Amendment No. 7 to Credit Agreement





[Execution Version]







AMENDMENT NO. 7 TO CREDIT AGREEMENT






        This AMENDMENT NO. 7 TO CREDIT
AGREEMENT (this “Amendment”), dated as of February 27,
2004, is entered into by and among Haynes International, Inc., a Delaware
corporation (the “Borrower”), the financial institutions
party to the below-defined Credit Agreement (the
“Lenders”), Fleet Capital Corporation, in its capacity
as administrative agent for itself as a Lender and the other Lenders (the
“Administrative Agent”). 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 are parties to a Credit Agreement, dated as
of November 22, 1999 (as amended, restated, supplemented or otherwise modified
from time to time, the “Credit Agreement”);




        WHEREAS, the Borrower, the
Lenders and the Administrative Agent have agreed to enter into an amendment to
the Credit Agreement as set forth herein, in each case upon the terms and
conditions contained in this Amendment;




        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 hereby agree as follows:



        SECTION
1.    Definitions.    As
used herein, the following terms shall have the meanings set forth
below:




        “Suspension
Period” shall mean the period beginning on February 29, 2004 and
ending on the Suspension Termination Event.




        “Suspension
Termination Event” shall mean the earlier to occur of
(a) March 15, 2004 or (b) the existence or occurrence of any one
or more of the following:



        (i)        
The failure of the Borrower to comply with any term, condition or covenant set
forth in this Amendment.



        (ii)        The
occurrence of any Default under the Loan Documents.




        SECTION
2.    Temporary Suspension of Senior Note Reserve
During Suspension Period.    The Borrower, the
Lenders and the Administrative Agent agree that, notwithstanding anything to the
contrary in the Credit Agreement, immediately upon the effectiveness of this
Amendment, the Senior Note Reserve shall equal $0 at all times during the
Suspension Period only. Upon a Suspension Termination Event, the agreement set
forth in the preceding sentence shall immediately terminate and the reduction of
the Senior Note Reserve to $0 shall have no force or effect, all without the
requirement of any demand, presentment, protest or notice of any kind, all of
which the Borrower hereby waives. Upon a Suspension Termination Event, the
definition of the term “Senior Note Reserve” as set forth in the
Credit Agreement shall be immediately reinstated and shall be in full force and
effect, including, without limitation, for the purposes of calculating the
Borrowing Base and the Borrower’s prepayment obligation under and in
accordance with Section 2.3(B)(i) of the Credit Agreement, and the
Administrative Agent and the Lenders may proceed to exercise any and all of
their rights and remedies as if the Senior Note Reserve had not been reduced to
$0.








        SECTION
3.    Temporary Release of $500,000 from Fixed Charge
Reserve.    The Borrower, the Lenders and the
Administrative Agent agree that, notwithstanding anything to the contrary in the
Credit Agreement, immediately upon the effectiveness of this Amendment, the
Fixed Charge Reserve shall equal $6,500,000 at all times during the Suspension
Period only. Upon a Suspension Termination Event, the agreement set forth in the
preceding sentence shall immediately terminate and the reduction of the Fixed
Charge Reserve to $6,500,000 shall have no force or effect, all without the
requirement of any demand, presentment, protest or notice of any kind, all of
which the Borrower hereby waives. Upon a Suspension Termination Event, the
definition of the term “Fixed Charge Reserve” as set forth in the
Credit Agreement shall be immediately reinstated and shall be in full force and
effect, including, without limitation, for the purposes of calculating the
Borrowing Base and the Borrower’s prepayment obligation under and in
accordance with Section 2.3(B)(i) of the Credit Agreement, and the
Administrative Agent and the Lenders may proceed to exercise any and all of
their rights and remedies as if the Fixed Charge Reserve had not been reduced to
$6,500,000.




        SECTION
4.    Reservation of
Rights.    Notwithstanding any of the foregoing to
the contrary, the Administrative Agent and the Lenders expressly reserve all of
their rights, powers, privileges and remedies under the Credit Agreement and the
other Loan Documents and/or applicable law with respect to any event,
circumstance, act or omission which has occurred or exists or which may occur or
exist on or after the date hereof, in each case whether known or unknown, and
the Administrative Agent’s or any Lender’s failure to exercise any
such rights, powers, privileges or remedies shall not be deemed a waiver of such
rights, powers, privileges or remedies. No oral representations or course of
dealing on the part of the Administrative Agent or any Lender or any of their
officers, employees or agents, and no failure or delay by the Administrative
Agent or any Lender with respect to the exercise of any right, power, privilege
or remedy under the Credit Agreement and the other Loan Documents or applicable
law shall operate as a waiver thereof, and the single or partial exercise of any
such right, power, privilege or remedy shall not preclude any later exercise of
any other right, power, privilege or remedy.




