Exhibit 10.3

UBS AG, STAMFORD BRANCH

677 Washington Boulevard

Stamford, Connecticut 06901

May 15, 2013

AGY Holding Corp.

2556 Wagener Road

Aiken, South Carolina 29801

Ladies and Gentlemen:

Reference is made to that certain Second Amended and Restated Loan and Security
Agreement, dated as of June 15, 2012 (as amended by the First Amendment to
Second Amended and Restated Loan and Security Agreement, dated as of July 25,
2012, the “Credit Agreement”), among AGY Holding Corp., AGY Aiken LLC and AGY
Huntingdon LLC (collectively, the “Borrowers”), the Lenders from time to time
party thereto (the “Lenders”), and UBS AG, Stamford Branch, as Administrative
Agent (in such capacity or otherwise, the “Administrative Agent”). Capitalized
terms used in this letter agreement (this “Agreement”) and not otherwise defined
herein shall have the meanings ascribed to them in the Credit Agreement.

1. Borrowers have notified the Administrative Agent that an Event of Default
will occur as a result of the failure of Borrowers to make the interest payment
due on the Senior Second Lien Notes on May 15, 2013 (the “Interest Payment
Default” and the Interest Payment Default, together with any Defaults or Events
of Default arising under the Credit Agreement due to any cross-defaults arising
under the DB Lease Agreement with respect to the Interest Payment Default,
collectively, the “Specified Defaults”).

2. Borrowers acknowledge that based upon the Specified Defaults, the
Administrative Agent and Lenders have certain rights under the Credit Agreement
and the other Loan Documents.

3. The Administrative Agent and Required Lenders have elected to forbear from
exercising the rights and powers that are available to them under the Credit
Agreement and other Loan Documents based upon the Specified Defaults, subject to
the terms and conditions set forth herein. Such forbearance shall expire
automatically and without notice from any of the Administrative Agent or Lenders
on the earlier of (a) July 15, 2013 and (b) the occurrence of any Termination
Event (as defined below) (the period from the date of this Agreement until the
expiration of the forbearance provided for herein is referred to as the
“Forbearance Period”). The forbearance provided for herein does not constitute,
and is not intended to constitute, a forbearance or agreement to forbear at any
future time (including upon the expiration of the Forbearance Period). The
forbearance provided for herein does not constitute, and is not intended to
constitute, a waiver of the occurrence or the continuance of any Specified
Default. Subject to the terms set forth herein, the Administrative Agent and
Lenders are hereby expressly reserving all rights, powers and remedies provided
for in the Credit Agreement, the other Loan

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Documents, at law or in equity whether now or hereafter existing, including,
without limitation, all such rights, powers and remedies available to them based
upon any Specified Default. The Administrative Agent and Required Lenders hereby
acknowledge and agree that during the Forbearance Period, the occurrence and
continuance of the Specified Defaults alone does not give rise to a “Material
Adverse Effect” under the Credit Agreement.

4. The effectiveness of this Agreement is conditioned upon the prior
satisfaction or waiver of the following conditions precedent in a manner
reasonably acceptable to the Administrative Agent:

(a) Execution and delivery of this Agreement by Borrowers, the Guarantors, the
Administrative Agent and the Required Lenders;

(b) Entry into an amendment to the DB Lease Agreement, in the form attached
hereto as Exhibit A (the “Metals Lease Forbearance”);

(c) Entry into a restructuring and support agreement among KAGY Holdings, AGY
Holdings, Kohlberg Partners V, L.P., Kohlberg Investors V, L.P., Kohlberg TE
Investors V, L.P., Kohlberg Offshore Investors V, L.P. and certain holders of
the Senior Second Lien Notes, in the form attached hereto as Exhibit B (the
“Restructuring and Support Agreement”);

(d) Payment to the Administrative Agent, for the ratable benefit of the Lenders,
of a forbearance fee in an amount equal to 0.25% of the aggregate amount of the
Commitments under the Credit Agreement; and

(e) Absence of any Defaults or Events of Default other than Specified Defaults.

5. Notwithstanding the provisions of Section 6.2(a) of the Credit Agreement and
the Specified Defaults, during the Forbearance Period, the Lenders and Issuing
Bank will make Loans and other extensions of credit according to the terms of
this Agreement and the other terms of the Credit Agreement; provided, that, no
Loans and other extensions of credit shall be made if a Termination Event has
then occurred or would occur as a result of the making of such Loan or other
extension of credit.

6. The Borrowers and other Obligors shall afford such field examiners and
appraisers as may be engaged by the Administrative Agent, including, without
limitation, any appraisers engaged to conduct a new Inventory Appraisal and a
new Equipment Appraisal, access to all such books, records and other information
and access to the members of the management of the Borrowers and other Obligors
as they may reasonably request in connection with their work as field examiners
and appraisers and, in furtherance thereof, shall cooperate with such field
examiners and appraisers as and to the extent reasonably requested by the
Administrative Agent.

7. The occurrence of any of the following shall automatically constitute a
“Termination Event” hereunder:

 

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(a) The occurrence of any Default or Event of Default, other than a Specified
Default;

(b) The occurrence of any breach or default by Borrowers or other Obligors of
any of the provisions of this Agreement;

(c) The exercise of any rights and remedies or the taking of any enforcement
action by the lessor under the DB Lease Agreement;

(d) The termination or expiration of the Metals Lease Forbearance or the DB
Lease Agreement for any reason;

(e)(1) The acceleration of any obligations under the Senior Second Lien Notes or
(2) the exercise of any rights and remedies with respect to Collateral or the
taking of any enforcement action with respect to Collateral by the indenture
trustee or any holders of the Senior Second Lien Notes; or

(f) The termination or expiration of the Restructuring and Support Agreement for
any reason.

