-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VXnFFehJrIfWqASId5qQuMEp2I5JHYH2NoZnXPw56TO4yBi1hWLB1h3PGDj6SllW wnYZTOxEIuNRpVoND1d6ZQ== 0000950128-02-000271.txt : 20020415 0000950128-02-000271.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950128-02-000271 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020315 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLEGHENY TECHNOLOGIES INC CENTRAL INDEX KEY: 0001018963 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 251792394 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-12001 FILM NUMBER: 02575919 BUSINESS ADDRESS: STREET 1: 1000 SIX PPG PLACE CITY: PITTSBURGH STATE: PA ZIP: 15222 BUSINESS PHONE: 4123942800 MAIL ADDRESS: STREET 1: 100 SIX PPG PLACE CITY: PITTSBURGH STATE: PA ZIP: 15222 FORMER COMPANY: FORMER CONFORMED NAME: ALLEGHENY TELEDYNE INC DATE OF NAME CHANGE: 19960716 10-K405 1 j9326701e10-k405.txt FORM 10-K 2001 ============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------ FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ______ Commission file number 1-12001 ALLEGHENY TECHNOLOGIES INCORPORATED (Exact name of registrant as specified in its charter) Delaware 25-1792394 (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification Number) 1000 Six PPG Place, Pittsburgh, Pennsylvania 15222-5479 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (412) 394-2800 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: =============================================================================== Title of each class Name of each exchange on which registered - ------------------------------------------------------------------------------- Common Stock, $0.10 Par Value New York Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange =============================================================================== SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] At March 11, 2002, the Registrant had outstanding 80,568,079 shares of its Common Stock. The aggregate market value of the Registrant's voting stock held by non-affiliates at that date was approximately $1.28 billion, based on the closing price per share of Common Stock on that date of $16.75 as reported on the New York Stock Exchange. Shares of Common Stock known by the Registrant to be beneficially owned by directors of the Registrant and officers of the Registrant subject to the reporting and other requirements of Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are not included in the computation. The Registrant, however, has made no determination that such persons are "affiliates" within the meaning of Rule 12b-2 under the Exchange Act. Documents Incorporated By Reference Selected portions of the 2001 Annual Report to Stockholders - Part I, Part II and Part IV of this Report. Selected portions of the Proxy Statement for 2002 Annual Meeting of Stockholders - - Part III of this Report. The information included in the Proxy Statement as required by paragraphs (a) and (b) of Item 306 of Regulation S-K and paragraphs (k) and (l) of Item 402 of Regulation S-K is not incorporated by reference in this Form 10-K. ================================================================================ INDEX
PAGE NUMBER ------ PART I....................................................................................3 Item 1. Business................................................................3 Item 2. Properties.............................................................12 Item 3. Legal Proceedings......................................................14 Item 4. Submission of Matters to a Vote of Security Holders....................16 PART II ................................................................................ 17 Item 5. Market for Registrant's Common Equity and Related Stockholder Matters...............................................17 Item 6. Selected Financial Data................................................17 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.........................................17 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.............17 Item 8. Financial Statements and Supplementary Data............................17 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...............................17 PART III ................................................................................17 Item 10. Directors and Executive Officers of the Registrant.....................17 Item 11. Executive Compensation.................................................18 Item 12. Security Ownership of Certain Beneficial Owners and Management........................................................18 Item 13. Certain Relationships and Related Transactions.........................18 PART IV ................................................................................ 18 Item 14. Exhibits, Financial Statement Schedules, and Report on Form 8-K........18 SIGNATURES...............................................................................19 EXHIBIT INDEX............................................................................20
2 PART I ITEM 1. BUSINESS THE COMPANY Allegheny Technologies Incorporated is one of the largest and most diversified specialty materials producers in the world. The Company uses innovative technologies to offer growing global markets a wide range of specialty materials. High-value products include super stainless steel, nickel-based and cobalt-based alloys and superalloys, titanium and titanium alloys, specialty steels, tungsten materials, exotic alloys, which include zirconium, hafnium and niobium, and highly engineered strip and Precision Rolled Strip(R) products. In addition, we produce commodity specialty materials such as stainless steel sheet and plate, silicon electrical and tool steels, and forgings and castings. The Company operates in the following three business segments, which accounted for the following percentages of total revenues of $2.13 billion, $2.46 billion, and $2.30 billion for the years ended December 31, 2001, 2000 and 1999, respectively: 2001 2000 1999 ---- ---- ---- Flat-Rolled Products 51% 59% 56% High Performance Metals 36% 30% 32% Industrial Products 13% 11% 12% Business segment information presented for 1999 has been restated to conform with the 2000 and 2001 presentations. Additional financial information with respect to the Company's business segments, including their contributions to operating profit and their identifiable assets, for the three years ended December 31, 2001, is presented under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Operations" on pages 9 through 13 of the 2001 Annual Report to Stockholders (the "2001 Annual Report") and in Note 10 of the Notes to Consolidated Financial Statements on pages 41 through 43 of the 2001 Annual Report and is incorporated herein by reference. Allegheny Technologies Incorporated is a Delaware corporation with its principal executive offices located at 1000 Six PPG Place, Pittsburgh, Pennsylvania 15222-5479, telephone number (412) 394-2800. References to "Allegheny Technologies," the "Company" or the "Registrant" mean Allegheny Technologies Incorporated and its subsidiaries, unless the context otherwise requires. OUR BUSINESS Specialty materials play a significant role in our lives. Allegheny Technologies is a world leader in the manufacture of high value and commodity specialty products. Our high value products accounted for 71% of total sales in 2001 and our commodity products accounted for 29% of total sales in 2001. Specialty materials are produced in a variety of forms, including sheet, strip, foil, plate, slab, ingot, billet, bar, rod, wire, coil, tubing, and shapes, and are selected for use in environments that demand materials having exceptional hardness, toughness, strength, resistance to heat, corrosion or abrasion, or a combination of these characteristics. Common end uses of our products include jet engines, air frames, electrical energy production and generation, automotive, chemical processing, oil and gas, construction and mining, machine and cutting tools, appliances and food equipment, transportation and medical equipment and implants. 3 Flat-Rolled Products Segment The Company produces, converts and distributes stainless steel, nickel-based alloys and superalloys, and titanium and titanium-based alloys, in sheet, strip, plate and foil, and Precision Rolled Strip(R) products, as well as silicon electric steels and tool steels. Our Flat-Rolled Products segment consists of Allegheny Ludlum, Allegheny Rodney, Rome Metals and Allegheny Ludlum's 60% interest in the Chinese joint venture company known as Shanghai STAL Precision Stainless Steel Company Limited ("STAL"), which commenced commercial production in 2000. The remaining 40% interest in STAL is owned by the Baosteel Group, a state authorized investment company whose equity securities are publicly traded in the People's Republic of China. As compared with carbon steel, stainless steel and nickel-based alloys contain elements such as chromium, nickel and molybdenum for strength and corrosion and heat resistance; titanium and titanium-based alloys provide higher strength-to-weight ratios and are corrosion-resistant; tool steel alloys, which contain more carbon than stainless steel, include tungsten, molybdenum and other metals to make them both hard and malleable; and electrical steel contains silicon to minimize electrical energy loss when in use. We offer these flat-rolled products in a broad selection of grades, sizes and finishes designed to meet international specifications. Finishing capabilities include plasma arc cutting, shearing, abrasive cutting, sawing and machining. We provide technical support for material selection. Our wide array of alloys and product forms provides customers with choices from which to select the optimum alloy for their application. Sheet. Stainless steel, nickel-based alloy and titanium alloy sheet products are used in a wide variety of consumer and industrial applications such as food preparation, appliance, automotive, aerospace and medical applications that require cleanability, fabricability and corrosion resistance. Approximately 70% by volume of the Company's sheet products are sold to service centers, which have slitting, cutting or other processing facilities, with the remainder sold directly to end-use customers. Strip. Stainless steel, nickel-based alloy and titanium alloy strip products are used in a variety of consumer and industrial products and a wide range of automotive components. We also offer very thin Precision Rolled Strip(R) products which range from 0.015 inch to less than 0.0015 inch (0.38 - 0.038 mm) thick. Our Precision Rolled Strip(R) products include stainless steel, nickel-based alloys, titanium and titanium alloys, and carbon steel that are used by customers to fabricate a variety of different products ranging from automobile components to photographic, computer, building and construction and consumer products. Approximately 49% by volume of the Company's strip products are shipped directly to end-use customers, with the remainder to service centers, including the Company's own distribution network for flat-rolled strip materials. Plate. Stainless steel, nickel-based alloy and titanium alloy plate products are primarily used in industrial equipment that requires cleanability or corrosion-resistant capabilities such as pollution control scrubbers, food processing equipment, pulp and paper equipment, chemical processing equipment, power generation equipment and aerospace applications. We process and distribute stainless steel and nickel alloy plate and titanium and titanium alloy plate products in a wide variety of grades and gauges. Approximately 75% by volume of our plate products are sold to service centers, with the remainder sold directly to end-use customers. 4 Silicon Electric Steel. The Company's grain-oriented silicon electrical steel products are used generally in applications in which electrical conductivity and magnetic properties are important. These products are sold directly to end-use customers, including manufacturers of transformers and communications equipment. High Performance Metals Segment The Company's High Performance Metals segment produces, converts and distributes a wide range of high performance alloys, including nickel- and cobalt-based alloys and superalloys, titanium and titanium-based alloys, exotic alloys such as zirconium, hafnium, niobium, tantalum, and their related alloys, and other specialty materials, primarily in slab, ingot, billet, bar, rod, wire, coil and seamless tube forms, and zirconium chemicals. Our High Performance Metals segment consists of Allvac, Allvac Ltd (U.K.) and Wah Chang. Nickel-, Cobalt- and Titanium-Based Alloys and Superalloys. Our nickel-, iron-, cobalt- and titanium-based alloys and superalloys are engineered to retain exceptional strength and corrosion resistance at temperatures through 2,000 degrees Fahrenheit (1,093 degrees Celsius) and are used in critical, high-stress applications. These products are designed for the high performance requirements of aerospace, oil and gas, power generation, chemical processing, transportation, biomedical, marine and nuclear industries. The Company permanently idled its high cost titanium sponge facility in the first half of 2001. The Company now purchases titanium sponge in the open market. Exotic Alloys - Zirconium, Hafnium, Niobium and Tantalum. We are a leading U.S. producer of zirconium, a highly corrosion-resistant metal that is transparent to neutrons. Zirconium is used for fuel tubes and structural parts in nuclear power reactors and for corrosion-resistant chemical industry applications, and is also used in the jewelry and personal hygiene industries. Hafnium, derived as a by-product of zirconium, is principally used for control rods in nuclear reactors due to its ability to absorb neutrons, and as an alloying addition in aerospace applications. The Company also produces niobium, also known as columbium, in various forms and alloys. The higher quality grades the Company produces are used as an alloying addition in superalloys for jet engines and for aerospace applications such as rocket and fuel nozzles. Niobium and related alloys are used in applications requiring superconducting characteristics for high-strength magnets, including in medical devices for body-scanning, accelerators for high-energy physics, and fusion energy projects for the generation of electricity. The Company also produces tantalum, one of the most corrosion-resistant metals, which is used for medical implants, chemical process equipment and aerospace engine components. Industrial Segment The Industrial Products segment's principal business includes the production of tungsten powder, tungsten heavy alloys, tungsten carbide materials and carbide cutting tools. The segment also produces large grey and ductile iron castings and carbon alloy steel forgings. The companies in this segment are Metalworking Products, Casting Service and Portland Forge. Cutting Tools and Tungsten Carbide Products. The Company produces a line of sintered tungsten carbide products that approach diamond hardness for the metalworking, mining, oil and gas, and other industries requiring tools with extra hardness. Cemented carbide products, which may be coated or uncoated, are used as super-hard cutters in the high-speed machining and cutting of steel, high temperature alloys and other applications where hardness and wear 5 resistance are important. Technical developments related to ceramics, coatings and other disciplines are incorporated in these products. The Company also produces tungsten for worldwide markets, starting with numerous and varied tungsten-bearing raw materials and resulting in tungsten and tungsten carbide powders. Previously used cemented carbide parts are also recycled into tungsten carbide powder. Forgings and Castings. The Company forges carbon alloy steels into finished forms that are used in a diverse number of industries. With the latest screw-type forging presses, the Company produces carbon alloy steel forgings in sizes ranging from one pound to more than 200 pounds. The Company also casts grey and ductile iron metals in sizes ranging from 1,000 pounds to 160,000 pounds and in forms ranging from diesel locomotive engine blocks to housings and parts for power generation equipment, tools, and automobiles. CAPITAL INVESTMENTS The current 2002 capital expenditure plan is approximately $50 million for operational necessities and for completion of capital programs which commenced in 2001. COMPETITION Markets for the Company's products and services in each of its principal business segments are highly competitive. The Company competes with many manufacturers which, depending on the product involved, range from large diversified enterprises to smaller companies specializing in particular products. Factors that affect the Company's competitive posture are the quality of its products, services and delivery capabilities, its capabilities to produce a wide range of specialty materials in various unique grades, alloys and product forms, its technology capabilities including its research and development efforts, and its marketing strategies and price. Our companies face competition from domestic and foreign competitors, a number of which are government subsidized. In 1999, the United States imposed antidumping and countervailing duties on dumped and subsidized imports of stainless steel sheet and strip in coils and stainless steel plate in coils from companies in ten foreign countries. Current administrative reviews by the U.S. Commerce Department are revising the findings at lower duty rates. The Company continues to monitor unfairly traded imports from foreign producers for appropriate action. On March 5, 2002, President Bush announced a decision imposing tariffs on certain steel imports resulting from his June 5, 2001 order for an investigation by the U.S. International Trade Commission ("ITC") under Section 201 of the 1974 Trade Act ("Section 201") related to certain specialty steel products. Section 201 allows the President to restrict imports or impose tariffs on imports that are seriously injuring a domestic industry. Specialty steel products under investigation for the years 1996 through 2000 include stainless steel bar, rod and wire, and tool steel. The ITC found that certain imported products were seriously injuring the domestic industry and in December 2001 made its recommendations to the President for consideration. The Company believes that this decision has minimal impact on its business because of limited applicability to the Company's products. 6 RAW MATERIALS AND SUPPLIES Substantially all parts and materials required in the manufacture of the Company's products are available from more than one supplier and the sources and availability of raw materials essential to its businesses are adequate. The principal materials used by the Company in the production of its specialty materials are scrap (including nickel-, chromium-, titanium- and molybdenum-bearing scrap), nickel, titanium sponge, zirconium sand and sponge, ferrochromium, ferrosilicon, molybdenum and molybdenum alloys, ammonium paratungstate, manganese and manganese alloys, cobalt, niobium and other alloying materials. Purchase prices of certain critical raw materials are volatile. As a result, the Company's operating results could be subject to significant fluctuation. For example, since the Company generally uses in excess of 40,000 tons of nickel each year, a hypothetical change of $1.00 per pound in nickel prices would result in increased costs of approximately $80 million. In addition, certain of these raw materials, such as nickel, cobalt, ferrochromium and titanium sponge, can be acquired by the Company and its specialty materials industry competitors, in large part, only from foreign sources. Some of these foreign sources are located in countries that may be subject to unstable political and economic conditions, which might disrupt supplies or affect the price of these materials. The Company purchases its nickel requirements principally from producers in Australia, Canada, Norway, Russia, and the Dominican Republic. Zirconium sponge is purchased from a source in France, while zirconium sand is purchased from both U.S. and Australian sources. Cobalt is purchased primarily from producers in Canada. More than 80% of the world's reserves of ferrochromium are located in South Africa, Zimbabwe, Albania, and Kazakhstan. The Company also purchases titanium sponge from sources in Kazakhstan, Japan and Russia. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Other Matters -Forward Looking Statements - Volatility of Energy Prices; Availability of Energy Resources" and " - Volatility of Prices of Critical Raw Materials; Unavailability of Raw Materials" on pages 22 through 23 of the 2001 Annual Report. EXPORT SALES AND FOREIGN OPERATIONS International sales represented approximately 23%, 18%, and 20% of the Company's total sales in 2001, 2000, and 1999, respectively. These figures include export sales by U.S. operations to customers in foreign countries, which accounted for approximately 15%, 12%, and 13% of the Company's total sales in each of 2001, 2000, and 1999, respectively. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -Other Matters - Forward Looking Statements - Export Sales" on page 23 of the 2001 Annual Report. The Company's overseas sales, marketing and distribution efforts are aided by international marketing offices or representatives located at various locations throughout the world. See Note 10 of the Notes to Consolidated Financial Statements on pages 41 through 43 of the 2001 Annual Report for more information regarding international sales activity. 7 For 2001, external sales in the United States and Canada represented 77% and 3%, respectively, of total 2001 external sales. Within Europe, external sales to the United Kingdom, France and Germany represented 5%, 4% and 4%, respectively, of total external sales. The Company's Metalworking Products unit manufactures high precision threading, milling, boring and drilling systems for the European market from locations in the United Kingdom, Spain, France, Germany and Switzerland. The Company's Allvac Ltd unit has manufacturing capabilities in the United Kingdom and has enhanced service to customers by improving the sales and distribution network for the Company's nickel-based alloys, specialty steel and titanium in Europe. In 2000, the STAL joint venture in the People's Republic of China began commercial production of Precision Rolled Strip(R) products. This venture enables the Company to offer its Precision Rolled Strip(R) products more effectively to markets in China and other Asian countries. BACKLOG, SEASONALITY AND CYCLICALITY The Company's backlog of confirmed orders was approximately $488.9 million at December 31, 2001 and $559.5 million at December 31, 2000. It is anticipated that approximately 90% of confirmed orders on hand at December 31, 2001 will be fulfilled during the year ended December 31, 2002. Backlog of confirmed orders of the Flat-Rolled Products segment was $105.2 million at December 31, 2001 and $143.5 million at December 31, 2000. It is anticipated that approximately 100% of the confirmed orders on hand at December 31, 2001 for this segment will be fulfilled during the year ending December 31, 2002. Backlog of confirmed orders of the High Performance Metals segment was $377.9 million at December 31, 2001 and $353.5 million at December 31, 2000. It is anticipated that approximately 86% of the confirmed orders on hand at December 31, 2001 for this segment will be fulfilled during the year ending December 31, 2002. Generally, sales and operations of the Company's businesses are not seasonal. However, demand for products of the Company's businesses are cyclical over longer periods because specialty materials customers operate in cyclical industries and are subject to changes in general economic conditions. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Other Matters - Forward Looking Statements - Cyclical Demand for Products" on page 22 of the 2001 Annual Report. RESEARCH, DEVELOPMENT AND TECHNICAL SERVICES The Company's management believes that the Company's research and development capabilities give it an edge in developing new products and manufacturing processes that contribute to the profitable growth potential of the Company on a long-term basis. The Company conducts research and development at its various operating locations both for its own account and, on a limited basis, for customers on a contract basis. Estimates of the components of research and development for each of the Company's segments for the years ended December 31, 2001, 2000, and 1999 included the following: 8
(In millions) 2001 2000 1999 ---- ---- ---- Company-Sponsored: Flat-Rolled Products $ 4.5 $ 6.3 $ 7.3 High Performance Metals 5.0 5.0 5.7 Industrial Products 1.8 2.3 2.2 ----- ----- ----- $11.3 $13.6 $15.2 ----- ----- ----- Customer-Sponsored: High Performance Metals $ 2.0 $ 2.0 $ 1.1 ----- ----- ----- Total Research and Development $13.3 $15.6 $16.3 ===== ===== =====
With respect to the Flat-Rolled Products and High Performance Metals segments, the Company's research, development and technical service activities are closely interrelated and are directed toward cost reduction, process improvement, process control, quality assurance and control, system development, the development of new manufacturing methods, the improvement of existing manufacturing methods, the improvement of existing products, and the development of new products. The Company owns several hundred United States patents, many of which are also filed under the patent laws of other nations. Although these patents, as well as the Company's numerous trademarks, technical information, license agreements, and other intellectual property, have been and are expected to be of value, management believes that the loss of any single such item or technically related group of such items would not materially affect the conduct of its business. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS The Company is subject to various domestic and international environmental laws and regulations that govern the discharge of pollutants into the air or water, and the management and disposal of hazardous substances, and which may require that it investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations, including sites at which the Company has been identified as a potentially responsible party ("PRP") under the Comprehensive Environmental Response, Compensation and Liability Act, commonly known as Superfund, and comparable state laws. The Company could incur substantial cleanup costs, fines and civil or criminal sanctions, third party property damage or personal injury claims as a result of violations or liabilities under these laws or non-compliance with environmental permits required at its facilities. The Company is currently involved in the investigation and remediation of a number of Company current and former sites as well as third party locations sites under these laws. The Company's reserves for environmental remediation totaled approximately $46.7 million at December 31, 2001. Based on currently available information, management does not believe that future environmental costs in excess of those accrued with respect to sites with which the Company has been identified are likely to have a material adverse effect on the Company's financial condition or liquidity. The resolution in any reporting period of one or more of these matters could have a material adverse effect on the Company's results of operations for that period. In addition, there can be no assurance that additional future developments, administrative actions or liabilities relating to environmental matters will not have a material adverse effect on the Company's financial condition or results of operation. 9 With respect to proceedings brought under the federal Superfund laws, or similar state statutes, the Company has been identified as a PRP at approximately 31 of such sites, excluding those at which it believes it has no future liability. The Company's involvement is very limited or de minimis at approximately 13 of these sites, and the potential loss exposure with respect to any of the remaining 18 individual sites is not considered to be material. The Company is a party to various cost-sharing arrangements with other PRPs at the sites. The terms of the cost-sharing arrangements are subject to non-disclosure agreements as confidential information. Nevertheless, the cost-sharing arrangements generally require all PRPs to post financial assurance of the performance of the obligations or to pre-pay into an escrow or trust account their share of anticipated site-related costs. In addition, the Federal government, through various agencies, is a party to several such arrangements. See the discussion of related matters in Item 3. Legal Proceedings. Additional related information is presented under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations - Other Matters - Forward Looking Statements - Risks Associated with Environmental Matters" on page 21 of the 2001 Annual Report and in Notes 1 and 13 of the Notes to Consolidated Financial Statements on pages 30 through 32, and pages 49 through 51, respectively, of the 2001 Annual Report. EMPLOYEES The Company has approximately 10,700 employees. A portion of the Company's workforce is covered by various collective bargaining agreements, principally with the United Steelworkers of America ("USWA"), including: approximately 3,700 Allegheny Ludlum production and maintenance employees covered by collective bargaining agreements between Allegheny Ludlum and the USWA, which are effective through June 2007; approximately 325 Oremet employees covered by a collective bargaining agreement with the USWA, which are effective through June 2007; and approximately 660 Wah Chang employees covered by a collective bargaining agreement with the USWA, which expired in October 2000. Generally, agreements that expire may be terminated after notice by the USWA. After termination, the USWA may authorize a strike. A strike by the employees covered by one or more of the collective bargaining agreements could materially adversely affect the Company's operating results. There can be no assurance that the Company will succeed in concluding collective bargaining agreements with the USWA or other unions to replace those that expire. See the discussion of related matters under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations - Other Matters - Forward Looking Statements - Labor Matters" on page 23 of the 2001 Annual Report. 10 PRINCIPAL OFFICERS OF THE REGISTRANT Principal officers of the Company as of February 28, 2002 are as follows:
NAME AGE TITLE - ---- --- ----- Robert P. Bozzone 68 Chairman of the Board and Director* James L. Murdy 63 President and Chief Executive Officer and Director* Jack W. Shilling 58 Executive Vice President, Strategic Initiatives and Technology and Chief Technology Officer* Douglas A. Kittenbrink 46 Executive Vice President and Chief Operating Officer and President of Allegheny Ludlum Corporation* Jon D. Walton 59 Senior Vice President, Chief Legal and Administrative Officer* Richard J. Harshman 45 Senior Vice President, Finance and Chief Financial Officer* Terry L. Dunlap 42 Vice President, Procurement, Information Technology and Chief Information Officer Robert S. Park 57 Vice President, Treasurer Dale G. Reid 46 Vice President, Controller and Chief Accounting Officer*
* Such officers are subject to the reporting and other requirements of Section 16 of the Securities Exchange Act of 1934, as amended. Set forth below are descriptions of the business background for the past five years of the principal officers of the Company. Robert P. Bozzone has been Chairman of the Board since December 2000 and was President and Chief Executive Officer from December 2000 until July 2001. Mr. Bozzone also served as Vice Chairman of the Company beginning August 1996 and was Vice Chairman of Allegheny Ludlum Corporation from August 1994 to August 1996. Previously, he was President and Chief Executive Officer of Allegheny Ludlum Corporation. James L. Murdy has been President and Chief Executive Officer since July 2001. He served as Executive Vice President from September 2000 to July 2001 and as Executive Vice President, Finance and Administration and Chief Financial Officer from December 1996 to September 2000. He served as Senior Vice President - Finance and Chief Financial Officer of the Company from August 1996 to December 1996, having previously served as the Senior Vice President-Finance and Chief Financial Officer of Allegheny Ludlum Corporation. Jack W. Shilling has been Executive Vice President, Strategic Initiatives and Technology and Chief Technology Officer since July 2001. He served as President of the High Performance Metals Group from April 2000 to July 2001. Previously he served as President of Allegheny Ludlum Corporation. He also served as Executive Vice President of Allegheny Ludlum from 1996 to 1998. Douglas A. Kittenbrink has been Executive Vice President and Chief Operating Officer since July 2001, and has served as President of Allegheny Ludlum Corporation since April 2000. 11 Previously he served as Senior Vice President, Manufacturing Engineering, Information Technology and Production Control of Allegheny Ludlum. He also served as Vice President, Engineering and Information Technology of Allegheny Ludlum from August 1994 to January 1998. Jon D. Walton has been Senior Vice President, Chief Legal and Administrative Officer since July 2001. He was Senior Vice President, General Counsel and Secretary of the Company from August 1997 to July 2001. Previously, he served as Vice President, General Counsel and Secretary of the Company from August 1996 to August 1997, having previously served in the same capacity as an officer of Allegheny Ludlum Corporation. Richard J. Harshman has been Senior Vice President, Finance and Chief Financial Officer as announced in December 2001 and served as Vice President, Finance and Chief Financial Officer from December 2000 to December 2001. Between September 2000 and December 2000, Mr. Harshman served as Vice President, Controller and Acting Chief Financial Officer. Previously, he had been Vice President, Investor Relations and Corporate Communications from July 1998, and prior thereto, Senior Vice President, Finance and Administration, at Allvac from 1995. Terry L. Dunlap has been Vice President, Procurement, Information Technology and Chief Information Officer since November 2001, and served as Vice President, e-Business from March 2000 until November 2001. Previously, he had been General Manager, Sheet Products for Allegheny Ludlum Corporation from 1998. Mr. Dunlap previously served in a number of management positions with Allegheny Ludlum. Mr. Dunlap is a member of Mr. Bozzone's immediate family. Robert S. Park has been Vice President, Treasurer of the Company since August 1996. From May 1994 to August 1996, Mr. Park served as Vice President, Treasurer of Allegheny Ludlum Corporation. Previously, he served as Treasurer of Allegheny Ludlum. Dale G. Reid has been Vice President, Controller and Chief Accounting Officer of the Company since December 2000 as well as from May 1997 to September 2000. In the interim he served as Vice President, Finance for Allegheny Ludlum Corporation. He had served as Controller of the Company from August 1996 to September 2000. Mr. Reid previously served as Chief Accounting Officer and Controller of Teledyne, Inc. ITEM 2. PROPERTIES The Company's principal domestic facilities as of December 31, 2001 are listed below by segment. Of those facilities listed below which are owned, five are subject to mortgages or similar encumbrances securing borrowings under certain industrial development authority financings. See Note 1 of the Notes to Consolidated Financial Statements on pages 30 and 31 of the 2001 Annual Report. Although the facilities vary in terms of age and condition, the Company's management believes that these facilities have generally been well-maintained. 12
APPROXIMATE SQUARE FOOTAGE FACILITY LOCATION PRINCIPAL USE (OWNED/LEASED) ----------------- ------------- -------------- FLAT-ROLLED PRODUCTS SEGMENT Brackenridge Works Manufacturing of stainless steel and other 2,443,000 (owned) Brackenridge and Natrona, PA specialty material strip, sheet, and plate and silicon electrical steel strip and sheet. West Leechburg Works Manufacturing of stainless steel and other 1,415,000 (owned) West Leechburg and specialty material strip and sheet and silicon Bagdad, PA electrical steel strip and sheet. Vandergrift Plant Manufacturing of stainless steel strip and sheet. 966,000 (owned) Vandergrift, PA Washington Plant Manufacturing of specialty material plate. 615,000 (owned) Washington, PA Washington Flat-Roll Plant Manufacturing of stainless steel sheet. 350,000 (owned) Washington, PA Wallingford Plant Manufacturing of stainless steel and other 591,000 (owned) Wallingford and specialty material strip. Waterbury, CT Houston Plant Manufacturing of stainless steel and other 298,000 (owned) Houston, PA specialty material. Latrobe Plant Manufacturing of nickel-based and other specialty 468,000 (owned) Latrobe, PA steel. New Castle Plant Manufacturing of stainless steel sheet. 178,000 (owned) New Castle, IN Massillon Plant Manufacturing of stainless steel and other 165,000 (owned) Massillon, OH specialty material plate on 96-inch wide anneal and pickle line. Allegheny Rodney Strip Plant Manufacturing of stainless steel precision rolled 250,000 (leased) New Bedford, MA thin sheet strip and foil, custom roll-formed and stretch-formed shapes. HIGH PERFORMANCE METALS SEGMENT Monroe Plant Production of nickel and titanium products and 640,000 (owned) Monroe, NC other specialty steel long products. Lockport Plant Manufacturing nickel-based alloy and other 282,000 (leased) Lockport, NY specialty material products. Richburg Plant Production of nickel and titanium product and 221,000 (owned) Richburg, SC other specialty steel long products. Bakers Plant Production of titanium ingot. 60,000 (owned) Monroe, NC Oremet Facility Production of titanium ingot, mill products and 491,000 (owned) Albany, OR castings. Wah Chang Facility Production of zirconium, hafnium, niobium, 917,000 (owned) Albany, OR titanium and tantalum.
13
APPROXIMATE SQUARE FOOTAGE FACILITY LOCATION PRINCIPAL USE (OWNED/LEASED) ----------------- ------------- -------------- Richland Plant Production of titanium ingots, slabs and 103,000 (owned) Richland, WA electrodes. Huntsville Plant Production of exotic alloys and other specialty 91,000 (owned) Huntsville, AL material wire. Frackville, PA Production of titanium wire products. 55,000 (owned) INDUSTRIAL PRODUCTS SEGMENT Waynesboro, PA Production of threading systems. 386,000 (owned) Huntsville, AL Production of tungsten and tungsten carbide 293,000 (owned) powders. Grant, AL Production of primary tungsten sintered parts. 88,000 (leased) Houston, TX Production of tungsten carbide products used in 120,000 (owned) oil and gas drilling applications. Nashville, TN Production of tungsten carbide and cutting tools. 134,000 (leased) La Porte, IN Manufacturing of large ductile and grey iron 453,000 (owned) castings. Portland, IN Manufacturing of carbon and alloy steel forgings. 215,000 (owned) Lebanon, KY Manufacturing of carbon and alloy steel forgings. 100,000 (owned) Gurley, AL Production of tungsten, tungsten carbide and 435,000 (leased) molybdenum powders.
The Company also owns or leases production facilities in a number of foreign countries, including the United Kingdom, Germany, France, Spain, Switzerland, and the People's Republic of China. The Company owns and operates 625,000-square foot facilities for melt and remelt, machining and bar mill operations, laboratories and offices located on a 25-acre site in Sheffield, England, and a 40,000-square foot leased facility in Sheffield, England for computer numerically controlled milling and machine operations. Through its STAL joint venture, the Company operates a 130,000-square foot facility for finishing Precision Rolled Strip(R) products in the Xin-Zhuang Industrial Zone, Shanghai, China. The Company's executive offices, located at PPG Place in Pittsburgh, Pennsylvania are leased. These facilities are modern and sufficient for the Company to carry on its current activities. ITEM 3. LEGAL PROCEEDINGS The Company becomes involved from time to time in various lawsuits, claims and proceedings relating to the conduct of its business, including those pertaining to environmental, government contracting, product liability, patent infringement, commercial, employment, employee benefits, and stockholder matters. In June 1995, the U.S. Government commenced an action against Allegheny Ludlum in the United States District Court for the Western District of Pennsylvania, alleging multiple 14 violations of the federal Clean Water Act. The trial of this matter concluded in February 2001 with a favorable jury verdict for Allegheny Ludlum on approximately 85 percent of the claims. In February 2002, the Court issued a decision imposing a penalty of $8.2 million for approximately 160 incidents at five facilities that occurred over a period of about six years which Allegheny Ludlum had reported to the appropriate environmental agencies. The Company has filed a post-trial motion seeking a reduction in the penalty and is reviewing options for appealing the Court's decision. On October 1, 2001, the Company received an Administrative Complaint from the U.S. Environmental Protection Agency alleging that Allegheny Rodney failed to file required Toxic Chemical Release Reports for its Waterbury, Connecticut facility for the years 1996 through 1999. The EPA has proposed the imposition of a civil penalty of $330,000 on account of this failure. The Company has denied the allegations and set forth its defenses. On March 20, 1995, Kaiser Aerospace & Electronics Corporation ("Kaiser") filed a civil complaint against Teledyne Industries, Inc. (now TDY Industries, Inc. ("TDY")), a wholly-owned subsidiary of the Company) and Dimeling Schreiber & Park ("DS&P"), DS&P's general partners, and New Piper Aircraft, Inc. in the state court for Miami-Dade County, Florida. The complaint alleged that TDY breached a Cooperation and Shareholder Agreement with Kaiser under which the parties agreed to cooperate in the filing and promotion of a proposed plan for acquiring out of bankruptcy the assets of Piper Aircraft, a manufacturer of general aviation aircraft. Kaiser alleged that TDY breached contractual and fiduciary duty obligations under the agreement by instead entering into a proposed plan with another party, DS&P, and sought damages as well as a constructive trust over the shares of New Piper Aircraft. In a related action in the Federal Court for the Southern District of Florida, TDY sought to enjoin continuation of the state lawsuit. Both parties appealed to the Court of Appeals for the 11th Circuit in Florida. In May 2001, the Court permitted Kaiser to proceed in the Florida State lawsuit. TDY and the other parties are engaged in discovery and have agreed to participate in a mediation. This matter is tentatively scheduled for trial during the fourth quarter 2002. Allegheny Ludlum and the United Steelworkers of America ("USWA") are parties to various collective bargaining agreements which set forth a "Profit Sharing Plan". The USWA disputes the Company's Profit Sharing Pool calculations for 1996, 1997, 1998 and 1999. The USWA's outside accountant, KPMG LLP, identified certain adjustments it believed should be made to those calculations and that the net effect of those adjustments would result in additional amounts allegedly owed to USWA-represented employees of approximately $20 million. The Company maintains that its certified determinations of the Profit Sharing Pool calculations were made as prescribed by the Profit Sharing Plan. On November 20, 2001, the USWA filed a Complaint to compel the arbitration in this matter. The Complaint has been filed in the United States District Court for the Western District of Pennsylvania and is captioned United Steelworkers of America, AFL-CIO CLC v. Allegheny Ludlum Corporation, Civil Action No. 01-2196. The Company denies that any adjustments to the Profit Sharing Pool calculations are required and intends to contest the USWA's claim vigorously. TDY Industries, Inc. and the San Diego Unified Port District ("Port District") entered into a lease of property located in San Diego, California on October 1, 1984. TDY operated its Teledyne Ryan Aeronautical division ("Ryan") at the property until May 1999, when substantially all the assets and business of Ryan were sold to Northrop Grumman Corporation ("Northrop"). Northrop subleased a portion of the property until early 2001. TDY also entered into three separate sublease arrangements for portions of the property. TDY sought Port District 15 consent to the subleases, which the Port District refused. After its administrative appeal to the Port District was denied, TDY Industries, Inc. commenced a lawsuit against the Port District. The complaint, filed in December 2001 in state court in San Diego, alleges breach of contract, inverse condemnation, tortious interference with a prospective economic advantage and other causes of action relating to the Port District's failure to consent to subleases of the space. The Complaint seeks at least $4 million for damages from the Port District and declaratory relief. TDY is obligated to continue to pay rent to the Port District, in an amount of approximately $400,000 per month. Due to the Port District's failure to consent to subleases, TDY is unable to mitigate its costs related to the property. While TDY is continuing its marketing efforts to sublease the property, TDY and the Port District continue to discuss a resolution to the matter. In another matter related to the property, the Port District has requested that the California Department of Toxic Substances Control ("DTSC") evaluate whether the property is regulated as a hazardous waste transportation, storage, or disposal facility under the Resource Conservation and Recovery Act ("RCRA") and similar state laws. DTSC recognizes that the information pertaining to the RCRA permitting status of the property is ambiguous and has agreed to refer the issue of the property's RCRA permitting status to DTSC's Legal Office for further consideration. TDY has an opportunity to discuss this matter directly with DTSC's Legal Office and DTSC will refrain from taking action regarding this issue until after completion of DTSC's Legal Office review and discussions with TDY. To the extent the facility is subject to RCRA permitting and corrective action is required at the property, DTSC has agreed that the San Diego Regional Water Quality Control Board ("Regional Board") is the appropriate agency to oversee the corrective action work. The Regional Board is currently overseeing other investigative work at the site. A number of other lawsuits, claims and proceedings have been or may be asserted against the Company relating to the conduct of its business, including those pertaining to product liability, patent infringement, commercial, employment, employee benefits, environmental and stockholder matters. While the outcome of litigation cannot be predicted with certainty, and some lawsuits, claims or proceedings may be determined adversely to the Company, management does not believe that the disposition of any such pending matters is likely to have a material adverse effect on the Company's financial condition or liquidity, although the resolution in any reporting period of one or more of these matters could have a material adverse effect on the Company's results of operations for that period. For additional information see Note 13 of the Notes to Consolidated Financial Statements on pages 49 through 52 of the 2001 Annual Report. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 16 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information required by this item is incorporated by reference to Note 14 of the Notes to Consolidated Financial Statements on page 52 of the 2001 Annual Report and to "Common Stock Prices" on page 53 of the 2001 Annual Report. ITEM 6. SELECTED FINANCIAL DATA Information required by this item is incorporated by reference to "Selected Financial Data" on pages 54 and 55 of the 2001 Annual Report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Information required by this item is incorporated by reference to "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 9 through 55 of the 2001 Annual Report. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information required by this item is incorporated by reference to "Management's Discussion and Analysis of Financial Condition and Results of Operations - Other Matters - Forward Looking Statements - Volatility of Energy Prices; Availability of Energy Resources" and "- Volatility of Prices of Critical Raw Materials; Unavailability of Raw Materials" and "- Interest Rate Risk" on pages 22 through 23 of the 2001 Annual Report and Note 1 of the Notes to Consolidated Financial Statements on pages 30 and 32 of the 2001 Annual Report. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Consolidated Financial Statements and Notes to Consolidated Financial Statements listed in Item 14(a)(1) are incorporated by reference to pages 25 through 52 of the 2001 Annual Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT In addition to the information set forth under the caption "Principal Officers of the Registrant" in Part I of this report, the information concerning the directors of the Company required by this item is incorporated by reference to "Election of Directors" as set forth in the 2002 Proxy Statement filed by the Registrant pursuant to Regulation 14A (the "2002 Proxy Statement"). 17 ITEM 11. EXECUTIVE COMPENSATION Information required by this item is incorporated by reference to "Directors Compensation," "Executive Compensation" and "Compensation Committee Interlocks and Insider Participation" as set forth in the 2002 Proxy Statement. The Registrant does not incorporate by reference in this Form 10-K either the "Report on Executive Compensation" or the "Cumulative Total Stockholder Return" section of the 2002 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information required by this item is incorporated by reference to "Stock Ownership Information" as set forth in the 2002 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information required by this item is incorporated by reference to "Certain Transactions" as set forth in the 2002 Proxy Statement. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (A) EXHIBITS AND FINANCIAL STATEMENT SCHEDULES: (1) FINANCIAL STATEMENTS The following consolidated financial statements included on pages 25 through 52 of the 2001 Annual Report are incorporated by reference: Consolidated Statements of Income - Years Ended December 31, 2001, 2000, and 1999 Consolidated Balance Sheets at December 31, 2001 and 2000 Consolidated Statements of Cash Flows - Years Ended December 31, 2001, 2000, and 1999 Consolidated Statements of Stockholders' Equity - Years Ended December 31, 2001, 2000, and 1999 Report of Ernst & Young LLP, Independent Auditors Notes to Consolidated Financial Statements (2) FINANCIAL STATEMENT SCHEDULES All schedules set forth in the applicable accounting regulations of the Commission either are not required under the related instructions or are not applicable and, therefore, have been omitted. (3) EXHIBITS A list of exhibits included in this Report or incorporated by reference is found in the Exhibit Index beginning on page 20 of this Report and incorporated by reference. 18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. ALLEGHENY TECHNOLOGIES INCORPORATED Date: March 15, 2002 By /s/ James L. Murdy -------------------------------------- James L. Murdy President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and as of the 15th day of March, 2002. /s/ James L. Murdy /s/ Richard J. Harshman - -------------------------------------------------- ------------------------------------------------------ James L. Murdy Richard J. Harshman President and Chief Executive Officer and Senior Vice President, Finance Director And Chief Financial Officer (Principal Financial Officer) /s/ Dale G. Reid ------------------------------------------------------ Dale G. Reid Vice President-Controller and Chief Accounting Officer (Principal Accounting Officer) /s/ Robert P. Bozzone /s/ Paul S. Brentlinger - -------------------------------------------------- ------------------------------------------------------ Robert P. Bozzone Paul S. Brentlinger Chairman Director /s/ Frank V. Cahouet /s/ Diane C. Creel - -------------------------------------------------- ------------------------------------------------------ Frank V. Cahouet Diane C. Creel Director Director /s/ James C. Diggs /s/ C. Fred Fetterolf - -------------------------------------------------- ------------------------------------------------------ James C. Diggs C. Fred Fetterolf Director Director /s/ George J. Kourpias /s/ W. Craig McClelland - -------------------------------------------------- ------------------------------------------------------ George J. Kourpias W. Craig McClelland Director Director /s/ William G. Ouchi /s/ Charles J. Queenan, Jr. - -------------------------------------------------- ------------------------------------------------------ William G. Ouchi Charles J. Queenan, Jr. Director Director /s/ James E. Rohr - -------------------------------------------------- James E. Rohr Director
19 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - ------- ----------- 2.1 Separation and Distribution Agreement dated November 29, 1999 among Allegheny Teledyne Incorporated (now known as Allegheny Technologies Incorporated), TDY Holdings, LLC, Teledyne Industries, Inc., and Teledyne Technologies Incorporated (incorporated by reference to Exhibit 2.1 to Registrant's Current Report on Form 8-K dated November 29, 1999 (File No. 1-12001)). 2.2 Separation and Distribution Agreement dated November 29, 1999 among Allegheny Teledyne Incorporated (now known as Allegheny Technologies Incorporated), TDY Holdings, LLC, Teledyne Industries, Inc., and Water Pik Technologies, Inc. (incorporated by reference to Exhibit 2.2 to Registrant's Current Report on Form 8-K dated November 29, 1999 (File No. 1-12001)). 3.1 Certificate of Incorporation of Allegheny Technologies Incorporated, as amended, (incorporated by reference to Exhibit 3.1 to the Registrant's Report on Form 10-K for the year ended December 31, 1999 (File No. 1-12001)). 3.2 Amended and Restated Bylaws of Allegheny Technologies Incorporated (incorporated by reference to Exhibit 3.2 to the Registrant's Report on Form 10-K for the year ended December 31, 1998 (File No. 1-12001)). 4.1 Credit Agreement dated as of December 21, 2001 (filed herewith). 4.2 Indenture dated as of December 18, 2001 between Allegheny Technologies Incorporated and The Bank of New York, as trustee, relating to Allegheny Technologies Incorporated 8.375% Notes due 2011 (filed herewith). 4.3 Form of 8.375% Notes due 2011 (included as part of Exhibit 4.2). 4.4 Indenture dated as of December 15, 1995 between Allegheny Ludlum Corporation and The Chase Manhattan Bank (National Association), as trustee (relating to Allegheny Ludlum Corporation's 6.95% Debentures due 2025) (incorporated by reference to Exhibit 4(a) to Allegheny Ludlum Corporation's Report on Form 10-K for the year ended December 31, 1995 (File No. 1-9498)), and First Supplemental Indenture by and among Allegheny Technologies Incorporated, Allegheny Ludlum Corporation and The Chase Manhattan Bank (National Association), as Trustee, dated as of August 15, 1996 (incorporated by reference to Exhibit 4.1 to Registrant's Current Report on Form 8-K dated August 15, 1996 (File No. 1-12001)). 4.5 Rights Agreement dated March 12, 1998, including Certificate of Designation for Series A Junior Participating Preferred Stock as filed with the State of Delaware on March 13, 1998 (incorporated by reference to Exhibit 1 to the Registrant's Current Report on Form 8-K dated March 12, 1998 (File No. 1-12001)). 4.6 Issuing and Paying Agency Agreement dated as of January 25, 2002 between Allegheny Technologies Incorporated and JP Morgan Chase Bank (filed herewith). 20 4.7 Commercial Paper Dealer Agreement 4(2) Program between Allegheny Technologies Incorporated and Chase Securities, Inc. dated as of November 2, 2000 (incorporated by reference to Exhibit 4.5 to the Registrant's Report on Form 10-K for the year ended December 31, 2000 (File No. 1-12001)). 4.8 First Amendment dated as of January 25, 2002 to the Commercial Paper Dealer Agreement 4(2) Program between Allegheny Technologies Incorporated and J. P. Morgan Securities, Inc. (formerly "Chase Securities, Inc.") dated November 2, 2000 (filed herewith). 4.9 Commercial Paper Dealer Agreement 4(2) Program between Allegheny Technologies Incorporated and Goldman, Sachs & Co. dated as of November 2, 2000 (incorporated by reference to Exhibit 4.6 to the Registrant's Report on Form 10-K for the year ended December 31, 2000 (File No. 1-12001)). 4.10 First Amendment dated as of January 25, 2002 to the Commercial Paper Dealer Agreement 4(2) Program between Allegheny Technologies Incorporated and Goldman, Sachs & Co. dated November 2, 2000 (filed herewith). 4.11 Exchange and Registration Rights Agreement dated as of December 18, 2001 (filed herewith). 10.1 Allegheny Technologies Incorporated 1996 Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant's Report on Form 10-K for the year ended December 31, 1997 (File No. 1-12001)).* 10.2 Allegheny Technologies Incorporated Stock Acquisition and Retention Plan effective January 1, 1997 (incorporated by reference to Exhibit 10.2 to the Registrant's Report on Form 10-K for the year ended December 31, 1996 (File No. 1-12001)).* 10.3 Allegheny Technologies Incorporated Stock Acquisition and Retention Program effective January 1, 1998, as amended and restated (incorporated by reference to Exhibit 10.3 to the Registrant's Report on Form 10-K for the year ended December 31, 1998 (File No. 1-12001)).* 10.4 Allegheny Technologies Incorporated Stock Acquisition and Retention Program effective December 13, 2000 (incorporated by reference to Exhibit 10.4 to the Registrant's Report on Form 10-K for the year ended December 31, 2001 (File No. 1-12001)).* 10.5 Allegheny Technologies Incorporated 1996 Non-Employee Director Stock Compensation Plan, as amended December 17, 1998 (incorporated by reference to Exhibit 10.4 to the Registrant's Report on Form 10-K for the year ended December 31, 1998 (File No. 1-12001)).* 10.6 Allegheny Technologies Incorporated Fee Continuation Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.4 to the Company's Report on Form 10-K for the year ended December 31, 1997 (File No. 1-12001)).* 10.7 Supplemental Pension Plan for Certain Key Employees of Allegheny Technologies Incorporated and its subsidiaries (formerly known as the Allegheny Ludlum Corporation 21 Key Man Salary Continuation Plan) (incorporated by reference to Exhibit 10.7 to the Company's Report on Form 10-K for the year ended December 31, 1997 (File No. 1-12001)).* 10.8 Allegheny Technologies Incorporated Benefit Restoration Plan, as amended (incorporated by reference to Exhibit 10.8 to the Registrant's Report on Form 10-K for the year ended December 31, 1999 (File No. 1-12001)).* 10.9 Allegheny Ludlum Corporation 1987 Stock Option Incentive Plan (as amended and restated) (incorporated by reference to Exhibit 10(f) to Allegheny Ludlum Corporation's Report on Form 10-K for the year ended December 31, 1995 (File No. 1-9498)).* 10.10 Allegheny Ludlum Corporation Performance Share Plan (as amended and restated) (incorporated by reference to the Registration Statement on Form S-4 (No. 333-8235) of Allegheny Technologies Incorporated, appears as Appendix F to the Joint Proxy Statement/Prospectus forming part of the Registration Statement).* 10.11 Allegheny Ludlum Corporation Stock Acquisition and Retention Plan, as restated effective as of August 15, 1996 (incorporated by reference to Exhibit 10.10 to the Company's Report on Form 10-K for the year ended December 31, 1997 (File No. 1-12001)).* 10.12 Teledyne, Inc. 1990 Stock Option Plan (incorporated by reference to Exhibit 10 to Teledyne, Inc.'s Report on Form 10-K for the year ended December 31, 1990 (File No. 1-5212)).* 10.13 Teledyne, Inc. 1994 Long-Term Incentive Plan (incorporated by reference to Exhibit A to Teledyne, Inc.'s 1994 proxy statement (File No. 1-5212)).* 10.14 Teledyne, Inc. 1995 Non-Employee Director Stock Option Plan (incorporated by reference to Exhibit A to Teledyne, Inc.'s 1995 proxy statement (File No. 1-5212)).* 10.15 Employment Agreement dated July 15, 1996 between Allegheny Technologies Incorporated and James L. Murdy (incorporated by reference to Exhibit 10.4 to the Company's Registration Statement on Form S-4 (No. 333-8235)).* 10.16 Employment Agreement dated July 15, 1996 between Allegheny Technologies Incorporated and Jon D. Walton (incorporated by reference to Exhibit 10.5 to the Company's Registration Statement on Form S-4 (No. 333-8235)).* 10.17 Form of Amended and Restated Change in Control Severance Agreement (Senior Management)(filed herewith).* 10.18 Employee Benefits Agreement dated November 29, 1999 between Allegheny Technologies Incorporated and Teledyne Technologies Incorporated (incorporated by reference to Exhibit 10.23 to the Registrant's Report on Form 10-K for the year ended December 31, 1999 (File No. 1-12001)).* 10.19 Employee Benefits Agreement dated November 29, 1999 between Allegheny Technologies Incorporated and Water Pik Technologies, Inc. (incorporated by reference 22 to Exhibit 10.24 to the Registrant's Report on Form 10-K for the year ended December 31, 1999 (File No. 1-12001)).* 10.20 Tax Sharing and Indemnification Agreement dated November 29, 1999 between Allegheny Technologies Incorporated and Teledyne Technologies (incorporated by reference to Exhibit 10.25 to the Registrant's Report on Form 10-K for the year ended December 31, 1999 (File No. 1-12001)). 10.21 Tax Sharing and Indemnification Agreement dated November 29, 1999 between Allegheny Technologies Incorporated and Teledyne Technologies Incorporated (incorporated by reference to Exhibit 10.26 to the Registrant's Report on Form 10-K for the year ended December 31, 1999 (File No. 1-12001)). 10.22 Allegheny Technologies Incorporated Executive Deferred Compensation Plan, as amended (incorporated by reference to Exhibit 10.27 to the Registrant's Report on Form 10-K for the year ended December 31, 2000 (File No. 1-12001)).* 10.23 Allegheny Technologies Incorporated Performance Share Program (incorporated by reference to Exhibit 10.22 to the Registrant's Report on Form 10-K for 1998 (File 1-12001)).* 10.24 Allegheny Technologies Incorporated Annual Incentive Plan (incorporated by reference to Exhibit 10.23 to the Registrant's Report on Form 10-K for the year ended December 31, 1998 (File 1-12001)).* 10.25 Allegheny Technologies Incorporated 2000 Incentive Plan (incorporated by reference to Exhibit 10.30 to the Registrant's Report on Form 10-K for the year ended December 31, 1999 (File No. 1-12001)).* 10.26 Allegheny Technologies Incorporated Performance Share Program and form of Participant Agreement for the 2000-2002 Award Period (incorporated by reference to Exhibit 10.32 to the Registrant's Report on Form 10-K for the year ended December 31, 2000 (File No. 1-12001)).* 10.27 Allegheny Technologies Incorporated Annual Incentive Plan for the year 2000 (incorporated by reference to Exhibit 10.33 to the Registrant's Report on Form 10-K for the year ended December 31, 2000 (File No. 1-12001)).* 10.28 Allegheny Technologies Incorporated Annual Incentive Plan for the year 2001 (filed herewith). 10.29 Total Shareholder Return Incentive Compensation Program effective January 1, 2001 (filed herewith). 13.1 Pages 9 through that part of page 55 referencing financial data, included in the Annual Report of Allegheny Technologies Incorporated for the year ended December 31, 2001 (filed herewith). 21.1 Subsidiaries of the Registrant (filed herewith). 23 23.1 Consent of Ernst & Young LLP (filed herewith). * Management contract or compensatory plan or arrangement required to be filed as an Exhibit to this Report. Certain instruments defining the rights of holders of long-term debt of the Company and its subsidiaries have been omitted from the Exhibits in accordance with Item 601(b)(4)(iii) of Regulation S-K. A copy of any omitted document will be furnished to the Commission upon request. 24 EX-4.1 3 j9326701ex4-1.txt CREDIT AGREEMENT EXHIBIT 4.1 CREDIT AGREEMENT ($325,000,000 CREDIT FACILITY) Dated as of December 21, 2001 By and Among ALLEGHENY TECHNOLOGIES INCORPORATED as the Borrower, THE BANKS HERETO as the Lenders hereunder, MELLON BANK, N.A., JPMORGAN CHASE BANK, AND BANK OF AMERICA, N.A. as Syndication Agents, and PNC BANK, NATIONAL ASSOCIATION as the Documentation and Administrative Agent, and PNC CAPITAL MARKETS, INC. as Lead Arranger TABLE OF CONTENTS -----------------
PAGE ARTICLE I. DEFINITIONS......................................................................2 1.1 Defined Terms....................................................................2 1.2 GAAP Definitions................................................................23 1.3 Other Definitional Conventions and Rules of Construction........................23 ARTICLE II. THE LOANS.......................................................................23 2.1 The Revolving Credits...........................................................23 2.2 Bid Rate Loans..................................................................28 2.3 Swingline Loans.................................................................32 2.4 Interest Rates, Interest Payment and Certain Provisions Relating to Interest and Fees..................................................36 2.5 Yield-Protection, Capital Adequacy and Miscellaneous Provisions Relating to LIBOR...................................................41 2.6 Fees............................................................................43 2.7 Calculation of Interest and Certain Fees........................................45 2.8 Extension of Short Term Revolving Credit Termination Date.......................45 2.9 Substitution or Replacement of a Lender.........................................47 2.10 Loan Repayment..................................................................47 2.11 Additional Payments by the Borrower.............................................48 2.12 Voluntary Reduction of Availability.............................................48 2.13 Loan Account....................................................................49 2.14 Payment from Accounts Maintained by Borrower....................................49 2.15 Time, Place and Manner of Payments..............................................49 2.16 Letter of Credit Sub-Facility...................................................50 ARTICLE III. REPRESENTATIONS AND WARRANTIES..................................................56 3.1 Corporate Existence.............................................................56 3.2 Corporate Authority.............................................................56 3.3 Enforceability..................................................................56 3.4 No Restrictions.................................................................57 3.5 Financial Statements............................................................57 3.6 Absence of Litigation...........................................................57 3.7 Tax Returns and Payments........................................................57 3.8 Pension Plans...................................................................57 3.9 Compliance with Applicable Laws.................................................58 3.10 Environmental Matters...........................................................58 3.11 Governmental Approval...........................................................58 3.12 Regulations T, U and X..........................................................58 3.13 Investment Company Act..........................................................58 3.14 Public Utility Holding Company Act..............................................58
-i- 3.15 Disclosure......................................................................59 ARTICLE IV. AFFIRMATIVE COVENANTS...........................................................59 4.1 Use of Proceeds.................................................................59 4.2 Furnishing Information..........................................................59 4.3 Visitation......................................................................60 4.4 Preservation of Existence; Qualification........................................61 4.5 Compliance with Laws and Contracts..............................................61 4.6 Payment of Taxes and Other Liabilities..........................................61 4.7 Insurance.......................................................................61 4.8 Maintenance of Properties.......................................................61 4.9 Plans and Benefit Arrangements..................................................62 4.10 Senior Debt Status..............................................................62 4.11 Ownership of Operating Subsidiaries.............................................62 ARTICLE V. NEGATIVE COVENANTS..............................................................62 5.1 Indebtedness....................................................................62 5.2 Encumbrances....................................................................63 5.3 Leverage Ratio..................................................................63 5.4 Interest Coverage Ratio.........................................................63 5.5 Sales of Assets.................................................................63 5.6 Merger..........................................................................64 5.7 Restriction on Dividends........................................................64 5.8 Restriction on Guarantees.......................................................64 5.9 Regulation T, U and X Compliance................................................64 5.10 ERISA...........................................................................64 ARTICLE VI. CONDITIONS PRECEDENT TO ALL DISBURSEMENTS.......................................65 6.1 All Disbursements...............................................................65 6.2 Conditions Precedent to the Initial Disbursement Under the Commitment.....................................................................65 ARTICLE VII. DEFAULTS........................................................................67 7.1 Payment Default.................................................................67 7.2 Nonpayment of Other Indebtedness................................................67 7.3 Insolvency......................................................................67 7.4 Termination of Existence........................................................68 7.5 Failure to Comply with Covenants................................................68 7.6 Misrepresentation...............................................................68 7.7 Adverse Judgments, Etc..........................................................68 7.8 Invalidity or Unenforceability..................................................69 7.9 ERISA...........................................................................69 7.10 Change of Control...............................................................69 7.11 Consequences of an Event of Default.............................................70 7.12 Remedies Upon Default...........................................................70 7.13 Cash Collateral.................................................................70
-ii- ARTICLE VIII. AGREEMENT AMONG LENDERS........................................................71 8.1 Appointment and Grant of Authority..............................................71 8.2 Non-Reliance on Agent...........................................................71 8.3 Responsibility of Agent and Other Matters.......................................72 8.4 Action on Instructions..........................................................72 8.5 Indemnification.................................................................73 8.6 Agent's Rights as a Lender......................................................73 8.7 Payment to Lenders..............................................................73 8.8 Pro Rata Sharing................................................................73 8.9 Successor Agent.................................................................74 8.10 Syndication Agents..............................................................74 ARTICLE IX. GENERAL PROVISIONS..............................................................74 9.1 Amendments and Waivers..........................................................74 9.2 Expenses........................................................................76 9.3 Notices.........................................................................76 9.4 Tax Withholding.................................................................77 9.5 Successors and Assigns..........................................................78 9.6 Assignments and Participations..................................................78 9.7 Severability....................................................................80 9.8 Survival........................................................................80 9.9 Governing Law...................................................................80 9.10 Non-Business Days...............................................................80 9.11 Integration.....................................................................80 9.12 Set-Off.........................................................................80 9.13 Forum...........................................................................81 9.14 Waiver of Jury Trial............................................................81 9.15 Indemnity.......................................................................81 9.16 Termination of Existing Bank Credit Agreements..................................82 9.17 Counterparts....................................................................82 9.18 Permitted Adjustments to Commitment Percentages and Short Term Revolving Credit Commitment Percentages..................................................82
-iii- TABLE OF EXHIBITS AND SCHEDULES ------------------------------- EXHIBITS Exhibit A-1 - Form of Long Term Revolving Credit Note Exhibit A-2 - Form of Short Term Revolving Credit Note Exhibit B-1 - Form of Bid Rate Note (Allocated to Long Term Revolving Credit Note) Exhibit B-2 - Form of Bid Rate Note (Allocated to Short Term Revolving Credit Note) Exhibit C - Form of Bid Rate Quote Request Exhibit D - Form of Bid Rate Quote Exhibit E - Form of Swingline Note Exhibit F - Form of Swingline Quote Request Exhibit G - Form of Swingline Quote Exhibit H - Form of Compliance Certificate Exhibit I - Form of Opinion of Counsel Exhibit J - Form of Assignment and Assumption Agreement Exhibit K - Form of Term Note SCHEDULES 3.8 - Plans 5.1 - Existing Indebtedness 5.2 - Existing Encumbrances Securing Indebtedness 5.5 - Assets Held For Sale 9.3 - Notices -iv- CREDIT AGREEMENT ($325,000,000 CREDIT FACILITY) THIS CREDIT AGREEMENT, dated as of December 21, 2001, by and among ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation (the "Borrower"), the FINANCIAL INSTITUTIONS listed on the signature pages hereto, and each other financial institution which, from time to time, becomes a party hereto in accordance with Subsection 9.6a (individually, a "Lender", and collectively, the "Lenders"), MELLON BANK, N.A., JPMORGAN CHASE BANK, and BANK OF AMERICA, N.A., as Syndication Agents (individually a "Syndication Agent", and collectively the Syndication Agents) and PNC BANK, NATIONAL ASSOCIATION, a national banking association, as Documentation and Administrative Agent for the Lenders and the issuer of Letters of Credit hereunder (in such capacity the "Agent"). WITNESSETH: WHEREAS, the Borrower desires to obtain a Long Term Revolving Credit Commitment (as defined below) from each of the Lenders pursuant to which Long Term Revolving Credit Loans, in a maximum aggregate principal amount at any one time outstanding not to exceed $195,000,000, will be made to the Borrower from time to time prior to the Long Term Revolving Credit Termination Date (as defined below); and WHEREAS, the Borrower desires to obtain a Short Term Revolving Credit Commitment (as defined below) from each of the Lenders pursuant to which Short Term Revolving Credit Loans, in a maximum aggregate principal amount at any one time outstanding not to exceed $130,000,000, will be made to the Borrower from time to time prior to the Short Term Revolving Credit Termination Date (as defined below); and WHEREAS, the Borrower has requested a letter of credit sub-facility under the Commitments herein established in the amount of $50,000,000; and WHEREAS, the Borrower, the Syndication Agents, the Agent and the Lenders acknowledge that PNC Capital Markets ("PNC Capital") has acted as the lead arranger for the credit herein describe notwithstanding, PNC Capital is not and shall not be a party this Agreement; and WHEREAS, the Lenders are willing, on the terms and subject to the conditions hereinafter set forth, to extend such Commitments, to make such Loans to the Borrower and to issue certain Letters of Credit for the account of the Borrower. NOW, THEREFORE, in consideration of mutual promises contained herein and other valuable consideration and with the intent to be legally bound hereby, the parties hereto agree as follows: ARTICLE I. DEFINITIONS. 1.1 DEFINED TERMS. As used herein the following terms shall have the meaning specified unless the context otherwise requires: "Absolute Rate Auction" means a solicitation of Bid Rate Quotes setting forth Bid Rate Absolute Rates pursuant to Subsection 2.2c. "ALC" means Allegheny Ludlum Corporation, a Pennsylvania corporation, which is an indirect wholly owned Subsidiary of the Borrower. "Adjusted Long Term Revolving Credit LIBOR" means the interest rate relating to the LIBOR Option as described in item (B) of Subsection 2.4b(i). "Adjusted Short Term Revolving Credit LIBOR" means the interest rate relating to the LIBOR Option as described in item (B) of Subsection 2.4b(ii). "Adjusted Term Loan LIBOR" means the interest rate relating to the LIBOR Option as described in item (B) of Subsection 2.4b(iii). "Agent" has the meaning set forth in the preamble to this Agreement. "Agent's Fees" means those certain fees for the sole account of the Agent or PNC Capital set forth in that certain letter agreement by and between the Agent and the Borrower dated September 4, 2001. "Agent's Letter" means that certain letter agreement dated September 4, 2001 by PNC Bank, National Association and PNC Capital and accepted by the Borrower, which sets forth the Agent's Fee. "Agreeing Lenders" shall have the meaning ascribed to such term in Section 2.8a hereof; and the term "Agreeing Lender" shall refer to any of the Agreeing Lenders. "Agreement" means this Credit Agreement together with the exhibits and schedules hereto and all extensions, renewals, amendments, modifications, substitutions and replacements hereto and hereof. "Applicable Long Term Revolving Credit LIBOR Margin" means for each LIBOR Portion of the Long Term Revolving Credit Loans, the percentage (expressed in basis points) determined from time to time based upon the Senior Ratings then in effect from Moody's and S&P set forth under the relevant column heading below: - 2 -
- ------------------------------------------------------------ ------------------------------------------ Applicable Long Term Revolving Credit Senior Ratings LIBOR Margin - ------------------------------------------------------------ ------------------------------------------ LEVEL I Senior Ratings are equal to or better than A from S&P or A2 from Moody's 32.5 Basis Points - ------------------------------------------------------------ ------------------------------------------ LEVEL II Senior Ratings are A- from S&P or A3 from Moody's 40 Basis Points - ------------------------------------------------------------ ------------------------------------------ LEVEL III Senior Ratings are BBB+ from S&P or Baa1 from Moody's 47.5 Basis Points - ------------------------------------------------------------ ------------------------------------------ LEVEL IV Senior Ratings are BBB from S&P or Baa2 from Moody's 57.5 Basis Points - ------------------------------------------------------------ ------------------------------------------ LEVEL V Senior Ratings are equal to or less than BBB- from S&P and Baa3 from Moody's 77.5 Basis Points - ------------------------------------------------------------ ------------------------------------------
PROVIDED, however, that (i) in the event the Senior Ratings of S&P and Moody's do not coincide, the Applicable Long Term Revolving Credit LIBOR Margin shall be determined utilizing the higher of such Senior Ratings; and (ii) in the event only one Senior Rating is in effect, the Applicable Long Term Revolving Credit LIBOR Margin set forth opposite such Senior Rating shall apply. "Applicable Short Term Revolving Credit LIBOR Margin" means for each LIBOR Portion of the Short Term Revolving Credit Loans, the percentage (expressed in basis points) determined from time to time based upon the Senior Ratings then in effect from Moody's and S&P set forth under the relevant column heading below:
- ------------------------------------------------------------ ------------------------------------------ Applicable Short Term Revolving Credit Senior Ratings LIBOR Margin - ------------------------------------------------------------ ------------------------------------------ LEVEL I Senior Ratings are equal to or better than A from S&P or A2 from Moody's 34.5 Basis Points - ------------------------------------------------------------ ------------------------------------------ LEVEL II Senior Ratings are A- from S&P or A3 from Moody's 42.5 Basis Points - ------------------------------------------------------------ ------------------------------------------ LEVEL III Senior Ratings are BBB+ from S&P or Baa1 from Moody's 50.0 Basis Points - ------------------------------------------------------------ ------------------------------------------ LEVEL IV Senior Ratings are BBB from S&P or Baa2 from Moody's 62.5 Basis Points - ------------------------------------------------------------ ------------------------------------------
- 3 -
- ------------------------------------------------------------ ------------------------------------------ Applicable Short Term Revolving Credit Senior Ratings LIBOR Margin - ------------------------------------------------------------ ------------------------------------------ LEVEL V Senior Ratings are equal to or less than BBB- from S&P Baa3 and from Moody's 82.5 Basis Points - ------------------------------------------------------------ ------------------------------------------
PROVIDED, however, that (i) in the event the Senior Ratings of S&P and Moody's do not coincide, the Applicable Short Term Revolving Credit LIBOR Margin shall be determined utilizing the higher of such Senior Ratings; and (ii) in the event only one Senior Rating is in effect, the Applicable Short Term Revolving Credit LIBOR Margin set forth opposite such Senior Rating shall apply. "Applicable Term Loan LIBOR Margin" means for each LIBOR Portion of the Term Loans, the percentage (expressed in basis points) determined from time to time based upon the Senior Ratings then in effect from Moody's and S&P set forth under the relevant column heading below:
- ------------------------------------------------------------ ------------------------------------------ Applicable Term Loan Senior Ratings LIBOR Margin - ------------------------------------------------------------ ------------------------------------------ LEVEL I Senior Ratings are equal to or better than A from S&P or A2 from Moody's 95 Basis Points - ------------------------------------------------------------ ------------------------------------------ LEVEL II Senior Ratings are A- from S&P or A3 from Moody's 105 Basis Points - ------------------------------------------------------------ ------------------------------------------ LEVEL III Senior Ratings are BBB+ from S&P or Baa1 from Moody's 115 Basis Points - ------------------------------------------------------------ ------------------------------------------ LEVEL IV Senior Ratings are BBB from S&P or Baa2 from Moody's 130 Basis Points - ------------------------------------------------------------ ------------------------------------------ LEVEL V Senior Ratings are equal to or less than BBB- from S&P and Baa3 from Moody's 155 Basis Points - ------------------------------------------------------------ ------------------------------------------
PROVIDED, however, that (i) in the event the Senior Ratings of S&P and Moody's do not coincide, the Applicable Term Loan LIBOR Margin shall be determined utilizing the higher of such Senior Ratings; and (ii) in the event only one Senior Rating is in effect, the Applicable Term Loan LIBOR Margin set forth opposite such Senior Rating shall apply. "Assignment and Assumption Agreement" means an Assignment and Assumption Agreement in the form of Exhibit "J" hereto. - 4 - "ATI Funding" means ATI Funding Corporation, a Delaware corporation, which is a wholly owned Subsidiary of the Borrower. "Authorized Officer" means the President, any Vice President, the Chief Financial Officer, the Treasurer or the principal accounting officer of the Borrower. The Agent and the Lenders shall be entitled to rely on the incumbency certificate delivered pursuant to Subsection 6.2 (vi) for the initial designation of each Authorized Officer. Additions or deletions to the list of Authorized Officers may be made by the Borrower at any time by delivering to the Agent for redelivery to each Lender a revised incumbency certificate. "Bank Indebtedness" means the liability of the Borrower to pay the Loans, the Facility Fees, the Utilization Fees, the Agent's Fees, the Letter of Credit Fees, the Fronting Fees, the Closing Fees, the aggregate stated amount of Letters of Credit Outstanding, the aggregate amount of unreimbursed draws on Letters of Credit issued hereunder, interest thereon, and the other amounts, including, without limitation, expenses, due hereunder. "Base Rate" means, for any day, the higher of (i) the sum of (A) the Federal Funds Effective Rate for such day PLUS (B) fifty (50) basis points (1/2%) per annum and (ii) the Prime Rate, as of such day. "Base Rate Option" means the interest rate option described in Subsection 2.4b(i)(A), Subsection 2.4b(ii)(A) or Subsection 2.4b(iii)(A). "Base Rate Portion" means a Revolving Credit Loan or Term Loan, as applicable, or a portion thereof, which bears, or is to bear, interest at the Base Rate. "Bid Rate" means the rate or rates of interest from time to time in effect pursuant to agreements reached between the Borrower and any or all of the Lenders pursuant to Section 2.2. "Bid Rate Absolute Rate" has the meaning set forth in Subsection 2.2c(iii)(B)(4). "Bid Rate Interest Period" means any individual period of one (1) to two hundred seventy (270) days, all determined in accordance with Section 2.2, commencing on the date of the extension of the relevant Bid Rate Loan; PROVIDED, however, that no Bid Rate Interest Period shall extend beyond the Business Day immediately preceding (A) the Long Term Revolving Credit Termination Date in the case of a Disbursement under the Long Term Revolving Credit Commitment or (B) the Short Term Revolving Credit Termination Date in the case of a Disbursement under the Short Term Revolving Credit Commitment. "Bid Rate Loan" means a Disbursement by any Lender pursuant to Section 2.2. "Bid Rate Margin" has the meaning set forth in Subsection 2.2c(iii)(B)(3). - 5 - "Bid Rate Notes" means any one or all of the several promissory notes of the Borrower evidencing Indebtedness of the Borrower under the Bid Rate Option, which notes are substantially in the form of Exhibit "B-1" and Exhibit "B-2" to this Agreement, together with all extensions, renewals, amendments, modifications, substitutions and replacements thereto and thereof; and the term "Bid Rate Note" shall mean any of the Bid Rate Notes. "Bid Rate Option" means the interest rate option that may be agreed upon between the Borrower and one or more of the Lenders pursuant to Section 2.2 hereof. "Bid Rate Quote" means each offer by a Lender to make a Bid Rate Loan which offer is substantially in the form of Exhibit "D" attached hereto. "Bid Rate Quote Request" means the written request of the Borrower for a Bid Rate Loan delivered to the Agent in accordance with the provisions of Subsection 2.2c, which request shall be substantially in the form of Exhibit "C" attached hereto. "Borrower" has the meaning given it in the preamble to this Agreement. "Borrowing Date" means the date on which any Disbursements are to be made hereunder. "Business Day" means, any day other than a Saturday or Sunday or a legal holiday on which commercial banks are authorized or required to be closed for business in Pittsburgh, Pennsylvania or New York, New York and, if the applicable Business Day relates to any Disbursement or Term Loan to which the LIBOR Option or the Bid Rate Margin applies, such day must also be a day on which dealings are carried on in the London interbank market. "Capital Adequacy Event" shall have the meaning given it in Subsection 2.5b. "Capital Compensation Amount" shall have the meaning given it in Subsection 2.5b. "Closing" means the execution and delivery of this Agreement which execution and delivery shall occur at the offices of Tucker Arensberg, P.C. in Pittsburgh, Pennsylvania, at 10:00 A.M. (eastern time) on December 21, 2001, or such other date and time as is mutually agreeable to the parties hereto. "Closing Date" means the day on which the Closing occurs. "Closing Fee" with respect to each Lender, means the closing fees set forth in the fee letter dated September 4, 2001 among the Borrower, the Agent and PNC Capital. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation thereto, together with all regulations promulgated and rulings issued thereunder. - 6 - "Commitment" means, as to each Lender, the sum of the Dollar amount set forth opposite such Lender's name on its signature page hereto (i) under the heading "Maximum Dollar Amount of Long Term Revolving Credit Commitment" PLUS (ii) under the heading "Maximum Dollar Amount of Short Term Revolving Credit Commitment" (as the same may be reduced at any time or from time to time pursuant to Subsection 2.1Af, Subsection 2.1Bf, Subsection 2.1Bg and Section 2.12) and, as to all Lenders, the obligation of the Lenders to make Revolving Credit Loans available to the Borrower in a maximum aggregate amount not to exceed $325,000,000 as set forth in Section 2.1 (as the same may be reduced at any time or from time to time pursuant to Subsection 2.1Af, Subsection 2.1Bf, Subsection 2.1Bg and Section 2.12) "Commitment Percentage" means, as to each Lender, the percentage of the Commitments set forth opposite such Lender's name on the signature pages hereto, as the same may be adjusted (i) pursuant to an Assignment and Assumption Agreement delivered in connection with Section 9.6 hereof, or (ii) pursuant to the terms of Section 9.18 hereof as applicable. "Compliance Certificate" means a Compliance Certificate substantially in the form of Exhibit "H" attached hereto. "Consolidated" means the consolidation of the accounts of any two or more Persons in accordance with GAAP. "Consolidated EBITDA" means for any period Consolidated Net Income for such period (x) excluding therefrom (A) any extraordinary items of gain or loss (including without limitation those items created by mandated changes in accounting treatment), (B) any gain or loss of any other Person accounted for on the equity method, except to the extent of cash distributions received during the relevant period, and (C) any other non-cash non-recurring items of gain or loss not covered in clauses (A) and (B) of this definition, (y) plus the aggregate amounts deducted in determining Consolidated Net Income for such period in respect of (i) Consolidated Interest Expense (ii) depreciation expense, (iii) any amortization of goodwill or other intangible and (iv) income taxes. "Consolidated Interest Expense" means, for the relevant period, on a Consolidated basis, the sum of all interest (and all earned discount or similar concept paid or incurred by a Special purpose Subsidiary pursuant to a Securitization Contract) due and payable by the Borrower, its Consolidated Subsidiaries and/or any Special Purpose Subsidiary with regard to Indebtedness for such period. "Consolidated Net Income" means the net income (or deficit) of the Borrower and its Consolidated Subsidiaries, for the period in question, after deducting all operating expenses, provisions for all taxes and reserves (including reserves for all deferred income taxes) and all other proper deductions, all determined on a Consolidated basis in accordance with GAAP, consistently applied; provided that in the determination of the net income or loss of the Borrower and its Consolidated Subsidiaries, for the period in question, any earned discount or similar concept paid or accrued by a Special Purpose Subsidiary pursuant to a Securitization Contract for - 7 - such period shall be deducted from the Consolidated gross income of the Borrower and its Consolidated Subsidiaries for the period in question. "Consolidated Shareholders' Equity" means the total of those items enumerated under the heading "Shareholders' Equity" in the Borrower's relevant balance sheets determined on a Consolidated basis in accordance with GAAP, consistently applied. "Consolidated Subsidiary" means any Subsidiary (whether now existing or hereafter organized or acquired) which shall, during the applicable period, be Consolidated with the Borrower in any Consolidated financial statement furnished to the Lenders. "Consolidated Tangible Net Worth" means the Consolidated Shareholders' Equity in the Borrower and its Consolidated Subsidiaries, except that there shall be deducted therefrom (if not otherwise deducted or eliminated) the funded amount under any Securitization Contract entered into by a Special Purpose Subsidiary, good will, corporate organization expenses (other than initial organization expenses and fees), unamortized debt discount and expense, patents, trademarks, licenses, copyrights, franchises, research and development expenses, any amounts for treasury stock and other intangibles not approved in writing by the Required Lenders, all determined on a Consolidated basis and in accordance with GAAP, consistently applied, plus the value of all Receivables, net of allowance for bad debt, on the balance sheet of a Special Purpose Subsidiary, as of the date of determination, determined in accordance with GAAP consistently applied. "Consolidated Total Assets" means as of any date of determination on a Consolidated basis, the value of all properties and all right, title and interest in such properties which would be classified as assets, determined in accordance with GAAP exclusive of all write-ups above depreciated costs (other than write-ups of assets resulting from foreign currency translations, write-ups to market value of marketable securities and of swaps, hedges and futures and write-ups of assets of a going concern business made within twelve months after the acquisition of such business). "Consolidated Total Capitalization" means as of any date of determination the sum of (i) Consolidated Total Indebtedness plus (ii) Consolidated Shareholders' Equity. "Consolidated Total Indebtedness" means the Indebtedness of the Borrower and its Consolidated Subsidiaries determined on a Consolidated basis in accordance with GAAP, consistently applied, together with the funded amount under any Securitization Contract entered into by a Special Purpose Subsidiary. "Disbursement" means each advance of funds by a Lender hereunder whether as a Revolving Credit Loan, a Bid Rate Loan or a Swingline Loan or the issuance, renewal or extension of a Letter of Credit by the Agent. "Dollars" or "$" means the legal tender of the United States of America. "Drawing Date" has the meaning given it in Subsection 2.16d(B). - 8 - "Encumbrance" means any encumbrance, mortgage, lien, charge, pledge, security interest, priority payment, conditional sales agreement right, or other title retention agreement right (including any right under a lease which, in accordance with GAAP, would be treated as a capitalized item) in, upon or against any asset of any Person. "Environmental Law(s)" means any and all statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions of any Federal, state or local governmental authority relating to the environment or the release of any materials into the environment, whether now in existence or hereafter enacted, agreed to, issued or otherwise becoming effective. "ERISA" means the Employee Retirement Income Security Act of 1974, together with the regulations thereunder, as now in effect and as hereafter from time to time amended or any successor statute. "ERISA Affiliate" means, as of any date, any member of a controlled group of corporations of which the Borrower or any Subsidiary is a member, which, in any event together with the Borrower are treated as of such date as a single employer under Section 414 of the Code. "Event of Default" has the meaning given it in Article VII. "Existing Bank Credit Agreement" means the Credit Agreement dated as of August 30, 1996, as amended, by and among the Borrower, the financial institutions party thereto as lenders and PNC Bank, National Association as agent. "Facility Fees" means collectively the Long Term Revolving Credit Facility Fee and the Short Term Revolving Credit Facility Fee; and the term "Facility Fee" shall mean any of the Facility Fees. "Federal Funds Effective Rate" means, for any day, the rate per annum (based on a year of 360 days and the actual days elapsed and rounded upward to the nearest 1/100th of 1%) announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight federal funds transactions arranged by federal funds brokers on the previous trading day, as computed and announced by Federal Reserve Bank New York (or any successor) in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the "Federal Funds Effective Rate" as of the date of this Agreement; PROVIDED, if such Federal Reserve Bank (or its successor) does not announce such rate on any day, the "Federal Funds Effective Rate" for such day shall be the Federal Funds Effective Rate for the last day for which such rate was announced. "Fees" means any of, or all of, a the case may be, the Facility Fees, the Utilization Fees, the Agent's Fees, the Letter of Credit Fees, the Fronting Fees and the Closing Fees. - 9 - "Fiscal Quarter" means the three month fiscal period of the Borrower beginning on each January 1, April 1, July 1 and October 1 and ending on the succeeding March 31, June 30, September 30 and December 31. "Fiscal Year" means each fiscal period of the Borrower beginning January 1 and ending on the succeeding December 31. "Fronting Fee" has the meaning given it in Subsection 2.16b. "GAAP" means generally accepted accounting principles which shall include, but not be limited to, the official interpretations thereof as defined by the Financial Accounting Standards Board, its predecessors and its successors. "Governmental Authority" means the government of the United States or the government of any state or locality therein, any political subdivision or any governmental, quasi-governmental, judicial, public or statutory instrumentality, authority, body or entity, or other regulatory bureau, authority, body or entity of the United States or any state or locality therein, including the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System, and any central bank of any other country or any comparable authority. "Governmental Acts" has the meaning given it in Subsection 2.16i. "Governmental Rule" means any law, statute, rule, regulation, ordinance, order, judgment, guideline or decision of any Governmental Authority. "Guaranty" or "Guarantee" means any obligation, direct or indirect, by which a Person undertakes to guaranty, assume or remain liable for the payment or performance of another Person's obligations, including but not limited to (i) endorsements of negotiable instruments, (ii) discounts with recourse, (iii) agreements to pay or perform upon a second Person's failure to pay or perform, (iv) remaining liable on obligations assumed by a second Person, (v) agreements to maintain the capital, working capital solvency or general financial condition of a second Person, (vi) agreements for the purchase or other acquisition of products, materials, supplies or services, if in any case payment therefor is to be made regardless of the non-delivery of such products, materials or supplies or the non-furnishing of such services, (vii) all Indebtedness of such other Person to the extent secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Encumbrance on property owned or acquired by such Person, whether or not the Indebtedness of such other Person secured thereby has been assumed by such Person; provided however, such term shall not include the Borrower's or any Subsidiary's Performance Guarantees. "Hazardous Substances" means any (i) hazardous, toxic or polluting substances or wastes as defined by any Environmental Law or (ii) petroleum products. "Indebtedness" as applied to any Person means, without duplication, all liabilities of such Person for borrowed money, whether secured or unsecured (other than trade accounts - 10 - payable arising in the ordinary course of business, but including in the term borrowed money the funded amount of any Securitizations concerning the Borrower or any Subsidiary of the Borrower, including a Special Purpose Subsidiary), direct or contingent, whether evidenced by a bond, note, debenture, capitalized lease obligation, deferred purchase price arrangement, title retention device, any interest or currency swap, future, option or other interest rate protection or similar agreement (but only the net mark to market liability arising from any such interest or currency swap, future, option or other interest rate protection or similar agreement), letter of credit obligation, reimbursement agreement, Securitization Contract (but only to the extent of the funded amount of the Securitization), Guaranty (but only to the extent of the funded amount of the guaranteed Indebtedness), book entry or otherwise, provided, however, that the term "Indebtedness" shall include liabilities of any less than wholly owned Consolidated Subsidiary which would otherwise be included in such definition only to the extent that the Borrower or a Subsidiary of the Borrower (excluding any such less than wholly owned Consolidated Subsidiary) has guaranteed or otherwise assumed liability with respect to such obligations. "Interest Period" means any or all of a LIBOR Interest Period or a Bid Rate Interest Period. "Invitation for Bid Rate Quotes" means the written solicitation by the Agent for Bid Rate Quotes delivered to the Lenders in accordance with the provisions of Subsection 2.2c. "Invitation for Swingline Quote" means the written solicitation by the Agent for Swingline Quotes delivered to the Swingline Lenders in accordance with the provisions of Subsection 2.3c. "LC Participation Advance" means, with respect to any Lender, such Lender's payment in respect of its participation in a Letter of Credit Borrowing according to its Long Term Revolving Credit Commitment Percentage pursuant to Subsection 2.16d. "Lender" has the meaning given in the preamble to this Agreement. "Letter of Credit" has the meaning given it in Subsection 2.16a. "Letter of Credit Borrowing" means an extension of credit resulting from a drawing under any Letter of Credit which shall not have been reimbursed on the date when made and shall not have been converted into a Long Term Revolving Credit Loan under Subsection 2.16d(B). "Letter of Credit Fee" has the meaning given it in Subsection 2.16b. "Letters of Credit Outstanding" means at any time the sum of (i) the aggregate undrawn face amount of outstanding Letters of Credit and (ii) the aggregate amount of all unpaid and outstanding Reimbursement Obligations. "LIBOR" means, with respect to the Loans comprising any Disbursement to which the LIBOR Option or the Bid Rate Margin applies for any Interest Period, the interest rate - 11 - per annum determined by the Agent by dividing (the resulting quotient rounded upward to the nearest 1/100th of 1% per annum) (i) the rate of interest determined by the Agent in accordance with its usual procedures (which determination shall be conclusive and binding upon the Borrower, absent manifest error on the part of the Agent) to be equal to the offered rates for deposits in Dollars for the applicable LIBOR Interest Period which appear on Page 3750 of the TELERATE rate reporting system or other similar system as of approximately 11:00 a.m., Greenwich Mean Time, two (2) Business Days prior to the first day of such LIBOR Interest Period for an amount comparable to such Loan and having a borrowing date and a maturity comparable to such Interest Period by (ii) a number equal to 1.00 minus the LIBOR Reserve Percentage. The LIBOR may also be expressed by following formula: LIBOR = Offered Rate On TELERATE Page 3750 ---------------------------------- 1.00 - LIBOR Reserve Percentage If more than one offered rate appears on 3750 of the TELERATE rate reporting system or similar system, the rate will be the arithmetic mean of such offered rates. "LIBOR Auction" means a solicitation of Bid Rate Quotes setting forth Bid Rate Margins pursuant to Subsection 2.2c. "LIBOR Interest Period" means, subject to the provisions of Subsection 2.4c, any individual period of one (1), two (2), three (3) or six (6) months selected by the Borrower commencing on the Borrowing Date, conversion date or renewal date of a LIBOR Portion or a Bid Rate Loan to which the Bid Rate Margin applies, in either case, to which such period shall apply. "LIBOR Option" means the interest rate option described in Subsection 2.4b(i)(B), Subsection 2.4b(ii)(B) or Subsection 2.4b(iii)(B). "LIBOR Portion" means a Revolving Credit Loan or the Term Loan, as applicable, or portion thereof, which bears, or is to bear, interest at the Adjusted Long Term Revolving Credit LIBOR, the Adjusted Short Term Revolving Credit LIBOR or the Adjusted Term Loan LIBOR. "LIBOR Reserve Percentage" means the maximum effective percentage (expressed as a decimal, rounded upward to the nearest 1/100th of 1%), as determined in good faith by the Agent (which determination shall be conclusive), which is in effect on such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirements (including, without limitation, supplemental, marginal and emergency reserve requirements) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"). "Loan" means with respect to any Lender as of any date, the aggregate amount of all Disbursements then outstanding from such Lender to the Borrower hereunder as of such date (including without limitation, the Revolving Credit Loans, the Bid Rate Loans, the Swingline Loans and the Term Loans). - 12 - "Loan Account" means the individual loan account maintained by each Lender as more fully described in Section 2.13. "Loan Documents" means collectively this Agreement, the Notes, the Letters of Credit and any other documents furnished in connection herewith. "Long Term Revolving Credit Commitment" shall mean the several obligations of the Lenders, each in accordance with its Long Term Revolving Credit Commitment Percentage, to make available to the Borrower the Long Term Revolving Credit Loans, all as set forth in Section 2.1A. "Long Term Revolving Credit Commitment Percentage" shall mean as to any Lender, the percentage set forth opposite such Lender's name on its signature page hereto under the caption "Long Term Revolving Credit Commitment Percentage", as the same may be adjusted pursuant to an Assignment and Assumption Agreement delivered in connection with Section 9.6 hereof. "Long Term Revolving Credit Facility Fee" means the fee described in Subsection 2.6a. "Long Term Revolving Credit Facility Fee Percentage" shall mean the rate per annum (expressed in basis points) determined from time to time based upon the Senior Ratings in effect by S&P and Moody's set forth under the relevant column heading below opposite such Senior Ratings:
- ---------------------------------------------------------- ----------------------------------- Long Term Revolving Credit Senior Ratings Facility Fee Percentage - ---------------------------------------------------------- ----------------------------------- LEVEL I Senior Ratings are equal to or better than A from S&P or A2 from Moody's 12.5 Basis Points - ---------------------------------------------------------- ----------------------------------- LEVEL II Senior Ratings are A- from S&P or A3 from Moody's 15 Basis Points - ---------------------------------------------------------- ----------------------------------- LEVEL III Senior Ratings are BBB+ from S&P or Baa1 from Moody's 17.5 Basis Points - ---------------------------------------------------------- ----------------------------------- LEVEL IV Senior Ratings are BBB from S&P or Baa2 from Moody's 22.5 Basis Points - ---------------------------------------------------------- ----------------------------------- LEVEL V Senior Ratings are equal to or less than BBB- from S&P and Baa3 from Moody's 27.5 Basis Points - ---------------------------------------------------------- -----------------------------------
provided that, in the event that the Senior Ratings of S&P and Moody's do not coincide, the Long Term Revolving Credit Facility Fee Percentage set forth above opposite the higher of such - 13 - Senior Ratings will apply; and provided further, in the event that one Senior Rating is in effect, the Long Term Revolving Credit Facility Fee Percentage set forth above for such Senior Rating will apply. "Long Term Revolving Credit Loan" shall mean any Disbursements made by the Lenders under the Long Term Revolving Credit Commitment, which Disbursements in the aggregate shall not exceed more than $195,000,000 at any one time outstanding. "Long Term Revolving Credit Notes" shall mean any one or all of the several promissory notes of the Borrower evidencing Indebtedness under the Long Term Revolving Credit Commitment, which notes are substantially in the form of Exhibit "A-1" hereto, together with and all extensions, renewals, amendments, substitutions and replacements thereto and thereof; and the term "Long Term Revolving Credit Note" shall mean any of the Long Term Revolving Credit Notes. "Long Term Revolving Credit Termination Date" shall mean December 21, 2006. "Margin Stock" is defined herein as defined in Regulation U. "Material Adverse Effect" means, with respect to any Person relative to any occurrence of whatever nature (including, without limitation, any adverse determination in any litigation, arbitration or governmental investigation or proceeding), a materially adverse effect on (i) the business, operations, affairs, condition (financial or otherwise), properties, assets or revenues of the affected Person, or (ii) the ability of the affected Person to perform any of its obligations under or with respect to any Loan Document to which it is a party. "Moody's" means Moody's Investors Service, Inc. "Non-Agreeing Lenders" shall have the meaning ascribed to such term in Section 2.8a hereof; and the term "Non-Agreeing Lender" shall refer to any of the Non-Agreeing Lenders. "Note" means any one of the several Revolving Credit Notes, Bid Rate Notes, Swingline Notes or the Term Notes; and the term "Notes" means all of the several Revolving Credit Notes, Bid Rate Notes, Swingline Notes and the Term Notes. "Notice of Bid Rate Borrowing" has the meaning set forth in Subsection 2.2c(v). "Option" means any one or more of the Base Rate Option, the LIBOR Option, the Bid Rate Option, or the Swingline Option. "OREMET" means Oregon Metallurgical Corporation, an Oregon corporation, which is an indirect wholly owned Subsidiary of the Borrower. - 14 - "Participant" means any financial institution or other Person to which a Lender sells a Participation in one or more of its Loans and its interests in the Letters of Credit Outstanding. "Participation" means the sale by a Lender to any Participant of an undivided interest in all or any part of such Lender's Loans and interest in Letters of Credit Outstanding. "PBGC" means the Pension Benefit Guaranty Corporation or any successor Person. "Performance Guarantee" means any undertaking by the Borrower or any Subsidiary of the Borrower pursuant to which, in the ordinary course of such Person's business, such Person guarantees the performance by a Subsidiary of such Subsidiary's performance under a contract for the production or delivery of goods or services. "Permitted Encumbrance" shall mean, as to any Person, any of the following: (i) Encumbrances for taxes, assessments, governmental charges or levies on any of such Person's properties, which taxes, assessments, governmental charges or levies are at the time due and payable or if they can thereafter be paid without penalty or are being contested in good faith by appropriate proceedings diligently conducted and with respect to which the affected Person has created adequate reserves; (ii) Pledges or deposits to secure payment of workers' compensation obligations, unemployment insurance, deposits or indemnities to secure public or statutory obligations or for similar purposes; (iii) Encumbrances arising out of judgments or awards against such Person but only to the extent that the creation of any such encumbrance shall not be an event or condition which, with or without notice or lapse of time or both, would cause the Borrower to be in violation of Section 7.7; (iv) Mechanics', carriers', workmen's, repairmen's and other similar statutory Encumbrances incurred in the ordinary course of such Person's business, so long as the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate actions or proceedings diligently conducted; (v) Security interests in favor of lessors of personal property, which property is the subject of a true lease between such lessor and such Person; (vi) Encumbrances securing Indebtedness existing on the Closing Date without enlargement or extension of the Indebtedness secured thereby or the assets encumbered thereby (any such Encumbrance securing Indebtedness in excess of $1,000,000 on the Closing Date is listed on Schedule 5.2); - 15 - (vii) Encumbrances created against production contracts to secure Indebtedness incurred to acquire equipment and facilities required to produce the items being sold pursuant to such production contracts, provided that the Indebtedness secured thereby together with all other outstanding Indebtedness permitted by such item does not exceed the limitation set forth in item (iii) of Section 5.1; (viii) Encumbrances created in the ordinary course of business in favor of lenders granting an extension of credit to the Borrower in the form of bankers acceptances, provided that the Indebtedness secured thereby, together with the sum of the principal amount of all Loans then outstanding plus Letters of Credit Outstanding does not exceed the aggregate Commitments of the Lenders, plus the outstanding Term Loans, if any, and provided further, that such Encumbrances shall be limited to the goods (or documents evidencing the goods) the purchase or shipment of which shall have been financed by such bankers' acceptances; (ix) Easements, rights-of-way, restrictions, leases or subleases to others or other similar Encumbrances created in the ordinary course of business which Encumbrances do not interfere in any material respect with the ordinary conduct of the business of the Borrower and its Subsidiaries; (x) Encumbrances in favor of any Governmental Authority created pursuant to production contracts with such Governmental Authority; (xi) Encumbrances securing (i) the non-delinquent performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, (ii) contingent obligations on surety and appeal bonds, and (iii) other non-delinquent obligations of a like nature; in each case, incurred in the ordinary course of business, provided all such Encumbrances in the aggregate would not (even if enforced) cause a Material Adverse Effect on the Borrower and its Consolidated Subsidiaries taken as a whole; (xii) Encumbrances arising solely by virtue of any statutory or common law provision relating to banker's liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution; provided that (i) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by the Borrower or its Subsidiaries in excess of those set forth by regulations promulgated by the Federal Reserve Board, and (ii) such deposit account is not intended by the Borrower or any Subsidiary to provide collateral to the depository institution; (xiii) Encumbrances consisting of pledges of cash collateral or government securities to secure obligations under Swap Contracts entered into in the ordinary course of business as bona fide hedging transactions, provided that the counterparty to such Swap Contract is under a similar requirement to deliver similar collateral from time to time to the Borrower or the Subsidiary party thereto; and (xiv) Encumbrances consisting of assignments of Receivables in connection with a Securitization permitted by Section 5.5 hereof. - 16 - "Person" means any individual, partnership, corporation, trust, joint venture, limited liability company, banking association, unincorporated organization or any other entity or enterprise or government or department or agency thereof. "Plan" means an employee pension benefit plan (other than a multiemployer plan) which is maintained by the Borrower or any ERISA Affiliate for employees of the Borrower or any ERISA Affiliate and which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 302 of ERISA and Section 412 of the Code. "PNC Capital" shall have the meaning set forth in the "Whereas" clauses to this Agreement. "Portion" means either the Base Rate Portion, the LIBOR Portion, the Bid Rate Loans, the Swingline Loans, or all of the foregoing, as the case may be. "Potential Default" means an event which, with the passage of time or the giving of notice or both, shall be an Event of Default. "Prime Rate" means the interest rate per annum announced from time to time by the PNC Bank, National Association as its prime rate, which rate may not be the lowest rate of interest then being charged by the PNC Bank, National Association to its commercial borrowers. "Purchase Money Indebtedness" means Indebtedness incurred by a Person solely for the acquisition of an asset, which Indebtedness is secured by an Encumbrance only on the asset so acquired, additions and accessions thereto and any proceeds thereof and which Indebtedness does not exceed ninety percent (90%) of the purchase price of such asset. "Purchasing Lender" has the meaning given it in Subsection 9.6a. "Receivable" shall mean, with respect to the Borrower or any Subsidiary of the Borrower, any or all accounts, accounts receivable, contract rights related to such accounts, instruments, chattel paper, general intangibles related to such accounts and all other rights to payments of moneys for any reason (whether or not evidenced by a contract, instrument, chattel paper or document), and all other rights, powers and privileges of the Borrower, or any Subsidiary, as the case may be, arising thereunder or related thereto (including but not limited to all guarantees, collateral security, surety bonds, rights under letters of credit, insurance or other direct or indirect security), assertible against any Person whatever and all rebates, refunds, adjustments and returned, rejected, or repossessed goods relating thereto and all proceeds of any of the foregoing. "Register" has the meaning given it in Subsection 9.6b. "Regulation D" means Regulation D promulgated by the Board of Governors of the Federal Reserve System (12 C.F.R. Part 204 et seq.) as such regulation is now in effect and as may hereafter be amended. - 17 - "Regulation T" means Regulation T promulgated by the Board of Governors of the Federal Reserve System (12 C.F.R. Part 220 et seq.) as such regulation is now in effect and as may hereafter be amended. "Regulation U" means Regulation U promulgated by the Board of Governors of the Federal Reserve System (12 C.F.R. Part 221 et seq.) as such regulation is now in effect and as may hereafter be amended. "Regulation X" means Regulation X promulgated by the Board of Governors of the Federal Reserve System (12 C.F.R. Part 224 et seq.) as such regulation is now in effect and as may hereafter be amended. "Reimbursement Obligation" has the meaning given it in Subsection 2.16d(B). "Reportable Event" means any one or more event, defined in Section 4043(b) of ERISA and in 29 C.F.R. Part 2615, other than an event for which the requirement for the thirty (30) day notice to the PBGC is waived. "Required Lenders" means as of a particular date (i) prior to the termination of the Commitments, the Lenders whose Commitment Percentages aggregate at least fifty-one percent (51%) of the aggregate Commitment Percentages of all the Lenders and (ii) after the termination of the Commitments, fifty-one (51%) of the aggregate principal amount of the Loans and the Letters of Credit Outstanding at the particular time outstanding. "Revolving Credit Loans" means Disbursements by a Lender pursuant to Section 2.1A or Section 2.1B. "Revolving Credit Note" means any one of the several Long Term Revolving Credit Notes, and the Short Term Revolving Credit Notes, and the term "Revolving Credit Notes" means all of the several Long Term Revolving Credit Notes and the Short Term Revolving Credit Notes. "S&P" means Standard & Poor's Rating Group, a division of McGraw-Hill, Inc. "Securitization" shall mean the monetizing of Receivables of the Borrower and/or any its Subsidiaries. "Securitization Contract" shall mean, individually or collectively, as the context requires, (i) a contract between the Borrower and/or one or more of the Subsidiaries of the Borrower on the one hand and a Special Purpose Subsidiary on the other for the sale of Receivables to such Special Purpose Subsidiary on a "true sale" basis and (ii) a separate contract concurrently entered into with the contract described in clause (i) of this definition between such Special Purposes Subsidiary on the one hand and the purchaser of any, all or an undivided portion of such Receivables on the other hand, each relating to a Securitization. - 18 - "Senior Ratings" means (i) if the Borrower has a long term senior unsecured public debt rating, such long term senior unsecured public debt rating in effect from time to time as assigned by Moody's and S&P; provided that if the ratings issued by Moody's and S&P are not at the same level the rating at the higher level shall be selected; and (ii) if the Borrower has no long term senior unsecured public debt rating in effect but either of its two principal operating Subsidiaries, ALC or TDY Industries does have a long term senior unsecured public debt rating in effect such long term unsecured public debt rating; provided further that if both such Subsidiaries have long term senior unsecured public debt ratings the rating selected shall be the highest of such ratings. For the purposes of this definition a level of rating is the smallest increment of adjustment used by Moody's or S&P. By way of example, the difference between a Baa1 and Baa2 rating by Moody's or a BBB+ and a BBB rating by S&P represents one level of rating. "Short Term Revolving Credit Commitment" shall mean the several obligations of the Lenders, each in accordance with its Short Term Revolving Credit Commitment Percentage, to make available to the Borrower the Short Term Revolving Credit Loans, all as set forth in Section 2.1B. "Short Term Revolving Credit Commitment Percentage" shall mean as to any Lender, the percentage set forth opposite such Lender's name on its signature page hereto under the caption "Short Term Revolving Credit Commitment Percentage", as the same may be adjusted pursuant to an Assignment and Assumption Agreement delivered in connection with Section 9.6 hereof or pursuant to the terms of Section 9.18 hereof. "Short Term Revolving Credit Facility Fee Percentage" shall mean the rate per annum (expressed in basis points) determined from time to time based upon the Senior Ratings in effect by S&P and Moody's set forth under the relevant column heading below opposite such Senior Ratings:
