Haynes International, Inc. - Exhibit 10.09




Exhibit 10.09




AMENDMENT NO. 3

TO

CREDIT AGREEMENT





            AMENDMENT    NO.    3   (the
"Amendment") TO "CREDIT  AGREEMENT" (as defined below),  dated as of November 1,
2002, among Haynes International, Inc., a Delaware corporation (the "Borrower"),
the financial  institutions  party to the Credit Agreement (the "Lenders"),  and
Fleet Capital Corporation, in its capacity as administrative agent for itself as
a Lender and the other Lenders (the  "Administrative  Agent") under that certain
Credit Agreement,  dated as of November 22, 1999, by and among the Borrower, the
Lenders  and the  Administrative  Agent (as the same may be  amended,  restated,
supplemented or otherwise  modified from time to time, the "Credit  Agreement").
Each  capitalized  term used herein and not otherwise  defined herein shall have
the meaning given to it in the Credit Agreement.




PRELIMINARY STATEMENTS



        WHEREAS,  the  Borrower,  the
Lenders and the Administrative Agent have entered into the Credit Agreement; and




        WHEREAS,  the  Borrower,  the
Lenders and the  Administrative  Agent have agreed to amend the Credit Agreement
on the terms and conditions set forth herein.




        NOW, THEREFORE, in consideration
of the premises set forth above, and for other good and valuable  consideration,
the receipt and sufficiency of which are hereby acknowledged,  the Borrower, the
Lenders and the Administrative Agent agree as follows:




                
1.    Amendments  to the Credit Agreement.  Effective
as of the date first above  written,  unless  otherwise  specified  herein,  and
subject  to the  execution  of this  Amendment  by the  parties  hereto  and the
satisfaction  of the conditions  precedent set forth in Section 2 below,
the Credit Agreement shall be and hereby is amended as follows:



                
a.     
The definition of "Availability Reserve" is hereby amended in its entirety as follows:




             
           
"Availability Reserve" means, on any date of calculation, the
sum of:




                        
                (i)   the Senior Note Reserve, plus




                        
                (ii)   the excess of that portion of the Borrowing Base related to
the sum of (A) Eligible Inventory of the Eligible Foreign Subsidiaries plus (B)
Net Amount of Eligible Accounts of the Eligible Foreign Subsidiaries, over (C)
prior to the Amendment No. 3 Effective Date, $12,000,000, and (D) subsequent to
the Amendment No. 3 Effective Date, $17,000,000 minus the Eligible Foreign
Subsidiary Reduction Amount, plus




                        
                (iii)   the Fixed Charge Reserve, plus





                        
(iv)   the  aggregate  balance of all trade  payables owed by the
Borrower  and any  Subsidiary  if,  in the  reasonable  credit  judgment  of the
Administrative  Agent (which credit judgment shall be exercised in a manner that
is not  arbitrary  or  capricious  and  is  consistent  with  the  standards  of
eligibility and credit judgment generally applied by the Administrative Agent to
other  borrowers  similarly  situated),  such trade payables are materially past
due;  provided,  however,  that the Administrative Agent shall not
consider any trade payable  materially  past due unless such trade payable is at
least  thirty  days past due;  provided,  further,  that any trade
payable the payment of which is the subject of a dispute being contested in good
faith by appropriate proceedings properly instituted and diligently conducted by
the  Borrower  or the  applicable  Subsidiary  shall  not be  considered  by the
Administrative Agent materially past due.






                b.        
The definition of "EBITDA" set forth in Section 1.1 of the Credit
Agreement is hereby amended to insert immediately after clause (x) thereof and
immediately before the sentence which begins "For the purposes of calculating
EBITDA" the following:




                
plus  (xi) to the extent  deducted in  computing  Net Income  during such
period,   the  aggregate  of  the  non-cash   portion  of  pension   obligations
constituting  expenses or  liabilities  under FASB 87 during such period and the
non-cash  portion  of   post-retirement   benefits   constituting   expenses  or
liabilities  under FASB 106 during  such  period,  minus (xii) to the extent not
reflected in the  computation  of Net Income  during such period,  the aggregate
amount of cash  contributions  and other cash  payments  during  such  period in
respect of the pension obligations and post-retirement benefits described in the
preceding clause (xi).




                c.        
The definition of "Fixed Charge  Reserve" set forth in Section 1.1 of the Credit
Agreement is hereby amended in its entirety as follows:




        "Fixed Charge Reserve" means:




        (a)        
prior to the date on which the  Borrower  delivers to the Lenders the  financial
information required under Section 7.1(A) for the period ending June 30, 2003:



	
	
           (i)   the Standard  Fixed Charge  Reserve at any time the Fixed  Charge  Coverage  Ratio equals or exceeds
           1.0 to 1.0;



           (ii)   $2,500,000 plus the Standard Fixed Charge Reserve at any time
           the Fixed Charge Coverage Ratio equals or exceeds 0.85 to 1.0 but is
           less than 1.0 to 1.0, and;



