THIRD AMENDMENT TO
                       CREDIT AGREEMENT AND LIMITED WAIVER

        This THIRD AMENDMENT TO CREDIT AGREEMENT AND LIMITED WAIVER (this
"Amendment") is dated as of December 29, 1999 and entered into by and among
SPECIAL METALS CORPORATION, a Delaware corporation (the "Borrower"), the banks
and other financial institutions signatory hereto that are party as Lenders to
the Credit Agreement referred to below (the "Lenders") and CREDIT LYONNAIS NEW
YORK BRANCH, as Agent and as Issuing Bank.

                                    Recitals

        Whereas, the Borrower, the Lenders, the Issuing Bank and the Agent have
entered into that certain Credit Agreement dated as of October 28, 1998 (as
amended by First Amendment to Credit Agreement and Limited Waiver dated as of
March 31, 1999 and Second Amendment to Credit Agreement dated as of June 8,
1999, the "Credit Agreement"; capitalized terms used in this Amendment without
definition shall have the meanings given such terms in the Credit Agreement);
and

        Whereas, the Borrower has requested that the Lenders agree, subject to
the conditions and upon the terms set forth in this Amendment,  to amend certain
provisions of the Credit  Agreement and to waive certain  Events of Default that
occurred at September 30, 1999 under subsection 9.1 of the Credit Agreement (the
"Specified Defaults"); and

        Whereas, the Borrower desires to reduce the Revolving Credit
Commitments;

        Whereas, Societe Industrielle de Materiaux Avances ("SIMA"), a major
shareholder of Borrower, has agreed to provide up to $50,000,000 in subordinated
loans to the Borrower; and

        Whereas, the Lenders are willing to agree to amend to the Credit
Agreement, on the terms described herein, and to waive the Specified Defaults,
subject to the conditions and on the terms set forth herein;

        Now Therefore, in consideration of the premises and the mutual
agreements set forth herein, the Borrower, the Lenders, the Issuing Bank and the
Agent agree as follows:

        1. AMENDMENTS TO CREDIT AGREEMENT. Subject to the conditions and upon
the terms set forth in this Amendment and in reliance on the representations and
warranties of the Borrower set forth in this Amendment, the Credit Agreement is
hereby amended as follows:

        1.1 Indebtedness. The definition of "Indebtedness" contained in
subsection 1.1 of the Credit Agreement is amended by inserting therein,
immediately at the end thereof:


                                       1
<PAGE>


                For purposes of determining compliance with the covenants in
        this Agreement, the Subordinated Term Loans (including any Additional
        Advances, any Subordinated Revolving Loans converted into Subordinated
        Term Loans and all interest added to the principal amount of the
        Subordinated Term Loans) and Subordinated Revolving Loans shall be added
        to the stockholders' equity of the Borrower and subtracted from
        Indebtedness.

        1.2 Excess Cash Flow. The definition of "Excess Cash Flow"  contained in
subsection 1.1 of the Credit  Agreement is amended by deleting  clauses (b)(vii)
and (c) thereof.

                1.3 Net Proceeds. The definition of "Net Proceeds" contained in
        subsection 1.1 of the Credit Agreement is amended by deleting clauses
        (d) and (e) thereof and replacing such clauses with:

                        (d) 100% of the cash proceeds of any issuance of equity
                securities of the Borrower after the Closing Date (other than
                any proceeds of any issuance of common stock or preferred stock
                of the Borrower to SIMA that are applied to the substantially
                concurrent payment of Capital Expenditures or cash dividends on
                the Preferred Stock), net of reasonable attorneys' and
                accounting fees, investment banking or underwriting fees or
                discounts and other customary expenses actually incurred in
                connection therewith; and (e) 100% of the cash proceeds of any
                issuance of debt securities by the Borrower or any of its
                Subsidiaries after the Closing Date (other than Indebtedness
                permitted by subsection 9.2 and any proceeds of the Subordinated
                Loans), net of reasonable attorneys' fees and other customary
                expenses actually incurred in connection therewith.