- -------------------------------------------------------------- ----------------------------------- Short Term Revolving Credit Senior Ratings Facility Fee Percentage - -------------------------------------------------------------- ----------------------------------- LEVEL I Senior Ratings are equal to or better than A from S&P or A2 from Moody's 10.5 Basis Points - -------------------------------------------------------------- ----------------------------------- LEVEL II Senior Ratings are A- from S&P or A3 from Moody's 12.5 Basis Points - -------------------------------------------------------------- ----------------------------------- LEVEL III Senior Ratings are BBB+ from S&P or Baa1 from Moody's 15 Basis Points - -------------------------------------------------------------- -----------------------------------
- 19 -
- -------------------------------------------------------------- ----------------------------------- Short Term Revolving Credit Senior Ratings Facility Fee Percentage - -------------------------------------------------------------- ----------------------------------- LEVEL IV Senior Ratings are BBB from S&P or Baa2 from Moody's 17.5 Basis Points - -------------------------------------------------------------- ----------------------------------- LEVEL V Senior Ratings are equal to or less than BBB- from S&P and Baa3 from Moody's 22.5 Basis Points - -------------------------------------------------------------- -----------------------------------
provided that, in the event that the Senior Ratings of S&P and Moody's do not coincide, the Short Term Revolving Credit Facility Fee Percentage set forth above opposite the higher of such Senior Ratings will apply; and provided further, in the event that one Senior Rating is in effect, the Short Term Revolving Credit Facility Fee Percentage set forth above for such Senior Rating will apply. "Short Term Revolving Credit Facility Fee" means the fee described in Subsection 2.6b. "Short Term Revolving Credit Loans" shall mean any Disbursements made by the Lenders under the Short Term Revolving Credit Commitment which Disbursements in the aggregate shall not exceed more than $130,000,000 at any one time outstanding. "Short Term Revolving Credit Notes" shall mean any one or all of the several promissory notes of the Borrower evidencing Indebtedness under the Short Term Revolving Credit Commitment, which notes are substantially in the form of Exhibit "A-2" hereto, together with all extensions, renewals, amendments, substitutions and replacements thereto and thereof; and the term "Short Term Revolving Credit Note" shall mean any of the Short Term Revolving Credit Notes. "Short Term Revolving Credit Termination Date" shall mean December 20, 2002, or such later date as is ultimately determined in accordance with Section 2.8a hereof. In the event that one or more Lenders elects not to extend the Short Term Revolving Credit Termination Date pursuant to Section 2.8a hereof, then the definition of the Short Term Revolving Credit Termination Date shall remain the current Short Term Revolving Credit Termination Date for the Non-Agreeing Lenders (as defined in Section 2.8a) and shall be amended in accordance with Section 2.8a for the Agreeing Lenders (as defined in Section 2.8a). "Significant Subsidiary" means, as of any date of determination, (i) any Subsidiary of the Borrower that has on that date total assets constituting five percent (5%) or more of the Borrower's Consolidated Total Assets, and (ii) any Special Purpose Subsidiary. "Solvent" means, with respect to any person on a particular date, that on such date (i) the fair value of the assets of such person is greater than the total amount of liabilities, (ii) the present fair salable value of the assets of such person is not less than the amount that will be required to pay the probable liability of such person on its debts as they become absolute and - 20 - matured, (iii) such person is able to realize upon its assets and pay its debts and other liabilities and commitments as they mature in the normal course of business, and (iv) such person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such person's assets would constitute unreasonably small capital. "Special Purpose Subsidiary" shall mean any corporation, business trust or other entity formed by the Borrower or any Consolidated Subsidiary of the Borrower to engage only in the purchase of Receivables from the Borrower and/or its Consolidated Subsidiaries pursuant to a Securitization transaction permitted by Section 5.5(iv) and the financing of such Receivable pursuant to a customary transaction; and such Special Purpose Subsidiary shall be a direct or an indirect wholly owned Subsidiary of the Borrower. "Subsidiary" of any Person at any time shall mean (i) any corporation or trust of which more than 50% (by number of shares or number of votes) of the outstanding capital stock or shares of beneficial interest normally entitled to vote for the election of one or more directors or trustees (regardless of any contingency which does or may suspend or dilute the voting rights) is at such time owned directly or indirectly by such Person or one or more of such Person's Subsidiaries, (ii) any partnership of which such Person is a general partner or of which more than 50% of the partnership interests is at the time directly or indirectly owned by such Person or one or more of such Person's Subsidiaries, or (iii) any limited liability company of which such Person is a member or of which more than 50% of the limited liability company interests is at the time directly or indirectly owned by such Person or one or more of such Person's Subsidiaries. "Supermajority Lenders" shall have the meaning ascribed to such term in Section 2.8a hereof. "Swap Contract" means swap agreements (as such term is defined in Section 101 of the Federal Bankruptcy Reform Act of 1978, as amended), and any other agreements or arrangements designed to provide protection against fluctuations of interest or currency exchange rates or commodity prices. "Swingline Interest Rate" means, as to the relevant Swingline Loan, the interest rate therefor mutually agreed upon by the Borrower and the relevant Swingline Lender, all pursuant to Section 2.3 "Swingline Lender" means each of PNC Bank, National Association, Mellon Bank, N.A., JPMorgan Chase Bank, and Bank of America, N.A. "Swingline Loan" means a Disbursement made by one or more Swingline Lenders to Borrower pursuant to Section 2.3. "Swingline Loan Period" means as to each respective Swingline Loan a period of one (1) Business Day; PROVIDED, however, that no Swingline Loan Period shall extend beyond (A) the Long Term Revolving Credit Termination Date in the case of a Disbursement under the Long Term Revolving Credit Commitment or (B) the Short Term Revolving Credit Termination Date in the case of a Disbursement under the Short Term Revolving Credit Commitment. - 21 - "Swingline Notes" means any one or all of the promissory notes of the Borrower evidencing Indebtedness of the Borrower under the Swingline Option which notes are substantially in the form of Exhibit "E" to the Agreement, together with all extensions, renewals, amendments, modifications, substitutions and replacements thereto and thereof; and the term "Swingline Note" shall mean any of the Swingline Notes. "Swingline Option" means the loan and interest rate option that may be agreed upon between the Borrower and one or more of the Swingline Lenders pursuant to Section 2.3 hereof. "Swingline Quote" means each offer by a Swingline Lender to make a Swingline Loan which offer is substantially in the form of Exhibit "G". "Swingline Quote Request" means the written request of the Borrower for a Swingline Loan delivered to the Agent in accordance with the provision of Subsection 2.3c. "TDY Industries" means TDY Industries, Inc., a California corporation, which is an indirect wholly owned Subsidiary of the Borrower. "Term Loan" and "Term Loans" shall mean separately all term loans or any term loan made by the Lenders or one of the Lenders pursuant to Section 2.1Bg. "Term Loan Maturity Date" means with respect to any Lender the one year anniversary of the Short Term Revolving Credit Termination Date applicable to such Lender at the time of the conversion of the outstanding Short Term Revolving Credit Loans due to such Lender to the Term Loans due to such Lender pursuant to the Term-Out Option. "Term Note" and "Term Notes" shall have the meanings ascribed to such terms in Section 2.1Bg hereof. "Term-Out Option" shall have the meaning ascribed to such term in Section 2.1Bg hereof. "Termination Proceedings" means any action taken by the PBGC under ERISA to terminate any plan. "TILLC" means TDY Holdings, LLC, a Delaware limited liability company, having as its sole member the Borrower. "Transfer Effective Date" has the meaning given it in each respective Assignment and Assumption Agreement. "Transferor Lender" has the meaning given it in Subsection 9.6a. - 22 - "Utilization Fee" means the fee described in Subsection 2.6c of this Agreement. 1.2 GAAP DEFINITIONS. Accounting terms used herein but not defined herein shall have the meanings ascribed to them under GAAP in effect at the time of the execution of this Agreement as modified by any changes to GAAP adopted and in full force and effect as of January 1, 2002. 1.3 OTHER DEFINITIONAL CONVENTIONS AND RULES OF CONSTRUCTION. (i) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall, unless otherwise expressly specified, refer to this Agreement as a whole and not to any particular provision of this Agreement, and Article, Section and Subsection references are to this Agreement unless otherwise expressly specified. (ii) All terms defined in this Agreement in the singular shall have comparable meanings when used in plural, and vice versa, unless otherwise specified. (iii) The word "or" as used herein shall mean and connote nonexclusive alternatives, unless expressly stated or the context clearly requires otherwise. (iv) Captions, headings and Articles, Section and Subsection references used in this Agreement are for convenience only and shall not, and are not intended to, in any way or manner affect the scope or intent of this Agreement or of any provisions or subdivisions hereof. ARTICLE II. THE LOANS. 2.1 THE REVOLVING CREDITS. 2.1A THE LONG TERM REVOLVING CREDIT. 2.1Aa LONG TERM REVOLVING CREDIT LOANS. The Lenders hereby severally establish, upon the terms and conditions hereinafter set forth and relying upon the representations and warranties herein set forth, a long term revolving credit commitment in favor of the Borrower in the maximum aggregate amount of ONE HUNDRED NINETY-FIVE MILLION AND NO/100 DOLLARS ($195,000,000.00) (the "Long Term Revolving Credit Commitment"). The Borrower shall have the right to borrow, repay and reborrow from the Lenders from the date hereof until the Long Term Revolving Credit Termination Date pursuant to draws upon the Long Term Revolving Credit Commitment the principal amount of which, together with Letters of Credit Outstanding and the principal amount of Bid Rate Loans and Swingline Loans (other than Bid Rate Loans or Swingline Loans allocated to the Short Term Revolving Credit Commitment) then outstanding, shall not exceed $195,000,000 in the aggregate at any one time outstanding. 2.1Ab LONG TERM REVOLVING CREDIT COMMITMENT OF EACH LENDER. Each Lender agrees, for itself only, and subject to the terms and conditions of this Agreement, to make Long Term Revolving Credit Loans to the Borrower, to purchase participations in accordance with Section 2.16d(A), and to make LC Participation Advances, all from time to time not to exceed an - 23 - aggregate principal amount at any one time outstanding equal to the amount of its respective Long Term Revolving Credit Commitment Percentage of the Long Term Revolving Credit Commitment (as such amounts may be reduced by Section 2.2f and Section 2.3f hereof). 2.1Ac LONG TERM REVOLVING CREDIT NOTES. The obligation of the Borrower to repay, on or before the Long Term Revolving Credit Termination Date, the aggregate unpaid principal amount of all Long Term Revolving Credit Loans shall be evidenced by the several Long Term Revolving Credit Notes, each substantially in the form of Exhibit "A-1" hereto, drawn by the Borrower to the order of a Lender in the maximum amount of such Lender's Long Term Revolving Credit Commitment. The principal amount actually due and owing to a Lender at any time shall be the then aggregate unpaid principal amount of all Long Term Revolving Credit Loans made by such Lender as shown on the Loan Account established and maintained by such Lender in accordance with Section 2.13. Each Long Term Revolving Credit Note shall be dated the date hereof and shall be delivered to the Lenders on such date. 2.1Ad DISBURSEMENTS. The amount (i) of any Disbursement of Long Term Revolving Credit Loans consisting of a Base Rate Portion shall be in the minimum aggregate principal amount of $1,000,000 or an integral multiple thereof and (ii) of any Disbursement of Long Term Revolving Credit Loans consisting of a LIBOR Portion shall be in the minimum aggregate principal amount of $5,000,000; provided, however that each incremental unit in excess of $5,000,000 shall be $1,000,000 or an integral multiple thereof. 2.1Ae METHOD OF MAKING DISBURSEMENTS. (i) Each request for Disbursements of Long Term Revolving Credit Loans under the Long Term Revolving Credit Commitment shall be made by an Authorized Officer to the Agent orally or in writing (A) in the case of Disbursements of Long Term Revolving Credit Loans to bear interest at the Base Rate, by 11:00 A.M. (eastern time) on the Borrowing Date, and (B) in the case of Disbursements of Long Term Revolving Credit Loans to bear interest at the Adjusted Long Term Revolving Credit LIBOR, by 11:00 A.M. (eastern time) at least three (3) Business Days prior to the Borrowing Date. Each such request shall (i) specify the Borrowing Date, (ii) specify the amount of the Disbursements of Long Term Revolving Credit Loans and each Lender's ratable share thereof, (iii) select the Option or Options therefor and (iv) in the case of Disbursements of Long Term Revolving Credit Loans which will bear interest of Long Term Revolving Credit Loans at the Adjusted Long Term Revolving Credit LIBOR, the Interest Period therefor. Any oral request for Disbursements hereunder shall be followed by the Borrower's written confirmation of such request immediately thereafter. A request from the Borrower with respect to any Disbursements of Long Term Revolving Credit Loans bearing interest at an Adjusted Long Term Revolving Credit LIBOR shall irrevocably commit the Borrower to take such Disbursements on the Borrowing Date specified in the request. The Borrower may, without liability or cost hereunder, cancel any request for Disbursements of Long Term Revolving Credit Loans bearing interest at the Base Rate at any time prior to the funding thereof by each of the Lenders by delivering notice of such cancellation to the Agent. (ii) The Agent shall promptly notify the Lenders of each request for a Disbursement of Long Term Revolving Credit Loans. - 24 - (iii) Not later than 2:00 P.M. (eastern time) on the Borrowing Date, each Lender shall make available to the Agent in immediately available funds at the principal office of the Agent such Lender's pro-rata share of the Disbursements of Long Term Revolving Credit Loans, for the account of the Borrower. No Lender's obligation to make a Disbursement of Long Term Revolving Credit Loans shall be affected by any other Lender's failure to make funds available for the same or any other Disbursement of Long Term Revolving Credit Loans. Nothing in this Subsection 2.1Ae shall be deemed to relieve any Lender from its obligation to fulfill its obligations to the Borrower under this Agreement or to prejudice any rights which the Borrower may have against any Lender as a result of any default by such Lender under this Agreement. 2.1Af TEMPORARY REDUCTION OF AVAILABLE LONG TERM REVOLVING CREDIT COMMITMENT. While each Bid Rate Loan advanced pursuant to Section 2.2 and each Swingline Loan advanced pursuant to Section 2.3 (and in either case is allocated to the Long Term Revolving Credit Commitment) is outstanding, the principal amount available to be borrowed under the aggregate Long Term Revolving Credit Commitment shall be reduced by an amount equal to the principal amount of each such Bid Rate Loan or Swingline Loan then outstanding and allocated to the Long Term Revolving Credit Commitment pursuant to Section 2.2f or Section 2.3f hereof. Such temporary reduction shall not affect the calculation of the Long Term Revolving Credit Facility Fee. 2.1B THE SHORT TERM REVOLVING CREDIT. 2.1Ba SHORT TERM REVOLVING CREDIT LOANS. The Lenders hereby severally establish, upon the terms and conditions hereinafter set forth and relying upon the representations and warranties herein set forth, a short term revolving credit commitment in favor of the Borrower in the maximum aggregate amount of ONE HUNDRED THIRTY MILLION AND NO/100 DOLLARS ($130,000,000.00) (the "Short Term Revolving Credit Commitment"). The Borrower shall have the right to borrow, repay and reborrow from the Lenders from the date hereof until the Short Term Revolving Credit Termination Date pursuant to draws upon the Short Term Revolving Credit Commitment the principal amount of which, together with the principal amount of Bid Rate Loans and Swingline Loans (other than Bid Rate Loans or Swingline Loans allocated to the Long Term Revolving Credit Commitment) then outstanding, shall not exceed $130,000,000 in the aggregate at any one time outstanding. 2.1Bb SHORT TERM REVOLVING CREDIT COMMITMENT OF EACH LENDER. Each Lender agrees, for itself only, and subject to the terms and conditions of this Agreement, to make Short Term Revolving Credit Loans to the Borrower from time to time not to exceed an aggregate principal amount at any one time outstanding equal to the amount of its respective Short Term Revolving Credit Commitment Percentage of the Short Term Revolving Credit Commitment (as such amounts may be reduced by Section 2.2f and Section 2.3f hereof). 2.1Bc SHORT TERM REVOLVING CREDIT NOTES. The obligation of the Borrower to repay, on or before the Short Term Revolving Credit Termination Date, the aggregate unpaid principal amount of all Short Term Revolving Credit Loans shall be evidenced by the several Short Term Revolving Credit Notes, each substantially in the form of Exhibit "A-2" hereto, drawn by the - 25 - Borrower to the order of a Lender in the maximum amount of such Lender's Short Term Revolving Credit Commitment. The principal amount actually due and owing to a Lender at any time shall be the then aggregate unpaid principal amount of all Short Term Revolving Credit Loans made by such Lender as shown on the Loan Account established and maintained by such Lender in accordance with Section 2.13. Each Short Term Revolving Credit Note shall be dated the date hereof and shall be delivered to the Lenders on such date. 2.1Bd DISBURSEMENTS. The amount (i) of any Disbursement of Short Term Revolving Credit Loans consisting of a Base Rate Portion shall be in the minimum aggregate principal amount of $1,000,000 or an integral multiple thereof and (ii) of any Disbursement of Short Term Revolving Credit Loans consisting of a LIBOR Portion shall be in the minimum aggregate principal amount of $5,000,000; provided, however that each incremental unit in excess of $5,000,000 shall be $1,000,000 or an integral multiple thereof. 2.1Be METHOD OF MAKING DISBURSEMENTS. (i) Each request for Disbursements of Short Term Revolving Credit Loans under the Short Term Revolving Credit Commitment shall be made by an Authorized Officer to the Agent orally or in writing (A) in the case of Disbursements of Short Term Revolving Credit Loans to bear interest at the Base Rate, by 11:00 A.M. (eastern time) on the Borrowing Date, and (B) in the case of Disbursements of Short Term Revolving Credit Loans to bear interest at the Adjusted Short Term Revolving Credit LIBOR, by 11:00 A.M. (eastern time) at least three (3) Business Days prior to the Borrowing Date. Each such request shall (i) specify the Borrowing Date, (ii) specify the amount of the Disbursements of Short Term Revolving Credit Loans and each Lender's ratable share thereof, (iii) select the Option or Options therefor and (iv) in the case of Disbursements of Short Term Revolving Credit Loans which will bear interest at the Adjusted Short Term Revolving Credit LIBOR, the Interest Period therefor. Any oral request for Disbursements of Short Term Revolving Credit Loans hereunder shall be followed by the Borrower's written confirmation of such request immediately thereafter. A request from the Borrower with respect to any Disbursements of Short Term Revolving Credit Loans bearing interest at an Adjusted Short Term Revolving Credit LIBOR shall irrevocably commit the Borrower to take such Disbursements of Short Term Revolving Credit Loans on the Borrowing Date specified in the request. The Borrower may, without liability or cost hereunder, cancel any request for Disbursements of Short Term Revolving Credit Loans bearing interest at the Base Rate at any time prior to the funding thereof by each of the Lenders by delivering notice of such cancellation to the Agent. (ii) The Agent shall promptly notify the Lenders of each request for a Disbursement of Short Term Revolving Credit Loans. (iii) Not later than 2:00 P.M. (eastern time) on the Borrowing Date, each Lender shall make available to the Agent in immediately available funds at the principal office of the Agent such Lender's pro-rata share of the Disbursements of Short Term Revolving Credit Loans, for the account of the Borrower. No Lender's obligation to make a Disbursement of Short Term Revolving Credit Loans shall be affected by any other Lender's failure to make funds available for the same or any other Disbursement of Short Term Revolving Credit Loans. Nothing in this Subsection 2.1Be shall be deemed to relieve any Lender from its obligation to fulfill its obligations to the Borrower under this Agreement or to prejudice any rights which the - 26 - Borrower may have against any Lender as a result of any default by such Lender under this Agreement. 2.1Bf TEMPORARY REDUCTION OF AVAILABLE SHORT TERM REVOLVING CREDIT COMMITMENT. While each Bid Rate Loan advanced pursuant to Section 2.2 and each Swingline Loan advanced pursuant to Section 2.3 (and in either case is allocated to the Short Term Revolving Credit Commitment) is outstanding, the principal amount available to be borrowed under the aggregate Short Term Revolving Credit Commitment shall be reduced by an amount equal to the principal amount of each such Bid Rate Loan or Swingline Loan then outstanding and allocated to the Short Term Revolving Credit Commitment pursuant to Section 2.2f or Section 2.3f hereof. Such temporary reduction shall not affect the calculation of the Short Term Revolving Credit Facility Fee. 2.1Bg OPTION OF BORROWER TO TERM-OUT THE SHORT TERM REVOLVING CREDIT LOANS UPON SHORT TERM REVOLVING CREDIT TERMINATION DATE. Subject to Section 6.1 hereof, the Borrower may elect, by written request which shall be delivered ten (10) days prior to the Short Term Revolving Credit Termination Date, to repay all amounts or a portion thereof of principal outstanding under the Short Term Revolving Credit Loans due and payable on such Short Term Revolving Credit Termination Date on the applicable Term Loan Maturity Date (the "Term-Out Option"). Notwithstanding, any provision of this Agreement to the contrary all outstanding principal of, and accrued and unpaid interest on a Term Loan shall be due and payable on the applicable Term Loan Maturity Date. If the Borrower elects the Term-Out Option, it shall deliver to each applicable Lender, on or before the Short Term Revolving Credit Termination Date, a term note, substantially in the form of Exhibit "K" attached hereto, for the aggregate principal amount of the Short Term Revolving Credit Loans due such Lender and the subject of the Term-Out Option and setting forth such obligation of the Borrower to repay such Term Loan due to such Lender (each term note, together with all extensions, renewals, amendments, modifications, substitutions and replacements thereto and thereof; herein referred to individually as the "Term Note"; and collectively the "Term Notes"). Any request for the conversion of all or a portion of the outstanding of Short Term Revolving Credit Loans to Terms Loans shall be made by an Authorized Officer to the Agent in writing which shall state (A) whether upon such conversion the Term Loans or a portion thereof will bear interest at the Base Rate Option or the LIBOR Option, (B) the amount of Term Loans to bear interest initially at the Base Rate Option or the LIBOR Option, and (C) in the case of Portions of the Term Loans which will bear interest at the Adjusted Term Loan LIBOR, the Interest Period(s) therefor. A request from the Borrower with respect to the selection of a Portion of the Term Loans to bear interest at an Adjusted Term Loan LIBOR shall irrevocably commit the Borrower to accept the LIBOR Option for the period in question. Additionally, the Borrower hereby agrees to execute such amendments and modifications to the Loan Documents, prior to the Short Term Revolving Credit Termination Date, as Agent shall reasonably request to evidence and govern the Term Loan; provided that no amendments or modifications to the Loan Documents shall be made with respect to any covenants of the Borrower or to the rate of interest under any Interest Rate Option. The Term-Out Option may be applied for each Lender that elects not to extend the Short Term Revolving Credit Termination Date pursuant to Section 2.8b at the option of the Borrower as set forth in Section 2.8b. - 27 - 2.2 BID RATE LOANS. 2.2a BID RATE. Subject to the provisions of this Section 2.2, each Lender severally agrees that the Borrower may request Bid Rate Loans, in an aggregate amount at any one time outstanding not to exceed $325,000,000 (or the sum of $195,000,000 plus any remaining Short Term Revolving Credit Commitment on and after any Short Term Revolving Credit Termination Date) LESS the Letters of Credit Outstanding and the aggregate principal amount of all Revolving Credit Loans and Swingline Loans then outstanding, which shall bear interest at the Bid Rate Option. In selecting a Bid Rate Option from any Lender, such Lender may make an advance in excess of such Lender's Commitment. 2.2b LIMITATIONS ON AND EVIDENCE OF BID RATE LOANS. Except as provided under Section 2.2c(vi) hereof, each Bid Rate Loan or repayment of a Bid Rate Loan must be in the minimum principal amount of $5,000,000 or, if in excess of $5,000,000, in integral multiples of $1,000,000. The obligation of the Borrower to repay, on the Long Term Revolving Credit Termination Date (if the Borrower has requested a Disbursement under the Long Term Revolving Credit Commitment), the aggregate unpaid principal amount of such Bid Rate Loans advanced by each Lender shall be evidenced by the Bid Rate Notes substantially in the form of Exhibit "B-1" hereto, one made payable to each Lender in the amount of $195,000,000. The obligation of the Borrower to repay, on the Short Term Revolving Credit Termination Date (if the Borrower has requested the Disbursement under the Short Term Revolving Credit Commitment), the aggregate unpaid principal amount of such Bid Rate Loans advanced by each Lender shall be evidenced by the Bid Rate Notes substantially in the form of Exhibit "B-2" hereto, one made payable to each Lender in the amount of $130,000,000. The Borrower shall have, with the prior written consent of the Lender making such Bid Rate Loan, the right to prepay any Bid Rate Loan prior to the end of the relevant Bid Rate Interest Period. The Borrower shall repay each individual Bid Rate Loan, together with interest thereon on the last day of the Bid Rate Interest Period applicable to it. The principal amount actually due and owing each Lender shall be the aggregate unpaid principal amount of all Disbursements of Bid Rate Loans made by such Lender, all as shown on the Loan Account established pursuant to Section 2.13 hereof. 2.2c BID RATE LOAN PROCEDURE. (i) BID RATE LOAN REQUEST. When the Borrower wishes to request offers to make Bid Rate Loans under this Section, it shall transmit to the Agent by telex or facsimile transmission a Bid Rate Quote Request substantially in the form of Exhibit "C" hereto so as to be received no later than 11:00 A.M. (eastern time) on (x) the fifth Business Day prior to the date of Disbursement proposed therein, in the case of a LIBOR Auction or (y) the Business Day next preceding the date of Disbursement proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Agent shall have mutually agreed and shall have informed the Lenders of not later than the date of the Bid Rate Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying: (A) the proposed date of Disbursement, which shall be a Business Day, - 28 - (B) the aggregate amount of such Disbursement, which shall be $5,000,000 or a larger multiple of $1,000,000, (C) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, (D) whether the Bid Rate Quotes requested are to set forth a Bid Rate Margin or a Bid Rate Absolute Rate, and (E) whether the requested Disbursement shall be allocated to the Long Term Revolving Credit Commitment or the Short Term Revolving Credit Commitment or split between both Commitments, if applicable, and how split. The Borrower may request offers to make Bid Rate Loans for more than one Interest Period in a single Bid Rate Quote Request. The Borrower may request offers to make Bid Rate Loans allocated to each of the Commitments in a single Bid Rate Quote Request. (ii) INVITATION FOR BID RATE QUOTES. Promptly upon receipt of a Bid Rate Quote Request, the Agent shall send to the Lenders by telex or facsimile transmission an Invitation for Bid Rate Quotes, which shall constitute an invitation by the Borrower to each Lender to submit Bid Rate Quotes offering to make the Bid Rate Loans to which such Bid Rate Quote Request relates in accordance with this Subsection. (iii) SUBMISSION AND CONTENTS OF BID RATE QUOTES. (A) Each Lender may submit a Bid Rate Quote containing an offer or offers to make Bid Rate Loans in response to any Bid Rate Quote Request. Each Bid Rate Quote must comply with the requirements of this paragraph (iii) and must be submitted to the Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 9.3 not later than (x) 2:00 P.M. (eastern time) on the fourth Business Day prior to the proposed date of Disbursement, in the case of a LIBOR Auction or (y) 9:45 A.M. (eastern time) on the proposed date of Disbursement, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Agent shall have mutually agreed and shall have informed the Lenders of not later than the date of the Bid Rate Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective); PROVIDED that Bid Rate Quotes submitted by the Agent (or any affiliate of the Agent) in the capacity of a Lender may be submitted, and may only be submitted, if the Agent or such affiliate notifies the Borrower of the terms of the offer or offers contained therein not later than (x) one hour prior to the deadline for the other Lenders, in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the other Lenders, in the case of an Absolute Rate Auction. (B) Each Bid Rate Quote shall be in substantially the form of Exhibit "D" hereto and shall in any case specify: (1) the proposed date of Disbursement and the Interest Period therefor, - 29 - (2) the principal amount of the Bid Rate Loan for which each such offer is being made, which principal amount (w) may be greater than or less than the Commitment of the quoting Lender, (x) must be $5,000,000 or a larger multiple of $1,000,000, (y) may not exceed the principal amount of Bid Rate Loans for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Bid Rate Loans for which offers being made by such quoting Lender may be accepted, (3) in the case of a LIBOR Auction, the margin above or below the applicable LIBOR (the "Bid Rate Margin") offered for each such Bid Rate Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate, (4) in the case of an Absolute Rate Auction, the rate of interest per annum (specified to the nearest 1/10,000th of 1%) (the "Bid Rate Absolute Rate") offered for each such Bid Rate Loan, and (5) the identity of the quoting Lender. A Bid Rate Quote may set forth up to three separate offers by the quoting Lender with respect to each Interest Period specified in the related Bid Rate Quote Request. (C) Any Bid Rate Quote shall be disregarded if it: (1) is not substantially in conformity with Exhibit "D" hereto or does not specify all of the information required by paragraph (iii)(B) immediately above; (2) contains qualifying, conditional or similar language or, in particular, is conditioned on acceptance by the Borrower of all or some specified minimum principal amount of the Bid Rate Loan for which such Bid Rate Quote is being made; (3) proposes terms other than or in addition to those set forth in the applicable Bid Rate Quote Request; or (4) arrives after the time set forth in paragraph (iii)(A) above. (iv) NOTICE TO BORROWER. The Agent shall notify the Borrower promptly, and in the case of an Absolute Rate Auction no later than 45 minutes after receipt by the Agent, of the terms (x) of any Bid Rate Quote submitted by a Lender that is in accordance with paragraph (iii) above and (y) of any Bid Rate Quote that amends, modifies or is otherwise inconsistent with a previous Bid Rate Quote submitted by such Lender with respect to the same Bid Rate Quote Request. Any such subsequent Bid Rate Quote shall be disregarded by the Agent unless such subsequent Bid Rate Quote is submitted solely to correct a manifest error in such former Bid Rate Quote. The Agent's notice to the Borrower shall specify (A) the aggregate principal amount of Bid Rate Loans for which offers have been received for each Interest Period specified in the related Bid Rate Quote Request, (B) the respective principal amounts and Bid Rate Margins or - 30 - Bid Rate Absolute Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Bid Rate Loans for which offers in any single Bid Rate Quote may be accepted. (v) ACCEPTANCE AND NOTICE BY BORROWER. Not later than 11:00 A.M. (eastern time) on (x) the third Business Day prior to the proposed date of Disbursement, in the case of a LIBOR Auction or (y) the proposed date of Disbursement, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Agent shall have mutually agreed and shall have informed the Lenders of not later than the date of the Bid Rate Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the Borrower shall notify the Agent of its acceptance or non-acceptance of the offers so presented to it pursuant to Subsection (iv). In the case of acceptance, such notice (a "Notice of Bid Rate Borrowing") shall specify the aggregate principal amount of offers for each Interest Period that are accepted and the types of Commitments to be borrowed against. The Borrower may accept any Bid Rate Quote in whole or in part; PROVIDED that: (A) the aggregate principal amount of each Bid Rate Disbursement may not exceed the applicable amount set forth in the related Bid Rate Quote Request, (B) the principal amount of each Bid Rate borrowing must be $5,000,000 or a larger multiple of $1,000,000 (subject to Subsection 2.2c(vi) below), (C) acceptance of offers may only be made on the basis of ascending Bid Rate Margins or Bid Rate Absolute Rates, as the case may be, and (D) the Borrower may not accept any offer that is described in subsection (iii)(C) of this Section 2.2c or that otherwise fails to comply with the requirements of this Agreement. (vi) ALLOCATION BY AGENT. If offers are made by two or more Lenders with the same Bid Rate Margins or Bid Rate Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Bid Rate Loans in respect of which such offers are accepted shall be allocated by the Agent among such Lenders as nearly as possible (in multiples of $1,000,000, as the Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Agent of the amounts of Bid Rate Loans shall be conclusive in the absence of manifest error. (vii) NOTICE TO LENDERS. If the Borrower accepts one or more of the offers made by any Lender pursuant to clause (v) of this Section 2.2c above, the Agent shall in turn promptly notify (A) each Lender of the date of such Bid Rate Loan, and the aggregate amount, interest rate, type of Commitment to be borrowed against and maturity of such Bid Rate Loan and whether or not any offer or offers made by such Lender pursuant to clause (iii) of this Section 2.2c above have been accepted by the Borrower and (B) each Lender which is to make a Bid Rate Loan, of the amount of each Bid Rate Loan to be made by such Lender. Each Lender which is to make a Bid Rate Loan shall, before 1:00 p.m. (Pittsburgh, Pennsylvania time) on the - 31 - date of such Bid Rate Loan specified in the notice received from the Agent pursuant to clause (A) of the preceding sentence or any later time when such Lender shall have received notice from the Agent pursuant to clause (B) of the preceding sentence, make available to the Agent such Lender's Bid Rate Loan, in immediately available funds. Promptly after 1:00 p.m. (Pittsburgh, Pennsylvania time) and in any event before 3:00 p.m. (Pittsburgh, Pennsylvania time) on each date of the making of Bid Rate Loans, the Agent shall make the aggregate amount available to the Borrower. (viii) BID RATE LOAN PREPAYMENT. No Bid Rate Loan shall be prepaid prior to the end of the relevant Bid Rate Interest Period without the prior consent of the Lender extending such Bid Rate Loan. 2.2d BID RATE LOAN INTEREST. Interest on the Bid Rate Loans for a Bid Rate Interest Period shall accrue at the rate per annum agreed upon between the Lender or Lenders making such Bid Rate Loans and the Borrower pursuant to the Bid Rate selection procedures set forth in Subsection 2.2c above. 2.2e BASE RATE OPTION BORROWING IN EVENT OF CANCELLED BID RATE LOAN REQUEST. In the event of cancellation by the Borrower of a Bid Rate Loan Request pursuant to paragraph (v) of Subsection 2.2c, the Borrower may, before 1:00 P.M. (eastern time) on the day of such cancellation, submit to the Agent a request for a Disbursement under the Long Term Revolving Credit Commitment or the Short Term Revolving Credit Commitment to be made on the day of such cancellation and to bear interest at the Base Rate Option. The Lenders shall use their best efforts to make their respective pro rata shares of such Disbursement available at the office of the Borrower prior to 2:00 P.M. (eastern time) on the date of such Disbursement in accordance with the procedures set forth in Subsection 2.1Ae(iii) or Subsection 2.1Be(iii), as applicable. 2.2f REDUCTION OF AVAILABLE COMMITMENTS. While each such Bid Rate Loan is outstanding hereunder, the outstanding principal amount thereof shall reduce correspondingly availability under either or both of (i) the Long Term Revolving Credit Commitment and (ii) the Short Term Revolving Credit Commitment, as applicable, and shall reduce, as to each Lender availability under either or both of (i) that Lender's Long Term Revolving Credit Commitment or (ii) that Lender's Short Term Revolving Credit Commitment, as applicable, by an amount equal to such Lender's Long Term Revolving Credit Commitment Percentage or Lender's Short Term Revolving Credit Commitment Percentage, as applicable, of the aggregate outstanding principal balance of Bid Rate Loans issued by any Lender. 2.3 SWINGLINE LOANS. 2.3a SWINGLINE RATE. Subject to the provisions of this Section 2.3, each Swingline Lender severally agrees that the Borrower may request that Swingline Loans, in an aggregate amount at any one time outstanding not to exceed the lesser of (i) $25,000,000 or (ii) an amount which, when added to the Letters of Credit Outstanding and the aggregate principal amount of all other Loans then outstanding, does not exceed $325,000,000 (so long as both the Long Term Revolving Credit Commitments and all of the initial Short Term Revolving Credit Commitments are outstanding; the sum of $195,000,000 plus the sum of any remaining Short Term Revolving - 32 - Credit Commitments if a Short Term Revolving Credit Termination Date has occurred with respect to one or more Lenders plus the outstanding balance of the Term Loans, if any; and the sum of $195,000,000 plus the outstanding Term Loans, if any, in the event that only the Long Term Revolving Credit Commitment is outstanding), which shall bear interest at the Swingline Option. 2.3b LIMITATIONS ON AND EVIDENCE OF SWINGLINE LOANS. Except as provided under Subsection 2.3c(iv), each Swingline Loan or repayment of a Swingline Loan must be in the minimum principal amount of $10,000 or, if in excess of $10,000 in integral multiples of $10,000. Each Swingline Loan shall be for a Swingline Loan Period. The obligation of the Borrower to repay, prior to the Long Term Revolving Credit Termination Date, the aggregate unpaid principal amount of such Swingline Loans advanced by each Swingline Lender shall be evidenced by the Swingline Notes substantially in the form of Exhibit "E" hereto, one made payable to each Swingline Lender in the amount of $25,000,000. The principal amount actually due and owing each Swingline Lender shall be the aggregate unpaid principal amount of all Disbursements of Swingline Loans made by such Swingline Lender, all as shown on such Lender's Loan Account established pursuant to Section 2.13. 2.3c SWINGLINE LOAN PROCEDURE. (i) SWINGLINE LOAN REQUEST. When the Borrower wishes to request offers to make Swingline Loans under this Section, it shall transmit to the Agent by telex or facsimile transmission for each Swingline Loan Period a Swingline Quote Request, substantially in the form of Exhibit "F" hereto, so as to be received no later than 11:00 A.M. (eastern time) on the Business Day of Disbursement proposed therein specifying: (A) the proposed date of Disbursement, which shall be a Business Day, (B) the aggregate amount of such Disbursement, which shall be $10,000 or a larger multiple of $10,000, and (C) whether the requested Disbursement shall be allocated to the Long Term Revolving Credit Commitment or the Short Term Revolving Credit Commitment or split between both Commitments, if applicable, and how split. (ii) INVITATION FOR SWINGLINE QUOTES. Promptly upon receipt of a Swingline Quote Request, the Agent shall send to the Swingline Lenders by telex or facsimile transmissions an Invitation for Swingline Quote, which shall constitute an invitation by the Borrower to each Swingline Lender to submit Swingline Quotes offering to make the Swingline Loan for such Swingline Loan Period to which such Swingline Quote Request relates in accordance with this Subsection. (iii) SUBMISSION AND CONTENTS OF SWINGLINE QUOTES. (A) Each Swingline Lender may submit a Swingline Quote containing an offer to make a Swingline Loan for such Swingline Loan Period in response to any Swingline Quote Request. Each Swingline Quote must comply with the requirements of this paragraph (iii) and must be submitted to the Agent by - 33 - telex or facsimile transmission at its offices specified in or pursuant to Section 9.3 not later than (x) 1:00 P.M. (eastern time) on the Business Day on the proposed date of Disbursement (or such other time or date as the Borrower and the Swingline Lenders shall have mutually agreed); provided that Swingline Quotes submitted by the Agent (or any affiliate of the Agent) in the capacity of a Swingline Lender may be submitted, and may only be submitted, if the Agent or such affiliate notifies the Borrower of the terms of the offer or offers contained therein not later than 15 minutes prior to the deadline for the other Swingline Lenders. (B) Each Swingline Quote shall be in substantially the form of Exhibit "G" hereto and shall in any case specify: (1) the proposed date of Disbursement, (2) the principal amount of the Swingline Loan for which each such offer is being made, which principal amount, (x) must be $10,000 or a larger multiple of $10,000, (y) may not exceed the principal amount of Swingline Loan for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Swingline Loans for which offers being made by such quoting Swingline Lender may be accepted, (3) the rate of interest per annum (specified to the nearest 1/10,000th of 1%) offered for each such Swingline Loan; and (4) the identity of the quoting Swingline Lender. (C) Any Swingline Quote shall be disregarded if it: (1) is not substantially in conformity to Exhibit "G" hereto or does not supply all of the information required by paragraph (iii)(B) immediately above; (2) contains qualifying, conditional or similar language or, in particular, is conditioned on acceptance by the Borrower of all or some specified minimum principal amount of the Swingline Loan for which such Swingline Quote is being made; (3) proposes terms other than or in addition to those set forth in the applicable Swingline Loan Request; or (4) arrives after the time set forth in paragraph (iii)(A) above. (iv) NOTICE TO BORROWER. The Agent shall notify the Borrower, no later than 45 minutes after receipt by the Agent, of the terms (x) of any Swingline Quote submitted by a Swingline Lender that is in accordance with paragraph (iii) above (y) of any Swingline Quote that amends, modifies or is otherwise inconsistent with a previous Swingline Quote submitted by such Swingline Lender with respect to the same Swingline Quote Request. Any such subsequent Swingline Quote shall be disregarded by the Agent unless such subsequent Swingline Quote is submitted solely to correct a manifest error. The Agent's notice to the Borrower shall specify (A) - 34 - the aggregate principal amount of Swingline Loans for which offers have been received, (B) the respective principal amounts so offered and (C), if applicable, limitations on the aggregate principal amount of the Swingline Loans for which offers in any single Swingline Quote may be accepted. (v) ACCEPTANCE AND NOTICE BY BORROWER. Not later than 2:30 P.M. (eastern time) on the proposed date of Disbursement (or such other time or date as the Borrower and the Swingline Lenders shall have mutually agreed), the Borrower shall notify the Agent of its acceptance or non-acceptance of the offers so presented to it pursuant to Subsection (iii). In the case of acceptance, such notice (a "Notice of Swingline Borrowing") shall specify the aggregate principal amount of offers that are accepted. The Borrower may accept any Swingline Quote in whole or in part; PROVIDED that: (A) the aggregate principal amount of each Swingline Disbursement may not exceed the applicable amount set forth in the related Swingline Quote Request, (B) the principal amount of each Swingline borrowing must be $10,000 or a larger multiple of $10,000, (C) acceptance of offers may only be made on the basis of ascending Swingline Interest Rate, and (D) the Borrower may not accept any offer that fails to comply with the requirements of this Agreement. (vi) ALLOCATION BY BORROWER. If offers are made by two or more Swingline Lenders with the same Swingline Interest Rate for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Swingline Loan, the principal amount of Swingline Loans in respect of which such offers are accepted shall be allocated by the Borrower among such Swingline Lenders as nearly as possible (in multiples of $10,000, as the Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Borrower of the amounts of Swingline Loans shall be conclusive. (vii) SWINGLINE LOAN PREPAYMENT. A Swingline Loan may be prepaid at any time without the prior consent of the Swingline Lender extending such Swingline Loan. 2.3d SWINGLINE LOAN INTEREST. Interest on the Swingline Loans for each Swingline Loan Period shall accrue at the rate per annum agreed upon between the Swingline Lender or Swingline Lenders making such Swingline Loans and the Borrower, pursuant to the Swingline selection procedures set forth in Subsection 2.3c above; provided that upon the occurrence and during the continuance of an Event of Default interest on outstanding Swingline Loans shall be adjusted automatically as provided in Subsection 2.4f. Any interest paid on a Swingline Loan will be retained for the benefit of the applicable Swingline Lender subject to the provisions of Section 2.3e below. - 35 - 2.3e RISK PARTICIPATION. Upon the Disbursement of each Swingline Loan and without any further action by or on behalf of such Lender, each Lender hereby agrees to purchase, upon the occurrence of an Event of Default, an undivided full risk non-recourse participation in such Swingline Loan, in an amount equal to (i) such Lender's Long Term Revolving Credit Commitment Percentage (and in the event the Long Term Revolving Credit Commitment is fully drawn at the time of the Disbursement of such Swingline Loan, such Lender's Short Term Revolving Credit Commitment Percentage), (ii) multiplied by the outstanding principal amount of such Swingline Loan on the date of the Event of Default; PROVIDED HOWEVER, no Lender shall participate in any Swingline Loan which Swingline Loan is made after a notice of an Event of Default has been given. If and to the extent any Swingline Lender receives payment of principal or interest on a participated Swingline Loan, such Swingline Lender shall deliver to each Lender such Lender's pro rata share of such payment. 2.3f REDUCTION OF AVAILABLE COMMITMENTS. While each such Swingline Loan is outstanding hereunder, the outstanding principal amount thereof shall correspondingly reduce availability first under the Long Term Revolving Credit Commitment and first shall reduce, as to each Lender availability under the Lender's Long Term Revolving Credit Commitment by an amount equal to such Lender's Long Term Revolving Credit Commitment Percentage share of the aggregate outstanding principal balance of Swingline Loans issued by the Agent. If at any time the sum of the Long Term Revolving Credit Loans outstanding plus the Swingline Loans outstanding exceed the Long Term Revolving Credit Commitment, such excess shall correspondingly reduce availability under the Short Term Revolving Credit Commitment and shall reduce, as to each Lender availability under the Lender's Short Term Revolving Credit Commitment by an amount equal to such Lender's Short Term Revolving Credit Commitment Percentage share of such excess. 2.4 INTEREST RATES, INTEREST PAYMENT AND CERTAIN PROVISIONS RELATING TO INTEREST AND FEES. 2.4a PAYMENTS OF INTEREST. The Borrower shall pay interest on the principal amount of the Loans from time to time outstanding hereunder, from the date thereof until payment in full, at the rates of interest determined pursuant to this Section 2.4 (except to the extent expressly set forth to the contrary in Section 2.2d and 2.3d). The Borrower shall pay accrued interest on the unpaid principal balance of the Loans in arrears: (i) with respect to each Base Rate Portion, at the Base Rate on the last Business Day of each month during the term thereof; (ii) with respect to each LIBOR Portion, at the Adjusted Long Term Revolving Credit LIBOR, the Adjusted Short Term Revolving Credit LIBOR, or the Adjusted Term Loan LIBOR, on the last day of each LIBOR Interest Period as provided for in Subsection 2.4c (provided, however, if the LIBOR Interest Period chosen for a LIBOR Portion exceeds three (3) months, interest on that LIBOR Portion shall be due and payable on the day which is (A) three months after the first day of LIBOR Interest Period and (B) the last day of such LIBOR Interest Period); (iii) with respect to each Bid Rate Loan, at the Bid Rate on the last day of each Bid Rate Interest Period as provided for in Subsection 2.4c (provided, however, if the Bid Rate Interest Period chosen for a Bid Rate Loan exceeds ninety (90) days, interest on that Bid Rate Loan shall be due and payable every ninety (90) days during such Bid Rate Interest Period and on the last day of such Bid Rate Interest Period); (iv) with respect to each Swingline Loan at the Swingline Rate on the last day of - 36 - the Swingline Loan Period; and (v) with respect to all such Portions, at the applicable interest rate (A) when due, whether at maturity of such Note, by acceleration or otherwise, and (B) after maturity, on demand until paid in full. 2.4b INTEREST RATE OPTIONS FOR CERTAIN LOANS. (i) LONG TERM REVOLVING CREDIT LOANS. The unpaid principal amount of the Long Term Revolving Credit Loans shall bear interest, for each day until due, at one or more rates of interest selected by the Borrower from among the Options set forth below; it being understood that, subject to the provisions of this Agreement, the Borrower may select different Options to apply simultaneously to different Portions of the Long Term Revolving Credit Loans and may select different Interest Periods to apply simultaneously to different Portions of the LIBOR Portions of the Long Term Revolving Credit Loans. (A) BASE RATE OPTION: A rate of interest per annum (computed upon the basis of a year of 365 or 366 days, as the case may be, and the actual number of days elapsed) equal to the Base Rate. The rate of interest per annum under the Base Rate Option shall be adjusted automatically, from time to time, upon each change in the Base Rate. (B) LIBOR OPTION: A rate of interest per annum (computed on the basis of a year of 360 days and the actual number of days elapsed) equal to the sum of (x) the LIBOR PLUS (y) the Applicable Long Term Revolving Credit LIBOR Margin (the "Adjusted Long Term Revolving Credit LIBOR"). The Applicable Long Term Revolving Credit LIBOR Margin for each LIBOR Portion then outstanding shall be adjusted automatically, from time to time, effective upon each change in the Senior Ratings. (ii) SHORT TERM REVOLVING CREDIT LOANS. The unpaid principal amount of the Short Term Revolving Credit Loans shall bear interest, for each day until due, at one or more rates of interest selected by the Borrower from among the Options set forth below; it being understood that, subject to the provisions of this Agreement, the Borrower may select different Options to apply simultaneously to different Portions of the Short Term Revolving Credit Loans and may select different Interest Periods to apply simultaneously to different Portions of the LIBOR Portions of the Short Term Revolving Credit Loans. (A) BASE RATE OPTION: A rate of interest per annum (computed upon the basis of a year of 365 or 366 days, as the case may be, and the actual number of days elapsed) equal to the Base Rate. The rate of interest per annum under the Base Rate Option shall be adjusted automatically, from time to time, upon each change in the Base Rate. (B) LIBOR OPTION: A rate of interest per annum (computed on the basis of a year of 360 days and the actual number of days elapsed) equal to the sum of (A) the LIBOR PLUS (B) the Applicable Short Term Revolving Credit LIBOR Margin (the "Adjusted Short Term Revolving Credit LIBOR"). The - 37 - Applicable Short Term Revolving Credit LIBOR Margin for each LIBOR Portion then outstanding shall be adjusted automatically, from time to time, effective upon each change in the Senior Ratings. (iii) TERM LOANS. The unpaid principal amount of the Term Loans shall bear interest, for each day until due, at one or more rates of interest selected by the Borrower from among the Options set forth below; it being understood that, subject to the provisions of this Agreement, the Borrower may select different Options to apply simultaneously to different Portions of the Term Loans and may select different Interest Periods to apply simultaneously to different Portions of the LIBOR Portions of the Term Loans. (A) BASE RATE OPTION: A rate of interest per annum (computed upon the basis of a year of 365 or 366 days, as the case may be, and the actual number of days elapsed) equal to the Base Rate. The rate of interest per annum under the Base Rate Option shall be adjusted automatically, from time to time, upon each change in the Base Rate. (B) LIBOR OPTION: A rate of interest per annum (computed on the basis of a year of 360 days and the actual number of days elapsed) equal to the sum of (A) the LIBOR PLUS (B) the Applicable Term Loan LIBOR Margin (the "Adjusted Term Loan LIBOR"). The Applicable Term Loan LIBOR Margin for each LIBOR Portion then outstanding shall be adjusted automatically, from time to time, effective upon each change in the Senior Ratings. 2.4c INTEREST PERIODS; LIMITATIONS ON ELECTIONS. At any time when the Borrower shall select, convert to or renew at the LIBOR Option with respect to all or any Portion of the outstanding Revolving Credit Loans or Term Loans or select, convert or renew a Bid Rate Loan to which the Bid Rate Margin applies, it shall fix one or more Interest Periods during which such Option(s) shall apply. All of the foregoing, however, is subject to the following: (i) any LIBOR Interest Period which would otherwise end on a day which is not a Business Day shall be extended to the next Business Day unless such Business Day falls in the succeeding calendar month in which case such LIBOR Interest Period shall end on the next preceding Business Day; and (ii) any LIBOR Interest Period which begins on the last day of a calendar month or on a day for which there is no numerically corresponding day in the subsequent calendar month during which such LIBOR Interest Period is to end shall end on the last Business Day of such subsequent month. In addition, elections by the Borrower of the LIBOR Option shall be subject to the following further limitations: (i) If a LIBOR Interest Period is elected with regard to amounts outstanding under the Long Term Revolving Credit Commitment and such Interest Period would end after - 38 - the Long Term Revolving Credit Termination Date, such Interest Period shall end on the Long Term Revolving Credit Termination Date; and (ii) At no time may there be more than six (6) LIBOR Interest Periods in effect relating to Long Term Revolving Credit Loans; provided, however if a Base Rate Portion is outstanding there shall be not more than five (5) LIBOR Interest Periods in effect relating to Long Term Revolving Credit Loans; and (iii) If a LIBOR Interest Period is elected with regard to amounts outstanding under the Short Term Revolving Credit Commitment and such Interest Period would end after the Short Term Revolving Credit Termination Date, such Interest Period shall end on the Short Term Revolving Credit Termination Date; and (iv) At no time may there be more than six (6) LIBOR Interest Periods in effect relating to Short Term Revolving Credit Loans; provided, however if a Base Rate Portion is outstanding there shall be not more than five (5) LIBOR Interest Periods in effect relating to Short Term Revolving Credit Loans; and (v) If a LIBOR Interest Period is elected with regard to amounts outstanding under the Term Loan and such Interest Period would end after the Term Loan Maturity Date, such Interest Period shall end on the Term Loan Maturity Date; and (vi) At no time may there be more than three (3) LIBOR Interest Periods in effect relating to Term Loans; provided, however if a Base Rate Portion is outstanding there shall be not more than two (2) LIBOR Interest Periods in effect relating to Term Loans. 2.4d ELECTION, CONVERSION OR RENEWAL OF INTEREST RATE OPTIONS. Elections of or conversions to the Base Rate Option shall continue in effect until converted to the LIBOR Option as hereinafter provided. Elections of, conversions to or renewals of the LIBOR Option shall expire as to each LIBOR Portion at the expiration of the applicable Interest Period. Elections of Bid Rate Loans shall expire as to each such Bid Rate Loan at the end of the applicable Bid Rate Interest Period. Elections of Swingline Loans shall expire as to each such Swingline Loan at the end of the applicable Swingline Interest Period. At any time, with respect to any Base Rate Portion, or at the expiration of the applicable Interest Period, with respect to any LIBOR Portion, the Borrower (subject to Subsection 2.4c) may cause all or any part of the principal amount of such Portion to be converted to and/or (in the case of a LIBOR Portion) to be renewed under the LIBOR Option by notice to each of the Lenders as hereinafter provided. Such notice (i) shall be irrevocable; (ii) shall be given not later than 11:00 A.M. (eastern time) in the case of a conversion to or renewal of, either in whole or in part, the LIBOR Option on the third Business Day prior to the proposed effective date for the conversion or renewal; and (iii) shall set forth: (A) the effective date of such conversion or renewal, which shall be a Business Day; - 39 - (B) the new LIBOR Interest Period(s) selected; and (C) with respect to each such Interest Period, the aggregate principal amount of the corresponding LIBOR Portion. At the expiration of each LIBOR Interest Period, any part (including the whole) of the principal amount of the corresponding LIBOR Portion as to which no notice of conversion or renewal has been received as provided above, shall automatically be converted to the Base Rate Option. At the expiration of each Bid Rate Interest Period or Swingline Interest Period, any part (including the whole) of the principal amount of the corresponding Bid Rate Loan or Swingline Loan, as applicable, as to which no notice of an invitation for bid has been received as provided in Section 2.2 or Section 2.3, as applicable, shall automatically be converted to Revolving Credit Loans under the Commitment to which each was allocated and such principal amount shall bear interest at the Base Rate Option. 2.4e NOTIFICATION OF ELECTION OF AN INTEREST RATE OPTION. The Borrower, by an Authorized Officer, shall notify the Agent of (i) each election or renewal of an Option and each conversion from one Option to another, (ii) the Portion of the Long Term Revolving Credit Loans, the Short Term Revolving Credit Loans or the Term Loans, as applicable, then outstanding to be allocated to each Option and (iii) where relevant, the Interest Periods applicable to each Option, by communication as provided for in this Agreement. Any such communication may be oral or written and if oral, it shall be followed immediately by written confirmation of such Option election executed by an Authorized Officer. 2.4f DEFAULT INTEREST. After the occurrence of and during the continuance of an Event of Default and whether or not judgment has been entered against the Borrower on the Revolving Credit Notes or the Term Notes, all Base Rate Portions shall bear interest at a rate per annum which shall be two hundred (200) basis points (2%) per annum above the rate otherwise in effect under the Base Rate Option, such interest rate to change automatically from time to time, effective as of the effective date of each change in the Base Rate. After the occurrence of and during the continuance of an Event of Default and whether or not judgment has been entered against the Borrower on the Revolving Credit Notes, the Term Notes and the Bid Rate Notes, all such LIBOR Portions and Bid Rate Loans shall bear interest (i) until the end of the then current Interest Period, at a rate per annum which shall be two hundred (200) basis points (2%) per annum above the rate otherwise in effect under the LIBOR Option and the Bid Rate Option, as the case may be, and (ii) at the end of the then current Interest Period, and thereafter at the sum of (A) the Base Rate PLUS (B) two hundred (200) basis points (2%) per annum. After the occurrence of and during the continuance of an Event of Default whether or not judgment has been entered against the Borrower on the Swingline Notes, all Swingline Loans shall bear interest at the sum of (A) the Base Rate plus (B) two hundred (200) basis points (2%) per annum. - 40 - 2.5 YIELD-PROTECTION, CAPITAL ADEQUACY AND MISCELLANEOUS PROVISIONS RELATING TO LIBOR. 2.5a YIELD PROTECTION. Notwithstanding other provisions of this Section 2.5: (i) If any Governmental Rule (including, without limitation, Regulation D), or if any change therein on or after the date hereof, or in the interpretation thereof by any Governmental Authority charged with the administration thereof, shall: (A) subject any Lender to any tax, levy, impost, charge, fee, duty, deduction or withholding of any kind with respect to payments of principal or interest or other amounts due hereunder (other than any tax imposed or based upon the income of a Lender and payable to any Governmental Authority in the United States of America or any state thereof); or (B) change the basis of taxation of any Lender with respect to payments of principal or interest or other amounts due hereunder (other than any change which affects, and only to the extent that it affects, the taxation by the United States or any state thereof of the total net income of such Lender); or (C) impose, modify or deem applicable any reserve, special deposit or similar requirements against assets held by any Lender applicable to the Letters of Credit Outstanding or to the Commitment or Loans made hereunder (other than such requirements which are included in the determination of the applicable rate of interest hereunder); or (D) impose upon any Lender any other obligation or condition with respect to this Agreement, and the result of any of the foregoing is to increase the cost to the affected Lender, reduce the income receivable by the affected Lender, reduce the rate of return on the affected Lender's capital, or impose any expenses upon the affected Lender, all with respect to any of the Commitments, the Loans or the Letters of Credit Outstanding (or any portion thereof) by an amount which the affected Lender reasonably deems material, and if the affected Lender is then demanding similar compensation for such occurrences from other borrowers who are similarly situated and who have a similar relationship with the affected Lender and from which the affected Lender has the right to demand such compensation, then and in any such case: (1) the affected Lender shall promptly notify the Borrower of the happening of such event; (2) the Borrower shall pay to the affected Lender, on demand, such amount as will compensate the affected Lender for such reduction in its rate of return; and (3) the Borrower may pay the affected portion of the affected Lender's Commitments, Loans or interest in the Letters of Credit Outstanding in full without the payment of any additional amount, including prepayment penalties, other than amounts payable on account of the affected Lender's out-of-pocket losses (including funding loss, if any, as - 41 - provided in Section 2.11) which are not otherwise provided for in subparagraph (2) immediately above. (ii) A certificate as to the increased cost or reduced amount as a result of any event mentioned in this Subsection 2.5a shall be promptly submitted by the affected Lender to the Borrower in accordance with the provisions hereof. Such certificate shall be prima facie evidence as to the amount of such increased cost or reduced amount. (iii) Notwithstanding the foregoing provisions of this Section 2.5a, the Borrower shall not be required to indemnify a Lender for the imposition by the Agent of any federal income tax withholding in the event that such Lender fails to complete, execute and deliver to the Agent a Withholding Certificate (a defined under sec. 1.1441-1(c)(16) of the federal Income Tax Regulations). 2.5b CAPITAL ADEQUACY. If, after the date hereof, (i) any adoption of or any change in or in the interpretation of any Governmental Rule, or (ii) compliance with any Governmental Rule of any Governmental Authority exercising control over banks or financial institutions generally or any court of competent jurisdiction, requires that the Commitment (including, without limitation, obligations in respect of any Revolving Credit Loans, Bid Rate Loans, Swingline Loans or Letters of Credit Outstanding) hereunder be treated as an asset or otherwise be included for purposes of calculating the appropriate amount of capital to be maintained by any Lender or any corporation controlling any Lender (a "Capital Adequacy Event"), the result of which is to reduce the rate of return on a Lender's capital as a consequence of its Commitment to a level below that which the affected Lender could have achieved but for such Capital Adequacy Event, taking into consideration the Lender's policies with respect to capital adequacy, by an amount which the affected Lender reasonably deems to be material, the affected Lender shall promptly deliver to the Borrower a statement of the amount necessary to compensate the affected Lender or the reduction in the rate of return on its capital attributable to its Commitment (the "Capital Compensation Amount"). The affected Lender shall determine the Capital Compensation Amount in good faith, using reasonable attribution and averaging methods. Each affected Lender shall from time to time notify the Borrower of the amount so determined. Each such notification shall be prima facie evidence of the amount of the Capital Compensation Amount set forth therein, and such Capital Compensation Amount shall be due and payable by the Borrower to the affected Lender thirty (30) days after such notice is given. As soon as practicable after any Capital Adequacy Event, the affected Lender shall submit to the Borrower estimates of the Capital Compensation Amounts that would be payable as a function of the affected Lender's Commitment hereunder. Notwithstanding the foregoing, however, no Lender shall demand Capital Compensation Amounts hereunder unless it is demanding similar compensation from other borrowers who are similarly situated and who have a similar relationship with such Lender and from which such Lender has the right to demand such compensation. 2.5c LIBOR UNASCERTAINABLE. If, on any date on which the Adjusted Long Term Revolving Credit LIBOR, the Adjusted Short Term Revolving Credit LIBOR or the Adjusted Term Loan LIBOR would otherwise be set, the Agent reasonably shall have determined (which determination shall be final and conclusive) that by reason of circumstances affecting the - 42 - interbank Eurodollar market, adequate and reasonable means do not exist for ascertaining the LIBOR, the Agent shall give prompt notice of such determination to the Borrower and the Lenders and, until the Agent notifies the Borrower and the Lenders that the circumstances giving rise to such determination no longer exist, the right of the Borrower to borrow under, convert to or renew the LIBOR Option shall be suspended. Any notice of borrowing under, conversion to or renewal of the LIBOR Option which was to become effective during the period of such suspension shall be treated as a request to borrow under, convert to or renew at the Base Rate Option with respect to the principal amount therein specified. 2.5d ILLEGALITY. If a Lender shall determine in good faith (which determination shall be final and conclusive) that compliance by such Lender with any applicable law, treaty or other Governmental Rule, (whether or not having the force of law), or the interpretation or application thereof by any Governmental Authority, has made it unlawful for such Lender to make or maintain the Revolving Credit Loans or the Term Loans under the LIBOR Option or Bid Rate Loans to which the Bid Rate Margin applies (including but not limited to acquiring Eurodollar liabilities to fund such Loans), such Lender shall give notice of such determination to the Borrower and the other Lenders. Notwithstanding any provision of this Agreement to the contrary, unless and until the affected Lender shall have given notice to the Borrower and the other Lenders that the circumstances giving rise to such determination no longer apply: (i) with respect to any Interest Periods thereafter commencing, interest on the Revolving Credit Loans or Term Loans bearing interest at the Adjusted Long Term Revolving Credit LIBOR, the Adjusted Short Term Revolving Credit LIBOR or the Adjusted Term Loan LIBOR, as applicable, (in any such case whichever one or more have been determined by the affected Lender to be unlawful) shall, unless the Borrower shall have selected a different Option which is then available, be computed and payable under the Base Rate Option; and (ii) on such date, if any, as shall be required by law, any Loans bearing interest at the Adjusted Long Term Revolving Credit LIBOR, the Adjusted Short Term Revolving Credit LIBOR, the Adjusted Term Loan LIBOR or any Bid Rate Loan to which the Bid Rate Margin applies then outstanding shall be automatically converted to the Base Rate Option, and the Borrower shall pay to the affected Lender the accrued and unpaid interest on such Loans to (but not including) the date of such conversion at the applicable interest rate or rates in effect for such Loans prior to such conversion. 2.6 FEES. 2.6a LONG TERM REVOLVING CREDIT FACILITY. The Borrower agrees to pay to the Lenders, on a pro rata basis, beginning on March 31, 2002, and continuing quarterly in arrears thereafter on the last day of each December, March, June and September during the term hereof to and including the Long Term Revolving Credit Termination Date, a Long Term Revolving Credit Facility Fee calculated at the applicable Long Term Revolving Credit Facility Fee Percentage, on the daily (computed at the opening of business) average amount of the Long Term Revolving Credit Commitment for the quarter then ending; PROVIDED, however, the first payment under this Subsection 2.6a shall be for the actual number of days elapsed from and including the Closing Date to and including March 31, 2002, and the last payment under this - 43 - Subsection 2.6a shall be only for the actual number of days elapsed from the last quarterly payment date to and including the Long Term Revolving Credit Termination Date. The applicable Long Term Revolving Credit Facility Fee Percentage shall be adjusted automatically, from time to time, effective upon each change in the Senior Ratings. 2.6b SHORT TERM REVOLVING CREDIT FACILITY. The Borrower agrees to pay to the Lenders, on a pro rata basis, beginning on March 31, 2002, and continuing quarterly in arrears thereafter on the last day of each December, March, June and September during the term hereof to and including the Short Term Revolving Credit Termination Date, a Short Term Revolving Credit Facility Fee calculated at the applicable Short Term Revolving Credit Facility Fee Percentage, on the daily (computed at the opening of business) average amount of the Short Term Revolving Credit Commitment for the quarter then ending; PROVIDED, however, the first payment under this Subsection 2.6b shall be for the actual number of days elapsed from and including the Closing Date to and including March 31, 2002, and the last payment under this Subsection 2.6b shall be only for the actual number of days elapsed from the last quarterly payment date to and including the Short Term Revolving Credit Termination Date. The applicable Short Term Revolving Credit Facility Fee Percentage shall be adjusted automatically, from time to time, effective upon each change in the Senior Ratings. 2.6c UTILIZATION FEE. The Borrower agrees to pay to the Agent for the pro rata benefit of all of the Lenders a fee (the "Utilization Fee") (i) equal to 0.125% per annum on the aggregate amount of the sum of all outstanding Revolving Credit Loans, Bid Rate Loans, Swingline Loans, plus Letters of Credit Outstanding (computed on the basis of the actual number of days elapsed using a year of 360 days) for each date that the aggregate amount of the sum of all outstanding Revolving Credit Loans, Bid Rate Loans, Swingline Loans, plus Letters of Credit Outstanding exceeds an amount equal to thirty-three percent (33%) of the Commitments, but is less than sixty-six percent (66%) of the Commitments, and (ii) equal to 0.25% per annum on the aggregate amount of the sum of all outstanding Revolving Credit Loans, Bid Rate Loans, Swingline Loans, plus Letters of Credit Outstanding (computed on the basis of the actual number of days elapsed using a year of 360 days) for each date that the aggregate amount of the sum of all outstanding Revolving Credit Loans, Bid Rate Loans, Swingline Loans, plus Letters of Credit Outstanding exceeds an amount equal to sixty-six percent (66%) of the Commitments. The Utilization Fee shall be payable quarterly in arrears on the last day of each September, December, March and June during the term hereof and on the Long Term Revolving Credit Termination Date, with the first such payment due March 31, 2002 and shall be calculated for the period from and including the Closing Date to but excluding March 31, 2002. 2.6d AGENT'S FEE. The Borrower shall pay to the Agent for its own account the Agent's Fee in the amounts and at such times as set forth in the Agent's Letter. The Agent's Fee shall be retained by the Agent for its own account. 2.6e CLOSING FEE. The Borrower agrees to pay to the Agent, on behalf of each Lender, on the Closing Date, the Closing Fee payable to each such Lender. 2.6f LETTER OF CREDIT FEE AND FRONTING FEE. The Borrower shall pay to the Agent, from time to time, for the benefit of the Lenders, the Letter of Credit Fee as set forth in - 44 - Subsection 2.16b. The Borrower shall pay to the Agent, from time to time, for its sole account, the Fronting Fee as set forth in Subsection 2.16b. 2.7 CALCULATION OF INTEREST AND CERTAIN FEES. The calculation of the amount of interest due and owing to each Lender shall be made by each Lender and shall be evidenced by such Lender posting the amount of interest due under such Lender's Revolving Credit Loans, Term Loans, Bid Rate Loans, Swingline Loans and Letter of Credit Borrowings to the Loan Account established by such Lender pursuant to Section 2.13. The Facility Fees and the Utilization Fees shall be calculated on the basis of a 360 day year and actual number of days elapsed. The calculation of the amount of the Facility Fees due and owing to each Lender shall be made by each Lender and shall be evidenced by posting such amount due under the Loan Account established by such Lender pursuant to Section 2.13. The calculation of the amount of the Utilization Fees due and owing to each Lender shall be made by the Agent with notice thereof to each of the Lenders and shall be evidenced by posting such amount due under the Loan Account established by each Lender pursuant to Section 2.13. The calculation of the amount of the Letter of Credit Fees due and owing to each Lender shall be made by the Agent with notice thereof to each of the Lenders and shall be evidenced by posting such amount due under the Loan Account established by each Lender pursuant to Section 2.13. The calculation of the amount of the Fronting Fees due and owing to the Agent shall be made by the Agent with notice thereof to the Borrower and shall be evidenced by posting such amount due under the Loan Account established by the Agent pursuant to Section 2.13. 2.8 EXTENSION OF SHORT TERM REVOLVING CREDIT TERMINATION DATE. 2.8a REQUESTS; APPROVAL BY ALL LENDERS OR SUPERMAJORITY LENDERS; OPTIONAL CONVERSION TO TERM LOANS FOR NON-AGREEING LENDERS. (i) No earlier than forty-five (45) days and no later than thirty (30) days prior to the then applicable Short Term Revolving Credit Termination Date, the Borrower may request a 364-day extension of the Short Term Revolving Credit Termination Date by written notice to the Agent. Agent shall promptly notify the Lenders of such request. No later than twenty (20) days prior to the then applicable Short Term Revolving Credit Termination Date, each Lender shall respond to the Agent in writing as to whether or not it agrees to the Borrower's request for such extension; provided, however, that the failure of any Lender to respond with such time period shall not in any manner constitute an agreement by such Lenders to extend the Short Term Revolving Credit Termination Date and shall be deemed a notice of an election not to extend the then applicable Short Term Revolving Credit Termination Date. (ii) If all Lenders elect in writing to extend the then applicable Short Term Revolving Credit Termination Date, the Agent shall so notify the Lenders and the Borrower promptly, that such Short Term Revolving Credit Termination Date shall be extended for an additional period of 364 days. Borrower hereby agrees to execute such amendments and modifications to the Loan Documents, prior to the extension of the Short Term Revolving Credit Termination Date, as Agent shall reasonably request to evidence and govern the extension of such date. - 45 - (iii) In the event that Lenders with at least seventy-five percent (75%) of the Short Term Revolving Credit Commitments (the "Supermajority Lenders"), but less than all of the Lenders, shall agree in writing to an extension of the Short Term Revolving Credit Termination Date in accordance with this Section 2.8a(iii), the Agent shall so notify the Lenders and the Borrower promptly, but in no event earlier than twenty (20) days prior to the then applicable Short Term Revolving Credit Termination Date, and: (i) the Short Term Revolving Credit Commitments of those Lenders not agreeing in writing to an extension of the Short Term Revolving Credit Termination Date (the "Non-Agreeing Lenders") shall be terminated on the Short Term Revolving Credit Termination Date (without giving effect to the extension thereof) and all Short Term Revolving Credit Loans owing to the Non-Agreeing Lenders together with all interest thereon and costs and expenses related thereto shall be due and payable on such Short Term Revolving Credit Termination Date except to the extent that (A) the Borrower shall substitute for such Non-Agreeing Lender another financial institution pursuant to a duly executed Assignment and Assumption Agreement and in accordance with the terms and conditions of Section 9.6 (except that such financial institution may be assigned only the Short Term Revolving Credit Loan and Short Term Revolving Credit Commitment of such Non-Agreeing Lender), or (B) the Borrower has elected, by written notice received by the Agent no later than ten (10) days prior to the Short Term Revolving Credit Termination Date, to convert all or any portion of the Short Term Revolving Credit Loans of the Non-Agreeing Lenders to Term Loans in accordance with Section 2.1Bg and, to the extent that the less than the full aggregate amount of Short Term Revolving Credit Loans of the Lender are to be so converted, then the Borrower shall convert each and every Non-Agreeing Lender's Short Term Revolving Credit Loans on a PRO RATA basis, (ii) the Short Term Revolving Credit Commitments of the Lenders agreeing to an extension of the Short Term Revolving Credit Termination Date (the "Agreeing Lenders") shall be extended for an additional period of 364 days, and (iii) none of the Agreeing Lenders shall be required to increase its Short Term Revolving Credit Commitment. The Borrower hereby agrees to execute such amendments and modifications to the Loan Documents, prior to any extension of the Short Term Revolving Credit Termination Date, as Agent shall reasonably request to evidence and govern the extension of such date and the Term Loans, if any, arising under this Section 2.8. 2.8b FAILURE OF SUPERMAJORITY LENDERS TO EXTEND; OPTIONAL CONVERSION TO TERM LOAN. In the event that less than the Supermajority Lenders shall agree to an extension of the Short Term Revolving Credit Termination Date in accordance with Section 2.8a (iii), the Agent shall promptly so notify the Borrower and the Lenders, the Short Revolving Credit Commitments shall be terminated on the Short Term Revolving Credit Termination Date, and all Short Term Revolving Credit Loans, together with all interest thereon and costs and expenses related thereto, shall be due and payable on the Short Term Revolving Credit Termination Date, unless the Borrower has elected, by written notice received by the Agent no later than ten (10) days prior to the Short Term Revolving Credit Termination Date (which notice Agent shall promptly forward to the Lenders), to convert all or a portion of the Short Term Revolving Credit Loans outstanding on the Short Term Revolving Credit Termination Date to Term Loans in accordance with Section 2.1Bg. Term Loans advanced pursuant to this Section 2.8b shall be allocated pro rata among the Lenders based upon their respective Short Term Revolving Credit Commitment Percentage. Any failure of the Agent or any Lender to notify any party hereto that the Short Term Revolving - 46 - Credit Termination Date will not be extended shall not constitute a commitment or agreement of any nature to extend such date. 2.9 SUBSTITUTION OR REPLACEMENT OF A LENDER. The Borrower shall have the right (provided that at such time, no Event of Default and no Potential Default has occurred and is continuing), in its sole discretion, to either: (i) repay, (A) at any time if either no Loans are outstanding or if Loans bearing interest under the Base Rate Option are the only Loans outstanding, (B) subject to Section 2.11, upon three (3) days prior notice if the Loans outstanding include Revolving Credit Loans bearing interest under the LIBOR Option, the Bid Rate Loans or the Swingline Loans, the outstanding Loans of a Lender described in clause (x) or (y) of this Section 2.9 in whole, together with interest thereon and any other amount due such a Lender pursuant to the terms of this Agreement, and to terminate the Commitment of such a Lender; or (ii) seek a substitute lending institution or institutions (which may be one or more of the other Lenders) to purchase the Notes and assume the Loans, the Commitment and the other obligations of such a Lender under this Agreement, if any of the following conditions occur: (x) the obligation of a Lender to make Revolving Credit Loans which bear or are to bear interest under the LIBOR Option has been suspended pursuant to Subsection 2.5d; or (y) a Lender has responded negatively to a request for extension of the Short Term Revolving Credit Termination Date pursuant to Section 2.8. Any proposed substitute lending institution, which is not a Lender prior to the Borrower's selection thereof, must be acceptable to the Agent, whose consent shall not be unreasonably withheld, and the existing Lenders shall be given an option to increase these respective Commitments before any outside lending institution may purchase the Notes and assume the Loans, Commitments and other obligations of the Lender the subject of clauses (x) or (y) of this Section 2.9. 2.10 LOAN REPAYMENT. Each repayment of the Loans shall be in the minimum amount of $1,000,000, in the aggregate, or an integral multiple thereof (other than the Swingline Loans which shall be in the minimum amount of $10,000 and the Bid Rate Loans which shall be in the minimum amount of $5,000,000 or integral multiples of $1,000,000 for amounts in excess of $5,000,000), or such lesser amount as is actually outstanding thereunder. The Borrower, upon (i) oral or written notice to Agent by 11:00 A.M. (eastern time) on the day of the proposed repayment, in the case of Revolving Credit Loans or Term Loans bearing interest at the Base Rate or the Swingline Loans or (ii) three (3) Business Days' prior oral or written notice to the Agent, in the case of Bid Rate Loans or Revolving Credit Loans or Term Loans bearing interest at the Adjusted Long Term Revolving Credit LIBOR, the Adjusted Short Term Revolving Credit LIBOR or the Adjusted Term Loan LIBOR, followed immediately thereafter by the Borrower's written confirmation to the Agent of any oral notice, may repay the outstanding amount of the - 47 - Loans in whole or in part with accrued interest, fees, additional payments due pursuant to Section 2.11 hereof, if any, and other amounts then due and payable on the amount repaid to the date of such repayment. The Borrower may repay any Portion of the Revolving Credit Loans bearing interest at the Base Rate or the Swingline Loans without premium or penalty. All prepayments of the Bid Rate Loans or Revolving Credit Loans or Term Loans bearing interest at the LIBOR Option are subject to the terms of Section 2.11 hereof. In the event that principal payments are received on a day on which principal payments are due on Revolving Credit Loans, Term Loans, Bid Rate Loans and Swingline Loans the principal payments shall be applied: first, to repay in full outstanding Swingline Loans, if any; second, to repay in full the principal amount of the Revolving Credit Loans and Term Loans then due and payable, if any; and third, to repay in full the principal amount of the Bid Rate Loans then due and payable, if any. Any repayment of the Long Term Revolving Credit Loans shall increase, by the amount of that repayment, the unborrowed balance of the Long Term Revolving Credit Commitment; it being contemplated that the Borrower may repay and reborrow from time-to-time under the Long Term Revolving Credit Commitment until the Long Term Revolving Credit Termination Date. Any repayment of the Short Term Revolving Credit Loans shall increase, by the amount of that repayment, the unborrowed balance of the Short Term Revolving Credit Commitment; it being contemplated that the Borrower may repay and reborrow from time-to-time under the Short Term Revolving Credit Commitment until the Short Term Revolving Credit Termination Date. 2.11 ADDITIONAL PAYMENTS BY THE BORROWER. If (i) the Borrower shall fail to make any payment due hereunder on the due date thereof, (ii) the Borrower shall make a payment, prepayment or conversion of any LIBOR Portion of the Revolving Credit Loans or the Term Loans or any Bid Rate Loan on a day other than the last day of the applicable Interest Period, (iii) the Borrower shall convert any Portion to the Base Rate Option from another Option pursuant to Subsection 2.5d on a day other than the last day of the relevant Interest Period, or (iv) the Borrower shall fail on the date specified therefor to consummate any borrowing, conversion or renewal after giving a request for a Disbursement or notice of conversion or renewal or Notice of Bid Rate Borrowing, and, as a result of any such action or inaction, a Lender reasonably incurs any losses and expenses which it would not have incurred but for such action or inaction, the Borrower shall pay such additional amounts as will compensate the affected Lender for such losses and expenses, including the cost of reemployment of any funds prepaid at rates lower than the cost to the affected Lender of such funds. Such losses and expenses, which the affected Lender shall exercise reasonable efforts to minimize, shall be specified in writing (setting forth, in reasonable detail, the basis of calculation) to the Borrower by the affected Lender, which writing shall be prima facie evidence of the amounts set forth therein, and such amounts shall be payable within thirty (30) days of demand therefor. 2.12 VOLUNTARY REDUCTION OF AVAILABILITY. At any time and from time to time upon no less than three (3) Business Days prior written notice to the Agent, the Borrower may terminate, in whole or in part, without penalty, the then unused portion of the Commitments, thereby causing a corresponding abatement of the applicable Facility Fee. Each such reduction - 48 - shall be in a minimum principal amount of $10,000,000 or in integral multiples thereof. The applicable Facility Fee shall cease to accrue with respect to any unused portion of the commitments so terminated on either (i) the date five (5) Business Days after receipt of such notice or (ii) the date so designated in the written notice if such written notice is given to the Agent more than five (5) Business Days prior to the effective date of such termination. Notice of termination once given shall be irrevocable and the portion of the Commitments so terminated shall not be available for borrowing once such notice has been given under the terms hereof. The Agent shall promptly notify each Lender of its pro rata share of such terminated unused portion and the date of each such termination. On the effective date for the reduction of the Long Term Revolving Credit Commitment, the sum of (i) Letters of Credit Outstanding, PLUS (ii) Long Term Revolving Credit Loans outstanding hereunder, PLUS (iii) Bid Rate Loans and Swingline Loans outstanding hereunder and allocated to the Long Term Revolving Credit Commitment may not exceed the Long Term Revolving Credit Commitment as so reduced. On the effective date for the reduction of the Short Term Revolving Credit Commitment, the sum of (i) the Short Term Revolving Credit Loans outstanding hereunder, PLUS (ii) Bid Rate Loans and Swingline Loans outstanding hereunder and allocated to the Short Term Revolving Credit Commitment may not exceed the Short Term Revolving Credit Commitment as so reduced. 2.13 LOAN ACCOUNT. Each Lender and the Agent shall open and maintain on its books a Loan Account in the name of the Borrower with respect to Disbursements made, the Letters of Credit Outstanding, repayments, prepayments, conversion to Term Loans, the computation and payment of interest and the Fees and the computation of other amounts due and sums paid and payable to such Lender or Agent pursuant to this Article II. Such Loan Account shall be prima facie evidence as to the amount at any time due to such Lender or Agent from the Borrower pursuant to this Article II; PROVIDED, however, that the failure of a Lender to make notations, or to make accurate notations, on its Loan Account including without limitation notations with respect to interest and Fees shall not limit, expand or otherwise affect any obligations of the Borrower hereunder. 2.14 PAYMENT FROM ACCOUNTS MAINTAINED BY BORROWER. In the event that any payment of principal, interest, Reimbursement Obligation, Letter of Credit Borrowing, Fee or any other amount due to the Lenders or the Agent under the Agreement, the Notes or the other Loan Documents is not paid when due, the Agent is hereby authorized to effect such payment by debiting any demand deposit account of the Borrower maintained with the Agent (excluding however any special purpose fiduciary accounts, which are designated as such at the time of their creation, and mandated by applicable statutes, regulations or rules) and distributing such payment to the party to whom such amounts are due. This right of debiting accounts of the Borrower is in addition to any right of set-off accorded the Lenders or the Agent hereunder or by operation of law. 2.15 TIME, PLACE AND MANNER OF PAYMENTS. All payments to be made by the Borrower under the Notes (other than those provided for in Sections 2.5 and 2.11 hereof), and of all fees and any other amounts due hereunder shall be made at the principal office of the Agent. The Agent will promptly pay each such payment received to each Lender or its order. All payments due a Lender by reason of Sections 2.5 or 2.11 hereof shall be paid at the principal office of the Lender which invoices the Borrower for such payment. All payments to be made by - 49 - the Borrower under this Agreement shall be paid in immediately available funds no later than 12:00 Noon (eastern time) on the date such payment is due. Notwithstanding anything herein to the contrary, (i) the Agent's Fee, (ii) the Fronting Fee, and (iii) any interest paid with respect to any Loan or any unreimbursed draw on the Letter of Credit to the extent a Lender has not been required to honor or has not honored its funding obligation with respect thereto shall be solely for the account of the Agent. 2.16 LETTER OF CREDIT SUB-FACILITY. 2.16a ISSUANCE OF LETTERS OF CREDIT. The Borrower may request the issuance of a letter of credit (each a "Letter of Credit") by delivering to the Agent a completed application and agreement for letters of credit in such form as the Agent may specify from time to time by no later than 10:00 A.M., Pittsburgh, Pennsylvania time, at least five (5) business Days, or such shorter period as may be agreed to by the Agent, in advance of the proposed date of issuance. Each Letter of Credit shall be denominated in Dollars. Subject to the terms and conditions hereof and in reliance on the agreements of the other Lenders set forth in this Section 2.16, the Agent will issue a Letter of Credit provided that each Letter of Credit shall (A) have a maximum maturity of one year from the date of issuance, and (B) in no event expire later than ten (10) Business Days prior to the Long Term Revolving Credit Termination Date and providing that in no event shall the aggregate amount of Letters of Credit Outstanding exceed, at any one time, $50,000,000. The amount of Letters of Credit Outstanding at any time shall reduce the maximum amount otherwise available for Long Term Revolving Credit Loans under the Long Term Revolving Credit Commitments. No Letters of Credit may be issued hereunder to the extent that such issuance would cause the sum of (i) the Letters of Credit Outstanding PLUS (ii) the aggregate amount of Long Term Revolving Credit Loans outstanding to exceed the aggregate amount of Long Term Revolving Credit Commitments then in effect. 2.16b LETTER OF CREDIT FEES. The Borrower shall pay to the Agent for the ratable account of the Lenders a fee (the "Letter of Credit Fee") equal to the Applicable Long Term Revolving Credit LIBOR Margin for Long Term Revolving Credit Loans (computed on the basis of a year of 360 days and actual days elapsed), which fees shall be computed on the daily average amount of the Letters of Credit Outstanding and shall be payable quarterly in arrears commencing with the last Business Day of each March, June, September and December following issuance of each Letter of Credit. The Borrower shall also pay to the Agent for the Agent's sole account (i) one-eighth of one percent (.125%) per annum of the amount of any Letters of Credit Outstanding (the "Fronting Fee") quarterly in arrears, and (ii) as incurred the Agent's then current customary fees and administrative expenses payable with respect to the Letters of Credit as the Agent may generally charge or incur from time to time in connection with the issuance, maintenance, modification (if any), assignment or transfer (if any), negotiation, and administration of Letters of Credit. 2.16c LETTER OF CREDIT FEES UPON DEFAULT. (A) Upon the occurrence of an Event of Default, and during the continuance of such Event of Default, upon notice from the Agent (acting upon the instructions of the Required Lenders) to the Borrower, or (B) upon the acceleration of the Bank Indebtedness for any reason hereunder, the Letter of Credit Fee shall be - 50 - automatically increased by two hundred (200) basis points (2%) per annum in excess of the applicable Letter of Credit Fee then in effect. 2.16d DISBURSEMENTS, REIMBURSEMENT. (A) Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Agent a participation in such Letter of Credit and each drawing thereunder in an amount equal to such Lender's Long Term Revolving Credit Commitment Percentage of the maximum amount available to be drawn under such Letter of Credit and the amount of such drawing, respectively. (B) In the event of any request for a drawing under a Letter of Credit by the beneficiary or transferee thereof, the Agent will promptly notify the Borrower of the amount of such drawing and the date such payment shall be made. The Borrower shall reimburse (such obligation to reimburse the Agent shall sometimes be referred to as a "Reimbursement Obligation") the Agent for any amount paid by the Agent under any Letter of Credit (each such date of a payment by the Agent under a Letter of Credit, a "Drawing Date") in an amount equal to the amount so paid by the Agent. If the Agent gives the Borrower notice of the presentation of, and payment date of, a drawing under a Letter of Credit at or before 11:00 A.M., Pittsburgh, Pennsylvania time, on the Drawing Date, such Reimbursement Obligation shall be paid prior to 3:00 P.M., Pittsburgh, Pennsylvania time, on such Drawing Date; and if the Agent gives the Borrower notice of the presentation of, and payment date of, a drawing under a Letter of Credit after 11:00 A.M., Pittsburgh, Pennsylvania time, on a Drawing Date, such Reimbursement Obligation shall be paid prior to 12:00 noon, Pittsburgh, Pennsylvania time, on the Business Day following the Drawing Date. In the event the Borrower fails to reimburse the Agent for the full amount of any drawing under any Letter of Credit by 12:00 noon, Pittsburgh, Pennsylvania time, on the date the payment of such Reimbursement Obligation is due hereunder, the Agent will promptly notify each Lender thereof, and the Borrower shall be deemed to have requested that Long Term Revolving Credit Loans be made by the Lenders under the Base Rate Option to be disbursed on the Drawing Date under such Letter of Credit, subject to the amount of the unutilized portion of the Long Term Revolving Credit Commitments (without giving effect to outstanding Letters of Credit) and subject to the conditions set forth in Section 6.1 other than any notice requirements. Any notice given by the Agent pursuant to this Subsection 2.16d(B) may be oral if immediately confirmed in writing; PROVIDED that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice. (C) Each Lender shall upon any notice pursuant to Subsection 2.16d(B) make available to the Agent an amount in immediately available funds equal to its Long Term Revolving Credit Commitment Percentage of the amount of the drawing, whereupon the participating Lenders shall (subject to Subsection 2.16d(D)) each be deemed to have made a Long Term Revolving Credit Loan under the Base Rate Option to the Borrower in that amount. If any Lender so notified fails to make available to the Agent for the account of the Agent the amount of such Lender's Long Term Revolving Credit Commitment Percentage of such amount by no later than 2:00 P.M., Pittsburgh, Pennsylvania time on the Drawing Date, then interest shall accrue on such Lender's obligation to make such payment, from the Drawing Date to the date on which such Lender makes such payment (i) at a rate per annum equal to the Federal Funds - 51 - Effective Rate during the first three days following the Drawing Date and (ii) at a rate per annum equal to the rate applicable to Long Term Revolving Credit Loans under the Base Rate Option on and after the fourth day following the Drawing Date. The Agent will promptly give notice of the occurrence of the Drawing Date to each Lender, but failure of the Agent to give any such notice on the Drawing Date or in sufficient time to enable any Lender to effect such payment on such date shall not relieve such Lender from its obligation under this Subsection 2.16d(C). (D) With respect to any unreimbursed drawing that is not converted into Long Term Revolving Credit Loans under the Base Rate Option to the Borrower in whole or in part as contemplated by Subsection 2.16d(B), because of the timing of notice to the Borrower of the applicable Reimbursement Obligation or the Borrower's failure to satisfy the conditions set forth in Section 6.1 other than any notice requirements or for any other reason, the Borrower shall be deemed to have incurred from the Agent a Letter of Credit Borrowing in the amount of such drawing. Such Letter of Credit Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the rate per annum applicable to the Long Term Revolving Credit Loans under the Base Rate Option as adjusted to reflect the default rate provisions set forth in Subsection 2.4f. Each Lender's payment to the Agent pursuant to Subsection 2.16d(C) shall be deemed to be a payment in respect of its participation in such Letter of Credit Borrowing and shall constitute an LC Participation Advance from such Lender in satisfaction of its participation obligation under this Subsection 2.16d. The provisions of this Subsection (D) are solely for the benefit of the Agent, as issuer of the Letters of Credit, and shall not be deemed to excuse, waive or consent to an Event of Default under Section 7.1 arising from an unreimbursed drawing giving rise to an LC Participation Advance. 2.16e REPAYMENT OF LC PARTICIPATION ADVANCES. (A) Upon (and only upon) receipt by the Agent for its account of immediately available funds from the Borrower (i) in reimbursement of any payment made by the Agent under the Letter of Credit with respect to which any Lender has made a LC Participation Advance to the Agent, or (ii) in payment of interest on such a payment made by the Agent under such a Letter of Credit, the Agent will pay to each Lender, in the same funds as those received by the Agent, the amount of such Bank's Long Term Revolving Credit Commitment Percentage of such funds, except the Agent shall retain the amount of the Long Term Revolving Credit Commitment Percentage of such funds of any Lender that did not make an LC Participation Advance in respect of such payment by Agent. (B) If the Agent is required at any time to return to the Borrower, or to a trustee, receiver, liquidator, custodian, or any official in any proceeding described in Section 7.3, any portion of the payments made by the Borrower to the Agent pursuant to Subsection 2.16d(B) in reimbursement of a payment made under the Letter of Credit or interest or fee thereon, each Lender shall, on demand of the Agent, forthwith return to the Agent the amount of its Long Term Revolving Credit Commitment Percentage of any amounts so returned by the Agent plus interest thereon from the date such demand is made to the date such amounts are returned by such Lender to the Agent, at a rate per annum equal to the Federal Funds Effective Rate in effect from time to time. - 52 - 2.16f DOCUMENTATION. The Borrower agrees to be bound by the terms of the Agent's application and agreement for letters of credit and the Agent's written regulations and customary practices relating to letters of credit, though such interpretation may be different from the Borrower's own. In the event of a conflict between such application or agreement and this Agreement, this Agreement shall govern. It is understood and agreed that, except in the case of gross negligence or willful misconduct, the Agent shall not be liable for any error and/or mistakes, whether of omission or commission, in following the Borrower's instructions or those contained in the Letters of Credit or any modifications, amendments or supplements thereto. 2.16g DETERMINATIONS TO HONOR DRAWING REQUESTS. In determining whether to honor any request for drawing under any Letter of Credit by the beneficiary thereof, the Agent shall be responsible only to determine that the documents and certificates required to be delivered under such Letter of Credit have been delivered and that they comply on their face with the requirements of such Letter of Credit. 2.16h NATURE OF PARTICIPATION AND REIMBURSEMENT OBLIGATIONS. Each Lender's obligation in accordance with this Agreement to make the Long Term Revolving Credit Loans or Participation Advances, as contemplated by Subsection 2.16d, as a result of a drawing under an LC Letter of Credit, and the obligation of the Borrower to reimburse the Agent upon a draw under a Letter of Credit, shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Section 2.16 under all circumstances, including the following circumstances: (i) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Agent, the Borrower or any other Person for any reason whatsoever; (ii) the failure of the Borrower or any other Person to comply, in connection with a Letter of Credit Borrowing, with the conditions set forth in this Agreement for the making of a Long Term Revolving Credit Loan, it being acknowledged that such conditions are not required for the making of a Letter of Credit Borrowing and the obligation of the Lenders to make LC Participation Advances under Subsection 2.16d; provided, however the aggregate amount thereof shall in no event exceed the unutilized Long Term Revolving Credit Commitments; (iii) any lack of validity or enforceability of any Letter of Credit; (iv) the existence of any claim, set-off, defense or other right which the Borrower or any Lender may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such transferee may be acting), the Agent or any Lender or any other Person or, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between the Borrower and the beneficiary for which any Letter of Credit was procured); - 53 - (v) any draft, demand, certificate or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect even if the Agent has been notified thereof; (vi) payment by the Agent under any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit; (vii) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of the Borrower; (viii) any breach of this Agreement or any other Loan Document by any party thereto; (ix) the occurrence or continuance of any proceeding described in Section 7.3 with respect to the Borrower; (x) the fact that an Event of Default shall have occurred and be continuing; (xi) the fact that the Long Term Revolving Credit Termination Date shall have passed or this Agreement or the Long Term Revolving Credit Commitments hereunder shall have been terminated; and (xii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing. 2.16i INDEMNITY. In addition to amounts payable as provided in Section 9.15, the Borrower hereby agrees to protect, indemnify, pay and save harmless the Agent from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of counsel and allocated costs of internal counsel) which the Agent may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit, other than as a result of (A) gross negligence or willful misconduct of the Agent as determined by a final judgment of a court of competent jurisdiction or (B) subject to the following clause (ii), the wrongful dishonor by the Agent of a proper demand for payment made under any Letter of Credit, or (ii) the failure of the Agent to honor a drawing under any such Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto Governmental Authority (all such acts or omissions herein called "Governmental Acts"). 2.16j LIABILITY FOR ACTS AND OMISSIONS. As between the Borrower and the Agent, the Borrower assumes all risks of the acts and omission of, or misuse of the Letters of Credit by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, the Agent shall not be responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for an issuance of any such Letter of Credit, even if it should in fact prove to be in - 54 - any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) the failure of the beneficiary of any such Letter of Credit, or any other party to which such Letter of Credit may be transferred, to comply fully with any conditions required in order to draw upon such Letter of Credit so long as the documents presented in connection with such draw appear on their face to substantially comply with the terms and conditions of the relevant Letter of Credit; (iv) any claim of the Borrower against any beneficiary of any such Letter of Credit, or any transferee of such Letter of Credit, or any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any such transferee; (v) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (vi) errors in interpretation of technical terms; (vii) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (viii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (ix) any consequences arising from causes beyond the control of the Agent, including any Governmental Acts, and none of the above shall affect or impair, or prevent the vesting of, any of the Agent's rights or powers hereunder. Nothing in the preceding sentence shall relieve the Agent from liability for the Agent's gross negligence or willful misconduct in connection with actions or omissions described in such clauses (i) through (viii) of such sentence. 2.16k UNIFORM CUSTOMS. Except and to the extent inconsistent with the specific provisions hereof, this Agreement, each Letter of Credit hereunder and all transactions in connection therewith shall be interpreted, construed and enforced according to: (i) the "Uniform Customs and Practice for Documentary Credits" (1993 Revision), International Chamber of Commerce Publication No. 500 or the "International Standby Practices 1998", International Chamber of Commerce Publication No. 590, as applicable, and in each case subsequent revisions thereof, which shall supersede inconsistent provisions of applicable law to the extent not prohibited by applicable law and (ii) the laws of the jurisdiction in which the office of the Agent is located for purposes of issuing Letters of Credit hereunder including, without limitation, the Uniform Commercial Code, and excluding conflict of laws rules. 2.16l CONDITIONS PRECEDENT TO ISSUANCE OF LETTERS OF CREDIT. The obligation of the Agent to issue, or amend, any Letters of Credit hereunder is subject to the satisfaction of each of the following conditions precedent: (i) The Borrower shall have performed and complied, in all material respects, with all agreements and conditions herein required to be performed or complied with by it prior to any issuance of, or amendment of, a Letter of Credit and, at the time of such issuance of, or amendment of, a Letter of Credit, no Potential Default or Event of Default shall exist. (ii) The representations and warranties contained in Article III hereof shall be correct in all material respects (A) when made and (B) at the time of each issuance of, or amendment of, a Letter of Credit except for such representations and warranties which - 55 - relate solely to an earlier date (in which case such representations and warranties shall have been true and correct in all material respects as of such date); PROVIDED, however, that for purposes of clause (B) of this Subsection 2.16l, the representations and warranties contained in Section 3.6 shall be deemed updated if, and to the extent that, an action, suit, investigation, litigation or governmental investigation is set forth in any Form 10-K or 10-Q filed by the Borrower in respect of any period subsequent to the date hereof or in any Form 8-K filed by the Borrower subsequent to the date hereof. (iii) The Borrower shall have complied with the requirements of this Section 2.16l with respect to the requested Letter of Credit or amendment thereto. Each request for a Letter of Credit or amendment thereto shall constitute, as at the time made, a representation and warranty by the Borrower that the matters set forth in clause (i) and (ii) of this Subsections 2.16l are true and correct. ARTICLE III. REPRESENTATIONS AND WARRANTIES. To induce the Lenders and the Agent to enter into this Agreement and to make the Loans and issue the Letters of Credit herein provided for, the Borrower warrants to the Lenders and the Agent that: 3.1 CORPORATE EXISTENCE. The Borrower and each of its Significant Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its respective state of incorporation and it is duly qualified and in good standing as a foreign corporation authorized to do business in each jurisdiction where, because of the nature of its respective properties or businesses, such qualification is required or, if not so qualified or in good standing in any state, the lack of such qualification or good standing will not materially affect the Agent's or the Lender's ability to enforce this Agreement, the Notes or the other Loan Documents or will not have a Material Adverse Effect on the Borrower's or such Subsidiary's ability to carry on its business or the Borrower's ability to comply with this Agreement, the Notes or the other Loan Documents. 3.2 CORPORATE AUTHORITY. The Borrower is duly authorized to execute and deliver this Agreement, the Notes and the other Loan Documents to which it is or will become a party; all necessary corporate action to authorize the execution and delivery of this Agreement, the Notes and the other Loan Documents to which it is or will become a party has been properly taken; and it is and will continue to be duly authorized to borrow hereunder and to perform all of the other terms and provisions of this Agreement, the Notes and the other Loan Documents to which it is or will become a party. 3.3 ENFORCEABILITY. This Agreement and the Notes have each been, and each other Loan Document to which it will become a party will be, duly and validly executed and delivered by the Borrower and each constitutes or will constitute a valid and legally binding agreement of the Borrower enforceable in accordance with its terms. - 56 - 3.4 NO RESTRICTIONS. Neither the execution and delivery of this Agreement, the Notes and the other Loan Documents to which it is or will become a party, the consummation of the transactions herein contemplated nor compliance with the terms and provisions hereof or of the Notes, will conflict with or result in a breach of any of the terms, conditions or provisions of the certificate of incorporation or the by-laws of the Borrower or of any law or of any regulation, order, writ, injunction or decree of any court or governmental agency or of any agreement, indenture or other instrument to which the Borrower or any Significant Subsidiary is a party or by which any of them is bound or to which it is subject, or constitute a default thereunder or result in the creation or imposition of any Encumbrance of any nature whatsoever upon any of the property or assets of the Borrower pursuant to the terms of any agreement, indenture or other instrument, except those restrictions which, individually or in the aggregate, would not have a Material Adverse Effect upon the Borrower and its Consolidated Subsidiaries taken as a whole. 3.5 FINANCIAL STATEMENTS. The Borrower has furnished to the Lenders and the Agent the consolidated balance sheets and the related consolidated statements of income, shareholders' equity and changes in financial position of the Borrower as at Borrower's Fiscal Year ending December 31, 2000 and for its Fiscal Quarter ending September 30, 2001. All such financial statements, including the related notes, have been prepared in accordance with GAAP, except as expressly noted therein, and fairly present the consolidated financial position of the Borrower as at the dates thereof and the results and consolidated results of the operations and the changes in the financial position of the Borrower and its Consolidated Subsidiaries. Other than the Bank Indebtedness there were no material liabilities of the Borrower and its Consolidated Subsidiaries, taken as a whole, contingent or otherwise, not reflected in such financial statements. 3.6 ABSENCE OF LITIGATION. Except as set forth in the Forms 10-K, 10-Q, or 8-K most recently filed by the Borrower as of the Closing Date, respectively, there are no actions, suits, investigations, litigation or governmental proceedings pending or, to the Borrower's knowledge, threatened against the Borrower or any Consolidated Subsidiary or any of their respective properties, which would have a Material Adverse Effect on the Borrower and the Consolidated Subsidiaries taken as a whole, or which purport to affect the legality, validity or enforceability of this Agreement or the Notes. 