           (iii)   $5,000,000 plus the Standard Fixed Charge Reserve at any time
           the Fixed Charge Coverage Ratio equals or exceeds 0.75 to 1.0 but is
           less than 0.85 to 1.0; and








        (b)        
subsequent  to the  date on which  the  Borrower  delivers  to the  Lenders  the
financial  information  required under Section 7.1(A) for the period ending June
30, 2003:



	
	
           (i)   $0 at any time the Fixed Charge Coverage Ratio equals or exceeds 1.25 to 1.0;



           (ii)   the Standard Fixed Charge Reserve at any time the Fixed Charge
           Coverage Ratio equals or exceeds 1.0 to 1.0 but is less than 1.25 to
           1.0;



           (iii)   $2,500,000 plus the Standard Fixed Charge Reserve at any time
           the Fixed Charge Coverage Ratio equals or exceeds 0.85 to 1.0 but is
           less than 1.0 to 1.0, and;



           (iv)   $5,000,000 plus the Standard Fixed Charge Reserve at any time
           the Fixed Charge Coverage Ratio equals or exceeds 0.75 to 1.0 but is
           less than 0.85 to 1.0.








        d.        
The definition of "Revolving Loan Termination  Date" set forth in Section 1.1 of
the Credit Agreement is hereby amended in its entirety as follows:




        "Revolving            Loan
Termination  Date" means the earlier to occur of (i) October 31, 2005 or
(ii) the day which is ninety days prior to the  scheduled  maturity  date of the
Senior Notes, as such date may change from time to time.




        e.        
Section 1.1 is hereby  amended to insert  alphabetically  therein the  following
defined terms:




        "Amendment  No. 3" means  Amendment  No. 3 to Credit  Agreement,  dated as of November 1, 2002, by and among
the Borrower, the Lenders, and the Administrative Agent.




        "Amendment No. 3 Effective
Date" means November 1, 2002.




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        "Eligible Foreign Subsidiary Reduction Amount" means, on any date of
determination after the Amendment No. 3 Effective Date, an amount equal to
$83,333.33 times the number of months that have ended subsequent to the
Amendment No. 3 Effective Date. For example, on May 1, 2003, the Eligible
Foreign Subsidiary Reduction Amount would equal $83,333.33 times 6, or
$499,999.98. The Eligible Foreign Subsidiary Reduction Amount would remain equal
to $499,999.98 on May 15, 2003 because such month had not yet ended.




        f.        
Section 2.13(D)(ii) is hereby amended in its entirety as follows:




        (ii)        
Prior to the Amendment No. 3 Effective Date, the Applicable Floating Rate Margin
and the Applicable  Eurodollar Rate Margin shall be determined from time to time
by reference to the table set forth below,  on the basis of the then  applicable
Interest Coverage Ratio as calculated on a quarterly basis as of the end of each
of the Borrower's  fiscal  quarters  using EBITDA and Interest  Expense for such
fiscal quarter:



	
Interest Coverage Ratio	
Applicable Floating Margin

for Revolving Loans	
Applicable Eurodollar Margins

for Revolving Loans
	
Less than 1.25 to 1.0	
0.75%	
2.75%
	
Greater than or equal to

1.25 to 1.0	
0.50%	
2.50%




On and after the Amendment No. 3 Effective Date, the Applicable Floating Rate
Margin and the Applicable Eurodollar Rate Margin shall be determined from time
to time by reference to the table set forth below, on the basis of the then
applicable Interest Coverage Ratio as calculated on a quarterly basis as of the
end of each of the Borrower's fiscal quarters using EBITDA and Interest Expense
for such fiscal quarter:



	
Interest Coverage Ratio	
Applicable Floating Rate Margin

for Revolving Loans	
Applicable Eurodollar Margins

for Revolving Loans
	
Less than 1.25 to 1.0	
0.75%	
2.75%
	
Less than 1.5 to 1.0 but equal

to or greater than 1.25 to 1.0	
0.50%	
2.50%
	
Equal to or greater

than 1.5 to 1.0	
0.25%	
2.25%




Upon receipt of each quarterly report provided for in Section 7.1(A)(ii), the
Applicable Floating Margin and the Applicable Eurodollar Margin shall be
adjusted, any such adjustment being effective three (3) Business Days following
the Administrative Agent's receipt of such financial statements and the
compliance certificate required to be delivered in connection therewith pursuant
to Section 7.1(a)(iv); provided, that if the Borrower shall not have timely
delivered its financial statements in accordance with Section 7.1(A)(ii), then
commencing on the date upon which such financial statements should have been
delivered and continuing until such financial statements are actually delivered,
it shall be assumed for purposes of determining the Applicable Floating Margin
and Applicable Eurodollar Margin that the Interest Coverage Ratio was less than
(x) 1.5 to 1.0 prior to the Amendment No. 3 Effective Date and (y) 1.25 to 1.0
on and after the Amendment No. 3 Effective Date. Notwithstanding anything herein
to the contrary, from the Amendment No. 3 Effective Date through the date of
delivery of the quarterly financial statement due for the quarter ending
September 30, 2002, the Applicable Floating Margin and the Applicable Eurodollar
Margin shall be determined based upon an assumption that the Interest Coverage
Ratio is equal to or greater than 1.5 to 1.0.