        
SECTION 5.    Covenants.    Notwithstanding
anything contained in this Amendment or in any Loan Document to the contrary,
during the Suspension Period (i) neither the Borrower nor any of its
Subsidiaries may make any Permitted Acquisition that would otherwise be
permitted to be made pursuant to Section 7.3(F) of the Credit Agreement or any
Investment in Permitted Acquisition that would otherwise be permitted to be made
pursuant to Section 7.3(D)(vi) of the Credit Agreement, (ii) neither
the Borrower nor any of its Subsidiaries may make any payment of the Blackstone
Monitoring Fees that would otherwise be permitted to be made pursuant to Section
7.3(E)(iii) of the Credit Agreement, and (iii) without the prior written consent
of the Administrative Agent, neither the Borrower nor any of its Subsidiaries
may sell, assign, transfer, lease, convey or otherwise dispose of any assets
outside of the ordinary course of business that would otherwise be permitted to
be disposed of pursuant to Section 7.3(B)(iii) of the Credit
Agreement.










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        SECTION
6.    Interest
Expense.    For the avoidance of doubt, the
Borrower, the Administrative Agent and the Lenders acknowledge and agree that
any semi-annual interest payment due on the Senior Notes (including, without
imitation, such interest payment due on March 1, 2004) shall constitute and
shall be deemed to be an Interest Expense under the Credit Agreement, whether
actually paid or not.




        SECTION 7.    Condition
Precedent.    This Amendment shall become effective
as of the date above written, if, and only if, (i) the Administrative Agent
has received an executed copy of this Amendment from the Borrower, the Lenders,
and the Administrative Agent, (ii) the Administrative Agent has received
(for the account of each Lender) a non-refundable and fully earned amendment fee
in immediately available funds equal to such Lender’s Pro Rata Share of
$500,000, provided however that as to only those Lenders who participate in the
restructuring financing with the Borrower, 70% of such Lender’s Pro Rata
Share of the aforementioned $500,000 fee shall be applied against the fees
earned by such Lender under such restructuring financing, and (iii)
Administrative Agent has received from Parent a duly executed Consent and
Reaffirmation in the form of Exhibit A attached hereto.




        SECTION
8.    Limited
Waiver.    The Administrative Agent and each Lender
hereby temporarily waive, until the occurrence of a Suspension Termination
Event, any Unmatured Default under the Credit Agreement or any other Loan
Document resulting solely from the failure of the Borrower to pay interest on
the Senior Notes due on March 1, 2004; provided however that immediately upon
the occurrence of a Suspension Termination Event, the temporary waiver set forth
in the preceding sentence shall immediately terminate and such temporary waiver
shall have no force or effect, all without the requirement of any demand,
presentment, protest or notice of any kind, all of which the Borrower hereby
waives, and the Administrative Agent and the Lenders may proceed to exercise any
and all of their rights and remedies as if such temporary waiver had never
existed; provided further however, that if any holder of Senior Notes, or any
Person claiming by, through, or under one or more such holders, takes any action
to collect or otherwise enforce any right or remedy with respect to the
Borrower’s failure to pay interest on the Senior Notes due on March 1,
2004, then (i) the Borrower shall, promptly after obtaining knowledge thereof,
notify the Administrative Agent of such action (and the failure to provide such
notice as provided herein shall constitute an immediate Default under the Credit
Agreement) and (ii) a Default under the Credit Agreement shall exist if such
action has not, within five (5) Business Days after Borrower knows or should
reasonably know that such action has been taken, been terminated or dismissed in
a manner satisfactory to the Administrative Agent in its sole and absolute
discretion.