3.7 TAX RETURNS AND PAYMENTS. As of the date hereof, the Borrower and its Subsidiaries have filed all Federal and other material tax returns required by law to be filed and have paid all material taxes, material assessments and other material governmental charges levied upon the Borrower and its Subsidiaries taken as a whole, or any of the respective properties, assets, income or franchises of the Borrower and its Subsidiaries taken as a whole, which are due and payable, other than those currently payable or deferrable without penalty or interest or those which are being contested in good faith and by appropriate proceedings diligently conducted. As of the date hereof, the charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of Federal, state and local income taxes for all fiscal periods are adequate, and the Borrower knows of no unpaid assessments for additional Federal, state or local income taxes for any such fiscal period or any basis therefor. 3.8 PENSION PLANS. Except as otherwise noted on Schedule 3.8, (i) each Plan has been and will be maintained and funded, in all material respects, in accordance with its terms and - 57 - with all provisions of ERISA and the Code applicable thereto; (ii) no Reportable Event has occurred and is continuing with respect to any Plan; (iii) no liability to PBGC has been incurred with respect to any Plan, other than for premiums due and payable; (iv) no Plan has been terminated, no proceedings have been instituted to terminate any Plan, and there exists no intent to terminate or institute proceedings to terminate any Plan, which has caused or would cause the Borrower or any ERISA Affiliate to incur any liability to the PBGC under Title IV of ERISA; (v) no withdrawal, either complete or partial, has occurred or commenced with respect to any multiemployer Plan, and there exists no intent to withdraw either completely or partially from any multiemployer Plan and (vi) the Borrower is not subject to any liability for unpaid penalties or taxes imposed under Section 502(i) of ERISA or Section 4975 of the Code and has not engaged in a prohibited transaction as defined in Section 406 of ERISA and Section 4975 of the Code. 3.9 COMPLIANCE WITH APPLICABLE LAWS. The Borrower and each Consolidated Subsidiary (i) is not in default with respect to any order, writ, injunction or decree of any court or of any Federal, state, municipal or other Governmental Authority; and (ii) is substantially complying with all applicable statutes and regulations of each Governmental Authority having jurisdiction over its activities; except for those orders, writs, injunctions, decrees, statutes and regulations, non-compliance with which would not have a Material Adverse Effect upon the Borrower and its Consolidated Subsidiaries taken as a whole. 3.10 ENVIRONMENTAL MATTERS. To the Borrower's knowledge, except as set forth on the Forms 10-K, 10-Q or 8-K most recently filed by the Borrower, the Borrower and its Subsidiaries are in compliance with all applicable Environmental Laws; except for matters which do not have a Material Adverse Effect on the financial condition of the Borrower and its Consolidated Subsidiaries taken as a whole. 3.11 GOVERNMENTAL APPROVAL. No order, authorization, consent, license, validation or approval of, or notice to, filing, recording, or registration with, any Governmental Authority, or exemption by any Governmental Authority, is required to authorize, or is required in connection with, (i) the execution, delivery and performance of this Agreement or the Notes or (ii) the legality, binding effect or enforceability of this Agreement or the Notes. 3.12 REGULATIONS T, U AND X. The Borrower is not engaged in the business of purchasing or selling Margin Stock or extending credit to others for the purpose of purchasing or carrying Margin Stock and no part of the proceeds of the Loans (and no obligation supported by a Letter of Credit) will be used to purchase or carry any Margin Stock or for any other purpose which would violate or be inconsistent with Regulations T, U or X. 3.13 INVESTMENT COMPANY ACT. The Borrower is not an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 3.14 PUBLIC UTILITY HOLDING COMPANY ACT. The Borrower is not a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding - 58 - company" or of a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. 3.15 DISCLOSURE. Neither this Agreement nor any other document, certificate or statement (financial or otherwise) furnished to the Lenders or the Agent by or on behalf of the Borrower pursuant to this Agreement contains any untrue statement of a material fact. There is no fact which materially and adversely affects or in the future may (so far as the Borrower now foresees) have a material adverse effect on the business, operations, affairs, condition, prospects, properties, assets or revenues of the Borrower and its Consolidated Subsidiaries, taken as a whole, which has not been set forth in this Agreement or in the other documents, certificates and statements (financial or otherwise) furnished to the Lenders or the Agent or otherwise disclosed in writing to the Lenders or the Agent by or on behalf of the Borrower prior to the Closing Date. 3.16. SOLVENCY. On the Closing Date, and on the date of each Disbursement, the Borrower is, or will be, Solvent. ARTICLE IV. AFFIRMATIVE COVENANTS. From the date hereof and thereafter until the termination of the Commitments and until all of the Bank Indebtedness is paid in full, the Borrower agrees that: 4.1 USE OF PROCEEDS. The proceeds of the Loans (and the proceeds of any obligations supported by a Letter of Credit) will be used by the Borrower and its Consolidated Subsidiaries for general corporate purposes and working capital purposes of the Borrower and its Consolidated Subsidiaries. 4.2 FURNISHING INFORMATION. The Borrower shall: (i) deliver to the Lenders, as soon as available but not later than forty-five (45) days after the last day of each of the first three Fiscal Quarters of each Fiscal Year, the Borrower's quarterly report to shareholders, if any, and its quarterly report on Form 10-Q as filed with the Securities and Exchange Commission and, within ninety (90) days after the end of each Fiscal Year, the Borrower's annual report to shareholders and its annual report on Form 10-K as filed with the Securities and Exchange Commission, in each case accompanied by a completed Compliance Certificate substantially in the form of Exhibit "H" attached hereto duly executed by an Authorized Officer stating that (A) such Authorized Officer has reviewed the terms of the Agreement and of the Notes and has made, or caused to be made under his supervision, a review of the transactions and condition of the Borrower during the accounting period covered by such financial statements and that such review has not disclosed the existence during such accounting period, and that the signer does not have knowledge of the existence as at the date of such Officer's Certificate, of any condition or event which constitutes, a Potential Default or an Event of Default or, if a Potential Default or an Event of Default does exist, a statement describing such a Potential Default or an Event of Default and the action the Borrower has taken or proposes to take with respect thereto and (B) the Borrower was in compliance with the covenants set forth in Sections 5.3 and 5.4 of this Agreement; - 59 - (ii) deliver to the Lenders promptly upon their becoming available, copies of all financial statements, reports, notices and information statements sent or made available generally by the Borrower to its security holders (including, without limitation, proxy materials) and copies of all other regular and periodic reports (including, without limitation, Form 8-K) filed by the Borrower with the Securities and Exchange Commission or any Governmental Authority succeeding to any of its functions, and of all press releases and other statements made available generally by the Borrower to the public concerning material developments in the business of the Borrower and any of its Subsidiaries taken as a whole; (iii) deliver to the Lenders, as soon as available but not later than forty-five (45) days after the last day of each of the first three Fiscal Quarters of each Fiscal Year, the financial statements of any Special Purpose Subsidiary as of the Fiscal Quarter most recently ended and a report on the outstanding funded balances as of the Fiscal Quarter most recently ended for any Securitization entered into by the Borrower or any Subsidiary of the Borrower, including any Special Purpose Subsidiary, and, within ninety (90) days after the end of each Fiscal Year, the financial statements of any Special Purpose Subsidiary as of the Fiscal year most recently ended and a report on the outstanding funded balances as of the Fiscal Year most recently ended for any Securitization entered into by the Borrower or any Subsidiary of the Borrower, including any Special Purpose Subsidiary, as of the Fiscal Year most recently ended, each in form and substance reasonably acceptable to the Agent; (iv) promptly after receipt thereof, by the Borrower or the administrator of any Plan, deliver to the Lenders a copy of any notice from the PBGC that the PBGC is instituting Termination Proceedings; (v) promptly and in any event within 30 days after the Borrower or the administrator of any Plan knows or has reason to know that any Reportable Event has occurred which would cause the PBGC to institute termination proceedings, if the liability of the Borrower to the PBGC would exceed five percent (5%) of the Consolidated Tangible Net Worth of the Borrower at the time of notice thereof, give notice thereof to the Lenders; (vi) promptly, but not later than five (5) Business Days, after any Authorized Officer obtains knowledge of the happening of any event which constitutes an Event of Default or a Potential Default, give written notice thereof to the Lenders; and (vii) promptly, deliver to the Lenders such other publicly available information and data with respect to the Borrower or any of its Subsidiaries as from time to time may be reasonably requested by any Lender. 4.3 VISITATION. The Borrower will permit the Lenders and the Lender's designated employees and agents to have access, at any time and from time to time, upon reasonable notice and during normal business hours at any reasonable time, to visit any of the properties of the Borrower, to examine and make copies of any of its books of record and account and such reports and returns as the Borrower may file with any Governmental Authority and discuss the Borrower's affairs and accounts with, and be advised about them, by any Authorized Officer. - 60 - 4.4 PRESERVATION OF EXISTENCE; QUALIFICATION. At its own cost and expense, the Borrower will do all things necessary to preserve and keep in full force and effect its and each of its Consolidated Subsidiaries' corporate existence and qualification under the laws of their respective states of incorporation and each state where, due to the nature of their respective activities or the ownership of their respective properties, qualification to do business is required except where (i) the lack of corporate existence of a Subsidiary or (ii) the failure to be so qualified would not have a Material Adverse Effect upon the Borrower and its Consolidated Subsidiaries taken as a whole or except as permitted by Sections 5.6 and 7.4. 4.5 COMPLIANCE WITH LAWS AND CONTRACTS. The Borrower shall and shall cause each Subsidiary to comply with all applicable Governmental Rules (including, but not limited to, Environmental Laws), except where failure to comply would not have a Material Adverse Effect on the Borrower and its Consolidated Subsidiaries taken as a whole. 4.6 PAYMENT OF TAXES AND OTHER LIABILITIES. The Borrower shall and shall cause each Subsidiary to promptly pay and discharge all obligations, accounts and liabilities to which it is subject or which are asserted against it and which obligations, accounts and liabilities are, to the Borrower and the Subsidiaries taken as a whole, material, including but not limited to all taxes, assessments and governmental charges and levies upon it or upon any of its income, profits, or property prior to the date on which penalties attach thereto; provided, however, that for purposes of this Agreement, neither the Borrower nor the relevant Subsidiary shall be required to pay any tax, assessment, charge or levy (i) the payment of which is being contested in good faith by appropriate and lawful proceedings diligently conducted and (ii) as to which the Borrower shall have set aside on its books reserves for such claims as are determined to be adequate pursuant to the accounting procedures employed by the Borrower, but only to the extent that failure to discharge any such liabilities would not result in any additional liability which would have a Material Adverse Effect upon the Borrower and its Consolidated Subsidiaries taken as a whole. 4.7 INSURANCE. The Borrower will keep and maintain, and cause each Subsidiary to keep and maintain, insurance with responsible insurance companies, satisfactory to the Agent, on such of their respective properties, in such amounts and against such risks as is customarily maintained by similar businesses similarly situated and owning, leasing or operating similar properties. The Borrower may satisfy the requirements of the preceding sentence with self insurance and deductibles consistent with customary and prudent industry standards. The Borrower will furnish to the Agent at the Closing and together with the annual reports delivered pursuant to Subsection 4.2(ii) hereof, a certificate of an Authorized Officer of the Borrower certifying that such insurance is in force, is adequate in nature and amount and complies with the Borrower's and each Subsidiary's obligations under this Section 4.7. 4.8 MAINTENANCE OF PROPERTIES. The Borrower shall and shall cause its Significant Subsidiaries to maintain, preserve, protect and keep their respective properties in good repair, working order and condition (ordinary wear and tear excepted), and make all necessary and proper repairs, renewals and replacements so that their business carried on in connection therewith may be properly and advantageously conducted at all times, except where the failure to - 61 - maintain, preserve, protect or keep such properties would not have a Material Adverse Effect upon the Borrower and its Consolidated Subsidiaries taken as a whole. 4.9 PLANS AND BENEFIT ARRANGEMENTS. The Borrower shall, and shall cause each ERISA Affiliate to, comply with ERISA, the Code and all other applicable laws which are applicable to Plans, except where the failure to do so, alone or in conjunction with any other failure to do so, would not have a Material Adverse Effect upon the Borrower and its Consolidated Subsidiaries taken as a whole. 4.10 SENIOR DEBT STATUS. The Bank Indebtedness will rank at least PARI PASSU in priority of payment with all other Indebtedness of the Borrower, except Indebtedness of the Borrower which may be secured by Encumbrances pursuant to Section 5.2. 4.11 OWNERSHIP OF OPERATING SUBSIDIARIES. The Borrower shall at all times, directly or indirectly through one or more wholly-owned Subsidiaries, be the legal and beneficial owner of, and shall retain all voting rights relating to, all of the issued and outstanding capital stock of ATI Funding, TILLC, OREMET, ALC, TDY Industries and any Special Purpose Subsidiary. ARTICLE V. NEGATIVE COVENANTS. From the date hereof and thereafter until the Commitments are terminated and until the Bank Indebtedness is paid in full, the Borrower agrees that: 5.1 INDEBTEDNESS. The Borrower shall not and shall not permit any Consolidated Subsidiary to create, incur, assume, cause, permit or suffer to exist or remain outstanding, any Consolidated Indebtedness except for: (i) Bank Indebtedness; (ii) Existing Indebtedness set forth on Schedule 5.1 hereof; provided, however, the Indebtedness set forth on Schedule 5.1 outstanding under the Existing Bank Credit Agreements must be repaid in full on the Closing Date; and (iii) Additional Indebtedness (including additional Purchase Money Indebtedness) PROVIDED such additional Indebtedness, when added to the Borrower's then outstanding Consolidated Indebtedness, would not cause the Borrower to be in violation of Sections 5.2, 5.3 and 5.4 hereof; and PROVIDED FURTHER the additional Indebtedness permitted pursuant to this item (iii) which is incurred by the Borrower's Consolidated Subsidiaries shall not exceed, in the aggregate at any one time outstanding, $150,000,000. In addition, Indebtedness incurred pursuant to item (iii) may not contain covenants (other than covenants relating to collateral, if any, securing such Indebtedness as such security interests are permitted hereby) more restrictive than or in addition to those contained herein. - 62 - 5.2 ENCUMBRANCES. The Borrower shall not and shall not permit any Consolidated Subsidiary to create, assume, incur, permit or suffer to exist upon any of their respective assets and properties, whether tangible or intangible and whether now owned or in existence or hereafter acquired or created and wherever located, any Encumbrance except for: (i) Permitted Encumbrances (including without limitation those listed on Schedule 5.2), (ii) Additional Encumbrances which secure additional Purchase Money Indebtedness permitted pursuant to Section 5.1, (iii) Additional Encumbrances on assets acquired by the Borrower or any Consolidated Subsidiary, PROVIDED (A) those Encumbrances existed prior to the acquisition of such assets by the Borrower or any Consolidated Subsidiary and (B) the lien thereof is limited to the assets then being acquired and additions or accessions to such assets and identifiable proceeds thereof; and (iv) Additional Encumbrances which secure Indebtedness of the Borrower and its Consolidated Subsidiaries, PROVIDED however Encumbrances permitted pursuant to this item (iv), shall not, at any time, secure Indebtedness which exceeds in the aggregate $70,000,000 at any one time outstanding. 5.3 LEVERAGE RATIO. At no time shall the Borrower's Consolidated Total Indebtedness be more than sixty percent (60%) of its Consolidated Total Capitalization. 5.4 INTEREST COVERAGE RATIO. (i) At no time prior to or on December 31, 2002 shall the ratio of the Borrower's Consolidated EBITDA for the four (4) most recently completed Fiscal Quarters, taken as a single accounting period, to its Consolidated Interest Expense for the four (4) most recently completed Fiscal Quarters, taken as a single accounting period, be less than 3.0 to 1.0; and (ii) at no time after December 31, 2002 shall the ratio of the Borrower's Consolidated EBITDA for the four (4) most recently completed Fiscal Quarters, taken as a single accounting period, to its Consolidated Interest Expense for the four (4) most recently completed Fiscal Quarters, taken as a single accounting period, be less than 3.5 to 1.0. 5.5 SALES OF ASSETS. The Borrower shall not nor shall it permit any Consolidated Subsidiary to enter into any arrangement, direct or indirect, pursuant to which the Borrower or any Consolidated Subsidiary shall sell or otherwise transfer or dispose of any property, real, personal or mixed, whether now owned or hereafter acquired, except (i) sales, transfers or dispositions in the ordinary course of business, (ii) the sale, transfer or other disposition of the stock or assets set forth on Schedule 5.5, (iii) sales, transfers or dispositions not in the ordinary course of business provided that the aggregate proceeds of all such sales, transfers and dispositions permitted by this item (iii) shall not exceed (A) from the date hereof until November 30, 2006, thirty percent (30%) of the Borrower's Consolidated Total Assets as of September 30, 2001, and (B) beginning with the first day of the Borrower's Fiscal Year 2002-2003 and thereafter, more than ten (10%) of the Borrower's Consolidated Total Assets as of the beginning of the Fiscal Year in question, and (iv) any absolute sale or assignment of Receivables in - 63 - connection with a Securitization with a Special Purpose Subsidiary pursuant to a Securitization Contract, provided that (A) such transaction, except for the customary exceptions, is nonrecourse to the Borrower or any of its Subsidiaries (including the Special Purpose Subsidiary), (B) such Securitization is classified as "off balance sheet" for financial reporting purposes in accordance with GAAP with respect to the Borrower on a Consolidated basis, and (C) the only assets of the Special Purpose Subsidiary are Receivables acquired from the Borrower or its other Subsidiaries pursuant to a Securitization Contract. 5.6 MERGER. The Borrower shall not merge or consolidate with any other Person except a merger or consolidation in which each of the following conditions is satisfied: (i) the Borrower is the surviving Person; (ii) no Event of Default or Potential Default occurs as a result of such a merger or consolidation; and (iii) the Borrower's Consolidated Shareholder's Equity immediately after such merger or consolidation is not less than the Borrower's Consolidated Shareholder's Equity immediately prior to such merger or consolidation. 5.7 RESTRICTION ON DIVIDENDS. The Borrower shall not and shall not permit any Subsidiary to enter into any agreement which restricts in any manner dividends or distributions to the Borrower from any Subsidiary; provided however this restriction shall not apply to Subsidiaries, the assets of which, in the aggregate, constitute less than five percent (5%) of the Borrower's Consolidated Total Assets as of any date of determination. 5.8 RESTRICTION ON GUARANTEES. The Borrower shall not and shall not permit any Subsidiary to enter into an agreement pursuant to which any such Subsidiary guarantees either the payment of Indebtedness incurred by the Borrower or the performance of the Borrower's contractual obligations. 5.9 REGULATION T, U AND X COMPLIANCE. The Borrower shall not and shall not permit any Subsidiary to use the proceeds of a Loan (or the proceeds of any obligation supported by a Letter of Credit) to purchase or carry Margin Stock or otherwise act so as to cause any Lender, in extending credit hereunder, to be in contravention of Regulations T, U or X. 5.10 ERISA. The Borrower shall not and shall not permit any ERISA Affiliate to permit any Plan to: (i) engage in any "prohibited transaction", as such term is defined in Section 406 of ERISA and Section 4975 of the Code; (ii) incur any "accumulated funding deficiency", as such term is defined in Section 302 of ERISA, whether or not waived; - 64 - (iii) be terminated in a manner which could result in liability to the PBGC under Title IV of ERISA or the imposition of a lien on the property of the Borrower or any ERISA Affiliate pursuant to Section 4068 of ERISA; or (iv) partially or completely withdraw from any Plan, which withdrawal shall subject the Borrower or any ERISA Affiliate to multiemployer withdrawal liability pursuant to Section 4201 of ERISA. ARTICLE VI. CONDITIONS PRECEDENT TO ALL DISBURSEMENTS. 6.1 ALL DISBURSEMENTS. The obligation of the Lenders to make any Disbursements (or the obligation of the Lenders to convert any of the then outstanding Short Term Revolving Credit Loans to the Term Loan on the Short Term Revolving Credit Termination Date) is subject to the satisfaction of each of the following conditions precedent: 6.1a NO DEFAULT. The Borrower shall have performed and complied, in all material respects, with all agreements and conditions herein required to be performed or complied with by it prior to any Disbursements (or the conversion to the Term Loan) and, at the time of such Disbursements (or the conversion to the Term Loan), no Potential Default or Event of Default shall exist. 6.1b REPRESENTATIONS CORRECT. The representations and warranties contained in Article III hereof shall be correct in all material respects (i) when made and (ii) at the time of each Disbursement (or the conversion to the Term Loan) except for such representations and warranties which relate solely to an earlier date (in which case such representations and warranties shall have been true and correct in all material respects as of such date). 6.1c DISBURSEMENT REQUIREMENTS. The Borrower shall have complied with the requirements of Section 2.1, Section 2.2, Section 2.3 or 2.16, as appropriate, with respect to the requested Disbursements (or the conversion to the Term Loan). Each request for Disbursement (or the conversion to the Term Loan) shall constitute, as at the time made, a representation and warranty by the Borrower that the matters set forth in Subsections 6.1a and 6.1b above are true and correct. 6.2 CONDITIONS PRECEDENT TO THE INITIAL DISBURSEMENT UNDER THE COMMITMENT. The obligation of the Lenders to make the initial Disbursements is subject to the satisfaction of each of the following conditions precedent in addition to the applicable conditions precedent set forth in Section 6.1 above: (i) Receipt by the Agent on behalf of each Lender of a counterpart original of this Agreement executed by the other Lenders and the Borrower. (ii) Receipt by the Agent on behalf of each Lender of a Long Term Revolving Credit Note and a Short Term Revolving Credit Note, substantially in the form of Exhibits "A-1" - 65 - and "A-2" attached hereto, respectively, made payable to such Lender in the amount of such Lender's Long Term Revolving Credit Commitment and Short Term Revolving Credit Commitment, as applicable, and otherwise properly completed and executed by the Borrower. (iii) Receipt by the Agent on behalf of each Lender of a Bid Rate Note substantially in the form of Exhibits "B-1" and "B-2" attached hereto, made payable to such Lender and otherwise properly completed and executed by the Borrower. (iv) Receipt by the Agent on behalf of each Swingline Lender of a Swingline Note substantially in the form of Exhibit "E" attached hereto, made payable to such Swingline Lender and otherwise properly completed and executed by the Borrower. (v) Receipt by the Agent of a copy of a certified copy (certified by the appropriate governmental official) of the Certificate of Incorporation, the Borrower and each of ALC, TDY Industries and Oremet which certifications are dated not more than 45 days prior to the Closing. (vi) Receipt by the Agent of a certificate, duly certified as of the date of the Closing by the secretary or assistant secretary of the Borrower and each of ALC, TDY Industries and Oremet, as applicable, as to (A) the By-Laws of the Borrower and each of ALC, TDY Industries and Oremet in effect as of the Closing, (B) the resolutions of the Borrower's Board of Directors authorizing the borrowings hereunder and the execution and delivery of this Agreement, the Notes, and all documents supplemental hereto and (C) the names of the officers of the Borrower authorized to sign this Agreement, the Notes, and all supplemental documentation and which contains a true signature of each such officer. (vii) Receipt by the Agent of good standing certificates and no lien certificates for the Borrower and each of ALC, TDY Industries and Oremet from the Secretary of State of the States of Delaware, Pennsylvania, California and Oregon, respectively, each dated not more than 45 days prior to the Closing. (viii) Receipt by the Agent of the certificate of the Borrower required pursuant to Section 4.7 of the Agreement. (ix) Receipt by the Agent of a written payoff letter concerning the termination and payoff of the Existing Credit Agreement. (x) Receipt by the Agent of written instructions addressed to the Agent and executed by an Authorized Officer of the Borrower relating to the initial Disbursement including satisfaction of any outstanding amounts due under the Existing Credit Agreement. (xi) Receipt by the Agent for the benefit of the Lenders, the Closing Fees payable to the Lenders. - 66 - (xii) Receipt by the Agent on behalf of each Lender of a signed favorable opinion of Jon D. Walton, Senior Vice President and Chief Legal and Administrative Officer, substantially in the form of Exhibit "I" attached hereto. (xiii) No event or condition shall have occurred, and be continuing, which would have a Material Adverse Effect upon the Borrower and its Consolidated Subsidiaries taken as a whole. (xiv) Receipt by the Agent of such other documents, certificates and opinions as reasonably requested by the Agent and its counsel. ARTICLE VII. DEFAULTS. Each of the events or occurrences described in Sections 7.1 to and including 7.10 below shall constitute an "Event of Default" hereunder. 7.1 PAYMENT DEFAULT . Default in the payment of (A) interest on any Loan, any Facility Fee, any Utilization Fee, any Letter of Credit Fee, any Fronting Fee, any Agent's Fee or any other amount due hereunder (other than principal), and continuance of any such nonpayment of such interest, any Facility Fee, any Utilization Fee, any Letter of Credit Fee, any Fronting Fee, any Agent's Fee or other amount (other than principal) for five (5) Business Days, or (B) principal of any Loan or Letter of Credit Borrowing when due. 7.2 NONPAYMENT OF OTHER INDEBTEDNESS. The Borrower or any Subsidiary shall fail to pay any Indebtedness of the Borrower or such Subsidiary, as the case may be, other than the Bank Indebtedness, in an aggregate amount as to the Borrower and its Subsidiaries collectively of $20,000,000 or more, as and when the same shall become due, or the occurrence of any default under any agreement or instrument under or pursuant to which such Indebtedness is incurred or issued and continuance of such default beyond the period of grace, if any, allowed with respect thereto; provided however, that the foregoing provisions shall not apply to any such default or defaults by one or more Subsidiaries during the term hereof where the aggregate assets of such Subsidiaries do not exceed five percent (5%) of the Borrower's Consolidated Total Assets. 7.3 INSOLVENCY. 7.3a INVOLUNTARY PROCEEDINGS. A proceeding shall have been instituted in a court having jurisdiction seeking a decree or order for relief in respect of the Borrower or a Subsidiary in an involuntary case under the Federal bankruptcy laws, or any other similar applicable Federal or state law, now or hereafter in effect, or for the appointment of a receiver, liquidator, trustee, sequestrator or similar official for the Borrower or any of its Subsidiaries or for a substantial part of its or their property, or for the winding up or liquidation of its or their affairs, and the same (i) is not controverted with a period fifteen (15) days or (ii) shall remain undismissed or unstayed and in effect for a period of sixty (60) days; provided however, that the foregoing provisions shall not apply to any such event or events commenced by or against one or more Subsidiaries - 67 - during the term hereof where the aggregate assets of such Subsidiaries do not exceed five percent (5%) of the Borrower's Consolidated Total Assets. 7.3b VOLUNTARY PROCEEDINGS. The Borrower or a Subsidiary shall institute proceedings to be adjudicated a voluntary bankrupt, or any of them shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization under the Federal bankruptcy laws, or any other similar applicable Federal or state law now or hereinafter in effect, or shall consent to the filing of any such petition or shall consent to the appointment of a receiver, liquidator, trustee, sequestrator or similar official for the Borrower or any of its Subsidiaries or for a substantial part of its or their property, or shall make an assignment for the benefit of creditors, or shall admit in writing its or their inability to pay its or their debts generally as they become due, or corporate action shall be taken by the Borrower or any of its Subsidiaries in furtherance of any of the aforesaid purposes; provided however, that the foregoing provisions shall not apply to any such event or events commenced by or against one or more Subsidiaries during the term hereof where the aggregate assets of such Subsidiaries do not exceed five percent (5%) of the Borrower's Consolidated Total Assets. 7.4 TERMINATION OF EXISTENCE. The Borrower shall terminate its existence or cease to exist or any Subsidiary (other than any Subsidiary the capital of which is less than $10,000,000 on the date hereof) shall terminate its existence or cease to exist except by reason of a merger or liquidation into or a consolidation with the Borrower or a Consolidated Subsidiary; provided however, that the foregoing provisions shall not apply to any such terminations or cessations of existence by one or more Subsidiaries during the term hereof where the aggregate assets of such Subsidiaries do not exceed five percent (5%) of the Borrower's Consolidated Total Assets. 7.5 FAILURE TO COMPLY WITH COVENANTS. 7.5a FAILURE TO COMPLY WITH ARTICLE V COVENANTS AND CERTAIN ARTICLE IV COVENANTS. The Borrower shall default in the observance or performance of Section 4.11 or of any covenant contained in Article V. 7.5b FAILURE TO COMPLY WITH OTHER COVENANTS. The Borrower shall default in the due performance or observance of any other covenant, condition or provision set forth herein and such default shall not be remedied for a period of thirty (30) days after such default is known to any Authorized Officer of the Borrower or notice thereof has been given to the Borrower by the Agent. 7.6 MISREPRESENTATION. Any representation or warranty made by the Borrower herein proves to have been untrue in any material respect as of the date when made, or any certificate or other document furnished by the Borrower to the Agent pursuant to the provisions hereof proves to have been untrue in any material respect on the date as of which the facts set forth therein are stated or certified. 7.7 ADVERSE JUDGMENTS, ETC. Entry or filing of any one or more judgments, writs or warrants of attachment or of any similar process in an aggregate amount, as to the Borrower and - 68 - its Subsidiaries collectively, of $10,000,000 or more in excess of any third-party insurance protecting against such liability against the Borrower and its Subsidiaries or against any of their respective properties and failure of the Borrower or its Subsidiaries to vacate, pay, bond, stay or contest in good faith such judgments, writs, warrants of attachment or other process within a period of thirty (30) days; provided however, the foregoing provisions shall not apply to any such judgment or judgments against one or more Subsidiaries during the term hereof where the aggregate assets of such Subsidiaries do not exceed five percent (5%) of the Borrower's Consolidated Total Assets. 7.8 INVALIDITY OR UNENFORCEABILITY. This Agreement, the Notes or any other Loan Document ceases to be valid and binding on the Borrower or is declared null and void, or the validity or enforceability thereof is contested by the Borrower or the Borrower denies it has any or further liability under this Agreement, any Note or under the other Loan Documents to which it is a party. 7.9 ERISA. (i) A trustee shall be appointed by a court of competent jurisdiction to administer any Plan of the Borrower or any ERISA Affiliate; (ii) the PBGC shall terminate any Plan of the Borrower or any ERISA Affiliate or appoint a trustee to administer any such Plan; or (iii) the Borrower or any ERISA Affiliate shall incur any liability to the PBGC in connection with any Plan, which, in any such case, likely would have a Material Adverse Effect on the Borrower and the Consolidated Subsidiaries, taken as a whole. 7.10 CHANGE OF CONTROL. 7.10a CHANGE OF BENEFICIAL OWNERSHIP. Any Person or group of Persons (within the meaning of Sections 13(a) or 14(a) of the Securities and Exchange Act of 1934), other than the then current officers or directors of the Borrower or an underwriter which obtains such ownership as a result of effecting a firm committed underwriting of a secondary offering of the Borrower's voting stock on behalf of such officers or directors, shall have acquired beneficial ownership of (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) thirty percent (30%) or more of the voting stock of the Borrower. For purposes of calculating the acquisition of beneficial ownership, any transfer of voting stock of the Borrower by any Person or group of Persons to a Permitted Transferee shall be deemed not to constitute a conveyance and acquisition of such stock. A "Permitted Transferee" includes any of the following with respect to any then current officer or director of the Borrower: (i) spouse; (ii) lineal descendants of all generations and spouses of such lineal descendants; (iii) a charitable corporation or trust established by such then current officer or director or by a person described in (i) or (ii) preceding; (iv) a trust (or in the case of a minor, a custodial account under a Uniform Gifts or Transfers to Minors Act) of which the beneficiar(ies) are one or more Persons described in (i), (ii) or (iii) preceding; and (v) an executor or administrator upon the death of such then current officer or director or any Person described in (i) or (ii) preceding. 7.10b CHANGE OF COMPOSITION OF BOARD OF DIRECTORS. Within a period of twelve (12) consecutive calendar months individuals who were directors of the Borrower on the first day of such period shall cease to constitute a majority of the board of directors of the Borrower. - 69 - 7.11 CONSEQUENCES OF AN EVENT OF DEFAULT. If one or more of the Events of Default occur then (a) if such Event of Default is set forth in Sections 7.3 or 7.4, the Commitments shall automatically terminate and the Bank Indebtedness then outstanding shall become immediately due and payable, without necessity of demand, presentation, protest, notice of dishonor or notice of default; or (b) if such Event of Default is set forth in any of the remaining Sections of this Article VII, then the Agent, at the request of the Required Lenders, and without notice to the Borrower, shall declare the Borrower in default hereunder, and upon such declaration, shall, at the request of the Required Lenders, terminate the Commitment and/or declare the Bank Indebtedness then outstanding immediately due and payable, without necessity of any further demand, presentation, protest, notice of dishonor or further notice of default, whereupon such Bank Indebtedness shall be immediately due and payable. 7.12 REMEDIES UPON DEFAULT. Upon the termination of the Commitments and acceleration of the Notes following the occurrence of an Event of Default, the Lenders shall, unless such termination and acceleration subsequently have been rescinded, have the full panoply of rights and remedies granted to them under this Agreement and all those rights and remedies granted by law to creditors, and the Agent, at the direction of the Required Lenders, shall proceed to protect and enforce the Lenders' rights by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein, in the Notes or in any of the other Loan Documents, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law. No right, power or remedy conferred by this Agreement, in the Notes, or by any other Loan Document, upon the Agent or the Lenders shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. No exercise of any one right or remedy shall be deemed a waiver of other rights or remedies. The rights and remedies of the Agent and the Lenders specified herein are for the sole and exclusive benefit, use and protection of the Agent and the Lenders, and the Agent and the Lenders shall be entitled, but shall have no duty or obligation, to exercise or to refrain from exercising any right or remedy reserved to the Agent or the Lenders hereunder. 7.13 CASH COLLATERAL. Upon the occurrence of any Event of Default or upon the declaration by the Required Lenders of any other Event of Default and the termination of the Commitments, the obligation of the Agent to issue or amend Letters of Credit shall terminate, and, in addition to the other amounts payable hereunder with respect to Letters of Credit, an amount equal to the maximum amount which may at any time be drawn under the Letters of Credit then outstanding (whether or not any beneficiary of such Letters of Credit shall have presented, or shall be entitled at such time to present, the drafts or other documents required to draw under such Letters of Credit) shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by the Borrower; PROVIDED that the foregoing shall not affect in any way the obligations of the Lenders to purchase from the Agent participations in the unreimbursed amount of any drawings under the Letters of Credit issued by it as provided in Subsection 2.16d. So long as the Letters of Credit shall remain outstanding, any amounts declared due pursuant to this Section with respect to the outstanding Letters of Credit when received by the Agent shall be deposited and held by the Agent in an interest bearing account denominated in the name of the Agent for the benefit of the Agent and the Lenders over which the Agent shall have sole - 70 - dominion and control of withdrawals (the "Cash Collateral Account") as cash collateral for the obligation of the Borrower to reimburse the Agent in the event of any drawing under the Letters of Credit and upon any drawing under such Letters of Credit in respect of which the Agent has deposited in the Cash Collateral Account any amounts declared due pursuant to this Section, the Agent shall apply such amounts held by the Agent to reimburse the Agent for the amount of such drawing. In the event that any Letter of Credit in respect of which the Agent has deposited in the Cash Collateral Account any amounts described above is cancelled or expires or in the event of any reduction in the maximum amount available at any time for drawing under any of the Letters of Credit outstanding, the Agent shall apply the amount then in the Cash Collateral Account designated to reimburse the Agent for any drawings under the Letters of Credit issued by it less the maximum amount available at any time for drawing under the Letters of Credit remaining outstanding immediately after such cancellation, expiration or reduction, if any, to the payment in full of the outstanding Bank Indebtedness, and second, to the payment of any excess, to the Borrower. ARTICLE VIII. AGREEMENT AMONG LENDERS. 8.1 APPOINTMENT AND GRANT OF AUTHORITY. Each of the Lenders hereby appoints PNC Bank, National Association, and PNC Bank, National Association hereby agrees to act as, the Agent under this Agreement, the Notes and the other Loan Documents. As such Agent, PNC Bank, National Association shall have and may exercise such powers under this Agreement as are specifically delegated to the Agent, by the terms hereto, of the Notes or of the other Loan Documents, together with such other powers as are incidental thereto. Without limiting the foregoing, the Agent, on behalf of the Lenders, is authorized to execute all of the Loan Documents (other than this Agreement) and to accept all of the Loan Documents and all other agreements, documents or instruments reasonably required to carry out the intent of the parties to this Agreement. 8.2 NON-RELIANCE ON AGENT. Each Lender agrees that it has, independently and without reliance on the Agent, based on such documents and information as it has deemed appropriate, made its own credit analysis and evaluation of the Borrower and its operations and decision to enter into this Agreement and that it will, independently and without reliance upon the Agent, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement. Except as otherwise provided herein, the Agent shall have no duty to keep the Lenders informed as to the performance or observance by the Borrower of this Agreement or any other document or instrument referred to or provided for herein or to inspect the properties or books of the Borrower. The Agent, in the absence of gross negligence or willful misconduct, shall not be liable to any Lender for its failure to relay or furnish to the Lender any information. The preceding provisions of this Section 8.2 to the contrary notwithstanding, the Agent shall notify each of the Lenders as soon as practicable after it receives a notice of an Event of Default from the Borrower. - 71 - 8.3 RESPONSIBILITY OF AGENT AND OTHER MATTERS. 8.3a MINISTERIAL NATURE OF DUTIES. As among the Lenders and the Agent, the Agent shall have no duties or responsibilities except those expressly set forth in this Agreement, the Notes or in the other Loan Documents, and those duties and responsibilities shall be subject to the limitations and qualifications set forth in this Article VIII. The duties of the Agent shall be ministerial and administrative in nature. 8.3b LIMITATION OF LIABILITY. As among the Lenders and the Agent, neither the Agent nor any of its directors, officers, employees or agents shall be liable for any action taken or omitted (whether or not such action taken or omitted is within or without the Agent's responsibilities and duties expressly set forth in this Agreement) under or in connection with this Agreement or any other instrument or document in connection herewith except for gross negligence or willful misconduct. Without limiting the foregoing, neither the Agent nor any of its directors, officers or employees shall be responsible for, or have any duty to examine (i) the genuineness, execution, validity, effectiveness, enforceability, value or sufficiency of (A) this Agreement, the Notes or any of the other Loan Documents or (B) any other document or instrument furnished pursuant to or in connection with this Agreement, (ii) the collectibility of any amounts owed by the Borrower to the Lenders, (iii) the truthfulness of any recitals, statements, representations or warranties made to the Agent or the Lenders in connection with this Agreement, (iv) any failure of any party to this Agreement to receive any communication sent, including any telegram, teletype, facsimile transmission or telephone message or any writing, application, notice, report, statement, certificate, resolution, request, order, consent letter or other instrument or paper or communication entrusted to the mails or to a delivery service, or (v) the assets, liabilities, financial condition, results of operations or business, or creditworthiness of the Borrower. 8.3c RELIANCE. The Agent shall be entitled to act, and shall be fully protected in acting upon, any telegram, teletype, facsimile transmission or any writing, application, notice, report, statement, certificate, resolution, request, order, consent, letter or other instrument, paper or communication believed by the Agent in good faith to be genuine and correct and to have been signed or sent or made by a proper Person. The Agent may consult counsel and shall be entitled to act, and shall be fully protected in any action taken in good faith, in accordance with advice given by counsel. The Agent may employ agents and attorneys-in-fact and shall not be liable for the default or misconduct of any such agents or attorneys-in-fact selected by the Agent with reasonable care. The Agent shall not be bound to ascertain or inquire as to the performance or observance of any of the terms, provisions or conditions of this Agreement or any of the other Loan Documents on the part of the Borrower or any other party thereto. 8.4 ACTION ON INSTRUCTIONS. The Agent shall be required to act and shall be fully protected in so acting and shall be entitled to refrain from acting, and shall be fully protected in refraining from so acting, under this Agreement, the Notes, the other Loan Documents or any other instrument or document executed or delivered in connection herewith or therewith, in accordance with written instructions from the Required Lenders or, in the case of the matters set forth in items (A) through (G) of Section 9.1, from all of the Lenders. - 72 - 8.5 INDEMNIFICATION. To the extent the Borrower does not reimburse and save harmless the Agent according to the terms hereof for and from all costs, expenses and disbursements in connection herewith, such costs, expenses and disbursements shall be borne by the Lenders ratably in accordance with their respective Commitment Percentages. Each Lender hereby agrees on such basis (i) to reimburse the Agent for such Lender's pro rata share of all such reasonable costs, expenses and disbursements on request and (ii) to the extent of each such Lender's pro rata share, to indemnify and save harmless the Agent against and from any and all losses, obligations, penalties, actions, judgments and suits and other costs, expenses and disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Agent, other than as a consequence of gross negligence or willful misconduct on the part of the Agent, arising out of or in connection with (i) this Agreement, the Notes, the other Loan Documents or any other agreement, instrument or document executed or delivered in connection herewith or therewith, or (ii) any action taken at the request of the Required Lenders or all of the Lenders hereunder, as the case may be, including without limitation the reasonable costs, expenses and disbursements in connection with defending themselves against any claim or liability, or answering any subpoena or other process related to the exercise or performance of any of their powers or duties under this Agreement, the other Loan Documents, or any of the other agreements, instruments or documents executed or delivered in connection herewith or the taking or refraining from any action under or in connection with any of the foregoing. 8.6 AGENT'S RIGHTS AS A LENDER. With respect to the Commitment of the Agent as a Lender hereunder, and any Loans and Letters of Credit Outstanding of the Agent under this Agreement, the other Loan Documents and any other agreements, instruments and documents delivered pursuant hereto and any other amounts due to the Agent under this Agreement, the Agent shall have the same rights and powers, duties and obligations under this Agreement, the Notes, the other Loan Documents or other agreement, instrument or document as any Lender and may exercise such rights and powers and shall perform such duties and fulfill such obligations as though it were not the Agent. The Agent may accept deposits from, lend money to, issue letters of credit and generally engage, and continue to engage, in any kind of business with the Borrower as if it were not the Agent. 8.7 PAYMENT TO LENDERS. Promptly after receipt from the Borrower of any principal repayment of the Loans, the Letter of Credit Borrowings, interest due on the Loans and the Letter of Credit Borrowings, any Facility Fees, any Utilization Fees or any Letter of Credit Fees owing to the Lenders or other amounts due under any of the Loan Documents (except for such amounts which are payable for the sole account of any Lender or the Agent), the Agent shall distribute to each Lender that Lender's share of the funds so received. 8.8 PRO RATA SHARING. All interest and principal payments on the Revolving Credit Loans, the Letter of Credit Borrowings, all Facility Fees, all Utilization Fees, and all Letter of Credit Fees are to be divided pro rata among the Lenders in accordance with their respective Long Term Revolving Credit Commitment Percentages or Short Term Revolving Credit Commitment Percentages, as applicable; provided that the Agent shall retain for its account any sum due a Lender that has failed to advance its pro rata share of any Loans or LC Participation Advance with respect to the amount not advanced. All interest and principal payments on the - 73 - Term Loans are to be divided pro rata among the Lenders in accordance with their respective pro rata share of the outstanding Term Loans at the time of disbursement. Any sums obtained from the Borrower by any Lender by reason of the exercise of its rights of set-off, banker's lien or in collection shall be shared (net of costs) pro rata among the Lenders on the basis of the principal amount of Loans outstanding. Nothing in this Section 8.8 shall be deemed to require the sharing among the Lenders of collections specifically relating to, or of the proceeds of any collateral securing, any other Indebtedness of the Borrower to any Lender. 8.9 SUCCESSOR AGENT. 8.9a RESIGNATION OF AGENT. The Agent may resign as Agent hereunder by giving ninety (90) days' prior written notice to the Lenders and the Borrower. If such notice shall be given, the Lenders shall appoint a successor agent for the Lenders, during such ninety (90) day period, which successor agent shall be reasonably satisfactory to the Borrower, to serve as agent hereunder and under the several Loan Documents. If at the end of such ninety (90) day period, the Lenders have not appointed such a successor, the Agent shall use reasonable commercial efforts to procure a successor reasonably satisfactory to the Lenders and the Borrower, to serve as agent for the Lenders hereunder and under the several Loan Documents. Any such successor agent shall succeed to the rights, powers and duties of the Agent. 8.9b RIGHTS OF THE FORMER AGENT. Upon the appointment of such successor agent or upon the expiration of such ninety (90) day period (or any longer period to which the Agent has agreed), the former Agent's rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement. After any retiring Agent's resignation hereunder as Agent hereunder, the provisions of this Article VIII shall inure to the benefit of such retiring Agent as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. 8.10 SYNDICATION AGENTS. None of the Lenders identified herein as a "Syndication Agent" shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders identified as Syndication Agents in deciding to enter into this Agreement or in taking action hereunder. ARTICLE IX. GENERAL PROVISIONS. 9.1 AMENDMENTS AND WAIVERS. Subject to the remaining provisions of this Section 9.1, the Agent, the Lenders and the Borrower may, from time to time, enter into amendments, extensions, renewals, modifications, supplements and replacements to and of this Agreement, the Notes or the other Loan Documents and the Lenders or the Required Lenders, as the case may be, may, from time to time, waive compliance with a provision thereof. No amendment, renewal, modification, extension, supplement, replacement or waiver of any provision of the Agreement, the Notes or the other Loan Documents or consent to any departure therefrom by the Borrower shall be effective unless it is in writing and is signed by the Required Lenders (or the Agent with the written consent of the Required Lenders), and then such waiver or consent shall - 74 - be effective only for the specific instance and for the specific purpose for which it is given; PROVIDED, however, that no amendment, renewal, modification, waiver or consent, unless in writing and signed by all of the Lenders (or the Agent with the written consent of all of the Lenders), shall do any of the following: (A) increase the Commitment of any Lender or subject any Lender to any additional obligations hereunder; (B) except for changes permitted by Section 2.12 or Section 9.18 hereof or changes made pursuant to an Assignment and Assumption Agreement, change any Lender's Commitment Percentage or the aggregate or individual unpaid principal amount of the Notes, or forgive the payment of the principal or interest payable on the Notes; (C) waive an Event of Default in the payment of principal and/or interest due hereunder and under any of the Notes; (D) decrease the interest rate relating to the Loans or the Letter of Credit Borrowings; (E) postpone any date fixed for any payment of principal of or interest on the Loans or the Letter of Credit Borrowings, the Facility Fees, the Utilization Fees, the Letter of Credit Fees or any other obligations of the Borrower set forth in Article II payable to all of the Lenders pursuant hereto; (F) reduce the Long Term Revolving Credit Facility Fees, the Short Term Revolving Credit Facility Fees, the Utilization Fees or the Letter of Credit Fees; or (G) amend the definition of the term "Required Lenders" or amend or waive the provisions of Section 8.8 or this Section 9.1. Any such supplemental agreement shall apply equally to the Borrower and each of the Lenders and shall be binding upon the Borrower, the Lenders, the Agent and all future holders of the Notes. In the case of any waiver, the Borrower, the Lenders and the Agent shall be restored to their former positions and rights, and any Event of Default waived shall be deemed to be cured and not continuing, but no such waiver shall extend to any subsequent or other Event of Default, or impair any right consequent thereon. - 75 - 9.2 EXPENSES. The Borrower shall pay: (i) All reasonable costs and expenses of the Agent (including without limitation the reasonable fees and disbursements of the Agent's special counsel, Tucker Arensberg, P.C.), incurred in connection with the preparation, negotiation, execution and delivery of this Agreement and the other Loan Documents and any and all other documents and instruments prepared in connection herewith, including but not limited to all amendments, extensions, modifications, replacements, waivers, consents and other documents and instruments prepared or entered into from time to time; (ii) All reasonable costs and expenses of the Agent and the Lenders (including without limitation the reasonable fees and disbursements of the Agent's and the Lenders' counsels, which may be in house counsel) in connection with (A) the enforcement of this Agreement and the other Loan Documents arising pursuant to a breach by the Borrower of any of the terms, conditions, representations, warranties or covenants of any Loan Document to which it is a party, and (B) defending or prosecuting any actions, suits or proceedings relating to any of the Loan Documents. All of such costs and expenses shall be payable by the Borrower to the Lenders or the Agent, as the case may be, upon demand or as otherwise agreed upon by the Lenders or the Agent and the Borrower, and shall constitute Bank Indebtedness under this Agreement. The Borrower further agrees to pay, and save the Agent and the Lenders harmless from any and all liability for, any stamp or other taxes which may be payable with respect to the execution or delivery of this Agreement, the issuance of the Notes or of any Letters of Credit. The Borrower's obligation to pay such costs and expenses shall survive the termination of this Agreement and the repayment of the Bank Indebtedness. 9.3 NOTICES. Any notice, request, demand, direction or other communication to be given to or made upon any party hereto under any provision of this Agreement and any financial report to be given pursuant to Section 4.2 hereof (each, for purposes of this Section 9.3 only, a "NOTICE") shall be given or made by telephone or in writing (which includes by means of electronic transmission (i.e., "E-MAIL") or facsimile transmission or by setting forth such Notice on a site on the World Wide Web (a "WEBSITE POSTING") if Notice of such Website Posting (including the information necessary to access such site) has previously been delivered to the applicable parties hereto by another means set forth in this Section 9.3) in accordance with this Section 9.3, PROVIDED, that any financial report to be given pursuant to Section 4.2 hereof shall be made in writing. Any such Notice must be delivered to the applicable parties hereto at the addresses and numbers set forth under their respective names on SCHEDULE 9.3 hereof or in accordance with any subsequent unrevoked Notice from any such party that is given in accordance with this Section 9.3. Any Notice shall be effective: (a) In the case of hand-delivery, when delivered; - 76 - (b) If given by mail, four days after such Notice is deposited with the United States Postal Service, with first-class postage prepaid, return receipt requested; (c) In the case of a telephonic Notice, when a party is contacted by telephone, if delivery of such telephonic Notice is confirmed no later than the next Business Day by hand delivery, a facsimile or electronic transmission, a Website Posting or an overnight courier delivery of a confirmatory Notice (received at or before noon on such next Business Day); (d) In the case of electronic transmission, when actually received; (f) In the case of a Website Posting, upon delivery of a Notice of such posting (including the information necessary to access such site) by another means set forth in this Section 9.3, and (g) If given by any other means (including by overnight courier), when actually received. Any Lender giving a Notice to the Borrower shall concurrently send a copy thereof to the Agent, and the Agent shall promptly notify the other Lenders of its receipt of such Notice. All such notices shall be effective three (3) days after mailing, the date of electronic transmission or when received, whichever is earlier. The Borrower, the Lenders and the Agent may each change the address for service of notice upon it by a notice in writing to the other parties hereto. 9.4 TAX WITHHOLDING. Each Lender or assignee or participant of a Lender that is not incorporated under the Laws of the United States of America or a state thereof (and, upon the written request of the Agent, each other Lender or assignee or participant of a Lender) agrees that it will deliver to each of the Borrower and the Agent two (2) duly completed appropriate valid Withholding Certificates (as defined under sec. 1.1441-1(c)(16) of the Income Tax Regulations ("Regulations")) certifying its status (i.e., U.S. or foreign person) and, if appropriate, making a claim of reduced, or exemption from withholding tax on the basis of an income tax treaty or an exemption provided by the Internal Revenue Code. Such delivery may be made by electronic transmission as described in sec. 1.1441-1(e)(4)(iv) of the Regulations if the Agent establishes an electronic delivery system. The term "Withholding Certificate" means a Form W-9; a Form W-8BEN; a Form W-8ECI; a Form W-8IMY and the related statements and certifications as required under sec. 1.1441-1(e)(3) of the Regulations; a statement described in sec. 1.871-14(c)(2)(v) of the Regulations; or any other certificates under the Code or Regulations that certify or establish the status of a payee or beneficial owner as a U.S. or foreign person. Each Lender, assignee or participant required to deliver to the Borrower and the Agent a valid Withholding Certificate pursuant to the preceding sentences shall deliver such valid Withholding Certificate as follows: (A) each Lender which is a party hereto on the Closing Date shall deliver such valid Withholding Certificate at least five (5) Business Days prior to the first date on which any interest or fees are payable by the Borrower hereunder for the account of such Lender; and (B) each assignee or participant shall deliver such valid Withholding Certificate at least five (5) Business Days before the effective date of such assignment or participation (unless the Agent in its sole discretion shall permit such assignee or participant to deliver such Withholding Certificate less than five (5) Business Days before such date in which case it shall be due on the - 77 - date specified by the Agent). Each Lender, assignee or participant which so delivers a valid Withholding Certificate further undertakes to deliver to each of the Borrower and the Agent two (2) additional copies of such Withholding Certificate (or a successor form) on or before the date that such Withholding Certificate expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent Withholding Certificate so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by the Borrower or the Agent. Notwithstanding the submission of a Withholding Certificate claiming a reduced rate of, or exemption from, U.S. withholding tax, the Agent shall be entitled to withhold United States federal income taxes at the full 30% withholding rate if in its reasonable judgment it is required to do so under the due diligence requirements imposed upon a withholding agent under sec. 1.1441-7(b) of the Regulations. Further, the Agent is indemnified under sec. 2.1461-1(e) of the Regulations against any claims and demands of any Lender or assignee or participant of a Lender for the amount of any tax it deducts and withholds in accordance with regulations under sec. 1441 of the Internal Revenue Code. 9.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the Borrower, the Agent and the Lenders and their respective successors and assigns, and shall inure to the benefit of the Borrower, the Agent and the Lender and the successors and assigns of the Agent and the Lender. 9.6 ASSIGNMENTS AND PARTICIPATIONS. 9.6a ASSIGNMENTS. Subject to the remaining provisions of this Subsection 9.6a, any Lender (a "Transferor Lender"), at any time, in the ordinary course of its commercial banking business and in accordance with applicable law, may sell to one or more financial institutions (individually a "Purchasing Lender"), a portion or all of its rights and obligations under this Agreement and the Notes then held by it, pursuant to an Assignment and Assumption Agreement substantially in the form of Exhibit "J" executed by the Transferor Lender, such Purchasing Lender and the Agent; subject, however to the following requirements: (i) Each such assignment must be in a minimum amount of $5,000,000, or, if in excess thereof, in integral multiples of $1,000,000, unless such Lender's Commitment is less than $5,000,000, in which case such assignment shall be in the full amount of such Lender's Commitment; (ii) During the first ninety (90) days following the Closing Date, each assignment made shall become effective only on a date which coincides with the expiration date of any LIBOR Interest Period then in effect, unless the Agent agrees to waive this provision; (iii) The Borrower and the Agent shall consent to each such assignment, which consent shall not be unreasonably withheld (provided, that the Borrower shall not be deemed to have unreasonably withheld its consent if the proposed assignee is a "foreign person" as defined in sec. 1.1441-1(c)(2) of the Regulations); and (iv) The Transferor Lender shall pay to the Agent a $3,500 service fee for each such transfer at the time of each such transfer; - 78 - PROVIDED, however (x) the restrictions set forth in items (i) and (iii) above shall not apply in the case of an assignment by a Lender to an Affiliate of such Lender (other than an Affiliate of such Lender which is also a "foreign person" as defined in sec. 1.1441-1(c)(2) of the Regulations) and (y) the restriction set forth in item (i) above shall not apply in the case of any assignment by any Transferor Lender upon the occurrence and during the continuation of an Event of Default; and PROVIDED FURTHER, that upon the occurrence and during the continuance of an Event of Default the consent of the Borrower to any assignment is not required. Upon the execution, delivery, acceptance and recording of any such Assignment and Assumption Agreement, from and after the Transfer Effective Date determined pursuant to such Assignment and Assumption Agreement, all parties hereto agree that (a) the Purchasing Lender thereunder shall be a party hereto as a Lender and, to the extent provided in such Assignment and Assumption Agreement, shall have the rights and obligations of a Lender hereunder with a Commitment as set forth therein, and (b) the Transferor Lender thereunder shall, to the extent provided in such Assignment and Assumption Agreement, be released from its obligations as a Lender under this Agreement. Such Assignment and Assumption Agreement shall be deemed to amend this Agreement (without further action) to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Lender as a Lender and the resulting adjustment of Commitment Percentages arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such Transferor Lender under this Agreement and its Notes. On or prior to the Transfer Effective Date, the Borrower shall execute and deliver to the Agent, in exchange for the surrendered Notes held new Notes to the order of such Purchasing Lender in an amount equal to the Commitment or the Loans assumed by it and purchased by it pursuant to such Assignment and Assumption Agreement, and new Notes to the order of the Transferor Lender in an amount equal to the Commitment or the Loans retained by it hereunder. In addition to the assignments permitted above, any Lender may assign and pledge all or any portion of its Loans and Notes to any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations and duties hereunder. 9.6b ASSIGNMENT REGISTER. The Agent shall maintain, at its address referred to in Subsection 9.3b, a copy of each Assignment and Assumption Agreement delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the amount of the Loans owing to each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register as the owner of the Loans recorded therein for all purposes of this Agreement. The Register shall be available at the office of the Agent set forth in Subsection 9.3b for inspection by either Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. 9.6c PARTICIPATIONS. Each Lender, in the ordinary course of its commercial banking business and in accordance with applicable law, may sell to one or more Participants a participating interest in any Loan owing to such Lender, the interest of such Lender in any Notes - 79 - or any Letters of Credit Outstanding or the Commitment of such Lender. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of its Notes for all purposes under this Agreement and the Borrower, the other Lenders and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement or its Notes and the Participants shall have voting rights only with respect to matters described in items (B), (C), (D), (E) and (F) of Section 9.1. Each Lender agrees to promptly notify the Agent of the sale of each participating interest in the Loans and Commitments. 9.6d TAX WITHHOLDING COMPLIANCE. Any assignee or participant which is not incorporated under the Laws of the United States of America or a state thereof shall deliver to the Borrower and the Agent the form of certificate described in Section 9.4 relating to federal income tax withholding. 9.7 SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. 9.8 SURVIVAL. All representations, warranties, covenants and agreements of the Borrower contained herein in the Notes or in the other Loan Documents or made in writing in connection herewith or therewith shall survive the issuance of the Notes and the Letters of Credit and shall continue in full force and effect so long as the Borrower may borrow hereunder and so long thereafter until payment in full of all the Notes and the Bank Indebtedness. 9.9 GOVERNING LAW. This Agreement, each Note and each other Loan Document shall be a contract made under, governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without reference to the provision thereof regarding conflicts of law except where such law is superseded by applicable Federal law. 9.10 NON-BUSINESS DAYS. Except as otherwise specifically required pursuant to the terms of this Agreement, whenever any payment hereunder or under the Notes is due and payable on a day which is not a Business Day, such payment may be made on the next succeeding Business Day. 9.11 INTEGRATION. This Agreement constitutes the entire agreement between the parties relating to this financing transaction and it supersedes all prior understandings and agreements, whether written or oral, between the parties hereto concerning the subject matter of this Agreement. 9.12 SET-OFF. The Borrower hereby gives to the Lenders a lien and security interest for the amount of any Bank Indebtedness upon and in any property, credits, securities or money of the Borrower which may at any time be delivered to, or be in the possession of, or owed by any Lender in any capacity whatever, including the balance of any deposit account but excluding any - 80 - trust or fiduciary accounts, in each case maintained by the Borrower with such Lender. The Borrower hereby authorizes each Lender in case of an Event of Default, at such Lender's option, at any time and from time to time, to apply, at the discretion of such Lender, to the payment of Bank Indebtedness, any and all such property, credits, securities or money now or hereafter in the hands of such Lender belonging or owed to the Borrower. Nothing herein shall restrict any Lender's ability to set off any property, credits, securities or money of the Borrower which may at any time be delivered to, or be in possession or owed to any Lender in any capacity whatever to satisfy an independent obligation of the Borrower to the Lender. 9.13 FORUM. The parties hereto agree that any action or proceeding arising out of or relating to this Agreement, the Notes or the other Loan Documents shall be commenced only in the Court of Common Pleas of Allegheny County, Pennsylvania, or in the District Court of the United States for the Western District of Pennsylvania and each party agrees that a summons and complaint commencing an action or proceeding in either of such courts shall be properly served and shall confer personal jurisdiction if served personally or by certified mail to the party at its respective address set forth in Section 9.3, or as otherwise provided under the laws of the Commonwealth of Pennsylvania. Further, the parties hereby specifically consent to the personal jurisdiction of the Court of Common Pleas of Allegheny County, Pennsylvania, and the District Court of the United States for the Western District of Pennsylvania, and waive and hereby acknowledge that the parties are estopped from raising any claim that any such court lacks personal jurisdiction over such party so as to prohibit either such court from adjudicating any issues raised in a complaint filed with any such court against the Borrower or the Lenders concerning this Agreement. 9.14 WAIVER OF JURY TRIAL. Each of the Agent, the Lenders and the Borrower hereby knowingly, voluntarily and intentionally waive any rights they may have to a trial by jury in respect of any litigation based hereon, or arising out of, under, or in connection with, this Agreement or any other Loan Document, or any course of conduct, course of dealing, statements (whether verbal or written) or actions of the Agent, the Lenders or the Borrower relating hereto or thereto. The Borrower acknowledges and agrees that it has received full and sufficient consideration for this provision (and each other provision of each other Loan Document to which it is a party) and that this provision is a material inducement for the Lenders to enter into this Agreement and each such other Loan Document. 9.15 INDEMNITY. The Borrower hereby agrees to indemnify the Agent, the Syndication Agents, the Lenders and each of their respective directors, officers, employees, attorneys, agents and Affiliates against, and hold each of them harmless from, any loss, liabilities, damages, claims (including and to the extent permitted by applicable law, any claim on any theory of liability for special, indirect, consequential or punitive damages (as opposed to direct or actual damages)), together with reasonable costs and expenses, joint or several, (including reasonable attorneys' fees and disbursements reasonably incurred by any such Person in connection with the preparation for or defense of any pending or threatened claim, action or proceeding) suffered or incurred by any of them under any applicable federal or state law or otherwise caused by, arising out of, resulting from or in any manner connected with, the execution, delivery and performance of each of the Loan Documents, the Loans and any and all transactions related to or consummated in connection with the Loans or the Letters of Credit. The indemnity set forth in - 81 - this Section 9.15 shall be in addition to any other obligations or liabilities of the Borrower to the Agent, the Syndication Agents or the Lenders, or at common law or otherwise. The provisions of this Section 9.15 shall survive the payment of the Bank Indebtedness and the termination of this Agreement. The foregoing provisions of this Section 9.15 to the contrary notwithstanding, the Borrower shall not be obligated to indemnify the Agent, the Syndication Agents or any Lender pursuant to this Section 9.15 for any losses, liabilities, damages, claims, or costs which arise directly from the Agent's, such Syndication Agent's or such Lender's gross negligence or willful misconduct. All amounts owed pursuant to this Section 9.15 shall be part of the Bank Indebtedness. 9.16 TERMINATION OF EXISTING BANK CREDIT AGREEMENTS. It is the intent of the parties hereto that on the Closing Date the Borrower shall comply with each of items (i) through (xiv) inclusive of Section 6.2. Upon satisfaction of all of the provisions of Section 6.1 and Section 6.2 and the satisfaction of the terms of any applicable payoff letter delivered in connection with the Existing Credit Agreement, the Existing Bank Credit Agreements shall be terminated. 9.17 COUNTERPARTS. This Agreement and any amendment, modification, extension or renewal hereto or hereof may be executed in several counterparts and by each party on a separate counterpart, each of which, when so executed and delivered, shall be an original, but all of which together shall constitute but one and the same instrument. In proving this Agreement or any amendment, modification, extension or renewal, it shall not be necessary to produce or account for more than one such counterpart signed by the other party against whom enforcement is sought. 9.18 PERMITTED ADJUSTMENTS TO COMMITMENT PERCENTAGES AND SHORT TERM REVOLVING CREDIT COMMITMENT PERCENTAGES. In the event a Non-Agreeing Lender is repaid in full on the Short Term Revolving Credit Termination Date and no substitute Lender assumes the Short Term Revolving Credit Commitment of the Non-Agreeing Lender, the Agent will calculate the applicable Short Term Revolving Credit Commitment Percentage and Commitment Percentage of each Lender based on the reduced aggregate Short Term Revolving Credit Commitment. In the event the Borrower elects the Term-Out Option for one or more Non-Agreeing Lenders, then upon the execution and delivery by the Borrower of a Term Note to any Non-Agreeing Lender, such Non-Agreeing Lender shall be deemed to have, so long as the related Term Loan remains outstanding, but solely for the purpose of determining the Required Lenders at any time that Term Loans outstanding and for the purpose of defining the term "Commitment Percentage" as used in Section 8.5 hereof such a Non-Agreeing Lender shall have a Commitment Percentage based on the ratio of the outstanding principal balance of the Term Loan at the time of determination to the sum of the aggregate outstanding Commitments plus the outstanding Term Loans; and in such event the Commitment Percentages of the other Lenders will be adjusted to reflect the funded Term Loan then outstanding and due to Non-Agreeing Lender(s). 9.19 WAIVER OF CONSEQUENTIAL DAMAGES. To the extent permitted by applicable law, the Borrower hereby waives its right to pursue any claim against the Agent, the Syndication Agents, the Lenders and each of their respective directors, officers, employees, attorneys, agents - 82 - and Affiliates on any theory of liability for special, indirect, consequential or punitive damages (as opposed to direct or actual damages). [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] - 83 - IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first written above. ATTEST: ALLEGHENY TECHNOLOGIES INCORPORATED By: /s/ Mary Beth Luksik By: /s/ Robert S. Park ------------------------------ --------------------------------------- Name: Mary Beth Luksik Name: Robert S. Park Title: Assistant Secretary Title: Vice President, Treasurer PNC BANK, NATIONAL ASSOCIATION, in its capacity as the Agent hereunder By: /s/ David B. Gookin --------------------------------------- Name: David B. Gookin Title: Vice President - 84 - IN WITNESS WHEREOF, intending to be legally bound hereby, the undersigned Lender has caused this Agreement by and among ALLEGHENY TECHNOLOGIES INCORPORATED, THE LENDERS PARTY HERETO and PNC BANK, NATIONAL ASSOCIATION, as the Agent to be executed by its duly authorized officers as of the date first above written. Maximum Dollar Amount of Long Term PNC BANK, NATIONAL ASSOCIATION Revolving Credit Commitment $33,900,000 Long Term Revolving Credit Commitment By: /s/ David B. Gookin -------------------------------- Percentage Name: David B. Gookin 17.38461539% Title: Vice President Maximum Dollar Amount of Short Term Revolving Credit Commitment $22,600,000 Short Term Revolving Credit Commitment Percentage 17.38461539% Commitment Percentage (Total) 17.38461539% Addresses for notice purposes: If by United States Mail: If by other means: PNC Bank, National Association PNC Bank, National Association PNC Agency Services PNC Agency Services One PNC Plaza, 22nd Floor One PNC Plaza, 22nd Floor 249 Fifth Avenue 249 Fifth Avenue Pittsburgh, Pennsylvania 15222-2707 Pittsburgh, Pennsylvania 15222-2707 Attention: Trina Barkley Attention: Trina Barkley Telephone: (412) 768-0423 Telecopier: (412) 762-8672 With a copy to: With a copy to: PNC Bank, National Association PNC Bank, National Association Metals Group Metals Group One PNC Plaza - 3rd Floor One PNC Plaza - 3rd Floor 249 Fifth Avenue 249 Fifth Avenue Pittsburgh, Pennsylvania 15222-2707 Pittsburgh, Pennsylvania 15222-2707 Attention: David B. Gookin Attention: David B. Gookin Vice President Vice President Telephone: (412) 762-4815 Telecopier: (412) 705-3232 Address for LIBOR Loan Funding if different from above: N/A --- IN WITNESS WHEREOF, intending to be legally bound hereby, the undersigned Lender has caused this Agreement by and among ALLEGHENY TECHNOLOGIES INCORPORATED, THE LENDERS PARTY HERETO and PNC BANK, NATIONAL ASSOCIATION, as the Agent to be executed by its duly authorized officers as of the date first above written. Maximum Dollar Amount of Long Term BANK OF AMERICA, N.A. Revolving Credit Commitment $27,000,000 Long Term Revolving Credit Commitment By: /s/ Thomas R. Durham -------------------------------- Percentage Name: Thomas R. Durham 13.84615385% Title: Managing Director Maximum Dollar Amount of Short Term Revolving Credit Commitment $18,000,000 Short Term Revolving Credit Commitment Percentage 13.84615385% Commitment Percentage (Total) 13.84615385% Addresses for notice purposes: If by United States Mail: If by other means: Bank of America, N.A. Bank of America, N.A. 231 South LaSalle Street 231 South LaSalle Street Chicago, Illinois 60697 Chicago, Illinois 60697 Attention: Thomas R. Durham Attention: Thomas R. Durham Managing Director Managing Director Telephone: (312) 828-8044 Telecopier: (312) 974-8681 Address for LIBOR Rate Loan Funding if different from above: Bank of America, N.A. 1850 Gateway Boulevard Concord, California 94520 Attention: Gardelyn Jayme Telephone: (925) 675-7184 Telcopier: (888) 969-9232 Telex: IN WITNESS WHEREOF, intending to be legally bound hereby, the undersigned Lender has caused this Agreement by and among ALLEGHENY TECHNOLOGIES INCORPORATED, THE LENDERS PARTY HERETO and PNC BANK, NATIONAL ASSOCIATION, as the Agent to be executed by its duly authorized officers as of the date first above written. Maximum Dollar Amount of Long Term.. MELLON BANK, N.A. Revolving Credit Commitment $33,900,000 Long Term Revolving Credit Commitment By: /s/ John R. Cooper ---------------------------------- Percentage Name: John R. Cooper 17.38461539% Title: Vice President Maximum Dollar Amount of Short Term Revolving Credit Commitment $22,600,000 Short Term Revolving Credit Commitment Percentage 17.38461539% Commitment Percentage (Total) 17.38461539% Addresses for notice purposes: If by United States Mail: If by other means: Mellon Bank, N.A. Mellon Bank, N.A One Mellon Center, Room 370 One Mellon Center, Room 370 Pittsburgh, Pennsylvania 15258-0001 Pittsburgh, Pennsylvania 15258-0001 Attention: Peter K. Lee Attention: Peter K. Lee Vice President Vice President Telephone: (412) 234-1913 Telecopier: (412) 234-8888 Address for LIBOR Rate Loan Funding if different from above: Mellon Bank, N.A. Three Mellon Center, Room 1203 Pittsburgh, Pennsylvania 15259-0003 Attention: Pinkey Holiday Loan Administrator Telephone: 412-234-7366 Telecopier: 412-209-6114 Telex: 199103 MELBNKPGH IN WITNESS WHEREOF, intending to be legally bound hereby, the undersigned Lender has caused this Agreement by and among ALLEGHENY TECHNOLOGIES INCORPORATED, THE LENDERS PARTY HERETO and PNC BANK, NATIONAL ASSOCIATION, as the Agent to be executed by its duly authorized officers as of the date first above written. Maximum Dollar Amount of Long Term JP MORGAN CHASE BANK Revolving Credit Commitment $27,000,000 Long Term Revolving Credit Commitment By: /s/ James H. Ramage -------------------------------- Percentage Name: James H. Ramage 13.84615385% Title: Managing Director Maximum Dollar Amount of Short Term Revolving Credit Commitment $18,000,000 Short Term Revolving Credit Commitment Percentage 13.84615385% Commitment Percentage (Total) 13.84615385% Addresses for notice purposes: If by United States Mail: If by other means: JPMorgan Chase Bank JP Morgan Chase Bank 270 Park Avenue, 21st Floor 270 Park Avenue, 21st Floor New York, New York 10017 New York, New York 10017 Attention: James H. Ramage Attention: James H. Ramage Managing Director Managing Director Telephone: (212) 270-1373 Telecopier: (212) 270-4724 For operational issues: JPMorgan Chase Bank 1 Chase Manhattan Plaza New York, New York 10081 Attention: Sek Chan, Assistant Treasurer Telephone: (212) 552-7929 Telecopier: (212) 552-7490 Address for LIBOR Rate Loan Funding if different from above: N/A --- Telephone: Telecopier: Telex: IN WITNESS WHEREOF, intending to be legally bound hereby, the undersigned Lender has caused this Agreement by and among ALLEGHENY TECHNOLOGIES INCORPORATED, THE LENDERS PARTY HERETO and PNC BANK, NATIONAL ASSOCIATION, as the Agent to be executed by its duly authorized officers as of the date first above written. Maximum Dollar Amount of Long Term.. CITIBANK, N.A. Revolving Credit Commitment $19,200,000 Long Term Revolving Credit Commitment By: /s/ Prakash M. Chonkar --------------------------------- Percentage Name: Prakash M. Chonkar 9.84615385% Title: Managing Director Maximum Dollar Amount of Short Term Revolving Credit Commitment $12,800,000 Short Term Revolving Credit Commitment Percentage 9.84615385% Commitment Percentage (Total) 9.84615385% Addresses for notice purposes: If by United States Mail: If by other means: Citibank, N.A. Citibank, N.A. 388 Greenwich Street, 23rd Floor 388 Greenwich Street, 23rd Floor New York, New York 10013 New York, New York 10013 Attention: Prakash Chonkar Attention: Prakash Chonkar Managing Director Managing Director Telephone: (212) 816-5323 Telecopier: (212) 816-5402 Address for LIBOR Rate Loan Funding if different from above: Citibank, N.A. Two Penns Way, Suite 200 New Castle, Delaware 19720 Attention: Tony Neville Telephone: (302) 894-6057 Telecopier: (302) 894-6120 Telex: IN WITNESS WHEREOF, intending to be legally bound hereby, the undersigned Lender has caused this Agreement by and among ALLEGHENY TECHNOLOGIES INCORPORATED, THE LENDERS PARTY HERETO and PNC BANK, NATIONAL ASSOCIATION, as the Agent to be executed by its duly authorized officers as of the date first above written. Maximum Dollar Amount of Long Term THE BANK OF NEW YORK Revolving Credit Commitment $13,500,000 Long Term Revolving Credit Commitment By: /s/ Walter C. Parelli --------------------------------- Percentage Name: Walter C. Parelli 6.92307692% Title: Vice President Maximum Dollar Amount of Short Term Revolving Credit Commitment $9,000,000 Short Term Revolving Credit Commitment Percentage 6.92307692% Commitment Percentage (Total) 6.92307692% Addresses for notice purposes: If by United States Mail: If by other means: The Bank of New York The Bank of New York One Wall Street, 21st Floor One Wall Street, 21st Floor New York, New York 10286 New York, New York 10286 Attention: Walter Parelli Attention: Walter Parelli Telephone: (212) 635-6820 Telecopier: (212) 635-7978 Address for LIBOR Rate Loan Funding if different from above: The Bank of New York One Wall Street, 21st Floor New York, New York 10286 Attention: Terry Blackburn Telephone: (212) 635-7938 Telecopier: (212) 635-7970 Telex: IN WITNESS WHEREOF, intending to be legally bound hereby, the undersigned Lender has caused this Agreement by and among ALLEGHENY TECHNOLOGIES INCORPORATED, THE LENDERS PARTY HERETO and PNC BANK, NATIONAL ASSOCIATION, as the Agent to be executed by its duly authorized officers as of the date first above written. Maximum Dollar Amount of Long Term NATIONAL CITY BANK OF Revolving Credit Commitment PENNSYLVANIA $13,500,000 Long Term Revolving Credit Commitment By: /s/ D. W. Riefner --------------------------------- Percentage Name: D. W. Riefner 6.92307692% Title: Vice President Maximum Dollar Amount of Short Term Revolving Credit Commitment $9,000,000 Short Term Revolving Credit Commitment Percentage 6.92307692% Commitment Percentage (Total) 6.92307692% Addresses for notice purposes: If by United States Mail: If by other means: National City Bank of Pennsylvania National City Bank of Pennsylvania National City Center National City Center 20 Stanwix Street 20 Stanwix Street Pittsburgh, Pennsylvania 15222-4802 Pittsburgh, Pennsylvania 15222-4802 Attention: Debra W. Riefner Attention: Debra W. Riefner Telephone: (412) 644-8880 Telecopier: (412) 471-4883 Address for LIBOR Rate Loan Funding if different from above: National City Bank of Pennsylvania National City Center 20 Stanwix Street Pittsburgh, Pennsylvania 15222-4802 Attention: Nancy L. Karlo Telephone: (412) 644-8120 Telecopier: (412) 471-4883 Telex: IN WITNESS WHEREOF, intending to be legally bound hereby, the undersigned Lender has caused this Agreement by and among ALLEGHENY TECHNOLOGIES INCORPORATED, THE LENDERS PARTY HERETO and PNC BANK, NATIONAL ASSOCIATION, as the Agent to be executed by its duly authorized officers as of the date first above written. Maximum Dollar Amount of Long Term BANK OF TOKYO-MITSUBISHI TRUST Revolving Credit Commitment COMPANY $13,500,000 Long Term Revolving Credit Commitment By: /s/ Heather Zimmermann ------------------------------------ Percentage Name: H. Zimmermann 6.92307692% Title: Vice President Maximum Dollar Amount of Short Term Revolving Credit Commitment $9,000,000 Short Term Revolving Credit Commitment Percentage 6.92307692% Commitment Percentage (Total) 6.92307692% Addresses for notice purposes: If by United States Mail: If by other means: Bank of Tokyo-Mitsubishi Trust Company Bank of Tokyo-Mitsubishi Trust Company 1251 Avenue of the Americas, 12th Floor 1251 Avenue of the Americas, 12th Floor New York, New York 10020-1104 New York, New York 10020-1104 Attention: Heather Zimmermann Attention: Heather Zimmermann Telephone: (212) 782-4220 Telecopier: (212) 782-6440 Address for LIBOR Rate Loan Funding if different from above: Loan Operations Department BTM Information Services, Inc. c/o Bank of Tokyo-Mitsubishi Trust Company 1251 Avenue of the Americas, 12th Floor New York, New York 10020-1104 Attention: Rolando Uv Assistant Vice President Telephone: (201) 413-8570 Telecopier: (201) 521-2304 Telex: IN WITNESS WHEREOF, intending to be legally bound hereby, the undersigned Lender has caused this Agreement by and among ALLEGHENY TECHNOLOGIES INCORPORATED, THE LENDERS PARTY HERETO and PNC BANK, NATIONAL ASSOCIATION, as the Agent to be executed by its duly authorized officers as of the date first above written. Maximum Dollar Amount of Long Term THE INDUSTRIAL BANK OF JAPAN, Revolving Credit Commitment LIMITED $13,500,000 Long Term Revolving Credit Commitment By: /s/ Andreas Panteli ---------------------------------- Percentage Name: Andreas Panteli 6.92307692% Title: Senior Vice President Maximum Dollar Amount of Short Term Revolving Credit Commitment $9,000,000 Short Term Revolving Credit Commitment Percentage 6.92307692% Commitment Percentage (Total) 6.92307692% Addresses for notice purposes: If by United States Mail: If by other means: The Industrial Bank of Japan, Limited The Industrial Bank of Japan, Limited 1251 Avenue of the Americas 1251 Avenue of the Americas New York, New York 10020-1104 New York, New York 10020-1104 Attention: Hilary Zhang Attention: Hilary Zhang Assistant Vice President Assistant Vice President Telephone: (212) 282-3467 Telecopier: (212) 282-4488 Address for LIBOR Rate Loan Funding if different from above: The Industrial Bank of Japan, Limited 1251 Avenue of the Americas New York, New York 10020-1104 Attention: Hema Dibatia Telephone: (212) 282-4099 Telecopier: (212) 282-4478 Telex: EXHIBIT A-1 FORM OF LONG TERM REVOLVING CREDIT NOTE $___________ Pittsburgh, Pennsylvania December 20, 2001 This Long Term Revolving Credit Note is executed and delivered under and pursuant to the terms of that certain Credit Agreement dated as of December 20, 2001 (the Credit Agreement together with the exhibits and schedules thereto and all amendments, modifications, extensions, renewals, replacements or restatements thereof and thereto, the "Agreement") by and among ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation (the "Borrower"), the financial institutions listed on the signature pages thereof and each other financial institution which, from time to time, may become a party to the Agreement (collectively, the "Lenders"), the syndication agents referred to therein (collectively the "Syndication Agents") and PNC BANK, NATIONAL ASSOCIATION, as documentation and administrative agent for the Lenders (in each capacity the "Agent"). FOR VALUE RECEIVED, the Borrower promises to pay to the order of ________________ (the "Lender"), its successors and permitted assignees, at the office of the Agent at One PNC Plaza, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707 on the Long Term Revolving Credit Termination Date the lesser of (i) the principal sum of ______________ MILLION AND NO/100 DOLLARS ($___________) or (ii) the aggregate unpaid principal amount of all outstanding Long Term Revolving Credit Loans made by the Lender to the Borrower on or before the Long Term Revolving Credit Termination Date pursuant to the Agreement together with interest on the unpaid principal balance thereof from time to time outstanding. All Long Term Revolving Credit Loans made by the Lender, the respective types and maturities thereof, and all repayments of the principal thereof shall be recorded by the Lender in the Loan Account maintained by the Lender in accordance with the Agreement and, if the Lender so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Long Term Revolving Credit Loan then outstanding may be endorsed by the Lender on one or more schedules attached hereto, or on a continuation of such schedule attached to and made a part hereof; PROVIDED that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Agreement. Interest on the unpaid principal balance hereof shall be due and payable at the rates and at the times specified in the Agreement during the term hereof to and including the Termination Date and at maturity, and shall be calculated and adjusted in accordance with the terms of the Agreement. This Long Term Revolving Credit Note is one of the Long Term Revolving Credit Notes referred to in the Agreement. Reference is made to the Agreement for provisions for the prepayment hereof, for the termination of the Long Term Revolving Credit Commitment and the - 2 - reduction and cancellation thereof, and for the acceleration of the maturity hereof. All of the terms, conditions, covenants, representations and warranties of the Agreement are incorporated herein by reference as if same were fully set forth herein. Demand, presentation, protest, notice of dishonor and notice of default are hereby waived. THIS LONG TERM REVOLVING CREDIT NOTE SHALL BE GOVERNED BY THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REFERENCE TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAW. WITNESS the due execution of this Long Term Revolving Credit Note with the intent to be legally bound hereby. ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation By: --------------------------------------- Name: Title: - 3 - EXHIBIT A-2 FORM OF SHORT TERM REVOLVING CREDIT NOTE $___________ Pittsburgh, Pennsylvania December 20, 2001 This Short Term Revolving Credit Note is executed and delivered under and pursuant to the terms of that certain Credit Agreement dated as of December 20, 2001 (the Credit Agreement together with the exhibits and schedules thereto and all amendments, modifications, extensions, renewals, replacements or restatements thereof and thereto, the "Agreement") by and among ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation (the "Borrower"), the financial institutions listed on the signature pages thereof and each other financial institution which, from time to time, may become a party to the Agreement (collectively, the "Lenders"), the syndication agents referred to therein (collectively the "Syndication Agents") and PNC BANK, NATIONAL ASSOCIATION, as documentation and administrative agent for the Lenders (in each capacity the "Agent"). FOR VALUE RECEIVED, the Borrower promises to pay to the order of ________________ (the "Lender"), its successors and permitted assignees, at the office of the Agent at One PNC Plaza, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707 on the Short Term Revolving Credit Termination Date the lesser of (i) the principal sum of ______________ MILLION AND NO/100 DOLLARS ($___________) or (ii) the aggregate unpaid principal amount of all outstanding Short Term Revolving Credit Loans made by the Lender to the Borrower on or before the Short Term Revolving Credit Termination Date pursuant to the Agreement together with interest on the unpaid principal balance thereof from time to time outstanding. All Short Term Revolving Credit Loans made by the Lender, the respective types and maturities thereof, and all repayments of the principal thereof shall be recorded by the Lender in the Loan Account maintained by the Lender in accordance with the Agreement and, if the Lender so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Short Term Revolving Credit Loan then outstanding may be endorsed by the Lender on one or more schedules attached hereto, or on a continuation of such schedule attached to and made a part hereof; PROVIDED that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Agreement. Interest on the unpaid principal balance hereof shall be due and payable at the rates and at the times specified in the Agreement during the term hereof to and including the Short Term Revolving Credit Termination Date and at maturity, and shall be calculated and adjusted in accordance with the terms of the Agreement. This Short Term Revolving Credit Note is one of the Short Term Revolving Credit Notes referred to in the Agreement. Reference is made to the Agreement for provisions for the prepayment hereof, for the termination of the Short Term Revolving Credit Commitment and the - 4 - reduction and cancellation thereof, and for the acceleration of the maturity hereof. All of the terms, conditions, covenants, representations and warranties of the Agreement are incorporated herein by reference as if same were fully set forth herein. Demand, presentation, protest, notice of dishonor and notice of default are hereby waived. THIS SHORT TERM REVOLVING CREDIT NOTE SHALL BE GOVERNED BY THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REFERENCE TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAW. WITNESS the due execution of this Short Term Revolving Credit Note with the intent to be legally bound hereby. ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation By: --------------------------------------- Name: Title: - 5 - EXHIBIT B-1 FORM OF BID RATE NOTE (Long Term) $ Pittsburgh, Pennsylvania -------------------------- December 20, 2001 This Bid Rate Note is executed and delivered under and pursuant to the terms of that certain Credit Agreement dated as of December 1, 2001 (the Credit Agreement together with the exhibits and schedules thereto and all amendments, modifications, extensions, renewals, replacements or restatements thereof and thereto, the "Agreement") by and among ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation (the "Borrower"), the financial institutions listed on the signature pages thereof and each other financial institution which, from time to time, may become a party to the Agreement, the syndication agents referred to therein (collectively the "Syndication Agents") and PNC BANK, NATIONAL ASSOCIATION, as documentation and administrative agent for the Lenders (in such capacity, the "Agent"). FOR VALUE RECEIVED, the Borrower promises to pay to the order of ________________ (the "Lender"), its successors and permitted assignees, at the office of the Agent at One PNC Plaza, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707 on the Long Term Revolving Credit Termination Date the lesser of (i) the principal sum of ___________ MILLION AND NO/100 DOLLARS ($___________) or (ii) the aggregate unpaid principal amount of all outstanding Bid Rate Loans made by the Lender to the Borrower on or before the Long Term Revolving Credit Termination Date pursuant to the Agreement together with interest on the unpaid principal balance thereof from time to time outstanding. All Bid Rate Loans made by the Lender, the respective types and maturities thereof, and all repayments of the principal thereof shall be recorded by the in the Loan Account maintained by the Lender in accordance with the Agreement Lender and, if the Lender so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Bid Rate Loan then outstanding may be endorsed by the Lender on one or more schedules attached hereto, or on a continuation of such schedule attached to and made a part hereof; PROVIDED that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Agreement. Interest on the unpaid principal balance hereof shall be due and payable at the rates and at the times determined in accordance with the Agreement during the term hereof to and including the Long Term Revolving Credit Termination Date and at maturity, and shall be calculated and adjusted in accordance with the terms of the Agreement. - 6 - This Bid Rate Note is one of the Bid Rate Notes referred to in the Agreement. Reference is made to the Agreement for provisions for the prepayment hereof and for the acceleration of the maturity hereof. All of the terms, conditions, covenants, representations and warranties of the Agreement are incorporated herein by reference as if same were fully set forth herein. Demand, presentation, protest, notice of dishonor and notice of default are hereby waived. THIS BID RATE NOTE SHALL BE GOVERNED BY THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REFERENCE TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAW. WITNESS the due execution of this Bid Rate Note with the intent to be legally bound hereby. ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation By: ----------------------------------------- Name: Title: - 7 - EXHIBIT B-2 FORM OF BID RATE NOTE (Short Term) $ Pittsburgh, Pennsylvania -------------------------- December 20, 2001 This Bid Rate Note is executed and delivered under and pursuant to the terms of that certain Credit Agreement dated as of December 20, 2001 (the Credit Agreement together with the exhibits and schedules thereto and all amendments, modifications, extensions, renewals, replacements or restatements thereof and thereto, the "Agreement") by and among ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation (the "Borrower"), the financial institutions listed on the signature pages thereof and each other financial institution which, from time to time, may become a party to the Agreement, the syndication agents referred to therein (collectively the "Syndication Agents") and PNC BANK, NATIONAL ASSOCIATION, as documentation and administrative agent for the Lenders (in such capacity, the "Agent"). FOR VALUE RECEIVED, the Borrower promises to pay to the order of ________________ (the "Lender"), its successors and permitted assignees, at the office of the Agent at One PNC Plaza, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707 on the Short Term Revolving Credit Termination Date the lesser of (i) the principal sum of ___________ MILLION AND NO/100 DOLLARS ($___________) or (ii) the aggregate unpaid principal amount of all outstanding Bid Rate Loans made by the Lender to the Borrower on or before the Short Term Revolving Credit Termination Date pursuant to the Agreement together with interest on the unpaid principal balance thereof from time to time outstanding. All Bid Rate Loans made by the Lender, the respective types and maturities thereof, and all repayments of the principal thereof shall be recorded by the Lender in the Loan Account maintained by the Lender under the Agreement and, if the Lender so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Bid Rate Loan then outstanding may be endorsed by the Lender on one or more schedules attached hereto, or on a continuation of such schedule attached to and made a part hereof; PROVIDED that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Agreement. Interest on the unpaid principal balance hereof shall be due and payable at the rates and at the times determined in accordance with the Agreement during the term hereof to and including the Short Term Revolving Credit Termination Date and at maturity, and shall be calculated and adjusted in accordance with the terms of the Agreement. This Bid Rate Note is one of the Bid Rate Notes referred to in the Agreement. Reference is made to the Agreement for provisions for the prepayment hereof and for the acceleration of the - 8 - maturity hereof. All of the terms, conditions, covenants, representations and warranties of the Agreement are incorporated herein by reference as if same were fully set forth herein. Demand, presentation, protest, notice of dishonor and notice of default are hereby waived. THIS BID RATE NOTE SHALL BE GOVERNED BY THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REFERENCE TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAW. WITNESS the due execution of this Bid Rate Note with the intent to be legally bound hereby. ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation By: ------------------------------------------- Name: Title: - 9 - EXHIBIT C FORM OF BID RATE QUOTE REQUEST [Date] To: PNC Bank, National Association (the "Agent") From: Allegheny Technologies Incorporated, a Delaware corporation (the "Borrower") Re: Credit Agreement (the "Agreement") dated as of December ____, 2001 among the Borrower, the Lenders party thereto, the Syndication Agents referred to therein and the Agent. We hereby give notice pursuant to Section 2.2c(i) of the Agreement that we request Bid Rate Quotes for the following proposed Bid Rate Borrowing(s): Date of Disbursement: ________________________ Principal Amount* Interest Period** - ---------------- --------------- $ Such Bid Rate Quotes should offer a Bid Rate [Margin] [Absolute Rate]. [The applicable base rate is the Euro-Rate.] Terms used herein have the meanings assigned to them in the Agreement. ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation By: ----------------------------------------- Name: Title: - ------------------------------ * Amount must be $5,000,000 or a larger multiple of $1,000,000. ** Not less than 1 month (Euro-Rate Auction) or not less than 1 day (Absolute Rate Auction), subject to the provisions of the definition of Interest Period. - 10 - EXHIBIT D FORM OF BID RATE QUOTE PNC Bank, National Association, as Agent One PNC Plaza, ___ Floor 249 Fifth Avenue Pittsburgh, Pennsylvania 15222-2707 Attention: Agency Services Re: Bid Rate Quote to Allegheny Technologies Incorporated, a Delaware corporation (the "Borrower") In response to your invitation on behalf of the Borrower dated __________, 200[__], we hereby make the following Bid Rate Quote on the following terms: 1. Quoting Bank: _______________________________________________ 2. Person to contact at Quoting Bank: ____________________________________________________________________ 3. Date of Disbursement:_______________________________________________ * 4. We hereby offer to make Bid Rate Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates: - -------------------------- * As specified in the related Invitation. - 11 -
Principal Interest Bid Rate Amount** Period*** [Margin****] [Absolute Rate*****] - ------- ------ -------------------------------------- $ $
[Provided, that the aggregate principal amount of Bid Rate Loans for which the above offers may be accepted shall not exceed $______________.]** We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Credit Agreement (the "Credit Agreement") dated as of December ___, 2001 among the Borrower, the Lenders party thereto, the Syndication Agents referred to therein and the Agent referred to therein, irrevocably obligates us to make the Bid Rate Loan(s) for which any offer(s) are accepted, in whole or in part. Terms used herein have the meanings assigned to them in the Agreement. Very truly yours, [NAME OF BANK] Dated: By: --------------------- --------------------------------------- Authorized Officer - ------------------ ** Principal amount bid for each Interest Period may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the amount the Bank is willing to lend. Bids must be made for $5,000,000 or a larger multiple of $1,000,000. *** Not less than one month or not less than 1 day, as specified in the related Invitation. No more than five bids are permitted for each Interest Period. **** Margin over or under the Euro-Rate determined for the applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%) and specify whether "PLUS" or "MINUS". ***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%). - 12 - EXHIBIT E FORM OF SWINGLINE NOTE $ Pittsburgh, Pennsylvania -------------------------- December 20, 2001 This Swingline Note is executed and delivered under and pursuant to the terms of that certain Credit Agreement dated as of December 20, 2001 (the Credit Agreement together with the exhibits and schedules thereto and all amendments, modifications, extensions, renewals, replacements or restatements thereof and thereto, the "Agreement") by and among ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation (the "Borrower"), the financial institutions listed on the signature pages thereof and each other financial institution which, from time to time, may become a party to the Agreement (collectively the "Lenders"), the syndication agents referred to therein (collectively the "Syndication Agents") and PNC BANK, NATIONAL ASSOCIATION, as documentation and administrative agent for the Lenders (in such capacity, the "Agent"). FOR VALUE RECEIVED, the Borrower promises to pay to the order of ________________ (the "Swingline Lender"), its successors and permitted assignees, at the office of the Agent at One PNC Plaza, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707 on the Long Term Revolving Credit Termination Date the lesser of (i) the principal sum of ___________ MILLION AND NO/100 DOLLARS ($___________) or (ii) the aggregate unpaid principal amount of all outstanding Swingline Loans made by the Swingline Lender to the Borrower on or before the Long Term Revolving Credit Termination Date pursuant to the Agreement together with interest on the unpaid principal balance thereof from time to time outstanding. All Swingline Loans made by the Swingline Lender, the respective types and maturities thereof, and all repayments of the principal thereof shall be recorded by the Swingline Lender in the Loan Account maintained by the Swingline Lender in accordance with the Agreement and, if the Swingline Lender so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Swingline Loan then outstanding may be endorsed by the Swingline Lender on one or more schedules attached hereto, or on a continuation of such schedule attached to and made a part hereof; PROVIDED that the failure of the Swingline Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Agreement. Interest on the unpaid principal balance hereof shall be due and payable at the rates and at the times determined in accordance with the Agreement during the term hereof to and including the Long Term Revolving Credit Termination Date and at maturity, and shall be calculated and adjusted in accordance with the terms of the Agreement. This Swingline Note is one of the Swingline Notes referred to in the Agreement. Reference is made to the Agreement for provisions for the prepayment hereof and for the acceleration of the - 13 - maturity hereof. All of the terms, conditions, covenants, representations and warranties of the Agreement are incorporated herein by reference as if same were fully set forth herein. Demand, presentation, protest, notice of dishonor and notice of default are hereby waived. THIS SWINGLINE NOTE SHALL BE GOVERNED BY THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REFERENCE TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAW. WITNESS the due execution of this Swingline Note with the intent to be legally bound hereby. ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation By:_________________________________ Name: Title: - 14 - EXHIBIT F FORM OF SWINGLINE QUOTE REQUEST [Date] To: PNC Bank, National Association (the "Agent") From: Allegheny Technologies Incorporated, a Delaware corporation (the "Borrower") Re: Credit Agreement (the "Agreement") dated as of December ___, 2001 among the Borrower, the Lenders party thereto, the Syndication Agents referred to therein and the Agent. We hereby give notice pursuant to Section 2.3c(i) of the Agreement that we request Swingline Quotes for the following proposed Swingline Borrowing(s): Date of Disbursement: ________________________ Principal Amount* Interest Period - ----------------- --------------- $ Next Business Day Terms used herein have the meanings assigned to them in the Agreement. ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation By: ------------------------------------- Name: Title: - ---------------------- * Amount must be $10,000 or a larger multiple of $10,000. - 15 - EXHIBIT G FORM OF SWINGLINE QUOTE PNC Bank, National Association, as Agent One PNC Plaza, ___ Floor 249 Fifth Avenue Pittsburgh, Pennsylvania 15222-2707 Attention: Agency Services Re: Swingline Quote to Allegheny Technologies Incorporated, a Delaware corporation (the "Borrower") In response to your invitation on behalf of the Borrower dated __________, 200[__], we hereby make the following Swingline Quote on the following terms: 1. Quoting Bank: _____________________________________________________ 2. Person to contact at Quoting Bank: __________________________________________________________________ 3. Date of Disbursement: _________________________________________ * 4. We hereby offer to make Swingline Loan(s) in the following principal amounts, for repayment the next Business Day and at the following rate: - ------------------------- * As specified in the related Invitation. - 16 - Principal Interest Swingline Amount** Period Interest Rate*** - ------- ------ ------------- $ $ [Provided, that the aggregate principal amount of Swingline Loans for which the above offers may be accepted shall not exceed $______________.] We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Credit Agreement (the "Credit Agreement") dated as of December __, 2001 among the Borrower, the Lenders party thereto, the Syndication Agents referred to therein and the Agent, referred to therein, irrevocably obligates us to make the Swingline Loan(s) for which any offer(s) are accepted, in whole or in part. Terms used herein have the meanings assigned to them in the Agreement. Very truly yours, [NAME OF BANK] Dated:_________________________ By:___________________________________ Authorized Officer - ------------------------ ** Principal amount bid may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the amount the Bank is willing to lend. Bids must be made for $10,000 or a larger multiple of $10,000. *** Specify rate of interest per annum (to the nearest 1/10,000th of 1%). - 17 - EXHIBIT H FORM OF COMPLIANCE CERTIFICATE For the Fiscal Year Ended ___________, 200__ or For the Fiscal Quarter Ended _________, 200__ Reference is made to that certain Credit Agreement dated as of December ___, 2001(the Credit Agreement and all exhibits and schedules thereto, together with all amendments, modifications, extensions, renewals, substitutions and replacements thereto and thereof, the "Agreement") by and among ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation (the "Borrower"), the financial institutions party thereto as Lenders (collectively, the "Lenders"), the Syndication Agents referred to therein and PNC Bank, National Association, as Agent. All capitalized terms used as defined terms in this Compliance Certificate which are defined in the Agreement shall have the same meanings herein as in the Credit Agreement. This certificate is being delivered pursuant to the requirements of Subsection 4.2(i) of the Agreement. The undersigned, an Authorized Officer of the Borrower, hereby certifies that: CHECK ONE: ____1. The annual audited financial statements being delivered to the Bank with this Compliance Certificate are true, complete and correct. OR ____1. The quarterly financial statements being delivered to the Bank with this Compliance Certificate are true, complete and correct and present fairly the financial position of the Borrower and the results of its operations and its cash flows for the fiscal quarter set forth above in conformity with GAAP consistently applied. 2. The undersigned has reviewed the terms of the Agreement and of the Notes and has made, or caused to be made under his supervision, a review of the transactions and condition of the Borrower during the accounting period covered by the financial statements delivered herewith and that such review has not disclosed the existence during such accounting period, and that the undersigned does not have knowledge of the existence as at the date of such Compliance Certificate, of any condition or event which constitutes a Potential Default or an Event of Default on the date of this Compliance Certificate. [NOTE: If any of the above events has occurred or is continuing, set forth on a separate sheet the nature thereof and the action which the Borrower has taken, is taking or proposes to take with respect thereto.] - 18 - 3. The Borrower's compliance with the financial covenants set forth in Sections 5.3 and 5.4 of the Agreement is as follows:
Required Actual -------- ------ Consolidated Total 60% of Consolidated __________% Indebtedness (Section 5.3) Total Capitalization Consolidated EBITDA to Consolidated 3.0 prior to January 1, 2003 ______:1.00 Interest Expense (Section 5.4) 3.5 on or after January 1, 2003
