations which are more than such number of days past due, but not yet sent (without duplication of amounts included in clause (ii)(B) herein).

(e) “Haynes Wire Excess Availability” shall mean at any time and without duplication, the amount calculated at such time equal to:

(i) the lesser of: (A) the Haynes Wire Borrowing Base and (B) the amount equal to the Revolving Loan Limit minus the then outstanding Revolving Loans to Haynes Parent (in each case under (A) or (B) after giving effect to any applicable Reserves), minus

(ii) the sum of: (A) the amount of the then outstanding and unpaid principal amount of the Revolving Loans to Haynes Wire and the undrawn amount of Letter of Credit Accommodations issued on behalf or for the benefit of Haynes Wire, plus (B) the aggregate amount of all payables or other obligations of Haynes Wire outstanding more than forty-five (45) days after the due date therefor as of such time, plus (C) the amount of checks issued by Haynes Wire to pay payables and other obligations which are more than such number of days past due, but not yet sent (without duplication of amounts included in clause (ii)(B) herein).

(f) “Inventory Loan Limit” shall mean at any time, (i) as to Haynes Parent, the amount equal to (A) $70,000,000 minus (B) the then outstanding amount of Revolving Loans to Haynes Wire (and including Letter of Credit Accommodations to the extent provided in Haynes Wire Borrowing Base) based on Eligible Inventory of Haynes Wire and (ii) as to Haynes Wire, the amount equal to (A) $70,000,000 minus (B) the then outstanding amount of Revolving Loans to Haynes Parent (and including Letter of Credit Accommodations to the extent provided in Haynes Parent Borrowing Base) based on Eligible Inventory of Haynes Parent.

(g) “Loans” shall mean, collectively, the Revolving Loans and the Equipment Purchase Loans.

(h) “Monthly Average Excess Availability” shall mean, at any time, the daily average of the aggregate amount of the Excess Availability for the immediately preceding month as calculated by Agent in good faith, with Excess Availability calculated for this purpose without regard to the Revolving Loan Limit or the Maximum Credit.

(i) “Pro Rata Share” shall mean:

(i) with respect to a Lender’s obligation to make Loans and to acquire interests in Letter of Credit Accommodations and receive payments of interest and principal with respect thereto, the fraction (expressed as a percentage) the numerator of which is such Lender’s Commitment and the denominator of which is the aggregate amount of all of the Commitments, as adjusted from time to time in accordance with the provisions of Section 13.7 hereof; provided, that, if the Commitments have been terminated, the numerator shall be the unpaid amount of such Lender’s Loans and its interest in the Letter of Credit Accommodations and the denominator shall be the aggregate amount of all unpaid Loans and Letter of Credit Accommodations;

(ii) with respect to all other matters (including the indemnification obligations arising under Section 11.5 hereof, the voting rights set forth in Section 11.3 hereof and the payment of any fees for the account of Lenders), at any time, as to any Lender, except as Agent and Lenders may otherwise agree, the fraction (expressed as a percentage) the numerator of which is such Lender’s Commitment (provided, that, if the Commitments have been terminated, the numerator shall be the unpaid amount of such Lender’s Loans and its interest in the Letter of Credit Accommodations) and the denominator of which shall be the amount equal to the aggregate amount of all Commitments of Lenders, as adjusted from time to time in accordance with the provisions of Section 13.7 hereof.

1.4 Deleted Definitions . The defined terms “Tranche A Commitment”, “Tranche A Lender”, “Tranche A Loan Limit”, “Tranche A Loans”, “Tranche B Borrowing Base”, “Tranche B Commitment”, “Tranche B Lender”, “Tranche B Loan Limit” and “Tranche B Loans” contained in Section 1 of the Loan Agreement are each hereby deleted.

Section 2. Revolving Loans . Section 2.1 of the Loan Agreement is hereby deleted in its entirety and the following substituted therefor:

“(a) Subject to and upon the terms and conditions contained herein, each Lender severally (and not jointly) agrees to make its Pro Rata Share of Revolving Loans to: (i) Haynes Parent from time to time in amounts requested by Haynes Parent in the aggregate amount for the Loans of all Lenders of up to the lesser of (A) the Borrowing Base of Haynes Parent at such time or (B) the Commitments minus the then outstanding Revolving Loans to Haynes Wire and (ii) Haynes Wire from time to time in amounts requested by or on behalf of Haynes Wire in the aggregate amount for the Revolving Loans of all Lenders of up to the lesser of: (A) the Borrowing Base of Haynes Wire at such time or (B) the Commitments minus the then outstanding Revolving Loans to Haynes Parent.

(b) Except in Agent’s discretion, with the consent of all Lenders, or as otherwise provided herein, (i) the aggregate amount of the Loans and the Letter of Credit Accommodations outstanding at any time shall not exceed the Maximum Credit, (ii) the aggregate principal amount of the Revolving Loans outstanding at any time shall not exceed the lesser of the Borrowing Base and the Revolving Loan Limit, (iii) the aggregate principal amount of the Revolving Loans outstanding at any time based on Eligible Inventory consisting of work-in-process shall not exceed $40,000,000, (iv) the aggregate principal amount of the Revolving Loans to Haynes Parent outstanding at any time shall not exceed the Haynes Parent Borrowing Base, (v) the aggregate principal amount of Revolving Loans to Haynes Wire outstanding at any time shall not exceed the Haynes Wire Borrowing Base, (vi) the aggregate principal amount of the Revolving Loans to Haynes Parent outstanding at any time based on Eligible Inventory of Haynes Parent shall not exceed the Inventory Loan Limit applicable to Haynes Parent, and (vii) the aggregate principal amount of the Revolving Loans to Haynes Wire outstanding at any time based on Eligible Inventory of Haynes Wire shall not exceed the Inventory Loan Limit applicable to Haynes Wire.

(c) In the event that the aggregate principal amount of the Loans and Letter of Credit Accommodations outstanding at any time exceeds the Maximum Credit, or the aggregate principal amount of the Revolving Loans exceeds the lesser of the Borrowing Base or the Revolving Loan Limit, or the aggregate amount of the outstanding Letter of Credit Accommodations exceed the sublimit for Letter of Credit Accommodations set forth in Section 2.2(e), or the aggregate principal amount of the Revolving Loans applicable to Haynes Parent outstanding at any time exceed the Haynes Parent Borrowing Base, or the aggregate principal amount of the Revolving Loans to Haynes Wire outstanding at any time exceed the Haynes Wire Borrowing Base, or the aggregate principal amount of the Revolving Loans to Haynes Parent outstanding at any time based on Eligible Inventory of Haynes Parent exceed the Inventory Loan Limit applicable to Haynes Parent, or the aggregate principal amount of the Revolving Loans to Haynes Wire outstanding at any time based on Eligible Inventory of Haynes Wire exceed the Inventory Loan Limit applicable to Haynes Wire, in any case such event shall not limit, waive or otherwise affect any rights of Agent or Lenders in such circumstances or on any future occasions and Borrower shall, upon demand by Agent, which may be made at any time or from time to time, immediately repay to Agent the entire amount of any such excess(es) for which payment is demanded.”

Section 3. Letter of Credit Accommodations .

3.1 Section 2.2(a) of the Loan Agreement is hereby deleted in its entirety and the following substituted therefor:

“(a) Subject to and upon the terms and conditions contained herein, at the request of Borrower, Agent agrees, for the ratable risk of each Lender according to its Pro Rata Share, to provide or arrange for Letter of Credit Accommodations for the account of a Borrower containing terms and conditions acceptable to Agent and the issuer thereof. Any payments made by or on behalf of Agent or any Lender to any issuer thereof and/or related parties in connection with the Letter of Credit Accommodations provided to or for

the benefit of a Borrower shall constitute additional Revolving Loans to such Borrower pursuant to this Section 2 (or in any event Special Agent Advances as the case may be).”

3.2 Section 2.2(e) of the Loan Agreement is hereby deleted in its entirety and the following substituted therefor:

“(e) Except in Agent’s discretion, with the consent of all Lenders, the amount of all outstanding Letter of Credit Accommodations and all other commitments and obligations made or incurred by Agent or any Lender in connection therewith shall not at any time exceed $10,000,000.”

Section 4. Equipment Purchase Loans . Section 2.3(d)(vi) of the Loan Agreement is hereby deleted in its entirety and the following substituted therefor:

“(vi) as of the date of such Equipment Purchase Loan, and after giving effect thereto, the aggregate amount of the Loans and the Letter of Credit Accommodations shall not exceed the Maximum Credit minus the sum of (A) the aggregate amount of the Revolving Loans then outstanding, and (B) the aggregate amount of the undrawn Letter of Credit Accommodations then outstanding;”

Section 5. Payments . Section 6.4(a) of the Loan Agreement is hereby deleted in its entirety and the following substituted therefor:

“(a) All Obligations shall be payable to the Agent Payment Account as provided in Section 6.3 or such other place as Agent may designate from time to time. The foregoing shall not apply to payments with proceeds of Loans to a Bank Product Provider for Obligations to such Bank Product Provider in connection with checks or other items issued by Borrower drawn on such Bank Product Provider. Subject to the other terms and conditions contained herein, Agent shall apply payments received or collected from Borrower or for the account of Borrower (including the monetary proceeds of collections or of realization upon any Collateral) as follows: first , to pay any fees, indemnities or expense reimbursements then due to Agent and Lenders from Borrower; second , to pay interest due in respect of any Loans (and including any Special Agent Advances); third , to pay or prepay principal in respect of Special Agent Advances; fourth , to pay or prepay principal in respect of the Loans or to pay or prepay Obligations arising under or pursuant to any Hedge Agreement of Borrower that has been approved in writing by Agent (up to the amount of any then effective Reserve established in respect of such Obligations) on a pro rata basis; fifth , to pay or prepay any other Obligations whether or not then due, in such order and manner as Agent reasonably determines or to be held as cash collateral in connection with any Letter of Credit Accommodations or other contingent Obligations (but not including for purposes of this clause “fifth” any Obligations arising under or pursuant to any Hedge Agreement or in connection with any Bank Products); sixth , to pay or prepay any of the UK Obligations after demand for payment under the Guarantee by Borrower in favor of UK Lender; provided, that, any such amounts received for application to the UK Obligations shall not be applied to such UK Obligations for a period of sixty (60) days (or such longer period as UK Lender may agree) after the date of such demand and shall be held as cash collateral in connection

with the UK Obligations until the end of such sixty (60) day period (or such longer period as UK Lender may agree); and seventh , to pay or prepay any Obligations arising under or pursuant to Hedge Agreements that have been approved in writing by Agent (other than to the extent provided for above) and any Obligations then due to any Bank Provider arising from or in connection with any Bank Products, as to all of such Obligations on a pro rata basis. Notwithstanding anything to the contrary contained in this Agreement, except as Agent may from time to time otherwise determine at any time an Event of Default exists or has occurred and is continuing, payments with proceeds of Collateral of Haynes Parent shall be applied to the payment of the Obligations of Haynes Parent and payments with proceeds of Collateral of Haynes Wire shall be applied to the payment of the Obligations of Haynes Wire.”

Section 6. Amount of Lenders Commitments: Schedule 1.134 . Schedule 1.134 of the Loan Agreement is hereby amended and restated in its entirety by Amendment and Restated Schedule 1.134 to this Amendment No. 2.

Section 7. Representations and Warranties . Each Borrower hereby represents and warrants to Agent and Lenders the following (which shall survive the execution and delivery of this Amendment No. 2, the truth and accuracy of which on the date hereof are a continuing condition of the making of Loans and providing Letter of Credit Accommodations to Borrowers:

7.1 This Amendment No. 2 has been duly authorized, executed and delivered by it, and has been authorized by all necessary action on the part of such Borrower which is a party hereto (and, if necessary, their respective stockholders) and each such agreement is in full force and effect as of the date hereof, and the agreements and obligations of Haynes Parent and Haynes Wire, as the case may be, contained herein, constitute the legal, valid and binding obligations of such Borrower, enforceable against it in accordance with its terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity.

7.2 The execution, delivery and performance of this Amendment No. 2 (a) are all within the corporate powers of Haynes Parent and Haynes Wire and (b) are not in contravention of law or the terms of such Borrower’s certificate of incorporation, by-laws, or other organizational documentation, or any indenture, agreement or undertaking to which such Borrower is a party or by which such Borrower or its property are bound.

7.3 After giving effect to this Amendment No. 2, no Default or Event of Default exists or has occurred and is continuing.

Section 8. Conditions Precedent . The amendments contained herein shall only be effective upon the receipt by Agent of each of the following, in each case in form and substance reasonably satisfactory to Agent:

8.1 an executed original or executed original counterparts of this Amendment No. 2 (as the case may be), duly authorized, executed and delivered by the respective party or parties hereto;

8.2 a true and correct copy of any consent, waiver or approval (if any) to or of this Amendment No. 2, which any Borrower is required to obtain from any other Person;

8.3 such approvals of Lenders, in form and substance satisfactory to Agent, to the terms and conditions of this Amendment No. 2 as are required under the terms of the Loan Agreement.

Section 9. Provisions of General Application .

9.1 Effect of this Amendment . Except as expressly amended pursuant hereto, no other changes or modifications to the Financing Agreements are intended or implied and, in all other respects, the Financing Agreements are hereby specifically ratified, restated and confirmed by all parties hereto as of the effective date hereof. To the extent that any provision of the Loan Agreement or any of the other Financing Agreements are inconsistent with the provisions of this Amendment No. 2, the provisions of this Amendment No. 2 shall control. The Loan Agreement and this Amendment No. 2 shall be read and construed as one Agreement.

9.2 Governing Law . The validity, interpretation and enforcement of this Amendment No. 2 and the other Financing Agreements (except as otherwise provided therein) and any dispute arising out of the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of Illinois, but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of Illinois.

9.3 Binding Effect . This Amendment No. 2 shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns. Any acknowledgments or consents contained herein shall not be construed to constitute a consent to any other or further action by a Borrower or to entitle such Borrower to any other consent.