        1.4 Transaction Documents. The definition of "Transaction Documents"
contained in subsection 1.1 of the Credit Agreement is amended by inserting the
following after "Preferred Stock Documents":

                the Subordinated Debt Documents,

        1.5 Additional Definitions. Subsection 1.1 of the Credit Agreement is
amended by adding the following additional definitions in the proper
alphabetical sequence:

                        "Additional Advance": any additional advance of the
                Subordinated Term Loans (other than any interest added to the
                principal amount thereof or Subordinated Revolving Loans
                converted into Subordinated Term Loans) the proceeds which are
                used substantially concurrently to make Capital Expenditures or
                to pay cash dividends on the Preferred Stock.

                        "Debt Subordination Agreement": that certain Debt
                Subordination Agreement dated as of the date of the Third
                Amendment among SIMA, the Borrower and the Agent in the form
                attached as Exhibit A to the Third Amendment.


                                       2
<PAGE>


                        "SIMA Letter of Credit": one or more standby letter(s)
                of credit issued in the aggregate face amount of $30,000,000 and
                delivered to the Agent on or prior to the Third Amendment
                Effective Date, which shall have terms satisfactory to the Agent
                and the Required Lenders.

                        "Subordinated Debt Documents": the Subordinated Loan
                Agreement dated as of December 17, 1999 between the Borrower and
                SIMA,  the  promissory  notes  issued  thereunder  and the  Debt
                Subordination Agreement..

                        "Subordinated Loans": collectively, the Subordinated
                Term Loans (including any increase therein as a result of adding
                accrued interest to the principal balance thereof, conversion of
                Subordinated Revolving Loans, and Additional Advances) and the
                Subordinated Revolving Loans.

                        "Subordinated Revolving Loans": the unsecured
                subordinated revolving loans to be made to the Borrower by SIMA
                on and after the Third Amendment Effective Date and until August
                15, 2001 in an aggregate principal amount of up to $30,000,000,
                which mature on July 28, 2006, accrue interest at a rate equal
                to LIBOR plus 1% but provide that interest is only payable in
                kind, by addition of such interest to the outstanding balance of
                the Subordinated Term Loans, and otherwise on terms (including
                subordination provisions) satisfactory to the Agent and the
                Required Lenders.

                        "Subordinated Term Loans": the unsecured subordinated
                term loans to be made to the Borrower by SIMA on or before the
                Third Amendment Effective Date in the original aggregate
                principal amount of $20,000,000 (subject to increase as
                permitted hereby), which matures on July 28, 2006, accrues
                interest at a rate equal to LIBOR plus 1% but provides that
                interest is only payable in kind, and otherwise on terms
                (including subordination provisions) satisfactory to the Agent
                and the Required Lenders.

                        "Third Amendment": the Third Amendment to Credit
                Agreement and Limited Waiver among the Borrower, the Lenders,
                the Issuing Bank and the Agent.

                        "Third Amendment Effective Date": the date on which
                Third Amendment becomes effective in accordance with its terms.

        1.6 Additional Conditions for Revolving Credit Loans and Letters of
Credit. Subsection 7.2 of the Credit Agreement is amended to add the following
subsections (d) and (e):

                        (d) Subordinated Term Loans. The Subordinated Term Loans
                shall have been, and shall remain, fully funded in an aggregate
                amount equal to $20,000,000 plus the amount of all interest
                accrued on the Subordinated Loans and added to the principal of
                the Subordinated Term Loans, plus all Subordinated Revolving
                Loans converted into Subordinated Term Loans, plus all
                Additional Advances.


                                       3
<PAGE>


                        (e) Limit on Revolving Credit Loans and Letters of
                Credit Outstanding. After giving effect to any Revolving Credit
                Loan to be made or Letters of Credit to be issued on such date,
                the aggregate outstanding Revolving Credit Loans and Letter of
                Credit Outstanding shall not exceed $76,000,000 unless
                Subordinated Revolving Loans (including for this purpose
                Subordinated Revolving Loans converted into Subordinated Term
                Loans) are outstanding in a principal amount of at least
                $30,000,000.