4. The calculations used in connection with the above financial covenants are attached to this Compliance Certificate. All capitalized terms used in this Compliance Certificate as defined terms which are not defined herein but which are defined in the Agreement shall have the meanings given them in the Agreement. Dated the ____ day of __________, 200__. ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation By:_____________________________________ Name: Title: - 19 - EXHIBIT I Form of Opinion of Counsel ALLEGHENY TECHNOLOGIES INCORPORATED JON D. WALTON Corporate Counsel Senior Vice President and Chief Legal and Administrative Officer 412-394-2984 December __, 2001 PNC Bank, National Association, Documentation and Administrative Agent One PNC Plaza 249 Fifth Avenue Pittsburgh, Pennsylvania 15222-2707 and The several Lenders party to the Agreement (as defined below) as of the date hereof and who may become parties to the Agreement Re: Credit Agreement Ladies and Gentlemen: I have served as counsel to Allegheny Technologies Incorporated (the "Borrower") in connection with the Credit Agreement by and among the Borrower, the Lenders party thereto, ________________________________________________________________, as Syndication Agents, and PNC Bank, National Association, as Documentation and Administrative Agent thereunder dated as of December __, 2001 (the "Agreement"). You have requested that I furnish to you my written opinion pursuant to Section _____ of the Agreement. Terms not otherwise defined herein shall have the meanings assigned to them in the Agreement. I have reviewed the Agreement and Notes and such corporate records of the Borrower, certificates of public officials, certificates of officers of the Borrower and other documents and have made such examinations of law as I have deemed necessary or relevant in connection with the opinions set forth below. I have also assumed, with your permission, the following: - 20 - (i) the due completion and execution by duly authorized officers of each Lender and the Agent and delivery of all documents and instruments to be delivered by the Lenders and the Agent, if any; and (ii) that each of the Lenders and the Agent is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization or formation, that the Agreement constitutes the legal and binding obligation of such Lender or the Agent, that the Agreement has been duly authorized by all necessary action by each Lender and the Agent, and that each Lender and the Agent has full corporate power and authority to perform its obligations under the Agreement. I am a member of the Bar of the Commonwealth of Pennsylvania and am opining herein only as to the effect on the subject transactions of the laws of the Commonwealth of Pennsylvania (excluding conflict of laws rules), the General Corporation Law of the State of Delaware and the federal laws of the United States of America to the extent referred to specifically herein, all in effect on the date hereof I express no opinion with respect to the laws of any other jurisdiction. Based upon and subject to the foregoing as well as to the additional qualifications and other matters hereinafter set forth, I am of the opinion that: 1. The Borrower is a corporation validly organized and existing as a corporation under the laws of the State of Delaware. 2. The Borrower has all requisite corporate power and authority to own and operate its properties and assets and carry on its business as presently conducted. 3. The execution and delivery of the Agreement and the Notes by the Borrower and the performance by the Borrower of its obligations under the Agreement and the Notes have been duly authorized by all necessary corporate action on the part of the Borrower The Borrower has the corporate power and authority to enter into and perform its obligations under the Agreement and the Notes. 4. The execution and delivery of the Agreement and the Notes and the performance by the Borrower of its obligations thereunder (A) do not violate any provision of W the Borrower's Restated Certificate of Incorporation or its Amended and Restated By-Laws, (ii) any material law binding upon or affecting the Borrower, or (iii) any material agreement to which the Borrower is a party or by which it or its properties are bound, or (B) result in the creation or imposition of any Encumbrance in, of or on the property of the Borrower pursuant to the terms of any such material agreement The Agreement and the Notes constitute legal, valid binding obligations of the Borrower, enforceable in accordance with their terms. 5. Neither the execution and delivery nor the performance of the Agreement and the Notes requires the giving of notice to, filing with, or consent or approval of or other action by, any Governmental Authority except to the extent that such notice or filing has been or will be accomplished or obtained in the ordinary course without violating applicable law. 6. The Borrower is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or "holding company", or an "affiliate" of - 21 - a "holding company" or "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. The opinions set forth herein are subject to the following qualifications: A. Insofar as the enforceability and binding effect of the Agreement and Notes are concerned, the opinions set forth herein are subject to limitations arising pursuant to applicable bankruptcy, insolvency, moratorium, fraudulent transfer, preference and other laws and equitable principles affecting the scope and enforcement of creditors, rights generally, and are also limited by the Lenders' and the Agent's implied covenants of good faith, fair dealing and commercially reasonable conduct, and by the effect of judicial discretion on the availability of remedies and realization of benefits under the enforceability of the Agreement and the Notes in all respects as written, including, but not limited to, the recovery of attorneys, fees. B. I express no opinion as to the enforceability of any provision in any of the Agreement or the Notes (i) purporting to preclude the modification of the Agreement or the Notes through conduct, custom or course of performance, action or dealing, (ii) purporting to waive defenses or equitable, constitutional or statutory rights or remedies, (iii) purporting to require the payment or reimbursement or prepayment premiums, penalties, fees, costs, expenses or other amounts which are unreasonable in nature or amount, (iv) purporting to limit the liability of any Lender or the Agent or to indemnify any Lender or the Agent for its acts or omissions, (v) constituting waivers of or indemnification against violations by any Lender or the Agent, (vi) purporting to restrict or prohibit the ability of the Borrower to transfer rights in the property, or (vii) purporting to waive or restrict the right to a jury trial, specify a means for service of process, select venue or consent to personal jurisdiction. Further and in response to your request, be advised that, to my knowledge, except as set forth or incorporated by reference in the Borrower's Registration Statement on Form S-4 filed under the Securities Act of 1933, as amended, Registration No. 333-8235, or in the Forms 10-K, 10-Q or 8-K most recently filed by Allegheny Ludlum Corporation and Teledyne, Inc., respectively, there are no actions, suits, investigations, litigation or governmental proceedings pending or, to my knowledge, threatened against or affecting the Borrower or any of its Consolidated Subsidiaries before any court or arbitrator or by or before any administrative agency or other governmental authority which would have a Material Adverse Effect on the Borrower and its Consolidated Subsidiaries taken as a whole, or which purport to affect the legality, validity or enforceability of the Agreement or the Notes. This letter is furnished to you specifically in connection with the Agreement and solely for your information and benefit. It may not be relied upon in any manner or for any other purpose by any other person without my prior written consent. This opinion is rendered as of the date hereof, and I have not undertaken to supplement this opinion with respect to factual matters or changes of law that may occur hereafter. It is limited to the matters set forth herein, and no opinion may be inferred or implied beyond the matters expressly stated herein. Yours truly, Jon D. Walton - 22 - EXHIBIT J FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT ASSIGNMENT AND ASSUMPTION AGREEMENT dated as of ______________, 200__ by and among _______________________________ (the "Transferor Lender"), ____________________________________________ (the "Purchasing Lender"), and PNC BANK, NATIONAL ASSOCIATION, as the Documentation and Administrative Agent for the Lenders under the Credit Agreement described below (in such capacity the "Documentation and Administrative Agent"). WITNESSETH: ----------- WHEREAS, this Assignment and Assumption Agreement is being executed and delivered in accordance with that certain Credit Agreement dated as of December ___, 2001 by and among the Borrower, the Lenders party thereto and the Documentation and Administrative Agent (the Credit Agreement together with the exhibits and schedules thereto and all amendments, modifications, extensions, renewals, substitutions and replacements thereto and thereof is hereinafter referred to as the "Agreement"); WHEREAS, the Purchasing Lender (if it is not already a party to the Agreement) wishes to become a party to the Agreement and assume the rights, obligations and commitments of a Lender thereunder; and WHEREAS, the Transferor Lender wishes to sell and assign to the Purchasing Lender [all] [a portion] of the Transferor Lender's rights, obligations, commitments and Loans under the Agreement. NOW, THEREFORE, in consideration of mutual promises contained herein and other valuable consideration and with the intent to be legally bound hereby, the parties hereto agree as follows: 1. All capitalized terms used herein as defined terms which are not defined herein but which are defined in the Agreement shall have the same meanings herein as given to them in the Agreement unless the context clearly indicates otherwise. 2. Upon receipt by the Documentation and Administrative Agent of counterparts of this Assignment and Assumption Agreement which have been executed by the Transferor Lender, the Purchasing Lender and the Documentation and Administrative Agent and to each of which is attached a fully completed Schedule I, the Documentation and Administrative Agent will complete, execute and deliver to the Borrower, the Transferor Lender, the Purchasing Lender and the remaining Lenders, a Transfer Effective Notice substantially in the form of Schedule II to this Assignment and Assumption Agreement (a "Transfer Effective Notice"). Such Transfer Effective Notice shall set forth, INTER ALIA, the date on which the transfer affected by this Assignment and Assumption Agreement shall become effective (the "Transfer Effective - 23 - Date"), which date shall be the third Business Day following the date of such Transfer Effective Notice. 3. Effective upon the opening of business of the Documentation and Administrative Agent on the Transfer Effective Date, the Transferor Lender hereby sells, assigns, delegates and transfers to the Purchasing Lender, without recourse and without any representations or warranties except as set forth in paragraph 9 hereof, and the Purchasing Lender hereby buys, assumes and accepts, [all] [a portion] of the Transferor Lender' s rights, as set forth in item 2 of Schedule I hereto in (i) the Transferor Lender's Revolving Credit Commitment, (ii) the principal of, and all accrued and unpaid interest on, all outstanding Loans of the Transferor Lender, (iii) all accrued but unpaid Fees owing to the Transferor Lender under the Agreement and the other Loan Documents and (iv) all of the Transferor Lender's other rights (including voting rights), interests, duties, liabilities and obligations under the Agreement and the other Loan Documents. 4. On the Transfer Effective Date, the Purchasing Lender shall pay to the Documentation and Administrative Agent at or before 12:00 Noon (Eastern time), in immediately available funds, an amount equal to the principal of all outstanding Loans being sold by the Transferor Lender to the Purchasing Lender. The Documentation and Administrative Agent shall pay such amount to the Transferor Lender, in immediately available funds, on the Transfer Effective Date. The principal amount paid by the Purchasing Lender to the Documentation and Administrative Agent is referred to hereinafter as the "Purchase Price". On and after the Transfer Effective Date, the Documentation and Administrative Agent shall begin to calculate interest on the outstanding Loans and all Fees under the Agreement and the other Loan Documents which are owed to the Transferor Lender and the Purchasing Lender, based on the Transferor Lender's and the Purchasing Lender's Commitment Percentages set forth in items 3 and 4 of Schedule I hereto. 5. From and after the Transfer Effective Date, (i) the Purchasing Lender (A) shall be a Lender party to the Agreement, (B) subject to the terms thereof, and to the extent provided in this Assignment and Assumption Agreement, shall have the rights, interests, liabilities, duties and obligations of the Transferor Lender thereunder and under the Loan Documents and (C) shall have a Revolving Credit Commitment and Commitment Percentage as set forth opposite the Purchasing Lender's name in item 3 of Schedule I hereto and (ii) the Transferor Lender (A) shall, to the extent provided in this Assignment and Assumption Agreement, relinquish such rights and interests and be released from such liabilities, duties and obligations under the Agreement and the other Loan Documents as shall have been assigned to the Purchasing Lender hereunder and (B) shall have the reduced Revolving Credit Commitment and Commitment Percentage as set forth opposite the Transferor Lender's name in item 4 of Schedule I hereto. 6. The Transferor Lender has made arrangements with the Purchasing Lender with respect to (i) the amount, if any, to be paid, and the date or dates for payment, by the Transferor Lender to such Purchasing Lender of any Fees heretofore received by the Transferor Lender pursuant to the Agreement or any other Loan Document prior to the Transfer Effective Date and (ii) the amount, if any, to be paid, and the date or dates for payment, by such - 24 - Purchasing Lender to the Transferor Lender of Fees or interest received by such Purchasing Lender pursuant to the Agreement or any other Loan Document from and after the Transfer Effective Date. Any such amount is in addition to the Purchase Price. 7. (i) All principal payments that would otherwise be payable from and after the Transfer Effective Date to or for the account of the Transferor Lender pursuant to the Agreement and the Notes payable to the Transferor Lender shall instead be payable to or for the account of the Transferor Lender and the Purchasing Lender in accordance with their respective interests as reflected in this Assignment and Assumption Agreement and on Schedule I hereto. (ii) All interest, Fees and other amounts that would otherwise accrue for the account of the Transferor Lender from and after the Transfer Effective Date pursuant to the Agreement, the Notes payable to the Transferor Lender or the other Loan Documents shall instead accrue for the account of, and be payable to, the Transferor Lender and the Purchasing Lender in accordance with their respective interests as reflected in this Assignment and Assumption Agreement and on Schedule I hereto. 8. As soon as possible after the Documentation and Administrative Agent has received from the Transferor Lender the existing Notes payable to the Transferor Lender and after the Borrower has executed and delivered to the Documentation and Administrative Agent new Notes, the Documentation and Administrative Agent shall deliver to the Transferor Lender a new Revolving Credit Note payable to the order of the Transferor Lender in a principal amount equal to the revised Revolving Credit Commitment of the Transferor Lender set forth in item 4 of Schedule I hereto and shall deliver to the Purchasing Lender a Revolving Credit Note payable to the order of the Purchasing Lender in a principal amount equal to the Revolving Credit Commitment of the Purchasing Lender set forth in item 3 of Schedule I hereto. 9. Each of the Transferor Lender and the Purchasing Lender represents and warrants to the other that (i) it has full power and legal right to execute and deliver this Assignment and Assumption Agreement and to perform the provisions of this Assignment and Assumption Agreement, (ii) the execution, delivery and performance of this Assignment and Assumption Agreement have been authorized by all necessary corporate action and (iii) this Assignment and Assumption Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. 10. By executing and delivering this Assignment and Assumption Agreement, the Transferor Lender and the Purchasing Lender confirm to and agree with each other, the Documentation and Administrative Agent and the other Lenders as follows: (i) except as set forth in paragraph 9 immediately above, the Transferor Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Agreement or any Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto; (ii) the Transferor Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or any of the Lenders or the performance or observance by the Borrower or any of the Lenders of any of their respective obligations under - 25 - the Agreement, the other Loan Documents or any other instrument or document furnished pursuant thereto; (iii) the Purchasing Lender confirms that it has received a copy of the Agreement, together with copies of the financial statements delivered to the Documentation and Administrative Agent pursuant to the Agreement, if any, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption Agreement; (iv) the Purchasing Lender has not relied upon and will continue independently and without reliance upon the Documentation and Administrative Agent, the Transferor Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, make its own credit decision in taking or not taking action under the Agreement and the other Loan Documents; (v) the Purchasing Lender appoints and authorizes the Documentation and Administrative Agent to take such action on its behalf and to exercise such powers under the Agreement and the other Loan Documents as are delegated to the Documentation and Administrative Agent by the terms of the Agreement and the other Loan Documents, together with such powers as are reasonably incidental thereto, all in accordance with Article VIII of the Agreement and in certain other Loan Documents; and (vi) the Purchasing Lender agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Agreement and the other Loan Documents are required to be performed by it as a Lender. 11. Each of the parties to this Assignment and Assumption Agreement agrees that, at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Assignment and Assumption Agreement. 12. As of the Transfer Effective Date, the Agreement shall be deemed to be amended (i) to make the Purchasing Lender a Lender for all purposes of the Agreement and the other Loan Documents and (ii) to adjust the Revolving Credit Commitment and Commitment Percentage of the Transferor Lender, and to provide for a Revolving Credit Commitment and Commitment Percentage for the Purchasing Lender, all as set forth on Schedule I hereto. 13. Schedule I hereto sets forth in items 3 and 4 thereof the Revolving Credit Commitment and Commitment Percentage of the Purchasing Lender and the revised Revolving Credit Commitment and Commitment Percentage of the Transferor Lender, and sets forth in item 2 certain administrative information with respect to the Purchasing Lender. 14. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REFERENCE TO THE PROVISIONS THEREOF REGARDING CONFLICTS OF LAW. 15. This Assignment and Assumption Agreement may be executed in as many counterparts as shall be convenient, each of which, when executed by the Transferor Lender, the Purchasing Lender or the Documentation and Administrative Agent shall be regarded as an original. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] - 26 - IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Assumption Agreement to be executed as of the date first above written. TRANSFEROR LENDER: By: ------------------------------------------- Name: Title: PURCHASING LENDER: By: ------------------------------------------- Name: Title: PNC BANK, NATIONAL ASSOCIATION, as the Documentation and Administrative Agent for the Lenders By: ------------------------------------------- Name: Title: Consented to this _____ day of ______________, 200__ ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation By:___________________________ Name: Title: SCHEDULE I TO ASSIGNMENT AND ASSUMPTION AGREEMENT 1. ___________________ Existing Long Term Revolving [Transferor Lender] Credit Commitment: $_________ Existing Long Term Revolving Credit Commitment Percentage: ________% Existing Short Term Revolving Credit Commitment: $_________ Existing Short Term Revolving Credit Commitment Percentage: ________% 2. ___________________ Purchased Amount of Long Term [Purchasing Lender] Revolving Credit Commitment: $_________ Purchased Amount of Short Term Revolving Credit Commitment: $_________ Address of Purchasing Lender for notice purposes: If by United States Mail: If by other means: ________________________ ________________________ ________________________ ________________________ Attention: _________________ ________________________ Attention: _____________________ Telephone: _____________________ Telecopier: _____________________ Telex: _____________________ Address of Purchasing Lender for LIBOR-Rate Loan funding, if different from above: Same as Above ______________________________________ ______________________________________ Attention: _______________________ Telephone: _______________________ Telecopier: _______________________ Telex: _______________________ 3. ___________________ Long Term Revolving Credit [Purchasing Lender] Commitment: $_________ Long Term Revolving Credit Commitment Percentage: ________% Short Term Revolving Credit Commitment: $_________ Short Term Revolving Credit Commitment Percentage: ________% 4. ___________________ Revised Long Term Revolving [Transferor Lender] Credit Commitment: $_________ Revised Long Term Revolving Credit Commitment Percentage: ________% Revised Short Term Revolving Credit Commitment: $_________ Revised Short Term Revolving Credit Commitment Percentage: ________% SCHEDULE II TO ASSIGNMENT AND ASSUMPTION AGREEMENT TRANSFER EFFECTIVE NOTICE ------------------------- TO: The Borrower, the Transferor Lender, the Purchasing Lender and each other Lender The undersigned, the Agent pursuant to the Amended and Restated Credit Agreement dated as of December 19, 2001 by and among Allegheny Technologies Incorporated, as the Borrower, the financial institutions which are or which become parties thereto as the Lenders, Mellon Bank, N.A., JPMorgan Chase Bank and Bank of America, National Association, as Syndication Agents and PNC Bank, National Association, as the Documentation and Administrative Agent for the Lenders, acknowledges receipt of fully executed counterparts of an Assignment and Assumption Agreement, as described in Schedule I attached hereto. Pursuant to such Assignment and Assumption Agreement, you are advised that the Transfer Effective Date will be _______________ [INSERT DATE WHICH IS THREE (3) BUSINESS DAYS FOLLOWING THE DATE OF THE TRANSFER EFFECTIVE NOTICE]. Capitalized terms used in this Transfer Effective Notice as defined terms shall have the meanings given them in the above-referenced Assignment and Assumption Agreement. Dated as of _________________. PNC BANK, NATIONAL ASSOCIATION, as Agent for the Lenders By: ---------------------------------------------- Name: Title: EXHIBIT K FORM OF TERM NOTE $ Pittsburgh, Pennsylvania -------------------------- December 20, 2001 This Term Note is executed and delivered under and pursuant to the terms of that certain Credit Agreement dated as of December 20, 2001 (the Credit Agreement together with the exhibits and schedules thereto and all amendments, modifications, extensions, renewals, replacements or restatements thereof and thereto, the "Agreement") by and among ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation (the "Borrower"), the financial institutions listed on the signature pages thereof and each other financial institution which, from time to time, may become a party to the Agreement, the syndication agents referred to therein (collectively the "Syndication Agents") and PNC BANK, NATIONAL ASSOCIATION, as documentation and administrative agent for the Lenders (in such capacity, the "Agent"). FOR VALUE RECEIVED, the Borrower promises to pay to the order of ________________ (the "Lender"), its successors and permitted assignees, at the office of the Agent at One PNC Plaza, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707 on the Term Loan Maturity Date the principal sum of _______________________________ Dollars ($___________) on or before the Term Loan Maturity Date pursuant to the Agreement together with interest on the unpaid principal balance thereof from time to time outstanding. Such Term Loan made by the Lender, and all repayments of the principal thereof shall be recorded by the Lender in the Loan Account maintained by the Lender under the Agreement and, if the Lender so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to such Term Loan then outstanding may be endorsed by the Lender on one or more of schedules attached hereto, or on a continuation of such schedule attached to and made a part hereof; PROVIDED that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Agreement. Interest on the unpaid principal balance hereof shall be due and payable at the rates and at the times determined in accordance with the Agreement during the term hereof to and including the Term Loan Maturity Date, and shall be calculated and adjusted in accordance with the terms of the Agreement. This Term Note is one of the Term Notes referred to in the Agreement. Reference is made to the Agreement for provisions for the prepayment hereof and for the acceleration of the maturity hereof. All of the terms, conditions, covenants, representations and warranties of the Agreement are incorporated herein by reference as if same were fully set forth herein. Demand, presentation, protest, notice of dishonor and notice of default are hereby waived. THIS TERM NOTE SHALL BE GOVERNED BY THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REFERENCE TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAW. WITNESS the due execution of this Term Note with the intent to be legally bound hereby. ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation By: --------------------------------------- Name: Title: SCHEDULE 3.8 Plans 1. REPORTABLE EVENTS AS DEFINED FOR PURPOSES OF THIS AGREEMENT. Reportable Events, as defined for purposes of this Agreement, (a) occurred in 1996 under PBGC Reg. 4043.19 (plan mergers) and 4043.29 (new contributing sponsor in controlled group which sponsors a plan underfunded by $1,000,000 or more) in connection with the business combination of Allegheny Ludlum Corporation and Teledyne, Inc. and essentially contemporaneous merger of the following overfunded defined benefit plans sponsored by Teledyne, Inc. with and into the respective underfunded defined benefit pension plan sponsored by Allegheny Ludlum Corporation indicated below with the resulting plan in each case being an overfunded plan sponsored by Allegheny Ludlum Corporation: (i) the Continental Motors Corporation Salaried Employees' Pension Plan with and into the Allegheny Ludlum Corporation Salaried Employees' Retirement Plan; (ii) the Teledyne Salaried Employees' Pension Plan with and into the Allegheny Ludlum Corporation Hourly Employees' Pension Plan; (iii) the Ohio Steel Corporation Salaried Employees' Pension Plan with and into the Jessop Steel Corporation Salaried Employees' Pension Plan; (iv) the Teledyne Ryan Aeronautical Hourly Pension Plan with and into the Jessop Steel Corporation Hourly Employees' Pension Plan; (v) the Teledyne Monarch Rubber Salaried Pension Plan with and into the Green River Steel Corporation Salaried Employees' Pension Plan; (vi) the Teledyne Retirement Plan for Production and Maintenance Employees with and into the Green River Steel Corporation Hourly Employees' Pension Plan; and (vii) the merger of the foregoing to form the Allegheny Technologies Incorporated Pension Plan (the "ATI Pension Plan"); and (b) occurred under PBGC Reg. 4043.32 on November 29, 1999 upon the spin off of stock of Teledyne Technologies Incorporated ("TTI"), and spin off of assets and liabilities to a defined benefit plan sponsored by TTI from the ATI Pension Plan. SCHEDULE 5.1 Existing Indebtedness $ in millions 1. ATI 10yr 8.375% notes due 12-15-11 $ 300 2. Commercial Paper 70 3. Bonds 33 see attached schedule 5.1A 4. Allegheny Ludlum 6.95% Debentures 150 due 12/15/25 5. Stahl Debt 10 * 6. Stellram S.A./Stellram GmbH 19 ** 7. Letters of Credit 39 see attached schedule 5.1B 8. Guarantee's 11 see schedule 5.1C 9. All other 2 see attached schedule 5.1D -------- Total $ 634
*STAHL DEBT - This relates to a joint venture in which Allegheny Ludlum has a 60% interest. ** STELLRAM - Reflects USD equivalent for current drawings on two revolving credit facilities. The total availability for each facility is 36 million swiss francs and 3 million euro's. Both facilities are placed with Bank of Tokyo Mitsubishi with an expiration date of May 31, 2004. SCHEDULE 5.1A Bonds ($000's) Allegheny Ludlum Industrial Revenue Bonds
Issue Maturity Original Amount Issue Date Date Amount Outstanding Rate - ----------------------------------------------------------------------------------------------------------------------------------- Allegheny County 2/1/1977 2/1/2007 $ 13,000 $ 9,400 Floating Allegheny County 12/15/78 12/1/03 1,700 600 7.20% Niagara Country 11/1/84 10/1/02 10,000 10,000 Floating Vandergrift (PIDA) 12/28/88 1/1/2004 2,000 373 3.00% Vandergrift (SunDay) 4/27/89 5/1/2004 3,750 772 3.00% -------- --------- $ 30,450 $ 21,145 TDY INDUSTRIES, INC. State of Oregon 11/13/01 9/1/2016 11,500 11,500 6.50% OREGON METALLURIGICAL CORPORATION Ti Wire 5/5/1980 5/04 201 61 85% of Prime Grand Total $ 42,151 $ 32,706 =========== ============
SCHEDULE 5.1B ( $ 000's)
Details of Letters of Credit Allegheny Ludlum Corporation Workers Comp PNC $ 750 Workers Comp Mellon 10,900 Comp Landfill PNC 1,970 Landfill PNC 250 * IRB - Support (Net) PNC 801 --------- Sub-Total $ 14,671 TDY Industries, Inc. Workers Comp BofA $ 2,481 Environmental Chase 2,000 Environmental BofA 610 Environmental Mellon 1,194 Performance Chase 3,215 All Other BofA/Mellon 1,250 --------- $ 10,750 Allegheny Technology Incorporated Workers Comp BofA $ 1,940 Workers Comp BofA 1,000 Workers Comp BTM 10,443 --------- Sub-Total $ 13,383 Grand Total $ 38,804 ==========
* A $10.8 million letter of credit supports the $10 million industrial revenue bond shown on schedule 5.1A. The balance relates to covered interest expense. SCHEDULE 5.1C ($ 000's)
Details of Guarantee's 1. ATI Green River - Environmental $ 8,000 2. TDY Holdlings for Wah Chang - Environmental 81 3. ATI for Wah Chang - Environmental 1,000 4. ATI for Packaging - Environmental 12 5. ATI for Adams, Union NJ - Environmental 100 6. TDY Holdings - Westmoreland NJ Facility - Environmental 699 7. ALC - Buckeye Landfill 643 ----------- $ 10,535
SCHEDULE 5.1D ($ 000's) All Other Oregon Metallurigical Corporation - 2 capitalized leases $ 359 Rome Metals - Promissory Note 1,529 ----------- $ 1,888 SCHEDULE 5.2 Existing Encumbrances Securing Indebtedness Security interests granted pursuant to the bonds listed in Schedule 5.1A. SCHEDULE 5.5 Assets Held For Sale - - North American operations of the titanium distribution company, Titanium Industries, Inc., excluding the Frackville, PA facility. - - The capital stock of Coordinators, Inc. $000's REAL PROPERTY LOCATION DESCRIPTION NBV ---------------------- ----------- ------- Ann Arbor, MI Land 2.3 San Marcos, CA Land 0 Riverside, CA Land 139.5 South El Monte, CA Land 220.8 Galveston, TX Land 98.3 Mohnton, PA Land - Buildings 86.7 Muskegon, MI Land 221.5 Hartville, OH Land - Buildings 0 Cleveland, OH Land 0 Ansonia, CT Land - Buildings 99.5 Latrobe, PA Land 37.1 San Diego, CA Land 993.6 Chester, PA Land - Buildings 0 Howell, MI Land - Buildings 260.9 San Diego, CA1 Land - Buildings 0 Sheffield, UK Buildings 1,300.0 Sheffield, UK Land 2,900.0 Nyon, SUI Buildings 3,125.0 Albany, OR Land 4,038.0 Monroe, NC Land 7.1 Monroe, NC Land 8.3 Monroe, NC Land 1.2 Monroe, NC Land 21.9 Monroe, NC Land 10.8 Richburg, SC Land 146.0 Richburg, SC Land 1,025.0 Woodstock, Ontario Land - Buildings 50.5 Skokie, IL Land 812.0 Buildings 891.6 Pittsburgh, PA(2) Buildings 0 San Diego, CA Land 221.0 Houston, TX Land 120.5 Building 788.2 ------- 17,627.3 - --------------------------------------- (2) Leased space held for sublease. SCHEDULE 9.3 Notices Allegheny Technologies Incorporated For operational issues: 1000 Six PPG Place JP Morgan Chase Bank Pittsburgh, Pennsylvania 15222 1 Chase Manhattan Plaza Attention: Robert S. Park New York, New York 10082 Vice President/Treasurer Attention: Sek Chan, Assistant Fax: 412-394-3034 Treasurer Telephone: 212-552-7929 WITH A COPY TO: Telecopier: 212-552-7490 Allegheny Technologies Incorporated Mellon Bank, N.A. 1000 Six PPG Place One Mellon Center, Room 370 Pittsburgh, Pennsylvania 15222 Pittsburgh, Pennsylvania 15258 Attention: Jon D. Walton Attention: Peter K. Lee Senior Vice President, Chief Fax: 412-234-8888 Legal and Administrative Email: lee.p@mellon.com Officer and Secretary Fax: 412-394-3034 Bank of America, N.A. 231 South LaSalle, IL1-231-10-50 PNC Bank, National Association Chicago, Illinois 60697 c/o PNC Agency Services Attention: Thomas R. Durham One PNC Plaza, 22nd Floor Fax: 312-974-8681 249 Fifth Avenue Email: Pittsburgh, Pennsylvania 15222 Attention: Trina Barkley Fax: 412-762-8672 PNC Bank, National Association, as Lender One PNC Plaza, 3rd Floor 249 Fifth Avenue Citibank, N.A. Pittsburgh, Pennsylvania 15222 388 Greenwich Street, 23rd Floor Attention: David B. Gookin New York, New York 10013 Fax: 412-705-3232 Attention: Prakash Chonkar Fax: 212-816-5402 Email: Bank of Tokyo-Mitsubishi Trust Company 1251 Avenue of the Americas, 12th Floor New York, New York 10020-1104 JPMorgan Chase Bank Attention: Heather Zimmermann 270 Park Avenue, 21st Floor Fax: 212-782-6440 New York, New York 10017 Email: hzimmermann@btmna.com Attention: James H. Ramage Fax: 212-270-4724 Email: james.ramage@jpmorgan.com -------------------------
The Industrial Bank of Japan, Limited National City Bank of Pennsylvania 1251 Avenue of the Americas National City Center New York, New York 20 Stanwix Street, 19th Floor Attention: Hilary Zhang Pittsburgh, Pennsylvania 15222 Fax: 212-282-4488 Attention: Debra W. Riefner Email: hzhang@ibjus.com Fax: 412-471-4883 Email: The Bank of New York One Wall Street, 21st Floor New York, New York 10286 Attention: Walter Parelli Fax: 212-635-7978 Email: EX-4.2 4 j9326701ex4-2.txt INDENTURE EXHIBIT 4.2 ================================================================================ ALLEGHENY TECHNOLOGIES INCORPORATED as Issuer and THE BANK OF NEW YORK as Trustee - -------------------------------------------------------------------------------- Indenture Dated as of December 18, 2001 - -------------------------------------------------------------------------------- $300,000,000 8.375% Notes due 2011 ================================================================================
CROSS-REFERENCE TABLE TIA Sections Indenture Sections - ------------ ------------------ ss. 310 (a)..........................................................................................7.10 (b)..........................................................................................7.08 ss. 311 .............................................................................................7.03 ss. 312 ............................................................................................10.02 ss. 313 .............................................................................................7.06 ss. 314 (c).........................................................................................10.04 (e).........................................................................................10.05 ss. 315 (a)....................................................................................7.01, 7.02 (b)....................................................................................7.02, 7.05 (c)..........................................................................................7.01 (d)..........................................................................................7.02 (e)....................................................................................6.12, 7.02 ss. 316 (a)........................................................................2.05, 6.02, 6.04, 6.05 (b)....................................................................................6.06, 6.07 (c).........................................................................................10.02 ss. 317 (a) (1)......................................................................................6.08 (a) (2)......................................................................................6.09 (b)..........................................................................................2.03 ss. 318 ............................................................................................10.01
i RECITALS ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions...................................................................................1 --------------------------- Section 1.02. Rules of Construction........................................................................10 ------------------------------------- ARTICLE 2 THE NOTES ------------------- Section 2.01 Form, Dating and Denominations; 144A, Reg S...................................................10 ---------------------------------------------------------- Section 2.02. Execution and Authentication; Exchange Notes; Additional Notes...............................12 ------------------------------------------------------------------------------ Section 2.03. Registrar, Paying Agent and Authenticating Agent; ---------------------------------------------------------------- Paying Agent to Hold Money in Trust........................................................13 ------------------------------------ Section 2.04. Replacement Notes............................................................................13 --------------------------------- Section 2.05. Outstanding Notes............................................................................14 --------------------------------- Section 2.06. Temporary Notes..............................................................................14 ------------------------------- Section 2.07. Cancellation.................................................................................15 ---------------------------- Section 2.08. CUSIP and CINS Numbers.......................................................................15 -------------------------------------- Section 2.09. Registration, Transfer and Exchange..........................................................15 --------------------------------------------------- Section 2.10. Restrictions on Transfer and Exchange........................................................18 ----------------------------------------------------- Section 2.11. Temporary Offshore Global Notes..............................................................20 ----------------------------------------------- ARTICLE 3 REDEMPTION -------------------- Section 3.01. Optional Redemption..........................................................................21 ----------------------------------- Section 3.02. Method and Effect of Redemption..............................................................21 ----------------------------------------------- ARTICLE 4 COVENANTS ------------------- Section 4.01. Payment of Notes.............................................................................22 -------------------------------- Section 4.02. Maintenance of Office or Agency..............................................................23 ----------------------------------------------- Section 4.03. Paying Agent.................................................................................23 ---------------------------- Section 4.04. Certificate to Trustee.......................................................................24 -------------------------------------- Section 4.05. Corporate Existence..........................................................................24 ----------------------------------- Section 4.06. Securityholders' Lists.......................................................................24 --------------------------------------
ii Section 4.07. Reports by the Issuer........................................................................24 ------------------------------------- Section 4.08. Reports by the Trustee.......................................................................24 -------------------------------------- Section 4.09. Appointment to Fill a Vacancy in Office of Trustee...........................................25 ------------------------------------------------------------------ Section 4.10. Limitation on Liens..........................................................................25 ----------------------------------- Section 4.11. Limitation on Sale and Leaseback Transactions................................................26 ------------------------------------------------------------- Section 4.12. Limitation on Guarantees.....................................................................26 ---------------------------------------- Section 4.13. Waiver of Certain Covenants..................................................................26 ------------------------------------------- ARTICLE 5 CONSOLIDATION, MERGER OR SALE OF ASSETS ------------------------------------------------- Section 5.01. Consolidation, Merger or Sale of Assets by the Company.......................................27 ---------------------------------------------------------------------- Section 5.02. Successor Person Substituted.................................................................27 -------------------------------------------- ARTICLE 6 DEFAULT AND REMEDIES ------------------------------ Section 6.01. Events of Default............................................................................28 --------------------------------- Section 6.02. Acceleration.................................................................................28 ---------------------------- Section 6.03. Other Remedies...............................................................................29 ------------------------------ Section 6.04. Waiver of Past Defaults......................................................................29 --------------------------------------- Section 6.05. Control by Majority..........................................................................29 ----------------------------------- Section 6.06. Limitation on Suits..........................................................................29 ----------------------------------- Section 6.07. Rights of Holders to Receive Payment.........................................................30 ---------------------------------------------------- Section 6.08. Collection Suit by Trustee...................................................................30 ------------------------------------------ Section 6.09. Trustee May File Proofs of Claim.............................................................30 ------------------------------------------------ Section 6.10. Priorities...................................................................................31 -------------------------- Section 6.11. Restoration of Rights and Remedies...........................................................31 -------------------------------------------------- Section 6.12. Undertaking for Costs........................................................................31 ------------------------------------- Section 6.13. Rights and Remedies Cumulative...............................................................32 ---------------------------------------------- Section 6.14. Delay or Omission Not Waiver.................................................................32 -------------------------------------------- Section 6.15. Waiver of Stay, Extension or Usury Laws......................................................32 -------------------------------------------------------
iii ARTICLE 7 THE TRUSTEE --------------------- Section 7.01. General......................................................................................32 ----------------------- Section 7.02. Certain Rights of Trustee....................................................................33 ----------------------------------------- Section 7.03. Individual Rights of Trustee.................................................................34 -------------------------------------------- Section 7.04. Trustee's Disclaimer.........................................................................34 ------------------------------------ Section 7.05. Notice of Default............................................................................35 --------------------------------- Section 7.06. Reports by Trustee to Holders................................................................35 --------------------------------------------- Section 7.07. Compensation and Indemnity...................................................................35 ------------------------------------------ Section 7.08. Replacement of Trustee.......................................................................36 -------------------------------------- Section 7.09. Successor Trustee by Merger..................................................................37 ------------------------------------------- Section 7.10. Eligibility..................................................................................37 --------------------------- Section 7.11. Money Held in Trust..........................................................................37 ----------------------------------- ARTICLE 8 DEFEASANCE AND DISCHARGE ---------------------------------- Section 8.01. Discharge of Company's Obligations...........................................................37 -------------------------------------------------- Section 8.02. Legal Defeasance.............................................................................38 -------------------------------- Section 8.03. Covenant Defeasance..........................................................................39 ----------------------------------- Section 8.04. Application of Trust Money...................................................................39 ------------------------------------------ Section 8.05. Repayment to Company.........................................................................40 ------------------------------------ Section 8.06. Reinstatement................................................................................40 ----------------------------- ARTICLE 9 AMENDMENTS, SUPPLEMENTS AND WAIVERS --------------------------------------------- Section 9.01. Amendments Without Consent of Holders........................................................40 ----------------------------------------------------- Section 9.02. Amendments With Consent of Holders...........................................................41 -------------------------------------------------- Section 9.03. Effect of Consent............................................................................42 --------------------------------- Section 9.04. Trustee's Rights and Obligations.............................................................43 ------------------------------------------------ Section 9.05. Conformity with Trust Indenture Act..........................................................43 --------------------------------------------------- Section 9.06. Payments for Consents........................................................................43 -------------------------------------
iv ARTICLE 10 MISCELLANEOUS ------------------------ Section 10.01. Trust Indenture Act of 1939.................................................................43 -------------------------------------------- Section 10.02. Noteholder Communications; Noteholder Actions...............................................43 -------------------------------------------------------------- Section 10.03. Notices.....................................................................................44 ------------------------ Section 10.04. Certificate and Opinion as to Conditions Precedent..........................................45 ------------------------------------------------------------------- Section 10.05. Statements Required in Certificate or Opinion...............................................45 -------------------------------------------------------------- Section 10.06. Payment Date Other Than a Business Day......................................................46 ------------------------------------------------------- Section 10.07. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.............................46 -------------------------------------------------------------------------------- Section 10.08. No Adverse Interpretation of Other Agreements...............................................46 -------------------------------------------------------------- Section 10.09. Successors..................................................................................47 --------------------------- Section 10.10. Duplicate Originals.........................................................................47 ------------------------------------ Section 10.11. Separability................................................................................47 ----------------------------- Section 10.12. Table of Contents and Headings..............................................................47 ----------------------------------------------- Section 10.13. No Liability of Directors, Officers, Employees, Incorporators and Stockholders..............47 ------------------------------------------------------------------------------------------------------------
EXHIBITS - -------- Exhibit A.....................................................Form of Note Exhibit B.....................................................Restricted Legend Exhibit C.....................................................DTC Legend Exhibit D.....................................................Regulation S Certificate Exhibit E.....................................................Rule 144A Certificate Exhibit F.....................................................Form of Certificate of Beneficial Ownership Exhibit G.....................................................Institutional Accredited Investor Certificate Exhibit H.....................................................Temporary Offshore Global Note Legend
v INDENTURE, dated as of December 18, 2001, between ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation (the "Company"), and THE BANK OF NEW YORK, a New York banking corporation, as Trustee. RECITALS The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of up to $300,000,000 aggregate principal amount of the Company's 8.375% Notes due 2011 (the "Notes", which term includes, if and when issued, any Additional Notes and any Exchange Notes issued therefor as provided herein). All things necessary to make this Indenture a valid and legally binding agreement of the Company, in accordance with its terms, have been done, and the Company has done all things necessary to make the Notes (in the case of the Additional Notes, when duly authorized), when issued, executed and delivered by the Company and authenticated and delivered by the Trustee, the valid and legally binding obligations of the Company as hereinafter provided. This Indenture is subject to, and will be governed by, the provisions of the Trust Indenture Act that are required to be a part of and govern indentures qualified under the Trust Indenture Act. THIS INDENTURE WITNESSETH For and in consideration of the premises and the purchase of the Notes by the Holders thereof, the parties hereto covenant and agree, for the equal and proportionate benefit of all Holders, as follows: ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions. "Additional Interest" means additional interest owed to the Holders pursuant to a Registration Rights Agreement. "Additional Notes" means any notes issued under this Indenture in addition to the Original Notes, including any Exchange Notes issued in exchange for such Additional Notes, having the same terms in all respects as the Original Notes except that interest will accrue on the Additional Notes from their date of issuance. "Adjusted Treasury Rate" means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with") with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the 1 management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Agent" means any Registrar, Paying Agent or Authenticating Agent. "Agent Member" means a member of, or a participant in, the Depositary. "Attributable Debt" in respect of a Sale and Leaseback Transaction means, as of any particular time, the present value (discounted at the rate of interest implicit in the terms of the lease involved in such Sale and Leaseback Transaction, as determined in good faith by the Company) of the obligation of the lessee thereunder for net rental payments (excluding, however, any amounts required to be paid by such lessee, whether or not designated as rent or additional rent, on account of maintenance and repairs, services, insurance, taxes, assessments, water rates or similar charges and any amounts required to be paid by such lessee thereunder contingent upon monetary inflation or the amount of sales, maintenance and repairs, insurance, taxes, assessments, water rates or similar charges) during the remaining term of such lease (including any period for which such lease has been extended or may, at the option of the lessor, be extended). "Authenticating Agent" refers to a Person engaged to authenticate the Notes in the stead of the Trustee. "bankruptcy default" has the meaning assigned to such term in Section 6.01(e). "Board of Directors" means the board of directors or comparable governing body of the Company, or any committee thereof duly authorized to act on its behalf. "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City or in the city where the Corporate Trust Office of the Trustee is located are authorized by law to close. "Certificate of Beneficial Ownership" means a certificate substantially in the form of Exhibit F. "Certificated Note" means a Note in registered individual form without interest coupons. "Clearstream" means Clearstream Banking, S.A. and its successors. "Commission" means the Securities and Exchange Commission. "Company" means the party named as such in the first paragraph of this Indenture or any successor obligor under this Indenture and the Notes pursuant to Article 5. "Comparable Treasury Issue" means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the remaining term of the Notes to be redeemed that would be utilized, at the time of selection and in accordance with customary 2 financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such Notes. "Comparable Treasury Price" means, with respect to any redemption date, (i) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (ii) if the Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the average of all such quotations. "Consolidated Net Tangible Assets," which may be determined as of a date not more than 60 days prior to the happening of an event for which such determination is being made, means the total of all the assets appearing on the consolidated balance sheet of the Company and its Subsidiaries, less the following: (i) current liabilities; (ii) intangible assets, including without limitation, such items as goodwill, trademarks, trade names, patents and unamortized debt discount and expense carried as an asset on said balance sheet; and (iii) appropriate adjustments on account of minority interests of other Persons holding stock in any Subsidiary of the Company. "Corporate Trust Office" means the office of the Trustee at which the corporate trust business of the Trustee is principally administered, which at the date of this Indenture is located at 5 Penn Plaza, 13th Floor, New York, New York 10001. "Debt" means all indebtedness for money borrowed. "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Depositary" means the depositary of each Global Note, which will initially be DTC. "DTC" means The Depository Trust Company, a New York corporation, and its successors. "Discharged" means, for purposes of Section 8.03, that the Company shall be deemed to have paid and discharged the entire indebtedness represented by, and obligations under, the Notes and to have satisfied all the obligations under this Indenture relating to the Notes (and the Trustee, at the expense of the Company, shall execute proper instruments prepared by the Company acknowledging the same), except (i) rights of registration of transfer and exchange, and the Company's right of optional redemption, if any, (ii) substitution of mutilated, defaced, destroyed, lost or stolen Notes, (iii) rights of Holders of Notes to receive from the trust fund described in Section 8.01(a)(ii)(B), payments of principal of, and premium (not relating to optional redemption), if any, and interest on the Notes, (iv) the rights, obligations and immunities of the Trustee hereunder and (v) the rights of the Holders as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them. 3 "DTC Legend" means the legend set forth in Exhibit C. "Domestic Subsidiary" means any Subsidiary formed under the laws of, or conducting its principal operations within, the United States of America or any State or territory thereof. "Euroclear" means Euroclear Bank S.A./N.V., and its successors or assigns, as operator of the Euroclear System. "Event of Default" has the meaning assigned to such term in Section 6.01. "Exchange Act" means the Securities Exchange Act of 1934. "Exchange Notes" means the Notes of the Company issued pursuant to this Indenture in exchange for, and in an aggregate principal amount equal to, the Initial Notes or any Initial Additional Notes in compliance with the terms of a Registration Rights Agreement and containing terms substantially identical to the Initial Notes or any Initial Additional Notes (except that (i) such Exchange Notes will be registered under the Securities Act and will not be subject to transfer restrictions or bear the Restricted Legend, and (ii) the provisions relating to Additional Interest will be eliminated). "Exchange Offer" means an offer by the Company to the Holders of the Initial Notes or any Initial Additional Notes to exchange outstanding Notes for Exchange Notes, as provided for in a Registration Rights Agreement. "Exchange Offer Registration Statement" means the Exchange Offer Registration Statement as defined in a Registration Rights Agreement. "GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time. "Global Note" means a Note in registered global form without interest coupons. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof, in whole or in part; provided that the term "Guarantee" does not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Holder" or "Noteholder" means the registered holder of any Note. 4 "Indenture" means this indenture, as amended or supplemented from time to time. "Initial Additional Notes" means Additional Notes issued in an offering not registered under the Securities Act and any Notes issued in replacement thereof, but not including any Exchange Notes issued in exchange therefor. "Initial Notes" means the Notes issued on the Issue Date and any Notes issued in replacement thereof, but not including any Exchange Notes issued in exchange therefor. "Initial Purchasers" means the initial purchasers party to a purchase agreement with the Company relating to the sale of the Initial Notes or Initial Additional Notes by the Company. "Institutional Accredited Investor Certificate" means a certificate substantially in the form of Exhibit G hereto. "interest", in respect of the Notes, unless the context otherwise requires, refers to interest and Additional Interest, if any. "Interest Payment Date" means each June 15 and December 15 of each year, commencing June 15, 2002. "Issue Date" means the date on which the Notes are originally issued under this Indenture. "Lien" means any mortgage, pledge, lien, encumbrance, charge or security interest of any kind; provided, however, that none of the following shall be deemed to be a Lien: (1) pledges or deposits under workmen's compensation, unemployment insurance or similar statutes and mechanics', workmen's, repairmen's, materialmen's, carriers' or other similar liens arising in the ordinary course of business or deposits or pledges to obtain the release of any such liens; (2) liens for taxes or assessments or governmental charges or levies not yet due or delinquent, or which can thereafter be paid without penalty, or which are being contested in good faith by appropriate proceedings; landlord's liens on property held under lease; and any other liens of a nature similar to those herein above described in this clause (2) which do not, in the opinion of the Company, materially impair the use of such property in the operation of the business of the Company or a Domestic Subsidiary or the value of such property for the purpose of such business; or (3) any easement or similar encumbrance, the existence of which does not impair the use of the property subject thereto for the purposes for which it is used. "Non-U.S. Person" means a Person that is not a U.S. person, as defined in Regulation S. 5 "Notes" has the meaning assigned to such term in the Recitals. "Officer" means the chairman of the Board of Directors, the president or chief executive officer, any vice president, the chief financial officer, the treasurer or any assistant treasurer, or the secretary or any assistant secretary, of the Company. "Officers' Certificate" means a certificate signed in the name of the Company (i) by the chairman of the Board of Directors, the president or chief executive officer, an executive vice president, senior vice president or a vice president and (ii) by the chief financial officer, the treasurer or any assistant treasurer or the secretary or any assistant secretary. "Offshore Global Note" means a Global Note representing Notes issued and sold pursuant to Regulation S. "Opinion of Counsel" means a written opinion signed by legal counsel, who may be an employee of or counsel to the Company. "Original Notes" means the Initial Notes and any Exchange Notes issued in exchange therefor. "Paying Agent" refers to a Person engaged to perform the obligations of the Trustee in respect of payments made or funds held hereunder in respect of the Notes. "Permanent Offshore Global Note" means an Offshore Global Note that does not bear the Temporary Offshore Global Note Legend. "Permitted Liens" means (1) Liens on any property acquired, constructed or improved by the Company or any Domestic Subsidiary after the Issue Date, which are created or assumed contemporaneously with or within three years after, such acquisition, or completion of construction or improvement (or within six months thereafter pursuant to a firm commitment for financing arrangements entered into with a lender or investor within such three-year period) to secure or provide for the payment of all or any part of the purchase price of such property or the cost of such construction or improvement incurred after the Issue Date, or, in addition to Liens contemplated by clauses (2) or (3) below, Liens on any property existing at the time of acquisition thereof, provided that the Lien shall not apply to any property theretofore owned by the Company or any Domestic Subsidiary other than, in the case of any such construction or improvement, any theretofore unimproved real property on which the property so constructed, or the improvement, is located; (2) Liens on any property, shares of stock or indebtedness existing at the time of acquisition thereof and acquired from a Person that is merged or consolidated with or into the Company or a Domestic Subsidiary after the Issue Date; 6 (3) with respect to any corporation that becomes a Domestic Subsidiary after the Issue Date, Liens on property, or shares of stock or indebtedness of a corporation existing at the time such corporation becomes a Domestic Subsidiary and not incurred in connection with or anticipation of such corporation becoming a Domestic Subsidiary; (4) Liens to secure Debt of a Domestic Subsidiary owed to the Company or Debt of a Domestic Subsidiary owed to another Domestic Subsidiary; (5) Liens in favor of the United States or any State thereof, or any department, agency or instrumentality or political subdivision of the United States or any state thereof, to secure partial progress, advance or other payments pursuant to any contract or statute; (6) any Lien existing on the Issue Date; or (7) Liens for the sole purpose of extending, renewing or replacing Debt, in whole or in part, secured by any Lien referred to in the foregoing clauses (1) to (6), inclusive, provided, however, that the principal amount of Debt secured thereby shall not exceed the principal amount of Debt so secured at the time of such extension, renewal or replacement, and that such extension, renewal or replacement shall be limited to all or a part of the property that secured the Lien so extended, renewed or replaced (plus improvements on such property). "Person" means any individual, corporation, partnership, joint venture, limited liability company, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "principal" of any Debt means the principal amount of such Debt, (or if such Debt was issued with original issue discount, the face amount of such Debt less the remaining unamortized portion of the original issue discount of such Debt), together with, unless the context otherwise indicates, any premium then payable on such Debt. "Principal Property" means any manufacturing plant or other similar facility owned by the Company or any Domestic Subsidiary, the book value of the real property, plant and equipment of which (as shown, without deduction of any depreciation reserves, on the books of the owner or owners) is not less than two percent of Consolidated Net Tangible Assets except (a) any such plant or facility which our Board of Directors determines is not of material importance to the total business conducted, or assets owned, by the Company and its Domestic Subsidiaries as an entirety, or (b) any portion of any such plant or facility which our Board of Directors determines not to be of material importance to the use or operation thereof. "Quotation Agent" means the Reference Treasury Dealer appointed by the Company. 7 "Reference Treasury Dealer" means (i) each of J.P. Morgan Securities Inc. and Banc of America Securities LLC, and their respective successors and three other nationally recognized investment banking firms that are Primary U.S. Government Securities dealers in New York City (each, a "Primary Treasury Dealer") specified from time to time by the Company. However, if any the foregoing shall cease to be a Primary Treasury Dealer, the Company shall substitute therefor another Primary Treasury Dealer; and (ii) any other Primary Treasury Dealer selected by the Company. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Company, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding such redemption date. "Register" has the meaning assigned to such term in Section 2.09. "Registrar" means a Person engaged to maintain the Register. "Registration Rights Agreement" means (i) the Registration Rights Agreement dated on or about the Issue Date between the Company and the Initial Purchasers party thereto with respect to the Initial Notes, and (ii) with respect to any Additional Notes, any registration rights agreements between the Company and the Initial Purchasers party thereto relating to rights given by the Company to the purchasers of Additional Notes to register such Additional Notes or exchange them for Notes registered under the Securities Act. "Regular Record Date" for the interest payable on any Interest Payment Date means the June 1 or December 1 (whether or not a Business Day) next preceding such Interest Payment Date. "Regulation S" means Regulation S under the Securities Act. "Regulation S Certificate" means a certificate substantially in the form of Exhibit D hereto. "Resale Registration Statement" means the Resale Registration Statement as defined in the Registration Rights Agreement. "Responsible Officer" shall mean, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture. "Restricted Legend" means the legend set forth in Exhibit C. 8 "Restricted Period" means the relevant 40-day distribution compliance period as defined in Regulation S. "Rule 144A" means Rule 144A under the Securities Act. "Rule 144A Certificate" means (i) a certificate substantially in the form of Exhibit E hereto or (ii) a written certification addressed to the Company and the Trustee to the effect that the Person making such certification (x) is acquiring such Note (or beneficial interest) for its own account or one or more accounts with respect to which it exercises sole investment discretion and that it and each such account is a qualified institutional buyer within the meaning of Rule 144A, (y) is aware that the transfer to it or exchange, as applicable, is being made in reliance upon the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A, and (z) acknowledges that it has received such information regarding the Company as it has requested pursuant to Rule 144A(d)(4) or has determined not to request such information. "Sale and Leaseback Transaction" means any arrangement with any Person providing for the leasing to the Company or any Domestic Subsidiary of any Principal Property (or portion thereof) (except for temporary leases for a term, including any renewal thereof, of not more than 36 months and except for leases between the Company and a Subsidiary or between Subsidiaries), which Principal Property (or portion thereof) has been or is to be sold or transferred by the Company or such Domestic Subsidiary to such Person. "Securities Act" means the Securities Act of 1933. "Stated Maturity" means (i) with respect to any Debt, the date specified as the fixed date on which the final installment of principal of such Debt is due and payable or (ii) with respect to any scheduled installment of principal of or interest on any Debt, the date specified as the fixed date on which such installment is due and payable as set forth in the documentation governing such Debt, not including any contingent obligation to repay, redeem or repurchase prior to the regularly scheduled date for payment. "Subsidiary" means with respect to any Person, any corporation, association or other business entity of which more than 50% of the outstanding Voting Stock is owned, directly or indirectly, by such Person and one or more Subsidiaries of such Person (or a combination thereof). Unless otherwise specified, "Subsidiary" means a Subsidiary of the Company. "Temporary Offshore Global Note" means an Offshore Global Note that bears the Temporary Offshore Global Note Legend. "Temporary Offshore Global Note Legend" means the legend set forth in Exhibit H. "Trustee" means the party named as such in the first paragraph of this Indenture or any successor trustee under this Indenture pursuant to Article 7. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended. 9 "U.S. Global Note" means a Global Note that bears the Restricted Legend representing Notes issued and sold pursuant to Rule 144A. "U.S. Government Securities" means obligations issued or directly and fully guaranteed or insured by the United States of America or by any agent or instrumentality thereof, provided that the full faith and credit of the United States of America is pledged in support thereof. "Voting Stock," as applied to the stock of any corporation, means stock of any class or classes (however designated) having by the terms thereof ordinary voting power to elect a majority of the members of the board of directors (or other governing body) of such corporation other than stock having such power only by reason of the happening of a contingency. Section 1.02. Rules of Construction. Unless the context otherwise requires or except as otherwise expressly provided, (1) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (2) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Section, Article or other subdivision; (3) all references to Sections or Articles or Exhibits refer to Sections or Articles or Exhibits of or to this Indenture unless otherwise indicated; (4) references to agreements or instruments, or to statutes or regulations, are to such agreements or instruments, or statutes or regulations, as amended from time to time (or to successor statutes and regulations); and (5) in the event that a transaction meets the criteria of more than one category of permitted transactions or listed exceptions the Company may classify such transaction as it, in its sole discretion, determines. ARTICLE 2 THE NOTES Section 2.01 Form, Dating and Denominations; 144A, Reg S. (a) The Notes and the Trustee's certificate of authentication will be substantially in the form attached as Exhibit A. The terms and provisions contained in the form of the Notes annexed as Exhibit A constitute, and are hereby expressly made, a part of this Indenture. The Notes may have notations, legends or endorsements required by law, rules of or agreements with national securities exchanges to which the Company is subject, or usage. Each Note will be dated the date of its authentication. The Notes will be 10 issuable in denominations of $1,000 in principal amount and any multiple of $1,000 in excess thereof. (b)(i) Except as otherwise provided in Section 2.01(c), Section 2.09(b)(iv), Section 2.10(b)(iii), Section 2.10(b)(v), or Section 2.10(c), each Initial Note or Initial Additional Note (other than a Permanent Offshore Note) will bear the Restricted Legend. (ii) Each Global Note, whether or not an Initial Note or Initial Additional Note, will bear the DTC Legend. (iii) Each Temporary Offshore Global Note will bear the Temporary Offshore Global Note Legend. (iv) Initial Notes and Initial Additional Notes offered and sold in reliance on Regulation S will be issued as provided in Section 2.11(a). (v) Initial Notes and Initial Additional Notes offered and sold in reliance on any exception under the Securities Act other than Regulation S and Rule 144A will be issued, and upon the request of the Company to the Trustee, Initial Notes offered and sold in reliance on Rule 144A may be issued, in the form of Certificated Notes. (vi) Exchange Notes will be issued, subject to Section 2.09(b), in the form of one or more Global Notes. (c)(i) If the Company determines (upon the advice of counsel and such other certifications and evidence as the Company may reasonably require) that a Note is eligible for resale pursuant to Rule 144(k) under the Securities Act (or a successor provision) and that the Restricted Legend is no longer necessary or appropriate in order to ensure that subsequent transfers of the Note (or a beneficial interest therein) are effected in compliance with the Securities Act, or (ii) after an Initial Note or any Initial Additional Note is (x) sold pursuant to an effective registration statement under the Securities Act, pursuant to the Registration Rights Agreement or otherwise, or (y) is validly tendered for exchange into an Exchange Note pursuant to an Exchange Offer, the Company may instruct the Trustee to cancel the Note and issue to the Holder thereof (or to its transferee) a new Note of like tenor and amount, registered in the name of the Holder thereof (or its transferee), that does not bear the Restricted Legend, and the Trustee will comply with such instruction. (d) By its acceptance of any Note bearing the Restricted Legend (or any beneficial interest in such a Note), each Holder thereof and each 11 owner of a beneficial interest therein acknowledges the restrictions on transfer of such Note (and any such beneficial interest) set forth in this Indenture and in the Restricted Legend and agrees that it will transfer such Note (and any such beneficial interest) only in accordance with this Indenture and such legend. Section 2.02. Execution and Authentication; Exchange Notes; Additional Notes. (a) An Officer shall execute the Notes for the Company by facsimile or manual signature in the name and on behalf of the Company. If an Officer whose signature is on a Note no longer holds that office at the time the Note is authenticated, the Note will still be valid. (b) A Note will not be valid until the Trustee manually signs the certificate of authentication on the Note, with the signature conclusive evidence that the Note has been authenticated under this Indenture. (c) At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Notes executed by the Company to the Trustee for authentication. The Trustee will authenticate and deliver (i) Initial Notes for original issue in the aggregate principal amount not to exceed $300,000,000, (ii) Initial Additional Notes from time to time for original issue in aggregate principal amounts specified by the Company, and (iii) Exchange Notes from time to time for issue in exchange for a like principal amount of Initial Notes or Initial Additional Notes, in each case, after the following conditions have been met: (A) Receipt by the Trustee of an Officers' Certificate specifying: (1) the amount of Notes to be authenticated and the date on which the Notes are to be authenticated, (2) whether the Notes are to be Initial Notes, Additional Notes or Exchange Notes, (3) in the case of Initial Additional Notes, that the issuance of such Notes does not contravene any provision of Article 4, (4) whether the Notes are to be issued as one or more Global Notes or Certificated Notes, (5) other information the Company may determine to include or the Trustee may reasonably request, and 12 (6) in the case of Initial Additional Notes, receipt by the Trustee of an Opinion of Counsel confirming that the Holders of the outstanding Notes will be subject to federal income tax in the same amounts, in the same manner and at the same times as would have been the case if such Additional Notes were not issued. (B) In the case of Exchange Notes, effectiveness of an Exchange Offer Registration Statement and consummation of the exchange offer thereunder (and receipt by the Trustee of an Officers' Certificate to that effect). Initial Notes or Initial Additional Notes exchanged for Exchange Notes will be cancelled by the Trustee. (C) In any case contemplated by this Section 2.02, receipt by the Trustee of an Opinion of Counsel and Trustee's Certificate pursuant to Section 10.04 hereof. Section 2.03. Registrar, Paying Agent and Authenticating Agent; Paying Agent to Hold Money in Trust. (a) The Company may appoint one or more Registrars and one or more Paying Agents, and the Trustee may appoint an Authenticating Agent, in which case each reference in this Indenture to the Trustee in respect of the obligations of the Trustee to be performed by that Agent will be deemed to be references to the Agent. The Company may act as Registrar or (except for purposes of Article 8) Paying Agent. In each case the Company and the Trustee will enter into an appropriate agreement with the Agent implementing the provisions of this Indenture relating to the obligations of the Trustee to be performed by the Agent and the related rights. The Company initially appoints the Trustee as Registrar and Paying Agent. (b) The Company will require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of the Holders or the Trustee all money held by the Paying Agent for the payment of principal of and interest on the Notes and will promptly notify the Trustee of any default by the Company in making any such payment. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and account for any funds disbursed, and the Trustee may at any time during the continuance of any payment default, upon written request to a Paying Agent, require the Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed. Upon doing so, the Paying Agent will have no further liability for the money so paid over to the Trustee. Section 2.04. Replacement Notes. If a mutilated Note is surrendered to the Trustee or if a Holder claims that its Note has been lost, destroyed or wrongfully taken, the Company will issue and the Trustee will authenticate a replacement Note of like tenor and principal amount and bearing a number not contemporaneously outstanding. Every replacement Note is an additional obligation of the Company and entitled to the benefits of this Indenture. An indemnity must be furnished that is 13 sufficient in the judgment of both the Trustee and the Company to protect the Company and the Trustee from any loss they may suffer if a Note is replaced. The Company may charge the Holder for the expenses of the Company and the Trustee in replacing a Note. In case the mutilated, lost, destroyed or wrongfully taken Note has become or is about to become due and payable, the Company in its discretion may pay the Note instead of issuing a replacement Note. Section 2.05. Outstanding Notes. (a) Notes outstanding at any time are all Notes that have been authenticated by the Trustee except for (i) Notes cancelled by the Trustee or delivered to it for cancellation; (ii) any Note which has been replaced pursuant to Section 2.04 unless and until the Trustee and the Company receive proof satisfactory to them that the replaced Note is held by a bona fide purchaser; and (iii) on or after the maturity date or any redemption date, those Notes payable or to be redeemed on that date for which the Trustee (or Paying Agent, other than the Company or an Affiliate of the Company) holds money sufficient to pay all amounts then due. (b) A Note does not cease to be outstanding because the Company or one of its Affiliates holds the Note, provided that in determining whether the Holders of the requisite principal amount of the outstanding Notes have given or taken any request, demand, authorization, direction, notice, consent, waiver or other action hereunder, Notes owned by the Company or any Affiliate of the Company will be disregarded and deemed not to be outstanding, (it being understood that in determining whether the Trustee is protected in relying upon any such request, demand, authorization, direction, notice, consent, waiver or other action, only Notes which a Responsible Officer of the Trustee actually knows to be so owned will be so disregarded). Notes so owned which have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the Company or any Affiliate of the Company. Section 2.06. Temporary Notes. Until definitive Notes are ready for delivery, the Company may prepare and the Trustee will authenticate temporary Notes. Temporary Notes will be substantially in the form of definitive Notes but may have insertions, substitutions, omissions and other variations determined to be appropriate by the Officer executing the temporary Notes, as evidenced by the execution of the temporary Notes. If temporary Notes are issued, the Company will cause definitive Notes to be prepared without unreasonable delay. After the preparation of definitive Notes, the temporary Notes will be exchangeable for definitive Notes upon surrender of the temporary Notes at the office or agency of the Company designated for the purpose pursuant to Section 4.02, without charge to the Holder. Upon surrender for cancellation of any temporary Notes the Company will execute and the Trustee will authenticate and deliver in exchange 14 therefor a like principal amount of definitive Notes of authorized denominations. Until so exchanged, the temporary Notes will be entitled to the same benefits under this Indenture as definitive Notes. Section 2.07. Cancellation. The Company at any time may deliver to the Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee for cancellation any Notes previously authenticated hereunder which the Company has not issued and sold. Any Registrar or the Paying Agent will forward to the Trustee any Notes surrendered to it for transfer, exchange or payment. The Trustee will cancel all Notes surrendered for transfer, exchange, payment or cancellation and dispose of them in accordance with its normal procedures or the written instructions of the Company. The Company may not issue new Notes to replace Notes it has paid in full or delivered to the Trustee for cancellation. Section 2.08. CUSIP and CINS Numbers. The Company in issuing the Notes may use "CUSIP" and "CINS" numbers, and the Trustee will use CUSIP numbers or CINS numbers in notices of redemption or exchange as a convenience to Holders, the notice to state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of redemption or exchange. The Company will promptly notify the Trustee of any change in the CUSIP or CINS numbers. Section 2.09. Registration, Transfer and Exchange. (a) The Notes will be issued in registered form only, without coupons, and the Company shall cause the Trustee to maintain a register (the "Register") of the Notes, for registering the record ownership of the Notes by the Holders and transfers and exchanges of the Notes. (b) (i) Each Global Note will be registered in the name of the Depositary or its nominee and, so long as DTC is serving as the Depositary thereof, will bear the DTC Legend. (ii) Each Global Note will be delivered to the Trustee as custodian for the Depositary. Transfers of a Global Note (but not a beneficial interest therein) will be limited to transfers thereof in whole, but not in part, to the Depositary, its successors or their respective nominees, except (A) as set forth in Section 2.09(b)(iv) and (B) transfers of portions thereof in the form of Certificated Notes may be made upon request of an Agent Member (for itself or on behalf of a beneficial owner) by written notice given to the Trustee by or on behalf of the Depositary in accordance with customary procedures of the Depositary and in compliance with this Section and Section 2.10. (iii) Agent Members will have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary, and the Depositary may 15 be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner and Holder of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, the Depositary or its nominee may grant proxies and otherwise authorize any Person (including any Agent Member and any Person that holds a beneficial interest in a Global Note through an Agent Member) to take any action which a Holder is entitled to take under this Indenture or the Notes, and nothing herein will impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any security. (iv) If (A) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for a Global Note and a successor depositary is not appointed by the Company within 90 days of the notice or (B) an Event of Default has occurred and is continuing and the Trustee has received a request from the Depositary, the Trustee will promptly exchange each beneficial interest in the Global Note for one or more Certificated Notes in authorized denominations having an equal aggregate principal amount registered in the name of the owner of such beneficial interest, as identified to the Trustee by the Depositary, and thereupon the Global Note will be deemed canceled. If such Note does not bear the Restricted Legend, then the Certificated Notes issued in exchange therefor will not bear the Restricted Legend. If such Note bears the Restricted Legend, then the Certificated Notes issued in exchange therefor will bear the Restricted Legend, provided that any Holder of any such Certificated Note issued in exchange for a beneficial interest in a Temporary Offshore Global Note will have the right upon presentation to the Trustee of a duly completed Certificate of Beneficial Ownership after the Restricted Period to exchange such Certificated Note for a Certificated Note of like tenor and amount that does not bear the Restricted Legend, registered in the name of such Holder. (c) Each Certificated Note will be registered in the name of the Holder thereof or its nominee. (d) A Holder may transfer a Note (or a beneficial interest therein) to another Person or exchange a Note (or a beneficial interest therein) for another Note or Notes of any authorized denomination by presenting to the Trustee a written request therefor stating the name of the proposed transferee or requesting such an exchange, accompanied by any certification, opinion or other document required by Section 2.10. The Trustee will promptly register any transfer or exchange that meets the requirements of this Section by noting the same in the register maintained by the Trustee for the purpose; provided that (i) no transfer or exchange will be effective until it is registered in such register and (ii) the Trustee will not be required (A) to issue, register the transfer of or exchange any Note for a period of 15 days before a selection of Notes to be redeemed, (B) to register the transfer of or exchange any Note so selected for redemption, except, in the case of a partial redemption, that portion of 16 any Note not being redeemed, or (C) if a redemption is to occur after a Regular Record Date but on or before the corresponding Interest Payment Date, to register the transfer of or exchange any Note on or after the Regular Record Date and before the date of redemption. Prior to the registration of any transfer, the Company, the Trustee and their agents will treat the Person in whose name the Note is registered as the owner and Holder thereof for all purposes (whether or not the Note is overdue), and will not be affected by notice to the contrary. From time to time the Company will execute and the Trustee will authenticate additional Notes as necessary in order to permit the registration of a transfer or exchange in accordance with this Section. No service charge will be imposed in connection with any transfer or exchange of any Note, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than a transfer tax or other similar governmental charge payable upon exchange pursuant to subsection (b)(iv)). (e) (i) Global Note to Global Note. If a beneficial interest in a Global Note is transferred or exchanged for a beneficial interest in another Global Note, the Trustee will (A) record a decrease in the principal amount of the Global Note being transferred or exchanged equal to the principal amount of such transfer or exchange and (B) record a like increase in the principal amount of the other Global Note. Any beneficial interest in one Global Note that is transferred to a Person who takes delivery in the form of an interest in another Global Note, or exchanged for an interest in another Global Note, will, upon transfer or exchange, cease to be an interest in such Global Note and become an interest in the other Global Note and, accordingly, will thereafter be subject to all transfer and exchange restrictions, if any, and other procedures applicable to beneficial interests in such other Global Note for as long as it remains such an interest. (ii) Global Note to Certificated Note. If a beneficial interest in a Global Note is transferred or exchanged for a Certificated Note, the Trustee will (A) record a decrease in the principal amount of such Global Note equal to the principal amount of such transfer or exchange and (B) deliver one or more new Certificated Notes in authorized denominations having an equal aggregate principal amount to the transferee (in the case of a transfer) or the owner of such beneficial interest (in the case of an exchange), registered in the name of such transferee or owner, as applicable. (iii) Certificated Note to Global Note. If a Certificated Note is transferred or exchanged for a beneficial interest in a Global Note, the Trustee will (A) cancel such Certificated Note, (B) record an increase in the principal amount of such Global Note equal to the principal amount of such transfer or exchange and (C) in the event that such transfer or exchange involves less than the entire principal amount of the canceled Certificated Note, deliver to the Holder thereof one or more new Certificated Notes in authorized denominations having an aggregate principal amount equal to the untransferred or unexchanged 17 portion of the canceled Certificated Note, registered in the name of the Holder thereof. (iv) Certificated Note to Certificated Note. If a Certificated Note is transferred or exchanged for another Certificated Note, the Trustee will (A) cancel the Certificated Note being transferred or exchanged, (B) deliver one or more new Certificated Notes in authorized denominations having an aggregate principal amount equal to the principal amount of such transfer or exchange to the transferee (in the case of a transfer) or the Holder of the canceled Certificated Note (in the case of an exchange), registered in the name of such transferee or Holder, as applicable, and (C) if such transfer or exchange involves less than the entire principal amount of the canceled Certificated Note, deliver to the Holder thereof one or more Certificated Notes in authorized denominations having an aggregate principal amount equal to the untransferred or unexchanged portion of the canceled Certificated Note, registered in the name of the Holder thereof. Section 2.10. Restrictions on Transfer and Exchange. (a) The transfer or exchange of any Note (or a beneficial interest therein) may only be made in accordance with this Section and Section 2.09 and, in the case of a Global Note (or a beneficial interest therein), the applicable rules and procedures of the Depositary. The Trustee shall refuse to register any requested transfer or exchange that the Trustee actually knows does not comply with the preceding sentence. (b) Subject to paragraph (c), the transfer or exchange of any Note (or a beneficial interest therein) of the type set forth in column A below for a Note (or a beneficial interest therein) of the type set forth opposite in column B below may only be made in compliance with the certification requirements (if any) described in the clause of this paragraph set forth opposite in column C below. A B C U.S. Global Note U.S. Global Note (i) U.S. Global Note Offshore Global Note (ii) U.S. Global Note Certificated Note (iii) Offshore Global Note U.S. Global Note (iv) Offshore Global Note Offshore Global Note (i) Offshore Global Note Certificated Note (v) Certificated Note U.S. Global Note (iv) Certificated Note Offshore Global Note (ii) Certificated Note Certificated Note (iii) (i) No certification is required. (ii) The Person requesting the transfer or exchange must deliver or cause to be delivered to the Trustee a duly completed Regulation S Certificate; provided that if the requested transfer or exchange is made by the 18 Holder of a Certificated Note that does not bear the Restricted Legend, then no certification is required. (iii) The Person requesting the transfer or exchange must deliver or cause to be delivered to the Trustee (A) a duly completed Rule 144A Certificate, (B) a duly completed Regulation S Certificate or (C) a duly completed Institutional Accredited Investor Certificate, and/or an Opinion of Counsel and such other certifications and evidence as the Company or the Trustee may reasonably require in order to determine that the proposed transfer or exchange is being made in compliance with the Securities Act and any applicable securities laws of any state of the United States; provided that if the requested transfer or exchange is made by the Holder of a Certificated Note that does not bear the Restricted Legend, then no certification is required. In the event that (x) the requested transfer or exchange takes place after the Restricted Period and a duly completed Regulation S Certificate is delivered to the Trustee or (y) a Certificated Note that does not bear the Restricted Legend is surrendered for transfer or exchange, upon transfer or exchange the Trustee will deliver a Certificated Note that does not bear the Restricted Legend. (iv) The Person requesting the transfer or exchange must deliver or cause to be delivered to the Trustee a duly completed Rule 144A Certificate. (v) Notwithstanding anything to the contrary contained herein, no such exchange is permitted if the requested exchange involves a beneficial interest in a Temporary Offshore Global Note. If the requested transfer involves a beneficial interest in a Temporary Offshore Global Note, the Person requesting the transfer must deliver or cause to be delivered to the Trustee (A) a duly completed Rule 144A Certificate or (B) a duly completed Institutional Accredited Investor Certificate and/or an Opinion of Counsel and such other certifications and evidence as the Company may reasonably require in order to determine that the proposed transfer is being made in compliance with the Securities Act and any applicable securities laws of any state of the United States. If the requested transfer or exchange involves a beneficial interest in a Permanent Offshore Global Note, no certification is required and the Trustee will deliver a Certificated Note that does not bear the Restricted Legend. (c) No certification is required in connection with any transfer or exchange of any Note (or a beneficial interest therein) (i) after such Note is eligible for resale pursuant to Rule 144(k) under the Securities Act (or a successor provision); provided that the Company has provided the Trustee with an Officer's Certificate to that effect, and the Company may require from any Person requesting a transfer or exchange in reliance upon this clause (i) an opinion of counsel and any other reasonable certifications and evidence in order to support such certificate; or 19 (ii) (A) sold pursuant to an effective registration statement, pursuant to the Registration Rights Agreement or otherwise or (B) which is validly tendered for exchange into an Exchange Note pursuant to an Exchange Offer. Any Certificated Note delivered in reliance upon this paragraph will not bear the Restricted Legend. (d) The Trustee will retain copies of all certificates, opinions and other documents received in connection with the transfer or exchange of a Note (or a beneficial interest therein), and the Company will have the right, at its own expense, to inspect and make copies thereof at any reasonable time upon written notice to the Trustee. The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Depositary participants or beneficial owners of interests in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. Section 2.11. Temporary Offshore Global Notes. (a). Each Note originally sold by the Initial Purchasers in reliance upon Regulation S will be evidenced by one or more Offshore Global Notes that bear the Temporary Offshore Global Note Legend. (b) An owner of a beneficial interest in a Temporary Offshore Global Note (or a Person acting on behalf of such an owner) may provide to the Trustee (and the Trustee will accept) a duly completed Certificate of Beneficial Ownership at any time after the Restricted Period (it being understood that the Trustee will not accept any such certificate during the Restricted Period). Promptly after acceptance of a Certificate of Beneficial Ownership with respect to such a beneficial interest, the Trustee will cause such beneficial interest to be exchanged for an equivalent beneficial interest in a Permanent Offshore Global Note, and will (i) permanently reduce the principal amount of such Temporary Offshore Global Note by the amount of such beneficial interest and (ii) increase the principal amount of such Permanent Offshore Global Note by the amount of such beneficial interest. (c) Notwithstanding anything to the contrary contained herein, beneficial interests in a Temporary Offshore Global Note may be held through the Depositary only through Euroclear and Clearstream and their respective direct and indirect participants. (d) Notwithstanding paragraph (b), if after the Restricted Period any Initial Purchaser owns a beneficial interest in a Temporary Offshore Global Note, such Initial Purchaser may, upon written request to the Trustee accompanied by a certification as to its status as an Initial Purchaser, exchange such beneficial interest for an equivalent beneficial interest in a Permanent Offshore Global Note, and the Trustee will comply with such request and will 20 (i) permanently reduce the principal amount of such Temporary Offshore Global Note by the amount of such beneficial interest and (ii) increase the principal amount of such Permanent Offshore Global Note by the amount of such beneficial interest. ARTICLE 3 REDEMPTION Section 3.01. Optional Redemption. At any time and from time to time, the Company may redeem the Notes, in whole or in part, at a redemption price equal to the greater of (a) 100% of the principal amount of the Notes, plus accrued and unpaid interest thereon to the date of redemption; or (b) the sum of the remaining scheduled payments of principal of and interest on the Notes being redeemed (not including any portion of the payments of interest accrued as of the date of redemption), discounted to its present value as of the date of redemption, on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months), at the Adjusted Treasury Rate, as determined by the Quotation Agent, plus 25 basis points, plus accrued and unpaid interest on the principal amount being redeemed to the date of redemption. Section 3.02. Method and Effect of Redemption. (a) If the Company elects to redeem Notes, it must notify the Trustee of the redemption date and the principal amount of Notes to be redeemed by delivering an Officers' Certificate at least 60 days before the redemption date (unless a shorter period is satisfactory to the Trustee). If fewer than all of the Notes are being redeemed, the Officers' Certificate must also specify a record date not less than 15 days after the date the notice of redemption is given to the Trustee, and the Trustee will select the Notes to be redeemed pro rata, by lot or by any other method the Trustee in its sole discretion deems appropriate, in denominations of $1,000 principal amount and multiples thereof. The Trustee will notify the Company promptly of the Notes or portions of Notes to be called for redemption. Notice of redemption must be sent by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company, to Holders whose Notes are to be redeemed at least 30 days but not more than 60 days before the redemption date. (b) The notice of redemption will identify the Notes to be redeemed and will include or state the following: (i) the redemption date; (ii) the redemption price, including the portion thereof representing any accrued interest; (iii) the place or places where Notes are to be surrendered for redemption; (iv) Notes called for redemption must be so surrendered in order to collect the redemption price; 21 (v) on the redemption date the redemption price will become due and payable on Notes called for redemption, and interest on Notes called for redemption will cease to accrue on and after the redemption date; (vi) if any Note is redeemed in part, on and after the redemption date, upon surrender of such Note, new Notes equal in principal amount to the unredeemed portion will be issued; and (vii) if any Note contains a CUSIP or CINS number, no representation is being made as to the correctness of the CUSIP or CINS number either as printed on the Notes or as contained in the notice of redemption and that the Holder should rely only on the other identification numbers printed on the Notes. (c) Once notice of redemption is sent to the Holders, Notes called for redemption become due and payable at the redemption price on the redemption date, and upon surrender of the Notes called for redemption, the Company shall redeem such Notes at the redemption price. Commencing on the redemption date, Notes redeemed will cease to accrue interest. Upon surrender of any Note redeemed in part, the Holder will receive a new Note equal in principal amount to the unredeemed portion of the surrendered Note. ARTICLE 4 COVENANTS Section 4.01. Payment of Notes. (a). The Company agrees to pay the principal of and interest on the Notes on the dates and in the manner provided in the Notes and this Indenture. Not later than 9:00 A.M. (New York City time) on the due date of any principal of or interest on any Notes, or any redemption price of the Notes, the Company will deposit with the Trustee (or Paying Agent) money in immediately available funds sufficient to pay such amounts, provided that if the Company or any Affiliate of the Company is acting as Paying Agent, it will, on or before each due date, segregate and hold in a separate trust fund for the benefit of the Holders a sum of money sufficient to pay such amounts until paid to such Holders or otherwise disposed of as provided in this Indenture. In each case, the Company will promptly notify the Trustee of its compliance with this paragraph. (b) An installment of principal or interest will be considered paid on the date due if the Trustee (or Paying Agent, other than the Company or any Affiliate of the Company) holds on that date money designated for and sufficient to pay the installment. If the Company or any Affiliate of the Company acts as Paying Agent, an installment of principal or interest will be considered paid on the due date only if paid to the Holders. (c) The Company agrees to pay interest on overdue principal, and, to the extent lawful, overdue installments of interest at the rate per annum specified in the Notes. 22 (d) Payments in respect of the Notes represented by the Global Notes are to be made by wire transfer of immediately available funds to the accounts specified by the Holders of the Global Notes. With respect to Certificated Notes, the Company will make all payments by wire transfer of immediately available funds to the accounts specified by the Holders thereof or, if no such account is specified, by mailing a check to each Holder's registered address. Section 4.02. Maintenance of Office or Agency. The Company will maintain in the Borough of Manhattan, the City of New York, an office or agency where Notes may be surrendered for registration of transfer or exchange or for presentation for payment and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company hereby initially designates the Corporate Trust Office of the Trustee as such office of the Company. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company fails to maintain any such required office or agency or fails to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served to the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Notes may be surrendered or presented for any of such purposes and may from time to time rescind such designations. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Section 4.03. Paying Agent. Whenever the Company shall appoint a paying agent other than the Trustee, it will cause such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section, (a) that it will hold all sums received by it as such agent for the payment of the principal of or interest on the Notes (whether such sums have been paid to it by the Company or by any other obligor on the Notes) in trust for the benefit of the holders of the Notes or of the Trustee, (b) that it will give the Trustee notice of any failure by the Company (or by any other obligor on the Notes) to make any payment of the principal of or interest on the Notes when the same shall be due and payable, and (c) pay any such sums so held in trust by it to the Trustee upon the Trustee's written request at any time during the continuance of the failure referred to in clause 4.03(b) above. Anything in this section to the contrary notwithstanding, the Company may at any time, for the purpose of obtaining a satisfaction and discharge of this Indenture or for any other reason, pay or cause to be paid to the Trustee all sums held in trust by the Company or any paying agent hereunder, as required by this Section, such sums to be held by the Trustee upon the trusts herein contained. 23 Anything in this section to the contrary notwithstanding, the agreement to hold sums in trust as provided in this section are subject to the provision of Section 8.05. Section 4.04. Certificate to Trustee. The Company will furnish to the Trustee, within 120 days after the end of each fiscal year, a brief certificate (which need not comply with Section 10.04) from the principal executive, financial or accounting officer of the Company as to his or her knowledge of the Company's compliance with all conditions and covenants under this Indenture (such compliance to be determined without regard to any period of grace or requirement of notice provided under this Indenture). If the Company shall not be in such compliance, the certificate shall specify such non-compliance and the nature and status thereof of which the officer shall have knowledge. Section 4.05. Corporate Existence. Subject to Article 5, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence. Section 4.06. Securityholders' Lists. If and so long as the Trustee shall not be the Registrar of the Notes, the Company will furnish or cause to be furnished to the Trustee a list in such form as the Trustee may reasonably require of the names and addresses of the Holders of the Notes pursuant to Section 312 of the Trust Indenture Act (a) semi-annually not more than 15 days after each record date for the payment of semi-annual interest on the Notes, as herein above specified, as of such record date, and (b) at such other times as the Trustee may request in writing, within thirty days after receipt by the Company of any such request as of a date not more than 15 days prior to the time such information is furnished. Section 4.07. Reports by the Issuer. The Company covenants to file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents, and other reports which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). Section 4.08. Reports by the Trustee. Any Trustee's report required under Section 313(a) of the Trust Indenture Act of 1939 shall be transmitted on or before the first date for the regular payment of semi-annual interest on the Notes next succeeding May 15 in each year, and shall be dated as of a date convenient to the Trustee no more than 60 nor less than 45 days prior thereto (unless such 24 May 15 is less than 45 days prior to such interest payment date, in which case such report shall be (a) so transmitted on or before the second such interest payment date next succeeding such May 15 and (b) as of a date determined as provided above). A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange, if any, upon which the Notes are listed, with the Commission and with the Company. The Company will promptly notify the Trustee when the Notes are listed on any stock exchange and of any delisting thereof. Section 4.09. Appointment to Fill a Vacancy in Office of Trustee. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 7.08(b), a Trustee, so that there shall at all times be a Trustee hereunder. Section 4.10. Limitation on Liens. (a) The Company will not, nor will it permit any Domestic Subsidiary to, directly or indirectly, issue, assume or Guarantee any Debt if such Debt or Guarantee is secured by any Lien upon any Principal Property of the Company or of a Domestic Subsidiary or upon any shares of stock or indebtedness of any Domestic Subsidiary (whether such principal property, shares of stock or indebtedness is owned at the Issue Date or thereafter acquired) without in any such case effectively securing, concurrently with the issuance, assumption or Guaranty of any such Debt, any series of Notes (together with, if the Company shall so determine, any other indebtedness of or Guaranteed by the Company or such Domestic Subsidiary ranking equally with such series of Notes and then existing or thereafter created) equally and ratably with such Debt, so long as such Debt is so secured; provided, however, that the foregoing restriction shall not apply to Permitted Liens. (b) The provisions of subsection (a) of this Section shall not apply to the issuance, assumption or guarantee by the Company or any Domestic Subsidiary of Debt secured by a Lien which would otherwise be subject to the foregoing restrictions up to an aggregate amount which, together with (i) all other Debt of the Company and its Domestic Subsidiaries secured by Liens (not including Permitted Liens) that would otherwise be subject to the foregoing restrictions and (ii) the Attributable Debt with respect to Sale and Leaseback Transactions in existence at such time (other than any Sale and Leaseback Transaction that, if such Sale and Leaseback Transaction had been a Lien, would have been permitted by clause (1) of the definition of Permitted Lien), does not at the time exceed 10% of Consolidated Net Tangible Assets. (c) If at any time the Company or any Domestic Subsidiary shall issue, assume or Guarantee any Debt secured by any Lien and if subsection (a) of this Section requires that the Notes be secured equally and ratably with such Debt, the Company will promptly execute, at its expense, any instruments necessary to so equally and ratably secure the Notes and deliver the same to the Trustee and will promptly furnish to the Trustee: (i) an Officers' Certificate stating that the covenant of the Company contained in subsection (a) of this Section has been complied with; and 25 (ii) an Opinion of Counsel to the effect that such covenant has been complied with, and that any instruments executed by the Company in the performance of such covenant comply with the requirements of such covenant. In the event that the Company shall hereafter secure any series of Notes equally and ratably with any other obligation or indebtedness pursuant to the provisions of this Section, the Trustee is hereby authorized, but not required, to enter into an indenture or agreement supplemental hereto and to take such action, if any, as it may deem advisable to enable it to enforce effectively the rights of the Holders of the Notes so secured, equally and ratably with such other obligation or indebtedness. Section 4.11. Limitation on Sale and Leaseback Transactions. The Company will not, nor will it permit any Domestic Subsidiary to, enter into any Sale and Leaseback Transaction, unless: (a) the Company or such Domestic Subsidiary would be entitled, either pursuant to the provisions of paragraphs (a) or (b) of Section 4.10, to incur Debt secured by a Lien on such Principal Property without equally and ratably securing any of the Notes, or (b) the Company or such Domestic Subsidiary shall, within 180 days of the effective date of any such arrangement, apply an amount equal to the proceeds from such Sale and Leaseback Transaction relating to such Principal Property (x) to the payment or other retirement of Debt incurred or assumed by the Company that ranks senior to or pari passu with the Notes (other than, in either case, Debt owed by the Company or any Subsidiary) or (y) to the purchase of Principal Property (other than the Principal Property involved in such sale). Section 4.12. Limitation on Guarantees. The Company and its Domestic Subsidiaries will not enter into any agreement pursuant to which any such Domestic Subsidiary Guarantees the payment of Debt incurred by the Company without, in any such case, providing concurrently with the Guarantee of such Debt, that any series of Notes be equally and ratably guaranteed by such Domestic Subsidiary for so long as such Debt is so Guaranteed. Section 4.13. Waiver of Certain Covenants. The Company may omit in respect of the Notes, in any particular instance, to comply with any covenant or condition set forth in Sections 4.10, 4.11 or 4.12, if before or after the time for such compliance the Holders of at least a majority in aggregate principal amount of the Notes at the time outstanding, by act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such covenant or condition shall remain in full force and effect. 26 ARTICLE 5 CONSOLIDATION, MERGER OR SALE OF ASSETS Section 5.01. Consolidation, Merger or Sale of Assets by the Company. The Company shall not consolidate with or merge into any other Person or sell, assign, convey or transfer or otherwise dispose of all or substantially all of its properties and assets to any Person, unless: (a) the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer the properties and assets of the Company shall be a Person organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia, and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any) and interest on all the Notes and the performance of every covenant of this Indenture on the part of the Company to be performed or observed; (b) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time, or both, would become an Event of Default, shall have occurred and be continuing; and (c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that such consolidation, merger, conveyance or transfer and such supplemental indenture comply with paragraphs (a) and (b) of this section 5.01 and that all conditions precedent herein provided for relating to such transaction have been complied with. Section 5.02. Successor Person Substituted. Upon any consolidation or merger, or any conveyance or transfer of the properties and assets of the Company in accordance with Section 5.01, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein. In the event of any such conveyance or transfer, the Company as the predecessor Person may be dissolved, wound up or liquidated at any time thereafter. 27 ARTICLE 6 DEFAULT AND REMEDIES Section 6.01. Events of Default. An "Event of Default" with respect to the Notes, occurs if: (a) the Company defaults in the payment of interest (including any Additional Interest) on any Note, when the same becomes due and payable, and the default continues for a period of 30 days; (b) the Company defaults in the payment of the principal of, or premium, if any, on any Note when the same becomes due and payable at maturity, upon acceleration or redemption, or otherwise; (c) the Company defaults in the performance of or breaches any other covenant or agreement of the Company in this Indenture or under the Notes and the default or breach continues for a period of 90 days after written notice to the Company by the Trustee or to the Company by the Holders of 25% or more in aggregate principal amount of the Notes; (d) an involuntary case or other proceeding is commenced against the Company with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding remains undismissed and unstayed for a period of 60 days; or an order for relief is entered against the Company under the federal bankruptcy laws as now or hereafter in effect; (e) the Company (i) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (ii) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestration or similar official of the Company or for all or substantially all of the property and assets of the Company or (iii) effects any general assignment for the benefit of creditors (an event of default specified in clause (d) or (e), a "bankruptcy default"). Section 6.02. Acceleration. (a) If an Event of Default, other than a bankruptcy default, occurs and is continuing under this Indenture, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, by written notice to the Company (and to the Trustee if the notice is given by the Holders), may, and the Trustee at the request of such Holders shall, declare the principal of and accrued but unpaid interest on all the Notes to be immediately due and payable. Upon a declaration of acceleration, such principal and interest will become 28 immediately due and payable. If a bankruptcy default occurs, the principal of and accrued but unpaid interest on all the Notes then outstanding will become immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. (b) In the case of an Event of Default specified in Section 6.01(c), the Holders of a majority in aggregate principal amount of the outstanding Notes by written notice to the Company and to the Trustee may waive all past Defaults (except for Defaults in the payment of principal, any premium on, or any interest on the Notes) and rescind and annul a declaration of acceleration and its consequences if (i) all existing Events of Default, other than the nonpayment of the principal of, premium, if any, and interest on the Notes that have become due solely by any such declaration of acceleration, have been cured or waived, and (ii) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction. Section 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue, in its own name or as trustee of an express trust, any available remedy by a proceeding at law or in equity to collect the payment of principal of and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. Section 6.04. Waiver of Past Defaults. Except as otherwise provided in Sections 6.02, 6.07 and 9.02, the Holders of a majority in principal amount of the outstanding Notes may, by notice to the Trustee, waive an existing Default and its consequences. Upon such waiver, the Default will cease to exist, and any Event of Default arising therefrom will be deemed to have been cured, but no such waiver will extend to any subsequent or other Default or impair any right consequent thereon. Section 6.05. Control by Majority. The Holders of a majority in aggregate principal amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may, upon the advice of counsel, refuse to follow any direction that conflicts with law or this Indenture, that may involve the Trustee in personal liability, or that the Trustee determines in good faith may be unduly prejudicial to the rights of Holders of Notes not joining in the giving of such direction, and may take any other action it deems proper that is not inconsistent with any such direction received from Holders of Notes. Section 6.06. Limitation on Suits. 29 A Holder may not institute any proceeding, judicial or otherwise, with respect to this Indenture or the Notes, or for the appointment of a receiver or trustee, or for any other remedy under this Indenture or the Notes, unless: (a) the Holder has previously given to the Trustee written notice of a continuing Event of Default; (b) Holders of at least 25% in aggregate principal amount of outstanding Notes have made written request to the Trustee to institute proceedings in respect of the Event of Default in its own name as Trustee under this Indenture; (c) Holders have offered to the Trustee indemnity reasonably satisfactory to the Trustee against any costs, liabilities or expenses to be incurred in compliance with such request; (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (e) during such 60-day period, the Holders of a majority in aggregate principal amount of the outstanding Notes have not given the Trustee a direction that is inconsistent with such written request. Section 6.07. Rights of Holders to Receive Payment. Notwithstanding anything to the contrary, the right of a Holder of a Note to receive payment of principal of or interest on its Note on or after the Stated Maturity thereof, or to bring suit for the enforcement of any such payment on or after such respective dates, may not be impaired or affected without the consent of that Holder. Section 6.08. Collection Suit by Trustee. If an Event of Default in payment of principal or interest specified in clause (a) or (b) of Section 6.01 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust for the whole amount of principal and accrued interest remaining unpaid, together with interest on overdue principal and, to the extent lawful, overdue installments of interest, in each case at the rate specified in the Notes, and such further amount as is sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel and any other amounts due the Trustee hereunder. Section 6.09. Trustee May File Proofs of Claim. The Trustee may file proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee hereunder) and the Holders allowed in any judicial proceedings relating to the Company or its creditors or property, and is entitled and empowered 30 to collect, receive and distribute any money, securities or other property payable or deliverable upon conversion or exchange of the Notes or upon any such claims. Any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, if the Trustee consents to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee hereunder. Nothing in this Indenture will be deemed to empower the Trustee to authorize or consent to, or accept or adopt on behalf of any Holder, any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 6.10. Priorities. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: First: to the Trustee for all amounts due hereunder; Second: to Holders for amounts then due and unpaid for principal of and interest on the Notes, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal and interest; and Third: to the Company or as a court of competent jurisdiction may direct. The Trustee, upon written notice to the Company, may fix a record date and payment date for any payment to Holders pursuant to this Section. Section 6.11. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted a proceeding to enforce any right or remedy under this Indenture and the proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to the Holder, then, subject to any determination in the proceeding, the Company, the Trustee and the Holders will be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Company, the Trustee and the Holders will continue as though no such proceeding had been instituted. Section 6.12. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court may require any party litigant in such suit (other than the Trustee) to file an undertaking to pay the costs of the suit, and the court may assess reasonable costs, including reasonable attorneys fees and expenses, against any party litigant (other than the Trustee) in the suit having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not 31 apply to a suit by a Holder to enforce payment of principal of or interest on any Note on the respective due dates, or a suit by Holders of more than 10% in principal amount of the outstanding Notes. Section 6.13. Rights and Remedies Cumulative. No right or remedy conferred or reserved to the Trustee or to the Holders under this Indenture is intended to be exclusive of any other right or remedy, and all such rights and remedies are, to the extent permitted by law, cumulative and in addition to every other right and remedy hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or exercise of any right or remedy hereunder, or otherwise, will not prevent the concurrent assertion or exercise of any other right or remedy. Section 6.14. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder to exercise any right or remedy accruing upon any Event of Default will impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 6.15. Waiver of Stay, Extension or Usury Laws. The Company covenants, to the extent that it may lawfully do so, that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of, or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or that may affect the covenants or the performance of this Indenture. The Company hereby expressly waives, to the extent that it may lawfully do so, all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 7 THE TRUSTEE Section 7.01. General. (a) The duties and responsibilities of the Trustee are as provided by the Trust Indenture Act and as set forth herein. Whether or not expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee is subject to this Article. (b) Except during the continuance of an Event of Default, the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations will be read into 32 this Indenture against the Trustee. In case an Event of Default has occurred and is continuing, the Trustee shall exercise those rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct. Section 7.02. Certain Rights of Trustee. Subject to Trust Indenture Act Sections 315(a) through (d): (a) In the absence of bad faith on its part, the Trustee may conclusively rely, and will be protected in acting or refraining from acting, upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document (whether in its original or facsimile form) believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document, but, in the case of any document which is specifically required to be furnished to the Trustee pursuant to any provision hereof, the Trustee shall examine the document to determine whether it conforms to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). The Trustee, in its discretion, may make further inquiry or investigation into such facts or matters as it sees fit. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel conforming to Section 10.05 and the Trustee will not be liable for any action it takes or omits to take in good faith in reliance on the certificate or opinion. (c) The Trustee may act through its attorneys and agents and will not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee will be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders, unless such Holders have offered to the Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. (e) The Trustee will not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers or for any action it takes or omits to take in accordance with the direction of the Holders in accordance with Section 6.05 relating to the time, method and 33 place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture. (f) The Trustee may consult with counsel, and the advice of such counsel or any Opinion of Counsel will be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (g) No provision of this Indenture will require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties hereunder, or in the exercise of its rights or powers, unless it receives indemnity satisfactory to it against any loss, liability or expense. (h) The Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts. (i) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in principal amount of the outstanding Notes relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Notes. (j) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture. (k) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder. Section 7.03. Individual Rights of Trustee. The Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not the Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Trust Indenture Act Sections 310(b) and 311. Section 7.04. Trustee's Disclaimer. The Trustee (a) makes no representation as to the validity or adequacy of this Indenture or the Notes, (b) is not accountable for the Company's use or application of the proceeds from the Notes and (c) is not responsible for any statement in the Notes other than its certificate of authentication. 34 Section 7.05. Notice of Default. If any Default occurs and is continuing and is actually known to a Responsible Officer of the Trustee, the Trustee will send notice of the Default to each Holder within 90 days after it occurs, unless the Default has been cured; provided that, except in the case of a default in the payment of the principal of or interest on any Note, the Trustee may withhold the notice if and so long as the board of directors, the executive committee or a trust committee of Responsible Officers of the Trustee in good faith determines that withholding the notice is in the interest of the Holders. Notice to Holders under this Section will be given in the manner and to the extent provided in Trust Indenture Act Section 313(c). Section 7.06. Reports by Trustee to Holders. Within 60 days after each May 15, beginning with May 15, 2002, the Trustee will mail to each Holder, as provided in Trust Indenture Act Section 313(c), a brief report dated as of such May 15, if required by Trust Indenture Act Section 313(a), and file such reports with each stock exchange upon which the Notes are listed and with the Commission as required by Trust Indenture Act Section 313(d). Section 7.07. Compensation and Indemnity. (a) The Company will pay the Trustee compensation as agreed upon in writing for its services. The compensation of the Trustee is not limited by any law on compensation of a Trustee of an express trust. The Company will reimburse the Trustee upon request for all reasonable out-of-pocket expenses, disbursements and advances incurred or made by the Trustee, including the reasonable compensation and expenses of the Trustee's agents and counsel. (b) The Company will fully indemnify the Trustee for, and hold it harmless against, any and all loss, damage, claims or liability or expense incurred (including taxes (other than taxes based upon, measured by or determined by the income of the Trustee) and legal fees and expenses) by it without negligence or bad faith on its part arising out of or in connection with the acceptance or administration of this Indenture and its duties under this Indenture and the Notes, including the costs and expenses of defending itself against any claim or liability and of complying with any process served upon it or any of its officers in connection with the exercise or performance of any of its powers or duties under this Indenture and the Notes. (c) To secure the Company's payment obligations in this Section, the Trustee will have a lien prior to the Notes on all money or property held or collected by the Trustee, in its capacity as Trustee, except money or property held in trust to pay principal of, and interest on particular Notes. (d) When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 6.01(d) or Section 6.01(e), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable Federal or state bankruptcy, insolvency or other similar law. 35 (e) The provisions of this Section shall survive the termination of this Indenture and the resignation or removal of the Trustee. Section 7.08. Replacement of Trustee. (a) (i) The Trustee may resign at any time by written notice to the Company. (ii) The Holders of a majority in principal amount of the outstanding Notes may remove the Trustee by written notice to the Trustee. (iii) If the Trustee is no longer eligible under Section 7.10 or in the circumstances described in Trust Indenture Act Section 310(b), any Holder that satisfies the requirements of Trust Indenture Act Section 310(b) may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (iv) The Company may remove the Trustee if: (A) the Trustee is no longer eligible under Section 7.10; (B) the Trustee is adjudged a bankrupt or an insolvent; (C) a receiver or other public officer takes charge of the Trustee or its property; or (D) the Trustee becomes incapable of acting. A resignation or removal of the Trustee and appointment of a successor Trustee will become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. (b) If the Trustee has been removed by the Holders, Holders of a majority in principal amount of the Notes may appoint a successor Trustee with the consent of the Company. Otherwise, if the Trustee resigns or is removed, or if a vacancy exists in the office of Trustee for any reason, the Company will promptly appoint a successor Trustee. If the successor Trustee does not deliver its written acceptance within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in principal amount of the outstanding Notes may, at the expense of the Company, petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) Upon delivery by the successor Trustee of a written acceptance of its appointment to the retiring Trustee and to the Company, (i) the retiring Trustee will, upon payment of its charges, transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07, (ii) the resignation or removal of the retiring Trustee will become effective, and (iii) the successor Trustee will have all the rights, powers and duties of the Trustee under this Indenture. Upon request of any successor Trustee, the Company will execute any and all instruments for fully vesting in and confirming to the successor Trustee all such rights, powers and trusts. The Company will give notice of any resignation and any removal of the Trustee and each appointment of a successor Trustee to all Holders, and include in the notice the name of the successor Trustee and the address of its Corporate Trust Office. (d) Notwithstanding replacement of the Trustee pursuant to this Section, the Company's obligations under Section 7.07 will continue for the benefit of the retiring Trustee. 36 (e) The Trustee agrees to give the notices provided for in, and otherwise comply with, Trust Indenture Act Section 310(b). Section 7.09. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation or national banking association, the resulting, surviving or transferee corporation or national banking association without any further act will be the successor Trustee with the same effect as if the successor Trustee had been named as the Trustee in this Indenture. Section 7.10. Eligibility. This Indenture must always have a Trustee that satisfies the requirements of Trust Indenture Act Section 310(a) and has a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. Section 7.11. Money Held in Trust. The Trustee will not be liable for interest on any money received by it except as it may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law and except for money held in trust under Article 8. ARTICLE 8 DEFEASANCE AND DISCHARGE Section 8.01. Discharge of Company's Obligations. (a) Subject to paragraph (b), the Company's obligations under the Notes and this Indenture will terminate if: (i) all Notes previously authenticated and delivered (other than (A) destroyed, lost or stolen Notes that have been replaced or (B) Notes that are considered paid pursuant to Section 4.01(b) or (C) Notes for whose payment money or U.S. Government Securities have been held in trust and then repaid to the Company pursuant to Section 8.05) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder; or (ii) (A) the Notes mature within one year, or all of them are to be called for redemption within one year under arrangements satisfactory to the Trustee for giving the notice of redemption, (B) the Company irrevocably deposits in trust with the Trustee, as trust funds solely for the benefit of the Holders, cash in U.S. dollars or U.S. Government Securities or a combination thereof sufficient, in the opinion of a nationally recognized firm of 37 independent public accountants expressed in a written certificate delivered to the Trustee, without consideration of any reinvestment, to pay principal of, premium, if any, and interest and Additional Interest, if any, on the Notes to maturity or redemption, as the case may be, and to pay all other sums payable by it hereunder, (C) no Default has occurred and is continuing on the date of the deposit, (D) the deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound, and (E) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the satisfaction and discharge of this Indenture have been complied with. (b) After satisfying the conditions in clause (a)(i), only the Company's obligations under Section 7.07 will survive. After satisfying the conditions in clause (a)(ii), only the Company's obligations in Article 2 and Sections 4.01, 4.02, 7.07, 7.08, 8.05 and 8.06 will survive. In either case, the Trustee upon request will acknowledge in writing the discharge of the Company's obligations under the Notes and this Indenture other than the surviving obligations. Section 8.02. Legal Defeasance. After the 91st day following the deposit referred to in clause (a) below, the Company will be deemed to have paid and will be discharged from its obligations in respect of the Notes and this Indenture, other than its obligations in Article 2 and Sections 4.01, 4.02, 7.07, 7.08, 8.05 and 8.06, provided the following conditions have been satisfied: (a) The Company has irrevocably deposited in trust with the Trustee, as trust funds solely for the benefit of the Holders, cash in U.S. dollars or U.S. Government Securities or a combination thereof sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certificate thereof delivered to the Trustee, without consideration of any reinvestment, to pay principal of and interest on the Notes to maturity or redemption, as the case may be, provided that any redemption before maturity has been irrevocably provided for under arrangements satisfactory to the Trustee. (b) No Default has occurred and is continuing on the date of the deposit. (c) The deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound. 38 (d) The Company has delivered to the Trustee either (A) a ruling received from the Internal Revenue Service to the effect that the Holders will not recognize income, gain or loss for federal income tax purposes as a result of the defeasance and will be subject to federal income tax on the same amount and in the same manner and at the same times as would otherwise have been the case or (B) an Opinion of Counsel, based on a change in law after the date of this Indenture, to the same effect as the ruling described in clause (A). (e) If the Notes are listed on a national securities exchange, the Company has delivered to the Trustee an Opinion of Counsel to the effect that the deposit and defeasance will not cause the Notes to be delisted. (f) The Company has paid or caused to be paid all other sums payable with respect to the Notes at the time outstanding. (g) The Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the defeasance have been complied with. Prior to the end of the 91-day period, none of the Company's obligations under this Indenture will be discharged. Thereafter, the Trustee upon request will acknowledge in writing the discharge of the Company's obligations under the Notes and this Indenture except for the surviving obligations specified above. Section 8.03. Covenant Defeasance. The Company's obligations set forth in Sections 4.10 through 4.12, inclusive, will terminate, and clauses (c), (d) and (e) of Section 6.01 will no longer constitute Events of Default, provided the following conditions have been satisfied: (a) The Company has complied with clauses (a), (b), (c), (e),(f) and (g) of Section 8.02; and (b) the Company has delivered to the Trustee an Opinion of Counsel to the effect that the Holders will not recognize income, gain or loss for federal income tax purposes as a result of the defeasance and will be subject to federal income tax on the same amount and in the same manner and at the same times as would otherwise have been the case. Except as specifically stated above, none of the Company's obligations under this Indenture will be Discharged. Section 8.04. Application of Trust Money. Subject to Section 8.05, the Trustee will hold in trust the money or U.S. Government Securities deposited with it pursuant to Section 8.01, 8.02 or 8.03, and apply the deposited money and the proceeds from deposited U.S. Government Securities to the payment of principal of and interest on the Notes in accordance with the Notes and this Indenture. Such 39 money and U.S. Government Securities need not be segregated from other funds except to the extent required by law. Section 8.05. Repayment to Company. Subject to Sections 7.07, 8.01, 8.02 and 8.03, the Trustee will promptly pay to the Company upon request any excess money held by the Trustee at any time and thereupon be relieved from all liability with respect to such money. The Trustee will pay to the Company upon request any money held for payment with respect to the Notes that remains unclaimed for two years, provided that before making such payment the Trustee may at the expense of the Company publish once in a newspaper of general circulation in New York City, or send to each Holder entitled to such money, notice that the money remains unclaimed and that after a date specified in the notice (at least 30 days after the date of the publication or notice) any remaining unclaimed balance of money will be repaid to the Company. After payment to the Company, Holders entitled to such money must look solely to the Company for payment, unless applicable law designates another Person, and all liability of the Trustee with respect to such money will cease. Section 8.06. Reinstatement. If and for so long as the Trustee is unable to apply any money or U.S. Government Obligations held in trust pursuant to Section 8.01, 8.02 or 8.03 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Notes will be reinstated as though no such deposit in trust had been made. If the Company makes any payment of principal of or interest on any Notes because of the reinstatement of its obligations, it will be subrogated to the rights of the Holders of such Notes to receive such payment from the money or U.S. Government Obligations held in trust. ARTICLE 9 AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 9.01. Amendments Without Consent of Holders. The Company and the Trustee may amend or supplement this Indenture or the Notes without notice to or the consent of any Noteholder (a) to cure any ambiguity, defect or inconsistency in this Indenture or the Notes; (b) to comply with Article 5; (c) to comply with any requirements of the Commission in connection with the qualification of this Indenture under the Trust Indenture Act; (d) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee; 40 (e) to provide for uncertificated Notes in addition to or in place of certificated Notes, provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code; (f) to provide for any Guarantee of the Notes, to secure the Notes or to confirm and evidence the release, termination or discharge of any Guarantee of or Lien securing the Notes when such release, termination or discharge is permitted by this Indenture; (g) to provide for or confirm the issuance of Additional Notes; or (h) to make any other change that does not materially and adversely affect the rights of any Holder. Section 9.02. Amendments With Consent of Holders. (a). Except as otherwise provided in Sections 6.02, 6.04 and 6.07 or paragraph (b), the Company and the Trustee may amend this Indenture and the Notes with the written consent of at least the Holders of a majority in aggregate principal amount of the outstanding Notes, and the Holders of at least a majority in principal amount of the outstanding Notes by written notice to the Trustee may waive future compliance by the Company with any provision of this Indenture or the Notes. (b) Notwithstanding the provisions of paragraph (a), without the consent of each Holder affected, an amendment or waiver may not (i) change the Stated Maturity of the principal of, or the Stated Maturity of any premium on, or any installment of principal or interest on, any Note; (ii) reduce the principal amount of, or the interest or any premium on, any Note; (iii) reduce the amount payable upon the redemption of the Notes or change the time at which any Note may be redeemed; (iv) change the method or date of computing the amount of principal of, or interest on, the Notes; (v) change the place or currency of payment of principal of, or interest on, the Notes; (vi) impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity (or, in the case or redemption, on or after the date of redemption); (vii) reduce the percentage in principal amount of the outstanding Notes of any series, the consent of whose Holders is required for any waiver of 41 compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences, provided for in this Indenture; or (viii) modify any of the provisions of this Section 9.02(b), Section 6.04 or Section 4.13, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each outstanding Note affected thereby. (c) It is not necessary for Noteholders to approve the particular form of any proposed amendment, supplement or waiver, but is sufficient if their consent approves the substance thereof. (d) An amendment, supplement or waiver under this Section will become effective on receipt by the Trustee of written consents from the Holders of the requisite percentage in principal amount of the outstanding Notes. After an amendment, supplement or waiver under this Section becomes effective, the Company will send to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. The Company will send supplemental indentures to Holders upon request. Any failure of the Company to send such notice, or any defect therein, will not, however, in any way impair or affect the validity of any such supplemental indenture or waiver. Section 9.03. Effect of Consent. (a) After an amendment, supplement or waiver becomes effective, it will bind every Holder unless it is of the type requiring the consent of each Holder affected. If the amendment, supplement or waiver is of the type requiring the consent of each Holder affected, the amendment, supplement or waiver will bind each Holder that has consented to it and every subsequent Holder of a Note that evidences the same debt as the Note of the consenting Holder. (b) If an amendment, supplement or waiver changes the terms of a Note, the Trustee may require the Holder to deliver it to the Trustee so that the Trustee may place an appropriate notation of the changed terms on the Note and return it to the Holder, or exchange it for a new Note that reflects the changed terms. The Trustee may also place an appropriate notation on any Note thereafter authenticated. However, the effectiveness of the amendment, supplement or waiver is not affected by any failure to annotate or exchange Notes in this fashion. 42 Section 9.04. Trustee's Rights and Obligations. The Trustee shall be provided with, and will be fully protected in relying upon, an Opinion of Counsel stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article 9 is authorized or permitted by this Indenture. Upon receipt of such an Opinion of Counsel, it shall sign the amendment, supplement or waiver so long as the same does not adversely affect the rights of the Trustee. The Trustee may, but is not obligated to, execute any amendment, supplement or waiver that affects the Trustee's own rights, duties or immunities under this Indenture. Section 9.05. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act. Section 9.06. Payments for Consents. Neither the Company nor any of its Subsidiaries or Affiliates may, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid or agreed to be paid to all Holders of the Notes that consent, waive or agree to amend such term or provision within the time period set forth in the solicitation documents relating to the consent, waiver or amendment. ARTICLE 10 MISCELLANEOUS Section 10.01. Trust Indenture Act of 1939. This Indenture shall incorporate and be governed by the provisions of the Trust Indenture Act that are required to be part of and to govern indentures qualified under the Trust Indenture Act. Section 10.02. Noteholder Communications; Noteholder Actions. (a) The rights of Holders to communicate with other Holders with respect to this Indenture or the Notes are as provided by the Trust Indenture Act, and the Company and the Trustee shall comply with the requirements of Trust Indenture Act Sections 312(a) and 312(b). Neither the Company nor the Trustee will be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act. (b) (i) Any request, demand, authorization, direction, notice, consent to amendment, supplement or waiver or other action provided by this Indenture to be given or taken by a Holder (an "act") may be evidenced by an instrument signed by the Holder delivered to the Trustee. The fact and date of the execution of the instrument, or the authority of the person executing it, may be proved in any manner that the Trustee deems sufficient. (ii) The Trustee may make reasonable rules for action by or at a meeting of Holders, which will be binding on all the Holders. (c) Any act by the Holder of any Note binds that Holder and every subsequent Holder of a Note that evidences the same debt as the Note of the 43 acting Holder, even if no notation thereof appears on the Note. Subject to paragraph (d), a Holder may revoke an act as to its Notes, but only if the Trustee receives the notice of revocation before the date the amendment or waiver or other consequence of the act becomes effective. (d) The Company may, but is not obligated to, fix a record date (which need not be within the time limits otherwise prescribed by Trust Indenture Act Section 316(c)) for the purpose of determining the Holders entitled to act with respect to any amendment or waiver or in any other regard, except that during the continuance of an Event of Default, only the Trustee may set a record date as to notices of default, any declaration or acceleration or any other remedies or other consequences of the Event of Default. If a record date is fixed, those Persons that were Holders at such record date and only those Persons will be entitled to act, or to revoke any previous act, whether or not those Persons continue to be Holders after the record date. No act will be valid or effective for more than 90 days after the record date. Section 10.03. Notices. (a) Any notice or communication to the Company will be deemed given if in writing (i) when delivered in person or (ii) five days after mailing when mailed by first class mail, or (iii) when sent by facsimile transmission, with transmission confirmed. Any notice to the Trustee will be effective only upon receipt. In each case the notice or communication should be addressed as follows: if to the Company: Allegheny Technologies Incorporated 1000 Six PPG Place Pittsburgh, Pennsylvania 15222 Attention: Secretary Fax: (412) 394-2837 If to the Trustee: The Bank of New York 5 Penn Plaza Floor 13 New York, New York 10001 Attention: Corporate Trust Trustee Administration Fax: 212-896-7298 The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. (b) Except as otherwise expressly provided with respect to published notices, any notice or communication to a Holder will be deemed given when mailed to the Holder at its address as it appears on the Register by first class mail or, as to any Global Note registered in the name of DTC or its nominee, as agreed by the Company, the Trustee and DTC. Copies of any notice or communication to a Holder, if given by the Company, will be mailed to the 44 Trustee at the same time. Defect in mailing a notice or communication to any particular Holder will not affect its sufficiency with respect to other Holders. (c) Where this Indenture provides for notice, the notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and the waiver will be the equivalent of the notice. Waivers of notice by Holders must be filed with the Trustee, but such filing is not a condition precedent to the validity of any action taken in reliance upon such waivers. Section 10.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company will furnish to the Trustee: (a) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (b) an Opinion of Counsel stating that all such conditions precedent have been complied with. Section 10.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture must include: (a) a statement that each person signing the certificate or opinion has read the covenant or condition and the related definitions; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statement or opinion contained in the certificate or opinion is based; (c) a statement that, in the opinion of each such person, that person has made such examination or investigation as is necessary to enable the person to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether or not, in the opinion of each such person, such condition or covenant has been complied with, provided that an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials with respect to matters of fact. 45 Section 10.06. Payment Date Other Than a Business Day. If any payment with respect to a payment of any principal of, premium, if any, or interest on any Note (including any payment to be made on any date fixed for redemption or purchase of any Note) is due on a day which is not a Business Day, then the payment need not be made on such date, but may be made on the next Business Day with the same force and effect as if made on such date, and no interest will accrue for the intervening period. Section 10.07. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. (a) This Indenture and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to principles of conflicts of law thereunder. (b) The Company hereby irrevocably and unconditionally submits to the jurisdiction of any New York State or United States Federal court sitting in New York City over any suit, action or proceeding arising out of or relating to this Indenture or any Note. The Company irrevocably and unconditionally waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in such a court and any claim that any such suit, action or proceeding brought in such a court has been brought in an inconvenient forum. To the extent that the Company has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process with respect to itself or its property, the Company irrevocably waives, to the fullest extent permitted by law, such immunity in respect of its obligations hereunder or under any Note. The Company agrees that final judgment in any such suit, action or proceeding brought in such a court shall be conclusive and binding upon the Company and, to the fullest extent permitted by law, may be enforced in any court to the jurisdiction of which the Company is subject by a suit upon such judgment or in any manner provided by law. (c) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. Section 10.08. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture or loan or debt agreement of the Company or any Subsidiary of the Company, and no such indenture or loan or debt agreement may be used to interpret this Indenture. 46 Section 10.09. Successors. All agreements of the Company in this Indenture and the Notes will bind its successors. All agreements of the Trustee in this Indenture will bind its successor. Section 10.10. Duplicate Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. Section 10.11. Separability. In case any provision in this Indenture or in the Notes is invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby. Section 10.12. Table of Contents and Headings. The Table of Contents, Cross-Reference Table and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and in no way modify or restrict any of the terms and provisions of this Indenture. Section 10.13. No Liability of Directors, Officers, Employees, Incorporators and Stockholders. No director, officer, employee, incorporator, member or stockholder of the Company, as such, will have any liability for any obligations of the Company under the Notes or this Indenture or for any claim based on, in respect of, or by reason of, such obligations. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. 47 IN WITNESS WHEREOF, the parties hereto have caused the Indenture to be duly executed as of the date first written above. ALLEGHENY TECHNOLOGIES INCORPORATED as Issuer By: /s/ James L. Murdy --------------------------------------- Name: James L. Murdy -------------------------------------- Title: President and Chief Executive Officer ------------------------------------- THE BANK OF NEW YORK as Trustee By: /s/ Terence Rawlins --------------------------------------- Name: Terence Rawlins ----------------------------- Title: Vice President ---------------------------- 48 Exhibit A [FACE OF NOTE] ALLEGHENY TECHNOLOGIES INCORPORATED 8.375% Note due 2011 [CUSIP][CINS]: --------------------- No.: $ ------------------------------ -------------------- ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation (the "Company", which term includes any successor under the Indenture hereinafter referred to), for value received, promises to pay to CEDE & CO., or its registered assigns, the principal sum of DOLLARS ($ ) [or such other amount as indicated on the Schedule of Exchange of Notes attached hereto] on December 15, 2001. [Initial](1) Interest Rate: 8.375% per annum. Interest Payment Dates: June 15 and December 15, commencing June 15, 2002. Regular Record Dates: June 1 and December 1. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which will for all purposes have the same effect as if set forth at this place. - ------------- (1) For Initial Notes and Initial Additional Notes only. IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers. Date: December , 2001 ALLEGHENY TECHNOLOGIES INCORPORATED By: ---------------------------------- Name: ------------------------- Title: ------------------------- (Form of Trustee's Certificate of Authentication) This is one of the 8.375% Notes due 2011 described in the Indenture referred to in this Note. THE BANK OF NEW YORK, as Trustee By: ---------------------------------- Authorized Signatory A-2 [REVERSE SIDE OF NOTE] ALLEGHENY TECHNOLOGIES INCORPORATED 8.375% Note due 2011 1. Principal and Interest. The Company promises to pay the principal of this Note on December 15, 2011. The Company promises to pay interest on the principal amount of this Note on each interest payment date, as set forth on the face of this Note, at the rate of 8.375% per annum (subject to adjustment as provided below). Interest will be payable semiannually (to the holders of record of the Notes at the close of business on the June 1 or December 1 immediately preceding the interest payment date) on each interest payment date, commencing June 15, 2002. The Holder of this Note is entitled to the benefits of the Registration Rights Agreement, dated December 18, 2001, between the Company and the Initial Purchasers named therein (the "Registration Rights Agreement") pursuant to which (1) if the Company fails to file an Exchange Offer Registration Statement with the Securities and Exchange Commission (the "Commission") on or prior to the 90th day after the Issue Date, (2) if the Exchange Offer Registration Statement is not declared effective by the Commission on or prior to the 150th day after the Issue Date, (3) if the Exchange Offer is not consummated on or before the 180th day after the Issue Date, (4) if obligated to file the Resale Registration Statement, the Company fails to file the Resale Registration Statement with the Commission on or prior to the 30th day after the filing obligation arises, (5) if obligated to file the Resale Registration Statement, the Resale Registration Statement is not declared effective on or prior to the 90th day after the obligation to file the Resale Registration Statement arises, or (6) after the Exchange Offer Registration Statement or the Resale Registration Statement, as the case may be, is declared effective, that registration statement thereafter ceases to be effective or usable (each such event referred to in clauses (1) through (6) above, a "Registration Default"), then the Company will pay additional interest (in addition to the interest otherwise due hereon) ("Additional Interest") to the Holder during the first 90-day period immediately following the occurrence of each such Registration Default in an amount equal to 0.25% per annum. The amount of interest will increase by an additional 0.25% per annum for each subsequent 90-day period until such Registration Default is cured, up to a maximum amount of additional interest of 1.00% per annum. Such Additional Interest will cease accruing with respect to any Registration Default when such Registration Default has been cured. The Company shall pay amounts due in respect of Additional Interest on each Interest Payment Date (or, if the Company shall default in the payment of interest on any Interest Payment Date, on the date such interest is otherwise paid as provided in the Indenture). Interest on this Note will accrue from the most recent date to which interest has been paid on this Note [or the Note surrendered in exchange for this Note](2) (or, if there is no existing default in the payment of interest and if this Note is authenticated between a regular record date and the next interest payment date, from such interest payment date) or, if no interest A-3 has been paid, from [the Issue Date](3). Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. Indenture. This is one of the Notes issued under an Indenture dated as of December 18, 2001 (as amended from time to time, the "Indenture"), between the Company and The Bank of New York, as Trustee. Capitalized terms used herein are used as defined in the Indenture unless otherwise indicated. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act. The Notes are subject to all such terms, and Holders are referred to the Indenture and the Trust Indenture Act for a statement of all such terms. To the extent permitted by applicable law, in the event of any inconsistency between the terms of this Note and the terms of the Indenture, the terms of the Indenture will control. The Notes are general unsecured obligations of the Company. The Indenture limits the original aggregate principal amount of the Notes to $300,000,000, but Additional Notes may be issued pursuant to the Indenture, and the originally issued Notes and all such Additional Notes vote together for all purposes as a single class. 3. Redemption and Repurchase; Discharge Prior to Redemption or Maturity. This Note is subject to redemption by the Company at any time, as further described in the Indenture. There is no sinking fund or mandatory redemption applicable to this Note. - ---------------- (2) Include only for Exchange Note. (3) For Additional Notes, should be the date of their original issue. A-4 If the Company deposits with the Trustee money or U.S. Government Securities sufficient to pay the then outstanding principal of, premium, if any, and accrued interest on the Notes to redemption or maturity, the Company may in certain circumstances be discharged from the Indenture and the Notes or may be discharged from certain of its obligations under certain provisions of the Indenture. 4. Registered Form; Denominations; Transfer; Exchange. The Notes are in registered form without coupons in denominations of $1,000 principal amount and any multiple of $1,000 in excess thereof. A Holder may register the transfer or exchange of Notes in accordance with the Indenture. The Trustee may require a Holder to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. Pursuant to the Indenture, there are certain periods during which the Trustee will not be required to issue, register the transfer of or exchange any Note or certain portions of a Note. 5. Defaults and Remedies. If an Event of Default (other than a bankruptcy default), as defined in the Indenture, occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Notes may declare all the Notes to be due and payable. If a bankruptcy default with respect to the Company occurs and is continuing, the Notes automatically become due and payable. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of a majority in principal amount of the Notes then outstanding may direct the Trustee in its exercise of remedies. 6. Amendment and Waiver. Subject to certain exceptions, the Indenture and the Notes may be amended, or default may be waived, with the consent of the Holders of a majority in principal amount of the outstanding Notes. Without notice to or the consent of any Holder, the Company and the Trustee may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency if such amendment or supplement does not adversely affect the interests of the Holders. 7. Authentication. This Note is not valid until the Trustee (or Authenticating Agent) signs the certificate of authentication on the other side of this Note. 8. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A/ (= Uniform Gifts to Minors Act). A-5 The Company will furnish a copy of the Indenture to any Holder upon written request and without charge. A-6 [FORM OF TRANSFER NOTICE] FOR VALUE RECEIVED the undersigned registered Holder hereby sell(s), assign(s) and transfer(s) unto Insert Taxpayer Identification No. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Please print or typewrite name and address including zip code of assignee - -------------------------------------------------------------------------------- the within Note and all rights thereunder, hereby irrevocably constituting and appointing - -------------------------------------------------------------------------------- attorney to transfer said Note on the books of the Company with full power of substitution in the premises. A-7 [THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES BEARING A RESTRICTED LEGEND] In connection with any transfer of this Note occurring prior to the date which is the earlier of (i) the date of an effective Resale Registration Statement or (ii) two years after the later of the original issuance of this Note or the last date on which this Note was held by the Company or an Affiliate of the Company, the undersigned confirms that such transfer is made without utilizing any general solicitation or general advertising and further as follows: Check One [ ]: (1) This Note is being transferred to a "qualified institutional buyer" in compliance with Rule 144A under the Securities Act of 1933, as amended and certification in the form of Exhibit E to the Indenture is being furnished herewith. [ ]: (2) This Note is being transferred to a Non-U.S. Person in compliance with the exemption from registration under the Securities Act of 1933, as amended, provided by Regulation S thereunder, and certification in the form of Exhibit D to the Indenture is being furnished herewith. or [ ]: (3) This Note is being transferred other than in accordance with (1) or (2) above and documents are being furnished which comply with the conditions of transfer set forth in this Note and the Indenture. If none of the foregoing boxes is checked, the Trustee is not obligated to register this Note in the name of any Person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in the Indenture have been satisfied. Date:____________________ ------------------------------------ Seller By: ------------------------ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever. A-8 Signature Guarantee: (4) ------------------------------------ By: ------------------------------------------ To be executed by an executive officer - ------------------ (4) Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Note Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-9 SCHEDULE OF EXCHANGES OF NOTES(5) The following exchanges of a part of this Global Note for Physical Notes or a part of another Global Note have been made:
Amount of Amount of Principal amount of decrease in increase in this Global Note Signature of principal amount principal amount following such authorized Date of Exchange of this Global Note of this Global Note decrease (or increase) officer of Trustee ---------------- ------------------- ------------------- ---------------------- ------------------
- ---------- (5) For Global Notes. A-10 Exhibit B RESTRICTED LEGEND THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. Exhibit C DTC LEGEND UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS A BENEFICIAL INTEREST HEREIN. TRANSFERS OF THIS GLOBAL NOTE ARE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE ARE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE TRANSFER PROVISIONS OF THE INDENTURE. Exhibit D Regulation S Certificate -----------,---- THE BANK OF NEW YORK 5 Penn Plaza 13th Floor New York, New York 10001 Attention: Corporate Trust Administration Re: ALLEGHENY TECHNOLOGIES INCORPORATED 8.375% Notes due 2011 (the "Notes") Issued under the Indenture (the "Indenture") dated as of December 18, 2001 relating to the Notes Dear Sirs: Terms are used in this Certificate as used in Regulation S ("Regulation S") under the Securities Act of 1933, as amended (the "Securities Act"), except as otherwise stated herein. [CHECK A OR B AS APPLICABLE.] [ ] A. This Certificate relates to our proposed transfer of $____ principal amount of Notes issued under the Indenture. We hereby certify as follows: 1. The offer and sale of the Notes was not and will not be made to a person in the United States (unless such person is excluded from the definition of "U.S. person" pursuant to Rule 902(k)(2)(vi) or the account held by it for which it is acting is excluded from the definition of "U.S. person" pursuant to Rule 902(k)(2)(i) under the circumstances described in Rule 902(g)(3)) and such offer and sale was not and will not be specifically targeted at an identifiable group of U.S. citizens abroad. 2. The circumstances described in the parenthetical in paragraph 1 above are applicable, either (a) at the time the buy order was originated, the buyer was outside the United States or we and any person acting on our behalf reasonably believed that the buyer was outside the United States or (b) the transaction was executed in, on or through the facilities of a designated offshore securities market, and A-11 neither we nor any person acting on our behalf knows that the transaction was pre-arranged with a buyer in the United States. 3. Neither we, any of our affiliates, nor any person acting on our or their behalf has made any directed selling efforts in the United States with respect to the Notes. 4. The proposed transfer of Notes is not part of a plan or scheme to evade the registration requirements of the Securities Act. 5. We are a dealer or a person receiving a selling concession, fee or other remuneration in respect of the Notes, and the proposed transfer takes place during the Restricted Period (as defined in the Indenture), or we are an officer or director of the Company or an Initial Purchaser (as defined in the Indenture), we certify that the proposed transfer is being made in accordance with the provisions of Rule 904(b) of Regulation S. [ ] B. This Certificate relates to our proposed exchange of $____ principal amount of Notes issued under the Indenture for an equal principal amount of Notes to be held by us. We hereby certify as follows: 1. The time the offer and sale of the Notes was made to us, either (i) we were not in the United States or (ii) we were excluded from the definition of "U.S. person" pursuant to Rule 902(k)(2)(vi) or the account held by us for which we were acting was excluded from the definition of "U.S. person" pursuant to Rule 902(k)(2)(i) under the circumstances described in Rule 902(g)(3); and we were not a member of an identifiable group of U.S. citizens abroad. 2. The circumstances described in paragraph 1(ii) above are applicable, either (a) at the time our buy order was originated, we were outside the United States or (b) the transaction was executed in, on or through the facilities of a designated offshore securities market and we did not pre-arrange the transaction in the United States. 3. The proposed exchange of Notes is not part of a plan or scheme to evade the registration requirements of the Securities Act. D-2 You and the Company are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Very truly yours, [NAME OF SELLER (FOR TRANSFERS) OR OWNER (FOR EXCHANGES)] By: --------------------------------------- Name: ---------------------------- Title: --------------------------- Address: ------------------------- Date: ----------------------------- D-3 Exhibit E Rule 144A Certificate --------, ---- THE BANK OF NEW YORK 5 Penn Plaza 13th Floor New York, New York 10001 Attention: Corporate Trust Administration Re: ALLEGHENY TECHNOLOGIES INCORPORATED 8.375% Notes due 2011 (the "Notes") Issued under the Indenture (the "Indenture") dated as of December 18, 2001 relating to the Notes Ladies and Gentlemen: TO BE COMPLETED BY PURCHASER IF (1) ABOVE IS CHECKED. This Certificate relates to: [CHECK A OR B AS APPLICABLE.] [ ] A. Our proposed purchase of $____ principal amount of Notes issued under the Indenture. [ ] B. Our proposed exchange of $____ principal amount of Notes issued under the Indenture for an equal principal amount of Notes to be held by us. We and, if applicable, each account for which we are acting in the aggregate owned and invested more than $100,000,000 in securities of issuers that are not affiliated with us (or such accounts, if applicable), as of _________, 200_, which is a date on or since close of our most recent fiscal year. We and, if applicable, each account for which we are acting, are a qualified institutional buyer within the meaning of Rule 144A ("Rule 144A") under the Securities Act of 1933, as amended (the "Securities Act"). If we are acting on behalf of an account, we exercise sole investment discretion with respect to such account. We are aware that the transfer of Notes to us, or such exchange, as applicable, is being made in reliance upon the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. Prior to the date of this Certificate we have received such information regarding the Company as we have requested pursuant to Rule 144A(d)(4) or have determined not to request such information. You and the Company are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Very truly yours, [NAME OF PURCHASER (FOR TRANSFERS) OR OWNER (FOR EXCHANGES)] By: --------------------------------------- Name: ---------------------------- Title: --------------------------- Address: ------------------------- Date: ----------------------- E-2 Exhibit F [COMPLETE FORM I OR FORM II AS APPLICABLE.] [FORM I] Certificate of Beneficial Ownership [To: THE BANK OF NEW YORK 5 Penn Plaza 13th Floor New York, New York 10001 Attention: Corporate Trust Administration] OR [Euroclear Bank S.A./N.V., as operator of the Euroclear System] OR [Clearstream Banking SA] Re: ALLEGHENY TECHNOLOGIES INCORPORATED 8.375% Notes due 2011 (the "Notes") Issued under the Indenture (the "Indenture") dated as of December 18, 2001 relating to the Notes Ladies and Gentlemen: We are the beneficial owner of $____ principal amount of Notes issued under the Indenture and represented by a Temporary Offshore Global Note (as defined in the Indenture). We hereby certify as follows: [CHECK A OR B AS APPLICABLE.] [ ] A. We are a non-U.S. person (within the meaning of Regulation S under the Securities Act of 1933, as amended). [ ] B. We are a U.S. person (within the meaning of Regulation S under the Securities Act of 1933, as amended) that purchased the Notes in a transaction that did not require registration under the Securities Act of 1933, as amended. You and the Company are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Very truly yours, [NAME OF BENEFICIAL OWNER] By: -------------------------------------------- Name: ----------------------------------- Title: ----------------------------------- Address: -------------------------------- Date: ----------------------------- [FORM II] Certificate of Beneficial Ownership THE BANK OF NEW YORK 5 Penn Plaza 13th Floor New York, New York 10001 Attention: Corporate Trust Administration Re: ALLEGHENY TECHNOLOGIES INCORPORATED 8.375% Notes due 2011 (the "Notes") Issued under the Indenture (the "Indenture") dated as of December 18, 2001 relating to the Notes Ladies and Gentlemen: This is to certify that based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organizations ("Member Organizations") appearing in our records as persons being entitled to a portion of the principal amount of Notes represented by a Temporary Offshore Global Note issued under the above-referenced Indenture, that as of the date hereof, $____ principal amount of Notes represented by the Temporary Offshore Global Note being submitted herewith for exchange is beneficially owned by persons that are either (i) non-U.S. persons (within the meaning of Regulation S under the Securities Act of 1933, as amended) or (ii) U.S. persons that purchased the Notes in a transaction that did not require registration under the Securities Act of 1933, as amended. We further certify that (i) we are not submitting herewith for exchange any portion of such Temporary Offshore Global Note excepted in such Member Organization F-2 certifications and (ii) as of the date hereof we have not received any notification from any Member Organization to the effect that the statements made by such Member Organization with respect to any portion of such Temporary Offshore Global Note submitted herewith for exchange are no longer true and cannot be relied upon as of the date hereof. You and the Company are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Yours faithfully, EUROCLEAR BANK S.A./N.V., as operator of the Euroclear System or CLEARSTREAM BANKING SA By: --------------------------------------- Name: ---------------------------- Title: --------------------------- Address: ------------------------- Date: ---------------------- F-3 Exhibit G Institutional Accredited Investor Certificate THE BANK OF NEW YORK 5 Penn Plaza 13th Floor New York, New York 10001 Attention: Corporate Trust Administration Re: ALLEGHENY TECHNOLOGIES INCORPORATED 8.375% Notes due 2011 (the "Notes") Issued under the Indenture (the "Indenture") dated as of December 18, 2001 relating to the Notes Ladies and Gentlemen: This Certificate relates to: [CHECK A OR B AS APPLICABLE.] [ ] A. Our proposed purchase of $____ principal amount of Notes issued under the Indenture. [ ] B. Our proposed exchange of $____ principal amount of Notes issued under the Indenture for an equal principal amount of Notes to be held by us. We hereby confirm that: 1. We are an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act") (an "Institutional Accredited Investor"). 2. Any acquisition of Notes by us will be for our own account or for the account of one or more other Institutional Accredited Investors as to which we exercise sole investment discretion. 3. We have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of an investment in the Notes and we and any accounts for which we are acting are able to bear the economic risks of and an entire loss of our or their investment in the Notes. 4. We are not acquiring the Notes with a view to any distribution thereof in a transaction that would violate the Securities Act or the securities laws of any State of the United States or any other applicable jurisdiction; provided that the disposition of our property and the property of any accounts for which we are acting as fiduciary will remain at all times within our and their control. 5. We acknowledge that the Notes have not been registered under the Securities Act and that the Notes may not be offered or sold within the United States or to or for the benefit of U.S. persons except as set forth below. 6. The principal amount of Notes to which this Certificate relates is at least equal to $250,000. We agree for the benefit of the Company, on our own behalf and on behalf of each account for which we are acting, that such Notes may be offered, sold, pledged or otherwise transferred only in accordance with the Securities Act and any applicable securities laws of any State of the United States and only (a) to the Company, (b) pursuant to a registration statement which has become effective under the Securities Act, (c) to a qualified institutional buyer in compliance with Rule 144A under the Securities Act, (d) in an offshore transaction in compliance with Rule 904 of Regulation S under the Securities Act, (e) in a principal amount of not less than $250,000, to an Institutional Accredited Investor that, prior to such transfer, delivers to the Trustee a duly completed and signed certificate (the form of which may be obtained from the Trustee) relating to the restrictions on transfer of the Notes or (f) pursuant to an exemption from registration provided by Rule 144 under the Securities Act or any other available exemption from the registration requirements of the Securities Act. Prior to the registration of any transfer in accordance with (c) or (d) above, we acknowledge that a duly completed and signed certificate (the form of which may be obtained from the Trustee) must be delivered to the Trustee. Prior to the registration of any transfer in accordance with (e) or (f) above, we acknowledge that the Company reserves the right to require the delivery of such legal opinions, certifications or other evidence as may reasonably be required in order to determine that the proposed transfer is being made in compliance with the Securities Act and applicable state securities laws. We acknowledge that no representation is made as to the availability of any Rule 144 exemption from the registration requirements of the Securities Act. We understand that the Trustee will not be required to accept for registration of transfer any Notes acquired by us, except upon presentation of evidence satisfactory to the Company and the Trustee that the foregoing restrictions on transfer have been complied with. We further understand that the Notes acquired by us will be in the form of definitive physical certificates and that such certificates will bear a legend reflecting the substance of the preceding paragraph. We further agree to provide to any person acquiring any of the Notes from us a notice advising such person that resales of the Notes are restricted as stated herein and that certificates representing the Notes will bear a legend to that effect. We agree to notify you promptly in writing if any of our acknowledgments, representations or agreements herein ceases to be accurate and complete. G-2 We represent to you that we have full power to make the foregoing acknowledgments, representations and agreements on our own behalf and on behalf of any account for which we are acting. You and the Company are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Very truly yours, [NAME OF PURCHASER (FOR TRANSFER) OR OWNER (FOR EXCHANGES)] By: --------------------------------------- Name: ---------------------------- Title: --------------------------- Address: ------------------------- Date: -------------------- G-3 Upon transfer, the Notes would be registered in the name of the new beneficial owner as follows: By: ------------------------------------------------ Date: ---------------------------------------------- Taxpayer ID number: -------------------------------- G-4 Exhibit H THIS NOTE IS A TEMPORARY GLOBAL NOTE. PRIOR TO THE EXPIRATION OF THE RESTRICTED PERIOD APPLICABLE HERETO, BENEFICIAL INTERESTS HEREIN MAY NOT BE HELD BY ANY PERSON OTHER THAN (1) A NON-U.S. PERSON OR (2) A U.S. PERSON THAT PURCHASED SUCH INTEREST IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). BENEFICIAL INTERESTS HEREIN ARE NOT EXCHANGEABLE FOR PHYSICAL NOTES OTHER THAN A PERMANENT GLOBAL NOTE IN ACCORDANCE WITH THE TERMS OF THE INDENTURE. TERMS IN THIS LEGEND ARE USED AS USED IN REGULATION S UNDER THE SECURITIES ACT. EX-4.6 5 j9326701ex4-6.txt ISSUING AND PAYING AGENT AGREEMENT EXHIBIT 4.6 ISSUING AND PAYING AGENCY AGREEMENT This Agreement, dated as of January 25, 2002, is by and between Allegheny Technologies Incorporated (the "ISSUER") and JPMorgan Chase Bank ("JPMORGAN"). 1. APPOINTMENT AND ACCEPTANCE The Issuer hereby appoints JPMorgan as its issuing and paying agent in connection with the issuance and payment of certain short-term promissory notes of the Issuer (the "NOTES"), as further described herein, and JPMorgan agrees to act as such agent upon the terms and conditions contained in this Agreement. 2. COMMERCIAL PAPER PROGRAMS The Issuer may establish one or more commercial paper programs under this Agreement by delivering to JPMorgan a completed program schedule (the "PROGRAM SCHEDULE"), with respect to each such program. JPMorgan has given the Issuer a copy of the current form of Program Schedule and the Issuer shall complete and return its first Program Schedule to JPMorgan prior to or simultaneously with the execution of this Agreement. In the event that any of the information provided in, or attached to, a Program Schedule shall change, the Issuer shall promptly inform JPMorgan of such change in writing. 3. NOTES All Notes issued by the Issuer under this Agreement shall be short-term promissory notes, exempt from the registration requirements of the Securities Act of 1933, as amended, as indicated on the Program Schedules, and from applicable state securities laws. The Notes may be placed by dealers (the "DEALERS") pursuant to Section 4 hereof. Notes shall be issued in either certificated or book-entry form. 4. AUTHORIZED REPRESENTATIVES The Issuer shall deliver to JPMorgan a duly adopted corporate resolution from the Issuer's Board of Directors (or other governing body) authorizing the issuance of Notes under each program established pursuant to this Agreement and a certificate of incumbency, with specimen signatures attached, of those officers, employees and agents of the Issuer authorized to take certain actions with respect to the Notes as provided in this Agreement (each such person is hereinafter referred to as an "AUTHORIZED REPRESENTATIVE"). Until JPMorgan receives any subsequent incumbency certificates of the Issuer, JPMorgan shall be entitled to rely on the last incumbency certificate delivered to it for the purpose of determining the Authorized Representatives. The Issuer represents and warrants that each Authorized Representative may appoint other officers, employees and agents of the Issuer (the "DELEGATES"), including without limitation any Dealers, to issue instructions to JPMorgan under this Agreement, and take other actions on the Issuer's behalf hereunder, provided that notice of the appointment of each Delegate is delivered to JPMorgan in writing. Each such appointment shall remain in effect unless and until revoked by the Issuer in a written notice to JPMorgan. 5. CERTIFICATED NOTES If and when the Issuer intends to issue certificated notes ("CERTIFICATED NOTES"), the Issuer and JPMorgan shall agree upon the form of such Notes. Thereafter, the Issuer shall from time to time deliver to JPMorgan adequate supplies of Certificated Notes which will be in bearer form, serially numbered, and shall be executed by the manual or facsimile signature of an Authorized Representative. JPMorgan will acknowledge receipt of any supply of Certificated Notes received from the Issuer, noting any exceptions to the shipping manifest or transmittal letter (if any), and will hold the Certificated Notes in safekeeping for the Issuer in accordance with JPMorgan's customary practices. JPMorgan shall not have any liability to the Issuer to determine by whom or by what means a facsimile signature may have been affixed on Certificated Notes, or to determine whether any facsimile or manual signature is genuine, if such facsimile or manual signature resembles the specimen signature attached to the Issuer's certificate of incumbency with respect to such Authorized Representative. Any Certificated Note bearing the manual or facsimile signature of a person who is an Authorized Representative on the date such signature was affixed shall bind the Issuer after completion thereof by JPMorgan, notwithstanding that such person shall have ceased to hold his or her office on the date such Note is countersigned or delivered by JPMorgan. 6. BOOK-ENTRY NOTES The Issuer's book-entry notes ("BOOK-ENTRY NOTES") shall not be issued in physical form, but their aggregate face amount shall be represented by a master note (the "MASTER NOTE") in the form of Exhibit A executed by the Issuer pursuant to the book-entry commercial paper program of The Depository Trust Company ("DTC"). JPMorgan shall maintain the Master Note in safekeeping, in accordance with its customary practices, on behalf of Cede & Co., the registered owner thereof and nominee of DTC. As long as Cede & Co. is the registered owner of the Master Note, the beneficial ownership interest therein shall be shown on, and the transfer of ownership thereof shall be effected through, entries on the books maintained by DTC and the books of its direct and indirect participants. The Master Note and the Book-Entry Notes shall be subject to DTC's rules and procedures, as amended from time to time. JPMorgan shall not be liable or responsible for sending transaction statements of any kind to DTC's participants or the beneficial owners of the Book-Entry Notes, or for maintaining, supervising or reviewing the records of DTC or its participants with respect to such Notes. In connection with DTC's program, the Issuer understands that as one of the conditions of its participation therein, it shall be necessary for the Issuer and JPMorgan to enter into a Letter of Representations, in the form of Exhibit B hereto, and for DTC to receive and accept such Letter of Representations. In accordance with DTC's program, JPMorgan shall obtain from the CUSIP Service Bureau a written list of CUSIP numbers for Issuer's Book-Entry Notes, and JPMorgan shall deliver such list to DTC. The CUSIP Service Bureau shall bill the Issuer directly for the fee or fees payable for the list of CUSIP numbers for the Issuer's Book-Entry Notes. 7. ISSUANCE INSTRUCTIONS TO JPMORGAN; PURCHASE PAYMENTS The Issuer understands that all instructions under this Agreement are to be directed to JPMorgan's Commercial Paper Operations Department. JPMorgan shall provide the Issuer, or, if applicable, the Issuer's Dealers, with access to JPMorgan's Money Market Issuance System or other electronic means (collectively, the "SYSTEM") in order that JPMorgan may receive electronic instructions for the issuance of Notes. Electronic instructions must be transmitted in accordance with the procedures furnished by JPMorgan to the Issuer or its Dealers in connection with the System. These transmissions shall be the equivalent to the giving of a duly authorized written and signed instruction which JPMorgan may act upon without liability. In the event that the System is inoperable at any time, an Authorized Representative or a Delegate may deliver written, telephone or facsimile instructions to JPMorgan, which instructions shall be verified in accordance with any security procedures agreed upon by the parties. JPMorgan shall incur no liability to the Issuer in acting upon instructions believed by JPMorgan in good faith to have been given by an Authorized Representative or a Delegate. In the event that a discrepancy exists between a telephonic instruction and a written confirmation, the telephonic instruction will be deemed the controlling and proper instruction. JPMorgan may electronically record any conversations made pursuant to this Agreement, and the Issuer hereby consents to such 2 recordings. All issuance instructions regarding the Notes must be received by 1:00 P.M. New York time in order for the Notes to be issued or delivered on the same day. (a) ISSUANCE AND PURCHASE OF BOOK-ENTRY NOTES. Upon receipt of issuance instructions from the Issuer or its Dealers with respect to Book-Entry Notes, JPMorgan shall transmit such instructions to DTC and direct DTC to cause appropriate entries of the Book-Entry Notes to be made in accordance with DTC's applicable rules, regulations and procedures for book-entry commercial paper programs. JPMorgan shall assign CUSIP numbers to the Issuer's Book-Entry Notes to identify the Issuer's aggregate principal amount of outstanding Book-Entry Notes in DTC's system, together with the aggregate unpaid interest (if any) on such Notes. Promptly following DTC's established settlement time on each issuance date, JPMorgan shall access DTC's system to verify whether settlement has occurred with respect to the Issuer's Book-Entry Notes. Prior to the close of business on such business day, JPMorgan shall deposit immediately available funds in the amount of the proceeds due the Issuer (if any) to the Issuer's account at JPMorgan and designated in the applicable Program Schedule (the "ACCOUNT"), provided that JPMorgan has received DTC's confirmation that the Book-Entry Notes have settled in accordance with DTC's applicable rules, regulations and procedures. JPMorgan shall have no liability to the Issuer whatsoever if any DTC participant purchasing a Book-Entry Note fails to settle or delays in settling its balance with DTC or if DTC fails to perform in any respect. (b) ISSUANCE AND PURCHASE OF CERTIFICATED NOTES. Upon receipt of issuance instructions with respect to Certificated Notes, JPMorgan shall: (a) complete each Certificated Note as to principal amount, date of issue, maturity date, place of payment, and rate or amount of interest (if such Note is interest bearing) in accordance with such instructions; (b) countersign each Certificated Note; and (c) deliver each Certificated Note in accordance with the Issuer's instructions, except as otherwise set forth below. Whenever JPMorgan is instructed to deliver any Certificated Note by mail, JPMorgan shall strike from the Certificated Note the word "Bearer," insert as payee the name of the person so designated by the Issuer and effect delivery by mail to such payee or to such other person as is specified in such instructions to receive the Certificated Note. The Issuer understands that, in accordance with the custom prevailing in the commercial paper market, delivery of Certificated Notes shall be made before the actual receipt of payment for such Notes in immediately available funds, even if the Issuer instructs JPMorgan to deliver a Certificated Note against payment. Therefore, once JPMorgan has delivered a Certificated Note to the designated recipient, the Issuer shall bear the risk that such recipient may fail to remit payment of such Note or return such Note to JPMorgan. Delivery of Certificated Notes shall be subject to the rules of the New York Clearing House in effect at the time of such delivery. Funds received in payment of Certificated Notes shall be credited to the Account. 8. USE OF SALES PROCEEDS IN ADVANCE OF PAYMENT JPMorgan shall not be obligated to credit the Issuer's Account unless and until payment of the purchase price of each Note is received by JPMorgan. From time to time, JPMorgan, in its sole discretion, may permit the Issuer to have use of funds payable with respect to a Note prior to JPMorgan's receipt of the sales proceeds of such Note. If JPMorgan makes a deposit, payment or transfer of funds on behalf of the Issuer before JPMorgan receives payment for any Note, such deposit, payment or transfer of funds shall represent an advance by JPMorgan to the Issuer to be 3 repaid promptly, and in any event on the same day as it is made, from the proceeds of the sale of such Note, or by the Issuer if such proceeds are not received by JPMorgan. 9. PAYMENT OF MATURED NOTES Notice that the Issuer will not redeem any Note on the relative Initial Redemption Date (as defined in the applicable Extendible Commercial Note Announcement) must be received in writing by JPMorgan by 11:00 A.M. on such Initial Redemption Date. On any other day when a Note matures or is prepaid, the Issuer shall transmit, or cause to be transmitted, to the Account, prior to 2:30 P.M. New York time on the same day, an amount of immediately available funds sufficient to pay the aggregate principal amount of such Note and any applicable interest due. JPMorgan shall pay the interest (if any) and principal on a Book-Entry Note to DTC in immediately available funds, which payment shall be by net settlement of JPMorgan's account at DTC. JPMorgan shall pay Certificated Notes upon presentment. JPMorgan shall have no obligation under the Agreement to make any payment for which there is not sufficient, available and collected funds in the Account, and JPMorgan may, without liability to the Issuer, refuse to pay any Note that would result in an overdraft to the Account. 10. OVERDRAFTS (a) Intraday overdrafts with respect to each Account shall be subject to JPMorgan's policies as in effect from time to time. (b) An overdraft will exist in an Account if JPMorgan, in its sole discretion, (i) permits an advance to be made pursuant to Section 8 and, notwithstanding the provisions of Section 8, such advance is not repaid in full on the same day as it is made, or (ii) pays a Note pursuant to Section 9 in excess of the available collected balance in such Account. Overdrafts shall be subject to JPMorgan's established banking practices, including, without limitation, the imposition of interest, funds usage charges and administrative fees. The Issuer shall repay any such overdraft, fees and charges no later than the next business day, together with interest on the overdraft at the rate established by JPMorgan for the Account, computed from and including the date of the overdraft to the date of repayment. 11. NO PRIOR COURSE OF DEALING No prior action or course of dealing on the part of JPMorgan with respect to advances of the purchase price or payments of matured Notes shall give rise to any claim or cause of action by the Issuer against JPMorgan in the event that JPMorgan refuses to pay or settle any Notes for which the Issuer has not timely provided funds as required by this Agreement. 12. RETURN OF CERTIFICATED NOTES JPMorgan will in due course cancel any Certificated Note presented for payment and return such Note to the Issuer. JPMorgan shall also cancel and return to the Issuer any spoiled or voided Certificated Notes. Promptly upon written request of the Issuer or at the termination of this Agreement, JPMorgan shall destroy all blank, unissued Certificated Notes in its possession and furnish a certificate to the Issuer certifying such actions. 13. INFORMATION FURNISHED BY JPMORGAN Upon the reasonable request of the Issuer, JPMorgan shall promptly provide the Issuer with information with respect to any Note issued and paid hereunder, provided, that the Issuer 4 delivers such request in writing and, to the extent applicable, includes the serial number or note number, principal amount, payee, date of issue, maturity date, amount of interest (if any) and place of payment of such Note. 14. REPRESENTATIONS AND WARRANTIES The Issuer represents and warrants that: (i) it has the right, capacity and authority to enter into this Agreement; and (ii) it will comply with all of its obligations and duties under this Agreement. The Issuer further represents and agrees that each Note issued and distributed upon its instruction pursuant to this Agreement shall constitute the Issuer's representation and warranty to JPMorgan that such Note is a legal, valid and binding obligation of the Issuer, and that such Note is being issued in a transaction which is exempt from registration under the Securities Act of 1933, as amended, and any applicable state securities law. 15. DISCLAIMERS Neither JPMorgan nor its directors, officers, employees or agents shall be liable for any act or omission under this Agreement except in the case of gross negligence or willful misconduct. IN NO EVENT SHALL JPMORGAN BE LIABLE FOR SPECIAL, INDIRECT OR CONSEQUENTIAL LOSS OR DAMAGE OF ANY KIND WHATSOEVER (INCLUDING BUT NOT LIMITED TO LOST PROFITS), EVEN IF JPMORGAN HAS BEEN ADVISED OF THE LIKELIHOOD OF SUCH LOSS OR DAMAGE AND REGARDLESS OF THE FORM OF ACTION. In no event shall JPMorgan be considered negligent in consequence of complying with DTC's rules, regulations and procedures. The duties and obligations of JPMorgan, its directors, officers, employees or agents shall be determined by the express provisions of this Agreement and they shall not be liable except for the performance of such duties and obligations as are specifically set forth herein and no implied covenants shall be read into this Agreement against them. Neither JPMorgan nor its directors, officers, employees or agents shall be required to ascertain whether any issuance or sale of any Notes (or any amendment or termination of this Agreement) has been duly authorized or is in compliance with any other agreement to which the Issuer is a party (whether or not JPMorgan is also a party to such agreement). 16. INDEMNIFICATION The Issuer agrees to indemnify and hold harmless JPMorgan, its directors, officers, employees and agents from and against any and all liabilities, claims, losses, damages, penalties, costs and expenses (including attorneys' fees and disbursements) suffered or incurred by or asserted or assessed against JPMorgan or any of them arising out of JPMorgan or any of them acting as the Issuer's agent under this Agreement, except for such liability, claim, loss, damage, penalty, cost or expense resulting from the gross negligence or willful misconduct of JPMorgan, its directors, officers, employees or agents. This indemnity will survive the termination of this Agreement. 17. OPINION OF COUNSEL The Issuer shall deliver to JPMorgan all documents it may reasonably request relating to the existence of the Issuer and authority of the Issuer for this Agreement, including, without limitation, an opinion of counsel, substantially in the form of Exhibit C hereto. 5 18. NOTICES All notices, confirmations and other communications hereunder shall (except to the extent otherwise expressly provided) be in writing and shall be sent by first-class mail, postage prepaid, by telecopier or by hand, addressed as follows, or to such other address as the party receiving such notice shall have previously specified to the party sending such notice: If to the Issuer: Allegheny Technologies Incorporated 1000 Six PPG Place Pittsburgh, PA 15222 Attention: RS Park Telephone: 412-394-2822 Facsimile: 412-394-3034 If to JPMorgan concerning the daily issuance and redemption of Notes: Attention: Commercial Paper Operations 55 Water Street, 2nd Floor New York NY 10041-2413 Telephone: (212) 638-0451 Facsimile: (212) 638-7881 All other: Attention: Commercial Paper JPM 55 Water Street, Room 230 New York NY 10041-0199 Telephone: (212) 638-6106 Facsimile: (212) 638-0487/88 19. COMPENSATION The Issuer shall pay compensation for services pursuant to this Agreement in accordance with the pricing schedules furnished by JPMorgan to the Issuer from time to time and upon such payment terms as the parties shall determine. The Issuer shall also reimburse JPMorgan for any fees and charges imposed by DTC with respect to services provided in connection with the Book-Entry Notes. 20. BENEFIT OF AGREEMENT This Agreement is solely for the benefit of the parties hereto and no other person shall acquire or have any right under or by virtue hereof. 21. TERMINATION This Agreement may be terminated at any time by either party upon thirty (30) days prior written notice to the other, but such termination shall not affect the respective liabilities of the parties hereunder arising prior to such termination. 22. FORCE MAJEURE In no event shall JPMorgan be liable for any failure or delay in the performance of its obligations hereunder because of circumstances beyond JPMorgan's control, including, but not limited to, acts of God, flood, war (whether declared or undeclared), terrorism, fire, riot, strikes or 6 work stoppages for any reason, embargo, government action, including any laws, ordinances, regulations or the like which restrict or prohibit the providing of the services contemplated by this Agreement, inability to obtain material, equipment, or communications or computer facilities, or the failure of equipment or interruption of communications or computer facilities, and other causes beyond JPMorgan's control whether or not of the same class or kind as specifically named above. 23. ENTIRE AGREEMENT This Agreement, together with the exhibits attached hereto, constitutes the entire agreement between JPMorgan and the Issuer with respect to the subject matter hereof and supersedes in all respects all prior proposals, negotiations, communications, discussions and agreements between the parties concerning the subject matter of this Agreement. 24. WAIVERS AND AMENDMENTS No failure or delay on the part of any party in exercising any power or right under this Agreement shall operate as a waiver, nor does any single or partial exercise of any power or right preclude any other or further exercise, or the exercise of any other power or right. Any such waiver shall be effective only in the specific instance and for the purpose for which it is given. No amendment, modification or waiver of any provision of this Agreement shall be effective unless the same shall be in writing and signed by the Issuer and JPMorgan. 25. BUSINESS DAY Whenever any payment to be made hereunder shall be due on a day which is not a business day for JPMorgan, then such payment shall be made on JPMorgan's next succeeding business day. 26. COUNTERPARTS This Agreement may be executed in counterparts, each of which shall be deemed an original and such counterparts together shall constitute but one instrument. 27. HEADINGS The headings in this Agreement are for purposes of reference only and shall not in any way limit or otherwise affect the meaning or interpretation of any of the terms of this Agreement. 28. GOVERNING LAW This Agreement and the Notes shall be governed by and construed in accordance with the internal laws of the State of New York, without regard to the conflict of laws provisions thereof. 29. JURISDICTION AND VENUE Each party hereby irrevocably and unconditionally submits to the jurisdiction of the United States District Court for the Southern District of New York and any New York State court located in the Borough of Manhattan in New York City and of any appellate court from any thereof for the purposes of any legal suit, action or proceeding arising out of or relating to this Agreement (a "PROCEEDING"). Each party hereby irrevocably agrees that all claims in respect of any Proceeding may be heard and determined in such Federal or New York State court and irrevocably waives, to the fullest extent it may effectively do so, any objection it may now or hereafter have to the laying of venue of any Proceeding in any of the aforementioned courts and the defense of an inconvenient forum to the maintenance of any Proceeding. 7 30. WAIVER OF TRIAL BY JURY EACH PARTY HEREBY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR RELATING TO ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. 31. ACCOUNT CONDITIONS Each Account shall be subject to JPMorgan's account conditions, as in effect from time to time. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on their behalf by duly authorized officers as of the day and year first-above written. JPMORGAN CHASE BANK ALLEGHENY TECHNOLOGIES INCORPORATED By: /s/ Judith Hyppolite By: /s/ Richard J. Harshman ----------------------------- ----------------------------------- Name: Judith Hyppolite Name: Richard J. Harshman --------------------------- --------------------------------- Title: Assistant Vice President Title: Senior Vice President Finance, -------------------------- -------------------------------- and Chief Financial Officer -------------------------------- Date: January 22, 2002 Date: January 18, 2002 --------------------------- --------------------------------- 8 EX-4.8 6 j9326701ex4-8.txt 1ST AMENDMENT TO COMMERCIAL PAPER DEALER AGMENT EXHIBIT 4.8 FIRST AMENDMENT TO COMMERCIAL PAPER DEALER AGREEMENT This First Amendment dated as of January 25, 2002, by and between ALLEGHENY TECHNOLOGIES INCORPORATED ("ISSUER") and JPMORGAN SECURITIES, INC. (formerly "Chase Securities, Inc.") ("DEALER"). WHEREAS, Issuer and Dealer are parties to a Commercial Paper Dealer Agreement dated as of November 2, 2000 (the "Agreement"); and WHEREAS, Issuer and Dealer wish to amend the Agreement as provided herein: NOW, THEREFORE, for good and valuable consideration and intending to be legally bound hereby, Issuer and Dealer hereby agree as follows: 1. Effective with respect to Notes sold on or after January 25, 2002, the cover page of the Agreement is amended to delete the phrase: "Concerning Notes to be issued pursuant to an Issuing and Paying Agency Agreement dated as of November 2, 2000, between the Issuer and Bank One National Association, as Issuing and Paying Agent" and to insert in lieu thereof the phrase: "Concerning Notes to be issued pursuant to an Issuing and Paying Agency Agreement dated as of January 25, 2002, between the Issuer and JPMorgan Chase Bank, as Issuing and Paying Agent". 2. Except as provided herein, the Agreement shall remain in full force and effect. WITNESS the due execution hereof. ALLEGHENY TECHNOLOGIES, INC. By: /s/ Richard J. Harshman ---------------------------------- Title: Senior Vice President, Finance ------------------------------- and Chief Financial Officer ------------------------------- JPMORGAN SECURITIES, INC. By: /s/ Yolanda Nicholson ---------------------------------- Title: Vice President ------------------------------- EX-4.10 7 j9326701ex4-10.txt 1ST AMENDMENT TO COMMERCIAL PAPER DEALER AGMT EXHIBIT 4.10 FIRST AMENDMENT TO COMMERCIAL PAPER DEALER AGREEMENT This First Amendment dated as of January 25, 2002, by and between ALLEGHENY TECHNOLOGIES INCORPORATED ("ISSUER") and GOLDMAN, SACHS & C0. ("DEALER"). WHEREAS, Issuer and Dealer are parties to a Commercial Paper Dealer Agreement dated as of November 2, 2000 (the "Agreement"); and WHEREAS, Issuer and Dealer wish to amend the Agreement as provided herein: NOW, THEREFORE, for good and valuable consideration and intending to be legally bound hereby, Issuer and Dealer hereby agree as follows: 1. Effective with respect to Notes sold on or after January 25, 2002, the cover page of the Agreement is amended to delete the phrase: "Concerning Notes to be issued pursuant to an Issuing and Paying Agency Agreement dated as of November 2, 2000, between the Issuer and Bank One National Association, as Issuing and Paying Agent" and to insert in lieu thereof the phrase: "Concerning Notes to be issued pursuant to an Issuing and Paying Agency Agreement dated as of January 25, 2002, between the Issuer and JPMorgan Chase Bank, as Issuing and Paying Agent". 2. Except as provided herein, the Agreement shall remain in full force and effect. WITNESS the due execution hereof. ALLEGHENY TECHNOLOGIES, INC. By: /s/ Richard J. Harshman ------------------------------------ Title: Senior Vice President, Finance --------------------------------- and Chief Financial Officer --------------------------------- GOLDMAN, SACHS & CO. By: /s/ Susan Howling ------------------------------------ Title: Vice President --------------------------------- EX-4.11 8 j9326701ex4-11.txt EXCHANGE AND REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.11 EXECUTION COPY EXCHANGE AND REGISTRATION RIGHTS AGREEMENT EXCHANGE AND REGISTRATION RIGHTS AGREEMENT, dated as of December 18, 2001, among Allegheny Technologies Incorporated, a Delaware corporation (the "Issuer") and J.P. Morgan Securities Inc., Banc of America Securities LLC, Salomon Smith Barney Inc., PNC Capital Markets, Inc., BNY Capital Markets, Inc., Mizuho International plc and Tokyo-Mitsubishi International plc (the "Initial Purchasers"). The Issuer proposes to issue and sell to the Initial Purchasers upon the terms set forth in the Purchase Agreement the Securities (as defined herein). As an inducement to the Initial Purchasers to enter into the Purchase Agreement and in satisfaction of a condition to the obligations of the Initial Purchasers thereunder, the Issuer agrees with the Initial Purchasers for the benefit of holders (as defined herein) from time to time of the Registrable Securities (as defined herein) as follows: 1. Certain Definitions. For purposes of this Exchange and Registration Rights Agreement, the following terms shall have the following respective meanings: The term "broker-dealer" shall mean any broker or dealer registered with the Commission under the Exchange Act. "Closing shall mean the date of the closing of the issuance and sale of the Securities pursuant to the Purchase Agreement. "Commission" shall mean the United States Securities and Exchange Commission, or any other federal agency at the time administering the Exchange Act or the Securities Act, whichever is the relevant statute for the particular purpose. "Effective Time", in the case of (i) an Exchange Registration, shall mean the time and date as of which the Commission declares the Exchange Offer Registration Statement effective or as of which the Exchange Offer Registration Statement otherwise becomes effective and (ii) a Resale Registration, shall mean the time and date as of which the Commission declares the Resale Registration Statement effective or as of which the Resale Registration Statement otherwise becomes effective. "Electing Holder" shall mean any holder of Registrable Securities that has returned a completed and signed Notice and Questionnaire to the Issuer in accordance with Section 3(d)(ii) or 3(d)(iii) hereof. 2 "Exchange Act" shall mean the United States Securities Exchange Act of 1934, or any successor thereto, as the same shall be amended from time to time. "Exchange Offer" shall have the meaning assigned thereto in Section 2(a) hereof. "Exchange Offer Registration Statement" shall have the meaning assigned thereto in Section 2(a) hereof. "Exchange Registration" shall have the meaning assigned thereto in Section 3(c) hereof. "Exchange Securities" shall have the meaning assigned thereto in Section 2(a) hereof. The term "holder" shall mean each of the Initial Purchasers and other persons who acquire Registrable Securities from time to time (including any successors or assigns), in each case for so long as such person owns any Registrable Securities. "Indenture" shall mean the Indenture, dated as of December 18, 2001, among the Issuer and the Bank of New York, as Trustee, as the same shall be amended from time to time. "Issuer" shall have the meaning assigned thereto in the recitals hereof (together with any successor). "Notice and Questionnaire" shall mean a Notice of Registration Statement and Selling Securityholder Questionnaire substantially in the form of Exhibit A hereto. "Notice of Transfer" shall mean a Notice of Transfer pursuant to Registration Statement substantially in the form of Exhibit B hereto. The term "person" shall mean a corporation, association, partnership, organization, business, individual, government or political subdivision thereof or governmental agency. "Purchase Agreement" shall mean the Purchase Agreement, dated as of December 13, 2001, among the Issuer and the Initial Purchasers relating to the Securities, as the same shall be amended from time to time. "Registrable Securities" shall mean the Securities; provided, however, that a Security shall cease to be a Registrable Security when (i) in the circumstances contemplated by Section 2(a) hereof, the Security has been exchanged for an Exchange Security in an Exchange Offer as contemplated in Section 2(a) hereof (provided that any Exchange Security received by a broker-dealer in an Exchange Offer in exchange for a Registrable Security that was not acquired by the broker-dealer directly from the Issuer will also be a Registrable Security through and including the earlier of the expiration of the Resale Period or such time as such broker-dealer no longer owns such Security); (ii) in the circumstances contemplated by Section 2(b) hereof, a Resale Registration Statement registering such Security under the Securities Act has been 3 declared or becomes effective and such Security has been sold or otherwise transferred by the holder thereof pursuant to and in a manner contemplated by such effective Resale Registration Statement; (iii) such Security is sold pursuant to Rule 144 under circumstances in which any legend borne by such Security relating to restrictions on transferability thereof, under the Securities Act or otherwise, is removed by the Issuer or pursuant to the Indenture; (iv) such Security is eligible to be sold pursuant to paragraph (k) of Rule 144; or (v) such Security shall cease to be outstanding. "Registration Default" shall have the meaning assigned thereto in Section 2(c) hereof. "Registration Expenses" shall have the meaning assigned thereto in Section 4 hereof. "Resale Period" shall have the meaning assigned thereto in Section 2(a) hereof. "Resale Registration" shall have the meaning assigned thereto in Section 2(b) hereof. "Resale Registration Statement" shall have the meaning assigned thereto in Section 2(b) hereof. "Restricted Holder" shall mean (i) a holder that is an affiliate of the Issuer within the meaning of Rule 405, (ii) a holder who acquires Exchange Securities outside the ordinary course of such holders business, (iii) a holder who has arrangements or understandings with any person to participate in the Exchange Offer for the purpose of distributing Exchange Securities and (iv) a holder that is a broker-dealer, but only with respect to Exchange Securities received by such broker-dealer pursuant to an Exchange Offer in exchange for Registrable Securities acquired by the broker-dealer directly from the Issuer. "Rule 144, " "Rule 405" and "Rule 415" shall mean, in each case, such rule promulgated under the Securities Act (or any successor provision), as the same shall be amended from time to time. "Securities" shall mean, collectively, the 8.375% Notes due 2011 of the Issuer to be issued and sold to the Initial Purchasers, and securities issued in exchange therefor or in lieu thereof pursuant to the Indenture. "Securities Act" shall mean the United States Securities Act of 1933, or any successor thereto, as the same shall be amended from time to time. "Trust Indenture Act" shall mean the United States Trust Indenture Act of 1939, or any successor thereto, and the rules, regulations and forms promulgated thereunder, all as the same shall be amended from time to time. "Trustee" shall mean The Bank of New York, a national banking association (together with any successor). 4 Unless the context otherwise requires, any reference herein to a "Section" or "clause" refers to a Section or clause, as the case may be, of this Exchange and Registration Rights Agreement, and the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Exchange and Registration Rights Agreement as a whole and not to any particular Section or other subdivision. 2. Registration Under the Securities Act. (a) Except as set forth in Section 2(b) below, the Issuer agrees to: (i) file under the Securities Act, no later than 90 days after the Closing, a registration statement relating to an offer to exchange (such registration statement, the "Exchange Offer Registration Statement", and such offer, the "Exchange Offer") any and all of the Securities (other than Exchange Securities) for a like aggregate principal amount of debt securities issued by the Issuer, which debt securities are substantially identical to the Securities (and are entitled to the benefits of a trust indenture which is substantially identical to the Indenture or is the Indenture and which has been qualified under the Trust Indenture Act), except that they have been registered pursuant to an effective registration statement under the Securities Act and do not contain provisions for the additional interest contemplated in Section 2(c) below (such new debt securities hereinafter called "Exchange Securities"); (ii) use its best efforts to cause the Exchange Offer Registration Statement to become effective under the Securities Act as soon as practicable, but no later than 150 days after the Closing; (iii) use its best efforts to commence and complete the Exchange Offer promptly, but no later than 180 days after the Closing; and (iv) hold the Exchange Offer open for at least 30 days (or longer if required by applicable law) after the notice of the Exchange Offer is mailed to the holders and issue Exchange Securities for all Registrable Securities that have been properly tendered and not withdrawn on or prior to the expiration of the Exchange Offer. The Exchange Offer will be registered under the Securities Act on the appropriate form and will comply with all applicable tender offer rules and regulations under the Exchange Act. The Exchange Offer will be deemed to have been "completed" only if the debt securities received by holders other than Restricted Holders in the Exchange Offer for Registrable Securities are, upon receipt, transferable by each such holder without need for further compliance with Section 5 of the Securities Act and the Exchange Act (except for the requirement to deliver a prospectus included in the Exchange Offer Registration Statement applicable to resales by any broker-dealer of Exchange Securities received by such broker-dealer pursuant to the Exchange Offer in exchange for Registrable Securities other than those acquired by the broker-dealer directly from the Issuer), and without material restrictions under the blue sky or securities laws of a substantial majority of the States of the United States of America. 5 Subject to the preceding sentence, the Exchange Offer shall be deemed to have been completed upon the earlier to occur of (1) the Issuer having exchanged the Exchange Securities for all outstanding Registrable Securities (other than those held by Restricted Holders) pursuant to the Exchange Offer and (2) the Issuer having exchanged, pursuant to the Exchange Offer, Exchange Securities for all Registrable Securities that have been properly tendered and not withdrawn before the expiration of the Exchange Offer, which shall be on a date that is at least 30 days following the commencement of the Exchange Offer. The Issuer agrees (1) to include in the Exchange Offer Registration Statement a prospectus for use in connection with any resales of Exchange Securities by a broker-dealer, other than resales of Exchange Securities received by a broker-dealer pursuant to an Exchange Offer in exchange for Registrable Securities acquired by the broker-dealer directly from the Issuer, and (2) to keep such Exchange Offer Registration Statement effective for a period (the "Resale Period") beginning when Exchange Securities are first issued in the Exchange Offer and ending upon the earlier of the expiration of the 180th day after the Exchange Offer has been completed or such time as such broker-dealers no longer own any Registrable Securities. With respect to such Exchange Offer Registration Statement, each broker-dealer that holds Exchange Securities received in an Exchange Offer in exchange for Registrable Securities not acquired by it directly from the Issuer shall have the benefit of the rights of indemnification and contribution set forth in Sections 6(a), (c), (d) and (e) hereof. (b) If, (i)(A) existing Commission interpretations are changed such that the Securities received by holders other than Restricted Holders in the Exchange Offer for Registrable Securities are not or would not be, upon receipt, transferable by each such holder without need for further compliance with Section 5 of the Securities Act (except for the requirement to deliver a prospectus included in the Exchange Offer Registration Statement applicable to resales by a broker-dealer of Exchange Securities received by such broker-dealer pursuant to the Exchange Offer in exchange for Registrable Securities other than those acquired by the broker-dealer directly from the Issuer) or (B) for any reason, the Issuer does not consumate the Exchange Offer within 180 days of the Closing; or (ii) a holder of the Securities shall notify the Issuer that: (A) the holder is prohibited by law or Commission policy from participating in the Exchange Offer, (B)(1) the holder may not resell the Exchange Securities acquired by it in the Exchange Offer to the public without delivering a prospectus and (2) the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by the holder, or 6 (C) the holder is a broker-dealer and holds Securities that are part of an unsold allotment from the initial sale of Securities; then the Issuer shall, as promptly as practicable, file a "shelf" registration statement providing for the registration of, and the sale on a continuous or delayed basis by the holders of, all of the Registrable Securities, pursuant to Rule 415 or any similar rule that may be adopted by the Commission (such registration, the "Resale Registration" and such registration statement, the "Resale Registration Statement"). In addition, in the event that, after consummation of the Exchange Offer, the Initial Purchasers shall not have resold all of the Securities initially purchased by them from the Issuer pursuant to the Purchase Agreement and the Initial Purchasers shall so request after the consummation of the Exchange Offer, the Issuer shall file under the Securities Act as soon as practicable a Resale Registration Statement covering such unsold Registrable Securities. (In the case of any Resale Registration required only by the second sentence of this Section 2(b), references herein to "Registrable Securities" mean those Securities that the Initial Purchasers shall have purchased from the Issuer pursuant to the Purchase Agreement and shall not have resold.) The Issuer agrees: (I) to cause the Resale Registration Statement to become or be declared effective; (II) to keep such Resale Registration Statement continuously effective until the earliest of (A) two years from the Closing or (B) the date on which all Registrable Securities registered under the Resale Registration Statement are disposed of in accordance therewith, in order to permit the prospectus forming a part thereof to be usable by holders for resales of Registrable Securities, provided, however, that no holder shall be entitled to be named as a selling securityholder in the Resale Registration Statement or to use the prospectus forming a part thereof for resales of Registrable Securities unless such holder is an Electing Holder, and (III) after the Effective Time of the Resale Registration Statement and for so long as the Resale Registration Statement is required to be kept continuously effective pursuant to clause (II) above, promptly upon the request of any holder of Registrable Securities that is not then an Electing Holder, and provided that such holder shall have returned a completed and signed Notice and Questionnaire to the Issuer in accordance with Section 3(d)(iii) hereof, to take any action reasonably necessary to enable such holder to use the prospectus forming a part thereof for resales of Registrable Securities, including any action necessary to identify such holder as a selling securityholder in the Resale Registration Statement. 