9.4 Further Assurances . Each Borrower shall execute and deliver such additional documents and take such additional action as may be reasonably requested by Agent and Lenders to effectuate the provisions and purposes of this Amendment No. 2.

9.5 Headings . The headings listed herein are for convenience only and do not constitute matters to be construed in interpreting this Amendment No. 2.

9.6 Counterparts . This Amendment No. 2 may be executed in any number of counterparts, each of which shall be an original but all of which taken together shall constitute one and the same Agreement. Delivery of an executed counterpart of this Amendment No. 2 by telefacsimile shall have the same force and effect as the delivery of an original executed counterpart of this Amendment No. 2. Any party delivering an executed counterpart of this Amendment No. 2 by telefacsimile shall also deliver an originally executed counterpart of this Amendment No. 2, but the failure to do so shall not affect the validity, enforceability or binding effect of this Amendment No. 2.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be duly executed and delivered by their authorized officers as of the date and year first above written.

		CONGRESS FINANCIAL CORPORATION (CENTRAL), as Agent and as Lender

		By:	/s/ Vicky Geist

		Title:	Vice President


		HAYNES INTERNATIONAL, INC.

		By:	/s/ Marcel Martin

		Title:	CFO


		HAYNES WIRE COMPANY

		By:	/s/ Marcel Martin

		Title:	CFO

JPMORGAN CHASE BANK N.A.
successor by merger to BANK ONE, NA (Main Office Chicago)

By:	/s/ John Freeman

Title:	Vice President


WESTERNBANK PUERTO RICO
BUSINESSCREDIT DIVISION

By:	/s/ Miguel A. Vasquez

Title:	President

Exhibit 10.18

[Execution]

AMENDMENT NO. 3 TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

AMENDMENT NO. 3 TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT dated as of May 1, 2005 by and among Haynes International, Inc., a Delaware corporation (“Haynes Parent”), Haynes Wire Company, a Delaware corporation (“Haynes Wire” and together with Haynes Parent, each individually, a “Borrower” and collectively, “Borrowers”), the parties from time to time to the Loan Agreement (as hereinafter defined) as lenders (each individually, a “Lender” and collectively, “Lenders”) and Wachovia Capital Finance Corporation (Central), formerly known as Congress Financial Corporation (Central), an Illinois corporation, in its capacity as agent for Lenders pursuant to the Loan Agreement (in such capacity, “Agent”).

W I T N E S S E T H

WHEREAS, Borrowers have entered into financing arrangements with Agent and Lenders pursuant to which Lenders (or Agent on behalf of Lenders) have made and may make loans and advances and provide other financial accommodations to Borrowers as set forth in, and subject to the terms and conditions of, the Amended and Restated Loan and Security Agreement, dated August 31, 2004, by and among Agent, Lenders, JPMorgan Chase Bank N.A., successor by merger to Bank One, NA, in its capacity as documentation agent for Lenders, and Haynes Parent, as amended by Amendment No. 1 to Amended and Restated Loan and Security Agreement dated November 5, 2004, and Amendment No. 2 to Amended and Restated Loan and Security Agreement dated as of January 27, 2005 (as amended and supplemented hereby and as the same may hereafter be further amended, modified, supplemented, extended, renewed, restated or replaced, the “Loan Agreement”) and the other Financing Agreements (as defined therein); and

WHEREAS, Borrowers, Agent and Lenders have agreed to certain amendments to the Loan Agreement, subject to the terms and conditions herein; and

WHEREAS, by this Amendment No. 3, Borrowers, Agent and Lenders desire and intend to evidence such consents and amendments;

Section 1. Definitions .

1.1 Defined Terms . For purposes of this Amendment No. 3, unless otherwise defined herein, all capitalized terms used herein shall have the meanings assigned thereto in the Loan Agreement.

1.2 Amendment to Definition . The defined term below shall be deemed to be amended and restated in its entirety to have the meaning as to such term set forth below:

“Applicable Margin” shall mean, at any time, as to the interest rate for Prime Rate Loans, the interest rate for Prime Rate Fixed Asset Loans, the interest rate for Eurodollar Rate Loans, the interest rate for Eurodollar Rate Fixed Asset Loans, the interest rate for Prime Rate Equipment Purchase Loans, the interest rate for Eurodollar Rate Equipment Purchase Loans and the Letter of Credit Fee, the applicable percentage (on a per annum basis) set forth below indicated for the Monthly Average Excess Availability for the immediately preceding month is at or within the amounts indicated for such percentage:

		Loans Based on Accounts and Inventory				Loans Based on Fixed Asset Availability and Equipment Purchase Loans
Tier	Monthly Average Excess Availability	Applicable Prime Rate Margin		Applicable Eurodollar Margin		Applicable Prime Rate Margin		Applicable Eurodollar Margin		L/C Rate

1.	$20,000,000 or more	.50	%	2.00	%	1.00	%	2.50	%	1.75	%

2.	Greater than or equal to $10,000,000 and less than $20,000,000	.75	%	2.25	%	1.25	%	2.75	%	2.00	%

3.	Less than $10,000,000	1.00	%	2.50	%	1.50	%	3.00	%	2.25	%

provided , that , the Applicable Margin shall be calculated and established on the first day of each month (commencing on May 1, 2005) and shall remain in effect until adjusted thereafter at the beginning of the next month.”

Section 2. Representations and Warranties . Each Borrower hereby represents and warrants to Agent and Lenders the following (which shall survive the execution and delivery of this Amendment No. 3, the truth and accuracy of which on the date hereof are a continuing condition of the making of Loans and providing Letter of Credit Accommodations to Borrowers):

2.1 This Amendment No. 3 has been duly authorized, executed and delivered by it, and has been authorized by all necessary action on the part of such Borrower which is a party hereto (and, if necessary, their respective stockholders) and each such agreement is in full force and effect as of the date hereof, and the agreements and obligations of Haynes Parent and Haynes Wire, as the case may be, contained herein, constitute the legal, valid and binding obligations of such Borrower, enforceable against it in accordance with its terms, except as such enforceability may be limited by any applicable bankruptcy; insolvency, reorganization,

moratorium or similar laws affecting creditors’ rights generally and by general principles of equity.

2.2 The execution, delivery and performance of this Amendment No. 3 (a) are all within the corporate powers of each Borrower and (b) are not in contravention of law or the terms of such Borrower’s certificate of incorporation, by-laws, or other organizational documentation, or any indenture, agreement or undertaking to which such Borrower is a party or by which such Borrower or its property are bound.

2.3 After giving effect to this Amendment No. 3, no Default or Event of Default exists or has occurred and is continuing.

Section 3. Conditions Precedent . The amendments contained herein shall only be effective upon the receipt by Agent of each of the following, in each case in form and substance reasonably satisfactory to Agent:

3.1 an executed original or executed original counterparts of this Amendment No. 3 (as the case may be), duly authorized, executed and delivered by the respective party or parties hereto;

3.2 a true and correct copy of any consent, waiver or approval (if any) to or of this Amendment No. 3, which any Borrower is required to obtain from any other Person;

3.3 such approvals of Lenders, in form and substance satisfactory to Agent, to the terms and conditions of this Amendment No. 3 as are required under the terms of the Loan Agreement.

Section 4. Provisions of General Application .

4.1 Effect of this Amendment . Except as expressly amended pursuant hereto, no other changes or modifications to the Financing Agreements are intended or implied and, in all other respects, the Financing Agreements are hereby specifically ratified, restated and confirmed by all parties hereto as of the effective date hereof. To the extent that any provision of the Loan Agreement or any of the other Financing Agreements are inconsistent with the provisions of this Amendment No. 3, the provisions of this Amendment No. 3 shall control. The Loan Agreement and this Amendment No. 3 shall be read and construed as one Agreement.

4.2 Governing Law . The validity, interpretation and enforcement of this Amendment No. 3 and the other Financing Agreements (except as otherwise provided therein) and any dispute arising out of the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of Illinois, but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of Illinois.

4.3 Binding Effect . This Amendment No. 3 shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns. Any acknowledgments or consents contained herein shall not be construed to constitute a consent to any other or further action by a Borrower or to entitle such Borrower to any other consent.

4.4 Further Assurances . Each Borrower shall execute and deliver such additional documents and take such additional action as may be reasonably requested by Agent and Lenders to effectuate the provisions and purposes of this Amendment No. 3.

4.5 Headings . The headings listed herein are for convenience only and do not constitute matters to be construed in interpreting this Amendment No. 3.

4.6 Counterparts . This Amendment No. 3 may be executed in any number of counterparts, each of which shall be an original but all of which taken together shall constitute one and the same Agreement. Delivery of an executed counterpart of this Amendment No. 3 by telefacsimile shall have the same force and effect as the delivery of an original executed counterpart of this Amendment No. 3. Any party delivering an executed counterpart of this Amendment No. 3 by telefacsimile shall also deliver an originally executed counterpart of this Amendment No. 3, but the failure to do so shall not affect the validity, enforceability or binding effect of this Amendment No. 3.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. I to be duly executed and delivered by their authorized officers as of the date and year first above written.

		WACHOVIA CAPITAL FINANCE CORPORATION (CENTRAL), formerly known as Congress Financial Corporation (Central), as Agent, and as Lender

		By:	/s/ Vicky Geist
		Title:	Vice President

		HAYNES INTERNATIONAL, INC.

		By:	/s/ Marcel Martin
		Title:	CFO

		HAYNES WIRE COMPANY

		By:	/s/ Marcel Martin
		Title:	CFO

JPMORGAN CHASE BANK N.A. successor by merger to BANK ONE, NA (Main Office Chicago)

By:	/s/ John Freeman
Title:	Director

WESTERNBANK PUERTO RICO BUSINESS CREDIT DIVISION

By:	/s/ Julia Frentis
Title:	SVP Portfolio Manager

Exhibit 10.19

[Execution]

AMENDMENT NO. 4
TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

AMENDMENT NO.4 TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT, dated August 31, 2005, by and among Haynes International, Inc., a Delaware corporation (“Haynes Parent”), Haynes Wire Company, a Delaware corporation (“Haynes Wire” and together with Haynes Parent, each individually, a “Borrower” and collectively, “Borrowers”), the parties from time to time to the Loan Agreement (as hereinafter defined) as lenders (each individually, a “Lender” and collectively, “Lenders”) and Wachovia Capital Finance Corporation (Central), formerly known as Congress Financial Corporation (Central), an Illinois corporation, in its capacity as agent for Lenders pursuant to the Loan Agreement (in such capacity, “Agent”).

W I T N E S S E T H

WHEREAS, Borrowers have entered into financing arrangements with Agent and Lenders pursuant to which Lenders (or Agent on behalf of Lenders) have made and may make loans and advances and provide other financial accommodations to Borrowers as set forth in, and subject to the terms and conditions of, the Amended and Restated Loan and Security Agreement, dated August 31, 2004, by and among Agent, Lenders, JPMorgan Chase Bank N.A., successor by merger to Bank One, NA, in its capacity as documentation agent for Lenders, and Haynes Parent, as amended by Amendment No. 1 to Amended and Restated Loan and Security Agreement dated November 5, 2004, Amendment No. 2 to Amended and Restated Loan and Security Agreement dated as of January 27, 2005 and Amendment No. 3 to Amended and Restated Loan and Security Agreement dated May 1, 2005 (as amended and supplemented hereby and as the same may hereafter be further amended, modified, supplemented, extended, renewed, restated or replaced, the “Loan Agreement”) and the other Financing Agreements (as defined therein); and

WHEREAS, Borrowers, Agent and Lenders have agreed to certain amendments to the Loan Agreement, subject to the terms and conditions herein; and

WHEREAS, by this Amendment No. 4, Borrowers, Agent and Lenders desire and intend to evidence such consents and amendments;

1. Definitions .

1.1. Additional Definitions . As used herein, the following terms shall have the respective meanings given to them below and the other Financing Agreements shall be deemed and are hereby amended to include, in addition and not in limitation, each of the following definitions:

(a) “Amendment No. 4” shall mean this Amendment No. 4 to Amended and

Restated Loan and Security Agreement by and among Borrower, Agent and Lenders, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

(b) “Amendment No. 4 Effective Date” shall mean the date of the effectiveness of this Amendment No. 4 in accordance with Section 7 of this Amendment No. 4.

(c) “Approved Fund” shall mean with respect to any Lender that is a fund or similar investment vehicle that makes or invests in commercial loans, any other fund or similar investment vehicle that invests in commercial loans which is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

(d) “Early Termination Fee” shall mean the fee payable by Borrowers pursuant to Section 13.1(b) of the Loan Agreement.

(e) “Enforcement Action” shall mean the exercise by Agent (or its assignee or designee) in good faith and in a commercially reasonable manner of any of its material enforcement rights and remedies as a secured creditor hereunder or under the other Financing Agreements, applicable law or otherwise, in respect of any of the Collateral, at any time following the occurrence of an Event of Default (including, without limitation, the demand for the immediate payment of all or any portion of the Obligations, the solicitation of bids from third parties to conduct the liquidation of any of the Collateral, the engagement or retention of sales brokers, marketing agents, investment bankers, accountants, appraisers, auctioneers or other third parties for the purposes of valuing, marketing, promoting and selling any of the Collateral, the opposition of the sale of assets constituting Collateral in any bankruptcy or insolvency proceeding, the commencement of any action to foreclose on the security interests or liens of Agent in all or any material portion of the Collateral or commencement of any legal proceedings or actions against any Borrower or with respect to all or any portion of the Collateral).

(f) “Priority Event” shall mean the occurrence of any one or more of the following: (i) the occurrence and continuance of an Event of Default under Section 10.1(a)(i) of the Loan Agreement with respect to any Borrower’s failure to pay any of the Obligations arising pursuant to the Revolving Loans (including principal, interest, fees and expenses attributable thereto); (ii) the occurrence and continuance of an Event of Default under Sections 10.1(e), 10.1(f) or 10.1(g) of the Loan Agreement; (iii) the occurrence of any other Event of Default and the acceleration by Agent of the payment of all or a material portion of the Obligations; or (iv) Agent shall have received the written notice from Term B Loan Lender of a Term B Loan Action Default as provided in Section 10.2(i) of the Loan Agreement.

