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, 2000 [ ] 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 February 28, 2001, the Registrant had outstanding 80,133,152 shares of its Common Stock. The aggregate market value of the Registrant's voting stock held by non-affiliates at this date was approximately $1.35 billion, based on the closing price per share of Common Stock on this date of $17.72 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 Securities Exchange Act of 1934. Documents Incorporated By Reference Selected portions of the 2000 Annual Report to Stockholders - Part I, Part II and Part IV of this Report. Selected portions of the Proxy Statement for 2001 Annual Meeting of Stockholders - Part III of this Report. The information included in the Proxy Statement as required by paragraphs (k) and (l) of Item 402 of Regulation S-K is not incorporated by reference in this Form 10-K. ================================================================================ INDEX PART I.......................................................................................................3 Item 1. Business...............................................................................3 Item 2. Properties............................................................................24 Item 3. Legal Proceedings.....................................................................26 Item 4. Submission of Matters to a Vote of Security Holders...................................26 PART II ....................................................................................................26 Item 5. Market for Registrant's Common Equity and Related Stockholder Matters..............................................................26 Item 6. Selected Financial Data...............................................................27 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................27 Item 7A. Quantitative and Qualitative Disclosures About Market Risk............................27 Item 8. Financial Statements and Supplementary Data...........................................27 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..............................................27 PART III ...................................................................................................27 Item 10. Directors and Executive Officers of the Registrant....................................27 Item 11. Executive Compensation................................................................27 Item 12. Security Ownership of Certain Beneficial Owners and Management.......................................................................28 Item 13. Certain Relationships and Related Transactions........................................28 PART IV ....................................................................................................28 Item 14. Exhibits, Financial Statement Schedules, and Report on Form 8-K.......................28 SIGNATURES..................................................................................................29 EXHIBIT INDEX...............................................................................................30 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's talented people use 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 general purpose specialty materials such as stainless steel sheet and plate, silicon 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 $2.46 billion, $2.30 billion, and $2.40 billion for each of the three years ended December 31, 2000: 2000 1999 1998 ---- ---- ---- Flat-Rolled Products 59% 56% 50% High Performance Metals 30% 32% 36% Industrial Products 11% 12% 14% Business segment information presented for 1999 and 1998 has been restated to conform with the 2000 presentation. 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, 2000, is presented under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Operations" on pages 17 through 20 of the 2000 Annual Report to Stockholders (the "2000 Annual Report") and in Note 10 of Notes to Consolidated Financial Statements on pages 42 through 44 of the 2000 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. Allegheny Technologies, which changed its name from Allegheny Teledyne Incorporated in November, 1999, was formed on August 15, 1996 in the combination of Allegheny Ludlum Corporation ("Allegheny Ludlum") and Teledyne, Inc., which became wholly owned subsidiaries of Allegheny Technologies. 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 general purpose specialty products. Our high value products accounted for 64 percent of total sales in 2000 and our general purpose products 3 accounted for 36% of total sales in 2000. 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, automotive, chemical processing, oil and gas, construction and mining, machine and cutting tools, appliances and food equipment, transportation and medical. 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, 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. As compared with carbon steel, stainless steel and nickel-based alloys contain elements such as chromium, nickel and molybdenum for strength, 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 market basket of alloys and product forms provides customers with choices 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 60% of the Company's flat-rolled 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 in thinness from 0.015 inch to less than 0.0015 inch (0.038 - 0.003 mm). Our Precision Rolled Strip(R) products include stainless steel, nickel-based alloys, titanium and titanium alloys, and carbon and coated-carbon steel which are used by customers to fabricate a variety of different products ranging from automobile components to photographic, personal computer, building and construction and consumer products. Approximately 50% of the Company's flat-rolled strip products are sold directly to end-use customers, with the remainder sold to service centers, including the Company's own distribution network for flat-rolled strip materials which is known as the Allegheny Rodney Strip Service Center. 4 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. With our flat-roll capabilities, 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 80% of our flat-rolled plate products are sold to service centers, with the remainder sold directly to end-use customers. 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. STAL. The Company has established its STAL joint venture in the People's Republic of China with Shanghai No. 10 Steel Company Limited for the production and sale of Precision Rolled Strip(R) products. In 2000, STAL commenced its first year of commercial production. The new plant is a fully integrated finishing facility equipped with two Sendzimir mills, a bright anneal line, slitters, a tension leveler and roll grinders, and is expected to produce and sell up to 15,000 metric tonnes of Precision Rolled Strip(R) products. This venture is expected to enhance Allegheny Technologies' participation in the Asian market and other highly competitive global markets. 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.), Wah Chang, and Titanium Industries. 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 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 has approved $50 million for capital investments designed to expand the capabilities at Allvac, Allvac Ltd, and Wah Chang. The Company has announced that it is idling its high cost titanium sponge facility effective in 2001. The Company will purchase titanium sponge in the open market going forward. 5 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. It is used for fuel tubes and structural parts in nuclear power reactors and for corrosion-resistant chemical industry applications. Zirconium 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 nozzles. Niobium and related alloys are used in applications requiring superconducting characteristics for high-strength magnets and 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 produces 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 and non-ferrous forgings. The companies in this segment are Metalworking Products, including a recently acquired producer of tungsten carbide products for the oil and gas drilling industry, Casting Service and Portland Forge. Cutting Tools and Tungsten Carbide Products. For the metalworking, mining, oil and gas, and other industries requiring tools with extra hardness, the Company produces a line of sintered tungsten carbide products, made under heat to produce a material that approaches diamond 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 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 and alloy steel into finished forms that are used in a diverse number of industries. With the latest screw-type forging presses, Portland Forge produces carbon and alloy steel forgings in sizes ranging from one pound to more than 200 pounds. We also cast a variety of metals in sizes ranging from 1,000 pounds to 160,000 pounds and forms ranging from diesel locomotive engine blocks to housings and parts for power generation equipment, tools, and automobiles. 6 STRATEGIC CAPITAL INVESTMENTS In late 2000, the Company approved $50 million in capital investments designed to expand the capabilities of Allvac, Allvac Ltd, and Wah Chang. The Company has begun to add a GFM rotary forge and 3,800 ton press forge at Allvac and remelt furnaces at Allvac Ltd, as well as an electron beam furnace for use by Wah Chang. In addition to these capital investments, the Company is installing a cogeneration system at Wah Chang. GLOSSARY The following is a list of key terms describing the Company's products and product forms, melt, re-melt and other processes. Products and Product Forms Ammonium Paratungstate (APT) - A purified intermediate tungsten compound made from ore or tungsten scrap that is used as a starting material for making most tungsten powders. Bar - A long product that is 1/4 inch (6.35 mm) or more in diameter, having round, square, octagonal or hexagonal cross-sections. Billet - A long product with a diameter range of 8 to 14 inches (203 to 356 mm). Can either be sold in billet form or processed further to make other long products. Carbide Cutting Tools - Cemented carbides made into forms for removing materials in machining operations such as turning, milling or drilling. Normally, these tools have hard surface coatings consisting of carbides, nitrides and oxides of titanium and aluminum. The coatings are applied by either chemical or physical vapor deposition to a thickness of about 0.0005 inches. Cemented Carbides or Hardmetals - A class of materials in which refractory metal carbides are "cemented" together with iron group metals (i.e., cobalt, nickel and iron) to form a wear resistant composite, which is both hard and tough. Exotic Alloys - The Company's classification for its zirconium, niobium, hafnium and tantalum products. Flat-Rolled Products - A product form classification that includes sheet, strip, Precision Rolled Strip(R) products and plate. Hafnium - An exotic alloy usually obtained as a by-product of zirconium production with outstanding corrosion resistance and good mechanical properties. It is added to specialty alloys for use in jet engine parts and as control rod material in nuclear reactors. 7 High Performance Metals - A classification that includes the Company's nickel and nickel-based superalloys, titanium, specialty steel and exotic alloy products, primarily in the form of long products. These products typically exhibit any of the properties of high temperature resistance, high strength, and high temperature oxidation resistance. Hot Band or Hot Rolled Band (HRB) - A flat-rolled form, such as from a hot strip mill or steckel mill, produced by hot rolling and most often used to make flat-rolled products. Ingot - A product form resulting when molten metal is cast into molds which can be round, square, or rectangular. Can either be sold in ingot form or processed further to make other products. Long Products - A product form classification that includes ingot, billet, bar, rod and wire. Metallurgical Powders - High quality tungsten- and molybdenum-based powders which are further processed into products for applications that require toughness and/or heat resistance. Nickel-based Superalloys - Nickel alloys developed for very high temperature service where relatively high stresses are encountered and where high surface stability is frequently required. Typical applications are aircraft turbine and land-based turbine components. Niobium - An exotic alloy valued for its strength at extremely high temperatures and its ability to superconduct, or pass electricity with minimal resistance, at very low temperatures. It is used in aerospace applications, in superconducting magnets in MRI (magnetic resonance imaging) equipment, when alloyed with titanium, and in particle accelerators. Plate - A flat-rolled product that is 3/16 inch (4.76 mm) thick or greater and over 10 inches (254 mm) wide. Precision Rolled Strip(R) Products - Flat-rolled products including stainless steel, nickel-based alloys, titanium and titanium alloys, and carbon and coated-carbon steel under 0.015 inch (0.38 mm) thick and up to 24 inches (610 mm) wide, as well as certain strip products with special tempers and thicknesses. Rod - A long product that is from 0.118 (3 mm) to 3/4 inch (19 mm) in diameter. Sheet - A flat-rolled product that is greater than 24 inches (610 mm) wide and is less than 3/16 inch (4.76 mm) thick. Silicon Electrical Steel - Iron-based alloys containing silicon (typically 3.5%) as the major alloying addition. These steels are used generally in applications such as power transformers where electrical conductivity and magnetic properties are important. 