7 The Issuer further agrees to supplement or make amendments to the Resale Registration Statement, as and when required by the rules, regulations or instructions applicable to the registration form used by the Issuer for such Resale Registration Statement or by the Securities Act or rules and regulations thereunder for shelf registration, and the Issuer agrees to furnish to each Electing Holder copies of any such supplement or amendment prior to its being used or promptly following its filing with the Commission. (c) In the event that: (i) the Issuer has not filed the Exchange Offer Registration Statement on or before the 90th day after the Closing, (ii) such Exchange Offer Registration Statement has not become effective or been declared effective by the Commission on or prior to the 150th day after the Closing, (iii) the Exchange Offer has not been completed on or prior to the 180th day after the Closing (if the Exchange Offer is then required to be made), (iv) the Issuer is obligated to file the Resale Registration Statement and the Issuer fails to do so on or prior to the 30th day after the obligation arises, (v) the Issuer is obligated to file the Resale Shelf Registration Statement and such Resale Shelf Registration Statement is not declared effective on or prior to the 90th day after the obligation to file such Resale Registration Statement arises, or (vi) any Exchange Offer Registration Statement or Resale Registration Statement required by Section 2(a) or 2(b) hereof is filed and declared effective but shall thereafter either be withdrawn by the Issuer, become subject to an effective stop order issued pursuant to Section 8(d) of the Securities Act suspending the effectiveness of such registration statement or otherwise cease to be available for resales of Registrable Securities covered thereby (except as specifically permitted herein) without being succeeded promptly by an additional registration statement filed, declared effective and available for such purposes (each such event referred to in clauses (i) through (vi), a "Registration Default"), then, as liquidated damages for such Registration Default, subject to the provisions of Section 9(b), the Issuer will pay additional interest (in addition to the interest otherwise due on the Securities) to each holder of Securities during the first 90-day period immediately following the occurrence of the first such Registration Default, regardless of the number of Registration Defaults, in an amount equal to 0.25% per annum. The amount of additional interest will increase by an additional 0.25% per annum for each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of additional interest of 1.00% 8 per annum. Such additional interest will cease accruning on such Securities with respect to any Registration Default when such Registration Default has been cured. (d) The Issuer shall take all reasonable actions necessary or advisable to be taken to ensure that the transactions contemplated herein are effected as so contemplated. (e) Any reference herein to a registration statement as of any time shall be deemed to include any document incorporated, or deemed to be incorporated, therein by reference as of such time, and any reference herein to any amendment to a registration statement as of any time shall be deemed to include any document incorporated, or deemed to be incorporated, therein by reference as of such time. 3. Registration Procedures. If the Issuer files a registration statement pursuant to Section 2(a) or Section 2(b), the following provisions shall apply: (a) At or before the Effective Time of the Exchange Offer or the Resale Registration, as the case may be, the Issuer shall qualify the Indenture under the Trust Indenture Act. (b) In the event that such qualification would require the appointment of a new trustee under the Indenture, the Issuer shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture. (c) In connection with the Issuer's obligations with respect to the registration of Exchange Securities as contemplated by Section 2(a) (the "Exchange Registration"), if applicable, the Issuer shall, as soon as reasonably practicable (or as otherwise specified): (i) prepare and file with the Commission, no later than 90 days after the Closing, an Exchange Offer Registration Statement on any form which may be utilized by the Issuer and which shall permit the Exchange Offer and resales of Exchange Securities by broker-dealers during the Resale Period to be effected as contemplated by Section 2(a), and use all reasonable efforts to cause such Exchange Offer Registration Statement to become effective as soon as practicable thereafter, but no later than 150 days after the Closing; (ii) as soon as practicable prepare and file with the Commission such amendments and supplements to such Exchange Offer Registration Statement and the prospectus included therein as may be necessary to effect and maintain the effectiveness of such Exchange Offer Registration Statement for the periods and purposes contemplated in Section 2(a) hereof and as may be required by the applicable rules and regulations of the Commission and the instructions applicable to the form of such Exchange Offer Registration Statement, and promptly provide each broker-dealer holding Exchange Securities with such number of copies of the prospectus included therein (as then amended or supplemented), in conformity in all material respects with the 9 requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder, as such broker-dealer reasonably may request prior to the expiration of the Resale Period, for use in connection with resales of Exchange Securities; (iii) promptly notify each broker-dealer that has requested or received copies of the prospectus included in the Exchange Offer Registration Statement, and confirm such advice in writing, (A) when such Exchange Offer Registration Statement or the prospectus included therein, or any amendment or supplement thereto, has been filed, and, with respect to such Exchange Offer Registration Statement or any amendment thereto, when the same has become effective, (B) of any comments by the Commission and by the blue sky or securities commissioner or regulator of any state with respect thereto or any request by the Commission for amendments or supplements to such Exchange Offer Registration Statement or prospectus or for additional information, (C) of the issuance by the Commission of any stop order suspending the effectiveness of such Exchange Offer Registration Statement or the initiation or threatening of any proceedings for that purpose, (D) if at any time the representations and warranties of the Issuer contemplated by Section 5 cease to be true and correct in all material respects, (E) of the receipt by the Issuer of any notification with respect to the suspension of the qualification of the Exchange Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose or (F) at any time during the Resale Period when a prospectus is required to be delivered under the Securities Act, that such Exchange Offer Registration Statement, prospectus, or any amendment or supplement thereto, does not conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder or contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (iv) in the event that the Issuer would be required, pursuant to Section 3(c)(iii)(F) above, to notify any broker-dealers holding Exchange Securities, promptly to prepare and furnish to each such holder a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to purchasers of such Exchange Securities during the Resale Period, such prospectus shall conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder and shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. Each broker-dealer holding Exchange Securities during the Resale Period agrees that upon receipt of any notice from the Issuer pursuant to Section 3(c)(iii)(F) above, such broker-dealer shall forthwith discontinue disposition of Exchange Securities pursuant to the Exchange Offer Registration Statement applicable to such Exchange Securities until such broker-dealer shall have received copies of such amended or supplemented prospectus, and if so directed by the Issuer, such broker-dealer shall deliver to the Issuer (at the Issuer's expense) all copies, other than permanent file copies, then in such broker- 10 dealer's possession of the prospectus covering such Exchange Securities at the time of receipt of such notice; provided, however, that the Issuer hereby agrees that if it provides notice to any broker-dealers pursuant to Section 3(c)(iii)(F) above during the Resale Period, such Resale Period shall be extended by the number of days in the period from and including the date of the giving of such notice to and including the date on which the Issuer shall have made available to such broker-dealers copies of the amended or supplemented prospectus necessary to permit such broker-dealers to resume disposition of Exchange Securities; (v) use all reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of such Exchange Offer Registration Statement or any amendment thereto at the earliest practicable date; (vi) use all reasonable efforts to (A) register or qualify the Exchange Securities under the securities laws or blue sky laws of such jurisdictions as are contemplated by Section 2(a), if such registration or qualification is required by such laws, no later than the commencement of the Exchange Offer, (B) keep such registrations or qualifications in effect and comply with such laws so as to permit the continuance of offers, sales and dealings therein in such jurisdictions until the expiration of the Resale Period and (C) take any and all other actions as may be reasonably necessary or advisable to enable each broker-dealer holding Exchange Securities to consummate the disposition thereof in such jurisdictions; provided, however, that the Issuer shall not be required for any such purpose to (1) qualify as a foreign corporation in any jurisdiction wherein it would not otherwise be required to qualify but for the requirements of this Section 3(c)(vi) or (2) consent to general service of process in any such jurisdiction; (vii) use all reasonable efforts to obtain the consent or approval of each United States governmental agency or authority, whether federal, state or local, which may be required to effect the Exchange Registration, the Exchange Offer and the offering and sale of Exchange Securities by broker-dealers during the Resale Period; (viii) provide a CUSIP number for all Exchange Securities, not later than the applicable Effective Time; and (ix) comply with all applicable rules and regulations of the Commission and will make generally available to its securityholders as soon as practicable after the effective date of the Exchange Offer Registration Statement an earnings statement satisfying the provisions of Section 11(a) of the Securities Act; provided that in no event shall such earnings statement be delivered later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Issuer's first quarter commencing after the effective date of the Exchange Offer Registration Statement, which statement shall cover such 12-month period. (d) In connection with the Issuer's obligations with respect to the Resale Registration, if applicable, the Issuer shall, as soon as reasonably practicable (or as otherwise specified): 11 (i) prepare and file with the Commission, as soon as reasonably practicable but in any case within 30 days after the obligation to file the Resale Registration Statement arises, a Resale Registration Statement on any form which may be utilized by the Issuer and which shall register all of the Registrable Securities for resale by the holders thereof in accordance with such method or methods of disposition as may be specified by such of the holders as, from time to time, may be Electing Holders and use its reasonable best efforts to cause such Resale Registration Statement to become effective as soon as practicable but in any case within 90 days after the obligation to file the Resale Registration Statement arises; (ii) not less than 30 calendar days prior to the Effective Time of the Resale Registration Statement, mail the Notice and Questionnaire to the holders of Registrable Securities; no holder shall be entitled to be named as a selling securityholder in the Resale Registration Statement as of the Effective Time, and no holder shall be entitled to use the prospectus forming a part thereof for resales of Registrable Securities at any time, unless such holder has returned a completed and signed Notice and Questionnaire to the Issuer by the deadline for response set forth therein; provided, however, holders of Registrable Securities shall have at least 30 calendar days from the date on which the Notice and Questionnaire is first mailed to such holders to return a completed and signed Notice and Questionnaire to the Issuer; (iii) after the Effective Time of the Resale Registration Statement, (A) upon the request of any holder of Registrable Securities that is not then an Electing Holder, promptly send a Notice and Questionnaire to such holder and (B) upon receipt by the Issuer of a completed and signed Notice and Questionnaire from any holder of Registrable Securities that is not then an Electing Holder, take any action reasonably necessary to cause such holder to be named as a selling securityholder in the Resale Registration Statement and to enable such holder to use the prospectus forming a part thereof for resales of Registrable Securities; provided that the Issuer shall not be required to take any action contemplated in clause (B) of this paragraph until such holder has returned a completed and signed Notice and Questionnaire to the Issuer; (iv) as soon as reasonably practicable prepare and file with the Commission such amendments and supplements to such Resale Registration Statement and the prospectus included therein as may be necessary to effect and maintain the effectiveness of such Resale Registration Statement for the period specified in Section 2(b) hereof and as may be required by the applicable rules and regulations of the Commission and the instructions applicable to the form of such Resale Registration Statement, and furnish to the Electing Holders copies of any such supplement or amendment simultaneously with or prior to its being used or filed with the Commission; (v) comply with the provisions of the Securities Act with respect to the disposition of all of the Registrable Securities covered by such Resale Registration 12 Statement in accordance with the intended methods of disposition by the Electing Holders provided for in such Resale Registration Statement; (vi) provide (A) the Electing Holders, (B) the underwriters (which term, for purposes of this Exchange and Registration Rights Agreement, shall include a person deemed to be an underwriter within the meaning of Section 2(11) of the Securities Act), if any, thereof, (C) any sales or placement agent therefor, (D) counsel for any such underwriter or agent and (E) not more than one counsel for all the Electing Holders the opportunity to participate in the preparation of such Resale Registration Statement, each prospectus included therein or filed with the Commission and each amendment or supplement thereto; (vii) for a reasonable period prior to the filing of such Resale Registration Statement, and throughout the period specified in Section 2(b), make available at reasonable times at the Trustee's principal place of business or such other reasonable place for inspection by the persons referred to in Section 3(d)(vi) who shall certify to the Issuer that they have a current intention to sell the Registrable Securities pursuant to the Resale Registration such financial and other information and certified copies of the books and records of the Issuer, and cause the officers, employees, counsel and independent certified public accountants of the Issuer to respond to such inquiries, as shall be reasonably necessary, in the judgment of the Issuer and its counsel, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that each such party shall be required to maintain in confidence and not to disclose to any other person any information or records reasonably designated by the Issuer in writing as being confidential, until such time as (A) such information becomes a matter of public record (whether by virtue of its inclusion in such registration statement or otherwise), (B) such person shall be required so to disclose such information pursuant to a subpoena or order of any court or other governmental agency or body having jurisdiction over the matter (subject to the requirements of such order, and only after such person shall have given the Issuer prompt prior written notice of such requirement) or (C) such information is required to be set forth in such Resale Registration Statement or the prospectus included therein or in an amendment to such Resale Registration Statement or an amendment or supplement to such prospectus in order that such Resale Registration Statement, prospectus, amendment or supplement, as the case may be, complies with applicable requirements of the U.S. Federal securities laws and the rules and regulations of the Commission and does not contain an untrue statement of a material fact or omit to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (viii) promptly notify each of the Electing Holders, any sales or placement agent therefor and any underwriter thereof (which notification may be made through any managing underwriter that is a representative of such underwriter for such purpose) and confirm such advice in writing, (A) when such Resale Registration Statement or the prospectus included therein, or any amendment or supplement thereto, has been filed, 13 and, with respect to such Resale Registration Statement or any amendment thereto, when the same has become effective, (B) of any comments by the Commission and by the blue sky or securities commissioner or regulator of any state with respect thereto or any request by the Commission for amendments or supplements to such Resale Registration Statement or prospectus or for additional information, (C) of the issuance by the Commission of any stop order suspending the effectiveness of such Resale Registration Statement or the initiation or threatening of any proceedings for that purpose, (D) if at any time the representations and warranties of the Issuer contemplated by Section 3(d)(xvii) or Section 5 cease to be true and correct in all material respects, (E) of the receipt by the Issuer of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose or (F) if at any time when a prospectus is required to be delivered under the Securities Act, such Resale Registration Statement, prospectus, or amendment or supplement thereto, does not conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder or contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (ix) use all reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of such registration statement or any post-effective amendment thereto at the earliest practicable date; (x) if requested by any managing underwriter or underwriters, any placement or sales agent or any Electing Holder, promptly incorporate in a prospectus supplement or amendment such information as is required by the applicable rules and regulations of the Commission and as such managing underwriter or underwriters, such agent or such Electing Holder specifies should be included therein relating to the terms of the sale of such Registrable Securities, including information with respect to the principal amount of Registrable Securities being sold by such Electing Holder or agent or to any underwriters, the name and description of such Electing Holder, agent or underwriter, the offering price of such Registrable Securities and any discount, commission or other compensation payable in respect thereof, the purchase price being paid therefor by such underwriters and with respect to any other terms of the offering of the Registrable Securities to be sold by such Electing Holder or agent or to such underwriters; and make all required filings of such prospectus supplement or amendment promptly after notification of the matters to be incorporated in such prospectus supplement or amendment; (xi) furnish to each Electing Holder, each placement or sales agent, if any, therefor, each underwriter, if any, thereof and the respective counsel referred to in Section 3(d)(vi) an executed copy (or, in the case of an Electing Holder, a conformed copy) of such Resale Registration Statement, each such amendment and supplement thereto (in each case including all exhibits thereto (in the case of an Electing Holder of Registrable Securities, upon request) and documents incorporated by reference therein) and such number of copies of such Resale Registration Statement (excluding exhibits 14 thereto and documents incorporated by reference therein unless specifically so requested by such Electing Holder, agent or underwriter, as the case may be) and of the prospectus included in such Resale Registration Statement (including each preliminary prospectus and any summary prospectus), in conformity in all material respects with the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder, and such other documents, as such Electing Holder, agent, if any, and underwriter, if any, may reasonably request in order to facilitate the offering and disposition of the Registrable Securities owned by such Electing Holder, offered or sold by such agent or underwritten by such underwriter and to permit such Electing Holder, agent and underwriter to satisfy the prospectus delivery requirements of the Securities Act; and the Issuer hereby consents to the use of such prospectus (including such preliminary and summary prospectus) and any amendment or supplement thereto by each such Electing Holder and by any such agent and underwriter, in each case in the form most recently provided to such person by the Issuer, in connection with the offering and sale of the Registrable Securities covered by the prospectus (including such preliminary and summary prospectus) or any supplement or amendment thereto; (xii) use all reasonable efforts to (A) register or qualify the Registrable Securities to be included in such Resale Registration Statement under such securities laws or blue sky laws of such jurisdictions as any Electing Holder and each placement or sales agent, if any, therefor and underwriter, if any, thereof shall reasonably request, (B) keep such registrations or qualifications in effect and comply with such laws so as to permit the continuance of offers, sales and dealings therein in such jurisdictions during the period the Resale Registration is required to remain effective under Section 2(b) above and (C) take any and all other actions as may be reasonably necessary or advisable to enable each such Electing Holder, agent, if any, and underwriter, if any, to consummate the disposition in such jurisdictions of such Registrable Securities during the period the Resale Registration is required to remain effective under Section 2(b) above; provided, however, that the Issuer shall not be required for any such purpose to (1) qualify as a foreign corporation in any jurisdiction wherein it would not otherwise be required to qualify but for the requirements of this Section 3(d)(xii), (2) consent to general service of process in any such jurisdiction; (xiii) use all reasonable efforts to obtain the consent or approval of each United States governmental agency or authority, whether federal, state or local, which may be required to effect the Resale Registration or the offering or sale in connection therewith or to enable the selling holder or holders to offer, or to consummate the disposition of, their Registrable Securities; (xiv) cooperate with the Electing Holders and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, which certificates shall be printed, lithographed or engraved, or produced by any combination of such methods, and which shall not bear any restrictive legends (except in the case of a sale to a Restricted Holder); and, in the case of an 15 underwritten offering, enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters may request at least two business days prior to any sale of the Registrable Securities; (xv) provide a CUSIP number for all Registrable Securities, not later than the applicable Effective Time; (xvi) enter into one or more underwriting agreements, engagement letters, agency agreements, "best efforts" underwriting agreements or similar agreements, as appropriate, including customary provisions relating to indemnification and contribution, and take such other actions in connection therewith as any Electing Holders aggregating at least 25% in aggregate principal amount of the Registrable Securities at the time outstanding shall reasonably request in order to expedite or facilitate the disposition of such Registrable Securities; (xvii) whether or not an agreement of the type referred to in Section 3(d)(xvi) hereof is entered into and whether or not any portion of the offering contemplated by the Resale Registration is an underwritten offering or is made through a placement or sales agent or any other entity, (A) make such representations and warranties to the Electing Holders and the placement or sales agent, if any, therefor and the underwriters, if any, thereof in form, substance and scope as are customarily made in connection with an offering of debt securities pursuant to any appropriate and customary agreement or to a registration statement filed on the form applicable to the Resale Registration; (B) obtain an opinion of counsel to the Issuer in customary form and covering such matters, of the type customarily covered by such an opinion, as the managing underwriters, if any, or as any Electing Holders of at least 25% in aggregate principal amount of the Registrable Securities at the time outstanding may reasonably request, addressed to such Electing Holder or Electing Holders and the placement or sales agent, if any, therefor and the underwriters, if any, thereof and dated the effective date of such Resale Registration Statement (and if such Resale Registration Statement contemplates an underwritten offering of a part or all of the Registrable Securities, dated the date of the closing under the underwriting agreement relating thereto) (it being agreed that the matters to be covered by such opinion shall include the due authorization, execution and delivery of the relevant agreement of the type referred to in Section 3(d)(xvi) hereof; the due authorization, execution, authentication and issuance, and the validity and enforceability, of the Securities; the absence to such counsel's knowledge of material legal or governmental proceedings involving the Issuer ; the absence of governmental approvals required to be obtained in connection with the Resale Registration, the offering and sale of the Registrable Securities, this Exchange and Registration Rights Agreement or any agreement of the type referred to in Section 3(d)(xvi) hereof, except such approvals, if any, as may be required under state securities or blue sky laws; the material compliance as to form of such Resale Registration Statement and any documents incorporated by reference therein and of the Indenture with the requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder, respectively; and, as of the date of the opinion and of the Resale Registration Statement 16 or most recent amendment thereto, as the case may be, the absence from such Resale Registration Statement and the prospectus included therein, as then amended or supplemented, and from the documents incorporated by reference therein (in each case other than the financial statements and other financial information contained therein) of an untrue statement of a material fact or the omission to state therein a material fact necessary to make the statements therein not misleading (in the case of such documents, in the light of the circumstances existing at the time that such documents were filed with the Commission under the Exchange Act)), such opinion to be subject to customary qualifications and limitations; (C) obtain a "comfort" letter or letters from the independent certified public accountants of the Issuer addressed to the selling Electing Holders, the placement or sales agent, if any, therefor or the underwriters, if any, thereof, dated (i) the effective date of such Resale Registration Statement and (ii) the effective date of any prospectus supplement to the prospectus included in such Resale Registration Statement or amendment to such Resale Registration Statement which includes unaudited or audited financial statements as of a date or for a period subsequent to that of the latest such statements included in such prospectus (and, if such Resale Registration Statement contemplates an underwritten offering pursuant to any prospectus supplement to the prospectus included in such Resale Registration Statement or amendment to such Resale Registration Statement which includes unaudited or audited financial statements as of a date or for a period subsequent to that of the latest such statements included in such prospectus, dated the date of the closing under the underwriting agreement relating thereto), such letter or letters to be in customary form and covering matters of the type customarily covered by letters of such type; (D) deliver such documents and certificates, including officers' certificates, as may be reasonably requested by any Electing Holders of at least 25% in aggregate principal amount of the Registrable Securities at the time outstanding or the placement or sales agent, if any, therefor and the managing underwriters, if any, thereof to evidence the accuracy of the representations and warranties made pursuant to clause (A) above or those contained in Section 5(a) hereof and the compliance with or satisfaction of any agreements or conditions contained in the underwriting agreement or other agreement entered into by the Issuer; and (E) undertake such obligations relating to expense reimbursement, indemnification and contribution as are provided in Section 6 hereof; (xviii) notify in writing each holder of Registrable Securities of any proposal by the Issuer to amend or waive any provision of this Exchange and Registration Rights Agreement pursuant to Section 9(i) hereof and of any amendment or waiver effected pursuant thereto, each of which notices shall contain the text of the amendment or waiver proposed or effected, as the case may be; (xix) in the event that any broker-dealer registered under the Exchange Act shall underwrite any Registrable Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Rules of Fair Practice and the By-Laws of the National Association of Securities Dealers, Inc. ("NASD") or any successor thereto, as amended from time to time) thereof, whether as a holder of such Registrable Securities or as an underwriter, a placement or sales agent or a 17 broker or dealer in respect thereof, or otherwise, assist such broker-dealer in complying with the requirements of such Rules and By-Laws, including by (A) if such Rules or By-Laws shall so require, engaging a "qualified independent underwriter" (as defined in Rule 2720 (or any successor thereto)) to participate in the preparation of the Resale Registration Statement relating to such Registrable Securities, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Resale Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Registrable Securities, (B) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 6 hereof (or to such other customary extent as may be requested by such underwriter) and (C) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the Rules of Fair Practice of the NASD; and (xx) comply with all applicable rules and regulations of the Commission and will make generally available to its securityholders as soon as practicable after the effective date of the Resale Registration Statement an earnings statement satisfying the provisions of Section 11(a) of the Securities Act; provided that in no event shall such earnings statement be delivered later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Issuer's first quarter commencing after the effective date of the Resale Registration Statement, which statement shall cover such 12-month period. (e) In the event that the Issuer would be required, pursuant to Section 3(d)(viii)(F) above, to notify the Electing Holders, the placement or sales agent, if any, therefor and the managing underwriters, if any, thereof, the Issuer shall promptly prepare and furnish to each of the Electing Holders, to each placement or sales agent, if any, and to each such underwriter, if any, a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to purchasers of Registrable Securities, such prospectus shall conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder and shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. Each Electing Holder agrees that upon receipt of any notice from the Issuer pursuant to Section 3(d)(viii)(F) hereof, such Electing Holder shall forthwith discontinue the disposition of Registrable Securities pursuant to the Resale Registration Statement applicable to such Registrable Securities until such Electing Holder shall have received copies of such amended or supplemented prospectus, and if so directed by the Issuer, such Electing Holder shall deliver to the Issuer (at the Issuer's expense) all copies, other than permanent file copies, then in such Electing Holder's possession of the prospectus covering such Registrable Securities at the time of receipt of such notice. (f) In the event of a Resale Registration, in addition to the information required to be provided by each Electing Holder in its Notice and Questionnaire, the Issuer may require such Electing Holder to furnish to the Issuer such additional information regarding such Electing Holder and such Electing Holder's intended method of distribution of Registrable Securities as 18 the Issuer may from time to time reasonably request in writing, but only to the extent that such information is required in order to comply with the Securities Act or state securities or blue sky laws. Each such Electing Holder agrees to notify the Issuer as promptly as practicable of any inaccuracy or change in information previously furnished by such Electing Holder to the Issuer or of the occurrence of any event in either case as a result of which any prospectus relating to such Resale Registration contains or would contain an untrue statement of a material fact regarding such Electing Holder or such Electing Holder's intended method of disposition of such Registrable Securities or omits to state any material fact regarding such Electing Holder or such Electing Holder's intended method of disposition of such Registrable Securities required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly to furnish to the Issuer any additional information required to correct and update any previously furnished information or required so that such prospectus shall not contain, with respect to such Electing Holder or the disposition of such Registrable Securities, an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. Each Electing Holder further agrees that in the event the amount of Registrable Securities that are beneficially owned by such Electing Holder and are registered pursuant to such Resale Registration is reduced due to a sale of such Registrable Securities under such Resale Registration, such Electing Holder shall deliver to the Issuer and the Trustee, at the time of such sale, a Notice of Transfer. (g) Until the earlier of (i) the expiration of two years after the Closing or (ii) such time as the Exchange Offer has been completed or the Resale Registration Statement has become or been declared effective by the Commission, the Issuer will not, and will not permit any of its affiliates (as defined in Rule 144) to, re-issue or resell any of the Securities that have been acquired by any of them. 4. Registration Expenses. The Issuer agrees to bear and to pay or cause to be paid promptly all expenses incident to the Issuer's performance of or compliance with this Exchange and Registration Rights Agreement, including (a) all Commission and any NASD registration, filing and review fees and expenses including reasonable fees and disbursements of counsel for the placement or sales agent or underwriters in connection with such registration, filing and review, (b) all fees and expenses in connection with the qualification of the Securities for offering and sale under the State securities and blue sky laws and determination of their eligibility for investment under the laws of such jurisdictions as any managing underwriters or the Electing Holders may reasonably designate, including any reasonable fees and disbursements of counsel for the Electing Holders (subject to the limitations of Clause (i) below) or underwriters in connection with such qualification and determination, (c) all expenses relating to the preparation, printing, production, distribution and reproduction of each registration statement required to be filed hereunder, each prospectus included therein or prepared for distribution pursuant hereto, each amendment or supplement to the foregoing, the expenses of preparing the Securities for delivery and the expenses of printing or producing any underwriting agreements, agreements among underwriters, selling agreements and blue sky or legal investment memoranda and all other documents in 19 connection with the offering, sale or delivery of Securities to be disposed of (including certificates representing the Securities), (d) messenger, telephone and delivery expenses relating to the offering, sale or delivery of Securities and the preparation of documents referred in clause (c) above, (e) fees and expenses of the Trustee under the Indenture, any agent of the Trustee and any counsel for the Trustee (f) internal expenses (including all salaries and expenses of the Issuer's officers and employees performing legal or accounting duties), (g) reasonable fees, disbursements and expenses of counsel and independent certified public accountants of the Issuer (including the expenses of any opinions or "comfort" letters required by or incident to such performance and compliance), (h) reasonable fees, disbursements and expenses of any "qualified independent underwriter" engaged pursuant to Section 3(d)(xix) hereof, (i) fees, disbursements and expenses of one counsel for the Electing Holders retained in connection with a Resale Registration, as selected by the Electing Holders of at least a majority in aggregate principal amount of the Registrable Securities held by Electing Holders (which counsel shall be reasonably satisfactory to the Issuer ) and (l) any fees charged by securities rating services for rating the Securities as required by the Indenture (collectively, the "Registration Expenses"). To the extent that any Registration Expenses are incurred, assumed or paid by any holder of Registrable Securities or any placement or sales agent therefor or underwriter thereof, the Issuer shall reimburse such person for the full amount of the Registration Expenses so incurred, assumed or paid promptly after receipt of a request therefor (accompanied by receipts, invoices or other documentary evidence, as appropriate). Notwithstanding the foregoing, the holders of the Registrable Securities being registered shall pay all agency fees and commissions and underwriting discounts and commissions attributable to the sale of such Registrable Securities and the fees and disbursements of any counsel or other advisors or experts retained by such holders (severally or jointly), other than the counsel and experts specifically referred to above. 5. Representations and Warranties. The Issuer represents and warrants to, and agrees with, each Initial Purchaser and each of the holders from time to time of Registrable Securities that: (a) Each registration statement covering Registrable Securities and each prospectus (including any preliminary or summary prospectus) contained therein or furnished pursuant to Section 3(c) or Section 3(d) hereof and any further amendments or supplements to any such registration statement or prospectus, when it becomes effective or is filed with the Commission, as the case may be, and, in the case of an underwritten offering of Registrable Securities, at the time of the closing under the underwriting agreement relating thereto, will conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and at all times subsequent to the Effective Time when a prospectus would be required to be delivered under the Securities Act, other than from (i) such time as a notice has been given to holders of Registrable Securities pursuant to Section 3(c)(iii)(F) or Section 3(d)(viii)(F) hereof until (ii) such time as the Issuer furnishes an amended or supplemented prospectus pursuant to Section 3(c)(iv) or Section 3(e) hereof, each such registration statement, and each prospectus (including any summary 20 prospectus) contained therein or furnished pursuant to Section 3(c) or Section 3(d) hereof, as then amended or supplemented, will conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Issuer by or on behalf of a holder of Registrable Securities expressly for use therein. (b) Any documents incorporated by reference in any prospectus referred to in Section 5(a) hereof, when they become or became effective or are or were filed with the Commission, as the case may be, will conform or conformed in all material respects to the requirements of the Securities Act or the Exchange Act, as applicable, and none of such documents will contain or contained an untrue statement of a material fact or will omit or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Issuer by or on behalf of a holder of Registrable Securities expressly for use therein. (c) The compliance by the Issuer with all of the provisions of this Exchange and Registration Rights Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Issuer or any of its subsidiaries is a party or by which the Issuer or any such subsidiary is bound or to which any of the property or assets of the Issuer or any such subsidiary is subject, nor will such action result in any violation of the provisions of the certificate of incorporation and by-laws of the Issuer or any statute or any order, rule or regulation of any United States court or governmental agency or body having jurisdiction over the Issuer or any such subsidiary or any of their properties; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the consummation by the Issuer of the transactions contemplated by this Exchange and Registration Rights Agreement, except the registration under the Securities Act of the Securities, qualification of the Indenture under the Trust Indenture Act, and such consents, approvals, authorizations, registrations or qualifications, if any, as may be required under State securities or blue sky laws in connection with the offering and distribution of the Securities. (d) This Exchange and Registration Rights Agreement has been duly authorized, executed and delivered by the Issuer. 6. Indemnification. (a) Indemnification by the Issuer. In the event of a registration of the Registrable Securities pursuant to Section 2(a) or 2(b) hereof, the Issuer shall, and hereby agrees to, 21 indemnify and hold harmless each of the holders of Registrable Securities included in an Exchange Offer Registration Statement, each of the Electing Holders of Registrable Securities included in a Resale Registration Statement and each person who participates as a placement or sales agent or as an underwriter in any offering or sale of such Registrable Securities against any losses, claims, damages or liabilities, joint or several, to which such holder, agent or underwriter may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Exchange Offer Registration Statement or Resale Registration Statement, as the case may be, under which such Registrable Securities were registered under the Securities Act, or any preliminary, final or summary prospectus contained therein or furnished by the Issuer to any such holder, Electing Holder, agent or underwriter, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Issuer shall, and hereby agrees to, reimburse such holder, such Electing Holder, such agent and such underwriter for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the Issuer shall not be liable to any such person in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, or preliminary, final or summary prospectus, or amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Issuer by or on behalf of such person expressly for use therein; (b) Indemnification by the Holders and any Agents and Underwriters. The Issuer may require, as a condition to including any Registrable Securities in any registration statement filed pursuant to Section 2(b) hereof and to entering into any underwriting agreement with respect thereto, that it shall have received an undertaking reasonably satisfactory to it from the Electing Holder of such Registrable Securities and from each underwriter named in any such underwriting agreement, severally and not jointly, to (i) indemnify and hold harmless the Issuer, and all other holders of Registrable Securities, against any losses, claims, damages or liabilities to which the Issuer or such other holders of Registrable Securities may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in such registration statement, or any preliminary, final or summary prospectus contained therein or furnished by the Issuer to any Electing Holder, agent or underwriter, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Issuer by or on behalf of such Electing Holder or underwriter expressly for use therein, and (ii) reimburse the Issuer for any legal or other expenses reasonably incurred by it in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that no such Electing Holder shall be required to undertake liability to any person under 22 this Section 6(b) for any amounts in excess of the dollar amount of the proceeds to be received by such Electing Holder from the sale of such Electing Holder's Registrable Securities pursuant to such registration. (c) Notices of Claims, Etc. Promptly after receipt by an indemnified party under subsection (a) or (b) above of written notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party pursuant to the indemnification provisions of or contemplated by this Section 6, notify such indemnifying party in writing of the commencement of such action; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party other than under the indemnification provisions of or contemplated by Section 6(a) or 6(b) hereof. In case any such action shall be brought against any indemnified party and it shall notify an indemnifying party of the commencement thereof, such indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, such indemnifying party shall not be liable to such indemnified party for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, which shall not be unreasonably withheld, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) Contribution. If for any reason the indemnification provisions contemplated by Section 6(a) or Section 6(b) are unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or by such indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 6(d) were determined by pro rata 23 allocation (even if the holders or any agents or underwriters or all of them were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 6(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages, or liabilities (or actions in respect thereof) referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 6(d), no holder shall be required to contribute any amount in excess of the amount by which the dollar amount of the proceeds received by such holder from the sale of any Registrable Securities (after deducting any fees, discounts and commissions applicable thereto) exceeds the amount of any damages which such holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The holders' and any underwriters' obligations in this Section 6(d) to contribute shall be several in proportion to the principal amount of Registrable Securities registered or underwritten, as the case may be, by them and not joint. (e) The obligations of the Issuer under this Section 6 shall be in addition to any liability which the Issuer may otherwise have and shall extend, upon the same terms and conditions, to each officer, director and partner of each holder, agent and underwriter and each person, if any, who controls any holder, agent or underwriter within the meaning of the Securities Act; and the obligations of the holders and any agents or underwriters contemplated by this Section 6 shall be in addition to any liability which the respective holder, agent or underwriter may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Issuer (including any person who, with his consent, is named in any registration statement as about to become a director of the Issuer) and to each person, if any, who controls the Issuer within the meaning of the Securities Act. 7. Underwritten Offerings. (a) Selection of Underwriters. If any of the Registrable Securities covered by the Resale Registration are to be sold pursuant to an underwritten offering, the managing underwriter or underwriters thereof shall be designated by Electing Holders holding at least a majority in aggregate principal amount of the Registrable Securities to be included in such offering, provided that such designated managing underwriter or underwriters is or are reasonably acceptable to the Issuer. (b) Participation by Holders. Each holder of Registrable Securities hereby agrees with each other such holder that no such holder may participate in any underwritten offering hereunder unless such holder (i) agrees to sell such holder's Registrable Securities on the basis 24 provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 8. Rule 144. The Issuer covenants to the holders of Registrable Securities that to the extent it shall be required to do so under the Exchange Act, the Issuer shall timely file the reports required to be filed by it under the Exchange Act or the Securities Act (including the reports under Section 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted by the Commission under the Securities Act) and the rules and regulations adopted by the Commission thereunder, and shall take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitations of the exemption provided by Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar or successor rule or regulation hereafter adopted by the Commission. Upon the request of any holder of Registrable Securities in connection with that holder's sale pursuant to Rule 144, the Issuer shall deliver to such holder a written statement as to whether it has complied with such requirements. The Issuer shall not be required to comply with this Section 8 if the Exchange Offer has been completed. 9. Miscellaneous. (a) No Inconsistent Agreements. The Issuer represents, warrants, covenants and agrees that it has not granted, and shall not grant, registration rights with respect to Registrable Securities or any other securities which would be inconsistent with the terms contained in this Exchange and Registration Rights Agreement. (b) Specific Performance. The parties hereto acknowledge that there would be no adequate remedy at law if the Issuer failed to perform any of its obligations hereunder and that the Initial Purchasers and the holders from time to time of the Registrable Securities may be irreparably harmed by any such failure, and accordingly agree that the Initial Purchasers and such holders, in addition to any other remedy to which they may be entitled at law or in equity, shall be entitled to compel specific performance of the obligations of the Issuer under this Exchange and Registration Rights Agreement in accordance with the terms and conditions of this Exchange and Registration Rights Agreement, in any court of the United States or any State thereof having jurisdiction. (c) Notices. All notices, requests, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given when (i) delivered by hand, if delivered personally or by courier, (ii) transmitted by any standard form of telecommunication upon receipt of a signal confirming receipt or (iii) three days after being deposited in the mail (registered or certified mail, postage prepaid, return receipt requested) as follows: If to the Issuer, to Allegheny Technologies Incorporated, 1000 Six PPG Place, 25 Pittsburgh, PA 15222-5479 (telefax: (412) 394-2837, Attention: Jon D. Walton, Senior Vice President, Chief Legal and Administrative Officer, with a copy to Kirkpatrick & Lockhart LLP, 535 Smithfield Street, Pittsburgh, PA 15222 (telefax: (412) 355-6501), Attention: Ronald D. West, Esq., and if to a holder, to the address of such holder set forth in the security register or other records of the Issuer, or to such other address as the Issuer, or any such holder may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. (d) Parties in Interest. All the terms and provisions of this Exchange and Registration Rights Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by, the parties hereto and the holders from time to time of the Registrable Securities and the respective successors and assigns of the parties hereto and such holders. In the event that any transferee of any holder of Registrable Securities shall acquire Registrable Securities, in any manner, whether by gift, bequest, purchase, operation of law or otherwise, such transferee shall, without any further writing or action of any kind, be deemed a beneficiary hereof for all purposes and such Registrable Securities shall be held subject to all of the terms of this Exchange and Registration Rights Agreement, and by taking and holding such Registrable Securities such transferee shall be entitled to receive the benefits of, and be conclusively deemed to have agreed to be bound by, all of the applicable terms and provisions of this Exchange and Registration Rights Agreement. If the Issuer shall so request, any such successor, assign or transferee shall agree in writing to acquire and hold the Registrable Securities subject to all of the applicable terms hereof. (e) Survival. The respective indemnities, agreements, representations, warranties and each other provision set forth in this Exchange and Registration Rights Agreement or made pursuant hereto shall remain in full force and effect regardless of any investigation (or statement as to the results thereof) made by or on behalf of any holder of Registrable Securities, any director, officer or partner of such holder, any agent or underwriter or any director, officer or partner thereof, or any controlling person of any of the foregoing, and shall survive delivery of and payment for the Registrable Securities pursuant to the Purchase Agreement and the transfer and registration of Registrable Securities by such holder and the consummation of an Exchange Offer. (f) LAW GOVERNING. THIS EXCHANGE AND REGISTRATION RIGHTS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. (g) Jurisdiction, Venue and Service of Process. Each of the parties hereto hereby submits to the jurisdiction of any Federal or State court in the City, County and State of New York, or to the courts of its own corporate domicile, in respect of actions brought against it as a defendant, in any legal suit, action or proceeding based on or arising under this Exchange and Registration Rights Agreement and agrees that all claims in respect of such suit or proceeding may be determined in any such court. The Issuer waives, to the extent permitted by law, the defense of an inconvenient forum or objections to personal jurisdiction with respect to the maintenance of such legal suit, action or proceeding. 26 (h) Headings. The descriptive headings of the several Sections and paragraphs of this Exchange and Registration Rights Agreement are inserted for convenience only, do not constitute a part of this Exchange and Registration Rights Agreement and shall not affect in any way the meaning or interpretation of this Exchange and Registration Rights Agreement. (i) Entire Agreement; Amendments. This Exchange and Registration Rights Agreement and the other writings referred to herein (including the Indenture and the form of Securities) or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties with respect to its subject matter. This Exchange and Registration Rights Agreement supersedes all prior agreements and understandings between the parties with respect to its subject matter. This Exchange and Registration Rights Agreement may be amended and the observance of any term of this Exchange and Registration Rights Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a written instrument duly executed by the Issuer and the holders of at least a majority in aggregate principal amount of the Registrable Securities at the time outstanding. Each holder of any Registrable Securities at the time or thereafter outstanding shall be bound by any amendment or waiver effected pursuant to this Section 9(h), whether or not any notice, writing or marking indicating such amendment or waiver appears on such Registrable Securities or is delivered to such holder. (j) Inspection. For so long as this Exchange and Registration Rights Agreement shall be in effect, this Exchange and Registration Rights Agreement and a complete list of the names and addresses of all the holders of Registrable Securities shall be made available for inspection and copying on any business day by any holder of Registrable Securities for proper purposes only (which shall include any purpose related to the rights of the holders of Registrable Securities under the Securities, the Indenture and this Agreement) at the offices of the Issuer at the address thereof set forth in Section 9(c) above and at the office of the Trustee under the Indenture. (k) Counterparts. This agreement may be executed by the parties in counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute one and the same instrument. 27 Agreed to and accepted as of the date referred to above. Allegheny Technologies Incorporated as Issuer By: /s/ Jon D. Walton --------------------------- Name: Jon D. Walton Title: Senior Vice President, Chief Legal and Administrative Officer J.P. Morgan Securities Inc. Banc of America Securities LLC Salomon Smith Barney Inc. PNC Capital Markets, Inc. BNY Capital Markets, Inc. Mizuho International plc Tokyo-Mitsubishi International plc By: J.P. Morgan Securities Inc. By: /s/ Jose C. Padilla ------------------------------------ Name: Jose C. Padilla Title: Vice President By: Banc of America Securities LLC By: /s/ Lily Chang ------------------------------------ Name: Lily Chang Title: Principal 28 Exhibit A ALLEGHENY TECHNOLOGIES INCORPORATED (the "Issuer") INSTRUCTION TO DTC PARTICIPANTS (Date of Mailing) URGENT - IMMEDIATE ATTENTION REQUESTED DEADLINE FOR RESPONSE: [DATE] (1) --------------------------------- The Depository Trust Issuer ("DTC") has identified you as a DTC Participant through which beneficial interests in the Issuer's 8.375% Notes due 2011, (the "Securities"), are held. The Issuer is in the process of registering the Securities under the Securities Act of 1933 for resale by the beneficial owners thereof. In order to have their Securities included in the registration statement, beneficial owners must complete and return the enclosed Notice of Registration Statement and Selling Securityholder Questionnaire. It is important that beneficial owners of the Securities receive a copy of the enclosed materials as soon as possible as their rights to have the Securities included in the registration statement as of the date and time such registration statement becomes or is declared effective by the Securities and Exchange Commission depend upon their returning the Notice and Questionnaire by [DEADLINE FOR RESPONSE]. Please forward a copy of the enclosed documents to each beneficial owner that holds interests in the Securities through you. If you require more copies of the enclosed materials or have any questions pertaining to this matter, please contact Allegheny Technologies Incorporated 1000 Six PPG Place, Pittsburgh, PA 15222-5479 (telefax: (412) 394-2837), Attention: Jon D. Walton, Senior Vice President, Chief Legal and Administrative Officer. - -------- (1) Not less than 30 calendar days from date of mailing. 29 ALLEGHENY TECHNOLOGIES INCORPORATED (the "Issuer") Notice of Registration Statement and Selling Securityholder Questionnaire (Date) Reference is hereby made to the Exchange and Registration Rights Agreement (the "Exchange and Registration Rights Agreement" among the Issuer and the Initial Purchasers named therein. Pursuant to the Exchange and Registration Rights Agreement, the Issuer has filed with the United States Securities and Exchange Commission (the "Commission") a registration statement on Form [___] (the "Resale Registration Statement") for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"), of the Issuer's 8.375% Notes due 2011 (the "Securities"). A copy of the Exchange and Registration Rights Agreement is attached hereto. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Exchange and Registration Rights Agreement. Each beneficial owner of Registrable Securities is entitled to have the Registrable Securities beneficially owned by it included in the Resale Registration Statement. In order to have Registrable Securities included in the Resale Registration Statement as of its Effective Time, this Notice of Registration Statement and Selling Securityholder Questionnaire ("Notice and Questionnaire") must be completed, executed and delivered to the Issuer's counsel at the address set forth herein for receipt ON OR BEFORE [DEADLINE FOR RESPONSE]. Any beneficial owner of Registrable Securities who does not complete, execute and return this Notice and Questionnaire by such date (i) will not be named as a selling securityholder in the Resale Registration Statement and (ii) may not use the Prospectus forming a part thereof for resales of Registrable Securities; provided, however, that if any such beneficial owner delivers this Notice and Questionnaire to the Issuer after such date, the Issuer shall take any action reasonably necessary to cause such beneficial owner to be named as a selling securityholder in the Resale Registration Statement and to enable such beneficial owner to use the prospectus forming a part thereof for resales of Registrable Securities, in each case, as soon as reasonably practicable after the Effective Time. Certain legal consequences arise from being named as a selling securityholder in the Resale Registration Statement and related Prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Resale Registration Statement and related Prospectus. 30 ELECTION The undersigned holder (the "Selling Securityholder") of Registrable Securities hereby elects to include in the Resale Registration Statement the Registrable Securities beneficially owned by it and listed below in Item (3). The undersigned, by signing and returning this Notice and Questionnaire, agrees to be bound with respect to such Registrable Securities by the terms and conditions of this Notice and Questionnaire and the Exchange and Registration Rights Agreement, including Section 6 of the Exchange and Registration Rights Agreement, as if the undersigned Selling Securityholder were an original party thereto. Upon any sale of Registrable Securities pursuant to the Resale Registration Statement, the Selling Securityholder will be required to deliver to the Issuer and Trustee the Notice of Transfer set forth in Appendix A to the Prospectus and as Exhibit B to the Exchange and Registration Rights Agreement. The Selling Securityholder hereby provides the following information to the Issuer and represents and warrants that such information is accurate and complete: 31 QUESTIONNAIRE (1) (a) Full Legal Name of Selling Securityholder: (b) Full Legal Name of Registered Holder (if not the same as in (a) above) of Registrable Securities Listed in Item (3) below: (c) Full Legal Name of DTC Participant (if applicable and if not the same as (b) above) Through Which Registrable Securities Listed in Item (3) below are Held: (2) Address for Notices to Selling Securityholder: Telephone: -------------------------- Fax: -------------------------- Contact Person: -------------------------- (3) Beneficial Ownership of Securities: Except as set forth below in this Item (3), the undersigned does not beneficially own any Securities. (a) Principal amount of Registrable Securities beneficially owned: CUSIP No(s). of such Registrable Securities: (b) Principal amount of Securities other than Registrable Securities beneficially owned: CUSIP No(s). of such other Securities: 32 (c) Principal amount of Registrable Securities which the undersigned wishes to be included in the Shelf Registration Statement: CUSIP No(s). of such Registrable Securities to be included in the Shelf Registration Statement: (4) Relationships with the Issuer: Except as set forth below, neither the Selling Securityholder nor any of its affiliates, officers, directors or principal equity holders (5% or more) has held any position or office or has had any other material relationship with the Issuer (or any of their predecessors or affiliates) during the past three years. State any exceptions here: (5) Plan of Distribution: Except as set forth below, the undersigned Selling Securityholder intends to distribute the Registrable Securities listed above in Item (3) only as follows (if at all): Such Registrable Securities may be sold from time to time directly by the undersigned Selling Securityholder or, alternatively, through underwriters, broker-dealers or agents. Such Registrable Securities may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale, or at negotiated prices. Such sales may be effected in transactions (which may involve crosses or block transactions) (i) on any national securities exchange or quotation service on which the Registered Securities may be listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than on such exchanges or services or in the over-the-counter market, or (iv) through the writing of options. In connection with sales of the Registrable Securities or otherwise, the Selling Securityholder may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the Registrable Securities in the course of hedging the positions they assume. The Selling Securityholder may also sell Registrable Securities short and deliver Registrable Securities to close out such short positions, or loan or pledge Registrable Securities to broker-dealers that in turn may sell such securities. State any exceptions here: 33 (6) Whether you are a corporation or not, the following three questions should be answered. If you are a corporation these questions should also be answered with respect to your officers, directors and holders of 5% or more of your equity securities; if you are a partnership such questions should also be answered with respect to your general partners. (a) Except as set forth below in this Item (6)(a), neither the undersigned nor any of its affiliates(2) is a member(3) of the National Association of Securities Dealers, Inc. (the "NASD") or a person associated with a member** of the NASD. State any exceptions here: - -------- (2) NASD Rule 2720 defines the term "affiliate" to mean a company which controls, is controlled by or is under common control with a member. The term affiliate is presumed to include the following: (i) a company will be presumed to control a member if the company beneficially owns 10 percent or more of the outstanding voting securities of a member which is a corporation, or beneficially owns a partnership interest in 10 percent or more of the distributable profits or losses of a member which is a partnership; (ii) a member will be presumed to control a company if the member and persons associated with the member beneficially own 10 percent or more of the outstanding voting securities of a company which is a corporation, or beneficially own a partnership interest in 10 percent or more of the distributable profits or losses of a company which is a partnership; (iii) a company will be presumed to be under common control with a member if: (1) the same natural person or company controls both the member and company by beneficially owning 10 percent or more of the outstanding voting securities of a member or company which is a corporation, or by beneficially owning a partnership interest in 10 percent or more of the distributable profits or losses of a member or company which is a partnership; or (2) a person having the power to direct or cause the direction of the management or policies of the member or the company also has the power to direct or cause the direction of the management or policies of the other entity in question. (3) Article I of the NASD's By-Laws defines the term "member" to mean any broker or dealer admitted to membership in the NASD and defines the term "person associated with a member" to mean every sole proprietor, partner, officer, director or branch Initial Purchaser of any member, or any natural person occupying a similar status or performing similar functions, or any natural person engaged in the investment banking or securities business who is directly or indirectly controlling or controlled by such member (for example, any employee), whether or not such person is registered or exempt from registration with the NASD. 34 (b) Except as set forth below in this Item (6)(b), the undersigned does not own stock or other securities of any NASD member not purchased in the open market. State any exceptions here: (c) Except as set forth below in this Item (6)(c), the undersigned has not made any outstanding subordinated loans to any NASD member. State any exceptions here: By signing below, the Selling Securityholder acknowledges that it understands its obligation to comply, and agrees that it will comply, with the provisions of the Exchange Act and the rules and regulations thereunder, particularly Regulation M (which governs manipulation, stabilization and trading activity during a distribution of securities). In the event that the Selling Securityholder transfers all or any portion of the Registrable Securities listed in Item (3) above after the date on which such information is provided to the Issuer, the Selling Securityholder agrees to notify the transferee(s) at the time of the transfer of its rights and obligations under this Notice and Questionnaire and the Exchange and Registration Rights Agreement. By signing below, the Selling Securityholder consents to the disclosure of the information contained herein in its answers to Items (1) through (6) above and the inclusion of such information in the Resale Registration Statement and related Prospectus. The Selling Securityholder understands that such information will be relied upon by the Issuer and any underwriters in an underwritten offering of such Selling Securityholder's Registrable Securities listed in Item(3) above, in connection with the preparation of the Resale Registration Statement and related Prospectus. In accordance with the Selling Securityholder's obligation under Sections 3(d) and (f) of the Exchange and Registration Rights Agreement to provide such information as may be required by law for inclusion in the Resale Registration Statement, the Selling Securityholder agrees to promptly notify the Issuer of any inaccuracies or changes in the information provided herein which may occur subsequent to the date hereof at any time while the Resale Registration Statement remains in effect. All notices hereunder and pursuant to the Exchange and Registration Rights Agreement shall be made in writing, by hand-delivery, first-class mail, or air courier guaranteeing overnight delivery as follows: 35 (i) To the Issuer: Allegheny Technologies Incorporated 1000 Six PPG Place Pittsburgh, PA 15222-5479 (telefax: (412) 394-2837) Attention: Jon D. Walton, (ii) with a copy to: Kirkpatrick & Lockhart LLP 535 Smithfield Street Pittsburgh, PA 15222 (telefax: (412) 355-6501) Attention: Ronald D. West, Esq. Once this Notice and Questionnaire is executed by the Selling Securityholder and received by the Issuer's counsel, the terms of this Notice and Questionnaire, and the representations and warranties contained herein, shall be binding on, shall inure to the benefit of and shall be enforceable by the respective successors, heirs, personal representatives, and assigns of the Issuer and the Selling Securityholder (with respect to the Registrable Securities beneficially owned by such Selling Securityholder and listed in Item (3) above). This Agreement shall be governed in all respects by the laws of the State of New York. 36 IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent. Dated: ________________ Selling Securityholder (Print/type full legal name of beneficial owner of Registrable Securities) By: Name: Title: PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON OR BEFORE [DEADLINE FOR RESPONSE] TO THE ISSUER'S COUNSEL AT: Kirkpatrick & Lockhart LLP 535 Smithfield Street Pittsburgh, PA 15222 (telefax: (412) 355-6501) Attention: Ronald D. West, Esq. 37 Exhibit B NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT Attention: Trust Officer Re: Allegheny Technologies Incorporated (the "Issuer") 8.375% Notes due 2011 Dear Sirs: Please be advised that _____________________ has transferred $___________ aggregate principal amount of the above-referenced Notes pursuant to an effective Registration Statement on Form [___] (File No. 333-____) filed by the Issuer. We hereby certify that the above-named beneficial owner of the Notes is named as a "Selling Holder" in the Prospectus dated ___________, 20__ or in supplements thereto, and that the aggregate principal amount of the Notes transferred are the Notes listed in such Prospectus opposite such owner's name. Dated: Very truly yours, ----------------------------------- (Name) By: ------------------------------- (Authorized Signature) EX-10.17 9 j9326701ex10-17.txt AMENDED AND RESTATED CHANGE IN CONTROL SEVERANCE EXHIBIT 10.17 AMENDED AND RESTATED CHANGE IN CONTROL SEVERANCE AGREEMENT THIS AMENDED AND RESTATED AGREEMENT ("Agreement"), initially effective as of the 10th day of February, 2000 (the "Effective Date"), is amended and restated in its entirety effective as of July 13, 2000, by and between Allegheny Technologies Incorporated, a Delaware corporation (hereinafter referred to as the "Company"), and the individual identified on the signature page of this Agreement (the "Executive"). W I T N E S S E T H: WHEREAS, the Board of Directors of the Company (the "Board") has approved the Company entering into this agreement providing for certain severance protection for the Executive following a Change in Control (as hereinafter defined); WHEREAS, the Board of Directors approved certain changes at its meeting of July 13, 2000 and the parties hereto intend to hereby amend and restate the Agreement in its entirety effective as of July 13, 2000 without changing the Effective Date; WHEREAS, the Board of the Company believes that, should the possibility of a Change in Control arise, it is imperative that the Company be able to receive and rely upon the Executive's advice, if requested, as to the best interests of the Company and its stockholders without concern that the Executive might be distracted by the personal uncertainties and risks created by the possibility of a Change in Control; and WHEREAS, in addition to the Executive's regular duties, the Executive may be called upon to assist in the assessment of a possible Change in Control, advise management and the Board of the Company as to whether such Change in Control would be in the best interests of the Company and its stockholders, and to take such other actions as the Board determines to be appropriate; NOW, THEREFORE, to assure the Company that it will have the continued dedication of the Executive and the availability of Executive's advice and counsel notwithstanding the possibility, threat, or occurrence of a Change in Control, and to induce the Executive to remain in the employ of the Company, and for good and valuable consideration and the mutual covenants set forth herein, the Company and the Executive, intending to be legally bound, agree as follows: Article I. Definitions 1.1 Definitions. Whenever used in this Agreement, the following terms shall have the meanings set forth below when the initial letter of the word or abbreviation is capitalized: (a) "Accrued Obligations" means, as of the Effective Date of Termination, the sum of (i) the Executive's Base Compensation through and including the Effective Date of Termination, (ii) the amount of any bonus, incentive compensation, deferred compensation and other cash compensation accrued by the Executive as of the Effective Date of Termination under the terms of any such arrangement and not then paid, including, but not limited to, AIP accrued but not paid for a year ending prior to the year in which occur, the Effective Date of Termination, (iii) unused vacation time monetized at the then rate of Base Compensation, (iv) expense reimbursements or other cash entitlements, (v) amounts accrued, including but not limited to amounts accrued as a result of the application of Section 2.2(g), under any qualified, non-qualified or supplemental employee benefit plan, payroll practice, policy or perquisite. (b) "AIP" means the Company's Annual Incentive Plan as it exists on the date hereof and as it may be amended, supplemented or modified from time to time or any successor plan. (c) "Base Compensation" shall mean (1) the highest annual rate of base salary of the Executive within the time period consisting of two years prior to the date of a Change in Control and the Effective Date of Termination and (2) the AIP bonus target for performance in the calendar year that a Change in Control occurs or the actual AIP payment for the year immediately preceding the Change in Control, whichever is higher. (d) "Beneficiary" shall mean the persons or entities designated or deemed designated by the Executive pursuant to Section 7.2 herein. (e) "Board" shall mean the Board of Directors of the Company. (f) For purposes hereof, the term "Cause" shall mean the Executive's conviction of a felony, breach of a fiduciary duty involving personal profit to the Executive or intentional failure to perform stated duties reasonably associated with the Executive's position; provided, however, an intentional failure to perform stated duties shall not constitute Cause unless and until the Board provides the Executive with written notice setting forth the specific duties that, in the Board's view, the Executive has failed to perform and the Executive is provided a period of thirty (30) days to cure such specific failure(s) to the reasonable satisfaction of the Board. (g) For the purposes of this Agreement, "Change in Control" shall mean, and shall be deemed to have occurred upon the occurrence of, any of the following events: (1) The Company acquires actual knowledge that (x) any Person, other than the Company, a subsidiary, any employee benefit plan(s) sponsored by the Company or a subsidiary, has acquired the Beneficial Ownership, directly or indirectly, of securities of the Company entitling such Person to 20% or more of the Voting Power of the Company, or (y) any Person or Persons agree to act together for the purpose of acquiring, holding, voting or disposing of securities of the Company or to act in concert or otherwise with the purpose or effect of changing or influencing control of the Company, or in connection with or as Beneficial Ownership, directly or indirectly, of securities of the Company entitling such Person(s) to 20% or more of the Voting Power of the Company; or -2- (2) The completion of a Tender Offer is made to acquire securities of the Company entitling the holders thereof to 20% or more of the Voting Power of the Company; or (3) The occurrence of a successful solicitation subject to Rule 14a-11 under the Securities Exchange Act of 1934 as amended (or any successor Rule) (the "1934 Act") relating to the election or removal of 50% or more of the members of the Board or any class of the Board shall be made by any person other than the Company or less than 51% of the members of the Board (excluding vacant seats) shall be Continuing Directors; or (4) The occurrence of a merger, consolidation, share exchange, division or sale or other disposition of assets of the Company as a result of which the stockholders of the Company immediately prior to such transaction shall not hold, directly or indirectly, immediately following such transaction a majority of the Voting Power of (i) in the case of a merger or consolidation, the surviving or resulting corporation, (ii) in the case of a share exchange, the acquiring corporation or (iii) in the case of a division or a sale or other disposition of assets, each surviving, resulting or acquiring corporation which, immediately following the transaction, holds more than 20% of the consolidated assets of the Company immediately prior to the transaction; provided, however that (A) if securities beneficially owned by Executive are included in determining the Beneficial Ownership of a Person referred to in Section (i), (B) if Executive is named pursuant to Item 2 of the Schedule 14D-1 (or any similar successor filing requirement) required to be filed by the bidder making a Tender Offer referred to in Section (ii) or (C) if Executive is a "participant" as defined in Instruction 3 to Item 4 of Schedule 14A under the 1934 Act in a solicitation referred to in Section (iii) then no Change of Control with respect to Executive shall be deemed to have occurred by reason of any such event. For the purposes of Section 1(g), the following terms shall have the following meanings: (i) The term "Person" shall be used as that term is used in Section 13(d) and 14(d) of the 1934 Act as in effect on the Effective Date hereof. (ii) "Beneficial Ownership" shall be determined as provided in Rule 13d-3 under the 1934 Act as in effect on the Effective Date hereof. (iii) A specified percentage of "Voting Power" of a company shall mean such number of the Voting Shares as shall enable the holders thereof to cast such percentage of all the votes which could be cast in an annual election of directors (without consideration of the rights of any class of stock, other than the common stock of the company, to elect directors by a separate class vote); and "Voting Shares" shall mean all securities of a company entitling the holders thereof to vote in an annual election of directors (without consideration of the rights of any class of stock, -3- other than the common stock of the company, to elect directors by a separate class vote). (iv) "Tender Offer" shall mean a tender offer or exchange offer to acquire securities of the Company (other than such an offer made by the Company or any subsidiary), whether or not such offer is approved or opposed by the Board. (v) "Continuing Directors" shall mean a director of the Company who either (x) was a director of the Company on the date hereof or (y) is an individual whose election, or nomination for election, as a director of the Company was approved by a vote of at least two-thirds of the directors then still in office who were Continuing Directors (other than an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of the Company which would be subject to Rule 14a-11 under the 1934 Act, or any successor Rule). (h) "Code" shall mean the Internal Revenue Code of 1986, as amended. (i) "Effective Date of Termination" shall mean the date on which the Executive's employment terminates in a circumstance in which Section 2.1 provides for Severance Benefits (as defined in Section 2.1). (j) "Good Reason" shall mean, without the Executive's express written consent, the occurrence of any one or more of the following: (1) A material diminution of the Executive's authorities, duties, responsibilities, or status (including offices, titles, or reporting relationships) as an employee of the Company from those in effect as of one hundred eighty (180) days prior to the Change in Control or as of the date of execution of this Agreement if a Change in Control occurs within one hundred eighty (180) days of the execution of this Agreement (the "Reference Date") or the assignment to the Executive of duties or responsibilities inconsistent with his position as of the Reference Date, other than an insubstantial and inadvertent act that is remedied by the Company promptly after receipt of notice thereof given by the Executive, and other than any such alteration which is consented to by the Executive in writing; (2) The Company's requiring the Executive to be based at a location in excess of thirty-five (35) miles from the location of the Executive's principal job location or office immediately prior to the Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Executive's present business obligations; (3) A reduction in the Executive's annual salary or any material reduction by the Company of the Executive's other compensation or benefits from that in effect on the Reference Date or on the date of the Change in Control, whichever is greater; -4- (4) The failure of the Company to obtain an agreement satisfactory to the Executive from any successor to the Company to assume and agree to perform the Company's obligations under this Agreement, as contemplated in Article 5 herein; and (5) Any purported termination by the Company of the Executive's employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 2.6 below, and for purposes of this Agreement, no such purported termination shall be effective. The Executive's right to terminate employment for Good Reason shall not be affected by the Executive's (A) incapacity due to physical or mental illness or (B) continued employment following the occurrence of any event constituting Good Reason herein. (k) "PSP" means the Company's Performance Share Program as it exists on the date hereof and as it may be, amended, supplemented, or modified from time to time or any successor plan. (l) "SARP" means the Company's Stock Acquisition and Retention Program as it exists on the date hereof and as it may be, amended, supplemented or modified from time to time or any successor plan. (m) "Severance Compensation" means (Times) times Base Compensation. Article II. Severance Benefits 2.1 Right to Severance Benefits. The Executive shall be entitled to receive from the Company severance benefits described in Section 2.2 below (collectively, the "Severance Benefits") if a Change in Control shall occur and within twenty-four (24) months after the Change in Control either of the following shall occur: (a) an involuntary termination of the Executive's employment with the Company without Cause; or (b) a voluntary termination of the Executive's employment with the Company for Good Reason. 2.2 Severance Benefits. In the event that the Executive becomes entitled to receive Severance Benefits, as provided in Section 2.1, the Company shall provide the Executive with total Severance Benefits as follows (but subject to Sections 2.5 and 2.6): (a) The Executive shall receive a single lump sum cash Severance Compensation payment within thirty (30) days of the Effective Date of Termination. (b) The Executive shall receive the Accrued Obligations. -5- (c) The Executive shall receive as AIP for the year in which the termination occurs a lump sum cash payment paid within thirty (30) days of the Effective Date of Termination equal to that which would have been paid if corporate and personal performance had achieved 120% of target objectives established for the annual period in which the Change in Control occurred, multiplied by a fraction, the numerator of which is the number of days elapsed in the current fiscal period to the Effective Date of Termination, and the denominator of which is 365. (d) The Executive shall receive a lump sum payment paid within thirty (30) days of the Effective Date of Termination (in accordance with the then current PSP; provided that any portion of the PSP award which would have been paid in stock under the PSP is to be paid in cash based on the current market value of the stock) which payment will be determined based upon actual performance for the number of full years of completed then current PSP measurement period(s) at the time of the Effective Date of Termination and for years not yet completed in the then current PSP measurement period(s) Executive will be assumed to have met all applicable goals at 120% of performance. (e) All welfare benefits, including medical, dental, vision, life and disability benefits pursuant to plans under which the Executive and/or the Executive's family is eligible to receive benefits and/or coverage shall be continued for a period of thirty-six (36) months after the Effective Date of Termination. Such benefits shall be provided to the Executive at no less than the same coverage level as in effect as of the date of the Change in Control. The Company shall pay the full cost of such continued benefits, except that the Executive shall bear any portion of such cost as was required to be borne by key executives of the Company generally at the date of the Change in Control. Notwithstanding the foregoing, the benefits described in this Section 2.2(e) may be discontinued prior to the end of the periods provided in this Section to the extent, but only to the extent, that the Executive receives substantially similar benefits from a subsequent employer. In the event any insurance carrier shall refuse to provide coverage to a former employee, the Company shall secure comparable coverage or may self-insure the benefits if it pays such benefits together with a payment to the Executive equal to the federal income tax consequences of payments to a former highly compensated employee from a discriminatory self-insured plan. (f) The Executive shall be entitled to reimbursement for actual payments made for professional outplacement services or job search not to exceed $(Amount) in the aggregate. (g) In determining the Executive's pension benefit following entitlement to a Severance Benefit, (i) the Executive shall be deemed to have satisfied -6- the age and service requirements for full vesting under the Company's qualified (within applicable legal parameters), non-qualified and supplemental pension plans as of the Effective Date of Termination in which the Executive then participates such that the Executive shall be entitled to receive the full accrued benefit (based on actual service rendered through the Effective Date of Termination plus the service under subsection 2.2(g)(ii)) under all such plans in effect as of the date of the Change in Control, without any actuarial reduction for early payment and (ii) the Executive shall be credited with years of service for all purposes under each such plan equal to the number used to multiply Base Compensation in Section 1.1(m) (not to exceed a maximum total of ten credited years of service under the Company's Supplemental Pension Plan, if applicable). To the extent the amounts determined after giving effect to this Section 2.2(g) cannot be paid from or under a qualified plan, as determined by the administrator of the qualified plan(s), such amounts shall be paid in a single cash payment with the Accrued Obligations as provided in Section 2.2(b), it being understood that the Executive will receive all amounts that can be paid from or under a qualified plan from such plan when such amounts otherwise become due. (h) If the Executive was investing in Company common stock through automatic payroll deductions under the Company's Employee Stock Purchase Plan (the "ESPP") on the first business day of the year in which the Change in Control occurs (the "ESPP Date"), the Company shall pay the Executive a lump sum cash payment within thirty (30) days of the Effective Date of Termination equal to the amount the Company would have paid as matching contributions under the ESPP if the Executive had continued to invest in the ESPP at the same level of participation in effect on the ESPP Date for the number of years used to multiply Base Compensation in Section 1.1(m). 2.3. Stock Options. All Company stock options previously granted to the Executive shall be fully vested and exercisable immediately upon a Change in Control. Such options shall be exercisable for the remainder of the term established by the Company's stock option plan as if the options had vested in accordance with the normal vesting schedule and the Executive had remained an employee of the Company. Company stock acquired pursuant to any such exercise may be sold by the Executive free of any Company restrictions, whatsoever (other than those imposed by federal and state securities laws). 2.4. SARP. In the event of entitlement to a Severance Benefit, all forfeiture restrictions on all Company stock purchased by or granted to the Executive under the Company's SARP shall lapse and all shares of restricted stock shall vest. All of the foregoing shares may be sold by the Executive free of any Company restrictions whatsoever (other than those imposed by federal and state securities laws). Any promissory notes of Executive under the SARP shall be paid off by the Executive within ninety (90) days after Executive's receipt of the Severance Benefits. -7- 2.5. Termination for any Other Reason. If the Executive's employment with the Company is terminated under any circumstances other than those set forth in Section 2.1, including without limitation by reason of retirement, death, disability, discharge for Cause or resignation without Good Reason, or any termination, for any reason, that occurs prior to a Change in Control (other than as provided below) or after twenty-four (24) months following a Change in Control, the Executive shall have no right to receive the Severance Benefits under this Agreement or to receive any payments in respect of this Agreement. In such event Executive's benefits, if any, in respect of such termination shall be determined in accordance with the Company's retirement, survivor's benefits, insurance, and other applicable plans, programs, policies and practices then in effect. Notwithstanding anything in this Agreement to the contrary, if the Executive's employment with the Company is terminated at any time from three (3) to eight (8) months prior to the date on which a Change in Control occurs either (i) by the Company other than for Cause or (ii) by the Executive for Good Reason, and it is reasonably demonstrated that termination of employment (a) was at the request of an unrelated third party who has taken steps reasonably calculated to effect a Change in Control, or (b) otherwise arose in connection with or in anticipation of the Change in Control, then for all purposes of this Agreement the termination shall be deemed to have occurred as if immediately following a Change in Control for Good Reason and the Executive shall be entitled to Severance Benefits as provided in Section 2.2 hereof. Notwithstanding anything in this Agreement to the contrary, if the Executive's employment with the Company is terminated at any time within three (3) months prior to the date on which a Change in Control occurs either (i) by the Company other than for Cause or (ii) by the Executive for Good Reason, such termination shall conclusively be deemed to have occurred as if immediately following a Change in Control for Good Reason and the Executive shall be entitled to Severance Benefits as provided in Section 2.2. hereof. 2.6. Notice of Termination. Any termination by the Company for Cause or by the Executive for Good Reason shall be communicated by Notice of Termination to the other party. For purposes of this Agreement, a "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. 2.7. Withholding of Taxes. The Company shall withhold from any amounts payable under this Agreement all Federal, state, local, or other taxes that are legally required to be withheld. 2.8. Certain Additional Payments by the Company. (a) Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any economic benefit or payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), -8- then the Executive shall be entitled to receive an additional payment (a "Gross-Up-Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 2.8(c), all determinations required to be made under this Section 2.8, including whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made by the Company's regular outside independent public accounting firm (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within fifteen (15) business days of the Effective Date of Termination, if applicable, or such earlier time as is requested by the Company . The initial Gross-Up Payment, if any, as determined pursuant to this Section 2.8(b), shall be paid to the Executive within five (5) days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with an opinion that the Executive has substantial authority not to report any Excise Tax or excess parachute payments on Executive's federal income tax return. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 2.8(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten (10) business days after the later of either (i) the date the Executive has actual knowledge of such claim, or (ii) ten (10) days after the Internal Revenue Service issues to the Executive either a written report proposing imposition of the Excise Tax or a statutory notice of deficiency with respect thereto, and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the thirty-day period following the date on which he gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company -9- notifies the Executive in writing prior to the expiration of such period that the Company desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses. Without limitation of the foregoing provisions of this Section 2.8(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to request or accede to a request for an extension of the statute of limitations with respect only to the tax claimed, or pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax, including interest or penalties with respect thereto, imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further that any extension of the statute of limitations requested or acceded to by the Executive at the Company's request and relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 2.8(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject -10- to the Company's complying with the requirements of Section 2.8(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 2.8(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. (e) In the event that any state or municipality or subdivision thereof shall subject any Payment to any special tax which shall be in addition to the generally applicable income tax imposed by such state, municipality, or subdivision with respect to receipt of such Payment, the foregoing provisions of this Section 2.8 shall apply, mutatis mutandis, with respect to such special tax. Article III. The Company's Payment Obligation 3.1 Payment Obligations Absolute. Except as otherwise provided in the last sentence of Section 2.2(e), the Company's obligation to make the payments and the arrangements provided for in this Agreement shall be absolute and unconditional, and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right that the Company may have against the Executive or any other party. All amounts payable by the Company under this Agreement shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company shall not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reasons whatsoever. Notwithstanding any other provisions of this Agreement to the contrary, the Company shall have no obligation to make any payment to the Executive hereunder to the extent, but only to the extent, that such payment is prohibited by the terms of any final order of a Federal or state court or regulatory agency of competent jurisdiction; provided, however, that such an order shall not affect, impair, or invalidate any provision of this Agreement not expressly subject to such order. 3.2 Contractual Rights to Payments and Benefits. This Agreement establishes and vests in the Executive a contractual right to the payments and benefits to which the Executive is entitled hereunder. Nothing herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company to segregate, earmark, or otherwise set aside any funds or other assets, in trust or otherwise, to provide for any payments to be made or required hereunder. The Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such other employment shall in no event effect any reduction of the Company's obligations to make the payments and arrangements required to be made under this Agreement, except to the extent provided in the last sentence of Section 2.2(e). -11- Article IV . Enforcement and Legal Remedies 4.1. Consent to Jurisdiction. Each of the parties hereto irrevocably consents to personal jurisdiction in any action brought in connection with this Agreement in the United States District Court for the Western District of Pennsylvania or any Pennsylvania court of competent jurisdiction. The parties also consent to venue in the above forums and to the convenience of the above forums. Any suit brought to enforce the provisions of this Agreement must be brought in the aforementioned forums. 4.2 Cost of Enforcement. In the event that it shall be necessary or desirable for the Executive to retain legal counsel in connection with the enforcement of any or all of Executive's rights to Severance Benefits under Section 2.2 of this Agreement, and provided that the Executive substantially prevails in the enforcement of such rights, the Company, as applicable, shall pay (or the Executive shall be entitled to recover from the Company, as the case may be) the Executive's reasonable attorneys' fees, costs and expenses in connection with the enforcement of Executive's rights. Article V. Binding Effect; Successors The rights of the parties hereunder shall inure to the benefit of their respective successors, assigns, nominees, or other legal representatives. The Company shall require any successor (whether direct or indirect, by purchase, merger, reorganization, consolidation, acquisition of property or stock, liquidation, or otherwise) to all or a significant portion of the assets of the Company, as the case may be, by agreement in form and substance reasonably satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company, as the case may be, would be required to perform if no such succession had taken place. Regardless of whether such agreement is executed, this Agreement shall be binding upon any successor in accordance with the operation of law and such successor shall be deemed the "Company", as the case may be, for purposes of this Agreement. Article VI. Term of Agreement The term of this Agreement shall commence on the Effective Date and shall continue in effect for three (3) full years (the "Term") unless further extended as provided in this Article. The Term of this Agreement shall be automatically and without action by either party extended for one additional calendar month on the last business day of each calendar month so that at any given time there are no fewer than 35 nor more than 36 months remaining unless one party gives written notice to the other that it no longer wishes to extend the Term of this Agreement, after which written notice, the Term shall not be further extended except as may be provided in the following sentence. However, in the event a Change in Control occurs during the Term, this Agreement will remain in effect for the longer of: (i) thirty-six (36) months beyond the month in which such Change in Control occurred; or (ii) until all obligations of the Company hereunder have been fulfilled and all benefits required hereunder have been paid to the Executive or other party entitled thereto. -12- Article VII. Miscellaneous 7.1 Employment Status. Neither this Agreement nor any provision hereof shall be deemed to create or confer upon the Executive any right to be retained in the employ of the Company or any subsidiary or other affiliate thereof. 7.2 Beneficiaries. The Executive may designate one or more persons or entities as the primary and/or contingent Beneficiaries of any Severance Benefits owing to the Executive under this Agreement. Such designation must be in the form of a signed writing acceptable to the Board of Directors of the Company. The Executive may make or change such designation at any time. 7.3 Entire Agreement. This Agreement contains the entire understanding of the Company and the Executive with respect to the subject matter hereof. Any payments actually made under this Agreement in the event of the Executive's termination of employment shall be in lieu of any severance benefits payable under any severance plan, program, or policy of the Company to which the Executive might otherwise be entitled. 7.4 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular, and the singular shall include the plural. 7.5 Notices. All notices, requests, demands, and other communications hereunder must be in writing and shall be deemed to have been duly given if delivered by hand or mailed within the continental United States by first-class certified mail, return receipt requested, postage prepaid, to the other party, addressed as follows: (a) If to the Company: Allegheny Technologies Incorporated 1000 Six PPG Place Pittsburgh, PA 15222-5479 Attn: Senior Vice President, General Counsel and Secretary (b) If to Executive, to the Executive's address set forth at the end of this Agreement. Addresses may be changed by written notice sent to the other party at the last recorded address of that party. 7.6 Execution in Counterparts. The parties hereto in counterparts may execute this Agreement, each of which shall be deemed to be original, but all such counterparts shall constitute one and the same instrument, and all signatures need not appear on any one counterpart. 7.7. Severability. In the event any provision of this Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Agreement, and the Agreement shall be construed and enforced as if the illegal or invalid -13- provision had not been included. Further, the captions of this Agreement are for convenience of reference and not part of the provisions hereof and shall have no force and effect. 7.8. Modification. No provision of this Agreement may be modified, waived, or discharged unless such modification, waiver, or discharge is agreed to in writing and signed by the Executive and on behalf of the Company. 7.9. Applicable Law. To the extent not preempted by the laws of the United States, the laws of the Commonwealth of Pennsylvania, other than the conflict of law provisions thereof, shall be the controlling laws in all matters relating to this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. ALLEGHENY TECHNOLOGIES INCORPORATED By: /s/ Jon D. Walton ------------------------------------ Title: Senior Vice President, General Counsel and Secretary EXECUTIVE: ---------------------------------------- Name: (FirstName) (M) (LastName) Address: -14- EX-10.28 10 j9326701ex10-28.txt ANNUAL INCENTIVE PLAN FOR YEAR 2001 EXHIBIT 10.28 ALLEGHENY TECHNOLOGIES Specialty Materials That Make Our World THE ANNUAL INCENTIVE PLAN FOR YEAR 2001 CONTENTS PAGE - -------- ---- At a Glance 1 What is the Annual Incentive Plan? 1 Who is Eligible for This Plan? 1 How Does the Annual Incentive Plan Work? 1 Calculation of the Annual Incentive Plan Award 2 Target Bonus Percentage 2 Performance Goals and the Target Bonus Percentage 2 Financial Performance Goals 3 Safety Improvement Performance Goals 4 Other Individual Performance Goals 4 How the AIP Incentive Award is Calculated When All Goals Are Achieved 5 How the AIP Incentive Award is Calculated for Other Achievement Levels 6 o Maximums and Minimums 6 o Formulas for Weighting Performance 7 Putting it Together - Two Examples 8 Additional Guidelines for the Annual Incentive Plan 12 Discretionary Adjustments 12 Some Special Circumstances 12 Making Payments 13 Administration Details 13 AT A GLANCE WHAT IS THE ANNUAL INCENTIVE PLAN? The Annual Incentive Plan (the "AIP" or the "Plan") provides key managers of Allegheny Technologies Incorporated ("Allegheny Technologies" or the "Company") and its operating companies with the opportunity to earn an incentive award when certain pre-established goals are met at the corporate and operating company levels and at the individual level. WHO IS ELIGIBLE FOR THIS PLAN? Generally, key managers who have a significant impact on the company's operations will be eligible to participate in the Plan. Individuals eligible for participation are determined annually, based on recommendations of the operating company presidents, if applicable, and the Company's chief executive officer, with the approval of the Personnel and Compensation Committee of the Company's Board of Directors (the "Committee"). HOW DOES THE ANNUAL INCENTIVE PLAN WORK? Under the Plan, key managers may earn an incentive award based on a percentage of their base salary, depending on the extent to which pre-established corporate, operating company and individual performance goals have been achieved. o For purposes of the Plan, base salary is generally the manager's annual base salary rate as of the end of the year, excluding any commission or other incentive pay. For some special circumstances affecting the amount of base salary used in the Plan, see page 12. o A target bonus percentage is used in calculating the incentive award. It is explained on the next page. Each participating manager will have a target bonus percentage. o The target bonus percentage will be adjusted (upward or downward) based on the extent to which various performance goals are achieved. Under the Plan, 80% of the target bonus percentage will be adjusted based on corporate and operating company financial performance, 10% of the target bonus percentage will be adjusted based on safety improvement, and 10% of the target bonus percentage will be adjusted based on other individual performance. Incentive award payments will generally be distributed in cash after the year-end audit is complete. Page 1 CALCULATION OF THE ANNUAL INCENTIVE PLAN AWARD TARGET BONUS PERCENTAGE The Plan establishes an incentive opportunity for each Plan participant, calculated as a percentage of the manager's base salary. Each participant will be provided with an initial percentage, referred to as a "target bonus percentage." Generally, the target bonus percentage is the percentage of base salary that can be earned as an award under the Plan if 100% of the various performance goals are achieved. For 2001, if 100% of the performance goals are achieved, 100% of the target bonus percentage can be earned. If there is a change in the key manager's job position during the year that changes the manager's target bonus percentage, the target bonus percentage used in the award calculation will be determined as follows: o If the individual has at least six months of service in the new position, the newly adjusted target bonus percentage will be used in calculating the individual's award for the full year. o If the individual has less than six months of service in the new position, the individual's award for the year will be calculated on a pro-rata basis using the two different target bonus percentages weighted by length of service in each position during the year. Target bonus percentages, performance goals and performance achievements will be communicated to each eligible participant. The Committee may change the goals and objectives for the Plan at any time. PERFORMANCE GOALS AND THE TARGET BONUS PERCENTAGE An AIP award is based on the extent to which specified, preestablished performance objectives are achieved. For 2001, AIP awards will be based on the extent to which: o Allegheny Technologies and its operating companies achieve specified levels of Operating Profit and Managed Working Capital - the financial goals, o Allegheny Technologies and its operating companies achieve specified levels of improvements in safety performance - the safety goals, and o The participant achieves his or her own other individual performance objectives. At the end of the year, the Company will measure actual performance against each of the preestablished objectives. Page 2 As a first step in the calculation, the Company will determine the extent to which pre-established financial performance goals, specifically levels of Operating Profit and Managed Working Capital for 2001, have been achieved. The results achieved will be weighted under a formula, which in turn will impact 80% of the target bonus percentage. The formulas for weighting financial achievements are described on pages 5 to 7. For the remaining 20% of the target bonus percentage, the Company will review actual safety improvements and other individual performance against pre-established objectives: o Since 10% of the target bonus percentage is based on safety improvements, the participant can earn up to 10% (or more) of the target bonus percentage based on the extent to which safety objectives are achieved. The formulas for weighting safety achievements are the same as for weighting financial achievements and are described on pages 5 to 7. o Since 10% of the target bonus percentage is based on other individual performance, the participant can earn up to 10% (or more) of the target bonus percentage based on the extent to which other individual performance objectives are achieved. The formulas for weighting other individual performance achievements are the same as for weighting financial achievements and are described on pages 5 to 7. The weighted percentages attributable to each performance goal as noted above, then will be added together, and that sum will be multiplied by: (1) the individual's target bonus percentage, times (2) the individual's annual base salary, to produce the amount of the incentive award for 2001. Note that potential adjustments are described on page 12. FINANCIAL PERFORMANCE GOALS The financial performance goals for 2001 consist of two measures: Operating Profit ("OP"), and Managed Working Capital ("MWC"), which together comprise 80% of the target bonus percentage. For operating company managers, note that 60% of the financial performance goals' overall 80% weight will be based on the performance of the participant's operating company, and 20% of the financial performance goals' overall 80% weight will be based on corporate level performance. For corporate staff employees, financial performance will be measured completely at the corporate level. More specifically, the financial performance measures comprising 80% of the target bonus percentage will be as follows: o For managers at the operating companies: -- OP achievements at the participant's operating company: 45% -- MWC achievements at the participant's operating company: 15% -- OP achievements at Allegheny Technologies: 12% -- MWC achievements at Allegheny Technologies: 8% -- 80% Page 3 o For corporate staff employees: -- OP achievements at the corporate level: 60% -- MWC achievements at the corporate level: 20% -- 80% Each year, financial performance goals will be set at the corporate and operating company level based on the applicable business plan. With the concurrence of the Company's chief executive officer and the Committee, financial performance goals may be further weighted within a particular operating company in accordance with its separate business units ("SBU's") for key managers of those SBU's. SAFETY IMPROVEMENT PERFORMANCE GOALS 10% of the target bonus percentage is based on the extent to which pre-established levels of safety improvement are achieved. The Plan will principally rely upon the percentage improvement in two metrics to measure safety improvement: OSHA Total Recordable Incident Rate and the Lost Workday Case Rate. Each safety metric will comprise 5% of the target bonus percentage. Each of the safety achievement metrics - the OSHA Total Recordable Incident Rate and the Lost Workday Case Rate - will be independently weighted for 2001 under the same formulas as the financial performance goals. Consistent with the overall business plan of Allegheny Technologies, the pre-established safety goal under the Plan for 2001 is a 50% improvement vs. 1999. Safety goals for individuals at specific sites can be adjusted to the needs of their particular location as long as the collective goal for each operating company is a 50% improvement in these safety metrics vs. 1999. For corporate staff employees, the AIP award percentage for safety improvement is based on achieving a 50% safety improvement on the weighted average of all ATI operating companies vs. 1999. OTHER INDIVIDUAL PERFORMANCE GOALS 10% of the target bonus percentage is based on the extent to which pre-established individual performance goals are achieved. Each year, managers will establish other individual performance goals with their immediate supervisors. The achievement of Other Individual Performance goals will be weighted under the same formulas as the financial performance goals. Page 4 HOW THE AIP INCENTIVE AWARD IS CALCULATED WHEN ALL GOALS ARE ACHIEVED For the Year 2001, if 100% of the financial performance goals are achieved, then 80% of the target bonus percentage will be credited to the participant:
Goal % of Goal Formula Earned % of Goals Target Achieved % Weighting Target * ----- ------ ---------- --------- -------- FINANCIAL OP - Operating Company 45% 100% 100% 45% MWC - Operating Co. 15% 100% 100% 15% OP - Corporate 12% 100% 100% 12% MWC - Corporate 8% 100% 100% 8% -- -- Financial Total 80% 80%
*Earned % of Target = Goal % of Target X Formula Weighting Next, if 100% of the safety improvement goals are achieved, then an additional 10% of the target bonus percentage will be credited to the participant:
Goal % of Goal Formula Earned % of Goals Target Achieved % Weighting Target * ----- ------ ---------- --------- -------- SAFETY Total Recordable Incident 5% 100% 100% 5% Rate Lost Workday Case Rate 5% 100% 100% 5% -- -- Safety Total 10% 10%
Finally, if 100% of the individual performance goals are achieved, then an additional 10% of the target bonus percentage will be credited to the participant:
Goal % of Goal Formula Earned % of Goals Target Achieved % Weighting Target * ----- ------ ---------- --------- -------- INDIVIDUAL GOALS 10% 100% 100% 10%
Page 5 The sum of weighting the financial performance, safety performance, and individual performance produces the earned percentages of target as follows: Financial Performance Goals 80% Safety Improvement Goals 10% Individual Performance Goals 10% --- Total Earned Percentage of Target 100% In this example, assume that the operating company manager's target bonus percentage is 20%. The target bonus percentage of 20% is then multiplied by 100% to produce an adjusted bonus percentage equal to 20% of base salary: Earned Percentage of Target 100% X Target Bonus Percent 20% --- Equals Percentage of Salary for 20% Incentive Award The sections below discuss the impact of achieving more or less than 100% of various goals, and they also discuss the impact of other potential adjustments. HOW THE AIP INCENTIVE AWARD IS CALCULATED FOR OTHER ACHIEVEMENT LEVELS The following section describes maximum and minimum achievement levels, and the formulas used to weight achievements at all levels. Maximums and Minimums o Generally, the maximum percentage used in adjusting or weighting performance achievement is 200%, and the overall maximum incentive award that an individual can earn under the weighting formula is 200% of his or her target bonus percentage. o Where 75% of a financial, safety or other individual performance goal is achieved, only 25% of that goal's share will be allocated to his or her target bonus percentage. o Where less than 75% of a financial, safety or other individual performance goal is achieved, no amount of that goal will be allocated to his or her target bonus percentage. Page 6 Formulas for Weighting Performance The following formulas will be used to weight financial, safety, or other individual performance under the Plan: Formula A: If 75% to and including 100% of a goal is achieved, the Percent Allocated for that goal equals the Percentage of Goal Achieved (i.e. Actual Performance divided by Planned Performance) minus 75% (which is the threshold level of performance) times 3, plus 25%. Formula A examples: 1. Assumption: Percentage of Goal Achieved = 90% Weighted Percent for that Goal = [(90% - 75%) x 3] + 25% = [15% x 3] + 25% = 45% + 25% Percent Allocated for Goal = 70% 2. Assumption: Percentage of Goal Achieved = 85% Weighted Percent for that Goal = [(85% - 75%) x 3] + 25% = [10% x 3] + 25% = 30% + 25% Percent Allocated for Goal = 55% Formula B: If over 100% of goal is achieved, the Percent Allocated for that goal equals the Percentage of Goal Achieved (i.e. Actual Performance divided by Planned Performance) minus 100% times 5, plus 100%. In all cases, the maximum Percent Earned of 200% results when 120% or more of that goal is achieved. Formula B examples: 1. Assumption: Percentage of Goal Achieved = 130% Weighted Percent for that Goal = [(130% - 100%) x 5] + 100% = [30% x 5] + 100% = 150% + 100% Percent Allocated for Goal = 250% However, the maximum target bonus is capped at 200%. 2. Assumption: Percentage of Goal Achieved = 105% Weighted Percent for that Goal = [(105% - 100%) x 5] + 100% = [5% x 5] + 100% = 25% + 100% Percent Allocated for Goal = 125% Page 7 PUTTING IT TOGETHER Here are two examples of how an incentive award might be determined under the Plan. Example One: - ----------- Assume that the operating company manager's annual salary is $80,000 and that the manager's target bonus percentage is 20% of base salary. Also, assume actual performance is: Financial goals o 100% of planned Operating Profit, or OP, goals at the operating company o 105% of planned Managed Working Capital, or MWC, goals at the operating company o 105% of planned Operating Profit, or OP, goals at the corporate level o 130% of planned Managed Working Capital, or MWC, goals at the corporate level Safety goals o 90% of Recordable Incident Rate (improvement of 45% in metric since 1999) o 100% of Lost Workday Case Rate (improvement of 50% in metric since 1999) Other Individual Performance goals o 90% of planned Individual Performance goals are met The first step in this example is to calculate the impact of the actual financial performance on 80% of the target bonus percentage. Formula A on page 7 would be used for weighting OP at the operating company level, because 100% of that goal was achieved. Formula B on page 7 would be used for weighting the other financial metrics, because more than 100% of those goals were achieved. Following the formulas, the 80% share of the target bonus percentage is adjusted to 94.75%:
Goal % of Goal Formula Earned % of Goals Target Achieved % Weighting Target * ----- ------ ---------- --------- -------- OP - Operating Company 45% 100% 100% (A) 45.00% MWC - Operating Co. 15% 105% 125% (B) 18.75% OP - Corporate 12% 105% 125% (B) 15.00% MWC - Corporate 8% 130% 200% (B) 16.00% -- ----- Goals Total 80% 94.75%
*Earned % of Target = Goal % of Target X Formula Weighting Page 8 The next step in this example is to calculate the impact of the actual safety performance on 10% of the target bonus percentage. Accordingly Formula A on page 7 would be used for weighting the safety improvement metrics, because 100% or less of those goals were achieved. Following the formulas, the 10% safety performance share of the target bonus percentage is adjusted to 8.5%:
Goal % of Goal Formula Earned % of Goals Target Achieved % Weighting Target * ----- ------ ---------- --------- -------- Recordable Incident Rate 5% 90% 70% (A) 3.5% Lost Workday Case Rate 5% 100% 100% (B) 5.0% ---- Goals Total 10% 8.5%
The last step in this example is to calculate the impact of the actual individual performance on 10% of the target bonus percentage. Formula A on page 7 would be used for individual performance, because less than 100% of those goals were achieved. Following the formulas, the 10% individual performance share of the target bonus percentage is adjusted to 7%:
Goal % of Goal Formula Earned % of Goals Target Achieved % Weighting Target * ----- ------ ---------- --------- -------- Individual Performance 10% 90% 70% (A) 7%
The sum of the financial performance, safety performance, and individual performance is: Financial Performance Goals 94.75% Safety Improvement Goals 8.50% Individual Performance Goals 7.00% ------ Total Earned Percentage of Target 110.25% The target bonus percentage of 20% is multiplied by 110.25% to produce an adjusted bonus percentage equal to 22.05% of base salary: Earned Percentage of Target 110.25% X Target Bonus Percent 20 % ----- Equals Percentage of Salary for 22.05% Incentive Award With this first example, the incentive award would be calculated as 22.05% of the manager's base salary of $80,000, or $17,640. Page 9 Example Two: - ----------- Assume that the operating company manager's annual salary is again $80,000 and that the manager's target bonus percentage is 20% of base salary but that actual achievements are: Financial goals o 90% of planned Operating Profit, or OP, goals at the operating company o 100% of planned Managed Working Capital, or MWC, goals at the operating company o 75% of planned Operating Profit, or OP, goals at the corporate level o 105% of planned Managed Working Capital, or MWC, goals at the corporate level Safety goals o 100% of Recordable Incident Rate (improvement of 50% in metric since 1999) o 160% of Lost Workday Case Rate (improvement of 80% in metric since 1999) Other Individual Performance goals o 105% of planned Individual Performance goals are met The first step in this example is to calculate the impact of the actual financial performance on 80% of the target bonus percentage. Formula A on page 7 would be used for weighting OP and MWC at the operating company and OP at the corporate level, because 100% or less of those goals were achieved. Formula B on page 7 would be used for weighting the MWC goal at the corporate level, because over 100% of that goal was achieved. Following the formulas, the 80% share of the target bonus percentage is adjusted to 59.50%:
Goal % of Goal Formula Earned % of Goals Target Achieved % Weighting Target * ----- ------ ---------- --------- -------- OP - Operating Company 45% 90% 70% (A) 31.50% MWC - Operating Co. 15% 100% 100% (A) 15.00% OP - Corporate 12% 75% 25% (A) 3.00% MWC - Corporate 8% 105% 125% (B) 10.00% -- ----- Goals Total 80% 59.50%
*Earned % of Target = Goal % of Target X Formula Weighting Page 10 The next step in this example is to calculate the impact of the actual safety performance on 10% of the target bonus percentage. Accordingly Formula A on page 7 would be used for weighting the Total Recordable Incident Rate or TRIR, because 100% or less of those goals were achieved. Formula B will be used for weighting Lost Workday Case Rate or LWCR performance achievements as they are greater than 100% of planned improvement. Following the formulas, the 10% safety performance share of the target bonus percentage is adjusted to 15%:
Goal % of Goal Formula Earned % of Goals Target Achieved % Weighting Target * ----- ------ ---------- --------- -------- Recordable Incident Rate 5% 100% 100% (A) 5% Lost Workday Case Rate 5% 160% 200% (B) 10% -- --- Goals Total 10% 15%
The last step in this example is to calculate the impact of the actual individual performance on 10% of the target bonus percentage. Formula B on page 7 would be used for individual performance, because over 100% of those goals were achieved. Following the formulas, the 10% individual performance share of the target bonus percentage is adjusted 12.5%:
Goal % of Goal Formula Earned % of Goals Target Achieved % Weighting Target * ----- ------ ---------- --------- -------- Individual Performance 10% 105% 125% (B) 12.5%
The sum of the financial performance, safety performance, and individual performance is: Financial Performance Goals 59.50% Safety Improvement Goals 15.00% Individual Performance Goals 12.50% ------ Total Earned Percentage of Target 87.00% The target bonus percentage of 20% is multiplied by 87.00% to produce an adjusted bonus percentage equal to 17.40% of base salary: Earned Percentage of Target 87.00% X Target Bonus Percent 20 % ----- Equals Percentage of Salary for 17.40% Incentive Award With this first example, the incentive award would be calculated as 17.40% of the manager's base salary of $80,000, or $13,920. Page 11 ADDITIONAL GUIDELINES FOR THE ANNUAL INCENTIVE PLAN In any year, a minimum Operating Profit (OP) of 75% of plan must be achieved for annual incentives to be paid regardless of other factors. The total of the incentive awards in any given year cannot exceed 5% of the Operating Profit of Allegheny Technologies or the operating company, as the case may be. If, in any year, awards exceed 5% of Operating Profit, awards of the affected company will be reduced to eliminate the excess. DISCRETIONARY ADJUSTMENTS In some cases, the Plan allows for discretionary adjustments of up to +20% or - -20% of an individual's calculated award. However, the sum of discretionary adjustments for all eligible managers of the affected company cannot exceed +5% of the aggregate calculated awards for that company. SOME SPECIAL CIRCUMSTANCES The above formulas generally determine the amount of the incentive award for the year. Other factors that may affect the actual award follow: o If a manager leaves the company due to retirement, death, or disability, an award will be calculated based on the actual base salary earned during the year in which the manager left--so long as the manager worked at least six months of that year. o If a manager leaves the company before the end of the plan year for any other reason, the manager will not receive a bonus award for that year. o If a manager voluntarily leaves the company after the end of the year but before the award is paid, the manager would receive any bonus due unless the employment is terminated for cause. If employment is terminated for cause, the manager would not be entitled to receive an award under the Plan. o Managers who are hired mid-year may earn a pro-rated award for that year, based on the salary earned during that year. However, managers with less than two months service in a plan year (i.e. hired after October 31) would not be eligible for an award for that year. o If the manager received an adjustment in base salary due to a change in job position (i.e. other than a merit increase), the manager's base salary for plan purposes will be the sum of (1) the product of the number of months prior to the adjustment times the rate of monthly base salary immediately prior to the adjustment, and (2) the product of the number of months after the adjustment times the rate of monthly base salary as of the end of the Plan Year. Page 12 MAKING PAYMENTS All incentive award payments will generally be paid in cash, less applicable withholding taxes, after the year-end audit is complete. This is expected to occur by no later than March 15. ADMINISTRATION DETAILS This summary relates to the Annual Incentive Plan (AIP) of Allegheny Technologies Incorporated and its subsidiaries. The Plan is administered by the Committee, which has full authority to: o Interpret the Plan; o Designate eligible participants and categories of eligible participants; o Set the terms and conditions of incentive awards; and o Establish and modify administrative rules for the Plan. Plan participants may obtain additional information about the plan and the Committee from: Senior Vice President, General Counsel and Secretary Allegheny Technologies Incorporated 1000 Six PPG Place Pittsburgh PA 15222 5479 Phone: 412-394-2836 Fax: 412-394-2837 The Plan will remain in effect until terminated by the Committee. The Committee may also amend the plan at its discretion. The Plan is not subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA) and is not "qualified" under Section 401(a) of the Internal Revenue Code. Page 13 EX-10.29 11 j9326701ex10-29.txt INFORMATION STATEMENT EXHIBIT 10.29 Allegheny Technologies Specialty Materials That Make Our World INFORMATION STATEMENT FOR AWARDS GRANTED UNDER THE TOTAL SHAREHOLDER RETURN INCENTIVE COMPENSATION PROGRAM OF THE ALLEGHENY TECHNOLOGIES INCORPORATED 2000 INCENTIVE PLAN --------------------------------------------------- This document constitutes part of a Prospectus covering securities that have been registered under the Securities Act of 1933. --------------------------------------------------- - -------------------------------------------------------------------------------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offense. - -------------------------------------------------------------------------------- January 8, 2002 - -------------------------------------------------------------------------------- NAME OF PROGRAM: Allegheny Technologies Incorporated (the "Company") Total Shareholder Return Incentive Compensation Program ("TSRP" or the "Program"). PURPOSE: The primary purposes of the TSRP are to: (i) reward senior executives for the overall success of the Company as determined by the value created for stockholders relative to peer companies; and (ii) provide a means of encouraging Company stock ownership by senior executives. PERFORMANCE PERIOD: A performance period under the TSRP is three years. The initial performance period began January 1, 2001 and will end December 31, 2003. GRANT FREQUENCY: It is anticipated that a new performance period will begin every year, which will create overlapping performance periods. TSRP STRUCTURE: Each participant will be assigned a target number of shares. Participants can earn from 50% (at threshold) to 200% (at maximum) of their target shares based on performance. Performance below threshold will earn 0%. SIZE OF AWARDS: Target awards will be established for each participant, according to the following schedule:
------------------------------------------------------------------------------- POSITION TARGET AWARDS AS PERCENT OF SALARY ------------------------------------------------------------------------------- CEO 60% Segment Executives, Selected Corporate Officers 50% Other Corporate Officers, Selected Business Unit Heads 40% Selected Business Unit General Managers 30%
Targeted Awards will be calculated according to the following formula: Base Salary at x Target Opportunity / Average Closing Price For = Target Beginning of As a Percent of Salary 30 Trading Days Prior to Number of Performance Period Beginning of Three-Year Shares Performance Period Awarded