(g) “Registered Term B Loan” shall have the meaning set forth in Section 2.5 of this Amendment No. 4.

(h) “Registered Term B Note” shall have the meaning set forth in Section 2.5 of this Amendment No. 4.

(i) “Revolving Loan Commitment” shall mean, with respect to each Revolving Loan Lender, the principal amount set forth on Exhibit A to this Amendment No. 4 for such Lender or for any party becoming a Revolving Loan Lender after the date hereof the amount of such Lender’s Commitment as set forth on Schedule 1 to the Assignment and Acceptance

Agreement pursuant to which such Lender may become a Lender hereunder in accordance with the provisions of Section 13.7 of the Loan Agreement; as the same may be adjusted in accordance with the terms hereof; sometimes being collectively referred to as “Revolving Loan Commitments”.

(j) “Revolving Loan Lender” shall mean a Lender with a Revolving Loan Commitment; sometimes being referred to herein collectively as “Revolving Loan Lenders”.

(k) “Term B Loan” shall mean the Loan made by or on behalf of Term B Loan Lender or by Agent for the account of Term B Loan Lender as set forth in Section 2 of this Amendment No. 4. The Term B Loan shall not be deemed either a Prime Rate Loan or a Eurodollar Rate Loan.

(l) “Term B Loan Action Default” shall mean an Event of Default under Sections 10.1(a)(i), 10.1(d), 10.1(e), 10.1(f), 10.1(i), 10.1(1) or 10.1(m), or 10.1(a)(ii) and 10.1(a)(iii) of the Loan Agreement (to the extent arising as a result of the failure to comply with Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.17 or 9.18 of the Loan Agreement), in each case after giving effect to all applicable cure periods, if any.

(m) “Term B Loan Commitment” shall mean, at any time, as to Term B Loan Lender, the principal amount designated as its Term B Loan Commitment set forth on Exhibit A to this Amendment No. 4.

(n) “Term B Loan Fee Letter” shall mean the letter agreement, dated of even date herewith, by and among Borrower, Term B Loan Lender and Agent, setting forth certain fees payable by Borrower to Agent for the benefit of Term B Loan Lender, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

(o) “Term B Loan Interest Rate” shall mean a rate equal to four and three-quarters (4.75%) percent per annum in excess of the Adjusted Eurodollar Rate (as such rate is determined from time to time in accordance with the Loan Agreement), provided, that, the Term B Loan Interest Rate shall be seven and one-quarter (7.25%) percent per annum in excess of the Adjusted Eurodollar Rate, at the option of the Term B Loan Lender, after notice to Agent, for the period from and after the date of the occurrence of any Event of Default, and for so long as such Event of Default is continuing as determined by Agent; provided , that , if any of the conditions described in Sections 3.3(b)(i), 3.3(b)(ii) or 3.3(b)(iii) of the Loan Agreement exist with respect to Eurodollar Rate Loans, or if the adoption of or any change in any law, treaty, rule or regulation or final, non-appealable determination of an arbitrator or a court or other Governmental Authority or in the interpretation or application thereof, in each case, occurring after the date hereof shall make it unlawful for Term B Loan Lender to make or maintain loans based on the Adjusted Eurodollar Rate, then Term B Loan Lender may, at its option, after notice to Agent, convert the interest rate on the Term B Loan to three and one-quarter (3.25%) percent per annum in excess of the Prime Rate (or at the option of the Term B Loan Lender, after notice to Agent, for the period from and after the date of the occurrence of any Event of Default, and for so long as such Event of Default is continuing as determined by Agent, to five and three-quarters (5.75%) percent per annum in excess of the Prime Rate).

(p) “Term B Loan Lender” shall mean Ableco Finance LLC, a Delaware limited liability company, together with its successors and assigns.

1.2. Amendments to Definitions . Each of the defined terms in the Loan Agreement or any of the other Financing Agreements set forth below shall be deemed to be amended and restated in their entirety to have the meaning as to such term set forth below:

(a) “Applicable Margin” shall be deemed and each such reference is hereby amended to mean at any time, as to the interest rate for Prime Rate Loans, the interest rate for Prime Rate Fixed Asset Loans, the interest rate for Eurodollar Rate Loans, the interest rate for Eurodollar Rate Fixed Asset Loans, the interest rate for Prime Rate Equipment Purchase Loans, the interest rate for Eurodollar Rate Equipment Purchase Loans and the Letter of Credit Fee, the applicable percentage (on a per annum basis) set forth below indicated for the Monthly Average Excess Availability for the immediately preceding month is at or within the amounts indicated for such percentage:

	Loans Based on Accounts and Inventory				Loans based on Fixed Asset Availability and Equipment Purchase Loans
Monthly Average Excess Availability	Applicable Prime Rate Margin		Applicable Eurodollar Margin		Applicable Prime Rate Margin		Applicable Eurodollar Margin		L/C Rate
1. Greater than $20,000,000	0	%	1.50	%	.50	%	2.00	%	1.50	%

2. Greater than $10,000,000 and equal to or less than $20,000,000	.25	%	1.75	%	.75	%	2.25	%	1.75	%

3. Greater than $5,000,000 and equal to or less than $10,000,000	.50	%	2.00	%	1.00	%	2.50	%	2.00	%

4. Equal to or less than $5,000,000	.75	%	2.25	%	1.25	%	2.75	%	2.25	%

provided, that, the Applicable Margin shall be calculated and established on the first day of each month (commencing on March 1, 2005) and shall remain in effect until adjusted thereafter at the beginning of the next month.

(b) “Commitments” shall mean, collectively, the Revolving Loan Commitments and the Term B Loan Commitment.

(c) “Equipment Purchase Loan Limit” shall mean at any time the lesser of (i) $10,000,000 or (ii) the amount equal to: (A) $120,000,000 minus (B) the sum of (1) the Revolving Loans then outstanding, plus (2) the undrawn amount of Letter of Credit

Accommodations then outstanding.

(d) “Haynes Parent Fixed Asset Availability” shall mean $19,214,275; provided, that, effective on the first day of each month after the date hereof the Hayes Parent Fixed Asset Availability shall be reduced by the amount equal to $266,865 on the first day of each such month.

(e) “Haynes Wire Fixed Asset Availability” shall mean $2,203,450; provided, that, effective on the first day of each month after the date hereof the Hayes Wire Fixed Asset Availability shall be reduced by the amount equal to $30,603 on the first day of each such month.

(f) “Lenders” shall mean, collectively, the Revolving Loan Lenders and the Term B Loan Lender (sometimes being referred to individually as a “Lender”), except that for purposes of Sections 1.65, 1.85, 1.106, 2.1, 2.2, 2.3, 3.1, 3.2, 3.3, 6.11, 12.8 and 13.1(b) of the Loan Agreement, all references to the term “Lenders” in such Sections shall be deemed and each such reference is hereby amended to mean the Revolving Loan Lenders only.

(g) “Loans” shall mean the Revolving Loans, the Equipment Purchase Loans and the Term B Loan (sometimes referred to individually as a “Loan”), except that for purposes of Sections 1.18, 1.34, 1.57, 1.116, 1.125, 2.1(a), 3.2, 6.3(c), 6.6, 6.7, 6.10, 6.11 and 12.8 of the Loan Agreement, all references to the term “Loans” in such Sections and each such reference is hereby amended to mean the Revolving Loans and the Equipment Purchase Loans.

(h) “Maturity Date” shall mean April 12, 2009.

(i) “Maximum Credit” shall mean $130,000,000.

(j) “Pro Rata Share” shall mean:

(i) with respect to a Revolving Loan Lender’s obligation to make Revolving Loans and Equipment Purchase Loans and to acquire interests in Letter of Credit Accommodations and receive payments of interest and principal with respect thereto, the fraction (expressed as a percentage) the numerator of which is such Lender’s Revolving Loan Commitment and the denominator of which is the aggregate amount of all of the Revolving Loan Commitments, as adjusted from time to time in accordance with the provisions of Section 13.7 of the Loan Agreement; provided, that, if the Revolving Loan Commitments have been terminated, the numerator shall be the unpaid amount of such Lender’s Revolving Loans and Equipment Purchase Loans and its interest in the Letter of Credit Accommodations and the denominator shall be the aggregate amount of all unpaid Revolving Loans, Equipment Purchase Loans and Letter of Credit Accommodations;

(ii) with respect to the Term B Loan Lender’s obligations to make the Term B Loan and receive payments of principal, interest, fees, costs and expenses with respect thereto, one hundred (100%) percent;

(iii) with respect to all other matters as to a particular Lender (including the indemnification obligations arising under Section 11.5 of the Loan Agreement and the voting rights set forth in Section 11.3 of the Loan Agreement), the fraction (expressed as a percentage)

the numerator of which is the aggregate amount of all of such Lender’s Commitments and the denominator of which is the aggregate amount of all of the Commitments of all Lenders; provided, that, if the Revolving Loan Commitments have been terminated, the numerator shall be the unpaid amount of each Lender’s Loans (and in the case of Revolving Loan Lenders, its interest in the Letter of Credit Accommodations) and the denominator shall be the aggregate amount of all unpaid Revolving Loans, Equipment Purchase Loans, Letter of Credit Accommodations and Term B Loan.

(k) “Revolving Loan Limit” shall mean, at any time, the amount equal to: (i) $120,000,000 minus , (ii) the then outstanding aggregate principal amount of Equipment Purchase Loans.

1.3. Interpretation . For purposes of this Amendment No. 4, unless otherwise defined or amended herein, including, but not limited to, those terms used and/or defined in the recitals hereto, all terms used herein shall have the respective meanings assigned to such terms in the Loan Agreement.

2. Term B Loan .

2.1. Making of Term B Loan . Subject to and upon the terms and conditions contained herein, Term B Loan Lender agrees to make the Term B Loan to Borrowers on the Amendment No. 4 Effective Date in the amount of the Term B Loan Commitment.

2.2. Term B Loan Interest .

(a) Subject to Section 6.4 of the Loan Agreement, Borrower shall pay to Agent, for the benefit of Term B Loan Lender, interest on the outstanding principal amount of the Term B Loan at the Term B Loan Interest Rate. All interest accruing with respect to the Term B Loan hereunder on and after the Maturity Date or the date of any Event of Default or termination hereof shall be payable on demand in accordance with Section 6.4 of the Loan Agreement.

(b) All interest charges related to the Term B Loan shall be (i) calculated based upon the applicable Term B Loan Interest Rate, (ii) calculated on the basis of a three hundred sixty (360) day year and actual days elapsed and (iii) paid monthly in arrears to Agent on the first day of each calendar month, or at Agent’s option, charged to Borrower’s account(s) maintained by Agent as of the first day of each calendar month subject to Section 6.4 hereof.

(c) In no event shall charges constituting interest payable by Borrowers to Agent, for the benefit of Term B Loan Lender, exceed the maximum amount or the rate permitted under any applicable law or regulation, and if any such part or provision of this Amendment No. 4 or any of the other Financing Agreements is in contravention of any such law or regulation, such part or provision shall be deemed amended to conform thereto.

2.3. Repayment of Term B Loan . The Term B Loan shall be repaid in full on the Maturity Date (or if earlier, upon an Event of Default as provided in Section 10.2 of the Loan Agreement). Borrowers shall not make any prepayments in respect of the Term B Loan unless each of the following conditions is satisfied: (a) as of the date of any such prepayment and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing and (b) for each of the thirty (30) consecutive days prior to any such prepayment, Excess Availability shall have been not less than $15,000,000 and immediately after giving effect to any such prepayment,

Excess Availability shall be not less than $15,000,000. Any principal amount of the Term B Loan which is repaid or prepaid may not be reborrowed.

2.4. Term B Loan Fees . Borrower agrees to pay Agent for the benefit of the Term B Loan Lender the fees and other amounts set forth in the Term B Loan Fee Letter in the amounts and at the time specified therein.

2.5. Registered Term B Loan . Agent, on behalf of Borrowers, agrees to record the Term B Loan on the Register referred to in Section 13.7(b) of the Loan Agreement. The Term B Loan recorded on the Register (the “Registered Term B Loan”) may not be evidenced by promissory notes other than a Registered B Term Note (as defined below). Upon the registration of the Term B Loan, any promissory note (other than a Registered Term B Note) evidencing the same shall be null and void and shall be returned to Borrowers. Borrowers agree, at the request of Term B Loan Lender, to execute and deliver to Term B Loan Lender a promissory note in registered form reasonably acceptable to Term B Loan Lender to evidence such Registered Term B Loan (that is, containing registered note language) and registered as provided in Section 13.7(b) of the Loan Agreement (a “Registered Term B Note”), payable to the order of Term B Loan Lender and otherwise duly completed. Once recorded on the Register, the Obligations evidenced by such Registered Term B Note may not be removed from the Register so long as it remains outstanding, and a Registered Term B Note may not be exchanged for a promissory note that is not a Registered Term B Note.

3. Amendments .

3.1. Financing Agreements . The term “Financing Agreements” as used in the Loan Agreement and in the other Financing Agreements shall be deemed and each such reference is hereby amended to include, in addition and not in limitation, this Amendment No. 4, the Term B Loan Fee Letter and the Amendment Fee Letter, as each of the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

3.2. Reserves . Section 1.125 of the Loan Agreement is hereby amended by adding the following at the end thereof: “Without limiting the generality of the foregoing, the Revolving Loans and Letter of Credit Accommodations otherwise available to Borrowers shall, at Agent’s option, be subject to a special reserve, in an amount up to any unpaid interest, fees, costs, expenses or other charges with respect to the Term B Loan.”