8 Slab - Describes the size and shape of material at an early stage in processing. It may be continuously cast or bloomed from an ingot. A slab is typically 8-1/2 inches (216 mm) thick, 52 inches (1321 mm) wide, and around 200 inches (5080 mm) long. It will be further processed as a hot roll band to a finished product form such as plate, sheet, or strip. Stainless Steel - A broad classification of iron-based alloys containing at least 10% chromium, known for excellent corrosion and heat resistance. Austenitic (chrome-nickel) grades contain 18% to 30% chromium and 6% to 20% nickel for enhanced surface quality and formability and increased corrosion and wear resistance. These grades are used in appliances, kitchen utensils, processing equipment and a variety of industrial applications. Ferritic (chrome) grades are non-nickel-bearing and contain 11% to 17% chromium content for greater inherent strength and corrosion resistance than carbon steel. These grades are often used in automotive exhaust systems. Strip - A flat-rolled product up to 24 inches (610 mm) wide and less than 3/16 inch (4.76 mm) thick. Superalloy - An alloy, usually based on nickel, cobalt or iron, developed for high temperature service where relatively severe mechanical stressing is encountered and where high surface stability is frequently required. Super Stainless Steel - Stainless steel alloys with significant additions of chromium, nickel, molybdenum or copper. Super stainless steel is used in chemical processing, petroleum refining, marine, heat treating, pollution and waste control industries where there are requirements for extra corrosion protection, strength or heat resistance. Titanium - Titanium and its alloys have very high strength-to-weight ratios. At normal temperatures, they have high resistance to corrosion. Used primarily in aerospace and chemical processing applications. Tungsten Carbide Graded Powders - Made by blending tungsten carbide powder with other powder constituents like cobalt, tantalum carbide, niobium carbide, etc. to obtain a desired composition and carbide grain size. These powders, which generally include about 2% wax, are ready to be pressed to a desired shape and then sintered in the range 1350 degrees to 1500 degrees Centigrade to yield a cemented carbide part. Tungsten Carbide (WC) Powder - Made by heating a mixture of tungsten powder and carbon powder in hydrogen. Tungsten Heavy Alloys (WHA) - Produced by blending tungsten metal powders with iron group metals, primarily nickel and iron. The alloy powders are pressed and sintered in a process similar to that used for cemented carbides. Although these alloys are not as hard as cemented carbide, they have higher density and are more ductile. 9 Tungsten Materials - Include tungsten and tungsten carbide powders, sintered tungsten carbide products and cutting tools for the metalworking, mining, oil and gas, and other industries requiring tools with extra hardness. Tungsten (W) Powder - Made by hydrogen reduction of tungsten oxides derived from APT. Wire - A long product form that is from 0.030 (0.76 mm) to 1/4 inch (6.35 mm) in diameter, in round, square, octagonal, or hexagonal cross-sections. Zirconium - An exotic alloy valued for its strength, high corrosion resistance, and low thermal neutron absorption. Applications include nuclear reactors, marine vessels, commercial power generation, and those requiring contact with strong acids and basic environments. Melt and Remelt Electric Arc Furnace (EAF) - An open air melting furnace in which scrap and ferroalloys are melted by high power carbon arcs. Refining is accomplished by slags and various gases. The process is often used in conjunction with subsequent refining processes. Basic Oxygen Furnace (BOF) - A pneumatic process where hot metal is refined to meet chemical specifications by the blowing of oxygen from a top lance submerged in the "hot metal" bath. This reduces the carbon level to an acceptable level, and raw materials are added to achieve chemical specification. Electroslag Remelt (ESR) - A consumable electrode remelting process in which an AC current is passed from an electrode through a molten slag pool. Molten metal droplets fall through the slag and solidify in a water-cooled copper crucible. This process is utilized to improve both the cleanliness and structure of cast alloy materials. Electron Beam Furnace (EB) - The EB furnace uses high-energy electron beams in a vacuum environment to melt metals into a water-cooled crucible and is especially useful for titanium and exotic alloys. Vacuum Arc Remelt (VAR) - A consumable remelting process in which a high current DC arc is maintained under vacuum between an alloy electrode and a molten metal pool contained in a water-cooled copper crucible. Sequential melting produces an ingot with good internal structure, good surface finish and excellent chemical homogeneity. Vacuum Induction Melt (VIM) - A melting process that uses an induction furnace inside a vacuum chamber to melt and cast steel and other high alloy grades. The process is normally used for grades which require a high alloy content, precise chemistry control and low impurity levels. 10 Processing Annealing - Annealing is the process of heating and cooling material in such a way as to soften it, and to produce desired changes in other properties or microstructure. Bar Mill - A mechanical device used to decrease the cross-sectional area of metal stock and produce certain desired shapes as the metal passes between rotating rolls. Cylindrical rolls produce flat product and grooved rolls produce bar. Bright Annealing - In bright annealing, the material is annealed by heating and cooling in a furnace in an inert atmosphere filled with gases, such as hydrogen or nitrogen, which prevent oxide scale formation. The material comes out of the bright anneal furnace softer with the same relatively bright surface as it went in. Chemical Vapor Deposition (CVD) - A process in which precursor chemicals, such as titanium tetrachloride and nitrogen gas, chemically react on the tool surface at temperatures of about 1000 degrees Centigrade to form a hard coating on the tool surface. Forging Press - A press, usually vertical, used to operate dies to deform metal plastically. May be mechanically or hydraulically operated and either closed die for shaped, part forgings or open die for cogging. GFM Precision Rotary Forge - A forging process where rapid simultaneous action of forging hammers subjects the work-piece to a high rate of deformation under uniform compressive stressing. The control and reproducibility of the GFM process is designed to provide optimum metallurgical consistency. Physical Vapor Deposition (PVD) - A process in which metallic metal vapor, such as titanium, is ionized in a plasma and combined with gas ions, such as nitrogen, to form a hard coating on the surface of a tool. The process temperature is usually several hundred degrees lower than is used for CVD, and coatings thickness is usually less than half that of a CVD coating. Pickling - Pickling is the process of using various acids and acid mixtures to remove scale that can form on material during processing at elevated temperatures (such as hot rolling or annealing). Slit - The passing of sheet or strip material through the rotary knives of a slitter to cut the material lengthwise. Sonic Inspection - A nondestructive inspection method in which beams of high-frequency sound waves are introduced into materials for the detection of internal or surface defects such as cracks, voids, inclusions, laps or seams. Steckel Mill - A single stand reversing hot rolling mill with coil box furnaces to maintain temperature during the multiple hot rolling passes. 11 Z-Mill -A Z-mill, or Sendzimir mill, is a cold rolling mill characterized by small diameter work rolls backed up by successive clusters of rolls in a pyramid-shaped stack. This allows the mill to exert extremely high forces through the work roll and yet keep the work roll from extreme flexing. The combination of high pressure and tension makes the mill capable of cold rolling metal thin and flat to close tolerances. COMPLETION OF STRATEGIC TRANSFORMATION In 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. Additionally, as part of this strategic transformation, the Company sold several 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, nitrogen gas springs, consumer drinkware, construction and mining equipment and material handling businesses. ACQUISITIONS Over the past three years, the Company has made several strategic acquisitions: Tungsten Carbide Products Operation. In the second quarter of 2000, the Company acquired a producer of value-added tungsten carbide products for the oil and gas drilling industry which has been integrated into Metalworking Products. Flat-Roll Finishing Facility. In December, 1999, the Company acquired the Washington, Pennsylvania stainless steel sheet and strip finishing plant of Bethlehem Steel Corporation ("Bethlehem") for $20.5 million in cash. Melting and Hot Rolling Facilities. In the fourth quarter of 1998, the Company acquired melting and hot rolling facilities and a wide anneal and pickle line from Bethlehem, and entered into a 20-year conversion services agreement with Bethlehem to provide for the melting, casting and rolling of the Company's wide stainless steel continuous mill plate products and nickel-based alloys, for $105 million in cash and $70 million in a promissory note that was paid in 1999. Titanium Production Facilities. In March 1998, the Company acquired the stock of Oregon Metallurgical Corporation ("Oremet"), a producer and distributor of titanium ingot, mill products and castings, in exchange for Company stock. Oremet's operations have been 12 integrated into our High Performance Metals segment, except for Rome Metals, which is part of our Flat-Rolled Products segment. United Kingdom Production Facilities. In February 1998, the Company acquired specialty steel, nickel-based alloy and titanium production assets in the United Kingdom, for $110 million in cash, now known as Allvac Ltd. Additional Information. Additional information about recent acquisitions is included in "Management's Discussion and Analysis of Financial Condition and Results of Operations--Strategic Acquisitions" on page 20 of the 2000 Annual Report and in Note 9 to the Notes to Consolidated Financial Statements on pages 41 and 42 of the 2000 Annual Report, which information is incorporated herein by reference. Also see "Forward Looking and Other Statements - Uncertainties Relating to Synergies" herein. 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 research and development efforts, 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 ranging up to 60% 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. The Company continues to monitor unfairly traded imports from foreign producers for appropriate action. RAW MATERIALS AND SUPPLIES, INCLUDING ENERGY 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, 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. 13 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. We use large amounts of electricity and natural gas in the manufacture of our products. The prices for electricity, natural gas and other energy resources are subject to market conditions and may be volatile. As a result, the Company's operating results could be subject to significant fluctuation. See "Forward Looking and Other Statements - Volatility of Energy Prices; Availability of Energy Resources" and "Forward Looking and Other Statements - Volatility of Prices of Critical Raw Materials; Unavailability of Raw Materials." GOVERNMENT CONTRACTS For the year ended December 31, 2000, approximately 2% of the Company's total sales were attributable to sales under contracts with the U.S. Government. Most of the Company's contracts with the U.S. Government are terminable at the convenience of the government. See the discussion of related matters under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations - Other Matters - Government Contracts" on page 24 of the 2000 Annual Report and in Note 13 of Notes to Consolidated Financial Statements on pages 46 to 48 of the 2000 Annual Report. EXPORT SALES AND FOREIGN OPERATIONS International sales represented approximately 18%, 20%, and 19% of the Company's total sales in 2000, 1999, and 1998, respectively. These figures include export sales by U.S. operations to customers in foreign countries, which accounted for approximately 12%, 13%, and 11% of the Company's total sales in each of 2000, 1999 and 1998, respectively. See "Forward Looking and Other Statements - Risks of Export Sales." The Company's overseas sales, marketing and distribution efforts are aided by international marketing offices or representatives located at various locations throughout the world. The Company's Stellram group 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 also has manufacturing capabilities in the 14 United Kingdom, Allvac Ltd, which 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 should enable the Company to offer its Precision Rolled Strip(R) products more effectively to the Asian markets. BACKLOG, SEASONALITY AND CYCLICALITY The Company's backlog of confirmed orders was approximately $529.0 million at December 31, 2000 and $595.8 million at December 31, 1999. During the year ending December 31, 2001, it is anticipated that approximately 87% of confirmed orders on hand at December 31, 2000 will be filled. Backlog of confirmed orders of the Flat-Rolled Products segment was $113.2 million at December 31, 2000 and $138.4 million at December 31, 1999. During the year ending December 31, 2001, it is anticipated that approximately 100% of the confirmed orders on hand at December 31, 2000 for this segment will be filled. Backlog of confirmed orders of the High Performance Metals segment was $359.7 million at December 31, 2000 and $395.8 million at December 31, 1999. During the year ending December 31, 2001, it is anticipated that approximately 80% of the confirmed orders on hand at December 31, 2000 for this segment will be filled. 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 "Forward Looking and Other Statements - Cyclical Demand for Products." 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, including bid and proposal costs, for the years ended December 31, 2000, 1999, and 1998 included the following: (In millions) 2000 1999 1998 ---- ---- ---- Customer-Sponsored: High Performance Metals $2.0 $1.1 $0.8 Company-Sponsored: Flat-Rolled Products 6.3 7.3 7.4 High Performance Metals 5.0 5.7 8.3 Industrial Products 2.3 2.2 2.4 --- --- --- 13.6 15.2 18.1 ---- ---- ---- Total Research and Development $15.6 $16.3 $18.9 ==== ==== ==== 15 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 which 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 Comprehensive Environmental Response, Compensation and Liability Act, commonly known as Superfund, and comparable state laws. The Company is currently involved in the investigation and remediation of a number of sites under these laws. The Company's reserves for environmental remediation totaled approximately $50.8 million at December 31, 2000. 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. See the discussion of related matters herein under the caption "Forward Looking and Other Statements - Risks Associated with Environmental Matters" and 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 -Environmental" on page 24 of the 2000 Annual Report and in Notes 1 and 13 of Notes to Consolidated Financial Statements on pages 32 and 46 to 48 of the 2000 Annual Report. 