2 PERFORMANCE MEASURE: Performance under the TSRP is calculated as a function of the percentile ranking of ATI's total shareholder return during the performance period (TSR) versus a peer group composed of Companies selected at the beginning of the performance period. For the 2002 - 2004 performance period, the peer companies shall be the companies identified in Appendix A. TSR is the return that a shareholder realizes through stock price appreciation and dividend reinvestment on an equity instrument throughout a specified period. The return for a period is calculated as the stock price at the end of a period plus the dividends paid during the measurement period divided by the stock price at the beginning of the performance period. TSRP PAYOUTS: TSRP payouts are equal to: Target award x Percent of target earned from peer group percentile ranking in TSR PERFORMANCE GOALS: The following table shows the performance reward relationships for the TSRP: - -------------------------------------------------------------------------------- OUTCOME RELATIVE TO PEER GROUP TSR ----------------------------------------------------- LEVEL OF PERFORMANCE THREE-YEAR PERCENTILE PERCENT OF TARGET RANKING IN TSR AWARD EARNED - -------------------------------------------------------------------------------- Below Threshold Below 35th percentile 0% Threshold 35th percentile 50% Target 50th percentile 100% Excellent 75th percentile 200% - -------------------------------------------------------------------------------- NOTE: Interpolation between points will be made on a straight-line basis on each scale. Below the 35th percentile (and above the 75th percentile), there will be no interpolation. DIVIDENDS: No dividends will be paid on shares that are not yet earned. FORM AND TIMING OF PAYOUT: All payouts from the TSRP will be made in Company Common Stock, as soon as practicable following the award calculation; however, stock may be withheld in order to satisfy tax withholding requirements. 3 CERTAIN TERMINATIONS OF In the event of a participant's death, EMPLOYMENT: disability, or retirement (when the executive is at least 55 years of age with at least five years of service), pro rata awards based on the number of full months worked during that performance period will be calculated. Such awards will be based on goal achievement over the entire performance period. Awards in these situations will be calculated and paid after the end of the performance period. Amounts paid on account of death will be paid to a beneficiary designated by the participant. If no beneficiary has been designated, amounts will be paid to the participant's estate. OTHER TERMINATIONS OF In the event of a termination of employment not EMPLOYMENT: constituting a disability, death or retirement discussed above, the participant will forfeit any right to any payout for all performance periods in progress under the TSRP. For terminations after the end of a performance period, however, but before payout, payout will be made as though the termination had not occurred. TAX CONSIDERATIONS: The employee must report taxable income in the year in which the award is paid. TAX WITHHOLDING: The Company has the right to deduct any taxes or statutory deductions required by law to be withheld from all payments under the TSRP. See "Certain Federal Income Tax Consequences" below. CHANGE IN CAPITALIZATION: The number and kind of shares subject to outstanding awards will be appropriately adjusted to reflect any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other change in capitalization with a similar substantive effect upon the TSRP or the awards granted under the TSRP. The Committee shall have the power and sole discretion to determine the amount of the adjustment to be made in each case. CHANGE IN CONTROL: If a Change in Control (as defined in the TSRP) is deemed to have occurred, then all outstanding award cycles will automatically vest and be paid out (with the consent of the Committee, in cash) at the target level or the actual performance level (as of the Change in Control), whichever is larger. 4 GENERAL INFORMATION ABOUT THE INCENTIVE PLAN AND THE TSRP The Allegheny Technologies Incorporated 2000 Incentive Plan (the "INCENTIVE PLAN") was adopted by the Company's Board of Directors on January 31, 2000 and was approved by the Company's stockholders on May 11, 2000. The purpose of the Incentive Plan is to help attract and retain key employees and promote their commitment to achieving long-term corporate objectives. The Incentive Plan enables the Company to award various types of stock-based compensation. The following summary covers the terms of the Incentive Plan that relate to awards made by the Committee under the TSRP. Because it is a summary, it may not contain all the information that could be important to you. A copy of the complete text of the TSRP is attached to this Information Statement as Appendix A.1 and incorporated herein by reference. At your request, the Company will provide you with a copy of the complete text of the Incentive Plan without charge. See "Where You Can Find More Information." ADMINISTRATION The Personnel and Compensation Committee of the Company's Board of Directors administers the Incentive Plan with respect to participants in the Incentive Plan other than persons who are subject to the provisions of Section 16 of the Securities and Exchange Act of 1934 ("STATUTORY INSIDERS"). The Stock Incentive Award Subcommittee of the Personnel and Compensation Committee administers the Incentive Plan as it applies to the Company's statutory insiders. (The Stock Incentive Award Subcommittee and the Personnel and Compensation Committee are referred to in this Information Statement as the "COMMITTEE"). The Committee has full authority to interpret the Incentive Plan, designate eligible participants and categories of el igible participants, set the terms and conditions of performance awards and establish and modify administrative rules for the Incentive Plan. In addition, the Board of Directors may exercise any of the powers and authority of the Committee under the Incen tive Plan. The Committee is comprised of directors who are appointed by and serve at the pleasure of the Company's Board of Directors. ELIGIBILITY You are eligible to receive awards under the Incentive Plan if you are an officer or key employee of the Company or its subsidiaries who has been designated as a participant by the Committee in its sole discretion. STOCK SUBJECT TO THE INCENTIVE PLAN The Company may issue a maximum of up to 10% of its outstanding shares of Common Stock under the Incentive Plan. The Committee may adjust this number in certain instances. The Common Stock offered under the Incentive Plan may be either authorized and unissued shares or issued shares that the Company has reacquired and holds in its treasury. If for any reason an award terminates or expires, the shares of Common Stock covered by the award will again be available for the grant of new awards under the Incentive Plan. 5 THE TOTAL SHAREHOLDER RETURN INCENTIVE COMPENSATION PROGRAM The Committee adopted Administrative Rules under the Incentive Plan, effective as of January 1, 2001, that establish the TSRP. PROGRAM ELIGIBILITY The Committee has the sole discretion to designate those executives and senior managers who it believes most directly effect the Company's long-term success as eligible for the Program. The Committee makes these determinations and designations based on the recommendations of the Company's Chief Executive Officer (the "CEO"). AWARD AGREEMENTS The terms and conditions of an Award, as established by the Committee, are set forth in a total shareholder return incentive compensation award agreement between the Company and the participant who has been granted the Award. These agreements need not contain similar provisions with respect to Awards made to different participants or Awards made to the same participant at different times. Each award agreement describes: o The performance period for measuring the achievement of performance objectives, in whole or in part; o the performance levels for the TSRP, including the target level of performance, to be achieved during the performance period, and the number of shares of Common Stock available to the participant upon achieving the target level of performance (the "TARGET AWARD"); and o the applicable percentage of the target award that will be paid depending on the extent to which the target level of performance is fully or partially achieved or surpassed (the "PERCENT OF TARGET AWARD EARNED"). For the 2002-2004 performance period, the maximum Award, equal to 200% of your target award, is payable if the Company's three year percentile ranking in TSR is at or above the 75th percentile of the applicable peer group. No Award is paid if the Company's three-year percentile ranking in TSR is below the 35th percentile. PAYMENT OF AWARDS After the end of the award period, the Committee determines the number of shares of Common Stock, if any, to be paid based on the extent to which the target level of performance was fully or partially achieved or surpassed. All payouts will be made as soon as practicable following the award calculation. Generally, however, you will forfeit your right to payment of any Award under the TSRP unless you are continuously an employee of the Company or any of its affiliates from the date of grant of the Award to the date of payment. There are exceptions, however, in the case of retirement, disability or death, as described above. 6 You do not have the right to vote or receive dividends on the shares or have any other rights of a stockholder with respect to the shares, unless and until the shares are issued to you. NONASSIGNABILITY Awards under the Program are not transferable other than by will or by laws of descent and distribution. During your lifetime, Awards are payable only to you. AMENDMENT AND TERMINATION The Incentive Plan will remain in effect until terminated by the Board of Directors. The Board may at any time amend or terminate the Incentive Plan or the TSRP. Without your consent, no such action may materially impair your rights with respect to awards previously granted to you. MISCELLANEOUS The Committee has the discretion to suspend the payment of an Award if it determines that any of the following actions are necessary or desirable: any listing or registration of the shares of Common Stock; obtaining any consent or approval of any governmental body; or obtaining any other agreement or consent. In that situation, the Award will be suspended until the Committee is satisfied that the applicable action has been completed in a manner satisfactory to the Committee. Also, neither your selection for participation in the Program nor the execution of an award agreement will require the Company to retain your services for any period of time. CERTAIN FEDERAL INCOME TAX CONSEQUENCES This section summarizes the United States federal income tax consequences as of the date of this Information Statement to a participant who is a United States citizen with respect to shares of Common Stock that may be received as payment of an Award under the Program. THE COMPANY URGES YOU TO CONSULT YOUR PERSONAL TAX ADVISOR WITH RESPECT TO THE APPLICATION OF THE FEDERAL INCOME TAX LAWS TO YOUR PERSONAL CIRCUMSTANCES, CHANGES IN THESE LAWS, AND THE POSSIBLE EFFECT OF OTHER TAXES. GENERAL INFORMATION Payment of Awards will result in ordinary income to you in the years in which the shares of Common Stock are paid to you. The taxable amount is the fair market value (as defined in the Program) of the shares. If you sell the shares you received in payment of an Award, the difference between any amount realized on the sale and the fair market value of these shares at the time they were paid to you will be taxed as capital gain or loss, which will be short-term or long-term, depending on the length of time you held these shares before sale. The holding period for determining short-term or long-term capital gains or losses begins on the date of payment of an Award. 7 TAX RATES The Award will be treated as supplemental wages that require a minimum of 28% federal income tax withholding. You should also bear in mind that the federal income tax rate on capital gains from sales of property held for less than 12 months (short-term capital gains) generally is the same as your maximum ordinary income rate (maximum marginal federal rate of 39.6%). Also, the tax rate on capital gains from sales of capital assets held for more than 12 months (long-term capital gains) is generally 20%. The capital gains rate applicable to property acquired after December 31, 2000 and held for more than five years is 18%. State income taxes generally apply to the Award and the subsequent sale of the shares, and local income taxes may also be applicable. TAX WITHHOLDING When payments are made to you of amounts awarded under the Program, the Company will notify you of the amount of withholding taxes, if any, which must be paid under federal, state or local law. The Company may, with the consent of the Committee, arrange for payment of the withholding taxes in any one or combination of the following ways: o accepting your cash payment of the amount; o reducing the number of shares to be issued to you under the Program by the whole number of shares having a fair market value (as defined in the Program) equal to or greater than the amount the Company is required to withhold. No shares of Common Stock will be delivered to you under the Program until all applicable taxes have been paid in full. RESELLING SHARES The Program and the Incentive Plan generally do not impose restrictions upon the resale of Common Stock that you acquire under the Program. However, under certain circumstances, the Company may refuse to issue shares in connection with the Incentive Plan until it is satisfied that you have complied with applicable laws. RESELLING BY AFFILIATES Under the federal securities laws, if you are deemed to be an "affiliate" of the Company, you are restricted in the resale of your Common Stock (whether acquired under the Incentive Plan or otherwise). For this purpose, an "affiliate" of the Company is any person who controls the Company, is controlled by the Company, or is under common control with the Company, whether directly or indirectly through one or more intermediaries. A corporation's "affiliates" would usually include all persons whose security holdings are substantial enough to affect the corporation's management. Also, all statutory insiders are presumed to be "affiliates." In general, unless specifically registered for resale, shares owned by affiliates can be sold only in compliance with Rule 144 of the Securities and Exchange Commission or another applicable exemption from registration. Among other things, Rule 144 imposes limitations on the amount of securities sold by an affiliate in any three-month period and requires that sales be conducted through a broker. 8 SECTION 16 - RESTRICTIONS ON STATUTORY INSIDERS In addition, if you are subject to the provisions of Section 16 of the Securities Exchange Act - a "statutory insider" of the Company - you must comply with the reporting and short-swing profit forfeiture provisions of that Section. Section 16(a) contains reporting requirements applicable to statutory insiders. Section 16(b) sets forth rules concerning short-swing profit forfeiture that may require these persons to disgorge profits realized upon the sale and purchase or purchase and sale of Company securities within any six-month period. If you have any questions about the impact of Rule 144 or Section 16 on Awards granted to you under the Program, you should contact the Company at the address or telephone number set forth under the heading "Where You Can Find More Information" or, if appropriate, personal legal counsel. MISCELLANEOUS The Incentive Plan is not a "qualified" plan within the meaning of Section 401(a) of the Internal Revenue Code and is not subject to any provisions of the Employee Retirement Income Security Act of 1974, as amended. WHERE YOU CAN FIND MORE INFORMATION As required by the Securities and Exchange Commission, the Company has filed a Registration Statement on Form S-8 relating to the Incentive Plan. The Registration Statement incorporates by reference certain other documents that the Company files with the Securities and Exchange Commission. Those documents are also incorporated by reference into the prospectus relating to the Incentive Plan that meets the requirements of Section 10(a) of the Securities Act of 1933. This Information Statement is a part of the Section 10(a) prospectus. This means that the Company can disclose important information to you by referring you to the documents incorporated by reference. The information incorporated by reference is an important part of the Section 10(a) prospectus, and information that the Company files later with the Securities and Exchange Commission will automatically update and supersede this information. You may request a free copy of o the Incentive Plan and the Program, o the documents incorporated by reference into the Registration Statement and the Section 10(a) prospectus (other than certain exhibits), o all previously furnished Incentive Plan information documents that constitute part of the Section 10(a) prospectus, and o the Company's Annual Report to Stockholders for its latest fiscal year, by writing or telephoning the Office of the Senior Vice President, Chief Legal and Administrative Officer of the Company, at Allegheny Technologies Incorporated, 1000 Six PPG Place, Pittsburgh, Pennsylvania 15222-5479, or (412) 394-2800 telephone, or (412) 394-2837 fax. 9 APPENDIX A: LIST OF PEER COMPANIES (2002-2004 PERFORMANCE PERIOD) AK Steel Corporation Oregon Steel Mills Alcan, Inc. Phelps Dodge Corporation Alcoa Inc. Precision Castparts Corporation Brush Engineered Materials Quanex Corporation Carpenter Technology Corporation Reliance Steel and Aluminum Commercial Metals Company RTI International Metals Freeport McMoran Copper & Gold Ryerson Tull, Inc. Gibraltar Steel Special Metals Corporation Inco Limited Steel Dynamics IPSCO Steel, Inc. Titanium Metals Corporation Kaiser Aluminum & Chemical Corporation UCAR International, Inc. KEMET Corporation USX - U.S. Steel Kennametal Inc. Worthington Industries, Inc. Nucor Corporation A-1 APPENDIX A.1 ALLEGHENY TECHNOLOGIES INCORPORATED 2000 INCENTIVE PLAN ADMINISTRATIVE RULES FOR THE TOTAL SHAREHOLDER RETURN INCENTIVE COMPENSATION PROGRAM EFFECTIVE AS OF JANUARY 1, 2001 ARTICLE I. ADOPTION AND PURPOSE OF THE PROGRAM 1.01 ADOPTION. These rules are adopted by the Personnel and Compensation Committee and the Stock Incentive Award Subcommittee of the Board of Directors as a part of the Allegheny Technologies Incorporated 2000 Incentive Plan (the "Plan") pursuant to the authority reserved in Section 3.01 of the Plan. The Total Shareholder Return Incentive Compensation Program (the "TSRP") shall be the guidelines for making certain Performance Awards or Other Stock-Based Awards under Article VIII of the Plan. Capitalized terms used but not defined in these rules shall have the same meanings as in the Plan. 1.02 PURPOSE. The purposes of the TSRP are (i) to assist the Corporation in retaining and motivating selected key management employees of the Corporation and its subsidiaries who will contribute to the success of the Corporation, (ii) to reward key management employees for the overall success of the Corporation as determined by the value created for shareholders as measured by the percentile performance of Corporation Common Stock relative to a peer group and (iii) to provide a means of encouraging key management employees to acquire and hold shares of Corporation Common Stock. The TSRP encourages key management employees to acquire and hold shares of Corporation Common Stock by offering them an opportunity to receive shares of Common Stock which, in accordance with the terms and conditions set forth below, will be earned only if the sum of the price and yield of the Common Stock measured against the sums of prices and yields of shares of common stock of a peer group of corporations meets or exceeds the performance reward relationships set at the beginning of an Award Period. Awards under the TSRP are intended to act as an incentive to participating key management employees to achieve long-term objectives that will inure to the benefit of all stockholders of the Corporation measured in terms of relative stock prices. ARTICLE II. DEFINITIONS For purposes of these rules, the capitalized terms set forth below shall have the following meanings: 2.01 AWARD AGREEMENT means a written agreement between the Corporation and a Participant or a written acknowledgment from the Corporation specifically setting forth the terms and conditions of a TSR Target Award granted to a Participant pursuant to Article VI of these rules. A.1-1 2.02 AWARD TARGETS means the percentage of a TSR Target Award which shall be earned for a particular TSR Performance Period at Threshold, Target and Excellent, respectively. 2.03 BOARD means the Board of Directors of the Corporation. 2.04 BUSINESS DAY means any day on which the New York Stock Exchange shall be open for trading. 2.05 CAUSE means a determination by the Committee that a Participant has engaged in conduct that is dishonest or illegal, involves moral turpitude or jeopardizes the Corporation's right to operate its business in the manner in which it is now operated. 2.06 CHANGE IN CONTROL means any of the events set forth below: (a) The acquisition in one or more transactions, other than from the Corporation, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of a number of Corporation Voting Securities in excess of 25% of the Corporation Voting Securities unless such acquisition has been approved by the Board; or (b) Any election has occurred of persons to the Board that causes two-thirds of the Board to consist of persons other than (i) persons who were members of the Board on January 1, 2001 and (ii) persons who were nominated for election as members of the Board at a time when two-thirds of the Board consisted of persons who were members of the Board on January 1, 2001; provided, however, that any person nominated for election by the Board at a time when at least two-thirds of the members of the Board were persons described in clauses (i) and/or (ii) or by persons who were themselves nominated by such Board shall, for this purpose, be deemed to have been nominated by a Board composed of persons described in clause (i); or (c) Approval by the stockholders of the Corporation of a reorganization, merger or consolidation, unless, following such reorganization, merger or consolidation, all or substantially all of the individuals and entities who were the respective beneficial owners of the Outstanding Stock and Corporation Voting Securities immediately prior to such reorganization, merger or consolidation, following such reorganization, merger or consolidation beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors or trustees, as the case may be, of the entity resulting from such reorganization, merger or consolidation in substantially the same proportion as their ownership of the Outstanding Stock and Corporation Voting Securities immediately prior to such reorganization, merger or consolidation, as the case may be; or (d) Approval by the stockholders of the Corporation of (i) a complete liquidation or dissolution of the Corporation or (ii) a sale or other disposition of all or substantially all the assets of the Corporation. 2.07 COMMITTEE means the Stock Incentive Award Committee of the Board, in the case of individuals who are executive officers of the Corporation, and the Personnel and A.1-2 Compensation Committee of the Board, in the case of individuals who are not executive officers of the Corporation. 2.08 CORPORATION means Allegheny Technologies Incorporated, a Delaware corporation, and its successors. 2.09 CORPORATION VOTING SECURITIES means the combined voting power of all outstanding voting securities of the Corporation entitled to vote generally in the election of the Board. 2.10 DATE OF GRANT means the date as of which a TSR Target Award is granted in accordance with Article VI of these rules. 2.11 DISABILITY means any physical or mental injury or disease of a permanent nature which renders a Participant incapable of meeting the requirements of the employment performed by such Participant immediately prior to the commencement of such disability. The determination of whether a Participant is disabled shall be made by the Committee in its sole and absolute discretion. Notwithstanding the foregoing, if a Participant's employment by the Corporation or an applicable subsidiary terminates by reason of a disability, as defined in an Employment Agreement between such Participant and the Corporation or an applicable subsidiary, such Participant shall be deemed to be disabled for purposes of the TSRP. 2.12 EFFECTIVE DATE means January 1, 2001. 2.13 EXCHANGE ACT means the Securities Exchange Act of 1934, as amended. 2.14 EXCELLENT means a relative level of achievement of Performance Reward Criteria at which the TSR for the Corporation for a TSR Performance Period is at a percentile of the TSR for the Peer Group for that Performance Period as determined by the Committee under Section 6.02. Excellent shall be the highest level of performance for which a TSRP Reward will be paid. 2.15 FAIR MARKET VALUE means, as of any given date, the average of the closing trading price of the Common Stock on such date as reported on the New York Stock Exchange or, if the Common Stock is not then traded on the New York Stock Exchange, on such other national securities exchange on which the Common Stock is admitted to trade, or, if none, on the National Association of Securities Dealers Automated Quotation System if the Common Stock is admitted for quotation thereon; provided, however, if there were no sales reported as of such date, Fair Market Value shall be computed as of the last date preceding such date on which a sale was reported; provided, further, that if any such exchange or quotation system is closed on any day on which Fair Market Value is to be determined, Fair Market Value shall be determined as of the first date immediately preceding such date on which such exchange or quotation system was open for trading. 2.16 OUTSTANDING STOCK means, at any time, the issued and outstanding Common Stock. A.1-3 2.17 PARTICIPANT means any key management employee selected by the Committee, pursuant to Section 5.01 of these rules, as eligible to participate under the TSRP for any one or more TSR Performance Period. 2.18 PEER GROUP means a group of corporations with publicly traded common stock listed on a national securities exchange(s) deemed comparable to the Corporation as the number and identity of such group is determined by the Committee, in its discretion, for a particular TSR Performance Period. In the event of bankruptcy, delisting, merger, spin-off or other special circumstances affecting members of the Peer Group during a Performance Period, the Committee shall make such adjustments in the Peer Group as the Committee determines appropriate in its discretion. The Committee may select the number and identity of members of the Peer Group separately for each TSR Performance Period. 2.19 PERFORMANCE REWARD CRITERIA means the relative standing of the Corporation TSR, expressed in percentiles and ranked at Threshold, Target and Excellent, as compared to the TSR for the Peer Group, in each case for a particular TSR Performance Period. 2.20 PERFORMANCE LEVEL means the level of actual achievement of Performance Reward Criteria for a particular TSR Performance Period. In determining final Performance Levels, the Committee shall use straight-line interpolation between Threshold and Target, Target and Excellent but there shall be no interpolation above Excellent or below Threshold. 2.21 PLAN means the Allegheny Technologies Incorporated 2000 Incentive Plan, as the same may be amended from time to time. 2.22 RETIREMENT means a termination of employment with the Corporation and each subsidiary of the Corporation at or after (i) attaining age 55 and (ii) completing five years of employment with the Corporation and/or any subsidiary of the Corporation. 2.23 TARGET means a relative level of Performance Reward Criteria at which the Corporation TSR for a particular TSR Performance Period is at a percentile of TSR for the Peer Group for that TSR Performance Period as determined by the Committee under Section 6.02. 2.24 THRESHOLD means a relative level of Performance Reward Criteria at which the Corporation TSR for a particular TSR Performance Period is at a percentile of TSR for the Peer Group for that TSR Performance Period as determined by the Committee under Section 6.02. Threshold shall be the lowest level of Performance Reward Criteria for which a Plan Reward will be earned. 2.25 TSR is the percentil e ranking of the sum of stock price appreciation of and dividend reinvestment with respect to a share of Corporation Stock as compared to the comparable amount among the Peer Group for a particular TSR Performance Period as calculated on the Fair Market Value of a share of Stock as of the end of the TSR Performance Period plus dividends paid on a share of stock during the TSR Performance Period divided by the Fair Market Value of a share of Stock at the beginning of the TSR Performance Period using the methodology described in item 402(l) of Regulation S-K as promulgated under the Securities Act, as such act or regulation may be amended from time to time, or any successor to either. A.1-4 2.26 TSRP means the Total Shareholder Return Incentive Compensation Program as set forth in these rules as the same may be amended from time to time. 2.27 TSR PERFORMANCE PERIOD means a three calendar year period beginning on the January 1st designated by the Committee and continuing until the third December 31st thereafter. 2.28 TSR REWARDS means the number of shares of Stock earned for a particular TSR Performance period after application of the Performance Level. 2.29 TSR TARGET AWARD means an award of an opportunity to earn a number of shares of Stock in a TSR Performance Period. The number of shares for a particular Participant shall be determined by the Committee for each TSR Performance Period by dividing the Participant's base salary at the commencement of the TSR Performance Period by the average Fair Market Value for the 30 Business Days preceding the first Business Day of that TSR Performance Period and multiplying the result by a decimal determined appropriate by the Committee based on the Participant's responsibilities and opportunity to contribute to the success of the Corporation. 2.30 STOCK means Common Stock, par value $0.10 per share, of the Corporation. 2.31 WITHHOLDING OBLIGATIONS means the amount of federal, state and local income and payroll taxes the Corporation determines in good faith must be withheld with respect to a TSR Rewards. Withholding Obligations may be settled by the Participant, as permitted by the Committee in its discretion, in shares of Stock otherwise deliverable under the TRSP, cash, previously owned shares of Stock or any combination of the foregoing. A.1-5 ARTICLE III. ADMINISTRATION In addition to any power reserved to the Committee under Article III of the Plan, the TSRP shall be administered by the Committee, which shall have exclusive and final authority and discretion in each determination, interpretation or other action affecting the TSRP and its Participants. The Committee shall have the sole and absolute authority and discretion to interpret the TSRP, to modify these administrative rules for the TSRP, to select, in accordance with Section 5.01 of these rules, the persons who will be Participants hereunder, to determine all performance criteria, levels of awards and rewards payable, to impose such conditions and restrictions as it determines appropriate and to take such other actions and make such other determinations in connection with the TSRP as it may deem necessary or advisable. ARTICLE IV. STOCK ISSUABLE UNDER THE TSRP 4.01 NUMBER OF SHARES OF STOCK ISSUABLE. Subject to adjustments as provided in Section 11.07 of the Plan, the maximum number of shares of Stock available for issuance under the TSRP shall be 1,500,000. The Stock to be offered under the TSRP shall be authorized and unissued Stock, or Stock which shall have been reacquired by the Corporation and held in its treasury. 4.02 SHARES SUBJECT TO TERMINATED AWARDS. Shares of Stock forfeited as provided in Section 6.03 of these rules may again be issued under the TSRP. ARTICLE V. PARTICIPATION 5.01 DESIGNATION OF PARTICIPANTS. Participants in the TSRP shall be such key management employees of the Corporation or of its subsidiaries as the Committee, in its sole discretion, may designate as eligible to participate in the TSRP for any one or more TSR Performance Periods. No later than 90 days after the commencement of each TSR Performance Period during the term of the TSRP, the Committee shall designate the Participants who are eligible to participate in the TSRP during such TSR Performance Period. The Committee's designation of a Participant with respect to any TSR Performance Period shall not require the Committee to designate such person as a Participant with respect to any other TSR Performance Period. The Committee shall consider such factors as it deems pertinent in selecting Participants. The Committee shall promptly provide to each person selected as a Participant written notice of such selection. ARTICLE VI. GRANTS UNDER THE TSRP 6.01 ANNUAL DETERMINATION REGARDING TSR PERFORMANCE PERIOD. No later than the 60th day of each calendar year, the Committee shall determine whether to establish a TSR Performance Period, provided, however, for a TSR Performance Period established in calendar year 2001, the Committee may make a determination under this Section 6.01 at any time prior to the 90th day of calendar year 2001. 6.02 DETERMINATION OF GRANTS, AWARDS AND PERFORMANCE CRITERIA. For each TSR Performance Period, the Committee shall take the following actions no later than the 90th day of the first calendar year of that TSR Performance Period: A.1-6 (a) Identify Participants for that TSR Performance Period; (b) Establish the level of the TSR Target Awards for each Participant; (c) Set the Performance Reward Criteria in terms of percentile ranking among the Peer Group for such period at Threshold, Target and Excellent, respectively; (d) Set the Award Targets for Threshold, Target and Excellent; and (e) Determine the Peer Group for that TSR Performance Period. 6.03 TERMINATION OF EMPLOYMENT. If a Participant terminates employment with the Corporation and each subsidiary of the Corporation during a then uncompleted TSR Performance Period for reasons other than death, Disability or Retirement, any TSR Target Award for any then uncompleted TSR Performance Period shall be forfeited automatically and the shares represented by such TSR Target Awards shall again be eligible for awards under these Rules. If a Participant terminates employment with the Corporation and each subsidiary of the Corporation for reasons of death, Disability or Retirement during a then uncompleted TSR Performance Period, the Participant shall be entitled to receive a pro rata Plan Reward for each then uncompleted TSR Performance Period determined: (a) when the TSR Rewards for all other Participants in such TSR Performance Period(s) are determined; (b) based on the actual level of achievement of Performance Reward Criteria for that TSR Performance Period and the Participant's TSR Target Award; (c) pro rated by multiplying the number of shares of Stock the Participant would have received if the Participant completed the TSR Performance Period multiplied by a fraction, the numerator of which is the number of months of such TSR Performance Period completed before the Participant's termination of employment and the denominator is 36; and (d) certificates representing the number determined above shall be delivered at the same time as all other certificates for such TSR Performance Period are delivered to Participants who completed the TSR Performance Period. ARTICLE VII. DETERMINATION OF PERFORMANCE REWARD CRITERIA AND DELIVERY OF STOCK 7.01 DETERMINATION OF ACTUAL ACHIEVEMENT OF PERFORMANCE REWARD CRITERIA. As promptly as administratively feasible but in no event later than the March 1st of the calendar year following last calendar year of each TSR Performance Period, the Committee shall determine the TSR of the Corporation and the average TSR of each member of the Peer Group and determine the Performance Level, if any, at which the Performance Reward Criteria have been achieved. 7.02 DETERMINATION OF PLAN REWARDS. Plan Rewards for a particular TSR Performance Period for a particular participant shall be the result of multiplying that A.1-7 Participant's TSR Target Award by the Performance Level for that TSR Performance Period determined under Section 7.01. 7.03 DELIVERY OF STOCK CERTIFICATES. As promptly as administratively feasible after the but in no event later than the March 15th of the calendar year following the last calendar year of a TSR Performance Period, the Corporation shall prepare for each Participant due a Plan Reward under Section 7.02 one or more stock certificates registered in the name(s) indicated by such Participant and shall deliver such certificates to the Participant promptly following the Participant's settlement of the Withholding Obligations by placing such certificates or causing such certificates to be placed in the U.S. mail, postage prepaid, to the address indicated by the Participant. ARTICLE VIII. MISCELLANEOUS 8.01 APPLICATION OF PROVISIONS OF PLAN. Except as set forth in these Rules, the provisions of the Plan, including, but not limited to, Article X, the Terms Applicable Generally to Awards Granted under the Plan, shall apply to these Rules and are incorporated herein as if set forth at length. 8.02 CHANGE IN CONTROL. In the event of a Change in Control, Plan Rewards shall be determined for all then uncompleted TSR Performance Periods as of the date of the Change in Control at the greater of (i) the Performance Level actually attained prior to the Change in Control and projected for the remainder of such uncompleted TSR Performance Periods or (ii) Target for each such uncompleted TSR Performance Period and certificates (or, with the consent of the Committee an amount in cash representing the Fair Market Value of such certificates) representing the Plan Rewards shall be delivered to the Participant as soon after the Change in Control as is administratively feasible. 8.03 SECURITIES LAWS AND SECTION 162(M) RESTRICTIONS. Any TSR Award denominated in Common Stock shall be subject to the requirement that if at any time the Committee shall determine that any listing or registration of the shares of Common Stock or any consent or approval of any governmental body or any other agreement or consent is necessary or desirable as a condition to the granting of a TSR Award or issuance of shares of Common Stock or cash in satisfaction thereof, such grant of an award or issuance of shares of Common Stock may not be consummated unless such requirement is satisfied in a manner acceptable to the Committee. It is intended, unless the Committee determine otherwise, that the TSRP comply with Rule 16b-3 as issued by the Securities and Exchange Commission and Section 162(m) of the Code. All interpretations of the TSRP relating to Statutory Insiders shall be consistent with that Rule 16b-3, the Exchange Act and Section 162(m) of the Code. In order to maintain compliance with any of Rule 16b-3, the Exchange Act or the Code, the Committee may adopt such other rules or provide restrictions on outstanding TSR Awards as it in its discretion shall deem necessary and such rules or restrictions shall apply to outstanding TSR Awards as if set forth in the respective TSR Award Agreements. 8.04 INVESTMENT REPRESENTATION. Each TSR Award Agreement may provide that the Participant shall deliver to the Committee upon demand by the Committee a written representation that the shares of Common Stock to be delivered are acquired by the Participant for investment and not for resale or with a view to the distribution thereof. Upon demand, A.1-8 delivery of such representation prior to the delivery of shares of Common Stock shall be a condition precedent to the Participant's right to receive such shares of Common Stock. 8.05 NO RIGHTS AS STOCKHOLDERS. Participants shall have no rights as shareholders of the Corporation prior to the actual delivery of shares of Common Stock. The existence of these Rules and/or any TSR Awards then outstanding shall not be a bar or affect in any way the power or authority of the Corporation or any of its then stockholders to take any action regarding the Corporation, its assets or its capital structure. 8.06 NON-UNIFORM DETERMINATIONS. The actions and determinations of the Committee need not be uniform and may be taken or made by the Committee selectively among employees or Participants, whether or not similarly situated. 8.07 AMENDMENT AND TERMINATION OF RULES. The Committee shall have complete power and authority to amend or terminate these Rules at any time it is deemed necessary or appropriate. No termination or amendment of the Rules may, without the consent of the Participant to whom any award shall theretofore have been granted under the TSRP, adversely affect the right of such individual under such award; provided, however, that the Committee may, in its sole discretion, make such provision in the Award Agreement for amendments which, in its sole discretion, it deems appropriate. A.1-9 EX-13.1 12 j9326701ex13-1.txt MD&A EXHIBIT 13.1 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Allegheny Technologies Incorporated is one of the largest and most diversified producers of specialty materials in the world. Allegheny Technologies Incorporated and its subsidiaries and operating companies are sometimes referred to as "Allegheny Technologies" or the "Company." Certain statements contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations are forward looking statements. Actual results or performance could differ materially from those encompassed within such forward looking statements as a result of various factors, including those described below. OVERVIEW 2001 was a difficult and challenging year for the Company. In spite of weak conditions in many of the Company's markets, significant accomplishments included improvements in safety, cost reductions, and working capital management. - - Cash flow from operations in 2001 was $122.8 million. - - Managed working capital (gross inventory and accounts receivable less accounts payable) was reduced by $127.1 million, beating the $70 million managed working capital reduction goal by over 80 percent. - - Cost savings amounted to $115 million in 2001, exceeding the $110 million goal. - - In late December 2001, the Company strengthened its capital base by issuing $300 million of new 10-year notes and arranging a new $325 million revolving bank credit facility. - - As a result of the Company's continuing focus on safety, in 2001 the OSHA Total Recordable Incident Rate improved 17 percent and the Lost Day Case Rate improved 16 percent compared to 2000. Over the last two years, both measures of safety have improved by over 40 percent. Looking forward, based on the apparent continuing weakness and uncertainty in the U.S. and most global economies as we enter 2002, the Company expects the year to be difficult. Therefore, the Company's top financial priority is to continue to reduce costs and generate cash. Cost savings opportunities of $100 million have been identified for 2002. The current 2002 capital expenditure plan for operational necessities and for continuation of capital programs which commenced in 2001 is approximately $50 million, compared to capital investments totaling $104 million in 2001. Through the Company's Operational Excellence initiatives, the Company will stay focused on safety, customer satisfaction, cost reduction and reducing managed working capital. The Company's goal for 2002 is to further reduce managed working capital by $65 million. Success in achieving these goals should give the Company the financial capacity to weather the economic recession and emerge strongly when the economy recovers. RESULTS OF OPERATIONS The Company's sales were $2.13 billion in 2001, $2.46 billion in 2000 and $2.30 billion in 1999. International sales represented approximately 23 percent of sales in 2001, 18 percent in 2000, and 20 percent in 1999. Operating profit was $54.3 million in 2001, $207.8 million in 2000, and $184.4 million in 1999. In 2001, the Company had a net loss from continuing operations of $25.2 million, which included after-tax charges of $47.8 million related to the permanent idling of the Houston, PA stainless steel melt shop, workforce reductions and other asset impairments. For 2000 and 1999, the Company had net income from continuing operations of $132.5 million and $111.0 million, respectively. Allegheny Technologies operates in three business segments: Flat-Rolled Products, High Performance Metals and Industrial Products. Information with respect to the Company's business segments is presented below and in Note 10 of the Notes to Consolidated Financial Statements.
FLAT-ROLLED PRODUCTS (In millions) 2001 % Change 2000 % Change 1999 - ------------------------------------------------------------------------------------------------------------------------------ Sales to external customers $1,088.4 (24.6%) $1,444.1 11.4% $1,296.7 - ------------------------------------------------------------------------------------------------------------------------------ Operating profit (loss) (38.1) 119.6 40.4% 85.2 - ------------------------------------------------------------------------------------------------------------------------------ Operating profit (loss) as a percentage of sales (3.5%) 8.3% 6.6% - ------------------------------------------------------------------------------------------------------------------------------ International sales as a percentage of sales 11.9% 7.3% 7.7% - ------------------------------------------------------------------------------------------------------------------------------
- 9 - The Flat-Rolled Products segment produces, converts and distributes stainless steel, nickel-based alloys and superalloys, and titanium and titanium-based alloys in sheet, strip, plate and Precision Rolled Strip(R) products, as well as silicon electrical steels and tool steels. The companies in this segment include Allegheny Ludlum, Allegheny Rodney, Rome Metals, and Allegheny Ludlum's 60 percent interest in the Chinese joint venture company known as Shanghai STAL Precision Stainless Steel Co., Ltd. ("STAL"). The remaining 40 percent interest in STAL is owned by Baosteel Group, a state authorized investment company whose equity securities are publicly traded in the People's Republic of China. The financial results of STAL are consolidated into the segment's operating results with the 40 percent interest of the Company's minority partner recognized on the balance sheet in other long-term liabilities. 2001 COMPARED TO 2000 Sales for the Flat-Rolled Products segment decreased 24.6 percent in 2001 compared to 2000 resulting in an operating loss of $38.1 million for the year. During 2001, operating results were severely impacted by very low demand and poor prices for many stainless steel products. Finished tons shipped in 2001 declined by 18 percent to 498,066 tons compared to shipments of 608,601 tons for 2000. The average price of flat-rolled products in 2001 decreased by 9 percent to $2,162 per ton compared to $2,365 per ton in the same 2000 period. Commodity product shipments in the segment (including stainless steel hot roll and cold roll sheet, stainless steel plate and silicon electrical steel, among other products) decreased 20 percent compared to 2000. Average prices for commodity products decreased 16 percent during the same period. These decreases were primarily attributable to continued weak demand for stainless steel sheet and plate due to the weak U.S. industrial economy. High-value product shipments in the segment (including strip, Precision Rolled Strip(R), super stainless steel, and nickel alloy and titanium products) decreased 12 percent compared to 2000, while average prices for high-value products decreased 1 percent. Certain of these high-value products are used largely in the automotive industry and capital goods markets, both of which were impacted by the weak U.S. economy. Increased international sales, primarily of Precision Rolled Strip(R) products, in Europe and Asia were offset by the overall decline in shipments of high-value products in the U.S. Operating results were also adversely affected by $14.3 million in higher energy costs, on a volume-adjusted basis, in 2001 compared to the prior year. In addition, during 2001, accounts receivable reserves were increased by $7.3 million in recognition of the decline in the economy and the reduced availability of credit. The decline in operating results was partially offset by ongoing cost reductions in the segment's Allegheny Ludlum operation, including a 10 percent salaried workforce reduction that was completed in the first quarter of 2001 and a further 5 percent reduction in staff at the end of 2001. Cost reductions for 2001 totaled approximately $80 million. During the 2001 fourth quarter, the Company decided to permanently idle the melt and associated service operations located at its Houston, PA facility. The Company had determined that this facility could no longer be operated economically in the highly competitive global stainless steel market. This cost reduction action affected approximately 225 employees. A pre-tax charge of $70.0 million, primarily non-cash, for the related asset impairments, employee benefits, and other closure costs was recorded in the 2001 fourth quarter. These expenses are presented as restructuring costs on the statements of operations and are not included in the results for the segment. These cost reduction actions are expected to result in annual pre-tax cost savings of approximately $12 million. 2000 COMPARED TO 1999 Sales and operating profit for the segment increased 11.4 percent and 40.4 percent, respectively, in 2000 compared to 1999. The increase in sales was a result of improved pricing and higher demand for stainless steel products during the first three quarters of the year. Shipments of finished flat-rolled products were 608,601 tons in 2000 compared to 592,619 tons in 1999. - 10 - The average selling prices of finished flat-rolled products increased to $2,365 per ton in 2000 from $2,081 per ton in 1999. This increase was due principally to the impact of revised raw materials surcharge base levels, primarily for nickel and chrome, and an improved product mix. High value margin product shipments increased 13 percent in 2000. Operating profit increased 40.4 percent to $119.6 million in 2000 primarily due to revised raw material surcharge base levels and improved product mix towards higher margin products. Tight operating cost controls and cost reduction efforts continued in the segment. In the fourth quarter of 2000, Allegheny Ludlum announced a 10 percent salaried workforce reduction, which was subsequently completed in the first quarter of 2001. The segment's fourth quarter 2000 operating profit was reduced by $7.0 million, compared to the fourth quarter of 1999, due to increased natural gas costs. The STAL joint venture in Shanghai, China completed its first year of commercial production of Precision Rolled Strip(R) stainless steel strip in 2000.
HIGH PERFORMANCE METALS (In millions) 2001 % Change 2000 % Change 1999 - -------------------------------------------------------------------------------------------------------------------------------- Sales to external customers $771.8 4.9% $735.4 1.8% $722.7 - -------------------------------------------------------------------------------------------------------------------------------- Operating profit 82.0 23.3% 66.5 (23.6%) 87.0 - -------------------------------------------------------------------------------------------------------------------------------- Operating profit as a percentage of sales 10.6% 9.0% 12.0% - -------------------------------------------------------------------------------------------------------------------------------- International sales as a percentage of sales 36.0% 34.9% 36.7% - --------------------------------------------------------------------------------------------------------------------------------
The High Performance Metals segment produces, converts and distributes a wide range of high performance alloys including nickel- and cobalt-based alloys and superalloys, titanium and titanium-based alloys, zirconium, hafnium, niobium, tantalum and other specialty materials, primarily in slab, ingot, billet, bar, rod, wire, coil and seamless tube forms, and zirconium chemicals. The companies in this segment include Allvac, Allvac Ltd (U.K.) and Wah Chang. 2001 COMPARED TO 2000 Sales for the High Performance Metals segment increased 4.9 percent in 2001 compared to 2000 as a result of continued strong shipments of high-value products to the aerospace, electrical energy, and oil and gas markets due, in part, to strong order backlog built at the end of 2000 and the first half of 2001. Shipments of nickel-based and specialty steel alloys increased 11 percent and prices increased 8 percent compared to 2000. While titanium mill products shipments decreased 7 percent, prices increased 8 percent compared to 2000. Shipments and prices for exotic alloys were down 6 percent compared to 2000. Operating profit for 2001 increased 23.3 percent compared to 2000 primarily as a result of higher prices due to strong market conditions, combined with favorable product mix and efforts to reduce costs. Cost reductions for 2001 totaled approximately $27 million. However, operating profit was adversely affected by $14.1 million in higher energy costs in the first nine months of 2001 compared to the prior year. During the 2001 third quarter, the United Steelworkers of America (USWA) employees at the Wah Chang facility, located in Albany, Oregon, went on strike after the union membership rejected the previously negotiated tentative contract. After a brief shutdown, and while the Company and the USWA continued discussions, the Company resumed full operation of the plant with management and salaried employees and replacement workers. The Wah Chang facility is involved in the production of exotic alloys including zirconium and niobium, and the strike does not impact other Company operations. During the 2001 fourth quarter, the Company divested its North American operations of its titanium distribution company, Titanium Industries Inc. Results of operations for this business for 2001 and proceeds from the disposition of this business were not material to the Company. - 11 - Backlog of confirmed orders for the segment was approximately $350 million at December 31, 2001 and approximately $375 million at December 31, 2000. The Company expects demand for products used in commercial aerospace, which historically has been the segment's largest end-use market, to decrease in 2002 due to weaker market conditions, which have been exacerbated by the tragic events of September 11, 2001. As a result, in the 2001 fourth quarter the Company announced workforce reductions affecting approximately 220 employees at the Allvac and Allvac Ltd operations. In connection with these reductions, which were completed in the 2002 first quarter, the Company recorded a pre-tax charge of $1.8 million for the related employee benefits costs. These expenses are presented as restructuring costs on the statement of operations and are not included in the results for the segment. These cost reduction actions are expected to result in annual pre-tax cost savings of approximately $5 million. 2000 COMPARED TO 1999 Sales for the High Performance Metals segment increased 1.8 percent in 2000 compared to 1999. The increased sales reflected increased demand for nickel-based alloys and superalloys and specialty steel alloys from growing markets for electrical power generation turbines and biomedical products, and improved conditions in aerospace and oil and gas markets. In addition, shipments were strong for niobium-titanium alloys for superconducting applications, nickel-titanium shape memory alloys for cellular phones, nickel-titanium super-elastic alloys for the medical industry, and hafnium alloys used in the production of superalloys for aerospace applications. However, shipments of zirconium alloy products were lower in 2000 as a result of weaknesses in the chemical processing and commercial nuclear markets. Shipments for titanium products improved despite overall weakness in industrial markets, including chemical processing, which adversely affected pricing. Operating profit decreased 23.6 percent in 2000 compared to 1999. Increased energy costs of $9.0 million in the fourth quarter, primarily for electric power at the Wah Chang operation in Oregon, contributed to the decline in operating profit. Operating profit was also adversely impacted by weaker results for zirconium and titanium and by higher operating costs at the Company's titanium sponge facility, which was permanently idled in the first half of 2001. In 2000, due to persistent weak market conditions, together with the Company's ability to enter into long-term supply agreements for the purchase of titanium sponge at prices below the Company's manufacturing cost, the Company decided to discontinue producing titanium sponge. As a result, in the fourth quarter of 2000, the Company recorded a charge of $20.0 million for asset impairment, employee termination benefits, and contractual costs to exit the business related to the idling of high-cost titanium sponge production assets located in Albany, Oregon. The Company ceased production of titanium sponge in the first half of 2001.
INDUSTRIAL PRODUCTS (In millions) 2001 % Change 2000 % Change 1999 - ----------------------------------------------------------------------------------------------------------------------------- Sales to external customers $267.8 (4.7)% $280.9 1.5% $276.7 - ----------------------------------------------------------------------------------------------------------------------------- Operating profit 10.4 (52.1)% 21.7 77.9% 12.2 - ----------------------------------------------------------------------------------------------------------------------------- Operating profit as a percentage of sales 3.9% 7.7% 4.4% - ----------------------------------------------------------------------------------------------------------------------------- International sales as a percentage of sales 34.4% 28.4% 30.3% - -----------------------------------------------------------------------------------------------------------------------------
The Industrial Products segment's principal business consists of the production of tungsten powder, tungsten carbide materials and carbide cutting tools. The segment also produces large grey and ductile iron castings and carbon alloy steel forgings. The companies in this segment are Metalworking Products, Portland Forge and Casting Service. 2001 COMPARED TO 2000 Sales and operating profit for the Industrial Products segment decreased 4.7 percent and 52.1 percent, respectively, in 2001 compared to 2000. Weak demand from most U.S. industrial markets negatively impacted operating results for all businesses in the segment. In addition during 2001, accounts receivable reserves were increased by $1.7 million in recognition of the decline in the economy and the reduced availability of credit. The decline in operating results was partially offset by ongoing efforts to reduce costs, which totaled approximately $9 million in 2001. 2000 COMPARED TO 1999 Sales and operating profit for the Industrial Products segment increased 1.5 percent and 77.9 percent, respectively, in 2000 compared to 1999. These increases reflect improved performance at Metalworking Products due to stronger industrial demand in early 2000 and the impact of cost reduction initiatives. In addition, operating results for the second half of the year reflect the acquisition of a tungsten carbide products operation. During the - 12 - second quarter of 2000, the Company exited the molybdenum and tungsten mill products business, which had 1999 sales of approximately $15.0 million. The segment's forgings and castings businesses experienced a decrease in sales and operating profit in 2000 due primarily to continued weak conditions in the transportation, farm equipment and wind power generation markets. STRATEGIC TRANSFORMATION OVERVIEW In November 1999, the Company completed a major transformation that included the spin-offs of Teledyne Technologies Incorporated ("Teledyne"), which was comprised of certain businesses in the Company's former Aerospace and Electronics segment, and Water Pik Technologies, Inc. ("Water Pik"), which was comprised of businesses in the Company's former Consumer segment. The spin-offs were completed on November 29, 1999, when the Company distributed all of the stock of Teledyne (NYSE:TDY) and Water Pik (NYSE:PIK) to the Company's stockholders of record on November 22, 1999. Prior to the spin-offs, the Company received a ruling from the Internal Revenue Service that the spin-offs would be tax-free to the Company and its stockholders. Immediately following the spin-offs, the Company effected a one-for-two reverse split of its common stock and changed its name to Allegheny Technologies Incorporated from Allegheny Teledyne Incorporated. Additionally, as part of this strategic transformation, the Company sold several of its businesses. During 1999, the Company completed the sale of its unmanned aerial vehicle and its pyrotechnic components and systems businesses, known as Ryan Aeronautical and McCormick Selph Ordnance Unit, respectively. In addition, the Company sold its pressure relief valve, vehicle control valve, nitrogen gas springs, consumer drinkware, construction and mining equipment and material handling businesses. RESTRUCTURING AND TRANSFORMATION COSTS AND OTHER COSTS, NET OF GAINS ON ASSET SALES RESTRUCTURING AND TRANSFORMATION COSTS Restructuring and transformation costs were $74.2 million, $29.5 million and $5.6 million in 2001, 2000 and 1999, respectively. In 2001, the Company recorded a charge of $74.2 million related to the permanent idling of the Houston, PA stainless steel melt shop, workforce reductions and other asset impairments. Of this aggregate charge, $55.6 million related to the Houston, PA stainless steel melt shop, which was permanently idled in the 2001 fourth quarter, and other asset impairments; $9.8 million related to pension and termination benefits; $5.8 million related to severance and personnel costs; and $3.0 million related to contractual obligations and other exit costs. The workforce reductions affected approximately 520 employees across all of the Company's business segments and headquarters operations, and were substantially complete by the end of 2001. These cost reduction actions are estimated to provide annual pre-tax cost savings of approximately $19 million in 2002. Of the $74.2 million restructuring charge recorded in 2001, $4.0 million, net of tax benefits, is expected to result in expenditures of cash, which will be paid in 2002. Cash to meet these obligations will be generated from one or more of the following sources: internally generated funds from operations, current cash on hand, or borrowings under existing credit lines and the Company's commercial paper program. In 2000, the Company recorded restructuring and transformation charges of $29.5 million. The 2000 charge included $13.3 million for asset impairments, and $6.7 million for employee termination benefits, primarily severance pay, and other contractual obligations related to the decision in the 2000 fourth quarter to permanently idle the high-cost titanium sponge production assets of the High Performance Metals segment. The Company ceased titanium sponge production in the first half of 2001, and costs associated with operating the facility in 2001 were included in results of operations as they were incurred. The 2000 charge also included $3.1 million related to the 10 percent salaried workforce reduction at Allegheny Ludlum. The staffing reductions were made pursuant to a cost reduction plan, which resulted from a management study undertaken in an effort to remain cost competitive. The salaried workforce was notified by management of the planned workforce reduction and of the availability of termination benefits prior to December 31, 2000. The reduction in workforce was completed in the 2001 first quarter, and resulted in approximately $11 million in cost savings in 2001. In addition, restructuring and transformation charges for 2000 included $6.4 million for costs related to changes in the Company's executive management. Two executives left the Company in the 2000 fourth quarter. Both of these executives were parties to employment and severance arrangements with the Company that obligated Allegheny Technologies to make specific payments to them as a result of their departure. The 1999 net restructuring and transformation charges of $5.6 million include costs associated with adjusting employee benefit plans as a result of the spin-offs which were partially offset by a $7.2 million reversal of restructuring costs accrued in 1998 related to workforce reductions which were implemented at less than expected costs. At December 31, 2001, substantially all cash expenditures related to the 2000 and 1999 restructuring and transformation charges had been paid. - 13 - GAINS ON SALES OF ASSETS AND OTHER Gains on sales of assets and other includes pre-tax gains on the sale of real estate, certain investments and other assets, which are primarily included in other income on the statement of operations, as well as charges incurred in connection with closed operations. These items resulted in net charges of $14.8 million, $4.4 million and $0.2 million in 2001, 2000 and 1999, respectively. In 2001, the Company recorded a pre-tax charge of $5.6 million to write-off its minority interest in the e-Business site, MetalSpectrum, which terminated operations during the 2001 second quarter. In 2000, the Company realized a gain of $11.0 million on the sale of a minority interest in Gul Technologies Singapore, Ltd. Gains on sales of assets and other for 1999 does not include extraordinary gains on sales of operations of $129.6 million. These extraordinary gains are presented separately on the statement of operations. CORPORATE EXPENSES Corporate expenses were $25.5 million in 2001 compared to $30.6 million in 2000, and $38.9 million in 1999. The continued decline in corporate expenses is due to cost controls and reductions in the number of corporate employees. INCOME TAXES The Company's effective income tax rate from continuing operations was (30.8) percent, 36.5 percent and 36.3 percent in 2001, 2000 and 1999, respectively. The Company's negative effective income tax rate for 2001 represents a tax benefit that will be realized by a refund of income taxes paid in prior years. The effective tax rate for 2001 declined compared to prior years primarily due to losses at certain operations for which the Company did not receive a state tax benefit. At December 31, 2001, the Company had a state deferred tax asset resulting from net operating loss tax carryforwards of $18.2 million. A valuation allowance of $18.2 million was established for the full value of these operating loss carryforwards since the Company has concluded that it is more likely than not that these tax benefits would not be realized. Allegheny Technologies has concluded that the remaining deferred tax assets should be realized based upon its history of operating earnings, expectations of future operating earnings, and potential tax planning strategies. FINANCIAL CONDITION AND LIQUIDITY The Company believes that internally generated funds, current cash on hand and borrowings from existing credit lines and its commercial paper program will be adequate to meet foreseeable needs. However, the Company's ability to continue to utilize borrowings from existing credit lines and maintain its commercial paper program may be negatively affected by changes in the Company's credit rating based upon the financial performance of the Company, and the credit ratings agencies' and credit market's outlook for the industry and markets in which the Company participates, as well as failure to maintain required financial ratios, and other factors beyond the Company's control. The Company has no off-balance sheet financing relationships with special purpose entities, structured finance entities, or any other unconsolidated entities. CASH FLOW AND WORKING CAPITAL During 2001, cash generated from operations of $122.8 million, net borrowings of $37.6 million and net proceeds from asset sales of $18.5 million were used to invest $104.2 million in capital equipment and business expansion, primarily in the High Performance Metals segment, pay dividends of $64.2 million, repurchase common stock of $3.0 million and increase cash balances by $7.5 million. Cash transactions plus cash on hand at the beginning of the year resulted in an ending cash position of $33.7 million at December 31, 2001. Working capital decreased to $593.4 million at December 31, 2001 compared to $609.3 million at the end of 2000. The current ratio increased to 2.8 in 2001 from 2.5 in 2000. The reduction in working capital was primarily due to a decrease in inventory levels and accounts receivable, partially offset by reductions in short-term debt, accrued liabilities and accounts payable. As part of managing the liquidity of the business, the Company focuses on controlling inventory, accounts receivable and accounts payable. In measuring performance in - 14 - controlling this managed working capital, the Company excludes the effects of the LIFO inventory valuation reserves, excess and obsolete inventory reserves, and reserves for uncollectible accounts receivable which, due to their nature, are managed separately. During 2001, excluding the effects of operations sold, managed working capital, which is defined as gross inventory plus accounts receivable less accounts payable, declined by $127 million, or 14.9 percent, to $728 million. For 2001, the decline in managed working capital resulted from a $102 million decline in inventory and a $38 million decline in accounts receivable, partially offset by lower accounts payable balances of $13 million. Capital expenditures for 2001 were $104.2 million and are expected to approximate $50 million in 2002 for operational necessities and the completion of certain capital projects initiated in 2001. DEBT At December 31, 2001, the Company had $582.2 million in total outstanding debt. The Company's debt to capitalization ratio increased to 38.1 percent in 2001 from 34.4 percent in 2000. The Company's net debt to total capitalization ratio increased to 36.7 percent in 2001 from 33.2 percent in 2000. These higher ratios resulted primarily from the increase in debt levels and a reduction in stockholders' equity. In December 2001, the Company issued $300 million of 8.375% Notes due December 15, 2011 in a transaction exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. The Company is required to file a registration statement with the Securities and Exchange Commission in order to offer the holders of the Notes the ability to exchange the outstanding Notes for new notes with substantially identical terms, but which are registered under the Securities Act. Interest on the Notes is payable semi-annually, on June 15 and December 15, and is subject to adjustment under certain circumstances. These Notes contain default provisions with respect to default for the following, among other things: nonpayment of interest on the Notes for 30 days, default in payment of principal when due, or failure to comply with any covenant. Any violation of the default provision could result in the requirement to immediately repay the borrowings. On December 21, 2001, the Company entered into a new credit agreement with a group of banks that provides for borrowings of up to $325 million on a revolving credit basis. This new credit agreement replaces a $500 million credit facility, which was to expire in August 2002. The new credit agreement consists of a short-term 364-day $130 million credit facility which expires in December 2002, and a $195 million credit facility which expires in December 2006. Interest is payable based upon London Interbank Offered Rates (LIBOR) plus a spread, which is dependent on the Company's credit rating. The Company also has the option of using other alternative interest rate bases. The agreement has various covenants that limit the Company's ability to dispose of assets and merge with another corporation. The Company is also required to maintain a ratio of total consolidated indebtedness to total capitalization of not more than 60 percent. At December 31, 2001, the Company's total consolidated indebtedness to total capitalization calculated in accordance with the credit agreement, which includes certain standby letters of credit and guarantees, was 40 percent. This covenant also has the effect of limiting the total amount of dividend payments and share repurchases. Under this covenant, approximately $312 million, or 33 percent, of the Company's retained earnings, is currently free of restrictions pertaining to cash dividends and share repurchases. In addition, the credit agreement contains a covenant requiring the maintenance of specified consolidated earnings before interest, taxes, depreciation and amortization ("EBITDA"). For 2002, the Company must have, on a quarterly basis for the preceding twelve month period, EBITDA of at least 3.0 times gross interest expense. For 2003 through the remaining life of the credit agreement, the Company must have, on a quarterly basis for the preceding twelve month period, EBITDA of at least 3.5 times gross interest expense. The Company's EBITDA coverage (calculated in accordance with the credit agreement, which excludes certain non-cash charges) for the twelve months ended December 31, 2001 was 5.3 times gross interest expense. The Company had no borrowings outstanding under the revolving credit agreement at December 31, 2001. During the fourth quarter of 2000, the Company implemented a commercial paper program designed to cost effectively enhance the Company's access to credit markets. At December 31, 2001, the Company had $70 million of commercial paper outstanding, which is scheduled to mature in the first quarter of 2002. These commercial paper borrowings are presented as long-term obligations due to the Company's ability and intent to refinance a portion or all of these obligations on a long-term basis. The Company's intention is to continue to use the commercial paper program to fund its capital needs in excess of cash flow generated from operations. However, the Company's ability to continue its commercial paper program is dependent upon maintaining its current A2/P2 commercial paper credit rating, and on having a bank credit facility to support the program. - 15 - A summary of the Company's required payments under financial instruments (excluding accrued interest) and other commitments are presented below.
Less than 1-3 4-5 After 5 (In millions) Total 1 year years years years - ------------------------------------------------------------------------------------------------------------------------------- CONTRACTUAL CASH OBLIGATIONS - ------------------------------------------------------------------------------------------------------------------------------- Total Debt including Capital Leases $582.2 $ 9.2 $ 3.1 $ 99.2 $470.7 Operating Lease Obligations 52.3 15.4 21.3 12.2 3.4 - ------------------------------------------------------------------------------------------------------------------------------- OTHER FINANCIAL COMMITMENTS - ------------------------------------------------------------------------------------------------------------------------------- Lines of Credit (A) $373.1 $130.0 $ 48.1 $195.0 $ -- Standby Letters of Credit (B) 49.6 49.6 -- -- -- Guarantees 11.2 -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------------
(A) Drawn amounts are included in total debt. (B) These instruments expire and are renewed annually and are used to support: $28.3 million in workers compensation arrangements; $10.8 million in industrial revenue bonds of which $10.0 million is included in long-term debt; $6.0 million in facility closure costs; and $4.5 million related to international trade. Additionally, the Company uses derivative contracts to hedge, in certain circumstances, its exposure to fluctuations in the cost of energy, raw materials, and the value of foreign currencies. As part of certain of these contracts, the Company has agreed that the net value of the derivative instrument being used as a hedge will become immediately payable, or receivable, if there is deterioration in the Company's credit rating to non-investment grade. At December 31, 2001, the net value of hedges that would become immediately payable in the event of a downgrade in the Company's credit to non-investment grade was less than $3 million, after-tax. RETIREMENT BENEFITS The Company's defined benefit pension plan remained overfunded with investments exceeding liabilities by approximately $200 million at December 31, 2001. However, the value of pension plan assets declined by approximately $376 million during 2001 primarily due to the decline in the equity markets in 2001 and payment of benefits. This decline in the value of pension assets along with increased pension liabilities and higher projected retiree health care costs will result in a net non-cash, pre-tax retirement benefit expense for 2002 of approximately $24 million. This compares to non-cash pre-tax income of $53.1 million in 2001. The Company's defined benefit pension plan is fully funded with assets in excess of the projected benefit obligation. Under current Internal Revenue Code (Section 420) provisions, certain amounts that the Company pays for retiree health care benefits may be reimbursed annually from the excess pension plan assets. During the 2001 second quarter, the Company recovered $35.0 million under these provisions. While not affecting reported operating profit, cash flow from operations increased by the recovered amount. The ability of the Company to be reimbursed for retiree medical costs in future years is dependent upon the level of pension surplus, as computed under regulations of the Internal Revenue Service, as of the beginning of each year. The level of pension surplus (the value of pension assets less pension obligations) changes constantly due to the volatility of pension asset investments. Due to the decline in the U.S. equities market in 2001, the pension overfunded status at the beginning of 2002 is below the threshold required to fully reimburse the Company for retiree medical costs in 2002. This will negatively impact the after-tax cash flow in 2002 by approximately $22 million. The ability to resume full reimbursement to the Company for retiree health care costs beyond 2002 will depend upon the performance of the pension investments, and any changes in the Internal Revenue Code and regulations pertaining to reimbursement of retiree health care costs from pension surplus. Beginning in the second half of 2001, the Company began funding certain retiree health care benefits for Allegheny Ludlum using plan assets held in a Voluntary Employee Benefit Association (VEBA) trust. This allows the Company to recover a portion of the retiree medical costs that were previously funded from the pension surplus. The Company may continue to fund certain retiree medical benefits utilizing the plan assets held in the VEBA if the value of these plan assets exceed $50 million. Accounting standards require a minimum pension liability be recorded if the value of pension assets are less than the accumulated pension benefit obligation (ABO) at the end of the year. Based upon the value of pension assets as of December 31, 2001, the Company is not required to record such a minimum pension liability. However, if the value of pension assets were to decline to a level below the ABO, the Company would record a minimum pension liability and record a charge to shareholders' equity for the value of the prepaid pension asset currently recognized on the balance sheet, and the required minimum pension liability, net of deferred taxes. - 16 - OTHER On February 14, 2002, the Board of Directors declared a regular quarterly dividend of $0.20 per share of common stock. The dividend was paid on March 12, 2002 to stockholders of record at the close of business on February 25, 2002. The Company paid a quarterly dividend of $0.20 per share of common stock during each of the 2001 quarters. The future declaration and payment of dividends and the amount of such dividends will depend upon the Company's results of operations, financial condition, cash requirements, future prospects, any limitations imposed by credit agreements or senior securities, and other factors deemed relevant by the Board of Directors. In October 1998, the Company's Board of Directors authorized up to a total of 25 million shares of Allegheny Technologies common stock to be acquired under the Company's stock repurchase program from time-to-time in the open market or in negotiated transactions. From the inception of the share repurchase program through December 31, 2001, the Company repurchased 20.5 million shares at a cost of $531.5 million. The Company has not repurchased shares under the program since early 2001 and does not expect to resume repurchases under the program in the foreseeable future. CRITICAL ACCOUNTING POLICIES The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States. When more than one accounting principle, or the method of its application, is generally accepted, management selects the principle or method that is appropriate in the Company's specific circumstances. Application of these accounting principles requires Allegheny Technologies management to make estimates about the future resolution of existing uncertainties; as a result, actual results could differ from these estimates. In preparing these financial statements, management has made its best estimates and judgments of the amounts and disclosures included in the financial statements giving due regard to materiality. INVENTORIES At December 31, 2001, the Company had net inventory of $508.4 million. Inventories are stated at the lower of cost (last-in, first-out (LIFO), first-in, first-out (FIFO) and average cost methods) or market, less progress payments. Costs include direct material, direct labor and applicable manufacturing and engineering overhead, and other direct costs. Most of the Company's inventory is valued utilizing the LIFO costing methodology. Inventory of the Company's non-U.S. operations are valued using average cost or FIFO methods. The Company evaluates product lines on a quarterly basis to identify inventory values that exceed estimated net realizable value. The calculation of a resulting reserve, if any, is recognized as an expense in the period that the need for the reserve is identified. At December 31, 2001, the amount of such reserves were immaterial. It is the Company's general policy to write-down to scrap value any inventory that is identified as obsolete and any inventory that has aged or has not moved in more than twelve months. In some instances this criterion is twenty-four months. REVENUE RECOGNITION AND ACCOUNTS RECEIVABLE Revenue is recognized when title passes or as services are rendered. The Company has no significant unusual sale arrangements with any of its customers. The Company markets its products to a diverse customer base, principally throughout the United States. Trade credit is extended based upon evaluations of each customer's ability to perform its obligations, which are updated periodically. Accounts receivable reserves are based upon an aging of accounts plus identified specific accounts. Accounts receivable are presented net of a reserve for doubtful accounts of $12.3 million at December 31, 2001 and $7.4 million at December 31, 2000, which represented 4.3 percent and 2.2 percent, respectively, of total gross accounts receivable. During 2001, in recognition of the decline in the economy and reduced availability of credit, the Company recognized expense of $10.1 million to increase the reserve for doubtful accounts and wrote-off $5.2 million of uncollectable accounts, which reduced the reserve. ASSET IMPAIRMENT The Company monitors the recoverability of the carrying value of its long-lived assets. An impairment charge is recognized when the expected net undiscounted future cash flows from an asset's use (including any proceeds from disposition) are less than the asset's carrying value and the asset's carrying value exceeds its fair value. At December 31, 2001, the Company had $188.4 million of goodwill on its balance sheet. Of the total, $126.6 million related to the Flat-Rolled Products segment, $51.5 million related to the High Performance Metals segment, and $10.3 million related to the Industrial Products segment. For 2001 and prior years, the Company was required to evaluate whether the goodwill presented on the balance sheet was impaired based upon the undiscounted future cash flows of the operating company for which the goodwill relates. - 17 - In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). Under SFAS 142, the test for goodwill impairment changed and, commencing in 2002, goodwill is required to be reviewed annually, or more frequently if impairment indicators arise. The new impairment test for goodwill is a two step process. The first step is a comparison of the fair value of the reporting unit with its carrying amount, including goodwill. If this step reflects impairment, then the loss would be measured as the excess of recorded goodwill over its implied fair value. Implied fair value is the excess of the fair value of the reporting unit over the fair value of all recognized and unrecognized assets and liabilities. The Company is currently evaluating whether the goodwill on the balance sheet at December 31, 2001 is impaired at January 1, 2002. If goodwill is determined to be impaired, the Company would record a non-cash after-tax charge for the amount of the impairment. This initial impairment charge, if any, would be recorded as a cumulative effect of a change in accounting principle in the Company's results for the quarter ended June 30, 2002. CONTINGENCIES When it is probable that a liability has been incurred or an asset of the Company has been impaired, a loss is recognized assuming the amount of the loss can be reasonably estimated. The Company is subject to various domestic and international environmental laws and regulations that govern the discharge of pollutants into the air or water, and the management and disposal of hazardous substances, and which may require that it investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations, including sites at which the Company has been identified as a potentially responsible party ("PRP") under the Comprehensive Environmental Response, Compensation and Liability Act, commonly known as Superfund, and comparable state laws. The Company could incur substantial cleanup costs, fines and civil or criminal sanctions, third party property damage or personal injury claims as a result of violations or liabilities under these laws or non-compliance with environmental permits required at its facilities. The Company is currently involved in the investigation and remediation of a number of the Company's current and former sites as well as third party sites under these laws. The Company's reserves for environmental remediation totaled approximately $46.7 million at December 31, 2001. Based on currently available information, management does not believe that future environmental costs in excess of those accrued with respect to sites with which the Company has been identified are likely to have a material adverse effect on the Company's financial condition or liquidity. The resolution in any reporting period of one or more of these matters could have a material adverse effect on the Company's results of operations for that period. In addition, there can be no assurance that additional future developments, administrative actions or liabilities relating to environmental matters will not have a material adverse effect on the Company's financial condition or results of operation. With respect to proceedings brought under the federal Superfund laws, or similar state statutes, the Company has been identified as a potentially responsible party at approximately 31 of such sites, excluding those at which it believes it has no future liability. The Company's involvement is very limited or de minimis at approximately 13 of these sites, and the potential loss exposure with respect to any of the remaining 18 individual sites is not considered to be material. The Company is a party to various cost-sharing arrangements with other PRPs at the sites. The terms of the cost-sharing arrangements are subject to non-disclosure agreements as confidential information. Nevertheless, the cost-sharing arrangements generally require all PRPs to post financial assurance of the performance of the obligations or to pre-pay into an escrow or trust account their share of anticipated site-related costs. In addition, the Federal government, through various agencies, is a party to several such arrangements. Environmental liabilities are recorded when the Company's liability is probable and the costs are reasonably estimable, but generally not later than the completion of the feasibility study or the Company's recommendation of a remedy or commitment to an appropriate plan of action. The accruals are reviewed periodically and, as investigations and remediations proceed, adjustments are made as necessary. Accruals for losses from environmental remediation obligations do not take into account the effects of inflation, and anticipated expenditures are not discounted to their present value. The accruals are not reduced by possible recoveries from insurance carriers or other third parties, but do reflect anticipated allocations among potentially responsible parties at federal Superfund sites or similar state-managed sites after an assessment is made of the likelihood that such parties will fulfill their obligations at such sites. The measurement of environmental liabilities by the Company is based on currently available facts, present laws and regulations, and current technology. Such estimates take into consideration the Company's prior experience in site investigation and remediation, the data concerning cleanup costs available from other companies and regulatory authorities, and the professional judgment of the Company's environmental experts in consultation with outside environmental specialists, when necessary. - 18 - RETIREMENT BENEFITS The Company has defined benefit pension plans and defined contribution plans covering substantially all of its employees. The Company has not made contributions to the defined benefit pension plan in the past six years because the plan has remained fully funded. The Company accounts for its defined benefit pension plans in accordance with SFAS No. 87, "Employers' Accounting for Pensions", which requires that amounts recognized in financial statements be determined on an actuarial basis, rather than as contributions are made to the plan. A significant element in determining the Company's pension income (expense) in accordance with SFAS No. 87 is the expected return on plan assets. The Company has assumed, based upon the types of securities the plan assets are invested in and the long-term historical returns of these investments, that the long-term expected return on pension assets will be 9 percent. The assumed long-term rate of return on assets is applied to the market value of plan assets at the end of the previous year. This produces the expected return on plan assets that is included in annual pension income (expense) for the current year. The cumulative difference between this expected return and the actual return on plan assets is deferred and amortized into pension income or expense over future periods. The expected return on plan assets can vary significantly from year to year since the calculation is dependent on the market value of plan assets as of the end of the preceding year. U.S. generally accepted accounting principles allow companies to calculate expected return on pension assets using either an average of fair market values of pension assets over a period not to exceed five years, which reduces the volatility in reported pension income or expense, or their fair market value at the end of the previous year. However, the Securities and Exchange Commission currently does not permit companies to change from the fair market value at the end of the previous year methodology to an averaging of fair market values of plan assets methodology. As a result, the Company's results of operations and those of other companies, including companies with which we compete, may not be comparable due to these different methodologies in calculating expected return on pension assets. At the end of each year, the Company determines the discount rate to be used to value pension plan liabilities. In accordance with SFAS No. 87, the discount rate reflects the current rate at which the pension liabilities could be effectively settled at the end of the year. In estimating this rate, the Company assesses the rates of return on high quality, fixed-income investments. Changes in the discount rate, as well as the net effect of other changes in actuarial assumptions and experience, are deferred in accordance with SFAS No. 87. The Company also sponsors several defined benefit postretirement plans covering certain hourly and salaried employees. These plans provide health care and life insurance benefits for eligible employees. In certain plans, Company contributions towards premiums are capped based upon the cost as of a certain date, thereby creating a defined contribution. The Company uses actuarial assumptions, including the discount rate and the expected trend in health care costs, to estimate the costs and benefits obligations for the plans. The discount rate, which is determined annually at the end of each year, is developed based upon rates of return on high quality, fixed-income investments. At December 31, 2001, the Company determined this rate to be 7 percent. Based upon cost increases quoted by the Company's medical care providers for 2002 and predictions of continued significant medical cost inflation in future years, the Company raised its expected trend in health care costs. The annual assumed rate of increase in the per capita cost of covered benefits for health care plans is estimated at 11 percent in 2002 and is assumed to decrease to 5 percent in the year 2009 and remain level thereafter. As a result of this change in the expected trend of health care costs, the Company's 2002 pre-tax other postretirement benefits expense will increase by approximately $3 million compared to the 2001 expense. NEW ACCOUNTING PRONOUNCEMENTS In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). Although retaining many of the fundamental recognition and measurement provisions of the existing accounting standards, the new rules significantly change the criteria that would have to be met in order to classify an asset as held-for-sale. This distinction is important because assets to be disposed of are stated at the lower of their fair values or carrying amounts, and depreciation is no longer recognized. SFAS 144 also expands the types of dispositions which qualify for discontinued operations disclosure treatment and requires expected future operating losses from discontinued operations to be displayed in discontinued operations in the period in which the losses are incurred, rather than as of a measurement date. Effective January 1, 2002, the Company adopted this statement. In June 2001, the FASB issued Statement of Financial Accounting Standards No. 141, Business Combinations ("SFAS 141"), Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets ("SFAS 142"), and Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations ("SFAS 143"). These statements change the accounting for business combinations, goodwill, intangible assets, and asset retirement obligations. - 19 - SFAS 141 eliminates the pooling-of-interests method of accounting for business combinations and clarifies the criteria to recognize intangible assets separately from goodwill. The requirements of SFAS 141 are effective for any business combination accounted for by the purchase method that is completed after June 30, 2001. Under SFAS 142, goodwill and indefinite-lived intangible assets are no longer amortized but are reviewed annually, or more frequently if impairment indicators arise, for impairment. Separable intangible assets that have finite lives will continue to be amortized over their useful lives, with no maximum life. In addition, SFAS 142 changes the test for goodwill impairment. The new impairment test for goodwill is a two step process. The first step is a comparison of the fair value of the reporting unit with its carrying amount, including goodwill. If this step reflects impairment, then the loss would be measured as the excess of recorded goodwill over its implied fair value. Implied fair value is the excess of the fair value of the reporting unit over the fair value of all recognized and unrecognized assets and liabilities. The amortization provisions of SFAS 142 apply to goodwill and intangible assets acquired after June 30, 2001. With respect to goodwill and intangible assets acquired prior to July 1, 2001, companies are required to adopt SFAS 142 in their fiscal year beginning after December 15, 2001. Under SFAS 143, obligations associated with the retirement of tangible long-lived assets, such as landfill and other facility closure costs, would be capitalized and amortized to expense over an asset's useful life using a systematic and rational allocation method. This standard is effective for fiscal years beginning after June 15, 2002. The Company is currently evaluating adoption of SFAS 143 and has not yet determined the impact on the overall financial condition of the Company, if any, that may result. OTHER MATTERS MANAGEMENT Effective July 1, 2001, James L. Murdy was elected President and Chief Executive Officer by the Company's Board of Directors. Mr. Murdy succeeded Robert P. Bozzone, who remains Chairman of the Board. Mr. Murdy had been Executive Vice President since December 1996 and was Chief Financial Officer from August 1996 through August 2000. Mr. Murdy has also served as a director of the Company since 1999. Additionally, during the 2001 third quarter, the Company announced assignments establishing the executive management team reporting to James L. Murdy. Douglas A. Kittenbrink was elected to the position of Executive Vice President, Chief Operating Officer, and Jack W. Shilling was elected Executive Vice President, Strategic Initiatives and Technology and Chief Technology Officer. Completing the executive management team are Jon D. Walton, who is Senior Vice President, Chief Legal and Administrative Officer, and Richard J. Harshman, Vice President, Finance and Chief Financial Officer. During the 2001 fourth quarter, Mr. Harshman was elected Senior Vice President, Finance and Chief Financial Officer. BOARD OF DIRECTORS In July 2001, James C. Diggs, Senior Vice President and General Counsel of PPG Industries, Inc., was elected to the Company's Board of Directors. In February 2002, Ray J. Groves, President and Chief Operating Officer of Marsh Inc., a subsidiary of Marsh McClennan Companies, Inc. retired from the Company's Board of Directors. FORWARD-LOOKING STATEMENTS From time to time, the Company has made and may continue to make "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. This annual report contains many forward looking statements, which represent the Company's expectations or beliefs concerning various future events, unknown risks, uncertainties and other factors, many of which the Company is unable to predict or control. Forward looking statements include those statements related to anticipated business, economic and market conditions, product demand, including projected growth in aerospace, electrical energy, power generation, medical and electronics; operational actions, including special charges taken to respond to market conditions; sales and earnings, financial condition, financial performance and growth; prices, price increases and surcharges and the effect of price increases and surcharges on performance; raw material and energy costs; expected capital expenditures; cost reductions, including energy procurement initiatives; anticipated cost savings, including the anticipated time periods in which savings may be realized; capital investments and the impact of investments on the Company's capabilities; working capital, managed working capital and the ability to reduce managed working capital; cash flow, dividends and dividend policy, and potential repurchases of Company stock; projected pension surplus, excess pension income and reimbursement of retiree health care expenditures; realization of deferred income tax assets; anticipated effects of acquisitions, joint ventures or other business combinations on earnings; the outcome of any government inquiries, litigation or other proceedings related to government contracts or other matters; safety performance; and future - 20 - environmental costs. These statements are based on current expectations that involve a number of risks and uncertainties, including those described below. Actual results or performance may differ materially from any future results or performance anticipated based on management's current expectations contained in such forward looking statements. The Company assumes no duty to update its forward looking statements. Factors that could cause actual results to differ from those in such forward looking statements include the following: Risks Associated with Environmental Matters. The Company is subject to various domestic and international environmental laws and regulations that govern the discharge of pollutants into the air or water, and disposal of hazardous substances, and which may require that it investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations, including sites at which the Company has been identified as a potentially responsible party ("PRP") under the Comprehensive Environmental Response, Compensation and Liability Act, commonly known as Superfund, and comparable state laws. The Company could incur substantial cleanup costs, fines and civil or criminal sanctions, third party property damage or personal injury claims as a result of violations or liabilities under these laws or non-compliance with environmental permits required at the Company's facilities. The Company is currently involved in the investigation and remediation of a number of the Company's current and former sites as well as third party locations sites under these laws. The Company's reserves for environmental remediation totaled approximately $46.7 million at December 31, 2001. With respect to proceedings brought under the federal Superfund laws, or similar state statutes, the Company has been identified as a potentially responsible party at approximately 31 of such sites, excluding those at which it believes it has no future liability. The Company's involvement is very limited or de minimis at approximately 13 of these sites, and the potential loss exposure with respect to any of the remaining 18 individual sites is not considered to be material. The Company is a party to various cost-sharing arrangements with other PRPs at the sites. The terms of the cost-sharing arrangements are subject to non-disclosure agreements as confidential information. Nevertheless, the cost-sharing arrangements generally require all PRPs to post financial assurance of the performance of the obligations or to pre-pay into an escrow or trust account their share of anticipated site-related costs. In addition, the Federal government, through various agencies, is a party to several such arrangements. The Company believes that it operates its businesses in compliance in all material respects with applicable environmental laws and regulations. However, the Company is a party to lawsuits and other proceedings involving alleged violations of environmental laws. When the Company's liability is probable and it can reasonably estimate its costs, the Company records environmental liabilities on its financial statements. However, some of these environmental investigations are not at a stage where the Company has been able to determine liability, or if liability is probable, to reasonably estimate the loss or range of loss. Estimates of the Company's liability remain subject to additional uncertainties regarding: the nature and extent of site contamination; the range of remediation alternatives available; evolving remediation standards; imprecise engineering evaluations and estimates of appropriate cleanup technology, methodology and cost; the extent of corrective actions that may be required; and the number and financial condition of other potentially responsible parties, as well as the extent of their responsibility for the remediation. Accordingly, as investigation and remediation of these sites proceed and the Company receives new information, the Company expects that it will adjust its accruals to reflect new information. Future adjustments could have a material adverse effect on the Company's results of operations in a given period, but the Company cannot reliably predict the amounts of such future adjustments. Based on currently available information, the Company's management does not believe that future environmental costs, in excess of those already accrued, will materially adversely affect the Company's financial condition or results of operations. However, the Company cannot provide any assurance that additional future developments, administrative actions or liabilities relating to environmental matters will not have a material adverse effect on the Company's financial condition or results of operations. Risks Associated with Retirement Benefits. The Company's defined benefit pension plan is fully funded with assets in excess of the projected benefit obligation. Under current Internal Revenue Code (Section 420) provisions, certain amounts that the Company pays for retiree health care benefits may be reimbursed annually from the excess pension plan assets. During the 2001 second quarter, the Company recovered $35.0 million under these provisions. While not affecting reported operating profit, cash flow from operations increased by the recovered amount. The ability of the Company to be reimbursed for retiree medical costs in future years is dependent upon the level of pension surplus, as computed under regulations of the Internal Revenue Service, as of the beginning of each year. The level of pension surplus (the value of pension assets less pension obligations) changes constantly due to the volatility of pension asset investments. Due to the decline in the U.S. equities market in 2001, the pension overfunded status at the beginning of 2002 is below the threshold required to fully reimburse the Company for retiree medical costs in 2002. This will negatively impact the Company's after-tax cash flow in 2002 by approximately $22 million. The ability to resume reimbursement to the Company for retiree health care costs beyond 2002 from excess pension plan assets will depend upon the performance of the pension investments, and any changes in the Internal Revenue Code and regulations pertaining to reimbursement of retiree - 21 - health care costs from pension surplus. Beginning in the second half of 2001, the Company began funding certain retiree health care benefits for Allegheny Ludlum using plan assets held in a Voluntary Employee Benefit Association (VEBA) trust, which allows the Company to recover a portion of the retiree medical costs that were previously funded from the pension surplus. The Company may continue to fund certain retiree medical benefits utilizing the plan assets held in the VEBA so long as the value of these plan assets exceeds $50 million. Accounting standards require a minimum pension liability be recorded if the value of pension assets are less than the accumulated pension benefit obligation (ABO) at the end of the year. Based upon the value of pension assets as of December 31, 2001, the Company would not be required to record such a minimum pension liability. However, if the value of pension assets were to decline to a level below the ABO, the Company would record a minimum pension liability and record a charge to shareholders' equity for the value of the prepaid pension asset currently recognized on the balance sheet, and the required minimum pension liability, net of deferred taxes. Risks Associated with Insurance Matters. The Company obtains various kinds of insurance as may be needed to conduct its business. Such insurance may include all risk property, workers' compensation, third party liability, and other coverages deemed necessary and prudent. In view of the events of September 11, 2001 and for other reasons associated with the world economies, the Company cannot predict the conditions under which it will be able to obtain insurance coverage in the future, the level of premiums, the size of deductibles, or any other adjustments to the cost or coverage of insurance. Cyclical Demand for Products. The cyclical nature of the industries in which the Company's customers operate cause demand for products to be cyclical, creating uncertainty regarding future profitability. Various changes in general economic conditions affect the industries in which the Company's customers operate. These changes include decreases in the rate of consumption or use of the Company's customers' products due to economic downturns. Other factors causing fluctuation in the Company's customers' positions are changes in market demand, lower overall pricing due to national and international overcapacity, currency fluctuations, lower priced imports and increases in use or decreases in prices of substitute materials. As a result of these factors, the Company's profitability has been and may in the future be subject to significant fluctuation. Price Deflation. The current trend of price deflation for many commodity products has adversely affected prices for many of the Company's commodity products, including stainless steel, and may continue to do so. Therefore, revenues and operating results have been and may continue to be adversely affected by a deflationary price environment for these products. Volatility of Energy Prices; Availability of Energy Resources. Energy resources markets are subject to conditions that create uncertainty in the prices and availability of energy resources upon which we rely. The Company relies upon third parties for its supply of energy resources consumed in the manufacture of products. The prices for and availability of electricity, natural gas, oil and other energy resources are subject to volatile market conditions. These market conditions often are affected by political and economic factors beyond the Company's control. Disruptions in the supply of energy resources could temporarily impair the ability to manufacture products for customers. Further, increases in energy costs, or changes in costs relative to energy costs paid by competitors, has and may continue to adversely affect the Company's profitability. These factors also impact the Company's ability to implement or maintain energy surcharges and influence the business decisions made by suppliers and customers. To the extent that these uncertainties cause suppliers and customers to be more cost sensitive, increased energy prices may have an adverse effect on the Company's results of operations and financial condition. The company uses approximately 10 to 12 million MMBtu's of natural gas annually, depending upon business conditions, in the manufacture of its products. These purchases of natural gas expose the Company to risk of higher gas prices. For example, a hypothetical $1.00 per MMBtu increase in the price of natural gas would result in increased annual energy costs of approximately $10 to $12 million. As part of its risk management strategy the Company, from time to time, purchases swap contracts to manage exposure to changes in energy costs. The contracts obligate the Company to make or receive a payment equal to the net change in value of the contract at its maturity. These contracts are designated as hedges of the variability in cash flows of a portion of the Company's forecasted energy payments. Volatility of Prices of Critical Raw Materials; Unavailability of Raw Materials. The Company relies to a substantial extent on outside vendors to supply certain raw materials that are critical to the manufacture of products. Purchase prices and availability of these critical raw materials are subject to volatility. At any given time, the Company may be unable to obtain an adequate supply of these critical raw materials on a timely basis, on price and other terms acceptable, or at all. If suppliers increase the price of critical raw materials, the Company may not have alternative sources of supply. In addition, to the extent that the Company has quoted prices to customers and accepted customer orders for products prior to purchasing necessary raw materials, the Company may be unable to raise the price of products to cover all or part of the increased cost of the raw materials. - 22 - The manufacture of some of the Company's products is a complex process and requires long lead times. As a result, the Company has in the past and may in the future experience delays or shortages in the supply of raw materials. If unable to obtain adequate and timely deliveries of required raw materials, the Company may be unable to timely manufacture sufficient quantities of products. This could cause the Company to lose sales, incur additional costs, delay new product introductions and suffer harm to its reputation. While the Company enters into raw materials, such as nickel, futures contracts from time to time to hedge exposure to price fluctuations, the Company cannot be certain that its hedge position adequately reduces exposure. The Company believes that it has adequate controls to monitor these contracts, but it may not be able to accurately assess exposure to price volatility in the markets for critical raw materials. In addition, although the Company occasionally uses raw materials surcharges to offset the impact of increased costs, competitive factors in the marketplace can limit ability to institute surcharges, and there can be a delay between the increase in the price of raw materials and the realization of the benefit of surcharges. For example, since the Company generally uses in excess of 40,000 tons of nickel each year, a hypothetical change of $1.00 per pound in nickel prices would result in increased costs of approximately $80 million. The Company acquires certain important raw materials that it uses to produce specialty materials, including nickel, chrome, cobalt, titanium sponge and ammonia paratungstate, from foreign sources. Some of these sources operate in countries that may be subject to unstable political and economic conditions. These conditions may disrupt supplies or affect the prices of these materials. Labor Matters. The Company has approximately 10,700 employees. A portion of the Company's workforce is covered by various collective bargaining agreements, principally with the United Steelworkers of America ("USWA"), including: approximately 3,700 Allegheny Ludlum production and maintenance employees covered by collective bargaining agreements between Allegheny Ludlum and the USWA, which are effective through June 2007; approximately 325 Oremet employees covered by a collective bargaining agreement with the USWA which is effective through June 2007; and approximately 660 Wah Chang employees covered by a collective bargaining agreement with the USWA which expired in October 2000. Generally, agreements that expire may be terminated after notice by the USWA. After termination, the USWA may authorize a strike. A strike by the employees covered by one or more of the collective bargaining agreements could materially adversely affect the Company's operating results. There can be no assurance that the Company will succeed in concluding collective bargaining agreements with the USWA or other unions to replace those that expire. During the 2001 third quarter, the USWA employees at the Wah Chang facility, located in Albany, Oregon, went on strike after the union membership rejected the previously negotiated tentative contract. After a brief shutdown, and while the Company and the USWA continued discussions, the Company resumed full operation of the plant with management and salaried employees and replacement workers. The Wah Chang facility is involved in the production of exotic alloys including zirconium and niobium, and the strike does not impact other Company operations. Export Sales. The Company believes that export sales will continue to account for a significant percentage of the Company's future revenues. Risks associated with export sales include: political and economic instability, including weak conditions in the world's economies; accounts receivable collection; export controls; changes in legal and regulatory requirements; policy changes affecting the markets for the Company's products; changes in tax laws and tariffs; and exchange rate fluctuations (which may affect sales to international customers and the value of profits earned on export sales when converted into dollars). Any of these factors could materially adversely effect the Company's results for the period in which they occur. Interest Rate Risk. The Company attempts to maintain a reasonable balance between fixed- and floating-rate debt to keep financing costs as low as possible. At December 31, the Company had approximately $124 million of floating rate debt outstanding with an average interest rate of approximately 2.9 percent. Since the interest rate on this debt floats with the short-term market rate of interest, the Company is exposed to the risk that these interest rates may increase. For example, a hypothetical 1 percent in rate of interest on $124 million of outstanding floating rate debt would result in increased annual financing costs of $1.2 million. Risks Associated with Acquisition and Disposition Strategies. The Company intends to continue to strategically position its businesses in order to improve its ability to compete. The Company plans to do this by seeking specialty niches, expanding its global presence, acquiring businesses complementary to existing strengths and continually evaluating the performance and strategic fit of existing business units. The Company regularly considers acquisition, joint ventures, and other business combination opportunities as well as possible business unit dispositions. From time to time Company management holds discussions with management of other companies to explore such opportunities. As a result, the relative makeup of the businesses comprising the Company is subject to change. Acquisitions, joint ventures, and other business combinations involve various inherent risks, such as: assessing accurately the value, strengths, weaknesses, contingent and other liabilities and potential profitability of acquisition or other transaction candidates; the potential loss of key personnel of an acquired business; the Company's ability to achieve identified financial and operating synergies anticipated to - 23 - result from an acquisition or other transaction; and unanticipated changes in business and economic conditions affecting an acquisition or other transaction. International acquisitions and other transactions could be affected by export controls, exchange rate fluctuations, domestic and foreign political conditions and a deterioration in domestic and foreign economic conditions. Uncertainties Relating to Spin-Offs--General. In the spin-offs of Teledyne and Water Pik, completed in November 1999, the new companies agreed to assume and to defend and hold the Company harmless against all liabilities (other than certain income tax liabilities) associated with the historical operations of their businesses, including all government contracting, environmental, product liability and other claims and demands, whenever any such claims or demands might arise or be made. If the new companies were unable or otherwise fail to satisfy these assumed liabilities, the Company could be required to satisfy them, which could have a material adverse effect on the Company's results of operations and financial condition. Uncertainties Relating to Spin-Offs--Tax Ruling. While the tax ruling relating to the qualification of the spin-offs of Teledyne and Water Pik as tax-free distributions within the meaning of the Internal Revenue Code generally is binding on the Internal Revenue Service, the continuing validity of the tax ruling is subject to certain factual representations and uncertainties that, among other things, require the new companies to take or refrain from taking certain actions. If a spin-off were not to qualify as a tax-free distribution within the meaning of the Internal Revenue Code, the Company would recognize taxable gain generally equal to the amount by which the fair market value of the common stock distributed to the Company's stockholders in the spin-off exceeded the Company's basis in the new company's assets. In addition, the distribution of the new company's common stock to Company stockholders would generally be treated as taxable to the Company's stockholders in an amount equal to the fair market value of the common stock they received. If a spin-off qualified as a distribution within the meaning of the Internal Revenue Code but was disqualified as tax-free to the Company because of certain post-spin-off circumstances, the Company would recognize taxable gain as described in the preceding sentence, but the distribution of the new company's common stock to the Company's stockholders in the spin-off would generally be tax-free to each Company stockholder. In the spin-offs, the new companies executed tax sharing and indemnification agreements in which each agreed to be responsible for any taxes imposed on and other amounts paid by the Company, its agents and representatives and its stockholders as a result of the failure of the spin-off to qualify as a tax-free distribution within the meaning of the Internal Revenue Code if the failure or disqualification is caused by post-spin-off actions by or with respect to that company or its stockholders. Potential liabilities under these agreements could exceed the respective new company's net worth by a substantial amount. If either or both of the spin-offs were not to qualify as tax-free distributions to the Company or its stockholders, and either or both of the new companies were unable or otherwise failed to satisfy the liabilities they assumed under the tax sharing and indemnification agreements, the Company could be required to satisfy them without full recourse against the new companies. This could have a material adverse effect on the Company's results of operations and financial condition. Risks Associated with Government Contracts. One of the Company's operating companies directly performs contractual work for the U.S. Government. Various claims (whether based on U.S. Government or Company audits and investigations or otherwise) could be asserted against the Company related to its U.S. Government contract work. Depending on the circumstances and the outcome, such proceedings could result in fines, penalties, compensatory and treble damages or the cancellation or suspension of payments under one or more U.S. Government contracts. Under government regulations, a company, or one or more of its operating divisions or units, can also be suspended or debarred from government contracts based on the results of investigations. Risks Associated with September 11, 2001. The September 11, 2001 terrorist attacks and the possibility of additional attacks have adversely affected the U.S. and other economies and are likely to adversely affect the Company's operating results. These attacks and similar acts of violence or war could further exacerbate prevailing recessionary trends. As a result, demand for products, and the Company's profitability, could decline significantly. In particular, the events of September 11 have resulted in sharply reduced air travel, which has led to curtailed or delayed new plane orders and the idling of large portions of the fleets of commercial airlines. A significant portion of the sales of the High Performance Metals segment products are made to customers in the aerospace industry, and we expect that reduced orders from those customers will adversely affect the Company's results of operations. - 24 - ALLEGHENY TECHNOLOGIES INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In millions except per share amounts)
For the Years Ended December 31, 2001 2000 1999 - -------------------------------------------------------------------------------------------------------------------------------- SALES $ 2,128.0 $ 2,460.4 $ 2,296.1 - -------------------------------------------------------------------------------------------------------------------------------- Costs and expenses: Cost of sales 1,862.3 1,998.5 1,877.9 Selling and administrative expenses 198.8 203.7 229.1 Restructuring and transformation costs 74.2 29.5 5.6 - -------------------------------------------------------------------------------------------------------------------------------- Income (loss) before interest, other income and income taxes (7.3) 228.7 183.5 Interest expense, net 29.3 34.4 25.9 Other income 0.2 14.5 16.6 - -------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EXTRAORDINARY GAINS (36.4) 208.8 174.2 Income tax provision (benefit) (11.2) 76.3 63.2 - -------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY GAINS (25.2) 132.5 111.0 Income from discontinued operations, net of income taxes -- -- 59.6 Extraordinary gains on sales of operations, net of income taxes -- -- 129.6 - -------------------------------------------------------------------------------------------------------------------------------- NET INCOME (LOSS) $ (25.2) $ 132.5 $ 300.2 - -------------------------------------------------------------------------------------------------------------------------------- Basic net income (loss) per common share: Income (loss) from continuing operations before extraordinary gains $ (0.31) $ 1.60 $ 1.17 Income from discontinued operations -- -- 0.62 Extraordinary gains on sales of operations -- -- 1.36 - -------------------------------------------------------------------------------------------------------------------------------- BASIC NET INCOME (LOSS) PER COMMON SHARE $ (0.31) $ 1.60 $ 3.15 - -------------------------------------------------------------------------------------------------------------------------------- Diluted net income (loss) per common share: Income (loss) from continuing operations before extraordinary gains $ (0.31) $ 1.60 $ 1.16 Income from discontinued operations -- -- 0.62 Extraordinary gains on sales of operations -- -- 1.35 - -------------------------------------------------------------------------------------------------------------------------------- DILUTED NET INCOME (LOSS) PER COMMON SHARE $ (0.31) $ 1.60 $ 3.13 - --------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements. - 25 - ALLEGHENY TECHNOLOGIES INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In millions except share and per share amounts)