3.3. Revolving Loans . Section 2.1 (a) is hereby amended by deleting the references to “Commitments” contained therein and substituting the following therefor: “Revolving Loan Commitments”.

3.4. Equipment Purchase Loans . Section 2.3(d)(vi) of the Loan Agreement is hereby deleted in its entirety and the following substituted therefor:

“(vi) as of the date of such Equipment Purchase Loan, and after giving effect thereto, the aggregate amount of the Revolving Loans and the Letter of Credit Accommodations shall not exceed the amount equal to $120,000,000 minus the sum of (A) the aggregate amount of the Revolving Loans then outstanding, and (B) the aggregate amount of the undrawn Letter of Credit Accommodations then outstanding;”

3.5. Payments .

(a) Section 6.4(a) of the Loan Agreement is hereby deleted in its entirety and the following substituted therefor:

(i) first , to the payment in full of any fees, indemnities or expense reimbursements then due to Agent and Lenders from Borrower;

(ii) second , to the payment in full of interest then due in respect of any Loans (and including any Special Agent Advances);

(iii) third , to the payment or prepayment in full of principal in respect of Special Agent Advances;

(iv) fourth , to the payment or prepayment in full of principal in respect of the Revolving Loans or to pay or prepay Obligations arising under or pursuant to any Hedge Agreement of Borrower that has been approved in writing by Agent (up to the amount of any then effective Reserve established in respect of such Obligations) on a pro rata basis;

(v) fifth , to the payment in full of principal in respect of Equipment Purchase Loans then due;

(vi) sixth , to the payment in full of principal in respect of the Term B Loan then due;

(vii) seventh , to the payment or prepayment in full of any other Obligations whether or not then due, in such order and manner as Agent reasonably determines or to be held as cash collateral in connection with any Letter of Credit Accommodations or other contingent Obligations (but not including for purposes of this clause “seventh” any Obligations arising under or pursuant to any Hedge Agreement or in connection with any Bank Products);

(viii) eighth , to the payment or prepayment in full of any of the UK Obligations after demand for payment under the Guarantee by Borrower in favor of UK Lender; provided, that, any such amounts received for application to the UK Obligations shall not be applied to such UK Obligations for a period of sixty (60) days (or such longer period as UK Lender may agree) after the date of such demand and shall be held as cash collateral in connection with the UK Obligations until the end of such sixty (60) day period (or such longer period as UK Lender may agree); and

(ix) ninth , to the payment or prepayment in full of any Obligations arising under or pursuant to Hedge Agreements that have been approved in writing by Agent (other than to the extent provided for above) and any Obligations then due to any Bank Provider arising from or in connection with any Bank Products, as to all of such Obligations on a pro rata basis.

Provided, that, in each instance set forth above in Section 6.4(a) above so long as no Priority Event has occurred and is continuing, this Section 6.4(a) shall not be deemed to apply to any payment by a Borrower specified by such Borrower to be for the payment of specific Obligations then due and payable (or prepayable) under and in accordance with any provision of this Agreement. Notwithstanding anything to the contrary contained in this Agreement, except as Agent may from time to time otherwise determine at any time an Event of Default exists or has occurred and is continuing, payments with proceeds of Collateral of Haynes Parent shall be applied to the payment of the Obligations of Haynes Parent and payments with proceeds of Collateral of Haynes Wire shall be applied to the payment of the Obligations of Haynes Wire.”

(b) Section 6.4 is hereby amended to add new Sections 6.4(e) and 6.4(f) as follows:

“(e) Notwithstanding anything to the contrary contained in Section 6.4(a) above or otherwise herein, at any time on and after a Priority Event and for so long as the same is continuing, Agent shall apply payments received or collected from Borrower or for the account of Borrower (including the monetary proceeds of collections or of realization upon any Collateral) as follows:

(i) first , to the payment in full of any fees (other than the Early Termination Fee), indemnities or expense reimbursements then due to Agent and Lenders from Borrower;

(ii) second , to the payment in full of interest then due in respect of any Revolving Loans and Equipment Purchase Loans (and including any Special Agent Advances);

(iii) third , to the payment or prepayment in full of principal in respect of Special Agent Advances;

(iv) fourth , to the payment or prepayment in full of principal in respect of the Revolving Loans or to the payment or prepayment in full of Obligations arising under or pursuant to any Hedge Agreement of Borrower that has been approved in writing by Agent (up to the amount of any then effective Reserve established in respect of such Obligations) on a pro rata basis;

(v) fifth , to the payment in full of principal in respect of Equipment Purchase Loans then due;

(vi) sixth , to be held as cash collateral in connection with any Letter of Credit Accommodations or other contingent Obligations (but not including for purposes of this clause “sixth” any Obligations arising under or pursuant to any Hedge Agreement or in connection with any Bank Products and as to Letter of Credit Accommodations only up to the amount provided for in Section 13.1 (a) for such Obligations);

(vii) seventh , to the payment in full of interest then due in respect of Term B Loan;

(viii) eighth , to the payment in full of principal in respect of the Term B Loan then due;

(ix) ninth , to the payment or prepayment in full of any other Obligations whether or not then due (including the Early Termination Fee), in such order and manner as Agent reasonably determines;

(x) tenth , to the payment or prepayment in full of any of the UK Obligations after demand for payment under the Guarantee by Borrower in favor of UK Lender; provided, that, any such amounts received for application to the UK Obligations shall not be applied to such UK Obligations for a period of sixty (60) days (or such longer period as UK Lender may agree) after the date of such demand and shall be held as cash collateral in connection with the UK Obligations until the end of such sixty (60) day period (or such longer period as UK Lender may agree); and

(xi) eleventh , to the payment or prepayment in full of any Obligations arising under or pursuant to Hedge Agreements that have been approved in writing by Agent (other than to the extent provided for above) and any Obligations then due to any Bank Provider arising from or in connection with any Bank Products, as to all of such Obligations on a pro rata basis.

(f) All references to “payment in full” or “payment or prepayment in full” in this Section 6.4 means all amounts owing in respect of the Obligations referred to, including any principal, interest, fees, costs, expenses and other amounts owed to Agent or any Lender which would accrue and become due but for the commencement of any case under the Bankruptcy Code or any similar statute, whether or not such amounts are allowed or allowable in whole or in part in such a case, but excluding (A) interest to the extent paid in excess of amounts based on the pre-default rates (but not any other interest) and (B) fees paid in respect of the waiver of an Event of Default, in each case as to amounts under clause (A) and (B) only to the extent that such amounts are disallowed in any case with respect to Borrowers under the Bankruptcy Code.”

3.6. Taxes . Section 6.5(e) of the Loan Agreement is hereby deleted in its entirety and the following substituted therefor:

“(e) Each Lender that is organized under the laws of a jurisdiction outside the United States (a “Non-U.S. Lender”) agrees that it shall, no later than the Effective Date (or, in the case of a Lender which becomes a party hereto pursuant to Section 13.7 hereof after the Effective Date, promptly after the date upon which such Lender becomes a party hereto) deliver to the Agent (or, in the case of an assignee of a Lender which (x) is an Affiliate of such Lender or a Related Fund of such Lender and (y) does not deliver an Assignment and Acceptance to the Agent pursuant to the last sentence of Section 13.7(a) for recordation pursuant to Section 13.7(b), to the assigning Lender only, and in the case of a participant, to the Lender granting the participation only) two properly completed and duly executed copies of either U.S. Internal Revenue Service Form W-8BEN, W-8ECI or W-8IMY or any subsequent versions thereof or successors thereto, in each case

claiming complete exemption from, or reduced rate of, U.S. Federal withholding tax and payments of interest hereunder. In addition, in the case of a Non-U.S. Lender claiming exemption from U.S. Federal withholding tax under Section 871(h) or 881(c) of the Internal Revenue Code, such Non-U.S. Lender hereby represents to the Agent and the Borrowers that such Non-U.S. Lender is not a bank for purposes of Section 881(c) of the Internal Revenue Code, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Internal Revenue Code) of the Parent and is not a controlled foreign corporation related to the Parent (within the meaning of Section 864(d)(4) of the Internal Revenue Code), and such Non-U.S. Lender agrees that it shall promptly notify the Agent in the event any such representation is no longer accurate. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement and on or before the date, if any, such Non-U.S. Lender changes its applicable lending office by designating a different lending office (a “New Lending Office”). In addition, such Non-U.S. Lender shall deliver such forms within 20 days after receipt of a written request therefor from the Agent, the assigning Lender or the Lender granting a participation, as applicable. Notwithstanding any other provision of this Section 6.5, a Non-U.S. Lender shall not be required to deliver any form pursuant to this Section 6.5(e) that such Non-U.S. Lender is not legally able to deliver.”

3.7. Costs and Expenses .

(a) Section 9.21 of the Loan Agreement is hereby amended to insert the following on the second line after the word “all” and before the word “costs”: “of Agent’s and Term B Loan Lender’s”.

(b) Section 9.21(g) of the Loan Agreement is hereby amended to insert the following after the word “Agent” and before the word “in”: “and Term B Loan Lender”.

3.8. Remedies . Section 10.2 of the Loan Agreement is hereby amended to add the following new Section 10.2(i) at the end thereof.

“(i) Notwithstanding anything to the contrary contained herein, except as the Term B Loan Lender shall otherwise agree, Agent shall demand payment of the Obligations and commence and pursue such other Enforcement Actions as Agent in good faith deems appropriate within ninety (90) days (except with respect to Events of Default described in Sections 10.1(g) and 10.1(h), Agent shall take such Enforcement Actions as it deems appropriate under the circumstances promptly upon receipt of notice) after the date of the receipt by Agent of written notice executed and delivered by the Term B Loan Lender of a Term B Loan Action Default, and requesting that Agent commence Enforcement Actions, provided, that, (i) such Term B Loan Action Default has not been waived or cured, (ii) in the good faith determination of Agent, taking an Enforcement Action is permitted under the terms of this Agreement and applicable law, (iii) taking an Enforcement Action shall not result in any liability of Agent or Lenders to any Borrower or any other person, (iv) Agent shall be entitled to all of the benefits of Sections 12.2, 12.3 and 12.5 hereof, and (v) Agent shall not be required to take an Enforcement Action so long as within the ninety (90) day period provided above, Agent shall, at its option, appoint Term B Loan Lender, as an agent of Agent for purposes of exercising the rights of Agent to take an Enforcement Action, subject to the terms hereof.”

3.9. Amendments and Waivers . Section 11.3 of the Loan Agreement is hereby amended by adding a new Section 11.3(e) at the end thereof as follows:

“(e) Notwithstanding anything to the contrary contained in Section 11.3(a), no such amendment, waiver, discharge or termination shall provide for any such amendment, waiver, discharge or termination of any of the following to the extent provided below without the consent of Agent and Term B Loan Lender:

(i) the terms of Section 9.17 or 9.18 hereof (or any definition with respect to financial terms used in such financial covenant in a manner which has the effect of reducing the amounts which Borrowers are required to maintain pursuant to such financial covenants);

(ii) the definitions of “Adjusted Eurodollar Rate”, “Borrowing Base” (but only to the extent such proposed change in the definition would increase the advance rates above those in effect on the date hereof), “Change of Control”, “Consolidated Adjusted Net Income”, “EBITDA”, “Eligible Accounts”, “Eligible Inventory”, “Eligible Transferee”, “Enforcement Action”, “Excess Availability”, “Material Adverse Effect”, “Net Recovery Percentage”, “Priority Event”, “Pro Rata Share”, “Term B Loan”, “Term B Loan Action Default”, or “Term B Loan Interest Rate”;

(iii) the terms of Section 2 of Amendment No. 4;

(iv) any of the following Sections hereof in any material respect: 6.4, 7.7, 9.7, 9.8, 9.9, 9.10, 9.11, 9.12(b), 9.16, 9.21, 10.2, 11.3, 12.8, 12.11, 13.1(a), or 13.7 hereof,

(v) an increase in the Maximum Credit or the Revolving Loan Limit or the outstanding principal amount of the Term B Loan;

(vi) forgiveness, compromise or cancellation of any of the Term B Loan.

In addition, Agent shall not make any Special Agent Advance pursuant to Section 12.1(a)(i) or Section 12.11(a)(ii), or additional Revolving Loan or Letter of Credit Accommodation as provided in Section 12.8, without the prior consent of Term B Loan Lender if after giving effect thereto the sum of the then outstanding Special Agent Advances pursuant to such Sections and any then outstanding Revolving Loans and Letter of Credit Accommodations in excess of the Borrowing Base as provided in Section 12.8, would exceed the lesser of $10,000,000 or ten (10%) percent of the Borrowing Base (determined as of the date of such Special Agent Advance based on the then most recent information received and accepted by Agent) .”

3.10. The Agent . Section 12.13 of the Loan Agreement is hereby amended by adding the following at the end thereof:

“In the event that all Obligations other than in respect of the Term B Loan are fully and finally paid and satisfied or Term B Loan Lender has exercised its option to purchase Obligations owing to the Revolving Loan Lenders as provided in Amendment No. 4, (a) Agent may, at its option, appoint Term B Loan Lender as successor agent

hereunder and (b) Term B Loan Lender shall have the right, but not the obligation, upon written notice to Agent, to require Agent to resign under this Section 12.13 (and in the case of the exercise by Term B Loan Lender of its purchase option provided in Amendment No. 4, such resignation to be effective immediately upon the effectiveness of the purchase by Term B Loan Lender of the Obligations owing to the Revolving Loan Lenders pursuant to the purchase option granted to Term B Loan Lender set forth in Amendment No. 4).”

3.11. Maturity Date . The first sentence of Section 13.1 (a) of the Loan Agreement is hereby deleted in its entirety and the following substituted therefor:

“(a) This Agreement and the other Financing Agreements shall become effective as of the date set forth on the first page hereof and shall continue in full force and effect for a term ending on April 12, 2009 (the “Maturity Date”), unless sooner terminated pursuant to the terms hereof.”