        1.7 SIMA Letter of Credit. A new subsection 8.16 is added to the Credit
Agreement to read as follows:

                        8.16 SIMA Letter of Credit. If SIMA fails to make a
                Subordinated Revolving Loan within 10 days after the Borrower's
                request, the Borrower shall promptly notify the Agent and the
                Lenders in writing of such failure, and deliver to the Agent
                written instructions to make a drawing on the SIMA Letter of
                Credit in the amount of the Subordinated Revolving Loans
                requested by the Borrower and not funded by SIMA. The Agent
                shall be irrevocably authorized and empowered to make a drawing
                under the SIMA Letter of Credit within 5 days after receipt of
                the Borrower's written instructions by an officer of the Agent
                responsible for administering this Agreement. Notwithstanding
                the foregoing, in the event that (i) the Borrower fails to make
                such request for Subordinated Revolving Loans or (ii) SIMA fails
                to make such Subordinated Revolving Loans in accordance with the
                Subordinated Debt Documents, and in either instance such failure
                continues for more than ten (10) days after the date the
                Borrower delivers or is required to deliver its financial
                statements (either quarterly or annual) for such period to the
                Agent pursuant to subsection 8.1, the Borrower shall be deemed
                to have automatically and irrevocably instructed the Agent under
                this subsection 8.16 to make a drawing under the SIMA Letter of
                Credit to fund Subordinated Revolving Loans in an amount
                required to be made by the Borrower pursuant to the last
                sentence of Section 8.17. All funds received as a result of any
                such drawing shall be promptly remitted to the Borrower and
                shall constitute Subordinated Revolving Loans. The Agent shall
                have no obligation with respect to the SIMA Letter of Credit
                except to make a drawing thereon if and to the extent set forth
                in this subsection 8.16, and to consent to amendments to such
                Letter of Credit to reduce the face amount thereof by an amount
                equal to all Subordinated Revolving Loans converted to
                Subordinated Term Loans.

        1.8 Conversion of Subordinated Revolving Loans to Subordinated Term
Loans. A new subsection 8.17 is added to the Credit Agreement to read as
follows:

                        8.17 Conversion of Subordinated Revolving Loans to
                Subordinated Term Loans. Convert a portion of the outstanding
                principal balance of the Subordinated Revolving Loans
                (calculated as set forth below) into the Subordinated Term
                Loans, effective as of the last day of a fiscal quarter, if at
                the end of any such fiscal quarter ending on or prior to March
                31, 2001, the Consolidated EBITDA for the Borrower and its
                consolidated Subsidiaries for the four quarters then ending is
                less than the amount required under subsection 9.1(e). Such
                conversion shall be automatic and be effected by adding the
                applicable amount to the outstanding principal balance of the
                Subordinated Term Loan.

                                       4
<PAGE>


                The amount to be converted for each fiscal  quarter shall be the
                difference between the Projected EBITDA for the Borrower and its
                Subsidiaries  for such 12 month  period  shown in the  following
                schedule:

                                                 Projected
                    Quarter                        EBITDA
                    -------                        ------
                    12/31/99                    $30,190,000
                    3/31/00                      30,570,000
                    6/30/00                      30,240,000
                    9/30/00                      39,940,000
                    12/31/00                     54,930,000
                    3/31/01                      67,980,000

                and the actual Consolidated EBITDA for the Borrower and its
        consolidated Subsidiaries for such 12 month period. If the amount to be
        converted exceeds the outstanding principal balance of the Subordinated
        Revolving Loans, the Borrower shall borrow additional Subordinated
        Revolving Loans to the extent necessary to fund the converted amount,
        until SIMA's entire $30,000,000 commitment to make Subordinated
        Revolving Loans has been funded.

        1.9 Financial Condition Covenants. Subsection 9.1 of the Credit
Agreement is amended (a) to provide that the financial covenants set forth in
subsections (a) through (d) of subsection 9.1 will not be in effect or tested on
December 31, 1999, March 31, 2000, June 30, 2000, September 30, 2000, December
31, 2000 or March 31, 2001, and (b) to add the following subsection (e):

                        (e) EBITDA Maintenance. Permit the sum of (i)
                Consolidated EBITDA of the Borrower and its consolidated
                Subsidiaries for any period of four consecutive fiscal quarters
                ending on a date specified below plus (ii) the principal amount
                of all Subordinated Revolving Loans which are converted into
                Subordinated Term Loans in respect of such period in accordance
                with subsection 8.17 hereof to be less than the amount set forth
                opposite such period below:

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<PAGE>


          Period Ending                   Consolidated EBITDA
          -------------                   -------------------
             12/31/99                          $25,000,000
            3/31/2000                           25,000,000
            6/30/2000                           25,000,000
            9/30/2000                           32,000,000
           12/31/2000                           45,000,000
            3/31/2001                           55,000,000