16 EMPLOYEES The Company has approximately 11,400 employees. Approximately 47% of the Company's workforce is covered by various collective bargaining agreements, principally with the United Steelworkers of America ("USWA"), including: approximately 3,900 Allegheny Ludlum production and maintenance employees covered by collective bargaining agreements between Allegheny Ludlum and the USWA, which are effective through June 30, 2001; approximately 340 Oremet employees covered by a collective bargaining agreement with the USWA, which was effective through July 31, 2000; and approximately 650 Wah Chang employees covered by a collective bargaining agreement with the USWA, which the USWA terminated as of January 28, 2001. Until notice is provided otherwise, Oremet employees are currently working pursuant to the terms of the collective bargaining agreement. 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. In 1994, following the expiration of a prior collective bargaining agreement between Allegheny Ludlum and the USWA, the USWA authorized a strike by its members that lasted 10 weeks and materially adversely affected Allegheny Ludlum's operating results. PRINCIPAL OFFICERS OF THE REGISTRANT Principal officers of the Company as of February 28, 2001 are as follows: NAME AGE TITLE ---- --- ----- Robert P. Bozzone 67 Chairman, President and Chief Executive Officer* James L. Murdy 62 Executive Vice President* Jon D. Walton 58 Senior Vice President, General Counsel and Secretary* Douglas A. Kittenbrink 45 President, Allegheny Ludlum Corporation* Jack W. Shilling 57 President, High Performance Metals Group* Terry L. Dunlap 41 Vice President, e-Business Richard J. Harshman 44 Vice President, Finance and Chief Financial Officer* Robert S. Park 56 Vice President, Treasurer Dale G. Reid 45 Vice President, Controller and Chief Accounting Officer* David G. Vietmeier 56 Vice President, Procurement * Such officers are subject to the reporting and other requirements of Section 16 of the Securities Exchange Act of 1934, as amended. 17 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, President and Chief Executive Officer since December 2000. Mr. Bozzone had served as Vice Chairman of the Company since 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. James L. Murdy has been Executive Vice President of the Company since September 2000. He served 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. Douglas A. Kittenbrink has served as President of Allegheny Ludlum since April 2000. Previously he served as Senior Vice President of Allegheny Ludlum. He also served as Vice President, Engineering and Information Technology of Allegheny Ludlum from August 1994 to January 1998. Jack W. Shilling has served as President of the High Performance Metals Group since April 2000. Previously he served as President of Allegheny Ludlum. He also served as Executive Vice President of Allegheny Ludlum from 1996 to 1998. Jon D. Walton has been Senior Vice President, General Counsel and Secretary of the Company since August 1997 and 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. Terry L. Dunlap has served as Vice President, e-Business since April, 2000. He had been General Manager, Sheet Products for Allegheny Ludlum since 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. Richard J. Harshman has served as Vice President, Finance and Chief Financial Officer since December 2000. 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 since July 1998, and prior thereto, Senior Vice President, Finance and Administration, at Allvac since 1995. Robert S. Park has served as 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. Previously, he served as Treasurer of Allegheny Ludlum. Dale G. Reid has served as 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 18 he served as Vice President, Finance for Allegheny Ludlum. 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. David G. Vietmeier has served as Vice President, Procurement of the Company since April 1, 2000. Mr. Vietmeier had served as Vice President, Purchasing for Allegheny Ludlum since 1988. Messrs. Murdy and Walton have employment agreements with the Company. Copies of the employment agreements are filed as Exhibits 10.17 and 10.18 to this Form 10-K. The Company has executed change in control agreements, as amended, with certain key employees, including all of our principal officers listed above other than Mr. Bozzone, a form of which is filed as Exhibit 10.22 to this Form 10-K. FORWARD LOOKING AND OTHER 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, and product demand, including projected growth in aerospace, electrical energy, power generation, medical and electronics, and stainless steel; 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, e-business and 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, cash flow, dividends, 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 environmental costs. These statements are based on current expectations that involve a number of risks and uncertainties, including those described under the captions "Management's Discussion and Analysis of Financial Condition and Results of Operation - Other Matters - Environmental" and "Management's Discussion and Analysis of Financial Condition and Results of Operation - Other Matters - Government Contracts" on page 24 of the 2000 Annual Report. 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. Other important factors that could cause actual results to differ from those in such forward looking statements include the following: 19 Cyclical Demand for Products. Demand for the Company's products is cyclical because the industries in which customers of such businesses operate are cyclical. Various changes in general economic conditions affect these industries, including decreases in the rate of consumption or use of their products due to economic recessions. Significant downturns in the domestic economy are believed to have adversely affected the Company's results of operations from time to time. Other factors causing fluctuation in market demand and volatile pricing include national and international overcapacity, currency fluctuations, lower priced imports and increases in use or decreases in prices of substitute materials. The current trend of price deflation for many commodity products may also adversely affect prices for commodity grades of specialty materials and industrial products. As a result of these factors, the Company's operating results could be subject to significant fluctuation. For example, in recent years, adverse pricing environments for commodity grades of stainless steel have negatively affected the Company's sales and operating profit. Volatility of Energy Prices; Availability of Energy Resources: The prices for electricity, natural gas, oil and other energy resources are subject to market conditions and may be volatile. The Company relies upon outside sources for the supply of energy resources to manufacture its products, and the availability of such energy resources are subject to market conditions. These market conditions are often affected by political and economic factors outside the Company's control. The Company's ability to implement or maintain energy surcharges depends on market conditions. In addition, certain of our suppliers and customers may be impacted by power outages or high energy prices. Volatile prices for, or shortages in supply of, energy resources could materially adversely impact the Company's operating results. Volatility of Prices of Critical Raw Materials; Unavailability of Raw 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. While nickel surcharges are intended to offset the impact of increased nickel costs, competitive factors in the marketplace can limit the Company's ability to institute surcharges and there can be a delay between the increase in the price of nickel and the realization of the benefit of the surcharges. The Company enters into raw material future contracts from time to time to hedge its exposure to price fluctuation. The Company believes that it has adequate controls to monitor these contracts which are not financially material. Certain important raw materials used to produce specialty materials including nickel, titanium sponge and ammonia paratungstate are acquired 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 11,400 employees. Approximately 47 percent of the Company's workforce is covered by various collective bargaining agreements, principally with the United Steelworkers of America ("USWA"), including: approximately 3,900 Allegheny Ludlum production and maintenance employees covered by collective bargaining 20 agreements between Allegheny Ludlum and the USWA, which are effective through June 30, 2001; approximately 340 Oremet employees covered by a collective bargaining agreement with the USWA which was effective through July 31, 2000; and approximately 650 Wah Chang employees covered by a collective bargaining agreement with the USWA which the USWA terminated as of January 28, 2001. Until notice is provided otherwise, Oremet employees are currently working pursuant to the terms of the collective bargaining agreement. 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. In 1994, following the expiration of a prior collective bargaining agreement between Allegheny Ludlum and the USWA, the USWA authorized a strike by its members that lasted 10 weeks and materially adversely affected Allegheny Ludlum's operating results. Risks of Export Sales. The Company believes that export sales will continue to account for a material percentage of the Company's sales. 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 and profits earned on export sales when converted into dollars). Any of these factors could materially adversely effect the Company's results. 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. Its management from time to time 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 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 Synergies. There can be no assurance that the Company will be able to realize, or do so within any particular time frame, the cost reductions, cash flow increases 21 or other synergies expected to result from acquisitions, joint ventures and other transactions or investments the Company may undertake, or be able to generate additional revenue to offset any unanticipated inability to realize such expected synergies. Realization of the anticipated benefits of acquisitions and other transactions could take longer than expected and implementation difficulties, market factors and a deterioration in domestic or global economic conditions could alter the anticipated benefits. 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. 22 Risks Associated with Environmental Matters. The Company is subject to various domestic and international environmental laws and regulations. These laws have changed in recent years, and the Company expects to face increasingly stringent environmental standards in the future. 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 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) 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, 23 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. 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. ITEM 2. PROPERTIES The Company's principal domestic facilities as of December 31, 2000 are listed below by segment. Of those facilities listed below which are owned, three are subject to mortgages or similar encumbrances securing borrowings under certain industrial development authority financings. See Note 3 of the Notes to Consolidated Financial Statements on page 34 of the 2000 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. APPROXIMATE SQUARE FOOTAGE FACILITY LOCATION PRINCIPAL USE (OWNED/LEASED) ----------------- ------------- -------------- FLAT-ROLLED PRODUCTS 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 products. 615,000 (owned) Washington, PA Washington Flat-Roll Plant Anneal, pickle, roll and finish stainless steel sheet 350,000 (owned) Washington, PA products. Wallingford Plant Manufacturing of stainless steel and other specialty 591,000 (owned) Wallingford and material strip and sheet. Waterbury, CT Houston Plant Manufacturing of stainless steel and other specialty 298,000 (owned) Houston, PA material products. Latrobe Plant Production of nickel-based and other specialty steel 468,000 (owned) Latrobe, PA products. New Castle Plant Manufacturing of stainless steel sheet. 178,000 (owned) New Castle, IN 24 APPROXIMATE SQUARE FOOTAGE FACILITY LOCATION PRINCIPAL USE (OWNED/LEASED) ----------------- ------------- -------------- Massillon Plant 96-inch wide anneal and pickle line for manufacture 165,000 (owned) Massillon, OH of stainless steel and other specialty material plate. Allegheny Rodney Strip Plant Manufacturing of stainless steel precision rolled and 250,000 (owned) New Bedford, MA coated thin sheet strip and foil, custom roll-formed and stretch-formed shapes. HIGH PERFORMANCE METALS Monroe Plant Production of nickel and titanium products and other 640,000 (owned) Monroe, NC specialty steel long products. Lockport Plant Manufacturing nickel-based alloy and other specialty 282,000 (owned) Lockport, NY material products. Richburg Plant Production of nickel and titanium product and other 221,000 (owned) Richburg, SC 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, titanium 917,000 (owned) Albany, OR and tantalum. Richland Plant Production of titanium ingots, slabs and electrodes. 103,000 (owned) Richland, WA Huntsville Plant Production of exotic alloys and other specialty 91,000 (owned) Huntsville, AL material wire. INDUSTRIAL PRODUCTS Waynesboro, PA Production of threading systems. 386,000 (owned) Huntsville, AL Production of tungsten and tungsten carbide powders. 293,000 (owned) Grant, AL Production of primary tungsten sintered parts. 88,000 (leased) Houston, TX Production of tungsten carbide products used in oil 120,000 (owned) 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 castings. 453,000 (owned) Portland, IN Manufacturing of carbon and alloy steel forgings. 215,000 (owned) Lebanon, KY Manufacturing of carbon and alloy steel forgings. 100,000 (owned) 25 The Company also owns or leases production facilities in a number of foreign countries, including the United Kingdom, Germany, France, Spain, and Switzerland. The Company 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 40,000-square foot leased facility for computer numerically controlled milling and machine operations. The Company's executive offices, located at PPG Place in Pittsburgh, Pennsylvania are leased from third parties. 