3.12. Early Termination Fee . Section 13.1(b) of the Loan Agreement is hereby deleted in its entirety and the following substituted therefor:

“(b) If for any reason this Agreement is terminated prior to the Maturity Date, in view of the impracticality and extreme difficulty of ascertaining actual damages and by mutual agreement of the parties as to a reasonable calculation of Agent’s and each Lender’s lost profits as a result thereof, Borrowers shall pay to Agent, for the account of Lenders (in accordance with the arrangements by and among the Lenders), upon the effective date of such termination, an early termination fee in the amount equal to

Amount		Period
(i) 1% of the Maximum Credit		From the date hereof to and excluding the fourth anniversary of the date hereof

(ii) ½% of the Maximum Credit		From and after the fourth anniversary hereof at any time prior to the Maturity Date.

Notwithstanding anything to the contrary contained in this Section, in the event of the termination of this Agreement by Borrowers prior to the Maturity Date and the full and final repayment in cash of all of the Obligations and receipt by Agent of cash collateral or at its option a letter of credit for contingent obligations in accordance with the terms hereof with the proceeds of initial loans and advances or other financial accommodations to Borrowers pursuant to a credit facility provided by Wachovia Bank, National Association or its affiliates (or for which Wachovia Bank, National Association or any of its affiliates is acting as agent), Borrowers shall not be required to pay the early termination fee provided for above.”

3.13. Assignments; Participations .

(a) Section 13.7(a) of the Loan Agreement is hereby deleted in its entirety and the following substituted therefor:

“(a) Each Lender may, with the prior written consent of Agent, assign all or, if less than all, a portion equal to at least $10,000,000 in the aggregate for the assigning Lender (or in the case of Term B Loan Lender, a portion equal to at least $2,000,000), of such rights and obligations under this Agreement to one or more Eligible Transferees (but not including for this purpose any assignments in the form of a participation), each of which assignees shall become a party to this Agreement as a Lender by execution of an Assignment and Acceptance; provided, that, (i) such transfer or assignment will not be effective until recorded by Agent on the Register and (ii) Agent shall have received for its sole account payment of a processing fee from the assigning Lender or the assignee in the amount of $5,000; provided , that , such fee shall not be applicable to any assignments made to Affiliates of the assigning Lender or Approved Funds. Notwithstanding anything to the contrary contained in this Section 13.7(a), Term B Loan Lender may assign any or all of its rights under the Financing Agreements to an Affiliate of Term B Loan Lender or an Approved Fund of Term B Loan Lender without the prior written consent of Agent and without delivering an Assignment and Acceptance to Agent or Borrowers, provided, that, (i) Borrowers and Agent may continue to deal solely and directly with such Term B Loan Lender until a fully executed Assignment and Acceptance has been delivered to Agent for recordation on the Register, (ii) the failure of Term B Loan Lender to deliver an Assignment and Acceptance to Agent or Borrowers shall not affect the legality, validity or binding effect of such assignment and (iii) an Assignment and Acceptance between Term B Loan Lender and an Affiliate of Term B Loan Lender or an Approved Fund of Term B Loan Lender shall be effective as of the date specified in such Assignment and Acceptance.”

(b) Section 13.7(b) of the Loan Agreement is hereby amended by adding the following at the end thereof: “In the case of an assignment by a Lender to any of its Approved Funds that is not reflected in Agent’s Register, the assigning Lender shall maintain a comparable register on behalf of Agent.”

(c) Section 13.7 of the Loan Agreement is hereby amended to add a new Section 13.7(i) as follows:

“(i) A Registered Term B Loan (and the Registered Term B Note, if any, evidencing the same) may be assigned or sold in whole or in part only by registration of such assignment or sale on the Register or comparable register (and each Registered Term B Note shall expressly so provide). Any assignment or sale of all or part of such Registered Term B Loan (and the Registered Term B Note, if any, evidencing the same) may be effected only by registration of such assignment or sale on the Register (or comparable register), together with the surrender of the Registered Term B Note, if any, evidencing the same duly endorsed by (or accompanied by a written instrument of assignment or sale duly executed by) the holder of such Registered Term B Note, whereupon, at the request of the designated assignee(s) or transferee(s), one or more new Registered Term B Notes in the same aggregate principal amount shall be issued to the designated assignee(s) or transferee(s). Prior to the registration of assignment or sale of any Registered Term B Loan (and the Registered Term Note, if any evidencing the

same), Agent and Borrowers shall treat the Person in whose name such Loan (and the Registered Term Note, if any, evidencing the same) is registered as the owner thereof for the purpose of receiving all payments thereon and for all other purposes, notwithstanding notice to the contrary. In the event that Term B Loan Lender sells participations in a Registered Term B Loan, Term B Loan Lender shall maintain a register on which it enters the name of all participants in the Registered Term B Loan (the “Participant Register”). A Registered Term B Loan (and the Registered Term B Note, if any, evidencing the same) may be participated in whole or in part only by registration of such participation on the Participant Register (and each Registered Term B Note shall expressly so provide). Any participation of such Registered Term Loan (and the Registered Term Note, if any, evidencing the same) may be effected only by the registration of such participation on the Participant Register.”

4. Term B Lender Purchase Option .

4.1. Notice of Exercise . Upon the occurrence and during the continuance of a Priority Event, Term B Loan Lender shall have the option at any time upon five (5) business days’ prior written notice to Agent to purchase all of the Obligations (other than those already owing to Term B Loan Lender) from the Revolving Loan Lenders. Such notice from Term B Loan Lender to Agent shall be irrevocable.

4.2. Purchase and Sale . On the date specified by Term B Loan Lender in such notice (which shall not be less than five (5) business days, nor more than twenty (20) days, after the receipt by Agent of the notice from Term B Loan Lender of its election to exercise such option), Revolving Loan Lenders shall sell to Term B Loan Lender, and Term B Loan Lender shall purchase from Revolving Loan Lenders, the Obligations (other than those already owing to Term B Loan Lender), provided that, Lenders shall retain all rights to be indemnified or held harmless by Borrowers in accordance with the terms of the Loan Agreement and the other Financing Agreements but shall not retain any rights to the security therefor. Agent hereby represents and warrants that, as to Obligations owing to it as a Lender, as of the date hereof, no approval of any court or other regulatory or governmental authority is required for such sale.

4.3. Payment of Purchase Price . Upon the date of such purchase and sale, Term B Loan Lender shall (a) pay to Agent on behalf of Revolving Loan Lenders as the purchase price therefor the full amount of all the Obligations (other than those already owing to Term B Loan Lender) then outstanding and unpaid (including principal, interest, fees and expenses, including reasonable attorneys’ fees and legal expenses but excluding the Early Termination Fee), (b) furnish cash collateral to Agent in a manner and in such amounts as Agent determines is reasonably necessary to secure Agent and Revolving Loan Lenders in connection with any issued and outstanding Letter of Credit Accommodations (but not in any event in an amount greater than one hundred five (105%) percent of the aggregate undrawn face amount of such Letter of Credit Accommodations), (c) agree to reimburse Agent and Revolving Loan Lenders for any loss, cost, damage or expense (including reasonable attorneys’ fees and legal expenses) in connection with any commissions, fees, costs or expenses related to any issued and outstanding Letter of Credit Accommodations as described above and any checks or other payments provisionally credited to the Obligations (other than those already owing to Term B Loan Lender), and/or as to which Agent or any Revolving Loan Lender has not yet received final payment and for any other amounts which Agent may be required to pay to any bank or other

financial institution that is a party to a Deposit Account Control Agreement (and, in each case, all of such payments shall be made without offset, deduction or defense), (d) agree to reimburse Agent and Revolving Loan Lenders in respect of indemnification obligations of Borrowers under the Loan Agreement and the other Financing Agreements as to matters or circumstances known to Term B Loan Lender at the time of the purchase and sale which would reasonably be expected to result in any loss, cost, damage or expense (including reasonable attorneys’ fees and legal expenses) to Agent or Revolving Loan Lenders, provided that, in no event will Term B Loan Lender have any liability for such amounts in excess of proceeds of Collateral received by Term B Loan Lender, (e) agree to indemnify and hold harmless Agent and Revolving Loan Lenders from and against any loss, liability, claim, damage or expense (including reasonable fees and expenses of legal counsel) arising out of any claim asserted by a third party as a direct result of any acts by Term B Loan Lender occurring after the date of such purchase and (f) agree to pay to Agent and Revolving Loan Lenders the Early Termination Fee within three (3) business days after receipt by Term B Loan Lender of amounts sufficient to pay such Early Termination Fee, after the payment in full in cash to Term B Loan Lender of the Term B Loan and the other Obligations purchased by Term B Loan Lender pursuant to this Section 4, including principal, interest and fees thereon and costs and expense of collection thereof (including reasonable attorneys’ fees and legal expenses), provided, that, the notice of termination or effective date of termination of the Loan Agreement occurs within ninety (90) days after the effective date of the purchase of the Obligations by Term B Loan Lender. Term B Loan Lender shall not agree to any amendment to the terms of the Loan Agreement with respect to the Early Termination Fee during such ninety (90) day period. Such purchase price and cash collateral shall be remitted by wire transfer in federal funds to such bank account of Agent in New York, New York, as Agent may designate in writing to Term B Loan Lender for such purpose. Interest shall be calculated to but excluding the Business Day on which such purchase and sale shall occur if the amounts so paid by Term Loan Agent to the bank account designated by Working Capital Agent are received in such bank account prior to 1:00 p.m., New York City time and interest shall be calculated to and including such business day if the amounts so paid by Term B Loan Lender to the bank account designated by Agent are received in such bank account later than 1:00 p.m., New York City time.

4.4. Limitation on Representations and Warranties . Such purchase shall be expressly made without representation or warranty of any kind by Agent or any Revolving Loan Lender as to the Obligations owing to any of them or otherwise and without recourse to Agent or any Revolving Loan Lender, except that each Revolving Loan Lender shall represent and warrant: (a) the amount of its portion of the Obligations being purchased, (b) that such Revolving Loan Lender owns its portion of the Obligations free and clear of any Liens or encumbrances and (c) such Revolving Loan Lender has the right to assign such Obligations and the assignment is duly authorized.

4.5. Notice of Exercise of Remedies . Agent agrees that it will give Term B Loan Lender five (5) Business Days’ prior written notice of its intention to commence the exercise of any enforcement right or remedy against the Collateral and/or to accelerate all or any material portion of the Obligations, except that such period of prior written notice may be less (but in any event concurrently with exercise thereof) as to any portion of the Collateral to the extent that in the good faith determination of Agent there are events or circumstances that imminently threaten the value of such Collateral or the ability of Agent to exercise its rights with respect to such Collateral, including the removal, diversion, concealment, abscondment, destruction or waste thereof. In the event that during such five (5) Business Day period (or such lesser period as

provided above), Term B Loan Lender shall send to Agent the irrevocable notice of Term B Loan Lender’s intention to exercise the purchase option given by Revolving Loan Lenders to Term B Loan Lender under this Section 4, Agent shall not commence any foreclosure or other action to sell or otherwise realize upon the Collateral or accelerate all or any material portion of the Obligations (provided that continuing collection of accounts receivable and other actions permitted under the Loan Agreement and other Financing Agreements shall not be prohibited hereunder), provided, that, the purchase and sale with respect to the Obligations provided for herein shall have closed within five (5) Business Days thereafter and Agent shall have received payment in full of the Obligations as provided for herein within such five (5) Business Day period.

5. Amendment Fees . Borrowers shall pay to Agent, or Agent may, at its option charge to the loan account of Borrowers, the fees provided for in the Amendment Fee Letter, dated of even date herewith, by Borrowers in favor of Agent (the “Amendment Fee Letter”).

6. Representations and Warranties . Each Borrower hereby represents and warrants to Agent and Lenders the following (which shall survive the execution and delivery of this Amendment No. 4), the truth and accuracy of which on the date hereof are a continuing condition of the making of Loans and providing Letter of Credit Accommodations to Borrowers:

6.1. This Amendment No. 4 has been duly authorized, executed and delivered by it, and has been authorized by all necessary action on the part of such Borrower which is a party hereto (and, if necessary, their respective stockholders) and each such agreement is in full force and effect as of the date hereof, and the agreements and obligations of Haynes Parent-and Haynes Wire, as the case may be, contained herein, constitute the legal, valid and binding obligations of such Borrower, enforceable against it in accordance with its terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity.

6.2. The execution, delivery and performance of this Amendment No. 4 (a) are all within the corporate powers of Haynes Parent and Haynes Wire and (b) are not in contravention of law or the terms of such Borrower’s certificate of incorporation, by-laws, or other organizational documentation, or any indenture, agreement or undertaking to which such Borrower is a party or by which such Borrower or its property are bound.

6.3. After giving effect to this Amendment No. 4, no Default or Event of Default exists or has occurred and is continuing.

7. Conditions Precedent . The amendments contained herein shall only be effective upon the receipt by Agent of each of the following, in each case in form and substance reasonably satisfactory to Agent:

7.1. an executed original or executed original counterparts of this Amendment No. 4 (as the case may be), Term B Loan Fee Letter (as the case may be) and the Amendment Fee Letter (as the case may be), in each case duly authorized, executed and delivered by the respective party or parties hereto;

7.2. a true and correct copy of any consent, waiver or approval (if any) to or of this Amendment No. 4, which any Borrower is required to obtain from any other Person; and

7.3. such approvals of Lenders, in form and substance satisfactory to Agent, to the terms and conditions of this Amendment No. 4 as are required under the terms of the Loan Agreement.

8. Provisions of General Application .

8.1. Effect of this Amendment . Except as expressly amended pursuant hereto, no other changes or modifications to the Financing Agreements are intended or implied and, in all other respects, the Financing Agreements are hereby specifically ratified, restated and confirmed by all parties hereto as of the effective date hereof. To the extent that any provision of the Loan Agreement or any of the other Financing Agreements are inconsistent with the provisions of this Amendment No. 4, the provisions of this Amendment No. 4 shall control. The Loan Agreement and this Amendment No. 4 shall be read and construed as one Agreement.