        1.10 Preferred Stock Dividends. Subsection 9.7 of the Credit Agreement
is amended by deleting subsection (a) in its entirety and replacing such text
with:

                        (a) the Borrower may declare and pay cash dividends on
                its Preferred Stock in accordance with the terms of the
                Preferred Stock Documents as in effect on the Closing Date if
                such payments are funded solely from the cash proceeds of a
                substantially concurrent issuance and sale of common or
                preferred stock of the Borrower to SIMA or a substantially
                concurrent Additional Advance;

        1.11 Capital Expenditures. Subsection 9.8 of the Credit Agreement is
deleted in its entirety and replaced with the following:

                        9.8 Limitation on Capital Expenditures. Make (by way of
                the acquisition of securities of a Person or otherwise) any
                Capital Expenditures, except for expenditures in the ordinary
                course of business not exceeding, in the aggregate for the
                Borrower and its consolidated Subsidiaries, during any fiscal
                year ending on December 31 an amount equal to:

                        (a) $44,000,000 in the fiscal year 1998;

                        (b) $15,000,000 in the fiscal years 1999 and 2000;

                        (c) $7,500,000 in the period from January 1, 2001 to
                June 30, 2001;

                        (d) in each fiscal year after 2000, if the EBITDA
                Threshold was met for the immediately preceding fiscal year, the
                amount set forth below:

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<PAGE>

          Fiscal Year                              Amount
          -----------                              ------

          2001                                    $36,800,000
          2002                                     37,500,000
          2003                                     39,100,000
          2004                                     41,100,000
          2005 and thereafter                      38,000,000

                        (e) in each fiscal year after 2000, if the EBITDA
                Threshold was not met for the immediately preceding fiscal year,
                the greater of (i) $15,000,000 and (ii) the amount set forth in
                the table in paragraph (d) above for the applicable fiscal year
                less the difference (if a positive number) between (i) the
                EBITDA Threshold for the immediately preceding fiscal year and
                (ii) Consolidated EBITDA of the Borrower and its consolidated
                Subsidiaries for the immediately preceding fiscal year;

                        (f) for the purposes of paragraphs (d) and (e) above,
                the "EBITDA Threshold" for any fiscal year shall be met if
                Consolidated EBITDA for the Borrower and its consolidated
                Subsidiaries for such fiscal year is at least the amount set
                forth below:

          Fiscal Year                              Amount
          -----------                              ------

          2000                                   $ 96,500,000
          2001                                    130,000,000
          2002                                    145,000,000
          2003 and thereafter                     150,000,000

                        (g) The amount of Capital Expenditures permitted under
                clauses (d) and (e) in any fiscal year after 2000 shall be
                increased by the difference (if a positive number) between (i)
                the amount of Capital Expenditures permitted in the immediately
                preceding fiscal year pursuant to this subsection 9.8, without
                giving effect to this subparagraph (g), and (ii) the aggregate
                Capital Expenditures made in the preceding fiscal year by the
                Borrower and its consolidated Subsidiaries; and

                        (h) The amount of Capital Expenditures permitted in
                1999, 2000 and the first six months of 2001 shall be increased
                by the amount of cash proceeds of a substantially concurrent
                issuance and sale of common stock or preferred stock of the
                Borrower to SIMA or a substantially concurrent Additional
                Advance, which proceeds are used to make such Capital
                Expenditures.

        1.12 Limitation on Optional Payments and Modification of Debt
Instruments and Capital Stock. Subsection 9.10 of the Credit Agreement is
amended to add in the parenthetical in clause (a):

                and other than payments of Subordinated Loans permitted by
                subsection 9.20.

                                       7
<PAGE>


        1.13 Limitation on Transactions with Affiliates. Subsection 9.11 of the
Credit Agreement is amended to add a clause (iv) at the end thereof:

                or (iv) the transactions contemplated by the Subordinated Debt
                Documents.

        1.14 Limitation on Issuance of Capital Stock. Subsection 9.18 of the
Credit Agreement is amended to add in the parenthetical in line two thereof:

                        and other than issuance of preferred stock to SIMA the
                proceeds of which are used substantially concurrently for
                Capital Expenditures or dividends on the Preferred Stock.