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. Department of Justice 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. Trial of this matter concluded in February 2001 with a favorable jury verdict for Allegheny Ludlum on virtually all claims. The Court is in the process of determining a penalty amount for approximately 150 incidents which Allegheny Ludlum had reported to the appropriate environmental agencies. While the outcome of litigation, including the matters specified above, 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. See the discussion of related matters in Item 1 of Part I of this Form 10-K under the captions "Environmental, Health and Safety Matters." ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 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 48 of the 2000 Annual Report and to "Common Stock Prices" on page 49 of the 2000 Annual Report. 26 ITEM 6. SELECTED FINANCIAL DATA Information required by this item is incorporated by reference to "Selected Financial Data" on pages 50 and 51 of the 2000 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 17 through 26 of the 2000 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 -Hedging" on pages 23 and 24 of the 2000 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 27 through 48 of the 2000 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 2001 Proxy Statement filed by the Registrant pursuant to Regulation 14A. 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 2001 Proxy Statement filed by the Registrant pursuant to Regulation 14A. 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 2001 Proxy Statement. 27 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 2001 Proxy Statement filed by the Registrant pursuant to Regulation 14A. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information required by this item is incorporated by reference to "Certain Transactions" as set forth in the 2001 Proxy Statement filed by the Registrant pursuant to Regulation 14A. 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 27 through 48 of the 2000 Annual Report are incorporated by reference: Consolidated Statements of Income - Years Ended December 31, 2000, 1999 and 1998 Consolidated Balance Sheets at December 31, 2000 and 1999 Consolidated Statements of Cash Flows - Years Ended December 31, 2000, 1999 and 1998 Consolidated Statements of Stockholders' Equity - Years Ended December 31, 2000, 1999 and 1998 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 30 of this Report and incorporated by reference. (b) REPORT ON FORM 8-K FILED IN THE FOURTH QUARTER OF 2000: The Company filed a current report on Form 8-K on December 7, 2000 regarding the announced resignation of Thomas A. Corcoran, as Chairman, President and Chief Executive Officer. 28 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 14, 2001 By /s/ Robert P. Bozzone ----------------------------------------------- Robert P. Bozzone Chairman, 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 14th day of March, 2001. /s/ Robert P. Bozzone /s/ Richard J. Harshman -------------------------------------------------- ------------------------------------------------------ Robert P. Bozzone Richard J. Harshman Chairman, President and Chief Executive Officer Vice President, Finance 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/ Paul S. Brentlinger /s/ Frank V. Cahouet -------------------------------------------------- ------------------------------------------------------ Paul S. Brentlinger Frank V. Cahouet Director Director /s/ Diane C. Creel /s/ C. Fred Fetterolf -------------------------------------------------- ------------------------------------------------------ Diane C. Creel C. Fred Fetterolf Director Director /s/ Ray J. Groves /s/ George J. Kourpias -------------------------------------------------- ------------------------------------------------------ Ray J. Groves George J. Kourpias Director Director /s/ W. Craig McClelland /s/ James L. Murdy -------------------------------------------------- ------------------------------------------------------ W. Craig McClelland James L. Murdy Director Executive Vice President and 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 29 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 August 30, 1996 (incorporated by reference to Exhibit 10 to the Registrant's Report on Form 10-Q for the quarter ended September 30, 1996 (File No. 1-12001)), Assignment and Assumption Agreements dated as of August 22, 1997 and First Amendment to Credit Agreement dated as of August 31, 1996 (incorporated by reference to Exhibit 4 to the Registrant's Report on Form 10-Q for the quarter ended September 30, 1997 (File No. 1-12001)), and Second Amendment to Credit Agreement dated as of March 24, 1998 to certain Credit Agreement dated as of August 30, 1996, as amended by First Amendment to Credit Agreement dated as of August 31, 1997 (incorporated by reference to Exhibit 4 to the Registrant's Report on Form 10-K for the quarter ended March 31, 1998 (File No. 1-12001), and Third Amendment to Credit Agreement dated as of March 30, 1999 (incorporated by reference to Exhibit 4 to the Registrant's Report on Form 10-Q for the quarter ended March 31, 1999 (File No. 1-12001)) and Fourth Amendment to Credit Agreement dated as of August 6, 1999 (incorporated by reference to Exhibit 4 to the Registrant's Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 1-12001)), and Fifth Amendment to Credit Agreement dated December 29, 2000 (filed herewith). 4.2 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 30 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)). 4.3 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)). 4.4 Issuing and Paying Agreement dated as of November 2, 2000 between Allegheny Technologies Incorporated and Bank One (filed herewith). 4.5 Commercial Paper Dealer Agreement 4(2) Program between Allegheny Technologies Incorporated and Chase Securities, Inc. dated as of November 2, 2000 (filed herewith). 4.6 Commercial Paper Dealer Agreement 4(2) Program between Allegheny Technologies Incorporated and Goldman, Sachs & Co. dated as of November 2, 2000 (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 (filed herewith).* 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)).* 31 10.7 Supplemental Pension Plan for Certain Key Employees of Allegheny Technologies Incorporated and its subsidiaries (formerly known as the Allegheny Ludlum Corporation 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 Summary of Teledyne, Inc. Executive Deferred Compensation Plan, as restated effective September 1, 1994 (incorporated by reference to Exhibit 10.2 to Teledyne, Inc.'s Report on Form 10-K for the year ended December 31, 1994 (File No. 1-5212)).* 10.16 First Amendment dated as of August 14, 1995 and Second Amendment dated as of December 4, 1995 to the Summary of Teledyne, Inc. Executive Deferred Compensation Plan (incorporated by reference to Exhibit 10.2 to Teledyne, Inc.'s Report on Form 10-K for the year ended December 31, 1995 (File No. 1-5212)).* 10.17 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)).* 32 10.18 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)).* 10.19 Employment Agreement dated August 17, 1999 between Allegheny Technologies Incorporated and Thomas A. Corcoran (incorporated by reference to Exhibit 10(a) of the Company's Report on Form 10-Q for the period ending September 30, 1999 (File No. 1-12001)).* 10.20 Restricted Stock Agreement dated September 16, 1999 between Allegheny Technologies Incorporated and Thomas A. Corcoran (incorporated by reference to Exhibit 10(b) to the Company's Report on Form 10-Q for the period ending September 30, 1999 (File No. 12001)).* 10.21 Supplemental Pension Plan Agreement dated September 16, 1999 between Allegheny Technologies Incorporated and Thomas A. Corcoran (incorporated by reference to Exhibit 10(c) to the Company's Report on Form 10-Q for the period ending September 30, 1999 (File No. 1-12001)).* 10.22 Form of Change in Control Severance Agreement (Senior Management), as amended (filed herewith).* 10.23 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)).* 10.24 Employee Benefits Agreement dated November 29, 1999 between Allegheny Technologies Incorporated and Water Pik Technologies, Inc. (incorporated by reference to Exhibit 10.24 to the Registrant's Report on Form 10-K for the year ended December 31, 1999 (File No. 1-12001)).* 10.25 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)).* 10.26 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)).* 10.27 Allegheny Technologies Incorporated Executive Deferred Compensation Plan, as amended (filed herewith). 33 10.28 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)).* 10.29 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)).* 10.30 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)).* 10.31 Settlement Agreement and Release dated February 15, 2001 by and between Thomas A. Corcoran and Allegheny Technologies Incorporated (filed herewith).* 10.32 Allegheny Technologies Incorporated Performance Share Program and form of Participant Agreement for the 2000-2002 Award Period (filed herewith).* 10.33 Allegheny Technologies Incorporated Annual Incentive Plan for the year 2000 (filed herewith).* 13.1 Pages 17 through that part of page 51 referencing financial data, inclusive, of the Annual Report of Allegheny Technologies Incorporated for the year ended December 31, 2000 (filed herewith). 21.1 Subsidiaries of the Registrant (filed herewith). 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. 34 EXHIBIT 4.1 FIFTH AMENDMENT TO CREDIT AGREEMENT Among ALLEGHENY TECHNOLOGIES INCORPORATED, (FORMERLY KNOWN AS ALLEGHENY TELEDYNE INCORPORATED) as the Borrower THE FINANCIAL INSTITUTIONS PARTY THERETO as the Lenders BANK OF AMERICA, N.A. (FORMERLY BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION) THE CHASE MANHATTAN BANK MELLON BANK, N.A. and PNC BANK, NATIONAL ASSOCIATION as Managing Agents and PNC BANK, NATIONAL ASSOCIATION as the Documentation and Administrative Agent Dated as of and Effective nunc pro tunc as of December 29, 2000 FIFTH AMENDMENT TO CREDIT AGREEMENT THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (the "Fifth Amendment") dated as of and effective nunc pro tunc as of December 29, 2000, to that certain Credit Agreement dated as of August 30, 1996, as amended by the First Amendment to Credit Agreement dated as of August 31, 1997, the Second Amendment to Credit Agreement dated as of March 24, 1998, the Third Amendment to Credit Agreement dated as of March 30, 1999, and the Fourth Amendment and Waiver to Credit Agreement dated as of August 6, 1999 (the Credit Agreement together with the exhibits and schedules thereto and all modifications, amendments, extensions, renewals, substitutions or replacements prior to the date hereof, the "Existing Agreement"), among ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation (formerly known as Allegheny Teledyne Incorporated), as the borrower (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 Section 9.6a (individually a "Lender" and collectively the "Lenders"), BANK OF AMERICA, N.A. (formerly Bank of America National Trust and Savings Association), THE CHASE MANHATTAN BANK, MELLON BANK, N.A. and PNC BANK, NATIONAL ASSOCIATION as Managing Agents (individually a "Managing Agent" and collectively the "Managing Agents") and PNC BANK, NATIONAL ASSOCIATION, a national banking association, Documentation and Administrative Agent for the Lenders (in such capacity the "Agent"). WITNESSETH: WHEREAS, the Borrower and the initial Lenders, the Managing Agents and the Agent entered into the Existing Agreement pursuant to which the Lenders made certain financial accommodations available to the Borrower including a Revolving Credit Commitment; WHEREAS, the Borrower and the Lenders, the Managing Agents and the Agent desire to amend the Existing Agreement as set forth herein. NOW THEREFORE, in consideration of the mutual premises contained herein and other good and valuable consideration, the Borrower, the Lenders, the Managing Agents and the Agent, with the intent to be legally bound hereby, agree that the Existing Agreement shall be amended as follows: ARTICLE I AMENDMENTS TO EXISTING AGREEMENT SECTION 1.01. ADDITIONAL DEFINITIONS. Section 1.1 of the Existing Agreement is hereby amended such that the following definition shall be added thereto in the appropriate alphabetical order: "Fifth Amendment" means the Fifth Amendment to Credit Agreement and Waiver among the Borrower, the Lenders, the Managing Agents and the Agent dated as of and effective nunc pro tunc as of December 29, 2000. "Fifth Amendment Effective Date" shall mean December 29, 2000. "Rodney Metals" the Rodney Metals division of TDY Industries, which consists of assets which produce stainless steel and specialty metal strip together with other related products. "TDY Industries" means TDY Industries, Inc., a California corporation. "TILLC" means TDY Holdings, LLC, a Delaware limited liability company, having as its sole member the Borrower. SECTION 1.02. AMENDMENT TO SECTION 4.11. Section 4.11 of the Existing Agreement is amended and restated in its entirety to read as follows: SECTION 4.11 OWNERSHIP OF OPERATING SUBSIDIARIES. After the Fifth Amendment Effective Date, 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 and TDY Industries. SECTION 1.03. AMENDMENT TO SECTION 5.5. Section 5.5 of the Existing Agreement is amended and restated in entirety to read as follows: 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 of assets (A) by any one of the Borrower, ATI Funding, TILLC, OREMET, ALC, TDY Industries or any other direct or indirect wholly-owned Subsidiary of any of the Borrower, ATI Funding, TILLC, OREMET, ALC or TDY Industries, (B) to any one or more of the Borrower, ATI Funding, TILLC, OREMET, ALC, TDY Industries or any direct or indirect wholly-owned Subsidiaries of any of the Borrower, ATI Funding, TILLC, OREMET, ALC or TDY Industries, and (iv) 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 (iv) shall not exceed, (A) from August 31, 1996 until December 31, 2001, thirty percent (30%) of the Borrower's Consolidated Total Assets as of June 30, 1996, and (B) beginning with the first day of the Borrower's Fiscal Year 2002, if and to the extent that the Termination Date is extended pursuant to Section 2.8, in any Fiscal Year of the Borrower thereafter during the term hereof more than ten (10%) of the Borrower's Consolidated Total Assets as of the beginning of such Fiscal Year. SECTION 1.04. NO OTHER AMENDMENTS. The amendments to the Existing Agreement set forth in Sections 1.01 and 1.03 inclusive above do not either implicitly or explicitly alter or amend, except as expressly provided in this Fifth Amendment, the