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        SECTION
9.    Release.    The
Borrower hereby represents and warrants that the Credit Agreement and the other
Loan Documents are enforceable in accordance with their respective terms (except
as the enforcement thereof may be limited by applicable bankruptcy, insolvency
or similar law affecting creditors’ rights generally and by general
principles of equity) and are not subject to any defenses or offsets of any kind
whatsoever (“Defenses”) and that there are no
liabilities, claims, suits, debts, liens, losses, causes of action, demands,
rights, damages or costs, or expenses of any kind, character or nature
whatsoever, known or unknown, fixed or contingent (collectively, the
“Claims”), which the Borrower may have or claim to have
against the Administrative Agent or any Lender, or any of their respective
affiliates, agents, employees, officers, directors, representatives, attorneys,
successors and assigns (collectively, the “Lender Released
Parties”), which might arise out of or be connected with or related
to any act of commission or omission of the Lender Released Parties existing or
occurring on or prior to the date of this Amendment relating to or arising out
of or in connection with the Obligations or any Loan Document or any other
agreement or transaction contemplated thereby. In furtherance of the foregoing,
the Borrower hereby waives, releases, acquits and forever discharges the Lender
Released Parties from any and all (i) Defenses which it may have as of the
date hereof in connection with or relating to the Credit Agreement or any other
Loan Document, and (ii) Claims that the Borrower may have or claim to have
as of the date hereof, relating to or arising out of or in connection with or
relating to the Obligations or any Loan Document or any other agreement or
transaction contemplated thereby or any action taken in connection therewith
from the beginning of time up to and including the date of the execution and
delivery of this Amendment. The Borrower further agrees forever to refrain from
commencing, instituting or prosecuting any lawsuit, action or other proceeding
against any Lender Released Parties with respect to any and all Claims expressly
released herein.



        SECTION
10.    Representations and
Warranties.    The Borrower represents and warrants
that:




        
10.1        The execution, delivery and
performance by Borrower of this Amendment have been duly authorized by all
necessary corporate action.




        10.2        
This Amendment and the Credit Agreement, as amended hereby, constitute legal,
valid and binding obligation of the Borrower and are enforceable against the
Borrower in accordance with their terms (except as the enforcement thereof may
be limited by applicable bankruptcy, insolvency or similar law affecting
creditors’ rights generally and by general principles of
equity).




        10.3        After
giving effect to this Amendment, each of the representations and warranties
contained in the Credit Agreement and the other Loan Documents is true and
correct in all material respects on and as of the date hereof as if made on the
date hereof, except to the extent that such representations and warranties
expressly relate to an earlier date; provided however, that until the occurrence
of a Suspension Termination Event and for purposes of Section 6.12(i) of the
Credit Agreement only, the Borrower shall not be deemed to be in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any Contractual Obligation applicable to it if and only
if such default results solely from the failure of the Borrower to pay interest
on the Senior Notes due on March 1, 2004.










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        10.4        Neither
the execution, delivery and performance of this Amendment nor the consummation
of the transactions contemplated hereby does or shall contravene, result in a
breach of, or violate (i) any provision of the Borrower’s certificate or
articles of incorporation or bylaws, (ii) any law or regulation, or any order or
decree of any court or government instrumentality, or (iii) any indenture,
mortgage, deed of trust, lease, agreement or other instrument to which the
Borrower is a party or by which Borrower or any of its property is bound, except
in any such case to the extent such conflict or breach has been waived by a
written waiver document, a copy of which has been delivered to Agent on or
before the date hereof; and




        10.5        After
giving effect to this Amendment, no Unmatured Default or Default has occurred
and is continuing under the Loan Documents.



        SECTION
11.    Reference to and Effect on the Credit Agreement
and the other Loan Documents.




        11.1        Neither
the reduction of the Senior Note Reserve to $0 or the Fixed Charge Reserve to
$6,500,000 set forth in Section 2 and Section 3, respectively, above nor any
anything in this Amendment or in any ongoing discussions or negotiations which
may take place between the Administrative Agent, any Lender, the Borrower or any
other Person shall directly or indirectly (i) create any obligation to
defer any enforcement action, (ii) except as expressly set forth herein,
constitute a consent or waiver of any past, present or future Default or other
violation of any provisions of the Credit Agreement and the other Loan
Documents, (iii) amend, modify or operate as a waiver of any provision of
the Credit Agreement and the other Loan Documents, except as expressly set forth
herein, or any right, power, privilege or remedy of the Administrative Agent and
the Lenders thereunder, or (iv) constitute a course of dealing or other basis
for altering any Obligation of the Borrower or any other Person obligated under
the Credit Agreement and the other Loan Documents or any other contract or
instrument.




        11.2        The
reduction of the Senior Note Reserve to $0 and the Fixed Charge Reserve to
$6,500,000 set forth in Section 2 and Section 3, respectively, above is
effective solely during the Suspension Period and such reduction and the
amendments set forth herein are effective solely for the purposes set forth
herein and shall be limited precisely as written, and shall not be deemed to
(i) except as expressly provided in this Amendment, be a consent to any
amendment, waiver or modification of any term or condition of the Credit
Agreement or of any other Loan Document or (ii) prejudice any right or
rights that the Agent or any Lender may now have or may have in the future under
or in connection with the Credit Agreement or any other Loan
Document.