8.2. Costs, Fees and Expenses . Borrowers agree to reimburse Agent and each Lender (including Term B Loan Lender) upon demand by Agent for all costs, fees and expenses (including the reasonable fees and expenses of counsels to Agent and each Lender (including Term B Loan Lender)) incurred in connection with the preparation, execution and delivery of this Amendment No. 4.

8.3. Governing Law . The validity, interpretation and enforcement of this Amendment No. 4 and the other Financing Agreements (except as otherwise provided therein) and any dispute arising out of the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of Illinois, but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of Illinois.

8.4. Binding Effect . This Amendment No. 4 shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns. Any acknowledgments or consents contained herein shall not be construed to constitute a consent to any other or further action by a Borrower or to entitle such Borrower to any other consent.

8.5. Further Assurances . Each Borrower shall execute and deliver such additional documents and take such additional action as may be reasonably requested by Agent and Lenders to effectuate the provisions and purposes of this Amendment No. 4.

8.6. Headings . The headings listed herein are for convenience only and do not constitute matters to be construed in interpreting this Amendment No. 4.

8.7. Counterparts . This Amendment No. 4 may be executed in any number of counterparts, each of which shall be an original but all of which taken together shall constitute one and the same Agreement. Delivery of an executed counterpart of this Amendment No. 4 by telefacsimile or other electronic means shall have the same force and effect as the delivery of an original executed counterpart of this Amendment No. 4. Any party delivering an executed counterpart of this Amendment No. 4 by telefacsimile or other electronic means shall also deliver an originally executed counterpart of this Amendment No. 4, but the failure to do so shall not affect the validity, enforceability or binding effect of this Amendment No. 4.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 4 to be duly executed and delivered by their authorized officers as of the date and year first above written.

WACHOVIA CAPITAL FINANCE CORPORATION (CENTRAL), formerly known as Congress Financial Corporation (Central), as Agent and as Lender

By:		/s/ Vicky Geist

Title:			Vice President


HAYNES INTERNATIONAL, INC.

By:	/s/ Marcel Martin

Title:			CFO — V.P. Finance


HAYNES WIRE COMPANY

By:	/s/ Marcel Martin

Title:			CFO — V.P. Finance

AGREED:

JPMORGAN CHASE BANK, N.A., successor by merger to BANK ONE, NA (Main Office Chicago)


By:	/s/ John Freeman

Title:				Vice President


WESTERNBANK PUERTO RICO BUSINESS CREDIT DIVISION

By:		/s/ Julia Fuentes

Title:					Senior Vice President


ABLECO FINANCE LLC

By:			/s/ Daniel E. Wolf

Title:					Senior Vice President

EXHIBIT A
TO
AMENDMENT NO. 4 TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

Revolving Loan Lenders		Revolving Loan Commitment

Wachovia Bank, National Association		$50,000,000

JPMorgan Chase Bank N.A.		$45,000,000

Westernbank Puerto Rico Credit Business Division		$25,000,000

Term B Loan Lender		Term B Loan Commitment

Ableco Finance LLC		$10,000,000

EXHIBIT 10.20

[Execution]

AMENDMENT NO. 5
TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

AMENDMENT NO. 5 TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT, dated as of February 2, 2006, by and among Haynes International, Inc., a Delaware corporation (“Haynes Parent”), Haynes Wire Company, a Delaware corporation (“Haynes Wire” and together with Haynes Parent, each individually, a “Borrower” and collectively, “Borrowers”), the parties from time to time to the Loan Agreement (as hereinafter defined) as lenders (each individually, a “Lender” and collectively, “Lenders”) and Wachovia Capital Finance Corporation (Central), an Illinois corporation, in its capacity as agent for Lenders pursuant to the Loan Agreement (in such capacity, “Agent”).

W I T N E S S E T H

WHEREAS, Borrowers have entered into financing arrangements with Agent and Lenders pursuant to which Lenders (or Agent on behalf of Lenders) have made and may make loans and advances and provide other financial accommodations to Borrowers as set forth in, and subject to the terms and conditions of, the Amended and Restated Loan and Security Agreement, dated August 31, 2004, by and among Agent, Lenders, JPMorgan Chase Bank N.A., successor by merger to Bank One, NA, in its capacity as documentation agent for Lenders, and Haynes Parent, as amended by Amendment No. 1 to Amended and Restated Loan and Security Agreement dated November 5, 2004, Amendment No. 2 to Amended and Restated Loan and Security Agreement dated as of January 27, 2005, Amendment No. 3 to Amended and Restated Loan and Security Agreement dated May 1, 2005 and Amendment No. 4 to Amended and Restated Loan and Security Agreement dated August 31, 2005 (as amended and supplemented hereby and as the same may hereafter be further amended, modified, supplemented, extended, renewed, restated or replaced, the “Loan Agreement”) and the other Financing Agreements (as defined therein); and

WHEREAS, Borrowers, Agent and Lenders have agreed to certain amendments to the Loan Agreement, subject to the terms and conditions herein; and

WHEREAS, by this Amendment No. 5, Borrowers, Agent and Lenders desire and intend to evidence such consents and amendments;

1. Definitions .

1.1 The term “Financing Agreements” as used in the Loan Agreement and in the other Financing Agreements shall be deemed and each such reference is hereby amended to include, in addition and not in limitation, this Amendment No. 5, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

1.2 Interpretation . For purposes of this Amendment No. 5, unless otherwise defined or amended herein, including, but not limited to, those terms used and/or defined in the recitals hereto, all terms used herein shall have the respective meanings assigned to such terms in the Loan Agreement.

2. Loans, Investments, Etc . Section 9.10(d) of the Loan Agreement is hereby amended by deleting “$100,000” and replacing it with “$1,000,000”.

3. Representations and Warranties . Each Borrower hereby represents and warrants to Agent and Lenders the following (which shall survive the execution and delivery of this Amendment No. 5), the truth and accuracy of which on the date hereof are a continuing condition of the making of Loans and providing Letter of Credit Accommodations to Borrowers:

3.1 This Amendment No. 5 has been duly authorized, executed and delivered by it, and has been authorized by all necessary action on the part of such Borrower which is a party hereto (and, if necessary, their respective stockholders) and each such agreement is in full force and effect as of the date hereof, and the agreements and obligations of Haynes Parent and Haynes Wire, as the case may be, contained herein, constitute the legal, valid and binding obligations of such Borrower, enforceable against it in accordance with its terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity.

3.2 The execution, delivery and performance of this Amendment No. 5 (a) are all within the corporate powers of Haynes Parent and Haynes Wire and (b) are not in contravention of law or the terms of such Borrower’s certificate of incorporation, by-laws, or other organizational documentation, or any indenture, agreement or undertaking to which such Borrower is a party or by which such Borrower or its property are bound.

3.3 After giving effect to this Amendment No. 5, no Default or Event of Default exists or has occurred and is continuing.

4. Conditions Precedent . The amendments contained herein shall only be effective upon the receipt by Agent of each of the following, in each case in form and substance reasonably satisfactory to Agent:

4.1 an executed original or executed original counterparts of this Amendment No. 5 (as the case may be), duly authorized, executed and delivered by the respective party or parties hereto;

4.2 a true and correct copy of any consent, waiver or approval (if any) to or of this Amendment No. 5, which any Borrower is required to obtain from any other Person; and

4.3 such approvals of Lenders, in form and substance satisfactory to Agent, to the terms and conditions of this Amendment No. 5 as are required under the terms of the Loan Agreement.

5. Provisions of General Application .

5.1 Effect of this Amendment . Except as expressly amended pursuant hereto, no other changes or modifications to the Financing Agreements are intended or implied and, in all other respects, the Financing Agreements are hereby specifically ratified, restated and confirmed by all parties hereto as of the effective date hereof. To the extent that any provision of the Loan Agreement or any of the other Financing Agreements are inconsistent with the provisions of this Amendment No. 5, the provisions of this Amendment No. 5 shall control. The Loan Agreement and this Amendment No. 5 shall be read and construed as one Agreement.

5.2 Governing Law . The validity, interpretation and enforcement of this Amendment No. 5 and the other Financing Agreements (except as otherwise provided therein) and any dispute arising out of the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of Illinois, but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of Illinois.

5.3 Binding Effect . This Amendment No. 5 shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns. Any acknowledgments or consents contained herein shall not be construed to constitute a consent to any other or further action by a Borrower or to entitle such Borrower to any other consent.

5.4 Further Assurances . Each Borrower shall execute and deliver such additional documents and take such additional action as may be reasonably requested by Agent and Lenders to effectuate the provisions and purposes of this Amendment No. 5.

5.5 Headings . The headings listed herein are for convenience only and do not constitute matters to be construed in interpreting this Amendment No. 5.

5.6 Counterparts . This Amendment No. 5 may be executed in any number of counterparts, each of which shall be an original but all of which taken together shall constitute one and the same Agreement. Delivery of an executed counterpart of this Amendment No. 5 by telefacsimile or other electronic means shall have the same force and effect as the delivery of an original executed counterpart of this Amendment No. 5. Any party delivering an executed counterpart of this Amendment No. 5 by telefacsimile or other electronic means shall also deliver an originally executed counterpart of this Amendment No. 5, but the failure to do so shall not affect the validity, enforceability or binding effect of this Amendment No. 5.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 5 to be duly executed and delivered by their authorized officers as of the date and year first above written.

		WACHOVIA CAPITAL FINANCE CORPORATION (CENTRAL), as Agent and as Lender

		By:	/s/ Vicky Geist

		Title:	Vice President

		HAYNES INTERNATIONAL, INC.

		By:	/s/ Marcel Martin

		Title:	Chief Financial Officer, Vice President Finance

		HAYNES WIRE COMPANY

		By:	/s/ Marcel Martin

		Title:	Chief Financial Officer, Vice President Finance
AGREED:

JPMORGAN CHASE BANK, N.A.,
successor by merger to BANK ONE, NA (Main Office Chicago)

By:	/s/ Grey

Title:	Regional Portfolio Manager

WESTERNBANK PUERTO RICO
BUSINESS CREDIT DIVISION

By:	/s/ Miguel A. Vazquez

Title:	President

ABLECO FINANCE LLC

By:	/s/ Daniel E. Wolf, Sr.

Title:	Senior Vice President

Exhibit 10.21

FORM OF
DIRECTOR INDEMNIFICATION AGREEMENT

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

RECITALS:

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

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

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

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

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

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

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

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

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

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

AGREEMENT :

ARTICLE I

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Section 1.07. Determination of Right to Indemnification .

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Section 1.18. Successors and Binding Agreement .

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

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

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

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

If to the Company:	Haynes International, Inc.
	1020 West Park Avenue
	P.O. Box 9013
	Kokomo, Indiana 46904-9015
	Attn.: V.P.-General Counsel/Corporate Secretary
	Tel.: (765) 456-6012
	Fax: (765) 456-6905

If to Indemnitee:


	Tel.:
	Fax:

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

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

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

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

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

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

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]

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

	HAYNES INTERNATIONAL, INC.

	By:
		Name:
		Title:


	“INDEMNITEE”

SCHEDULE OF DIRECTORS PARTY TO THE DIRECTOR
INDEMNIFICATION AGREEMENT

Bohan, Paul J.
Campion, Donald C.
Corey, John C.
Getz, Robert H.
McCarthy, Timothy J.
Petro, Francis J.
Wall, William P.
Zabel, Ronald W.

Exhibit 10.22

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

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

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

and

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

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

RECITALS

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

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

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

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

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

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

ARTICLE 1
DEFINITIONS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

OTD = (TD – R)/TD

Where:

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

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

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

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

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

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

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

“ Parties ” shall mean HAYNES and TIMET.

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

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

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

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

QTP = (TD-R)/TD

Where:

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

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

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

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

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

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

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

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

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

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

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

ARTICLE 2
TITANIUM CONVERSION SERVICES

2.1 Maximum Volumes .

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

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

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

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

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

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

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

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

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

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

2.3 Product Codes .

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

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

2.4 Forecasts .

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

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

2.5 Submission Sheets .

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

(b) Each Submission Sheet shall contain the following:

(i) reference to this Agreement;

(ii) the specific product code from Exhibit A;

(iii) a Purchase Order Number;

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

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

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

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

ARTICLE 3
PRICES AND PAYMENT

3.1 Base Prices .

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

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

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

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

3.4 Terms of Delivery and Payment .

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

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

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

ARTICLE 4
PRODUCTION AND QUALITY ASSURANCE MATTERS

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

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

4.3 Acceptance Procedure .

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

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

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

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

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

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

4.6 Quality Assurance Matters .

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

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

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

ARTICLE 5
BREACH OF WARRANTY; EVENTS OF DEFAULT; REMEDIES

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

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

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

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

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

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

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

5.3 Remedies .

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

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

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

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

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

ARTICLE 6
WARRANTY

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

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

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

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

ARTICLE 7
INSURANCE; INDEMNIFICATION

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

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

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

Workers’ Compensation - Statutory

Employers Liability - $500,000 per occurrence

The policy shall have alternative employer and borrowed servant coverage.

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

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

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

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

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

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

ARTICLE 8
FORCE MAJEURE; CONTINGENCIES

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

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

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

ARTICLE 9
CONFIDENTIALITY

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

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

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

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

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

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

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

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

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

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

ARTICLE 10
PROVISION OF TITANIUM PRODUCTS

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

ARTICLE 11
NON-COMPETITION

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

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

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

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

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

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

ARTICLE 12
GOVERNING LAW; SETTLEMENT OF DISPUTES

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

12.2 Voluntary Settlement of Disputes; Voluntary Arbitration .

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

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

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

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

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

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

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

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

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

ARTICLE 13
TERM AND TERMINATION

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

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

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

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

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

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

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

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

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

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

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

ARTICLE 14
GENERAL

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

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

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

If to TIMET:

Titanium Metals Corporation
PO Box 309
Toronto, OH 43964
Attn: Jim Pieron, Vice President of Manufacturing Strategy
Facsimile: (740) 537-5776

With a copy to:

Titanium Metals Corporation
Three Lincoln Centre
5430 LBJ Freeway
Suite 1700
Dallas, TX 75420
Attn: General Counsel

Facsimile: (972) 448-1445

If to HAYNES:

Haynes International, Inc.