provisions of the Existing Agreement. The amendments set forth in Sections 1.01 and 1.03 hereof do not waive, now or in the future, compliance with any other covenant, term or condition to be performed or complied with nor do they impair any rights or remedies of the Lenders or the Agent under the Existing Agreement with respect to any such violation. Nothing in this Fifth Amendment shall be deemed or construed to be a release of, or a limitation upon, the Lenders' or the Agents' exercise of any of their respective rights and remedies under the Existing Agreement and the other Loan Documents, whether arising as a consequence of any Events of Default which may now exist or otherwise, and all such rights and remedies are hereby expressly reserved. ARTICLE II BORROWER'S SUPPLEMENTAL REPRESENTATIONS SECTION 2.01 INCORPORATION BY REFERENCE. As an inducement to the Lenders to enter into this Fifth Amendment, the Borrower hereby repeats herein, for the benefit of the Lenders, the representations and warranties made by the Borrower in Sections 3.1 through 3.15, inclusive, of the Existing Agreement, as amended hereby, except that for purposes hereof such representations and warranties shall be deemed to extend to and cover this Fifth Amendment. ARTICLE III CONDITIONS PRECEDENT SECTION 3.01. CONDITIONS PRECEDENT. Each of the following shall be a condition precedent to the effectiveness of this Fifth Amendment: (i) The Agent shall have received duly executed counterpart originals of this Fifth Amendment executed by the Borrower and the Required Lenders. (ii) The Borrower shall deliver to the Agent a certificate of the Secretary or assistant secretary of the Borrower certifying: (A) the corporate authority of the Borrower to execute, deliver and perform under this Fifth Amendments; and (B) the names of the persons authorized on behalf of the Borrower to sign this Fifth Amendment, together with the true signatures of such persons. (iii) The following statements shall be true and correct on the Fifth Amendment Effective Date and on the date of the execution and delivery of this Fifth Amendment by the Borrower: (A) except to the extent modified in writing by the Borrower heretofore delivered to the Lenders, the representations and warranties made pursuant to Section 2.01 of this Fifth Amendment and in the other Loan Documents are true and correct on and as of the Fifth Amendment Effective Date and as of the date of the execution and delivery of this Fifth Amendment by the Borrower as though made on and as of such dates in all material respects; (B) no Event of Default or event which with the giving of notice or passage of time or both would become an Event of Default has occurred and is continuing, or would result from the execution of or performance under this Fifth Amendment; (C) the Borrower has in all material respects performed all agreements, covenants and conditions required to be performed on or prior to the date hereof under the Existing Agreement and the other Loan Documents. SECTION 3.02 FIFTH AMENDMENT EFFECTIVE DATE. Upon completion of the conditions set forth in Section 3.01 of this Fifth Amendment, the effective date of this Fifth Amendment is deemed to be December 29, 2000, nunc pro tunc. ARTICLE IV GENERAL PROVISIONS SECTION 4.01. RATIFICATION OF TERMS. Except as expressly amended or waived by this Fifth Amendment, the Existing Agreement and each and every representation, warranty, covenant, term and condition contained therein is specifically ratified and confirmed in all material respects. SECTION 4.02. REFERENCES. All notices, communications, agreements, certificates, documents or other instruments executed and delivered after the execution and delivery of this Fifth Amendment in connection with the Agreement, any of the other Loan Documents or the transactions contemplated thereby may refer to the Existing Agreement without making specific reference to this Fifth Amendment, but nevertheless all such references shall include this Fifth Amendment unless the context requires otherwise. After the execution and delivery of this Fifth Amendment by the Borrower and the effectiveness of this Fifth Amendment, all references in the Existing Agreement and each of the other Loan Documents to the "Agreement" shall be deemed to be references to the Existing Agreement as amended hereby. SECTION 4.03. COUNTERPARTS. This Fifth Amendment may be executed in different counterparts, and by the different parties hereto on separate counterparts, each of which when so executed shall be regarded as an original, and all such counterparts shall constitute one Fifth Amendment. Delivery of an executed signature page of a counterpart of this Fifth Amendment by telecopier shall be as effective as delivery of a manually executed counterpart of this Fifth Amendment. SECTION 4.04. CAPITALIZED TERMS. Except for proper nouns and as otherwise defined herein, capitalized terms used herein as defined terms shall have the meanings ascribed to them in the Existing Agreement, as amended hereby. SECTION 4.05. TAXES. The Borrower hereby agrees (i) to pay any and all stamp and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of this Fifth Amendment and (ii) to save the Managing Agents, the Agent and the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees. SECTION 4.06. COSTS AND EXPENSES. The Borrower hereby agrees to pay all costs and expenses of the Agent (including, without limitation, the reasonable fees and the disbursements of the Agent's special counsel, Tucker Arensberg, P.C.) in connection with the preparation, execution and delivery of this Fifth Amendment and the related documents. SECTION 4.07. SEVERABILITY. Any provision of this Fifth Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or enforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 4.08. GOVERNING LAW. THIS FIFTH AMENDMENT AND THE RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO THE PROVISIONS THEREOF REGARDING CONFLICTS OF LAW. SECTION 4.09. HEADINGS. The headings of the sections in this Fifth Amendment are for purposes of reference only and shall not be deemed to be a part hereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have caused this Fifth Amendment to be duly executed by their proper and duly authorized officers as of, and effective, nunc pro tunc as of the day first above written. PNC BANK, NATIONAL ASSOCIATION, ALLEGHENY TECHNOLOGIES as Lender, Managing Agent and Agent INCORPORATED, a Delaware corporation (formerly known as Allegheny Teledyne Incorporated) By:/s/David B. Gookin (SEAL) By:/s/R. S. Park (SEAL) ----------------------------------- ------------------------------------------ Name: Name: --------------------------------- ---------------------------------------- Title: Title: -------------------------------- --------------------------------------- THE CHASE MANHATTAN BANK, as BANK OF AMERICA, N.A. (formerly Bank as Lender and Managing Agent of America National Trust and Savings Association), as Lender and Managing Agent and as successor in interest to NationsBank, N.A. By:/s/James H. Ramage (SEAL) By:/s/Raju N. Patel (SEAL) ----------------------------------- ------------------------------------------- Name: Name: --------------------------------- ---------------------------------------- Title: Title: -------------------------------- --------------------------------------- THE BANK OF NEW YORK MELLON BANK, N.A., as Lender and Managing Agent By:/s/Walter C. Parelli (SEAL) By:/s/Edward L. McGrath, C.F.A. (SEAL) ----------------------------------- ------------------------------------------ Name: Name: --------------------------------- ---------------------------------------- Title: Title: -------------------------------- --------------------------------------- BANK OF TOKYO-MITSUBISHI TRUST COMPANY MORGAN GUARANTY TRUST COMPANY OF NEW YORK By:/s/M. R. Marron (SEAL) By:/s/Dennis R. Wilczek (SEAL) -------------------------------- ------------------------------------------- Name: Name: --------------------------------- ---------------------------------------- Title: Title: -------------------------------- --------------------------------------- BANK ONE, NA THE TORONTO-DOMINION BANK By:/s/Philip R. Manger (SEAL) By:/s/Susan K. Strong (SEAL) ---------------------------------- ----------------------------------------------- Name: Name: --------------------------------- ---------------------------------------- Title: Title: -------------------------------- --------------------------------------- THE FUJI BANK LIMITED, NEW YORK FIRST UNION NATIONAL BANK, successor BRANCH by merger to CoreStates Bank, NA By: (SEAL) By:/s/Barbara H. Pattison (SEAL) ----------------------------------- ----------------------------------------------- Name: Name: --------------------------------- ---------------------------------------- Title: Title: -------------------------------- --------------------------------------- THE SANWA BANK LIMITED NATIONAL CITY BANK OF PENNSYLVANIA By:/s/Christopher DiCarlo (SEAL) By:/s/Michael A. Heinricher (SEAL) ----------------------------------- ----------------------------------------------- Name: Name: --------------------------------- ---------------------------------------- Title: Title: -------------------------------- --------------------------------------- EXHIBIT 4.4 ISSUING AND PAYING AGENT AGREEMENT This Issuing and Paying Agency Agreement (the "Agreement"), dated as of November 2, 2000, between Allegheny Technologies Incorporated, a Delaware corporation (the "Issuer") and Bank One, National Association, a national banking association (the "IPA"), as issuing and paying agent, in connection with the issuance and payment, in book entry only form, of certain commercial paper notes (collectively the "Notes"). The Issuer hereby appoints the IPA its agent to issue, deliver and pay such Notes as herein set forth. The Issuer hereby agrees with the IPA as follows: 1. Definitions. Terms capitalized shall have the meanings assigned them below. "Advance" means funds credited by the IPA to or on behalf of the Issuer for the purpose of either crediting Proceeds to the Note Account or remitting payment on Notes. "Agreement" means this Issuing and Paying Agency Agreement as defined in the preamble, and includes the terms of the Exhibits. "Business Day" means any day that both the IPA and DTC are open for business. "Certificate Agreement" means the Certificate Agreement dated May 17, 1994, between DTC and the IPA (formerly known as The First National Bank of Chicago), a copy of which is attached hereto as Exhibit C. "Dealer" means any person other than an Issuer Agent, which has been authorized by the Issuer to deliver Issuance Instructions to the IPA and is listed on an Incumbency Certificate. "DTC" means The Depository Trust Company, a New York limited purpose trust company, and its successors and assigns. "GAITIR" means the Global Automated Issuance Trade Initiator and Reporter system. "Incumbency Certificate" means the certificate of the Issuer, substantially in the form of Exhibit A, executed by its Secretary or any of its Assistant Secretaries, which identifies Issuer Agents and Dealers from time to time. "Indemnified Persons" means the IPA and its officers, directors, employees, and agents. "Issuance Instructions" means the instructions as to issuance of Notes delivered to the IPA by an Issuer Agent or Dealer pursuant to Section 3.B. of the Agreement. "Issuer Agents" means those officers, employees, or agents of the Issuer identified on an Incumbency Certificate the Issuer has authorized to execute Notes, deliver Note Issuance Instructions, and deliver other notices hereunder to the IPA. "Manual" means the DTC Money Market Instrument Issuing/Paying Agent Manual, as modified from time to time, including the rules of the DTC Same Day Funds Settlement System, Money Market Instruments Program. "Maturity Date" means the date any Note is payable by its terms. "Note" or "Notes" means the commercial paper notes of the Issuer issued pursuant to the Agreement and identified on the records of the IPA as evidenced by the Issuer's Corporate Commercial Paper Master Note substantially in the form set forth in Exhibit B. "Note Account" means the Issuer's demand deposit account number 10-51085 established at the IPA pursuant to Section 6.A. "Proceeds" means, with respect to any Note, funds representing the purchase price for its original issuance. "Representation Letter" means the agreement by and among the IPA, the Issuer and DTC with respect to the Notes substantially in the form set forth in Exhibit D. 2. Authorization. The Issuer shall deliver to the IPA upon execution of this Agreement an Incumbency Certificate to designate the Issuer Agents and Dealers to the IPA. Until the IPA receives a subsequent Incumbency Certificate from the Issuer, it may rely on the last such Incumbency Certificate delivered to it. Any Note bearing the signature of an Issuer Agent on the date such signature is affixed thereto shall bind the Issuer after the authentication and delivery of such Note even if such person shall have ceased to hold his or her office on the date such Note is authenticated and delivered. 3. Notes. A. The Notes shall be issued to DTC or its nominee in book-entry form only. In connection with the issuance of Notes, (i) the IPA and DTC have previously entered into the Certificate Agreement and (ii) the IPA, the Issuer and DTC shall jointly execute the Representation Letter. The Issuer understands and acknowledges that the execution of the Certificate Agreement and the Representation Letter by the IPA is a necessary condition precedent to the acceptance of the Notes by DTC and as such, the Issuer agrees, (x) to be bound by the provisions of the Certificate Agreement and Representation Letter and (y) that the Certificate Agreement and Representation Letter shall supplement the provisions of this Agreement. B. Prior to 12:00 noon (Chicago time) on each issuance date, an Issuer Agent or Dealer shall provide the IPA with Issuance Instructions specifying the issue date, interest rate (if applicable), maturity date (which shall be no later than 364 days from the date of issuance thereof), proceeds amount, maturity amount, CUSIP number, purchaser and purchaser's settlement bank (which bank must be a participant in the DTC Same Day Funds Settlement System). C. Following receipt of Issuance Instructions, the IPA will process such Issuance Instructions in accordance with and subject to (i) this Agreement, (ii) the procedures set forth in the Manual, (iii) the terms and conditions of the Certificate Agreement and (iv) the terms and conditions of the Representation Letter. Unless otherwise instructed by an Issuer Agent or Dealer, Notes delivered under this Agreement shall be made against payment as more fully set forth in Section 4 below. In the event of a conflict between the terms of this Agreement and the terms of the Manual, the Certificate Agreement, or the Representation Letter, the provisions of this Agreement shall control. 