        11.3        This
Amendment shall be construed in connection with and as part of the Credit
Agreement and all terms, conditions, representations, warranties, covenants and
agreements set forth in the Credit Agreement and each other Loan Document,
except as herein amended or waived, are hereby ratified and confirmed and shall
remain in full force and effect.









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        11.4        Upon
the effectiveness of this Amendment, each reference in the Credit Agreement to
“this Credit Agreement”, “hereunder”, “hereof”,
“herein” or words of similar import shall mean and be a reference to
the Credit Agreement as amended hereby.




        SECTION
12.    Costs And
Expenses.    As provided in Section 10.7(A) of the
Credit Agreement, the Borrower agrees to reimburse the Administrative Agent for
all reasonable costs, internal charges, and out-of-pocket expenses (including
reasonable attorneys’ and paralegals’ fees and time charges of
attorneys and paralegals) paid or incurred in connection with the preparation,
execution, delivery and administration of this Amendment (and the other
documents to be delivered in connection herewith).




        SECTION
13.    No Third Party
Beneficiaries.    This Amendment does not create,
and shall not be construed as creating, any rights enforceable by any person not
a party to this Amendment.



        SECTION
14.    Loan
Document.    This Amendment shall constitute a Loan
Document.




        SECTION
15.    Severability.    In
case any provision in or obligation under this Amendment shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.




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




        SECTION
17.    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
purposes.




        SECTION
18.    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.




        SECTION
19.    Signatures by
Fax.    Delivery of an executed counterpart of this
Amendment by fax shall have the same force and effect as the delivery of an
original executed counterpart of this Amendment. Any party delivering an
executed counterpart of this Amendment by fax shall also deliver an original
executed counterpart, but the failure to do so shall not affect the validity,
enforceability or binding effect of this Amendment.




[The remainder of this page is internationally blank] 









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




	
 	
HAYNES INTERNATIONAL, INC.





By:  /s/ Calvin S. McKay



Print Name:  Calvin S. McKay



Title:  VP-Finance






FLEET CAPITAL CORPORATION,

as a Lender and as Administrative Agent





By:  /s/ Alan R. Meier



Print Name:  Alan R. Meier



Title:  Executive V-P






THE CIT GROUP/BUSINESS CREDIT, INC.,

as a Lender




By:  /s/ Glenn P. Bartley



Print Name:  Glenn P. Bartley



Title:  Vice President






NATIONAL CITY COMMERCIAL FINANCE, INC.,

as a Lender




By:  /s/ Elizabeth M. Lynch



Print Name:  Elizabeth M. Lynch



Title:  SVP











Signature Page to Amendment

No. 7 To Credit Agreement











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EXHIBIT A



CONSENT AND REAFFIRMATION





         The undersigned hereby (i)
acknowledges receipt of a final, signed copy of the foregoing Amendment No. 7 to
Credit Agreement (the “Amendment”; capitalized terms
used and not defined herein having the meanings assigned thereto in the
Amendment); (ii) consents to the execution and delivery by the Borrower of the
Amendment; (iii) agrees to cause Borrower to comply with the terms and
conditions of the Amendment; and (iv) affirms that nothing contained in the
Amendment shall modify in any respect whatsoever its guaranty of the Obligations
of the Borrower to the Agent for the benefit of the Lenders as provided in that
certain Guaranty, dated as of November 22, 1999 (as amended, restated,
supplemented or otherwise modified from time to time, the
“Guaranty”) or any other Loan Document to which it is a
party and reaffirms that the Guaranty and all other Loan Documents to which it
is a party shall continue to remain in full force and effect. Although the
undersigned have been informed of the matters set forth herein and has
acknowledged and agreed to same, the undersigned understands that neither the
Administrative Agent nor any Lender has any obligation to inform the undersigned
of such matters in the future or to seek either of the undersigned's
acknowledgment or agreement to future amendments, waivers or consents, and
nothing herein shall create such a duty.



        IN WITNESS WHEREOF, the
undersigned has executed this Consent and Reaffirmation on and as of the date of
the Agreement.



	
 	
HAYNES INTERNATIONAL, INC. a Delaware corporation





By:  /s/ Calvin S. McKay



Print Name:  Calvin S. McKay



Title:  VP-Finance












Exhibti A to Amendment No. 7 To

Credit Agreement