1020 West Park Avenue

P.O. Box 9013

Kokomo, Indiana 46904-9013

Attn: Marcel Martin, Chief Financial Officer

Facsimile: (765) 456-6526

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

Facsimile: (765) 456-6935

With a copy to:

Ice Miller LLP

One American Square

34 th Floor

Indianapolis, IN 46282-0200

Attn: Stephen J. Hackman

Facsimile: (317) 592-4666

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

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

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

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

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

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

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

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

(b) TIMET’s payment of the Fee.

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

	TITANIUM METALS CORPORATION


	By:	/s/BOBBY D. O’BRIEN
	Name:	Bobby D. O’Brien
	Title:	Chief Financial Officer


	HAYNES INTERNATIONAL, INC.


	By:	/s/ FRANCIS J. PETRO
	Name:	Francis J. Petro
	Title:	President & CEO

Exhibit A: Product, Price List and Maximum Cycle Times

[ * ]

EXHIBIT B

FORM OF PROMISSORY NOTE

$[up to 12,000,000.00]

, 20

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

B-3

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

	HAYNES INTERNATIONAL, INC.


	By:
		Name:
		Title:

B-4

Exhibit 10.23

[Execution]

AMENDMENT NO. 6
TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

AMENDMENT NO. 6 TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT, dated as of November 17, 2006, by and among Haynes International, Inc., a Delaware corporation (“Haynes Parent”), Haynes Wire Company, a Delaware corporation (“Haynes Wire” and together with Haynes Parent, each individually, a “Borrower” and collectively, “Borrowers”), the parties from time to time to the Loan Agreement (as hereinafter defined) as lenders (each individually, a “Lender” and collectively, “Lenders”) and Wachovia Capital Finance Corporation (Central), an Illinois corporation, in its capacity as agent for Lenders pursuant to the Loan Agreement (in such capacity, “Agent”).

W I T N E S S E T H

WHEREAS, Borrowers have entered into financing arrangements with Agent and Lenders pursuant to which Lenders (or Agent on behalf of Lenders) have made and may make loans and advances and provide other financial accommodations to Borrowers as set forth in, and subject to the terms and conditions of, the Amended and Restated Loan and Security Agreement, dated August 31, 2004, by and among Agent, Lenders, JPMorgan Chase Bank N.A., successor by merger to Bank One, NA, in its capacity as documentation agent for Lenders, and Haynes Parent, as amended by Amendment No. 1 to Amended and Restated Loan and Security Agreement dated November 5, 2004, Amendment No. 2 to Amended and Restated Loan and Security Agreement dated as of January 27, 2005, Amendment No. 3 to Amended and Restated Loan and Security Agreement dated May 1, 2005, Amendment No. 4 to Amended and Restated Loan and Security Agreement dated August 31, 2005 and Amendment No. 5 to Amended and Restated Loan and Security Agreement dated as of February 2, 2006 (as amended and supplemented hereby and as the same may hereafter be further amended, modified, supplemented, extended, renewed, restated or replaced, the “Loan Agreement”) and the other Financing Agreements (as defined therein); and

WHEREAS, Borrowers have requested that Agent and Lenders agree to amendments to the Loan Agreement in connection with Haynes Parent entering into certain arrangements to provide titanium processing services to Titanium Metals Corporation (“Timet” as hereinafter further defined) including the grant to Timet of a security interest in and lien upon certain specified assets of Haynes Parent related thereto; and

WHEREAS, Agent and Lenders are willing to agree to such amendments to the Loan Agreement, subject to the terms and conditions herein; and

WHEREAS, by this Amendment No. 6, Borrowers, Agent and Lenders desire and intend to evidence such amendments;

1. Definitions .

1.1. Additional Definitions . As used herein, the following terms shall have the respective meanings given to them below, and the other Financing Agreements shall be deemed and are hereby amended to include, in addition and not in limitation, each of the following definitions:

(a) “Amendment No. 6” shall mean this Amendment No. 6 to Amended and Restated Loan and Security Agreement by and among Borrowers, Agent and Lenders, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

(b) “4-High Facility” shall mean, collectively, the Mill and the Real Estate, in each case, as defined in the Timet Security Agreement as in effect on the date hereof.

(c) “4-High Intellectual Property” shall mean the Intellectual Property, as defined in the Timet Security Agreement as in effect on the date hereof.

(d) “Timet” shall mean Titanium Metals Corporation, a Delaware corporation, and its successors and assigns.

(e) “Timet Collateral” shall mean, collectively, the Mill, the Contract Rights, the Equipment, the Intellectual Property for Titanium Conversion Services, or any Proceeds thereof to the extent subject to the security interest and lien of Timet under the Timet Security Agreement as in effect on the date hereof. Each of the capitalized terms used in this definition of the term “Timet Collateral” shall have the meanings assigned thereto in the Timet Security Agreement as in effect on the date hereof.

(f) “Timet Conversion Agreement” shall mean the Conversion Services Agreement, dated on or about the date hereof, by and between Haynes Parent and Timet, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

(g) “Timet Documents” shall mean, collectively, the Timet Conversion Agreement, the Timet Security Agreement, the Timet Option Note and all agreements, documents or instruments at any time executed and/or delivered by Borrowers or any other Person with, to or in favor of Timet in connection therewith or related thereto, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

(h) “Timet Debt” shall mean, collectively, (i) any outstanding principal balance under the Timet Option Note and any accrued and unpaid interest thereon, if any; (ii) the entire unearned portion of the Timet Fee; (iii) the amount of any Liquidated Damages (as defined in the Timet Conversion Agreement as in effect on the date hereof); (iv) the amount of any

Termination Fee (as defined in the Timet Conversion Agreement as in effect on the date hereof); (v) the amount of any Non-Compete Amendment Fee (as defined in the Timet Conversion Agreement as in effect on the date hereof); and (vi) any amounts owed by Haynes Parent under Section 5.1 of the Timet Conversion Agreement as in effect on the date hereof.

(i) “Timet Fee” shall mean the amount of $50,000,000 payable by Timet to Haynes Parent in accordance with Section 2(c) of the Timet Security Agreement as in effect on the date hereof as consideration for (i) the capacity reservations and commitments described in Section 2(a) of the Timet Security Agreement and the Timet Conversion Agreement, (ii) the termination of the standstill provisions as described in Section 2(b) of the Timet Security Agreement and (iii) the option to order additional services granted to Timet pursuant to Section 2.1(b) of the Timet Conversion Agreement.

(j) “Timet Obligations” shall mean the Timet Debt together with Haynes Parent’s obligations under the Timet Documents as in effect on the date hereof.

(k) “Timet Option Note” shall mean the secured promissory note made by Haynes Parent in favor of Timet in an aggregate principal amount of not more than $12,000,000 pursuant to the Timet Documents, substantially in the form attached hereto as Exhibit A and as the same may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

(l) “Timet Security Agreement” shall mean the Access and Security Agreement, dated on or about the date hereof, by and between Haynes Parent and Timet, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

1.2. Amendments to Definitions .

(a) The term “Financing Agreements” as used in the Loan Agreement and in the other Financing Agreements shall be deemed and each such reference is hereby amended to include, in addition and not in limitation, this Amendment No. 6, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

(b) The term “Haynes Parent Fixed Asset Availability” as used in the Loan Agreement and in the other Financing Agreements shall be deemed and each such reference is hereby amended to mean $10,940,505.22; provided , that , effective on the first day of each month after the date hereof, the Haynes Parent Fixed Asset Availability shall be reduced by the amount equal to $198,386 on the first day of each such month.

1.3. Interpretation . For purposes of this Amendment No. 6, unless otherwise defined or amended herein, including, but not limited to, those terms used and/or defined in the recitals hereto, all terms used herein shall have the respective meanings assigned to such terms in the Loan Agreement.

2. Release of Timet Collateral .

2.1. Subject to the satisfaction of each of the conditions precedent set forth in Section 8 hereof, Agent hereby releases its security interests in and liens upon the Timet Collateral;

provided , that nothing contained herein shall be deemed a release or termination by Agent of any security interests in and liens upon any assets of Borrowers in favor of Agent other than the Timet Collateral, all of which shall continue in full force and effect. Nothing contained herein shall be construed in any manner to constitute a subordination, waiver, release or termination (other than as to the Timet Collateral as provided herein) or to otherwise limit or impair any of the Obligations of Borrowers. Each Lender authorizes and consents to the execution and delivery by Agent of such release agreements and the filing of UCC Financing Statement Amendments to reflect such release of security interests and liens, in each case in form and substance satisfactory to Agent and the Collateral Access Agreement referred to below.

2.2. Section 5.1(b) of the Loan Agreement is hereby amended by adding a new Section 5.1(b)(iv) at the end thereof as follows:

“(iv) the Timet Collateral.”

3. Sale of Assets, Etc . Section 9.7(b) of the Loan Agreement is hereby amended by adding a new Section 9.7(b)(x) at the end thereof as follows:

“(x) the grant by Haynes Parent of a non-exclusive license of the 4-High Intellectual Property to Timet in accordance with Section 5 of the Timet Security Agreement as in effect on the date of Amendment No. 6; provided , that , such license is only for the use of the 4-High Intellectual Property to the extent required for the titanium conversion services provided for under the Timet Conversion Agreement as in effect on the date of Amendment No. 6 and during the time that Timet is exercising its rights of access to the Timet Collateral in accordance with the terms of the Timet Security Agreement.”

4. Encumbrances . Section 9.8 of the Loan Agreement is hereby amended by adding a new Section 9.8(p) at the end thereof as follows:

“(p) the security interests in and liens upon the Timet Collateral to secure the Timet Obligations granted by Haynes Parent to Timet pursuant to the Timet Security Agreement as in effect on the date of Amendment No. 6.”

5. Indebtedness . Section 9.9 of the Loan Agreement is hereby amended by adding a new Section 9.9(l) at the end thereof as follows:

“(l) the Timet Debt arising pursuant to the Timet Documents as in effect on the date of Amendment No. 6; provided , that , the aggregate amount of such Indebtedness shall consist of and not exceed (A) the amount of the Timet Fee as reduced by an amount equal to $2,500,000 on November 17 of each year commencing on November 17, 2007, plus (B) the lesser of the amount equal to $12,000,000 or the amount of the cash received by Haynes Parent from Timet giving rise to Indebtedness evidenced by the Timet Option Note in the event that Timet makes a loan in such amount to Haynes Parent in accordance with the terms of Section 2.1(c) of the Timet Conversion Agreement as in effect on the date of Amendment No. 6, as reduced by all payments in respect thereof, plus accrued and unpaid interest thereon, if any, (C) the contingent liability of Haynes Parent to Timet for liquidated damages as provided in Section 5.3(a)(y) of the Timet Conversion

Agreement (not to exceed $25,000,000 in the aggregate), (D) the contingent liability of Haynes Parent to reimburse Timet under Section 5.1 of the Timet Conversion Agreement as a result of the failure of Haynes Parent to comply with the warranty set forth in Section 6.1 of the Timet Conversion Agreement, (E) the amount of any Termination Fee owing as a result of a Change in Control (as defined in the Timet Conversion Agreement) calculated in accordance with Section 13.2 of the Timet Conversion Agreement (not to exceed $25,000,000), and (F) the amount of any Non-Compete Amendment Fee calculated in accordance with Section 11.2 of the Timet Conversion Agreement (not to exceed $15,000,000 in the aggregate); (ii) Haynes Parent shall not, directly or indirectly, (A) amend, modify, alter or change the terms of such Indebtedness or any of the Timet Documents as in effect on the date of Amendment No. 6 (or in the case of the Timet Option Note as set forth in Exhibit A to Amendment No. 6, except to complete such form as required), except, that, Haynes Parent may, after prior written notice to Agent, amend, modify, alter or change the terms thereof so as to extend the maturity thereof, or defer the timing of any payments in respect thereof, or to forgive or cancel any portion of such Indebtedness (other than pursuant to payments thereof), or to reduce the interest rate or any fees in connection therewith, or to make any covenant less restrictive, or (B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness, or set aside or otherwise deposit or invest any sums for such purpose; (iii) Agent shall receive notice that Timet has exercised its option to require additional output pounds of titanium conversion services under Section 2.1(b) of the Timet Conversion Agreement promptly upon the receipt of such notice by Haynes Parent and a copy of the Timet Option Note as executed and delivered by Haynes Parent to Timet upon the execution and delivery thereof by Haynes Parent to Timet, and (iv) Haynes Parent shall furnish or cause to be furnished to Agent all notices or demands in connection with such Indebtedness or otherwise under the Timet Documents either received by Haynes Parent or on its behalf, promptly after the receipt thereof, or sent by Haynes Parent or on its behalf, concurrently with the sending thereof, as the case may be.”

6. Events of Default . Section 10.1(n) of the Loan Agreement is hereby amended by adding “or the Timet Documents” immediately before the period at the end of such Section.

7. Representations and Warranties . Each Borrower hereby represents and warrants to Agent and Lenders the following (which shall survive the execution and delivery of this Amendment No. 6), the truth and accuracy of which on the date hereof are a continuing condition of the making of Loans and providing Letter of Credit Accommodations to Borrowers:

7.1. This Amendment No. 6 has been duly authorized, executed and delivered by it, and has been authorized by all necessary action on the part of such Borrower which is a party hereto (and, if necessary, their respective stockholders) and each such agreement is in full force and effect as of the date hereof, and the agreements and obligations of Haynes Parent and Haynes Wire, as the case may be, contained herein, constitute the legal, valid and binding obligations of such Borrower, enforceable against it in accordance with its terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity.