4. Proceeds of Sale of Notes. A. The Issuer understands that when the IPA is instructed to deliver against payment, the processing of Issuance Instructions may not be completed simultaneously against the receipt of payment. Accordingly, the IPA is authorized to initiate delivery and to receive payment from the purchaser in accordance with the provisions of the Manual. All such payments shall be credited upon receipt to the Note Account. The Issuer hereby agrees to bear the risk that the IPA fails to receive payment of the Proceeds of any Notes issued pursuant to Issuance Instructions. B. Funds received by the IPA as Proceeds will be credited to the Note Account. Prior to receipt of such Proceeds, the IPA may, but shall not be obligated to, credit such Proceeds to the Issuer by making an Advance. Upon telephonic, written (which may be in facsimile form), or electronic instructions received by the IPA from an Issuer Agent, an Advance may be (i) used in payment of Notes presented for payment upon maturity, (ii) deposited to an account of the Issuer at the IPA, or (iii) transferred to the account of the Issuer at another bank. If the IPA, in its sole discretion, makes an Advance, the Issuer agrees to apply the Proceeds to repay such Advance. If such Proceeds are insufficient to repay the Advance in full, the Issuer agrees to repay such Advance within 24 hours, or the next business day, from the time such Advance was made. Interest on any Advance shall accrue from the day such Advance is made, and shall bear interest (i) in accordance with any separate agreement between the Issuer and the IPA in effect at the time, or (ii) if no such separate agreement is then in effect, then as described in the attached letter (Exhibit G). 5. Instructions A. The Issuer hereby authorizes the IPA to act in accordance with Issuance Instructions received electronically, in writing, by facsimile or by telephone from an Issuer Agent or the Dealer. The Issuer or the Dealer may initiate Issuance Instructions electronically via GAITIR or otherwise in accordance with the IPA's standard business practices. The IPA shall be entitled to rely on the Issuance Instructions received electronically hereunder and may assume conclusively that all such Issuance Instructions are correct and complete and were transmitted by the Issuer or on the Issuer's behalf. B. Telephonic Issuance Instructions shall be given to the IPA by an Issuer Agent or the Dealer at the telephone number specified by the IPA from time to time for such purpose, and shall be expressed to be for the attention of any of its officers or employees whose name has been specified for such purpose. The telephone numbers initially authorized for such purpose are set forth in Exhibit E, which may be modified by notice to the Issuer and each Dealer. Telephonic Issuance Instructions to the IPA by an Issuer Agent or Dealer shall be confirmed in writing by an Issuer Agent or Dealer within 24 hours of the time such instruction is given; provided that, in the event a discrepancy exists between the telephonic Issuance Instructions and the subsequent confirmation, or in the absence of receiving a written confirmation prior to the time specified in Sections 3.B. above, the Telephonic Issuance Instructions shall be deemed the proper and controlling Issuance Instructions. A written confirmation may be effected by any electronic means of communications, including transmission by telecopier or computer. 6. Note Account. A. For purposes of the transactions contemplated herein, the Issuer shall open and maintain the Note Account. B. Deposits will be made to the Note Account from time to time by or on behalf of the Issuer by delivery of funds to be deposited therein. All Proceeds shall be credited to the Note Account. Withdrawals or other uses of the funds from the Note Account shall be made in accordance with instructions from an Issuer Agent or to repay amounts payable under Sections 4.B. or 7.D. hereof. Notwithstanding anything in this Agreement to the contrary, the IPA shall not be obligated (i) to permit any withdrawal or other use of funds from the Note Account, or (ii) to honor any instructions to those effects, if the IPA, in its sole discretion, shall determine that as a result there would be an overdraft or negative balance in respect of final credits (whether in the course of any day, overnight or otherwise) in the Note Account. The Issuer shall deposit in the Note Account on the Maturity Date an amount in immediately available funds equal to the principal and interest payable on such Notes, unless such funds represent Proceeds and are deposited to the Note Account pursuant to Section 4.B. 7. Payment of Notes. A. The IPA hereby agrees to serve as paying agent of the Issuer with respect to each of the Notes presented for payment pursuant to this Agreement. B. The IPA is hereby authorized and instructed by the Issuer, to the extent that funds sufficient to effect such payment are available in the Note Account, to pay, and shall pay, each of the Notes upon presentation thereof. The IPA is further hereby authorized and instructed by the Issuer to debit the Note Account in the amount of each such payment. C. If at any time funds in the Note Account are insufficient to cover payment of any matured Notes presented prior to 2:00 p.m. (Chicago time) on the Maturity Date of such Notes, the IPA may, but shall not be obligated to, pay the Notes thus creating an overdraft for the account of the Issuer, which overdraft shall be charged to the Note Account. D. The amount of any resulting overdraft shall represent an Advance by the IPA to the Issuer to be promptly repaid by the Issuer together with any applicable overdraft charges and interest on such advance for each day such Advance remains outstanding in accordance with Section 4.B. 8. Representations and Warranties. Each day on which an Issuance Instruction is given to the IPA, the Issuer shall be deemed to represent and warrant to the IPA that (a) the issuance and delivery of the designated Notes will not violate any state or federal securities law, (b) the Notes have been duly and validly authorized by the Issuer and (c) the Notes, when issued and delivered pursuant hereto, will constitute the legal, valid, and binding obligations of the Issuer. 9. Concerning the IPA. A. In acting with respect to the Notes, and generally in acting under the provisions hereof, the IPA acts only as agent of the Issuer to perform only such duties as are specifically set forth herein and this Agreement shall not be construed to subject the IPA to any implied covenants or obligations. No provision of this Agreement shall be construed to impose upon the IPA any trust, agency of, or fiduciary duty to DTC or any beneficial owner of the Notes. The IPA may execute any of the powers hereunder or perform any duties hereunder either directly or by or through agents or affiliates. The IPA may consult with legal counsel regarding matters arising under this Agreement and shall not be liable for any action taken in good faith in reliance upon the advice of such counsel. The IPA or its affiliates in their individual or any other capacity may become the owner or pledgee of Notes and may transact business with the Issuer or its affiliates with the same rights they would have if the IPA were not acting hereunder. The IPA shall be under no liability for interest on any moneys received by it hereunder and need not segregate such moneys except as may be required by law. Except in the case of the IPA's gross negligence or willful misconduct, it shall not be liable to the Issuer for any action taken or omitted and reasonably believed by the IPA to be authorized or within the powers conferred upon it hereby. In no event shall the IPA be liable for consequential, indirect or special damages, even if it has been advised of the possibility of such damages. The IPA shall also not be liable for any action taken, or any failure to take any action in connection with this Agreement or the services provided hereunder or otherwise to fulfill its obligations in connection with this Agreement, in the event and to the extent that the taking of such action or such failure arises out of or is caused by mechanical breakdown, computer or system failure or other failure of equipment, failure or malfunctioning of any communications media for whatever reason, or any other cause outside of the control of the IPA, provided that it undertakes to use commercially reasonable efforts to cure any such failure or breakdown of its equipment. It is understood by the Issuer that provision of services under this Agreement is dependent upon the availability to the IPA and the Issuer of telecommunication facilities provided by third party vendors and that the IPA does not warrant or guarantee such availability. B. The Issuer shall indemnify and hold the Indemnified Persons harmless from and against any and all costs, expenses, claims or liabilities (including, without limitation, reasonable legal fees and expenses) arising out of or connected with the performance of each Indemnified Person's duties hereunder, except for costs, expenses, claims or liabilities arising out of the gross negligence or willful misconduct of an Indemnified Person. Each Indemnified Person may rely and shall be protected in acting upon any resolution, certificate, opinion, instructions (whether oral or otherwise), receipt, or other document reasonably believed by such Indemnified Person to be (i) genuine and (ii) to have been signed or given by the proper party or parties. C. Fees for the IPA's services, and reimbursement of its expenses hereunder shall be as mutually agreed upon in writing between the IPA and the Issuer, which are initially set forth as Exhibit F, and shall be payable by the Issuer in accordance with such agreement. D. Except as otherwise expressly provided herein, whenever, in the administration of this Agreement, the IPA shall deem it necessary that a matter be proved or established prior to taking, suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate or written instructions of an Issuer Agent and such certificate or written instructions shall be full warranty to the IPA for any action taken, suffered, or omitted under the provisions of this Agreement in reliance upon such certificate or written instructions. E. Any banking association or corporation into which the IPA may be merged, converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which it shall be a party, shall succeed to all its rights, obligations and immunities hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. F. The IPA's countersignature of a Note shall be for authentication purposes only. The IPA shall have no liability on any Notes. Except with respect to the IPA's own actions in issuing and delivering Notes pursuant to Issuance Instructions, it shall not be liable for the authorization, validity or legality of any Notes delivered by it in accordance with Issuance Instructions. G. Nothing in this Agreement constitutes a commitment or obligation of the IPA or its affiliates to extend any credit to the Issuer, nor shall any course of dealing between the Issuer and the IPA be deemed to be, or constitute, any such commitment or obligation. 10. Miscellaneous. A. The IPA or the Issuer may terminate this Agreement upon thirty (30) days' prior written notice to the other party; provided, however, that to the extent there are then outstanding any Notes, notwithstanding such termination they shall remain valid obligations of the Issuer and shall continue to be subject to the provisions of this Agreement. No termination of this Agreement shall affect the rights and obligations of the parties hereto with respect to transactions initiated prior to such termination. In the event that the IPA shall give the Issuer notice of termination, the Issuer shall not issue on or after the date of such notice any Notes having a maturity in excess of thirty (30) days. B. No amendment or modification of this Agreement shall be effective unless the same shall be in writing and signed by both of the parties hereto. No waiver of, nor any consent to any departure from, any provision of this Agreement shall be effective unless signed by the party intended to be bound. No such amendment, modification, waiver or consent shall adversely affect the rights of any holder of Notes outstanding at the time of such amendment, modification, waiver or consent. C. Any obligation under this Agreement or the Notes that falls on a day that is not a Business Day shall be performed on the next succeeding Business Day. D. Neither party hereto may assign any of its rights or obligations hereunder without the consent of the other party hereto. E. This Agreement may be executed in any number of counterparts and by each party hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts taken together shall constitute one and the same Agreement. 