        g.        
Section 7.4 (B) is hereby amended in its entirety as follows:



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        (B)     Capital
Expenditures.       The Borrower will not, nor will
it permit  any  Subsidiary  to  expend or be  committed  to expend  for  Capital
Expenditures  in any fiscal  year,  in the  aggregate  for the  Borrower and its
Subsidiaries,  in excess of (i) in fiscal year 2000, $14,000,000, (ii) in fiscal
year 2001, $16,000,000 plus an amount not in excess of $3,000,000 if such amount
was  permitted to be expended in fiscal year 2000 but was not expended in fiscal
year 2000,  (iii) in fiscal year 2002,  $18,000,000 plus an amount not in excess
of  $3,000,000  if such amount was  permitted to be expended in fiscal year 2001
but was not expended in fiscal year 2001, and (iv) in each of fiscal years 2003,
2004,  and 2005,  $7,000,000  plus,  in any such fiscal  year,  an amount not in
excess of  $3,000,000  if such amount was permitted to be expended in the fiscal
year immediately  preceding such fiscal year but was not previously  expended in
such immediately preceding fiscal year; provided, however, no such
addition shall be cumulative and no such addition  shall  carry-over  beyond one
fiscal year.




        h.     
Section 8.1 is hereby amended to insert immediately after clause (N) thereof the following clause (O):




        (O)     
Senior Notes Restructuring. The Borrower shall fail to
extend the scheduled maturity date and otherwise amend the terms and conditions
of the Senior Notes in a manner acceptable to the Required Lenders, in their
sole discretion, on or prior to May 31, 2004.




        2.     
Conditions Precedent. This Amendment shall become effective as of the
date above written, if, and only if, the Administrative Agent has received (i)
an executed copy of this Amendment from the Borrower, the Lenders and the
Administrative Agent, and (ii) a non-refundable $270,000 amendment fee in
immediately available funds for the ratable benefit of the Lenders.




        3.     
  Representations  and  Warranties  of  the  Borrower.   The  Borrower  hereby
represents and warrants as follows:




        (a)     
This Amendment and the Credit Agreement, as amended hereby,
constitute legal, valid and binding obligations of the Borrower and are
enforceable against the Borrower in accordance with their terms.




        (b)   Upon the effectiveness of this Amendment, the Borrower hereby
reaffirms all representations and warranties made in the Credit Agreement, and
to the extent the same are not amended hereby, agrees that all such
representations and warranties shall be deemed to have been remade as of the
date of delivery of this Amendment, unless and to the extent that any such
representation and warranty is stated to relate solely to an earlier date, in
which case such representation and warranty shall be true and correct as of such
earlier date.




        4.     
Reference to and Effect on the Credit Agreement.




        (a)     
 Upon the effectiveness of Section 1 hereof, on and after the date
hereof, each reference in the Credit Agreement to "this Credit Agreement,"
"hereunder," "hereof," "herein" or words of like import shall mean and be a
reference to the Credit Agreement as amended hereby.




        (b)     
 The Credit Agreement, as amended hereby, and all other documents,
instruments and agreements executed and/or delivered in connection therewith,
shall remain in full force and effect, and are hereby ratified and confirmed.




        (c)     
 Except as expressly provided herein, the execution, delivery and
effectiveness of this Amendment shall not operate as a waiver of any right,
power or remedy of the Administrative Agent or the Lenders, nor constitute a
waiver of any provision of the Credit Agreement or any other documents,
instruments and agreements executed and/or delivered in connection therewith.




        5.     Governing
Law. This  Amendment  shall be governed by and construed in accordance  with the
laws (including  Section 735 ILCS 105/5-1 et seq. but otherwise without regard to
conflict of law provisions) of the State of Illinois.




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        6.     Headings.
Section  headings in this  Amendment  are  included  herein for  convenience  of
reference  only and shall not  constitute a part of this Amendment for any other
purpose.




        7.     Counterparts.
This Amendment may be executed by one or more of the parties to the Amendment on
any number of separate  counterparts and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.




        IN    WITNESS   WHEREOF,    this
Amendment has been duly executed and delivered on the date first above written.



	
	
HAYNES INTERNATIONAL, INC.







By:  /ss/ Calvin S. McKay

Name:  Calvin S. McKay

Title:  Vice President, Finance, CFO







FLEET CAPITAL CORPORATION, individually and as

Administrative Agent







By:  /ss/ Robert J. Lund

Name:  Robert J. Lund

Title:  Senior Vice President







NATIONAL CITY COMMERCIAL FINANCE, INC.







By:  /ss/ Dennis Hatvany

Name:  Dennis Hatvany

Title:  Vice President







THE CIT GROUP/BUSINESS

CREDIT, INC.







By:  /ss/ James Andricopulas

Name:  James Andricopulas

Title:  Vice President







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