        1.15 Payments on Subordinated Loans. A new subsection 9.20 is added to
the Credit Agreement to read as follows:

                        9.20 Payments on the Subordinated Loans. Make any
                payments on or with respect to the Subordinated Loans except
                strictly in accordance with Sections 3 and 4 of the Debt
                Subordination Agreement

        2. REDUCTION OF REVOLVING CREDIT COMMITMENTS. On the Third Amendment
Effective Date, the Revolving Credit Commitments shall be reduced to
$100,000,000 pursuant to subsection 3.5 of the Credit Agreement. Schedule I to
the Credit Agreement is deleted in its entirety and replaced with Schedule I
attached hereto.

        3. WAIVER. Subject to the conditions and upon the terms set forth in
this Amendment and in reliance on the representations and warranties of the
Borrower set forth in this Amendment, the Lenders hereby waive (a) compliance
with subsections 9.1(a) and 9.1(b) as of September 30, 1999 and for the period
then ended and (b) if the Third Amendment Effective date occurs after December
31, 1999, compliance with subsections 9.1(a), 9.1(b), 9.1(c) and 9.1(d) as of
December 31, 1999 and for the period then ended. This waiver is limited solely
to the matters set forth above, as at the dates and for the period stated
therein, and does not constitute a waiver of any other Default or Event of
Default or compliance with any other term or condition of the Loan Documents.

        4. CONSENT. The Lenders consent to the dissolution of Special Metals
Foreign Sales Corp. and the distribution of its assets to Inco Alloys
International, Inc.

        5. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. In order to induce
the Lenders, the Agent and the Issuing Bank to enter into this Amendment, the
Borrower represents and warrants to each Lender, the Agent and the Issuing Bank
that the following statements are true, correct and complete:

        5.1 Power and Authority. Each of the Loan Parties has all corporate
power and authority to enter into this Amendment and, as applicable, the Consent
of Guarantors attached hereto (the "Consent"), and to carry out the transactions
contemplated by, and to perform its obligations under or in respect of, this
Amendment and the Credit Agreement as

                                       8
<PAGE>

amended hereby. Each of the Borrower and SIMA has all corporate power and
authority to enter into the Subordinated Debt Documents and to perform its
obligations thereunder.

        5.2 Corporate Action. The execution and delivery of this Amendment and
the Consent and the performance of the obligations of each Loan Party under or
in respect of this Amendment and the Credit Agreement as amended hereby have
been duly authorized by all necessary corporate action on the part of each of
the Loan Parties. The execution and delivery of the Subordinated Debt Documents
and the performance of the obligations of the Borrower and SIMA thereunder have
been duly authorized by all necessary corporate action on the part of the
Borrower and SIMA.

        5.3 No Conflict or Violation or Required Consent or Approval. The
execution and delivery of this Amendment, the Consent and the Subordinated Debt
Documents and the performance of the obligations of each Loan Party under or in
respect of this Amendment and the Credit Agreement as amended hereby and the
Subordinated Debt Documents do not and will not conflict with or violate (a) any
provision of the articles or certificate of incorporation or bylaws of any Loan
Party or the Preferred Stock Documents, (b) any Requirement of Law, (c) any
order, judgment or decree of any court or other governmental agency binding on
any Loan Party, or (d) any indenture, agreement or instrument to which the
Borrower or any of its Subsidiaries is a party or by which the Borrower or any
of its Subsidiaries, or any property of any of them, is bound, and do not and
will not require any consent or approval of any Person, except the consents and
approvals described in Annex A attached hereto, each of which has been duly
obtained.

        5.4 Execution, Delivery and Enforceability. This Amendment, the Consent
and the Credit Agreement as amended hereby and each other Loan Document have
been duly executed and delivered by each Loan Party thereto and are the legal,
valid and binding obligations of such Loan Party, enforceable in accordance with
their terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally or by general equitable principles. The
Subordinated Debt Documents have been duly executed and delivered by the
Borrower and SIMA and are the legal, valid and binding obligations of the
Borrower and SIMA, as applicable, enforceable in accordance with their terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally or by general equitable principles.

        5.5 No Default or Event of Default. After giving effect to this
Amendment, no event has occurred and is continuing or will result from the
execution and delivery of this Amendment that would constitute a Default or an
Event of Default.

        5.6 Financial Projections. The projected financial statements for the
Borrower and its Subsidiaries dated November 4, 1999 delivered to the Agent and
the Lenders in connection with this Amendment were prepared by the Borrower in
good faith and on the basis of the best information available at that time and
on the assumptions stated therein, which assumptions the Borrower believes to be
reasonable.