7.2. The execution, delivery and performance of this Amendment No. 6 (a) are all within the corporate powers of Haynes Parent and Haynes Wire and (b) are not in contravention of law or the terms of such Borrower’s certificate of incorporation, by-laws, or other organizational documentation, or any indenture, agreement or undertaking to which such Borrower is a party or by which such Borrower or its property are bound (including, without limitation, any Timet Document).

7.3. After giving effect to this Amendment No. 6 and to the transactions contemplated by the Timet Documents, no Default or Event of Default exists or has occurred and is continuing.

7.4. A correct and complete copy of the Timet Security Agreement (including all exhibits thereto) as executed and delivered by the parties thereto is set forth on Exhibit B to this Amendment No. 6. Borrowers have delivered, or caused to be delivered, to Agent true, correct and complete copies of all of the Timet Documents that are in effect on the date hereof.

8. Conditions Precedent . The amendments contained herein shall only be effective upon the receipt by Agent of each of the following, in each case in form and substance satisfactory to Agent by no later than November 20, 2006:

8.1. an executed original or executed original counterparts of this Amendment No. 6 (as the case may be), duly authorized, executed and delivered by the respective party or parties hereto;

8.2. true and complete copies of the Timet Documents and any documents relating thereto, all as duly executed and delivered by the parties thereto;

8.3. a Collateral Access Agreement duly executed and delivered by Timet with respect to the Timet Collateral;

8.4. evidence of the receipt by Haynes Parent of not less than $50,000,000 in cash constituting the Timet Fee payable to it under the Timet Security Agreement (of which a portion is being sent to Agent as provided below);

8.5. receipt by Agent of a payment from Haynes Parent of not less than $4,537,660 for application to the Obligations in such order and manner as Agent may determine;

8.6. a true and correct copy of any consent, waiver or approval (if any) to or of this Amendment No. 6 or the transactions contemplated by the Timet Documents which any Borrower is required to obtain from any other Person; and

8.7. such approvals of Lenders, in form and substance satisfactory to Agent, to the terms and conditions of this Amendment No. 6 as are required under the terms of the Loan Agreement.

9. Provisions of General Application .

9.1. Effect of this Amendment . Except as expressly amended pursuant hereto, no other changes or modifications to the Financing Agreements are intended or implied and, in all

other respects, the Financing Agreements are hereby specifically ratified, restated and confirmed by all parties hereto as of the effective date hereof. To the extent that any provision of the Loan Agreement or any of the other Financing Agreements are inconsistent with the provisions of this Amendment No. 6, the provisions of this Amendment No. 6 shall control. The Loan Agreement and this Amendment No. 6 shall be read and construed as one Agreement.

9.2. Governing Law . The validity, interpretation and enforcement of this Amendment No. 6 and the other Financing Agreements (except as otherwise provided therein) and any dispute arising out of the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of Illinois, but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of Illinois.

9.3. Binding Effect . This Amendment No. 6 shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns. Any acknowledgments or consents contained herein shall not be construed to constitute a consent to any other or further action by a Borrower or to entitle such Borrower to any other consent.

9.4. Further Assurances . Each Borrower shall execute and deliver such additional documents and take such additional action as may be reasonably requested by Agent and Lenders to effectuate the provisions and purposes of this Amendment No. 6.

9.5. Headings . The headings listed herein are for convenience only and do not constitute matters to be construed in interpreting this Amendment No. 6.

9.6. Counterparts . This Amendment No. 6 may be executed in any number of counterparts, each of which shall be an original but all of which taken together shall constitute one and the same Agreement. Delivery of an executed counterpart of this Amendment No. 6 by telefacsimile or other electronic means shall have the same force and effect as the delivery of an original executed counterpart of this Amendment No. 6. Any party delivering an executed counterpart of this Amendment No. 6 by telefacsimile or other electronic means shall also deliver an originally executed counterpart of this Amendment No. 6, but the failure to do so shall not affect the validity, enforceability or binding effect of this Amendment No. 6.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 6 to be duly executed and delivered by their authorized officers as of the date and year first above written.

		WACHOVIA CAPITAL FINANCE CORPORATION (CENTRAL), as Agent and as Lender

		By:	/s/ VICKY GEIST
		Title: VICE PRESIDENT


		HAYNES INTERNATIONAL, INC.

		By:	/s/ FRANCIS PETRO
		Title: President and CEO


		HAYNES WIRE COMPANY

		By:	/s/ FRANCIS PETRO
		Title: President and CEO


AGREED:

JPMORGAN CHASE BANK, N.A.,
successor by merger to BANK ONE, NA (Main Office Chicago)

By:	/s/ JOHN FREEMAN
Title: Vice President


WESTERNBANK PUERTO RICO
BUSINESS CREDIT DIVISION

By:	/s/ JULIA FRENTIS
Title: SVP Portfolio Manager


ABLECO FINANCE LLC

By:
Title: Senior Vice President

Exhibit 10.24

Summary of
2007 Management Incentive Plan

On January 12, 2007, the Compensation Committee of the Board of Directors of Haynes International, Inc. (the “Company”) approved the 2007 Management Incentive Plan (the “Plan”). Under the Plan, certain employees of the Company are eligible for cash awards based on Company performance, including, but not limited to, Francis J. Petro, the President and Chief Executive Officer, and the other named executive officers as set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2006, which are Marcel Martin, Vice President Finance and Chief Financial Officer; August A. Cijan, Vice President — Operations; James A. Laird, Vice President International Sales and Marketing; and Gregory M. Spalding, Vice President — Haynes Wire and Chief Operating Officer (Messrs. Petro, Martin, Cijan, Laird and Spalding are herein referred to collectively as the “named executive officers”).

If the Company meets certain specific financial targets established by the Compensation Committee for fiscal 2007 (the “Financial Targets”), each named executive officer is eligible for a cash payment under the Plan based on fiscal 2007 base salary. The target cash payments under the Plan are 60% of fiscal 2007 base salary for Mr. Petro, 45% of fiscal 2007 base salary for Mr. Martin, Mr. Cijan and Mr. Laird, and 25% of fiscal 2007 base salary for Mr. Spalding. The named executive officers are also eligible for a cash payment under the Plan if the Company’s performance is equal to at least 85% of the Financial Targets. Those cash payments would be 35% of fiscal 2007 base salary for Mr. Petro, 25% of fiscal 2007 base salary for Mr. Martin, Mr. Cijan and Mr. Laird, and 12.5% of fiscal 2007 base salary for Mr. Spalding. If the Company’s performance exceeds the Financial Targets by at least 15%, the named executive officers would be eligible for cash payments of 90% of fiscal 2007 base salary for Mr. Petro, 67.5% of fiscal 2007 base salary for Mr. Martin, Mr. Cijan and Mr. Laird, and 37.5% of fiscal 2007 base salary for Mr. Spalding. All payments pursuant to the Plan must be approved by the Company’s Board of Directors.

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.

(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.

(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.

(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

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

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

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

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);

(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.

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.

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).

Exhibit 10.26

	Haynes International, Inc.
	1020 West Park Avenue
	P.O. Box 9103
	Kokomo, Indiana 46904-9013
	765-456-6000 / Fax: 765-456-6905

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.

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.

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

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

Exhibit 10.27

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.

(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.

(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

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

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.

(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

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

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.

(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

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,

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

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).

Ice Miller LLP Draft
January 19, 2007

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	1,000,000

Exhibit 10.28

FORM OF

HAYNES INTERNATIONAL, INC.
NONQUALIFIED STOCK OPTION AGREEMENT

Dear :

You are hereby granted an option (the “Option”) to purchase Shares of Haynes International, Inc. pursuant to the Haynes International, Inc. (the “Company”) Stock Option Plan, dated as of August 31, 2004 (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 this Agreement. 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 this Agreement, 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 and with respect to an additional 33-1/3 percent on each of and , 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.

3. Termination of Employment or Service .

(a) Notwithstanding the vesting schedule set forth in Section 2 , if you cease to be an Executive, a Non-Employee Director or a Discretionary Participant (as applicable) of the Company or a Subsidiary (as applicable) due to a Termination for Cause, or if you terminate employment without Good Reason, 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 Executive or a Discretionary Participant (as applicable) of the Company or a Subsidiary (as applicable) for any reason other than Cause or for Good Reason, 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 six (6) months 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 Executive, a Non-Employee Director or a Discretionary Participant (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 Executive, a Non-Employee Director or a Discretionary Participant (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 Executive or a Discretionary Participant 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 value of the difference between the Fair Market Value of the Shares and the exercise price of such Option.

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, or except as otherwise provided in Section 11 of the Plan, the vesting of the Option shall not accelerate upon the occurrence of a Change in Control.

(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.

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

SCHEDULE OF EXECUTIVE OFFICERS PARTY TO THE STOCK OPTION AGREEMENT

Bohan, Paul J.

Campion, Donald C.

Cijan, August A.

Corey, John C.

Douglas, Michael

Getz, Robert

Laird, James A.

Losch, Marlin

Martin, Marcel

Maudlin, Daniel

McCarthy, Timothy J.

Neel, Jean C.

Petro, Francis J.

Pinkham, Scott R.

Spalding, Gregory M.

Sponaugle, Charles J.

Wall, William

Young, Jeff

Zabel, Ronald W.

Exhibit 10.29

August 31, 2004

HAYNES INTERNATIONAL, INC.

NONQUALIFIED STOCK OPTION AGREEMENT

Dear Francis J. Petro:

You are hereby granted an option (the “Option”) to purchase 200,000 Shares of Haynes International, Inc. (the “Company”) pursuant to the Haynes International, Inc. Stock Option Plan, dated as of August 31, 2004 (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 $12.80 per Share which is equal to the Fair Market Value per Share as of the date of this Agreement. 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, (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 at the time of exercise 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 in full has been made and received by the Company.

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 this Agreement, 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 SECTION 3 or 4, which provide for accelerated vesting under certain circumstances, the Option shall become vested and exercisable with respect to 33-1/3 percent of the total number of Shares covered by the Option on August 31, 2005 and with respect to an additional 33-1/3 percent on each of August 31, 2006 and August 31, 2007, 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.

3. TERMINATION OF EMPLOYMENT.

(a) Notwithstanding the vesting schedule set forth in SECTION 2, if you cease to be the CEO of the Company and all of its Subsidiaries due to Termination for Cause, all outstanding Options whether vested or unvested shall be void and deemed to be forfeited upon the date your employment ceases by reason of Termination for Cause and shall not be exercisable to any extent whatsoever. If you terminate employment during the employment term under your employment agreement without Good Reason, the unvested portion of the Option, shall terminate immediately and the vested portion of the Option shall remain exercisable for thirty (30) days following the date of such termination of

employment, but in no event later than the expiration of such Option as specified in this 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.

(b) If you cease to be the CEO of the Company and all of its Subsidiaries for any reason other than Cause or for Good Reason, the unvested portion of the Option shall immediately vest and become exercisable and the Option shall remain exercisable for one (1) year following such termination, but not later than the expiration of the Option Term. If you do not exercise such 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. If your employment terminates upon expiration of the employment term under your existing or a subsequent employment agreement, the unvested portion of the Option shall terminate immediately and the vested portion of the Option shall remain exercisable for ninety (90) days following termination of employment, but in no event later than the expiration of the Option Term. 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.

(c) If you cease to be the CEO of the Company and all of its Subsidiaries by reason of your death, Disability or Retirement, the unvested portion of the Option shall immediately vest and become exercisable and the Option shall remain exercisable for one (1) year following the date of death or Disability and for six (6) months following the date of Retirement, 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) In the event 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 value of the difference between the Fair Market Value of the Shares and the exercise price of such Option.

4. ADJUSTMENTS; 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 or except as otherwise provided in Section 11 of the Plan, the vesting of the Option shall not accelerate upon the occurrence of a Change in Control.

(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 during your lifetime only by you, or if you die, by your executor, administrator, or person(s) to whom the Option is transferred by will or the applicable 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. Nothing contained in this Agreement or the Plan shall restrict the right of the Company or any of its Subsidiaries to terminate your employment 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 regulations 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 THE OPTION. This Agreement is intended to grant a Nonqualified Option.

11. NOTICE. All notices sent 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.

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 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 federal, state or local 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.


	/s/ John C. Corey
	Chairman of the Board

Exhibit 21.1

HAYNES INTERNATIONAL, INC. AND SUBSIDIARIES

Haynes International, Inc.
Parent company

Haynes Wire Company
(Wholly owned subsidiary in Mountain Home, North Carolina)

Haynes International, Ltd.
(Wholly owned subsidiary in Openshaw, England)

Haynes International, S.A.R.L.
(Wholly owned subsidiary in Paris, France)

Nickel-Contor AG
(Wholly owned subsidiary in Zurich, Switzerland)

Haynes International, S.r.l.
(Wholly owned subsidiary of Nickel-Contor in Italy)

Haynes Pacific Pte Ltd
(Wholly owned subsidiary in Singapore)

Haynes International (China) Ltd.
(Wholly owned subsidiary of Haynes Pacific Pte. Ltd.)

Haynes International, Inc. India Branch Office
(Wholly owned Branch Office in India)

Haynes Sour Gas Tubulars, Inc.
(Wholly owned subsidiary, Inactive)

Haynes Specialty Steels Company
(Wholly owned subsidiary, Inactive)

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use in this Registration Statement on Form S-1 of our reports dated December 7, 2006 relating to the consolidated financial statements of Haynes International, Inc. (which report expresses an unqualified opinion and includes an explanatory paragraph referring to the Company’s application of AICPA Statement of Position, 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code ” , and an explanatory paragraph regarding the Company’s change of accounting for share-based payments as required by Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment ” ), and management’s report on the effectiveness of internal control over financial reporting appearing in the Prospectus, which is a part of this Registration Statement.

We also consent to the reference to us under the heading “Experts” in such Prospectus.

DELOITTE & TOUCHE LLP

Indianapolis, Indiana
January 23, 2007