11. Notices. Any notices, demands, instructions and other communications required or permitted to be given or made upon either party shall be in writing and shall be personally delivered or sent by first class mail, postage prepaid (or telecopier, as permitted hereunder), and shall be effective for purposes of this Agreement upon receipt by the intended recipient thereof at the address designated by such recipient, or on the next succeeding Business Day if received on other than a Business Day. Unless otherwise specified in a notice sent or delivered in accordance with the foregoing provisions of this paragraph (or with respect to Issuance Instructions, as permitted hereunder), notices, demands, instructions and other communications in writing shall be addressed as indicated below: If to the IPA Bank One, National Association 1 Bank One Plaza Suite IL1-0439, 1NS-9 Chicago, Illinois 60670-0439 Attn: Commercial Paper Customer Service Telephone: (312) 407-3358 Telecopier: (312) 407-4154 If to the Issuer: ALLEGHENY TECHNOLOGIES INCORPORATED 1000 Six PPG Place Pittsburgh, PA 15222-5479 Attn: R.S. Park Telephone: (412) 394-2822 Telecopier: (412) 394-3034 12. GAITIR License A. The IPA grants, if applicable, to the Issuer a personal, non-transferable and non-exclusive license to use the instruction and reporting communication software, GAITIR, to transmit Issuance Instructions made pursuant to Section 3 hereof and to obtain reports with respect to the Notes. The IPA warrants that for ninety (90) days from the date of installation of each copy of GAITIR software, that copy will perform substantially in accordance with user documentation provided by IPA. The IPA warrants that the tape, diskettes, or other media on which GAITIR software is delivered will be free of defects in materials and workmanship during the same ninety (90) days. The Issuer acknowledges that (a) GAITIR IS PROVIDED TO THE ISSUER WITHOUT ADDITIONAL WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED OF ANY KIND WHATSOEVER BY THE IPA OR ANY THIRD PARTY VENDOR, INCLUDING BUT NOT LIMITED, TO THE IMPLIED WARRANTY OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE; (b) GAITIR is proprietary and confidential property of IPA disclosed to the Issuer in confidence and only on the terms and conditions and for purposes set forth in this Agreement, and (c) GAITIR is a registered trademark of Bank One Corporation. IPA represents that it has all power and authority to grant the license herein. B. By this Agreement, the Issuer acquires no title, ownership or sublicensing rights whatsoever in GAITIR or in any trade secret, trademark, copyright or patent of the IPA now or to become applicable to GAITIR. The Issuer may not transfer, sublicense, assign, rent, lease, convey, modify, translate, convert to a programming language, decompile, disassemble, recirculate, republish or redistribute GAITIR for any purpose without the prior written consent of the IPA, provided; however, that the Issuer may make two (2) additional copies of the software for back-up purposes only without prior written consent of the IPA. The Issuer shall take commercially reasonable efforts to secure and protect GAITIR against any disclosure or transfer of any part thereof to any third party with the same degree of care it uses to protect its own confidential information of a similar character. C. In the event (a) any action is taken or threatened which may result in a disclosure or transfer of GAITIR or any part thereof, other than as authorized by this Agreement, or (b) the use of any trademark, trade name, service mark, service name, copyright or patent of the IPA by the Issuer amounts to unfair competition, or otherwise constitutes a possible violation of any kind, then the IPA shall have the right to take any and all action deemed necessary to protect their rights in GAITIR, and to avoid the substantial and irreparable damage which would result from such disclosure, transfer or use, including the immediate termination of the Issuer's right to use GAITIR. D. IPA shall defend and hold harmless including at its option, settle any claim, action or proceeding related thereto brought against Issuer that GAITIR infringes any patent, copyright, or trade secret, and shall indemnify Issuer against all damages and costs finally awarded in any action or proceedings. In the event of such claims, IPA shall have the right, at its option and expense, either (1) to obtain a license permitting continued use at no additional expense to Issuer, (2) to replace or modify as equivalent non-infringing software, or (3) to terminate the license and refund the depreciated value of the fee paid. E. To permit the use of GAITIR to issue Instructions and/or obtain reports with respect to the Notes, the IPA will supply the Issuer with an identification number and initial passwords. From time to time thereafter, the Issuer may change its passwords directly through GAITIR. The Issuer will keep all information relating to its identification number and passwords strictly confidential and will be responsible for the maintenance of adequate security over its customer identification number and passwords. 13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW OF THE STATE OF NEW YORK (EXCLUDING ITS CONFLICTS OF LAWS RULES). 14. Entire Agreement. This Agreement together with the Exhibits, constitute the entire agreement between the IPA and the Issuer relating to the subject matter hereof, and supersedes all proposals and all other communications between the parties relating hereto. ALLEGHENY TECHNOLOGIES INCORPORATED By: /s/R. S. Park -------------------------------- Name: -------------------------------- Title: -------------------------------- BANK ONE, National Association, as Issuing and Paying Agent By: /s/Maria G. Romero -------------------------------- Name: Maria G. Romero -------------------------------- Title: Corporate Account Representative -------------------------------- LIST OF EXHIBITS Exhibit A Issuer of Incumbency Certificates Exhibit B Form of Master Note Exhibit C IPA/DTC Commercial Paper Certificate Agreement Exhibit D Issuer/IPA/DTC Representation Letter Exhibit E Telephone Numbers for Telephonic Issuance Instructions to the IPA Exhibit F IPA Fee Schedule EXHIBIT 4.5 COMMERCIAL PAPER DEALER AGREEMENT 4(2) PROGRAM BETWEEN ALLEGHENY TECHNOLOGIES INCORPORATED, AS ISSUER AND CHASE SECURITIES INC., AS DEALER 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 DATED AS OF NOVEMBER 2, 2000 COMMERCIAL PAPER DEALER AGREEMENT 4(2) PROGRAM This agreement ("Agreement") sets forth the understandings between the Issuer and the Dealer, each named on the cover page hereof, in connection with the issuance and sale by the Issuer of its short-term promissory notes (the "Notes") through the Dealer. Certain terms used in this Agreement are defined in Section 6 hereof. The Addendum to this Agreement, and any Annexes or Exhibits described in this Agreement or such Addendum, are hereby incorporated into this Agreement and made fully a part hereof. Section 1. Offers, Sales and Resales of Notes. 1.1 While (i) the Issuer has and shall have no obligation to sell the Notes to the Dealer or to permit the Dealer to arrange any sale of the Notes for the account of the Issuer, and (ii) the Dealer has and shall have no obligation to purchase the Notes from the Issuer or to arrange any sale of the Notes for the account of the Issuer, the parties hereto agree that in any case where the Dealer purchases Notes from the Issuer, or arranges for the sale of Notes by the Issuer, such Notes will be purchased or sold by the Dealer in reliance on the representations, warranties, covenants and agreements of the Issuer contained herein or made pursuant hereto and on the terms and conditions and in the manner provided herein. 1.2 So long as this Agreement shall remain in effect, and in addition to the limitations contained in Section 1.7 hereof, the Issuer shall not, without the consent of the Dealer, offer, solicit or accept offers to purchase, or sell, any Notes except (a) in transactions with one or more dealers which may from time to time after the date hereof become dealers with respect to the Notes by executing with the Issuer one or more agreements which contain provisions substantially identical to those contained in Section 1 of this Agreement, of which the Issuer hereby undertakes to provide the Dealer prompt notice or (b) in transactions with the other dealers listed on the Addendum hereto, which are executing agreements with the Issuer which contain provisions substantially identical to Section 1 of this Agreement contemporaneously herewith. In no event shall the Issuer offer, solicit or accept offers to purchase, or sell, any Notes directly on its own behalf in transactions with persons other than broker-dealers as specifically permitted in this Section 1.2. 1.3 The Notes shall be in a minimum denomination of $250,000 or integral multiples of $1,000 in excess thereof, will bear such interest rates, if interest bearing, or will be sold at such discount from their face amounts, as shall be agreed upon by the Dealer and the Issuer, shall have a maturity not exceeding 366 days from the date of issuance (exclusive of days of grace) and shall not contain any provision for extension, renewal or automatic "rollover." 1.4 The authentication and issuance of, and payment for, the Notes shall be effected in accordance with the Issuing and Paying Agency Agreement, and the Notes shall be either individual physical certificates or book-entry notes evidenced by a Master Note registered in the name of DTC or its nominee, in the form or forms annexed to the Issuing and Paying Agency Agreement. 1.5 If the Issuer and the Dealer shall agree on the terms of the purchase of any Note by the Dealer or the sale of any Note arranged by the Dealer (including, but not limited to, agreement with respect to the date of issue, purchase price, principal amount, maturity and interest rate (in the case of interest-bearing Notes) or discount thereof (in the case of Notes issued on a discount basis), and appropriate compensation for the Dealer's services hereunder) pursuant to this Agreement, the Issuer shall cause such Note to be issued and delivered in accordance with the terms of the Issuing and Paying Agency Agreement and payment for such Note shall be made by the purchaser thereof, either directly or through the Dealer, to the Issuing and Paying Agent, for the account of the Issuer. Except as otherwise agreed, in the event that the Dealer is acting as an agent and a purchaser shall either fail to accept delivery of or make payment for a Note on the date fixed for settlement, the Dealer shall promptly notify the Issuer, and if the Dealer has theretofore paid the Issuer for the Note, the Issuer will promptly return such funds to the Dealer against its return of the Note to the Issuer, in the case of a certificated Note, and upon notice of such failure in the case of a book-entry Note. If such failure occurred for any reason other than default by the Dealer, the Issuer shall reimburse the Dealer on an equitable basis for the Dealer's loss of the use of such funds for the period such funds were credited to the Issuer's account. 1.6 The Dealer and the Issuer hereby establish and agree to observe the following procedures in connection with offers, sales and subsequent resales or other transfers of the Notes: (a) Offers and sales of the Notes by or through the Dealer shall be made only to: (i) investors reasonably believed by the Dealer to be Qualified Institutional Buyers ("QIB's"), Institutional Accredited Investors, or Sophisticated Individual Accredited Investors and (ii) non-bank fiduciaries or agents that will be purchasing Notes for one or more accounts, each of which is reasonably believed by the Dealer to be an Institutional Accredited Investor or Sophisticated Individual Accredited Investor. (b) Resales and other transfers of the Notes by the holders thereof shall be made only in accordance with the restrictions in the legend described in clause (e) below. (c) No general solicitation or general advertising shall be used in connection with the offering of the Notes. Without limiting the generality of the foregoing, without the prior written approval of the Dealer, the Issuer shall not issue any press release or place or publish any "tombstone" or other advertisement relating to the Notes. (d) No sale of Notes to any one purchaser shall be for less than $250,000 principal or face amount, and no Note shall be issued in a smaller principal or face amount. If the purchaser is a non-bank fiduciary acting on behalf of others, each person for whom such purchaser is acting must purchase at least $250,000 principal or face amount of Notes. (e) Offers and sales of the Notes by the Issuer through the Dealer acting as agent for the Issuer shall be made in accordance with Rule 506 under the Securities Act, and shall be subject to the restrictions described in the legend appearing on Exhibit A hereto. A legend substantially to the effect of such Exhibit A shall appear as part of the Private Placement Memorandum used in connection with offers and sales of Notes hereunder, as well as on each individual certificate representing a Note and each Master Note representing book-entry Notes offered and sold pursuant to this Agreement. (f) The Dealer shall furnish or shall have furnished to each purchaser of Notes for which it has acted as the Dealer a copy of the then-current Private Placement Memorandum unless such purchaser has previously received a copy of the Private Placement Memorandum as then in effect. The Private Placement Memorandum shall expressly state that any person to whom Notes are offered shall have an opportunity to ask questions of, and receive information from, the Issuer and the Dealer and shall provide the names, addresses and telephone numbers of the persons from whom information regarding the Issuer may be obtained. (g) The Issuer agrees, for the benefit of the Dealer and each of the holders and prospective purchasers from time to time of the Notes that, if at any time the Issuer shall not be subject to Section 13 or 15(d) of the Exchange Act, the Issuer will furnish, upon request and at its expense, to the Dealer and to holders and prospective purchasers of Notes information required by Rule 144A(d)(4)(i) in compliance with Rule 144A(d). (h) In the event that any Note offered or to be offered by the Dealer would be ineligible for resale under Rule 144A, the Issuer shall immediately notify the Dealer (by telephone, confirmed in writing) of such fact and shall promptly prepare and deliver to the Dealer an amendment or supplement to the Private Placement Memorandum describing the Notes that are ineligible, the reason for such ineligibility and any other relevant information relating thereto. (i) The Issuer represents that it is not currently issuing commercial paper in the United States market in reliance upon, and in compliance with, the exemption provided by Section 3(a)(3) of the Securities Act. In that connection, the Issuer agrees that in the event that it shall, after the date hereof, issue commercial paper in the United States in reliance upon the exemption provided by Section 3(a)(3) of the Securities Act, (a) the proceeds from the sale of the Notes will be segregated from the proceeds of the sale of any such commercial paper by being placed in a separate account; (b) the Issuer will institute appropriate corporate procedures to ensure that the offers and sales of notes issued by the Issuer pursuant to the Section 3(a)(3) exemption are not integrated with offerings and sales of Notes hereunder; and (c) the Issuer will comply with each of the requirements of Section 3(a)(3) of the Act in selling commercial paper or other short-term debt securities other than the Notes in the United States. (j) The Issuer hereby agrees that, not later than 15 days after the first sale of Notes as contemplated by this Agreement, it will file with the SEC a notice on Form D in accordance with Rule 503 under the Securities Act and that it will thereafter file such amendments to such notice as Rule 503 may require. 