                                       9
<PAGE>

        5.7 No Material Adverse Effect. No event has occurred (other than events
reflected in the projected financial statements referred to in Section 5.6 )
that has resulted, or could reasonably be expected to result, in a Material
Adverse Effect.

        5.8 Senior Debt. All Obligations of the Borrower, whether now
outstanding or hereafter created or incurred, constitute "Senior Debt" under the
terms of the Subordinated Debt Documents, and the subordination of the
Subordinated Loans to the Obligations is enforceable against SIMA and each
successor holder of any Subordinated Loan.

        5.9 Representations and Warranties. Each of the representations and
warranties  contained  in the Loan  Documents is and will be true and correct in
all material  respects on and as of the date hereof and as of the effective date
of this Amendment, except to the extent that such representations and warranties
specifically  relate to an earlier date,  in which case they were true,  correct
and complete in all material respects as of such earlier date.

        6. CONDITIONS TO EFFECTIVENESS OF THIS AMENDMENT. This Amendment
(including the waivers set forth in Section 3 above) shall be effective only if
and when signed by, and when counterparts hereof shall have been delivered to
the Agent (by hand delivery, mail or telecopy) by, the Borrower and the Required
Revolving Lenders, the Required Tranche A Lenders and the Required Tranche B
Lenders and only if and when each of the following conditions is satisfied:

        6.1 Consent of Guarantors. Each of the Guarantors shall have executed
and delivered to the Agent the Consent.

        6.2 No Default or Event of Default; Accuracy of Representations and
Warranties. After giving effect to this Amendment, no Default or Event of
Default shall exist and each of the representations and warranties made by the
Borrower or any of its Subsidiaries herein and in or pursuant to the Loan
Documents shall be true and correct in all material respects as if made on and
as of the date on which this Amendment becomes effective (except that any such
representation or warranty that is expressly stated as being made only as of a
specified earlier date shall be true and correct as of such earlier date), and
the Borrower shall have delivered to the Agent a certificate confirming such
matters.

        6.3 Subordinated Debt. The Borrower and SIMA shall have executed and
delivered  the  Subordinated  Debt  Documents,  which  shall  be  on  terms  and
conditions  satisfactory to the Agent and the Required  Lenders,  and shall have
delivered a certified  copy  thereof to the Agent.  The  Borrower and SIMA shall
have  executed and delivered to the Agent the Debt  Subordination  Agreement and
SIMA  shall  have  delivered  the SIMA  Letter  of  Credit,  each on  terms  and
conditions satisfactory to the Agent and the Required Lenders.

        6.4 Funding of Subordinated Term Loan. The Borrower shall have received
$20,000,000 in proceeds of the Subordinated Term Loans, and the Agent shall have
received evidence satisfactory to it of such funding.


                                       10
<PAGE>


        6.5 Supporting Documents and Opinions of Counsel. The Borrower shall
have delivered to the Agent copies of resolutions of each of the Loan Parties
approving and authorizing this Amendment, the Consent and the Subordinated Debt
Documents, together with an incumbency certificate for the persons executing
this Amendment or the Consent or the Subordinated Debt Documents and an opinion
of Bond, Schoeneck & King, LLP, counsel to the Borrower, as to the matters set
forth in Sections 5.1, 5.2, 5.3 and 5.4 hereof with respect to the Loan Parties
and such other matters as the Agent or Required Lenders may reasonably request.

        6.6 Amendment Fee. The Borrower shall have paid to the Agent an
amendment fee equal to 0.375% applied to the aggregate outstanding Loans and
unused Commitments of each Lender (taking into account the reduction of the
Revolving Loan Commitments effected hereby and any repayment of Loans on or
before December 31, 1999) that delivers to the Agent, by hand delivery or
telefax no later than 5:00 p.m. on December 28, 1999, a counterpart of this
Amendment executed by such Lender. Such fee (a) shall be received by the Agent
ratably for account of, and shall be remitted by the Agent solely to, such
Lenders and (b) shall be fully earned and nonrefundable when paid.

        6.7 Expense Reimbursements. The Borrower shall have paid all expense
reimbursements due to the Agent pursuant to Section 12.5 of the Credit
Agreement.