8. During the Forbearance Period, unless or until all Specified Defaults are
permanently waived, advisory fees, management fees and transaction fees payable
to the Sponsor under the Management Agreement, dated as of April 7, 2006 among
KAGY Holdings, KAGY Acquisition Corp., Borrower and Sponsor may accrue but shall
not be paid.

9. Beginning May 29, 2013, the Borrowers shall deliver to Administrative Agent,
not later than Wednesday of each week, a forecast prepared by management of the
Borrowers, in form and substance reasonably satisfactory to the Administrative
Agent, of cash flow statements of the Borrowers and their Subsidiaries on a
weekly basis for the period of 13 consecutive weeks commencing with the week of
such delivery.

10. All covenants, agreements, representations and obligations of Borrowers and
the other Obligors under this Agreement shall survive and remain binding upon
Borrowers and the other Obligors, regardless of whether any Specified Default
has occurred or has been cured or fails to occur.

11. Borrowers reaffirm their obligations under Section 3.4 of the Credit
Agreement to reimburse the Administrative Agent for all Extraordinary Expenses
and other expenses described therein and confirm that, pursuant to such
obligations, they shall pay on demand all of the Administrative Agent’s
Extraordinary Expenses and other reasonably incurred and documented
out-of-pocket expenses, including expenses of legal counsel, collateral auditors
and field examiners, collateral appraisers, and other consultants and advisors,
as well as the expenses of Winston & Strawn LLP, counsel to the Administrative
Agent.

12. Borrowers and the other Obligors hereby waive, release, remise and forever
discharge the Administrative Agent, each Lender and each other Indemnitee from
any and all actions, causes of action, suits or other claims of any kind or
character, known or unknown, which any Obligor ever had, now has or might
hereafter have against the Administrative Agent,

 

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any Lender or any other Indemnitee which relate, directly or indirectly, to acts
or omissions of the Administrative Agent, any Lender or any other Indemnitee on
or prior to the date hereof whether arising out of, in connection with, or
otherwise relating to, the Loan Documents, this Agreement or any matter in
connection with any of the foregoing. Nothing contained herein shall constitute
a waiver of any Defaults or Events of Default which may exist as of the date of
this Agreement of which the Administrative Agent currently does not have notice
or any rights or remedies that the Administrative Agent or Lenders might have in
respect of such Events of Default which may so exist.

13. As supplemented by this Agreement, the Credit Agreement and each other Loan
Document shall remain in full force and effect and each is hereby ratified and
confirmed by Borrowers and the other Obligors. Without limiting the foregoing,
the Liens granted pursuant to the Credit Agreement and the Security Documents
shall continue in full force and effect and the guaranties of the Guarantors
shall continue in full force and effect. This Agreement shall each be deemed a
Loan Document and the definition of Loan Document in the Credit Agreement shall
be deemed amended accordingly.

14. Nothing contained herein nor in any other communication or action between or
among the Administrative Agent, Lenders, Borrowers or any other Obligor shall be
deemed to constitute or be construed as (i) a waiver or release of any of the
Administrative Agent’s or Lenders’ rights or remedies against Borrowers or any
other Obligor or any other Person under the Loan Documents or pursuant to
applicable law, (ii) a course of dealing obligating the Administrative Agent or
Lenders to provide any Loans or other extensions of credit or other
accommodations, financial or otherwise, to Borrowers or any other Obligor at any
time or (iii) a commitment or any agreement to make a commitment with respect to
any possible waiver, amendment, consent or other modification of the terms
provided in the Credit Agreement or any other Loan Document, other than the
specific modifications set forth in this Agreement. Nothing contained herein
shall confer on Borrowers, any other Obligor or any other Person any right to
notice or cure periods with respect to any Specified Default or any action the
Administrative Agent and Lenders may take based upon any Specified Default
following the end of the Forbearance Period or any Event of Default which may
result from any Specified Default maturing into an Event of Default.

15. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL
BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF
THAT WOULD REQUIRE THE APPLICATION OF LAWS OTHER THAN THOSE OF THE STATE OF NEW
YORK.

16. This agreement may be executed in any number of counterparts, each of which
when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. Any
signature delivered by a party by facsimile or other electronic transmission
shall be deemed to be an original signature hereto.

[Signature Pages Follow]

 

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Very truly yours,

 

UBS AG, STAMFORD BRANCH,

as Administrative Agent

By:   /s/ Lana Gifas

Name:

Title:

 

Lana Gifas

Director

By:   /s/ Joselin Fernandes

Name:

Title:

 

Joselin Fernandes

Associate Director

 

UBS LOAN FINANCE LLC, as a Lender By:   /s/ Lana Gifas

Name:

Title:

 

Lana Gifas

Director

By:   /s/ Joselin Fernandes

Name:

Title:

 

Joselin Fernandes

Associate Director

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Acknowledged and Agreed:

 

AGY HOLDING CORP. By:   /s/ Jay W. Ferguson

Name:

Title:

 

Jay W. Ferguson

Interim Chief Financial Officer

 

AGY AIKEN LLC By:   /s/ Jay W. Ferguson

Name:

Title:

 

Jay W. Ferguson

Interim Chief Financial Officer

 

AGY HUNTINGDON LLC By:   /s/ Jay W. Ferguson

Name:

Title:

 

Jay W. Ferguson

Interim Chief Financial Officer

 

KAGY HOLDING COMPANY, INC. By:   /s/ Jay W. Ferguson

Name:

Title:

 

Jay W. Ferguson

Interim Chief Financial Officer

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Exhibit A

Form of Metals Lease Forbearance

Filed as exhibit 10.2 to this Current Report on Form 8-K.

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Exhibit B

Form of Restructuring and Support Agreement

Filed as exhibit 10.1 to this Current Report on Form 8-K.