DECEMBER 31, December 31, 2001 2000 - -------------------------------------------------------------------------------------------------------------------------------- ASSETS Cash and cash equivalents $ 33.7 $ 26.2 Accounts receivable, net 274.6 325.3 Inventories 508.4 585.7 Income tax refunds 48.5 -- Deferred income taxes 33.5 61.2 Prepaid expenses and other current assets 27.4 24.4 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 926.1 1,022.8 Property, plant and equipment, net 828.9 872.0 Prepaid pension cost 632.9 593.6 Cost in excess of net assets acquired 188.4 194.5 Other assets 66.9 93.3 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS $2,643.2 $2,776.2 - -------------------------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 155.3 $ 169.3 Accrued liabilities 168.2 191.0 Short-term debt and current portion of long-term debt 9.2 53.2 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 332.7 413.5 Long-term debt 573.0 490.6 Accrued postretirement benefits 506.1 525.9 Deferred income taxes 153.7 158.7 Other 133.0 148.3 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 1,698.5 1,737.0 - -------------------------------------------------------------------------------------------------------------------------------- Stockholders' Equity: Preferred stock, par value $0.10: authorized - 50,000,000 shares; issued - none -- -- Common stock, par value $0.10: authorized - 500,000,000 shares; issued 98,951,490 in 2001 and 2000; outstanding - 80,314,624 shares in 2001 and 80,339,957 shares in 2000 9.9 9.9 Additional paid-in capital 481.2 481.2 Retained earnings 957.5 1,050.0 Treasury stock: 18,636,866 shares in 2001 and 18,611,533 shares in 2000 (478.2) (482.3) Accumulated other comprehensive loss, net of tax (25.7) (19.6) - -------------------------------------------------------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY 944.7 1,039.2 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,643.2 $2,776.2 - --------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements. - 26 - ALLEGHENY TECHNOLOGIES INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions) For the Years Ended December 31, 2001 2000 1999 - -------------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES: Net income (loss) $(25.2) $132.5 $300.2 Less: Extraordinary gains on sales of operations, net of tax -- -- 129.6 Income from discontinued operations, net of tax -- -- 59.6 - -------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM CONTINUING OPERATIONS (25.2) 132.5 111.0 - -------------------------------------------------------------------------------------------------------------------------- Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 98.6 99.7 95.3 Restructuring costs and asset write-offs 79.7 30.8 -- Deferred income taxes 24.5 57.8 (11.3) Gains on sales of investments and businesses (2.8) (11.6) -- Change in operating assets and liabilities: Inventories 67.9 (20.4) (0.5) Accrued liabilities (49.9) (61.5) 28.0 Prepaid pension cost (49.0) (89.8) (66.9) Accrued income taxes (48.5) 0.2 (69.4) Accounts receivable 47.1 15.9 (26.5) Accounts payable (12.5) (3.6) 31.9 Other (7.1) (14.5) 11.3 - -------------------------------------------------------------------------------------------------------------------------- CASH PROVIDED BY OPERATING ACTIVITIES 122.8 135.5 102.9 - -------------------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES: Purchases of property, plant and equipment (104.2) (60.2) (74.1) Proceeds from sales of businesses and investments 17.9 17.0 370.4 Disposals of property, plant and equipment 4.3 5.2 28.5 Purchases of businesses and investment in ventures (0.5) (28.1) (23.9) Proceeds from spin-offs of Teledyne and Water Pik -- -- 134.0 Other (2.5) (3.9) (5.2) - -------------------------------------------------------------------------------------------------------------------------- CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (85.0) (70.0) 429.7 - -------------------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES: Issuance of 8.375% Notes, net 292.5 -- -- Net borrowings (repayments) under credit facilities (266.6) 195.1 (82.2) Dividends paid (64.2) (66.0) (122.1) Borrowings of other long-term debt 11.5 -- -- Purchases of common stock (3.0) (221.0) (257.6) Payments of long-term debt and capital leases (0.7) (1.4) (1.7) Exercises of stock options 0.2 3.3 8.2 Payments of short-term debt -- -- (70.0) - -------------------------------------------------------------------------------------------------------------------------- CASH USED IN FINANCING ACTIVITIES (30.3) (90.0) (525.4) - -------------------------------------------------------------------------------------------------------------------------- NET CASH USED IN DISCONTINUED OPERATIONS -- -- (30.7) - -------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 7.5 (24.5) (23.5) Cash and cash equivalents at beginning of year 26.2 50.7 74.2 - -------------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 33.7 $ 26.2 $ 50.7 - --------------------------------------------------------------------------------------------------------------------------
Amounts presented on the Consolidated Statements of Cash Flows may not agree to the corresponding changes in balance sheet items due to the accounting for purchases and sales of businesses and the effects of foreign currency translation. The accompanying notes are an integral part of these statements. - 27 - ALLEGHENY TECHNOLOGIES INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In millions except per share amounts) Accumulated Additional Other Common Paid-In Retained Treasury Comprehensive Stockholders' Stock Capital Earnings Stock Income Equity - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1998 $9.9 $477.2 $ 923.9 $(67.6) $(3.5) $1,339.9 - ---------------------------------------------------------------------------------------------------------------------------------- Net income -- -- 300.2 -- -- 300.2 Other comprehensive income, net of tax: Foreign currency translation gains -- -- -- -- 2.7 2.7 Change in unrealized gains on securities -- -- -- -- 4.8 4.8 - ---------------------------------------------------------------------------------------------------------------------------------- Comprehensive income -- -- 300.2 -- 7.5 307.7 Purchase of common stock -- -- -- (257.6) -- (257.6) Cash dividends on common stock ($1.28 per share) -- -- (122.1) -- -- (122.1) Spin-off of Water Pik Technologies, Inc. -- -- (54.6) -- 0.3 (54.3) Spin-off of Teledyne Technologies Incorporated -- -- (41.6) -- (0.8) (42.4) Employee stock plans -- 3.8 (11.3) 36.5 -- 29.0 - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1999 9.9 481.0 994.5 (288.7) 3.5 1,200.2 - ---------------------------------------------------------------------------------------------------------------------------------- Net income -- -- 132.5 -- -- 132.5 Other comprehensive income, net of tax: Foreign currency translation losses -- -- -- -- (19.4) (19.4) Change in unrealized gains on securities -- -- -- -- (3.7) (3.7) - ---------------------------------------------------------------------------------------------------------------------------------- Comprehensive income (loss) -- -- 132.5 -- (23.1) 109.4 Cash dividends on common stock ($0.80 per share) -- -- (66.0) -- -- (66.0) Purchase of common stock -- -- -- (221.0) -- (221.0) Employee stock plans -- 0.2 (11.0) 27.4 -- 16.6 - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 2000 9.9 481.2 1,050.0 (482.3) (19.6) 1,039.2 - ---------------------------------------------------------------------------------------------------------------------------------- Net income (loss) -- -- (25.2) -- -- (25.2) Other comprehensive loss, net of tax: Foreign currency translation losses -- -- -- -- (0.2) (0.2) Unrealized losses on energy, raw material and currency hedges -- -- -- -- (2.2) (2.2) Change in unrealized gains on securities -- -- -- -- (3.7) (3.7) - ---------------------------------------------------------------------------------------------------------------------------------- Comprehensive income (loss) -- -- (25.2) -- (6.1) (31.3) Cash dividends on common stock ($0.80 per share) -- -- (64.2) -- -- (64.2) Purchase of common stock -- -- -- (3.0) -- (3.0) Employee stock plans -- -- (3.1) 7.1 -- 4.0 - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 2001 $9.9 $481.2 $ 957.5 $(478.2) $(25.7) $ 944.7 - ----------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements. - 28 - REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS BOARD OF DIRECTORS ALLEGHENY TECHNOLOGIES INCORPORATED We have audited the accompanying consolidated balance sheets of Allegheny Technologies Incorporated and subsidiaries as of December 31, 2001 and 2000 and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Allegheny Technologies Incorporated at December 31, 2001 and 2000, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. January 14, 2002 Pittsburgh, Pennsylvania - 29 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Allegheny Technologies Incorporated and its subsidiaries, including the Chinese joint venture known as Shanghai STAL Precision Stainless Steel Co., LTD, in which the Company has a 60 percent interest. Significant intercompany accounts and transactions have been eliminated. Unless the context requires otherwise, "Allegheny Technologies" and the "Company" refer to Allegheny Technologies Incorporated and its subsidiaries. USE OF ESTIMATES The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates upon subsequent resolution of identified matters. Management believes that the estimates are reasonable. CASH EQUIVALENTS AND INVESTMENTS Cash equivalents are highly liquid investments valued at cost, which approximates fair value, acquired with original maturity of three months or less. The Company's investments in debt and equity securities are classified as available-for-sale and are reported at fair values, with net unrealized appreciation and depreciation on investments reported as a component of accumulated other comprehensive income. The fair values of financial instruments approximated their carrying values at December 31, 2001. Fair values have been determined through information obtained from quoted market sources and management estimates. ACCOUNTS RECEIVABLE Accounts receivable are presented net of a reserve for doubtful accounts of $12.3 million at December 31, 2001 and $7.4 million at December 31, 2000. The Company markets its products to a diverse customer base, principally throughout the United States. Trade credit is extended based upon evaluations of each customer's ability to perform its obligations, which are updated periodically. Accounts receivable reserves are determined based upon an aging of accounts and a review of specific accounts. INVENTORIES Inventories are stated at the lower of cost (last-in, first-out (LIFO), first-in, first-out (FIFO), and average cost methods) or market, less progress payments. Costs include direct material, direct labor and applicable manufacturing and engineering overhead, and other direct costs. Most of the Company's inventory is valued utilizing the LIFO costing methodology. Inventory of the Company's non-U.S. operations is valued using average cost or FIFO methods. The Company evaluates product lines on a quarterly basis to identify inventory values that exceed estimated net realizable value. The calculation of a resulting reserve, if any, is recognized as an expense in the period that the need for the reserve is identified. It is the Company's general policy to write-down to scrap value any inventory that is identified as obsolete and any inventory that has aged or has not moved in more than twelve months. In some instances this criterion is twenty-four months. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are recorded at cost. The principal method of depreciation adopted for all property placed into service after July 1, 1996 is the straight-line method. For buildings and equipment acquired prior to July 1, 1996, depreciation is computed using a combination of accelerated and straight-line methods. Significant enhancements that extend the lives of property and equipment are capitalized. Costs related to repairs and maintenance are charged to expense as incurred. The cost and related accumulated depreciation of property and equipment retired or disposed of are removed from the accounts and any related gains or losses are included in income. The Company monitors the recoverability of the carrying value of its long-lived assets. An impairment charge is recognized when the expected net undiscounted future cash flows from an asset's use (including any proceeds from disposition) are less than the asset's carrying value and the asset's carrying value exceeds its fair value. In August 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144") which - 30 - supersedes the existing accounting standards. Although retaining many of the fundamental recognition and measurement provisions of the existing accounting standards, the new rules significantly change the criteria that would have to be met to classify an asset as held-for-sale. This distinction is important because assets to be disposed of are stated at the lower of their fair values or carrying amounts and depreciation is no longer recognized. SFAS 144 also expands the types of dispositions which qualify for discontinued operations disclosure treatment and requires expected future operating losses from discontinued operations to be displayed in discontinued operations in the period in which the losses are incurred, rather than as of a measurement date. Effective January 1, 2002, the Company adopted this statement. COST IN EXCESS OF NET ASSETS ACQUIRED At December 31, 2001, the Company had $188.4 million of goodwill on its balance sheet. Of the total, $126.6 million related to the Flat-Rolled Products segment, $51.5 million related to the High Performance Metals segment, and $10.3 million related to the Industrial Products segment. Cost in excess of net assets acquired related to businesses purchased after November 1970 was amortized on a straight-line basis over periods not exceeding 40 years. Goodwill amortization expense was $5.8 million, $5.7 million and $4.6 million in 2001, 2000 and 1999, respectively. At December 31, 2001 and 2000, accumulated amortization related to goodwill was $34.2 million and $28.4 million, respectively. For 2001 and prior years, the Company evaluated whether the goodwill presented on the balance sheet was impaired based upon the undiscounted future cash flows of the operating company for which the goodwill relates. Effective January 1, 2002, goodwill will be evaluated in accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, discussed below. ENVIRONMENTAL Costs that mitigate or prevent future environmental contamination or extend the life, increase the capacity or improve the safety or efficiency of property utilized in current operations are capitalized. Other costs that relate to current operations or an existing condition caused by past operations are expensed. Environmental liabilities are recorded when the Company's liability is probable and the costs are reasonably estimable, but generally not later than the completion of the feasibility study or the Company's recommendation of a remedy or commitment to an appropriate plan of action. The accruals are reviewed periodically and, as investigations and remediations proceed, adjustments are made as necessary. Accruals for losses from environmental remediation obligations do not take into account the effects of inflation, and anticipated expenditures are not discounted to their present value. The accruals are not reduced by possible recoveries from insurance carriers or other third parties, but do reflect anticipated allocations among potentially responsible parties at federal Superfund sites or similar state-managed sites after an assessment is made of the likelihood that such parties will fulfill their obligations at such sites. The measurement of environmental liabilities by the Company is based on currently available facts, present laws and regulations, and current technology. Such estimates take into consideration the Company's prior experience in site investigation and remediation, the data concerning cleanup costs available from other companies and regulatory authorities, and the professional judgment of the Company's environmental experts in consultation with outside environmental specialists, when necessary. REVENUE RECOGNITION Revenue is recognized when title passes or as services are rendered. RESEARCH AND DEVELOPMENT Company funded research and development costs were $11.3 million in 2001, $13.6 million in 2000 and $15.2 million in 1999 and were expensed as incurred. Customer funded research and development costs were $2.0 million in 2001, $2.0 million in 2000 and $1.1 million in 1999. INCOME TAXES Deferred income taxes are recognized based upon the future income tax effects (which is based upon enacted tax laws and rates) of the differences that arise in the carrying amount of assets and liabilities for financial reporting and tax purposes. NET INCOME (LOSS) PER COMMON SHARE Basic earnings per share is calculated by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the year. Diluted income per share is calculated by using the weighted average number of common shares outstanding adjusted to include the potentially dilutive effect of outstanding stock options. - 31 - DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING As part of its risk management strategy the Company, from time to time, purchases exchange-traded futures and swap contracts to manage exposure to changes in nickel prices, a component of raw material cost for some of its flat-rolled and high performance metals products, and energy costs. The contracts obligate the Company to make or receive a payment equal to the net change in value of the contract at its maturity. These contracts are designated as hedges of the variability in cash flows of a portion of the Company's forecasted purchases of nickel and energy payments. Foreign currency exchange contracts are used to limit transactional exposure to changes in currency exchange rates. The Company sometimes purchases foreign currency forward contracts that permit it to sell specified amounts of foreign currencies expected to be received from its export sales for pre-established U.S. dollar amounts at specified dates. The forward contracts are denominated in the same foreign currencies in which export sales are denominated. These contracts, which are not financially material, are designated as hedges of the variability in cash flows of a portion of the Company's forecasted export sales transactions in which settlement will occur in future periods and which otherwise would expose the Company, on the basis of its aggregate net cash flows in respective currencies, to foreign currency risk. In general, hedge effectiveness is determined by examining the relationship between offsetting changes in fair value or cash flows attributable to the item being hedged and the financial instrument being used for the hedge. Effectiveness is measured utilizing regression analysis and other techniques, to determine whether the change in the fair market value or cash flows of the derivative exceeds the change in fair value or cash flow of the hedged item. Calculated ineffectiveness, if any, is immediately recognized on the statement of operations. Effective January 1, 2001, the Company began accounting for all of these contracts as hedges under FASB Statement 133. Changes in the fair value of these contracts are recognized as a component of other comprehensive income (loss) in stockholders' equity until the hedged item is recognized in the statement of operations. If a portion of the contract is ineffective as a hedge of the underlying exposure, the change in fair value related to the ineffective portion is immediately recognized as income or expense. FOREIGN CURRENCY TRANSLATION Assets and liabilities of international operations are translated into U.S. dollars using year-end exchange rates, while revenues and expenses are translated at average exchange rates during the period. The resulting net translation adjustments are recorded as a component of accumulated other comprehensive income (loss) in stockholders' equity. NEW ACCOUNTING PRONOUNCEMENTS In June 2001, the FASB issued Statement of Financial Accounting Standards No. 141, Business Combinations ("SFAS 141"), Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets ("SFAS 142"), and Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations ("SFAS 143"). These statements change the accounting for business combinations, goodwill, intangible assets, and asset retirement obligations. SFAS 141 eliminates the pooling-of-interests method of accounting for business combinations and clarifies the criteria to recognize intangible assets separately from goodwill. The requirements of SFAS 141 are effective for any business combination accounted for by the purchase method that is completed after June 30, 2001. Under SFAS 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually, or more frequently if impairment indicators arise, for impairment. Separable intangible assets that have finite lives will continue to be amortized over their useful lives, with no maximum life. In addition, SFAS 142 changes the test for goodwill impairment. The new impairment test for goodwill is a two step process. The first step is a comparison of the fair value of the reporting unit with its carrying amount, including goodwill. If this step reflects impairment, then the loss would be measured as the excess of recorded goodwill over its implied fair value. Implied fair value is the excess of the fair value of the reporting unit over the fair value of all recognized and unrecognized assets and liabilities. The amortization provisions of SFAS 142 apply to goodwill and intangible assets acquired after June 30, 2001. With respect to goodwill and intangible assets acquired prior to July 1, 2001, companies are required to adopt SFAS 142 in their fiscal year beginning after December 15, 2001. The Company is currently evaluating whether the $188.4 million of goodwill at December 31, 2001 is impaired at January 1, 2002. If goodwill is determined to be impaired, the Company would record a non-cash after-tax charge for the amount of the impairment. This initial impairment charge, if any, would be recorded as a cumulative effect of a change in accounting principle in the Company's results for the quarter ended June 30, 2002. Amortization of goodwill was $5.8 million in 2001. Under SFAS 143, obligations associated with the retirement of tangible long-lived assets, such as landfill and other facility closure costs, would be capitalized and amortized to expense over an asset's useful life using a systematic and rational allocation method. This standard is effective for fiscal years beginning after June 15, 2002. The Company is currently evaluating adoption of SFAS 143 and has not yet determined the impact on the overall financial condition of the Company, if any, that may result. RECLASSIFICATIONS Certain amounts from prior years have been reclassified to conform with the 2001 presentation. - 32 -
NOTE 2. INVENTORIES -- (In millions) DECEMBER 31, December 31, 2001 2000 - ------------------------------------------------------------------------------------------------------------------------------ Raw materials and supplies $ 85.9 $ 110.3 Work-in-process 419.6 488.4 Finished goods 83.0 99.1 - ------------------------------------------------------------------------------------------------------------------------------- Total inventories at current cost 588.5 697.8 Less allowances to reduce current cost values to LIFO basis (77.2) (108.7) Progress payments (2.9) (3.4) - ------------------------------------------------------------------------------------------------------------------------------- Total inventories $ 508.4 $ 585.7 - -------------------------------------------------------------------------------------------------------------------------------
Inventories, before progress payments, determined on the last-in, first-out method were $420.2 million at December 31, 2001 and $478.2 million at December 31, 2000. The remainder of the inventory was determined using the first-in, first-out and average cost methods. These inventory values do not differ materially from current cost. During 2001 and 2000, inventory usage resulted in liquidations of last-in, first-out inventory quantities. These inventories were carried at the lower costs prevailing in prior years as compared with the cost of current purchases. The effect of these last-in, first-out liquidations was to decrease the net loss by $6.8 million in 2001 and to increase net income by $3.3 million in 2000. NOTE 3. DEBT -- Debt at December 31, 2001 and 2000 was as follows:
(In millions) 2001 2000 - -------------------------------------------------------------------------------------------------------------------------------- Allegheny Technologies $300 million 8.375% Notes due 2011, net $ 292.5 $ -- Allegheny Ludlum 6.95% debentures, due 2025 150.0 150.0 Commercial paper 70.0 337.0 Credit agreements 25.6 23.5 Industrial revenue bonds, due 2001 through 2007 22.5 11.7 Capitalized leases and other 21.6 21.6 - --------------------------------------------------------------------------------------------------------------------------------- 582.2 543.8 Short-term debt and current portion of long-term debt (9.2) (53.2) - --------------------------------------------------------------------------------------------------------------------------------- Total long-term debt $ 573.0 $ 490.6 - ---------------------------------------------------------------------------------------------------------------------------------
Interest expense was $30.7 million in 2001, $37.6 million in 2000 and $30.7 million in 1999. Interest and commitment fees paid were $31.1 million in 2001, $38.0 million in 2000 and $31.5 million in 1999. Scheduled maturities of borrowings during the next five years are $9.2 million in 2002, $1.5 million in 2003, $1.6 million in 2004, $28.6 million in 2005 and $0.6 million in 2006. During the fourth quarter of 2000, the Company implemented a commercial paper program. At December 31, 2001, the Company had $70.0 million of commercial paper outstanding, which is scheduled to mature in the first quarter of 2002. These commercial paper borrowings are presented as long-term obligations due to the Company's ability and intent to refinance a portion or all of the these obligations on a long-term basis. The weighted average interest rate for the outstanding commercial paper was 3.09% at December 31, 2001. In December 2001, the Company issued $300 million of 8.375% Notes due December 15, 2011 in a transaction exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. The Company is required to file a registration statement with the Securities and Exchange Commission in order to offer the holders of the Notes the ability to exchange the outstanding Notes for new notes with substantially identical terms, but which are registered under the Securities Act. Interest on the Notes is payable semi-annually, on June 15 and December 15, and is subject to adjustment under certain circumstances. These Notes contain default provisions with respect to default for the following, among other things: nonpayment of interest on the Notes for 30 days, default in payment when due of principal, or failure to comply with any covenant. Any violation of the default provision could result in the requirement to immediately repay the borrowings. These Notes are presented on the balance sheet net of issuance costs of $7.5 million, which are being amortized over the life of the debt. - 33 - On December 21, 2001, the Company entered into a new credit agreement with a group of banks that provides for borrowings of up to $325 million on a revolving credit basis. This new credit agreement replaces a $500 million credit facility, which was to expire in August 2002. The new credit agreement consists of a short-term 364-day $130 million credit facility which expires in December 2002, and a $195 million credit facility which expires in December 2006. The interest is payable based upon London Interbank Offered Rates (LIBOR) plus a spread, which is dependent on the Company's credit rating. The Company also has the option of using other alternative interest rate bases. The agreement provides for a commitment fee of 0.234 percent, or $0.8 million, and an annual facility fee ranging from 0.15 to 0.175 percent. The agreement has various covenants that limit the Company's ability to dispose of assets and merge with another corporation. The Company is also required to maintain a ratio of total consolidated indebtedness to total capitalization of not more than 60 percent. At December 31, 2001, the Company's total consolidated indebtedness to total capitalization calculated in accordance with the credit agreement, which includes certain standby letters of credit and guarantees, was 40 percent. This covenant also has the effect of limiting the total amount of dividend payments and share repurchases. Under this covenant, approximately $312 million, or 33 percent, of the Company's retained earnings, is currently free of restrictions pertaining to cash dividends and share repurchases. The credit agreement also contains a covenant requiring the maintenance of specified consolidated earnings before interest, taxes, depreciation and amortization ("EBITDA"). For 2002, the Company must have, on a quarterly basis for the preceding twelve month period, EBITDA of at least 3.0 times gross interest expense. For 2003 through the remaining life of the credit agreement, the Company must have, on a quarterly basis for the preceding twelve month period, EBITDA of at least 3.5 times gross interest expense. The Company's EBITDA coverage for the twelve months ended December 31, 2001 (calculated in accordance with the credit agreement, which excludes certain non-cash charges) was 5.3 times gross interest expense. The Company had no borrowings outstanding under these revolving credit agreements at December 31, 2001 or 2000. The Company's subsidiaries also maintain credit agreements with various foreign banks, which provide for borrowings of up to approximately $48 million. These agreements provide for annual facility fees of up to 0.20 percent. Borrowings outstanding under the credit agreements are unsecured. Commitments under separate standby letters of credit outstanding were $49.6 million at December 31, 2001 and $45.3 million at December 31, 2000. The Company has no off-balance sheet financing relationships with special purpose entities, structured finance entities, or any other unconsolidated entities. NOTE 4. SUPPLEMENTAL BALANCE SHEET INFORMATION -- Cash and cash equivalents at December 31, 2001 and 2000 were as follows:
(In millions) 2001 2000 - -------------------------------------------------------------------------------------------------------------------------- Cash $ 19.1 $ 25.2 Other short-term investments, at cost which approximates market 14.6 1.0 - -------------------------------------------------------------------------------------------------------------------------- Total cash and cash equivalents $ 33.7 $ 26.2 - --------------------------------------------------------------------------------------------------------------------------
Accounts receivable are presented net of a reserve for doubtful accounts of $12.3 million at December 31, 2001 and $7.4 million at December 31, 2000. During 2001, the Company recognized expense of $10.1 million to increase the reserve for doubtful accounts and wrote-off $5.2 million of uncollectable accounts, which reduced the reserve. Property, plant and equipment at December 31, 2001 and 2000 were as follows:
(In millions) 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- Land $ 30.6 $ 31.7 Buildings 219.4 216.2 Equipment and leasehold improvements 1,534.4 1,507.9 - ---------------------------------------------------------------------------------------------------------------------------- 1,784.4 1,755.8 Accumulated depreciation and amortization (955.5) (883.8) - ---------------------------------------------------------------------------------------------------------------------------- Total property, plant and equipment $ 828.9 $ 872.0 - ----------------------------------------------------------------------------------------------------------------------------
Accrued liabilities included salaries and wages of $33.8 million and $37.4 million in 2001 and 2000, respectively. - 34 - NOTE 5. COMPREHENSIVE INCOME (LOSS) -- The components of accumulated other comprehensive income (loss), net of tax, for the years ended December 31, 2001, 2000 and 1999 were as follows:
(In millions) 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------------------------- Net income (loss) (net of taxes (benefit) of $(11.2), $76.3 and $170.9, respectively) $(25.2) $132.5 $300.2 - ---------------------------------------------------------------------------------------------------------------------------- Foreign currency translation losses, net of tax: Foreign currency translation losses arising during period (0.3) (21.7) (2.5) Foreign currency translation losses realized due to disposal of foreign entities 0.1 2.3 5.2 - ---------------------------------------------------------------------------------------------------------------------------- (0.2) (19.4) 2.7 - ---------------------------------------------------------------------------------------------------------------------------- Unrealized losses on energy, raw material and currency hedges, net of tax (2.2) -- -- - ---------------------------------------------------------------------------------------------------------------------------- Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during period (net of tax of $(1.0), $1.6 and $3.6, respectively) (1.4) 3.8 5.8 Realized gains (losses) included in net income (net of tax (benefit) of $(1.0), $4.3 and $0.5, respectively) (2.3) (7.5) (1.0) - ---------------------------------------------------------------------------------------------------------------------------- (3.7) (3.7) 4.8 - ---------------------------------------------------------------------------------------------------------------------------- Comprehensive income (loss) $(31.3) $109.4 $307.7 - ----------------------------------------------------------------------------------------------------------------------------
NOTE 6. STOCKHOLDERS' EQUITY -- PREFERRED STOCK Authorized preferred stock may be issued in one or more series, with designations, powers and preferences as shall be designated by the Board of Directors. At December 31, 2001, there were no shares of preferred stock issued. COMMON STOCK At a stockholders' meeting held in November 1999, the Company's stockholders approved a reduction in the authorized number of shares of the Company's common stock and a one-for-two reverse stock split of the common stock. The reverse stock split was effective immediately following the spin-offs of Teledyne Technologies Incorporated ("Teledyne") and Water Pik Technologies, Inc. ("Water Pik") on November 29, 1999. Stockholders' equity has been restated to give retroactive recognition to the reverse stock split for all periods presented by reclassifying from common stock to additional paid-in capital the par value of the number of shares that were eliminated as a result of the reverse stock split. In addition, all references in the financial statements and notes to the number of shares and per share amounts, stock option data and market prices have been restated to reflect this reverse stock split. During 2000, the Company adopted the Allegheny Technologies Incorporated 2000 Incentive Plan (the "Incentive Plan"). Options granted under the Incentive Plan, and predecessor plans, have been granted at not less than market prices on the dates of grant. Options granted under the Incentive Plan have a maximum term of 10 years. Vesting of stock options granted under the Incentive Plan generally occurs in three annual increments, beginning on the first anniversary of the grant date. At December 31, 2001, approximately 7.1 million shares of common stock were available for future awards under the Incentive Plan. The Company accounts for its stock option plans in accordance with APB Opinion 25, "Accounting for Stock Issued to Employees," and related Interpretations. Under APB Opinion 25, no compensation expense is recognized because the exercise price of the Company's employee stock options equals the market price of the underlying stock at the date of the grant. If compensation cost for these plans had been determined using the fair-value method prescribed by FASB Statement No. 123, "Accounting for Stock-based Compensation," net income would have been reduced by $5.3 million (or $0.07 per diluted share), $7.1 million (or $0.09 per diluted share) and $5.8 million (or $0.06 per diluted share) for the years ended December 31, 2001, 2000 and 1999, respectively. - 35 - Under FASB Statement No. 123, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:
2001 2000 1999 - -------------------------------------------------------------------------------------------------------------------------- Expected dividend yield 4.7% 4.3% 3.7% Expected volatility 39% 36% 35% Risk-free interest rate 4.8% 5.5% 6.5% Expected lives 8.0 8.0 8.0 Weighted average fair value of options granted during year $ 4.89 $ 5.38 $ 7.33 - --------------------------------------------------------------------------------------------------------------------------
Stock option transactions under the Company's employee plans are summarized as follows:
(shares in thousands) 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------------------------------- WEIGHTED Weighted Weighted AVERAGE Average Average NUMBER OF EXERCISE Number of Exercise Number of Exercise SHARES PRICE Shares Price Shares Price - ---------------------------------------------------------------------------------------------------------------------------------- Outstanding, beginning of year 4,480 $ 30.26 4,870 $ 29.66 3,578 $ 38.46 Granted 847 17.08 304 18.59 2,256 22.00 Exercised (28) 14.53 (195) 16.95 (408) 17.90 Cancelled (222) 30.75 (499) 27.86 (301) 33.69 Teledyne and Water Pik spin-offs -- -- -- -- (646) 39.19 Spin-off modification -- -- -- -- 391 -- - ---------------------------------------------------------------------------------------------------------------------------------- Outstanding at end of year 5,077 $ 27.88 4,480 $ 30.26 4,870 $ 29.66 - ---------------------------------------------------------------------------------------------------------------------------------- Exercisable at end of year 3,453 $ 32.10 2,318 $ 33.62 1,396 $ 33.57 - ----------------------------------------------------------------------------------------------------------------------------------
Options outstanding at December 31, 2001 were as follows:
(shares in thousands) - ---------------------------------------- ------------------------------ ----------------------------------------------------------- OPTIONS OUTSTANDING OPTIONS EXERCISABLE - ----------------------------------------------------------------------------------------------------------------------------------- Weighted Weighted Weighted Average Average Average Remaining Exercise Exercise Range of Exercise Prices Options Contractual Price Options Price - ----------------------------------------------------------------------------------------------------------------------------------- $9.50-$15.00 320 9.3 $14.75 40 $13.81 15.01-20.00 901 9.0 18.25 140 17.83 20.01-30.00 1,909 7.7 21.78 1,326 21.90 30.01-40.00 877 6.0 36.30 877 36.30 40.01-50.00 1,070 4.8 43.84 1,070 43.84 - ----------------------------------------------------------------------------------------------------------------------------------- 5,077 7.1 $27.88 3,453 $32.10 - -----------------------------------------------------------------------------------------------------------------------------------
Compensation expense related to the various stock-based plans was $1.2 million in 2001, $10.2 million in 2000 and $23.1 million in 1999. In the 1999 spin-offs of Teledyne and Water Pik, options to purchase Company stock that were held by employees of those two companies were converted into options to purchase Teledyne or Water Pik common stock, respectively. The number and exercise price of the other outstanding Company options were adjusted so that the "intrinsic value" of the options (that is, the difference between the market value of the stock that would be acquired upon exercise of the options and the exercise price of the options) before the spin-offs would be equivalent to the intrinsic value of the options immediately after the spin-offs. STOCKHOLDERS' RIGHTS PLAN Under the Company's stockholder rights plan, each share of Allegheny Technologies common stock is accompanied by one right to purchase two one-hundredths of a share of preferred stock for $100. Each two hundredths of a share of preferred stock would be entitled to dividends and to vote on an equivalent basis with - 36 - one share of common stock. The rights are neither exercisable nor separately transferable from shares of common stock unless a party acquires or effects a tender offer for more than 15 percent of Allegheny Technologies common stock. If a party acquired more than 15 percent of the Allegheny Technologies common stock or acquired the Company in a business combination, each right (other than those held by the acquiring party) would entitle the holder to purchase common stock or preferred stock at a substantial discount. The rights expire on March 12, 2008, and the Company's Board of Directors can amend certain provisions of the plan or redeem the rights at any time prior to their becoming exercisable. NOTE 7. INCOME TAXES -- Income tax provision (benefit) from continuing operations was as follows:
(In millions) 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------- Current: Federal $(40.4) $ 7.8 $ 24.1 State 0.5 5.7 4.3 Foreign 2.5 5.0 9.3 - ------------------------------------------------------------------------------------------------------------------------------- Total (37.4) 18.5 37.7 - ------------------------------------------------------------------------------------------------------------------------------- Deferred: Federal 25.9 55.1 24.1 State 0.3 2.7 1.4 - ------------------------------------------------------------------------------------------------------------------------------- Total 26.2 57.8 25.5 - ------------------------------------------------------------------------------------------------------------------------------- Income tax provision (benefit) $(11.2) $ 76.3 $ 63.2 - -------------------------------------------------------------------------------------------------------------------------------
In general, the Company is responsible for filing consolidated U.S., foreign and combined, unitary or separate state income tax returns. In 1999, these filings included the taxable income of companies spun-off or sold through the date of the spin-offs or sales. The Company is responsible for paying the taxes relating to such returns, including any subsequent adjustments resulting from the redetermination of such tax liability by the applicable taxing authorities. Income taxes paid for continuing and discontinued operations were $3.4 million, $20.5 million and $136.3 million in 2001, 2000, and 1999, respectively. No provision has been made for U.S., state or additional foreign taxes related to undistributed earnings of foreign subsidiaries which have been or are intended to be permanently re-invested. It is not practical to estimate the income tax expense or benefit that might be incurred if earnings were remitted to the U.S. Income from continuing operations before income taxes and extraordinary gains included income (loss) from domestic operations of $(45.3) million in 2001, $200.1 million in 2000 and $153.5 million in 1999. The following is a reconciliation of the statutory federal income tax rate to the actual effective income tax rate for continuing operations:
Tax Provision (Benefit) 2001 2000 1999 - ----------------------------------------------------------------------------------------------------------------------------- Federal tax rate (35.0%) 35.0% 35.0% State and local income taxes, net of federal tax benefit 2.7 1.1 2.8 Other 1.5 0.4 (1.5) - ----------------------------------------------------------------------------------------------------------------------------- Effective income tax rate (30.8%) 36.5% 36.3% - -----------------------------------------------------------------------------------------------------------------------------
Deferred income taxes result from temporary differences in the recognition of income and expense for financial and income tax reporting purposes, and differences between the fair value of assets acquired in business combinations accounted for as purchases for financial reporting purposes and their corresponding tax bases. Deferred income taxes represent future tax benefits or costs to be recognized when those temporary differences reverse. The categories of assets and liabilities that have resulted in differences in the timing of the recognition of income and expense were as follows: - 37 -
(In millions) 2001 2000 - ----------------------------------------------------------------------------------------------------------------------------- Deferred income tax assets: Postretirement benefits other than pensions $ 200.0 $205.3 Deferred compensation and other benefit plans 30.2 30.2 Environmental reserves 18.9 17.9 Vacation accruals 11.9 11.9 Self-insurance reserves 11.0 10.2 Other items 40.1 60.2 - ----------------------------------------------------------------------------------------------------------------------------- Total deferred income tax assets 312.1 335.7 - ----------------------------------------------------------------------------------------------------------------------------- Deferred income tax liabilities: Pension asset 245.4 221.3 Bases of property, plant and equipment 150.0 169.2 Inventory valuation -- 2.7 Other items 36.9 40.0 - ----------------------------------------------------------------------------------------------------------------------------- Total deferred income tax liabilities 432.3 433.2 - ----------------------------------------------------------------------------------------------------------------------------- Net deferred income tax liability $ 120.2 $ 97.5 - -----------------------------------------------------------------------------------------------------------------------------
At December 31, 2001, the Company had a state deferred tax asset resulting from net operating loss tax carryforwards of $18.2 million. A valuation allowance of $18.2 million was established for the full value of these net operating loss carryforwards since the Company has concluded that it is more likely than not that these tax benefits would not be realized. For most of these net operating loss carryforwards, expiration will occur in 10 years and utilization of the tax benefit is limited to $2 million per year. Although realization is not assured, Allegheny Technologies has concluded that the remaining deferred tax assets should be realized based upon its history of operating earnings, expectations of future operating earnings, and potential tax planning strategies. NOTE 8. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS -- The Company has defined benefit pension plans and defined contribution plans covering substantially all employees. Benefits under the defined benefit pension plans are generally based on years of service and/or final average pay. The Company funds the pension plans in accordance with the requirements of the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code. The Company also sponsors several defined benefit postretirement plans covering certain salaried and hourly employees. The plans provide health care and life insurance benefits for eligible retirees. In certain plans, Company contributions towards premiums are capped based on the cost as of a certain date, thereby creating a defined contribution. Certain pension plan assets and projected benefit obligations for pension and other postretirement benefits were transferred to Teledyne as part of the 1999 spin-off transaction. Income and expense amounts and accrued benefit costs pertaining to Teledyne have been excluded from all periods presented in this footnote. Components of pension expense (income) for the Company's defined benefit plans and components of postretirement benefit expense included the following:
EXPENSE (INCOME) - ------------------------------------------------------- -------------------------------------------------------------------------- PENSION BENEFITS OTHER POSTRETIREMENT BENEFITS - ---------------------------------------------------------------------------------------------------------------------------------- (In millions) 2001 2000 1999 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------------------------------- Service cost-- benefits earned during the year $ 22.9 $ 20.9 $ 23.6 $ 8.4 $ 7.9 $ 8.2 Interest cost on benefits earned in prior years 113.5 114.2 114.2 43.4 42.5 44.7 Expected return on plan assets (209.1) (228.4) (212.3) (20.6) (17.5) (15.3) Amortization of unrecognized transition asset (24.1) (24.1) (24.1) -- -- -- Amortization of prior service cost 19.3 13.7 13.7 (4.5) (4.7) (3.2) Amortization of net actuarial (gain) loss (0.6) (22.2) (11.7) (1.7) (2.2) 1.8 - ---------------------------------------------------------------------------------------------------------------------------------- Excess pension (income) expense (78.1) (125.9) (96.6) 25.0 26.0 36.2 Curtailment and termination benefits expense 9.8 -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Total retirement benefit (income) expense $ (68.3) $ (125.9) $ (96.6) $ 25.0 $ 26.0 $ 36.2 - ----------------------------------------------------------------------------------------------------------------------------------
- 38 - In 2001, the Company recorded curtailment and termination benefits expense of $9.8 million related to employees of the Company's Houston, PA stainless steel melt shop that was permanently idled during the fourth quarter. Of this amount, $8.2 million related to curtailment charges and $1.6 million related to a termination charge recorded in accordance with generally accepted accounting principles. This amount is included in restructuring and transformation costs on the statement of operations. In addition, the Company recorded a $1.8 million curtailment gain in 1999 as part of the extraordinary gains on sales of operations resulting from the sale of Ryan Aeronautical. Actuarial assumptions used to develop the components of pension expense (income) and postretirement benefit expense were as follows:
PENSION BENEFITS OTHER POSTRETIREMENT BENEFITS - ---------------------------------------------------------------------------------------------------------------------------------- (In millions) 2001 2000 1999 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------------------------------- Discount rate 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% Rate of increase in future compensation levels 3%-4.5% 3%-4.5% 3%-4.5% -- -- -- Expected long-term rate of return on assets 9.0% 9.0% 9.0% 9%-15% 9%-15% 9%-15% - ----------------------------------------------------------------------------------------------------------------------------------
A discount rate of 7.0% at both December 31, 2001 and 2000 was used for the valuation of pension and post-retirement obligations. The prepaid (accrued) benefit cost at December 31, 2001 and 2000 was as follows:
PENSION BENEFITS OTHER POSTRETIREMENT BENEFITS - --------------------------------------------------------------------------------------------------------------------------------- (In millions) 2001 2000 2001 2000 - --------------------------------------------------------------------------------------------------------------------------------- CHANGE IN BENEFIT OBLIGATION: Benefit obligation at beginning of year $ 1,629.1 $ 1,627.3 $ 638.5 $ 662.2 Service cost 22.9 20.9 8.4 7.9 Interest cost 113.5 114.2 43.4 42.5 Benefits paid (131.2) (144.5) (43.5) (44.8) Plan amendments 108.0 5.1 4.5 -- Net actuarial (gains) losses 67.2 6.1 (1.1) (29.3) Effect of curtailment and special termination benefits 6.6 -- 1.1 -- - --------------------------------------------------------------------------------------------------------------------------------- Benefit obligation at end of year 1,816.1 1,629.1 651.3 638.5 - --------------------------------------------------------------------------------------------------------------------------------- CHANGE IN PLAN ASSETS: Fair value of plan assets at beginning of year 2,388.3 2,602.9 138.0 123.7 Actual return on plan assets (213.0) (33.6) (4.5) 14.3 Section 420 transfer (35.0) (40.1) -- -- Benefits paid (128.3) (140.9) (3.2) -- Transfers of assets into plan -- -- 4.6 -- - --------------------------------------------------------------------------------------------------------------------------------- Fair value of plan assets at end of year 2,012.0 2,388.3 134.9 138.0 - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- Overfunded (underfunded) status of the plan 195.9 759.2 (516.4) (500.5) Unrecognized net actuarial (gain) loss 236.1 (253.8) 36.3 9.7 Unrecognized transition asset (10.8) (35.0) -- -- Unrecognized prior service cost 175.9 92.3 (26.0) (35.1) - --------------------------------------------------------------------------------------------------------------------------------- PREPAID (ACCRUED) BENEFIT COST $ 597.1 $ 562.7 $ (506.1) $ (525.9) - ---------------------------------------------------------------------------------------------------------------------------------
Amounts recognized in the balance sheet consist of:
(In millions) PENSION BENEFITS OTHER POSTRETIREMENT BENEFITS - --------------------------------------------------------------------------------------------------------------------------------- 2001 2000 2001 2000 - --------------------------------------------------------------------------------------------------------------------------------- Prepaid pension cost $ 632.9 $ 593.6 $ -- $ -- Accrued postretirement benefits -- -- (506.1) (525.9) Other long-term liabilities (35.8) (30.9) -- -- - --------------------------------------------------------------------------------------------------------------------------------- Net amount recognized $ 597.1 $ 562.7 $ (506.1) $ (525.9) - ---------------------------------------------------------------------------------------------------------------------------------
In 2001, the Company entered into new six-year labor agreements covering Allegheny Ludlum and Oremet employees represented by the United Steel Workers of America. These labor agreements included enhancements - 39 - to pension benefits. The increase in the pension liability resulting from these labor agreements, as well as, pension enhancements at other operations of the Company are presented as plan amendments in the tables above. The plan assets for the defined benefit pension plan at December 31, 2001 and 2000 include 1.3 million shares of Allegheny Technologies common stock with a fair value of $21.8 million and $20.6 million, respectively. Dividends of $1.0 million were received by the plan in 2001 and 2000 on the Allegheny Technologies common stock held by the plan. Company contributions to the defined contribution plans are funded with cash. Any reversion of pension plan assets to the Company would be subject to federal and state income taxes, substantial excise tax and other possible claims. Pension costs for defined contribution plans were $14.8 million in both 2001 and 2000 and $15.1 million in 1999. The Company contributes on behalf of its union employees at its Oremet facility to a pension plan which is administered by the USWA and funded pursuant to a collective bargaining agreement. Pension expense and contributions to this plan were $1.1 million in 2001, $1.4 million in 2000 and $1.3 million in 1999. The annual assumed rate of increase in the per capita cost of covered benefits (the health care cost trend rate) for health care plans was 11.0 percent in 2002 and was assumed to decrease to 5.0 percent in the year 2009 and remain at that level thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one percentage point change in assumed health care cost trend rates would have the following effects:
One Percentage One Percentage (In millions) Point Increase Point Decrease - ------------------------------------------------------------------------------------------------------------------------------ Effect on total of service and interest cost components for the year ended December 31, 2001 $ 5.3 $ (4.4) Effect on postretirement benefit obligation at December 31, 2001 $ 72.0 $ (56.6) - ------------------------------------------------------------------------------------------------------------------------------
The Company's defined benefit pension plan is fully funded with assets in excess of the projected benefit obligation. Under current Internal Revenue Code (Section 420) provisions, certain amounts that the Company pays for retiree health care benefits may be reimbursed annually from the excess pension plan assets. During the 2001 second quarter, the Company recovered $35.0 million under these provisions. While not affecting reported operating profit, cash flow from operations increased by the recovered amount. The ability of the Company to be reimbursed for retiree medical costs in future years is dependent upon the level of pension surplus, as computed under regulations of the Internal Revenue Service, as of the beginning of each year. The level of pension surplus (the value of pension assets less pension obligations) changes constantly due to the volatility of pension asset investments. Due to the decline in the U.S. equities market in 2001, the pension overfunded status at the beginning of 2002 is below the threshold required to fully reimburse the Company for retiree medical costs in 2002. This will negatively impact the after-tax cash flow in 2002 by approximately $22 million. The ability to resume full reimbursement to the Company for retiree health care costs beyond 2002 will depend upon the performance of the pension investments, and any changes in the Internal Revenue Code and regulations pertaining to reimbursement of retiree health care costs from pension surplus. Beginning in the second half of 2001, the Company began funding certain retiree health care benefits for Allegheny Ludlum using plan assets held in a Voluntary Employee Benefit Association (VEBA) trust. This allows the Company to recover a portion of the retiree medical costs that were previously funded from the pension surplus. The Company may continue to fund certain retiree medical benefits utilizing the plan assets held in the VEBA if the value of these plan assets exceed $50 million. NOTE 9. ACQUISITIONS AND DIVESTITURES -- During the 2001 fourth quarter, the Company divested its North American operations of its titanium distribution company, Titanium Industries Inc. Results of operations for this business for 2001 and proceeds from the disposition of this business were not material to the Company. During the 2000 second quarter, the Company purchased the Hughes Metallurgical Products Division, a tungsten carbide products business from Hughes Christensen. Operating results have been included in the Company's consolidated financial statements since the date of acquisition. In 1999, the Company effected a major transformation of the Company that included the sales of several of the Company's businesses, and the spin-offs of certain businesses in two of the Company's former business segments into independent, publicly-traded companies (the "spin-offs"). Teledyne was comprised of certain businesses in the Company's former Aerospace and Electronics segment. Water Pik was comprised of the Company's former Consumer segment. Prior to the spin-offs, the Company received a tax ruling from the Internal Revenue Service that the spin-offs would be tax-free to the Company and to the Company's stockholders. On November 29, 1999, the Company distributed all of the common stock of Teledyne and Water Pik to the Company's stockholders of record as of November 22, 1999. Stockholders of record received one share of Teledyne common stock for every seven shares of Allegheny Technologies common stock and one share of Water Pik common stock for every twenty shares of Allegheny Technologies common stock, based on the number of shares of Allegheny Technologies common stock they held prior to the reverse split. Immediately following the spin-offs, the Company effected a one-for-two reverse split of its common stock and changed its name to Allegheny Technologies Incorporated from Allegheny Teledyne Incorporated. - 40 - During 1999, as part of its strategic transformation, the Company completed the sale of its unmanned aerial vehicle and its pyrotechnic components and systems businesses, known as Ryan Aeronautical and McCormick Selph Ordnance Unit, respectively. In addition, the Company sold its pressure relief valve, vehicle control valve, nitrogen gas springs, consumer drinkware, construction and mining equipment and material handling businesses. The Company recognized extraordinary gains of $129.6 million, net of $79.9 million in taxes, in connection with the sales of these businesses. The pretax proceeds from these sales totaled approximately $370.0 million. All sold businesses have been classified as discontinued operations. Results of discontinued operations for the year ended December 31, 1999 was as follows:
(In millions) - ----------------------------------------------------------------------------------------------------- Net sales $ 1,175.7 - ------------------------------------------------------------------------------------------------------ Income before taxes 87.4 - ------------------------------------------------------------------------------------------------------ Provision for income taxes 27.8 - ------------------------------------------------------------------------------------------------------ Income from discontinued operations $ 59.6 - ------------------------------------------------------------------------------------------------------
The 1999 results for Teledyne and Water Pik, included in discontinued operations, represent the eleven month period ended November 29, 1999. The income statements of sold companies are reflected in the above table through the date of sale. Income from discontinued operations also includes non-deductible spin-off and transformation costs that primarily consist of legal and advisory services incurred in connection with these transactions. In the 1999 fourth quarter, the Company acquired the Washington, PA stainless steel finishing plant of Lukens' Washington Steel Division from Bethlehem Steel Corporation for $20.5 million in cash. NOTE 10. BUSINESS SEGMENTS -- The Company operates in three business segments: Flat-Rolled Products, High Performance Metals and Industrial Products. The Flat-Rolled Products segment produces, converts and distributes stainless steel, nickel-based alloys and superalloys, and titanium and titanium-based alloys in sheet, strip, plate and Precision Rolled Strip(R) products as well as silicon electrical steels and tool steels. The companies in this segment include Allegheny Ludlum, Allegheny Rodney, Rome Metals and Allegheny Ludlum's 60 percent interest in the Chinese joint venture company known as Shanghai STAL Precision Stainless Steel Company Limited ("STAL"). The High Performance Metals segment produces, converts and distributes nickel- and cobalt-based alloys and superalloys, titanium and titanium-based alloys, zirconium, hafnium, niobium, tantalum and other specialty materials, primarily in slab, ingot, billet, bar, rod, wire, coil and seamless tube forms, and zirconium chemicals. The companies in this segment include Allvac, Allvac Ltd (U.K.) and Wah Chang. The Industrial Products segment's principal business produces tungsten powder, tungsten carbide materials and carbide cutting tools. This segment also produces large grey and ductile iron castings and carbon alloy steel forgings. The companies in this segment are Metalworking Products, Casting Service and Portland Forge. Intersegment sales are generally recorded at full cost or market. Common services are allocated on the basis of estimated utilization. Information on the Company's business segments was as follows:
(In millions) 2001 2000 1999 - -------------------------------------------------------------------------------------------------------------------------------- Total sales: Flat-Rolled Products $ 1,118.8 $ 1,479.9 $ 1,322.4 High Performance Metals 831.7 800.5 798.0 Industrial Products 267.8 280.9 276.7 - -------------------------------------------------------------------------------------------------------------------------------- Total sales 2,218.3 2,561.3 2,397.1 Intersegment sales: Flat-Rolled Products 30.4 35.8 25.7 High Performance Metals 59.9 65.1 75.3 - -------------------------------------------------------------------------------------------------------------------------------- Total intersegment sales 90.3 100.9 101.0 - -------------------------------------------------------------------------------------------------------------------------------- Sales to external customers: Flat-Rolled Products 1,088.4 1,444.1 1,296.7 High Performance Metals 771.8 735.4 722.7 Industrial Products 267.8 280.9 276.7 - -------------------------------------------------------------------------------------------------------------------------------- Total sales to external customers $ 2,128.0 $ 2,460.4 $ 2,296.1 - --------------------------------------------------------------------------------------------------------------------------------
- 41 - The Company's backlog of confirmed orders was approximately $488.9 million at December 31, 2001 and $559.5 million at December 31, 2000. Total international sales were $499.5 million in 2001, $441.9 million in 2000 and $448.4 million in 1999. Of these amounts, sales by operations in the United States to customers in other countries were $318.9 million in 2001, $286.4 million in 2000 and $294.7 million in 1999.
(In millions) 2001 2000 1999 - -------------------------------------------------------------------------------------------------------------------------------- Operating profit (loss): Flat-Rolled Products $ (38.1) $ 119.6 $ 85.2 High Performance Metals 82.0 66.5 87.0 Industrial Products 10.4 21.7 12.2 - -------------------------------------------------------------------------------------------------------------------------------- Total operating profit 54.3 207.8 184.4 Corporate expenses (25.5) (30.6) (38.9) Interest expense, net (29.3) (34.4) (25.9) Transformation, restructuring and other costs, net of gains on asset sales (89.0) (33.9) (5.8) Excess pension income 53.1 99.9 60.4 - -------------------------------------------------------------------------------------------------------------------------------- Income (loss) from continuing operations before income taxes and extraordinary gains $ (36.4) $ 208.8 $ 174.2 - --------------------------------------------------------------------------------------------------------------------------------
In 2001, the Company recorded a restructuring charge of $74.2 million related to the permanent idling of the Houston, PA stainless steel melt shop, workforce reductions and other asset impairments. Of this aggregate charge, $55.6 million related to the Houston, PA stainless steel melt shop, which was permanently idled in the 2001 fourth quarter, and other asset impairments; $9.8 million related to pension and termination benefits; $5.8 million related to severance and personnel costs; and $3.0 million related to contractual obligations and other exit costs. The workforce reductions affected approximately 520 employees across all of Company's business segments and headquarters operations, and were substantially complete by the end of the 2001. These cost reduction actions are estimated to provide annual pre-tax cost savings of $19 million in 2002. Of the $74.2 million restructuring charge recorded in 2001, $4.0 million, net of tax benefits, is expected to result in expenditures of cash, which will paid in 2002. Cash to meet these obligations will be generated from one or more of the following sources: internally generated funds from operations, current cash on hand, or borrowings under existing credit lines and the Company's commercial paper program. In 2001, the Company also recorded a non-cash charge of $5.6 million related to the write-off of the Company's minority investment in the e-Business site, MetalSpectrum, which terminated operations during the second quarter of 2001. This amount is included in other income on the statement of operations. In 2000, the Company recorded restructuring and transformation charges of $29.5 million. The 2000 charge included $13.3 million for asset impairments, and $6.7 million for employee termination benefits, primarily severance pay, and other contractual obligations related to the decision in the 2000 fourth quarter to permanently idle the high-cost titanium sponge production assets of the High Performance Metals segment. The Company ceased titanium sponge production in the first half of 2001, and costs associated with operating the facility in 2001 were included in results of operations as they were incurred. The 2000 charge also included $3.1 million related to the 10 percent salaried workforce reduction at Allegheny Ludlum. The staffing reductions were made pursuant to a cost reduction plan, which resulted from a management study undertaken in an effort to remain cost competitive. The salaried workforce was notified by management of the planned workforce reduction and of the availability of termination benefits prior to December 31, 2000. The reduction in workforce was completed in the 2001 first quarter, and resulted in approximately $11 million in cost savings in 2001. In addition, restructuring and transformation charges for 2000 included $6.4 million for costs related to changes in the Company's executive management. Two executives left the Company in the 2000 fourth quarter. Both of these executives were parties to employment and severance arrangements with the Company that obligated Allegheny Technologies to make specific payments to them on account of their departure. The $29.5 million charge was partially offset by a gain of $11.0 million on the sale of a minority interest in Gul Technologies Singapore, Ltd. in 2000. This gain is included in other income on the statement of operations. The Company recorded a net transformation and restructuring charge of $5.6 million in 1999. This charge included costs associated with adjusting employee benefit plans as a result of the spin-offs partially offset by a $7.2 million reversal of restructuring costs accrued in 1998 related to workforce reductions which were implemented at less than expected costs. At December 31, 2001, substantially all cash expenditures related to the 2000 and 1999 restructuring and transformation charges had been paid. Excess pension income represents the amount of pension income in excess of amounts allocated to business segments to offset pension and other postretirement benefit expenses. - 42 -
(In millions) 2001 2000 1999 - -------------------------------------------------------------------------------------------------------------------------------- Depreciation and amortization: Flat-Rolled Products $ 65.4 $ 65.9 $ 62.4 High Performance Metals 20.3 22.3 22.6 Industrial Products 11.9 10.6 8.3 Corporate 1.0 0.9 2.0 - -------------------------------------------------------------------------------------------------------------------------------- $ 98.6 $ 99.7 $ 95.3 - -------------------------------------------------------------------------------------------------------------------------------- Capital expenditures: Flat-Rolled Products $ 20.1 $ 25.6 $ 43.5 High Performance Metals 75.8 21.7 11.3 Industrial Products 8.2 12.7 18.8 Corporate 0.1 0.2 0.5 - -------------------------------------------------------------------------------------------------------------------------------- $ 104.2 $ 60.2 $ 74.1 - -------------------------------------------------------------------------------------------------------------------------------- Identifiable assets: Flat-Rolled Products $ 1,037.5 $ 1,219.3 $ 1,270.9 High Performance Metals 625.0 599.9 594.3 Industrial Products 169.5 184.3 160.7 Corporate: Pension Asset 632.9 593.6 503.7 Other 178.3 179.1 221.0 - -------------------------------------------------------------------------------------------------------------------------------- $ 2,643.2 $ 2,776.2 $ 2,750.6 - --------------------------------------------------------------------------------------------------------------------------------
Geographic information for external sales, based on country of origin and assets are as follows:
PERCENT Percent Percent (In millions) 2001 OF TOTAL 2000 Of Total 1999 Of Total - ---------------------------------------------------------------------------------------------------------------------------------- External Sales: United States $1,628.5 77% $2,018.7 82% $1,847.7 80% United Kingdom 117.1 5% 106.4 4% 105.0 4% France 90.7 4% 79.0 3% 86.3 4% Germany 89.9 4% 73.6 3% 63.4 3% Canada 55.1 3% 50.7 2% 63.1 3% Japan 32.0 1% 26.6 1% 42.6 2% China 18.4 1% 8.6 1% 1.7 --% Other 96.3 5% 97.0 4% 86.3 4% - ---------------------------------------------------------------------------------------------------------------------------------- Total Sales $2,128.0 100% $2,460.6 100% $2,296.1 100% - ---------------------------------------------------------------------------------------------------------------------------------- PERCENT Percent Percent (In millions) 2001 OF TOTAL 2000 Of Total 1999 Of Total - ---------------------------------------------------------------------------------------------------------------------------------- Total Assets: United States $2,357.5 89% $2,491.7 90% $2,437.3 89% United Kingdom 157.3 6% 152.0 5% 167.0 5% China 51.6 2% 49.6 2% 42.3 2% Germany 24.2 1% 19.3 1% 16.5 1% Japan 10.8 1% 13.5 1% 15.4 1% France 6.8 --% 6.9 --% 9.8 --% Canada 5.1 --% 11.0 --% 25.3 1% Other 29.9 1% 32.2 1% 37.0 1% - ---------------------------------------------------------------------------------------------------------------------------------- Total Assets $2,643.2 100% $2,776.2 100% $2,750.6 100% - ----------------------------------------------------------------------------------------------------------------------------------
- 43 - NOTE 11. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS -- The payment obligations under the $150 million 6.95% debentures due 2025 issued by Allegheny Ludlum Corporation (the "Subsidiary") are fully and unconditionally guaranteed by Allegheny Technologies Incorporated (the "Guarantor Parent"). In accordance with positions established by the Securities and Exchange Commission, the following financial information set forth separately financial information with respect to the Subsidiary, the non-guarantor subsidiaries and the Guarantor Parent. The principal elimination entries eliminate investments in subsidiaries and certain intercompany balances and transactions. In 1996, the underfunded defined benefit pension plans of Allegheny Ludlum Corporation were merged with the overfunded defined benefit pension plans of Teledyne, Inc. and Allegheny Technologies became the plan sponsor. As a result, the balance sheets presented for Allegheny Ludlum Corporation and the non-guarantor subsidiaries do not include the Allegheny Technologies net prepaid pension asset or the related deferred taxes. Solely for purposes of this presentation, pension income has been allocated to Allegheny Ludlum Corporation and the non-guarantor subsidiaries to offset pension and postretirement expenses which may be funded with pension assets. This allocated pension income has not been recorded in the financial statements of Allegheny Ludlum Corporation or the non-guarantor subsidiaries. Management and royalty fees charged to Allegheny Ludlum Corporation and to the non-guarantor subsidiaries by the Guarantor Parent have been excluded solely for purposes of this presentation. ALLEGHENY TECHNOLOGIES INCORPORATED FINANCIAL INFORMATION FOR SUBSIDIARY AND GUARANTOR PARENT BALANCE SHEETS
December 31, 2001 - ----------------------------------------------------------------------------------------------------------------------------------- Non- Guarantor guarantor (In millions) Parent Subsidiary Subsidiaries Eliminations Consolidated - ----------------------------------------------------------------------------------------------------------------------------------- ASSETS Cash and cash equivalents $ 0.4 $ 14.3 $ 19.0 $ -- $ 33.7 Accounts receivable, net 0.1 84.8 189.7 -- 274.6 Inventories -- 249.2 259.2 -- 508.4 Deferred income taxes 82.0 -- -- -- 82.0 Prepaid expenses and other current assets 0.1 9.9 17.4 -- 27.4 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 82.6 358.2 485.3 -- 926.1 Property, plant, and equipment, net -- 459.7 369.2 -- 828.9 Prepaid pension cost 632.9 -- -- -- 632.9 Cost in excess of net assets acquired -- 112.1 76.3 -- 188.4 Other assets 1,175.6 539.3 337.4 (1,985.4) 66.9 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS $ 1,891.1 $ 1,469.3 $ 1,268.2 $(1,985.4) $ 2,643.2 - ----------------------------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 1.4 $ 77.4 $ 76.5 $ -- $ 155.3 Accrued liabilities 413.2 45.0 222.5 (512.5) 168.2 Short-term debt and current portion of long-term debt -- 0.5 8.7 -- 9.2 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 414.6 122.9 307.7 (512.5) 332.7 Long-term debt 362.5 370.4 40.0 (199.9) 573.0 Accrued postretirement benefits -- 302.4 203.7 -- 506.1 Deferred income taxes 153.7 -- -- -- 153.7 Other 15.6 28.7 88.7 -- 133.0 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 946.4 824.4 640.1 (712.4) 1,698.5 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY 944.7 644.9 628.1 (1,273.0) 944.7 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,891.1 $ 1,469.3 $ 1,268.2 $(1,985.4) $ 2,643.2 - -----------------------------------------------------------------------------------------------------------------------------------
- 44 - ALLEGHENY TECHNOLOGIES INCORPORATED FINANCIAL INFORMATION FOR SUBSIDIARY AND GUARANTOR PARENT STATEMENTS OF OPERATIONS For the year ended December 31, 2001
- ----------------------------------------------------------------------------------------------------------------------------------- Non- Guarantor guarantor (In millions) Parent Subsidiary Subsidiaries Eliminations Consolidated - ----------------------------------------------------------------------------------------------------------------------------------- SALES Costs and expenses: $ -- $ 1,062.9 $ 1,065.1 $ -- $ 2,128.0 Cost of sales (55.4) 1,058.4 859.3 -- 1,862.3 Selling and administrative expenses (3.4) 42.1 160.1 -- 198.8 Restructuring and transformation costs 9.8 61.5 2.9 -- 74.2 - ----------------------------------------------------------------------------------------------------------------------------------- Income (loss) before interest, other income and income taxes 49.0 (99.1) 42.8 -- (7.3) Interest expense, net 16.9 10.9 1.5 -- 29.3 Other income (expense) including equity in income (loss) of unconsolidated subsidiaries (71.2) 8.9 7.6 54.9 0.2 - ----------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) BEFORE INCOME TAXES (39.1) (101.1) 48.9 54.9 (36.4) Income tax provision (benefit) (13.9) (43.9) 29.8 16.8 (11.2) - ----------------------------------------------------------------------------------------------------------------------------------- NET INCOME (LOSS) $ (25.2) $ (57.2) $ 19.1 $ 38.1 $ (25.2) - ----------------------------------------------------------------------------------------------------------------------------------- ALLEGHENY TECHNOLOGIES INCORPORATED FINANCIAL INFORMATION FOR SUBSIDIARY AND GUARANTOR PARENT CONDENSED STATEMENTS OF CASH FLOWS For year ended December 31, 2001 - ----------------------------------------------------------------------------------------------------------------------------------- Non- Guarantor guarantor (In millions) Parent Subsidiary Subsidiaries Eliminations Consolidated - ----------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES $ 45.1 $ 131.5 $ 42.7 $ (96.5) $ 122.8 CASH FLOWS FROM INVESTING ACTIVITIES -- (17.3) (71.4) 3.7 (85.0) CASH FLOWS FROM FINANCING ACTIVITIES (44.8) (100.4) 22.1 92.8 (30.3) - -----------------------------------------------------------------------------------------------------------------------------------
- 45 - ALLEGHENY TECHNOLOGIES INCORPORATED FINANCIAL INFORMATION FOR SUBSIDIARY AND GUARANTOR PARENT BALANCE SHEETS
December 31, 2000 - ----------------------------------------------------------------------------------------------------------------------------------- Non- Guarantor guarantor (In millions) Parent Subsidiary Subsidiaries Eliminations Consolidated - ----------------------------------------------------------------------------------------------------------------------------------- ASSETS Cash and cash equivalents $ 0.1 $ 0.5 $ 25.6 $ -- $ 26.2 Accounts receivable, net -- 133.8 191.5 -- 325.3 Inventories -- 321.1 264.6 -- 585.7 Deferred income taxes 61.2 -- -- -- 61.2 Prepaid expenses and other current assets 1.9 8.2 14.3 -- 24.4 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 63.2 463.6 496.0 -- 1,022.8 Property, plant, and equipment, net -- 556.6 315.4 -- 872.0 Prepaid pension cost 593.6 -- -- -- 593.6 Cost in excess of net assets acquired -- 115.7 78.8 -- 194.5 Other assets 1,285.9 509.1 349.3 (2,051.0) 93.3 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS $ 1,942.7 $ 1,645.0 $ 1,239.5 $(2,051.0) $ 2,776.2 - ----------------------------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 2.6 $ 83.8 $ 82.9 $ -- $ 169.3 Accrued liabilities 385.4 55.4 199.0 (448.8) 191.0 Short-term debt and current portion of long-term debt 50.0 0.5 2.7 -- 53.2 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 438.0 139.7 284.6 (448.8) 413.5 Long-term debt 287.0 403.0 32.7 (232.1) 490.6 Accrued postretirement benefits -- 304.2 221.7 -- 525.9 Deferred income taxes 158.7 -- -- -- 158.7 Other 19.8 28.2 100.3 -- 148.3 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 903.5 875.1 639.3 (680.9) 1,737.0 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY 1,039.2 769.9 600.2 (1,370.1) 1,039.2 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,942.7 $ 1,645.0 $ 1,239.5 $(2,051.0) $ 2,776.2 - -----------------------------------------------------------------------------------------------------------------------------------
- 46 - ALLEGHENY TECHNOLOGIES INCORPORATED FINANCIAL INFORMATION FOR SUBSIDIARY AND GUARANTOR PARENT STATEMENTS OF OPERATIONS
For the year ended December 31, 2000 - ----------------------------------------------------------------------------------------------------------------------------------- Non- Guarantor guarantor (In millions) Parent Subsidiary Subsidiaries Eliminations Consolidated - ----------------------------------------------------------------------------------------------------------------------------------- SALES Cost and expenses: $ -- $ 1,432.8 $ 1,027.6 $ -- $ 2,460.4 Cost of sales (62.3) 1,269.6 791.2 -- 1,998.5 Selling and administrative expenses 13.7 54.5 135.5 -- 203.7 Restructuring and transformation costs -- -- 29.5 -- 29.5 - ----------------------------------------------------------------------------------------------------------------------------------- Income (loss) before interest, other income and income taxes 48.6 108.7 71.4 -- 228.7 Interest expense, net 20.6 11.0 2.8 -- 34.4 Other income (expense) including equity in income (loss) of unconsolidated subsidiaries 194.3 13.5 24.2 (217.5) 14.5 - ----------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) BEFORE INCOME TAXES 222.3 111.2 92.8 (217.5) 208.8 Income tax provision (benefit) 89.8 44.2 29.3 (87.0) 76.3 - ----------------------------------------------------------------------------------------------------------------------------------- NET INCOME (LOSS) $ 132.5 $ 67.0 $ 63.5 $ (130.5) $ 132.5 - -----------------------------------------------------------------------------------------------------------------------------------
ALLEGHENY TECHNOLOGIES INCORPORATED FINANCIAL INFORMATION FOR SUBSIDIARY AND GUARANTOR PARENT CONDENSED STATEMENTS OF CASH FLOWS
For the year December 31, 2000 - ----------------------------------------------------------------------------------------------------------------------------------- Non- Guarantor guarantor (In millions) Parent Subsidiary Subsidiaries Eliminations Consolidated - ----------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES $ 106.5 $ 78.3 $ 94.1 $ (143.4) $ 135.5 CASH FLOWS FROM INVESTING ACTIVITIES (0.9) (20.8) (52.1) 3.8 (70.0) CASH FLOWS FROM FINANCING ACTIVITIES (105.5) (57.1) (67.0) 139.6 (90.0) - -----------------------------------------------------------------------------------------------------------------------------------
- 47 - ALLEGHENY TECHNOLOGIES INCORPORATED FINANCIAL INFORMATION FOR SUBSIDIARY AND GUARANTOR PARENT STATEMENTS OF OPERATIONS
For the year ended December 31, 1999 - ----------------------------------------------------------------------------------------------------------------------------------- Non- Guarantor guarantor (In millions) Parent Subsidiary Subsidiaries Eliminations Consolidated - ----------------------------------------------------------------------------------------------------------------------------------- SALES $ -- $ 1,288.4 $ 1,007.7 $ -- $ 2,296.1 Cost of sales (37.0) 1,157.1 757.8 -- 1,877.9 Selling and administrative expenses 66.6 57.5 105.0 -- 229.1 Restructuring and transformation -- -- 5.6 -- 5.6 - ----------------------------------------------------------------------------------------------------------------------------------- Income (loss) before interest, other income and income taxes (29.6) 73.8 139.3 -- 183.5 Interest expense, net 8.3 2.1 15.5 -- 25.9 Other income (expense) including equity in income (loss) of unconsolidated subsidiaries 211.8 3.2 21.3 (219.7) 16.6 - ----------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) BEFORE INCOME TAXES (BENEFIT) 173.9 74.9 145.1 (219.7) 174.2 Income tax provision (benefit) 63.1 27.2 52.6 (79.7) 63.2 - ----------------------------------------------------------------------------------------------------------------------------------- INCOME FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY GAINS 110.8 47.7 92.5 (140.0) 111.0 Income from discontinued operations, net of income taxes -- -- 59.6 -- 59.6 Extraordinary gains on sales of operations, net of income taxes -- -- 129.6 -- 129.6 - ----------------------------------------------------------------------------------------------------------------------------------- Net income $ 110.8 $ 47.7 $ 281.7 $ (140.0) $ 300.2 - ----------------------------------------------------------------------------------------------------------------------------------- ALLEGHENY TECHNOLOGIES INCORPORATED FINANCIAL INFORMATION FOR SUBSIDIARY AND GUARANTOR PARENT CONDENSED STATEMENTS OF CASH FLOWS For the year December 31, 1999 - ----------------------------------------------------------------------------------------------------------------------------------- Non- Guarantor guarantor (In millions) Parent Subsidiary Subsidiaries Eliminations Consolidated - ----------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES $ 325.8 $ 41.5 $ 217.1 $ (481.5) $ 102.9 CASH FLOWS FROM INVESTING ACTIVITIES (2.1) (53.6) 461.8 23.6 429.7 CASH FLOWS FROM FINANCING ACTIVITIES (326.5) (15.8) (671.7) 457.9 (556.1) - -----------------------------------------------------------------------------------------------------------------------------------
- 48 - NOTE 12. EARNINGS PER SHARE -- The following table sets forth the computation of basic and diluted net income (loss) per common share:
(In millions except per share amounts) Years ended December 31, 2001 2000 1999 - -------------------------------------------------------------------------------------------------------------------------------- Numerator: Income (loss) from continuing operations before extraordinary gains $ (25.2) $ 132.5 $ 111.0 Income from discontinued operations, net of income taxes -- -- 59.6 Extraordinary gains on sales of operations, net of income taxes -- -- 129.6 - -------------------------------------------------------------------------------------------------------------------------------- Numerator for basic and diluted net income (loss) per common share-- Net income (loss) $ (25.2) $ 132.5 $ 300.2 - -------------------------------------------------------------------------------------------------------------------------------- Denominator: Weighted average shares 80.2 82.9 95.3 Contingent issuable stock 0.1 0.1 0.1 - -------------------------------------------------------------------------------------------------------------------------------- Denominator for basic net income (loss) per common share 80.3 83.0 95.4 Effect of dilutive securities: Employee stock options -- -- 0.5 - -------------------------------------------------------------------------------------------------------------------------------- Dilutive potential common shares -- -- 0.5 Denominator for diluted net income per common share-- adjusted weighted average shares and assumed conversions 80.3 83.0 95.9 - -------------------------------------------------------------------------------------------------------------------------------- Basic net income (loss) per common share: Income (loss) from continuing operations before extraordinary gains $ (0.31) $ 1.60 $ 1.17 Income from discontinued operations -- -- 0.62 Extraordinary gains on sales of operations -- -- 1.36 - -------------------------------------------------------------------------------------------------------------------------------- Basic net income (loss) per common share $ (0.31) $ 1.60 $ 3.15 - -------------------------------------------------------------------------------------------------------------------------------- Diluted net income (loss) per common share: Income (loss) from continuing operations before extraordinary gains $ (0.31) $ 1.60 $ 1.16 Income from discontinued operations -- -- 0.62 Extraordinary gains on sales of operations -- -- 1.35 - -------------------------------------------------------------------------------------------------------------------------------- Diluted net income (loss) per common share $ (0.31) $ 1.60 $ 3.13 - --------------------------------------------------------------------------------------------------------------------------------
Weighted average shares issuable upon the exercise of stock options which were antidilutive and thus not included in the calculation were 4.5 million in 2001 and 4.0 million in 2000. NOTE 13. COMMITMENTS AND CONTINGENCIES -- Rental expense under operating leases was $22.2 million in 2001, $21.9 million in 2000 and $24.1 million in 1999. Future minimum rental commitments under operating leases with non-cancelable terms of more than one year at December 31, 2001, were as follows: $15.4 million in 2002, $13.0 million in 2003, $8.3 million in 2004, $6.6 million in 2005, $5.6 million in 2006 and $3.4 million thereafter. The Company is subject to various domestic and international environmental laws and regulations that govern the discharge of pollutants into the air or water, and disposal of hazardous substances, and which may require that it investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations, including sites at which the Company has been identified as a potentially responsible party under the federal Superfund laws and comparable state laws. The Company could incur substantial cleanup costs, fines, and civil or criminal sanctions, third party property damage or personal injury claims as a result of violations or liabilities under these laws or noncompliance with environmental permits required at the Company's facilities. The Company is currently involved in the investigation and remediation of a number of the Company's current and former sites as well as third party location sites under these laws. - 49 - In accordance with the Company's accounting policy disclosed in Note 1, environmental liabilities are recorded when the Company's liability is probable and the costs are reasonably estimable. In many cases, however, investigations are not yet at a stage where the Company has been able to determine whether it is liable or, if liability is probable, to reasonably estimate the loss or range of loss, or certain components thereof. Estimates of the Company's liability are further subject to uncertainties regarding the nature and extent of site contamination, the range of remediation alternatives available, evolving remediation standards, imprecise engineering evaluations and estimates of appropriate cleanup technology, methodology and cost, the extent of corrective actions that may be required, and the number and financial condition of other potentially responsible parties, as well as the extent of their responsibility for the remediation. Accordingly, as investigation and remediation of these sites proceeds, it is likely that adjustments in the Company's accruals will be necessary to reflect new information. The amounts of any such adjustments could have a material adverse effect on the Company's results of operations in a given period, but the amounts, and the possible range of loss in excess of the amounts accrued, are not reasonably estimable. Based on currently available information, however, management does not believe that future environmental costs in excess of those accrued with respect to sites with which the Company has been identified are likely to have a material adverse effect on the Company's financial condition or results of operation. The resolution in any reporting period of one or more of these matters could have a material adverse effect on the Company's results of operations for that period. In addition, there can be no assurance that additional future developments, administrative actions or liabilities relating to environmental matters will not have a material adverse effect on the Company's financial condition or results of operations. At December 31, 2001, the Company's reserves for environmental remediation obligations totaled approximately $46.7 million, of which approximately $15.2 million were included in other current liabilities. The reserve includes estimated probable future costs of $18.8 million for federal Superfund and comparable state-managed sites; $3.8 million for formerly owned or operated sites for which the Company has remediation or indemnification obligations; $12.0 million for owned or controlled sites at which Company operations have been discontinued; and $12.2 million for sites utilized by the Company in its ongoing operations. The Company is evaluating whether it may be able to recover a portion of future costs for environmental liabilities from third parties other than participating potentially responsible parties. The timing of expenditures depends on a number of factors that vary by site, including the nature and extent of contamination, the number of potentially responsible parties, the timing of regulatory approvals, the complexity of the investigation and remediation, and the standards for remediation. The Company expects that it will expend present accruals over many years, and will complete remediation of all sites with which it has been identified in up to thirty years. Various claims (whether based on U.S. Government or Company audits and investigations or otherwise) have been or may be asserted against the Company related to its U.S. Government contract work, principally related to the former operations of Teledyne, Inc., including claims based on business practices and cost classifications and actions under the False Claims Act. Depending on the circumstances and the outcome, such proceedings could result in fines, penalties, compensatory and treble damages or the cancellation or suspension of payments under one or more U.S. Government contracts. Under government regulations, a company, or one or more of its operating divisions or units, can also be suspended or debarred from government contracts based on the results of investigations. Given the limited extent of the Company's business with the U.S. Government, the Company believes that a suspension or debarment of the Company would not have a material adverse effect on the future operating results and consolidated financial condition of the Company. Although the outcome of these matters cannot be predicted with certainty, management does not believe there is any audit, review or investigation currently pending against the Company of which management is aware that is likely to have a material adverse effect on the Company's financial condition or liquidity, although the resolution in any reporting period of one or more of these matters could have a material adverse effect on the Company's results of operations for that period. In the spin-offs of Teledyne and Water Pik, completed in November 1999, the new companies agreed to assume and to defend and hold the Company harmless against all liabilities (other than certain income tax liabilities) associated with the historical operations of their businesses, including all government contracting, environmental, product liability and other claims and demands, whenever any such claims or demands might arise or be made. If the new companies were unable or otherwise fail to satisfy these assumed liabilities, the Company could be required to satisfy them, which could have a material adverse effect on the Company's results of operations and financial condition. In connection with the spin-offs of Teledyne and Water Pik, the Company received a tax ruling from the Internal Revenue Service stating that the spin-offs will be tax-free to the Company and the Company's stockholders. While the tax ruling relating to the qualification of the spin-offs as tax-free distributions within the meaning of the Internal Revenue Code generally is binding on the Internal Revenue Service, the continuing validity of the tax ruling is subject to certain factual representations and uncertainties that, among other things, require the new companies to take or refrain from taking certain actions. If a spin-off were not to qualify as a tax-free distribution within the meaning of the Internal Revenue Code, the Company would recognize taxable gain generally equal to the amount by which the fair market value of the common stock distributed to the Company's stockholders in the spin-off exceeded the Company's basis in the new company's - 50 - assets. In addition, the distribution of the new company's common stock to Company stockholders would generally be treated as taxable to the Company's stockholders in an amount equal to the fair market value of the common stock they received. If a spin-off qualified as a distribution within the meaning of the Internal Revenue Code but was disqualified as tax-free to the Company because of certain post-spin-off circumstances, the Company would recognize taxable gain as described in the preceding sentence, but the distribution of the new company's common stock to the Company's stockholders in the spin-off would generally be tax-free to each Company stockholder. In the spin-offs, the new companies executed tax sharing and indemnification agreements in which each agreed to be responsible for any taxes imposed on and other amounts paid by the Company, its agents and representatives and its stockholders as a result of the failure of the spin-off to qualify as a tax-free distribution within the meaning of the Internal Revenue Code if the failure or disqualification is caused by post-spin-off actions by or with respect to that company or its stockholders. Potential liabilities under these agreements could exceed the respective new company's net worth by a substantial amount. If either or both of the spin-offs were not to qualify as tax-free distributions to the Company or its stockholders, and either or both of the new companies were unable or otherwise failed to satisfy the liabilities they assumed under the tax sharing and indemnification agreements, the Company could be required to satisfy them without full recourse against the new companies. This could have a material adverse effect on the Company's results of operations and financial condition. In June 1995, the U.S. Government commenced an action against Allegheny Ludlum in the United States District Court for the Western District of Pennsylvania, alleging multiple violations of the federal Clean Water Act. The trial of this matter concluded in February 2001 with a favorable jury verdict for Allegheny Ludlum of approximately 85 percent of the claims. In February 2002, the Court issued a decision imposing a penalty of $8.2 million for approximately 160 incidents at five facilities that occurred over a period of about six years which Allegheny Ludlum had reported to the appropriate environmental agencies. The Company is reviewing options for appealing the Court's decision. At December 31, 2001, the Company had adequate reserves for this matter. Allegheny Ludlum and the United Steelworkers of America ("USWA") are parties to various collective bargaining agreements which set forth a "Profit Sharing Plan." The USWA disputes the Company's Profit Sharing Pool calculations for 1996, 1997, 1998 and 1999. The USWA's outside accountant, KPMG LLP, identified certain adjustments it believed should be made to those calculations and that the net effect of those adjustments would result in additional amounts allegedly owed to USWA represented employees of approximately $20 million. The Company maintains that its certified determinations of the Profit Sharing Pool calculations were made as prescribed by the Profit Sharing Plan. On November 20, 2001, the USWA filed a Complaint to compel the arbitration in this matter. The Complaint has been filed in the United States District Court for the Western District of Pennsylvania and is captioned United Steelworkers of America, AFL-CIO CLC v. Allegheny Ludlum Corporation, Civil Action No. 01-2196. The Company denies that any adjustments to the Profit Sharing Pool calculations are required and intends to contest the USWA's claim vigorously. The Company believes that the disposition of this matter is not likely to have a material adverse effect on the Company's financial condition or liquidity, although resolution in any reporting period could have a material adverse effect on the Company's results of operations for that period. In March 1995, Kaiser Aerospace & Electronics Corporation ("Kaiser") filed a civil complaint against Teledyne Industries, Inc. (now TDY Industries, Inc. ("TDY")), a wholly-owned subsidiary of the Company, and Dimeling Schreiber & Park ("DS&P"), DS&P's general partners, and New Piper Aircraft, Inc. in the state court for Miami-Dade County, Florida. The complaint alleged that TDY breached a Cooperation and Shareholder's Agreement with Kaiser under which the parties agreed to cooperate in the filing and promotion of a proposed plan for acquiring out of bankruptcy the assets of Piper Aircraft, a manufacturer of general aviation aircraft. Kaiser alleged that TDY breached contractual and fiduciary duty obligations under the agreement by instead entering into a proposed plan with DS&P and sought damages as well as a constructive trust over the shares of New Piper Aircraft. TDY and the other parties are engaged in discovery and have agreed to participate in a mediation. This matter is tentatively scheduled for trial during the fourth quarter of 2002. While the outcome of the litigation cannot be predicted, and the Company believes that the claims are not meritorious, an adverse resolution of this matter could have a material adverse effect on the Company's results of operations, financial condition or liquidity. TDY Industries, Inc. and the San Diego Unified Port District ("Port District") entered into a lease of property located in San Diego, California on October 1, 1984. The current lease term expires in March 2004, with options to renew, which ultimately expire in 2024. TDY operated its Teledyne Ryan Aeronautical division ("Ryan") at the property until May 1999, when substantially all the assets and business of Ryan were sold to Northrop Grumman Corporation ("Northrop"). Northrop subleased a portion of the property until early 2001. TDY also entered into three separate sublease arrangements for portions of the property. TDY sought Port District consent to the subleases, which the Port District refused. After its administrative appeal to the Port District was denied, TDY Industries, Inc. commenced a lawsuit against the Port District. The complaint, filed in December 2001 in state court in San Diego, alleges breach of contract, inverse condemnation, tortuous interference with a prospective economic advantage and other causes of action relating to the Port District's failure to consent to subleases of the space. The Complaint seeks at least $4 million for damages from the Port District and declaratory relief. - 51 - TDY is obligated to continue to pay rent to the Port District, in an amount of approximately $0.4 million per month. Due to the Port District's failure to consent to subleases, TDY is unable to mitigate its costs related to the property. While TDY is continuing its marketing efforts to sublease the property, TDY and the Port District continue to discuss a resolution to the matter. At December 31, 2001, the Company had a reserve of approximately $5 million to cover the costs while the facility remains unoccupied. In another matter related to the property, the Port District has requested that the California Department of Toxic Substances Control ("DTSC") evaluate whether the property is regulated as a hazardous waste transportation, storage, or disposal facility under the Resource Conservation and Recovery Act ("RCRA") and similar state laws. DTSC recognizes that the information pertaining to the RCRA permitting status of the property is ambiguous and has agreed to refer the issue of the property's RCRA permitting status to DTSC's Legal Office for further consideration. TDY has an opportunity to discuss this matter directly with DTSC's Legal Office and DTSC will refrain from taking action regarding this issue until after completion of DTSC's Legal Office review and discussions with TDY. To the extent the facility is subject to RCRA permitting and corrective action is required at the property, DTSC has agreed that the San Diego Regional Water Quality Control Board ("Regional Board") is the appropriate agency to oversee the corrective action work. The Regional Board is currently overseeing other investigative work at the property. A number of other lawsuits, claims and proceedings have been or may be asserted against the Company relating to the conduct of its business, including those pertaining to product liability, patent infringement, commercial, employment, employee benefits, environmental and stockholder matters. While the outcome of litigation cannot be predicted with certainty, and some of these lawsuits, claims or proceedings may be determined adversely to the Company, management does not believe that the disposition of any such pending matters is likely to have a material adverse effect on the Company's financial condition or liquidity, although the resolution in any reporting period of one or more of these matters could have a material adverse effect on the Company's results of operations for that period. NOTE 14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) --
Quarter Ended - -------------------------------------------------------------------------------------------------------------------------------- (In millions except per share amounts) March 31 June 30 September 30 December 31 - -------------------------------------------------------------------------------------------------------------------------------- 2001 Sales $542.5 $554.7 $537.7 $493.1 Gross profit 65.6 70.9 67.4 61.8 Net income (loss) 6.4 6.2 8.0 (45.8) - -------------------------------------------------------------------------------------------------------------------------------- Basic and diluted net income (loss) per common share $ 0.08 $ 0.08 $ 0.10 $(0.57) - -------------------------------------------------------------------------------------------------------------------------------- Average shares outstanding 80,162,491 80,209,965 80,237,977 80,264,682 - -------------------------------------------------------------------------------------------------------------------------------- 2000 Sales $625.4 $638.3 $612.0 $584.7 Gross profit 114.7 123.5 121.5 102.2 Net income 41.3 43.7 42.1 5.4 - -------------------------------------------------------------------------------------------------------------------------------- Basic and diluted net income per common share $ 0.47 $ 0.53 $ 0.52 $ 0.07 - -------------------------------------------------------------------------------------------------------------------------------- Average shares outstanding 87,200,676 82,793,360 81,116,579 80,268,630 - --------------------------------------------------------------------------------------------------------------------------------
The 2001 fourth quarter includes an after-tax charge of $47.8 million, primarily non-cash, related to asset impairments and cost reduction actions, including the permanent idling of the Houston, Pennsylvania stainless steel melt shop and other workforce reductions. The 2001 second quarter includes a non-cash after-tax write-off of $3.4 million related to the Company's minority interest in the e-Business site, MetalSpectrum, which terminated operations during the 2001 second quarter. The 2000 fourth quarter includes after-tax costs of $20.0 million related to the permanent idling of high-cost titanium sponge production assets of the High Performance Metals segment, a salaried workforce reduction at Allegheny Ludlum, and costs related to changes in the Company's executive management. The 2000 first quarter includes after-tax gains of $7.1 million associated with the sale of a minority interest in Gul Technologies Singapore, Ltd. offset by after-tax costs of $2.1 million for exiting the tungsten mill products business of Metalworking Products. - 52 - COMMON STOCK PRICES The Company's common stock is traded on the New York Stock Exchange (symbol ATI). At December 31, 2001, there were approximately 8,077 record holders of Allegheny Technologies Incorporated common stock. The Company paid a cash dividend of $0.20 per share on its common stock in each of the 2001 and 2000 quarters. The Company's stock price ranges were as follows:
Quarter Ended - ------------------------------------------------------------------------------------------------------------------- 2001 March 31 June 30 September 30 December 31 - ------------------------------------------------------------------------------------------------------------------- High $ 19.00 $ 21.07 $ 19.80 $ 17.01 Low $ 13.19 $ 16.40 $ 12.55 $ 12.50 - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- 2000 March 31 June 30 September 30 December 31 - ------------------------------------------------------------------------------------------------------------------- High $ 23.75 $ 26.81 $ 22.63 $ 21.00 Low $ 16.13 $ 17.98 $ 17.06 $ 12.50 - -------------------------------------------------------------------------------------------------------------------
MANAGEMENT'S REPORT The accompanying consolidated financial statements of Allegheny Technologies Incorporated and subsidiaries have been prepared in accordance with generally accepted accounting principles and include some amounts that are based upon Management's best estimates and judgments. Management has the primary responsibility for the information contained in the financial statements and in other sections of this Annual Report and for their integrity and objectivity. The Company has a system of internal controls designed to provide reasonable assurance that assets are safeguarded and transactions are properly executed and recorded for the preparation of financial information. The concept of reasonable assurance is based on the recognition that there are inherent limitations in all systems of internal accounting control and that the cost of such systems should not exceed the benefits to be derived. The Company maintains a staff of professional internal auditors, who assist in audit coverage with the independent accountants and conduct operational and special audits. The independent accountants express their opinion on the Company's financial statements based on procedures, including an evaluation of internal controls, which they consider to be sufficient to form their opinion. The Audit Committee of the Board of Directors is composed of five non-employee members. Among its principal duties, the Committee is responsible for recommending the independent accountants to conduct the annual audit of the Company's financial statements and for reviewing the financial reporting and accounting practices. James L. Murdy Richard J. Harshman Dale G. Reid President Senior Vice President, Vice President, and Chief Executive Officer Finance and Controller and Chief Financial Officer Chief Accounting Officer
- 53 - SELECTED FINANCIAL DATA
For the Years Ended December 31, 2001 2000 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------------------------- Volume: Flat-Rolled Products -- commodity (finished tons) 367,894 460,940 475,557 424,659 437,409 Flat-Rolled Products-- high value (tons) 130,172 147,661 117,062 113,148 104,685 High Performance Metals-- nickel-based and specialty steel alloys (000's lbs.) 51,899 46,612 43,905 44,182 28,546 High Performance Metals -- titanium mill products (000's lbs.) 23,070 24,798 22,792 24,739 29,872 High Performance Metals -- exotic alloys (000's lbs.) 3,457 3,691 3,756 4,690 4,860 - ----------------------------------------------------------------------------------------------------------------------------------- Average Prices: Flat-Rolled Products -- commodity (per finished ton) $ 1,527 $ 1,819 $ 1,562 $ 1,663 $ 1,893 Flat-Rolled Products-- high value (per ton) 3,956 4,025 4,189 4,187 4,415 High Performance Metals - nickel-based and specialty steel alloys (per lb.) 6.31 5.86 5.98 7.33 8.45 High Performance Metals -- titanium mill products (per lb.) 11.70 10.87 11.70 14.03 14.03 High Performance Metals -- exotic alloys (per lb.) 33.52 35.56 34.77 29.69 26.41 - -----------------------------------------------------------------------------------------------------------------------------------
Certain amounts for prior periods have been reclassified to conform with 2001 presentation.
(In millions except per share amounts) For the Years Ended December 31, 2001 2000 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------------------------- Sales: Flat-Rolled Products $ 1,088.4 $ 1,444.1 $ 1,296.7 $ 1,193.1 $ 1,285.5 High Performance Metals 771.8 735.4 722.7 860.3 865.5 Industrial Products 267.8 280.9 276.7 349.0 349.9 - ----------------------------------------------------------------------------------------------------------------------------------- Total sales $ 2,128.0 $ 2,460.4 $ 2,296.1 $ 2,402.4 $ 2,500.9 - ----------------------------------------------------------------------------------------------------------------------------------- Operating profit (loss): Flat-Rolled Products $ (38.1) $ 119.6 $ 85.2 $ 126.3 $ 139.6 High Performance Metals 82.0 66.5 87.0 156.0 181.2 Industrial Products 10.4 21.7 12.2 35.8 42.9 - ----------------------------------------------------------------------------------------------------------------------------------- Total operating profit $ 54.3 $ 207.8 $ 184.4 $ 318.1 $ 363.7 - ----------------------------------------------------------------------------------------------------------------------------------- Income (loss) from continuing operations before extraordinary items $ (25.2) $ 132.5 $ 111.0 $ 155.0 $ 230.4 Income from discontinued operations -- -- 59.6 86.2 98.4 Extraordinary gains on sales of operations -- -- 129.6 -- -- Extraordinary loss on redemption of debt -- -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Net income (loss) $ (25.2) $ 132.5 $ 300.2 $ 241.2 $ 328.8 - ----------------------------------------------------------------------------------------------------------------------------------- Basic net income (loss) per common share: Income (loss) from continuing operations before extraordinary items $ (0.31) $ 1.60 $ 1.17 $ 1.57 $ 2.34 Income from discontinued operations -- -- 0.62 0.88 1.00 Extraordinary gains on sales of operations -- -- 1.36 -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Basic net income (loss) per common share $ (0.31) $ 1.60 $ 3.15 $ 2.45 $ 3.34 - ----------------------------------------------------------------------------------------------------------------------------------- Diluted net income (loss) per common share: Income (loss) from continuing operations before extraordinary items $ (0.31) $ 1.60 $ 1.16 $ 1.56 $ 2.30 Income from discontinued operations -- -- 0.62 0.87 0.98 Extraordinary gains on sales of operations -- -- 1.35 -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Diluted net income (loss) per common share $ (0.31) $ 1.60 $ 3.13 $ 2.43 $ 3.28 - -----------------------------------------------------------------------------------------------------------------------------------
- 54 -
For the Years Ended December 31, 2001 2000 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------------------------- Dividends declared $ 0.80 $ 0.80 $ 1.28 $ 1.28 $ 1.28 - ----------------------------------------------------------------------------------------------------------------------------------- Working capital 593.4 609.3 493.5 574.9 679.1 - ----------------------------------------------------------------------------------------------------------------------------------- Total assets 2,643.2 2,776.2 2,750.6 2,943.5 2,638.5 - ----------------------------------------------------------------------------------------------------------------------------------- Long-term debt 573.0 490.6 200.3 430.6 313.6 - ----------------------------------------------------------------------------------------------------------------------------------- Stockholders' equity 944.7 1,039.2 1,200.2 1,339.9 1,244.6 - -----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) was adversely affected by after-tax transformation, merger and restructuring charges of $47.8 million in 2001, $18.7 million in 2000, $45.8 million in 1998 and $7.6 million in 1997. In 1999, the Company completed a strategic transformation in which it spun-off Teledyne and Water Pik and sold certain businesses. The results of the companies spun-off and companies sold are reflected as discontinued operations for all periods presented. The Company recognized extraordinary gains of $129.6 million, net of $79.9 million in taxes, in connection with the sales of businesses in 1999. At a stockholders' meeting held in November 1999, the Company's stockholders approved a one-for-two reverse stock split of the Company's stock. The reverse stock split was effective immediately following the spin-offs of Teledyne and Water Pik on November 29, 1999. All references to number of shares and per share amounts have been restated to reflect the reverse stock split. Net income included after-tax gains of $34.1 million on the divestitures of certain non-strategic businesses and the sale of investments in 1997. - 55 - EX-21.1 13 j9326701ex21-1.txt SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT The following lists the subsidiaries of Allegheny Technologies Incorporated, excluding those subsidiaries which, considered in the aggregate as a single subsidiary, do not constitute a significant subsidiary. The subsidiaries listed are all wholly owned, either directly or indirectly. Name of Subsidiary State of Incorporation ------------------ ---------------------- ATI Funding Corporation Delaware Allegheny Ludlum Corporation Pennsylvania TDY Holdings LLC Delaware TDY Industries, Inc. California Jessop Steel Company Pennsylvania AII Acquisition Corp. Delaware ALC Funding Corporation Delaware Oregon Metallurgical Corporation Oregon EX-23.1 14 j9326701ex23-1.txt CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of Allegheny Technologies Incorporated of our report dated January 14, 2002, included in the 2001 Annual Report to Shareholders of Allegheny Technologies Incorporated. We consent to the incorporation by reference in Registration Statement (as may be amended) Nos. 333-08235, 333-10225, 333-10227, 333-10229, 333-10245, 333-46695, 333-45965, 333-48649, 333-59161, 333-46796, 333-54712, and 333-61210 of our report dated January 14, 2002 with respect to the consolidated financial statements of Allegheny Technologies Incorporated, incorporated by reference in the Annual Report (Form 10-K) for the year ended December 31, 2001. /s/ Ernst & Young LLP ------------------------- Pittsburgh, Pennsylvania March 15, 2002 -----END PRIVACY-ENHANCED MESSAGE-----