        6.8 Mortgage Modifications. The Borrower shall have executed and
delivered to the Agent such  modifications  to the  Mortgages as are  reasonably
required by the Agent.

        7. EFFECT OF AMENDMENT. From and after the date on which this Amendment
becomes effective, all references in the Loan Documents to the Credit Agreement
shall mean the Credit Agreement as amended hereby. Except as expressly amended
hereby or waived herein, the Credit Agreement and the other Loan Documents,
including the Liens granted thereunder, shall remain in full force and effect,
and are hereby ratified and confirmed.

        8. APPLICABLE LAW. This Amendment shall be governed by, and construed
and interpreted in accordance with, the laws of the State of New York.

        9. COMPLETE AGREEMENT. This Amendment sets forth exhaustively the
complete agreement of the parties in respect of any amendment to any of the
provisions of any Loan Document or any waiver thereof.

        10. CATCHLINES & COUNTERPARTS. The catchlines and captions herein are
intended solely for convenience of reference and shall not be used to interpret
or construe the provisions hereof. This Amendment may be executed by one or more
of the parties to this Amendment on any number of separate counterparts
(including by telecopy), all of which taken together shall constitute but one
and the same instrument.

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<PAGE>

                  [remainder of page intentionally left blank]

                                       12
<PAGE>

        IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by a duly authorized officer as of the date first above written.


                                     SPECIAL METALS CORPORATION


                                     By:_______________________________________
                                        Name:__________________________________
                                        Title:_________________________________


                                     CREDIT LYONNAIS NEW YORK BRANCH,
                                       as Agent, as a Lender and as Issuing Bank


                                     By:_______________________________________
                                        Name:__________________________________
                                        Title:_________________________________


                                     MANUFACTURERS & TRADERS TRUST COMPANY,
                                       as Documentation Agent and as a Lender


                                     By:_______________________________________
                                        Name:__________________________________
                                        Title:_________________________________


                                     MELLON BANK, N.A.,
                                        as Syndication Agent and as a Lender


                                     By:_______________________________________
                                        Name:__________________________________
                                        Title:_________________________________

                              [signatures continue]

                                       13
<PAGE>

                                     THE BANK OF NOVA SCOTIA,
                                        as Co-Agent and as a Lender


                                     By:_______________________________________
                                        Name:__________________________________
                                        Title:_________________________________



                                     KEYBANK NATIONAL ASSOCIATION,
                                          as Lender


                                     By:_______________________________________
                                        Name:__________________________________
                                        Title:_________________________________


                                     BANK UNITED,
                                       as Lender


                                     By:_______________________________________
                                        Name:__________________________________
                                        Title:_________________________________



                                     BANQUE NATIONALE DE PARIS,
                                        as Lender


                                     By:_______________________________________
                                        Name:__________________________________
                                        Title:_________________________________


                             [signatures continue]


                                       14
<PAGE>

                                     SOCIETE GENERALE, NEW YORK BRANCH,
                                           as Lender


                                     By:_______________________________________
                                        Name:__________________________________
                                        Title:_________________________________


                                     FLEET NATIONAL BANK,
                                        as Lender


                                     By:_______________________________________
                                        Name:__________________________________
                                        Title:_________________________________


                                     NATIONAL BANK OF CANADA,
                                        as Lender


                                     By:_______________________________________
                                        Name:__________________________________
                                        Title:_________________________________


                                     CREDIT AGRICOLE - INDOSUEZ,
                                         as Lender


                                     By:_______________________________________
                                        Name:__________________________________
                                        Title:_________________________________



                             [signatures continue]



                                       15
<PAGE>



                                     NATEXIS BANQUE,
                                         as Lender


                                     By:_______________________________________
                                        Name:__________________________________
                                        Title:_________________________________


                                     FIRSTAR BANK, N.A.,
                                        as Lender


                                     By:_______________________________________
                                        Name:__________________________________
                                        Title:_________________________________



                                       16
<PAGE>

                                     Annex A

                             CONSENTS AND APPROVALS


                                      None



                                       17
<PAGE>

                              CONSENT OF GUARANTORS


Each of the undersigned is a Guarantor of the Obligations of the Borrower under
the Credit Agreement and hereby (a) consents to the foregoing Amendment, (b)
acknowledges that notwithstanding the execution and delivery of the foregoing
Amendment, the obligations of each of the undersigned Guarantors are not
impaired or affected and the Guaranties continue in full force and effect, and
(c) ratifies its Guaranty.

        IN WITNESS WHEREOF, each of the undersigned has executed and delivered
this Consent of Guarantors as of the 29th day of December, 1999.

                                     SPECIAL METALS DOMESTIC SALES CORPORATION


                                     By:_______________________________________
                                        Name:__________________________________
                                        Title:_________________________________


                                     INCO ALLOYS INTERNATIONAL, INC.


                                     By:_______________________________________
                                        Name:__________________________________
                                        Title:_________________________________


                                     A-1 WIRE TECH, INC.


                                     By:_______________________________________
                                        Name:__________________________________
                                        Title:_________________________________

                                       18
<PAGE>

                                   CONTROLLED PRODUCTS GROUP INTERNATIONAL, INC.


                                     By:_______________________________________
                                        Name:__________________________________
                                        Title:_________________________________

                                       19
<PAGE>

                                   SCHEDULE I

         LENDERS, NOTICE ADDRESSES, COMMITMENTS, COMMITMENT PERCENTAGES

<TABLE>
<CAPTION>
Lenders/Notice Addresses          Revolver          Term Loan A       Term Loan B       Total         Term A & Revolver   Term B
                                  Commitment        Commitment        Commitment      Commitment           Percent        Percent
-----------------------           ----------        ----------        ----------      ----------           -------        -------
<S>                               <C>               <C>               <C>           <C>                  <C>             <C>

KeyBank National Association      $9,090,909.09     $10,454,545.44        N/A       $19,545,454.53         9.09091%         N/A
127 Public So.
Cleveland, OH 44126
Attention: Marianne Meil
Fax: (216) 689-4981

Bank United                       $9,090,909.09     $10,454,545.46        N/A       $19,545,454.55         9.09091%         N/A
3200 Southwest Freeway
Suite 1900
Houston, TX 77027
Attention: Phil Green
Fax: (713) 543-6651

Banque Nationale de Paris         $9,090,909.09     $10,454,545.44        N/A       $19,545,454.53         9.09091%         N/A
499 Park Avenue
New York, NY 10022
Attention: Nathalie
Herrington
Fax: (212) 415-9606

Societe Generale,                 $7,272,727.27      $8,363,636.37        N/A       $15,636,363.64         7.27273%         N/A
New York Branch
1221 Avenue of the Americas
New York, NY 10020
Attention: Cynthia Colucci
Fax: (212) 278-7463

Fleet National Bank               $7,272,727.27      $8,363,636.37        N/A       $15,636,363.64         7.27273%         N/A
1 Clinton Square
Syracuse, NY 13221
Attention: Greg Gilroy
Fax: (315) 426-4364
</TABLE>

                                       21
<PAGE>
<TABLE>
<CAPTION>

Lenders/Notice Addresses          Revolver          Term Loan A       Term Loan B       Total         Term A & Revolver   Term B
                                  Commitment        Commitment        Commitment      Commitment           Percent        Percent
-----------------------           ----------        ----------        ----------      ----------           -------        -------
<S>                               <C>               <C>               <C>           <C>                  <C>             <C>
National Bank of Canada           $5,454,545.45     $6,272,727.26         N/A       $11,727,272.71         5.45455%         N/A
350 Main Street Suite 2540
Buffalo, NY 14202
Attention: Michael Brace
Fax: (716) 852-6832

Credit Agricole -- Indosuez       $3,636,363.64     $4,181,818.19         N/A       $7,818,181.83          3.63636%         N/A
520 Madison Avenue
New York, NY 10022
Attention: Rene Leblanc
Fax: (212) 418-2228

Star Bank                         $3,636,363.64     $4,181,818.20         N/A       $7,818,181.84          3.63636%         N/A
1350 Euclid Avenue 8th Floor
Cleveland, OH    44115
Attn:  David Dannemiller
Fax: (216) 623-9208

Natexis Banque                    $1,818,181.82     $2,090,909.08    $4,950,000.00  $8,859,090.90          1.81818%       5.00000%
645 Fifth Avenue
New York, NY 10022
Attention: John Rigo
Fax: (212) 872-5045
</TABLE>

                                       22
<PAGE>

                                    EXHIBIT A

                          DEBT SUBORDINATION AGREEMENT