1.7 The Issuer hereby represents and warrants to the Dealer, in connection with offers, sales and resales of Notes, as follows: (a) Issuer hereby confirms to the Dealer that (except as permitted by Section 1.6(i)) within the preceding six months neither the Issuer nor any person other than the Dealer or the other dealers referred to in Section 1.2 hereof acting on behalf of the Issuer has offered or sold any Notes, or any substantially similar security of the Issuer (including, without limitation, medium-term notes issued by the Issuer), to, or solicited offers to buy any such security from, any person other than the Dealer or the other dealers referred to in Section 1.2 hereof. The Issuer also agrees that (except as permitted by Section 1.6(i)), as long as the Notes are being offered for sale by the Dealer and the other dealers referred to in Section 1.2 hereof as contemplated hereby and until at least six months after the offer of Notes hereunder has been terminated, neither the Issuer nor any person other than the Dealer or the other dealers referred to in Section 1.2 hereof (except as contemplated by Section 1.2 hereof) will offer the Notes or any substantially similar security of the Issuer for sale to, or solicit offers to buy any such security from, any person other than the Dealer or the other dealers referred to in Section 1.2 hereof, it being understood that such agreement is made with a view to bringing the offer and sale of the Notes within the exemption provided by Section 4(2) of the Securities Act and Rule 506 thereunder and shall survive any termination of this Agreement. The Issuer hereby represents and warrants that it has not taken or omitted to take, and will not take or omit to take, any action that would cause the offering and sale of Notes hereunder to be integrated with any other offering of securities, whether such offering is made by the Issuer or some other party or parties. (b) The Issuer represents that the proceeds of the sale of the Notes are contemplated to be used for the purpose of buying, carrying or trading securities within the meaning of Regulation T and the interpretations thereunder by the Board of Governors of the Federal Reserve System. In the event that the Dealer purchases Notes as principal and does not resell such Notes on the day of such purchase, to the extent necessary to comply with Regulation T and the interpretations thereunder, the Dealer will sell such Notes either (i) only to offerees it reasonably believes to be QIBs or to QIBs it reasonably believes are acting for other QIBs, in each case in accordance with Rule 144A or (ii) in a manner which would not cause a violation of Regulation T and the interpretations thereunder. Section 2. Representations and Warranties of Issuer. The Issuer represents and warrants that: 2.1 The Issuer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all the requisite power and authority to execute, deliver and perform its obligations under the Notes, this Agreement and the Issuing and Paying Agency Agreement. 2.2 This Agreement and the Issuing and Paying Agency Agreement have been duly authorized, executed and delivered by the Issuer and constitute legal, valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 2.3 The Notes have been duly authorized, and when issued as provided in the Issuing and Paying Agency Agreement, will be duly and validly issued and will constitute legal, valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 2.4 The offer and sale of Notes in the manner contemplated hereby do not require registration of the Notes under the Securities Act, pursuant to the exemption from registration contained in Section 4(2) thereof and Regulation D thereunder, and no indenture in respect of the Notes is required to be qualified under the Trust Indenture Act of 1939, as amended. 2.5 The Notes will rank at least pari passu with all other unsecured and unsubordinated indebtedness of the Issuer. 2.6 No consent or action of, or filing or registration with, any governmental or public regulatory body or authority, including the SEC, is required to authorize, or is otherwise required in connection with the execution, delivery or performance of, this Agreement, the Notes or the Issuing and Paying Agency Agreement, except as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Notes. 2.7 Neither the execution and delivery of this Agreement and the Issuing and Paying Agency Agreement, nor the issuance of the Notes in accordance with the Issuing and Paying Agency Agreement, nor the fulfillment of or compliance with the terms and provisions hereof or thereof by the Issuer, will (i) result in the creation or imposition of any mortgage, lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Issuer, or (ii) violate or result in a breach or a default under any of the terms of the Issuer's charter documents or by-laws, any contract or instrument to which the Issuer is a party or by which it or its property is bound, or any law or regulation, or any order, writ, injunction or decree of any court or government instrumentality, to which the Issuer is subject or by which it or its property is bound, which breach or default might have a material adverse effect on the condition (financial or otherwise), operations or business prospects of the Issuer, the validity of the Notes or the ability of the Issuer to perform its obligations under this Agreement, the Notes or the Issuing and Paying Agency Agreement. 2.8 There is no litigation or governmental proceeding pending, or to the knowledge of the Issuer threatened, against or affecting the Issuer or any of its subsidiaries which might result in a material adverse change in the condition (financial or otherwise), operations or business prospects of the Issuer or the ability of the Issuer to perform its obligations under this Agreement, the Notes or the Issuing and Paying Agency Agreement. 2.9 The Issuer is not an "investment company" or an entity "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 2.10 Neither the Private Placement Memorandum nor the Company Information contains any 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, in light of the circumstances under which they were made, not misleading. 2.11 Each (a) issuance of Notes by the Issuer hereunder and (b) amendment or supplement of the Private Placement Memorandum shall be deemed a representation and warranty by the Issuer to the Dealer, as of the date thereof, that, both before and after giving effect to such issuance and after giving effect to such amendment or supplement, (i) the representations and warranties given by the Issuer set forth above in this Section 2 remain true and correct on and as of such date as if made on and as of such date, (ii) in the case of an issuance of Notes, the Notes being issued on such date have been duly and validly issued and constitute legal, valid and binding obligations of the Issuer, enforceable against the Issuer in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law) and (iii) in the case of an issuance of Notes, since the date of the most recent Private Placement Memorandum, there has been no material adverse change in the condition (financial or otherwise), operations or business prospects of the Issuer which has not been disclosed to the Dealer in writing. Section 3. Covenants and Agreements of Issuer. The Issuer covenants and agrees that: 3.1 The Issuer will give the Dealer prompt notice (but in any event prior to any subsequent issuance of Notes hereunder) of any amendment to, modification of or waiver with respect to, the Notes or the Issuing and Paying Agency Agreement, including a complete copy of any such amendment, modification or waiver. 3.2 The Issuer shall, whenever there shall occur any change in the Issuer's condition (financial or otherwise), operations or business prospects or any development or occurrence in relation to the Issuer that would be material to holders of the Notes or potential holders of the Notes (including any downgrading or receipt of any notice of intended or potential downgrading or any review for potential change in the rating accorded any of the Issuer's securities by any nationally recognized statistical rating organization which has published a rating of the Notes), promptly, and in any event prior to any subsequent issuance of Notes hereunder, notify the Dealer (by telephone, confirmed in writing) of such change, development or occurrence. 3.3 The Issuer shall from time to time furnish to the Dealer such information as the Dealer may reasonably request, including, without limitation, any press releases or material provided by the Issuer to any national securities exchange or rating agency, regarding (i) the Issuer's operations and financial condition, (ii) the due authorization and execution of the Notes and (iii) the Issuer's ability to pay the Notes as they mature. 3.4 The Issuer will take all such action as the Dealer may reasonably request to ensure that each offer and each sale of the Notes will comply with any applicable state Blue Sky laws; provided, however, that the Issuer shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation in any jurisdiction in which it is not so qualified or subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. 3.5 The Issuer will not be in default of any of its obligations hereunder, under the Notes or under the Issuing and Paying Agency Agreement, at any time that any of the Notes are outstanding. 3.6 The Issuer shall not issue Notes hereunder until the Dealer shall have received (a) an opinion of counsel to the Issuer, addressed to the Dealer, satisfactory in form and substance to the Dealer, (b) a copy of the executed Issuing and Paying Agency Agreement as then in effect, (c) a copy of resolutions adopted by the Board of Directors of the Issuer, satisfactory in form and substance to the Dealer and certified by the Secretary or similar officer of the Issuer, authorizing execution and delivery by the Issuer of this Agreement, the Issuing and Paying Agency Agreement and the Notes and consummation by the Issuer of the transactions contemplated hereby and thereby, (d) prior to the issuance of any Notes represented by a book-entry note registered in the name of DTC or its nominee, a copy of the executed Letter of Representations among the Issuer, the Issuing and Paying Agent and DTC and (e) such other certificates, opinions, letters and documents as the Dealer shall have reasonably requested. 3.7 The Issuer shall reimburse the Dealer for all of the Dealer's out-of-pocket expenses related to this Agreement, including expenses incurred in connection with its preparation and negotiation, and the transactions contemplated hereby (including, but not limited to, the printing and distribution of the Private Placement Memorandum), and, if applicable, for the reasonable fees and out-of-pocket expenses of the Dealer's counsel. Section 4. Disclosure. 4.1 The Private Placement Memorandum and its contents (other than the Dealer Information) shall be the sole responsibility of the Issuer. The Private Placement Memorandum shall contain a statement expressly offering an opportunity for each prospective purchaser to ask questions of, and receive answers from, the Issuer concerning the offering of Notes and to obtain relevant additional information which the Issuer possesses or can acquire without unreasonable effort or expense. 4.2 The Issuer agrees to promptly furnish the Dealer the Company Information as it becomes available. 4.3 (a) The Issuer further agrees to notify the Dealer promptly upon the occurrence of any event relating to or affecting the Issuer that would cause the Company Information then in existence to include an untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they are made, not misleading. (b) In the event that the Issuer gives the Dealer notice pursuant to Section 4.3(a) and the Dealer notifies the Issuer that it then has Notes it is holding in inventory, the Issuer agrees promptly to supplement or amend the Private Placement Memorandum so that the Private Placement Memorandum, as amended or supplemented, shall not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and the Issuer shall make such supplement or amendment available to the Dealer. (c) In the event that (i) the Issuer gives the Dealer notice pursuant to Section 4.3(a), (ii) the Dealer does not notify the Issuer that it is then holding Notes in inventory and (iii) the Issuer chooses not to promptly amend or supplement the Private Placement Memorandum in the manner described in clause (b) above, then all solicitations and sales of Notes shall be suspended until such time as the Issuer has so amended or supplemented the Private Placement Memorandum, and made such amendment or supplement available to the Dealer. Section 5. Indemnification and Contribution. 5.1 The Issuer will indemnify and hold harmless the Dealer, each individual, corporation, partnership, trust, association or other entity controlling the Dealer, any affiliate of the Dealer or any such controlling entity and their respective directors, officers, employees, partners, incorporators, shareholders, servants, trustees and agents (hereinafter the "Indemnitees") against any and all liabilities, penalties, suits, causes of action, losses, damages, claims, costs and expenses (including, without limitation, fees and disbursements of counsel) or judgments of whatever kind or nature (each a "Claim"), imposed upon, incurred by or asserted against the Indemnitees arising out of or based upon (i) any allegation that the Private Placement Memorandum, the Company Information or any information provided by the Issuer to the Dealer included (as of any relevant time) or includes an untrue statement of a material fact or omitted (as of any relevant time) or omits to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or (ii) arising out of or based upon the breach by the Issuer of any agreement, covenant or representation made in or pursuant to this Agreement. This indemnification shall not apply to the extent that the Claim arises out of or is based upon Dealer Information. 5.2 Provisions relating to claims made for indemnification under this Section 5 are set forth on Exhibit B to this Agreement. 5.3 In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in this Section 5 is held to be unavailable or insufficient to hold harmless the Indemnitees, although applicable in accordance with the terms of this Section 5, the Issuer shall contribute to the aggregate costs incurred by the Dealer in connection with any Claim in the proportion of the respective economic interests of the Issuer and the Dealer; provided, however, that such contribution by the Issuer shall be in an amount such that the aggregate costs incurred by the Dealer do not exceed the aggregate of the commissions and fees earned by the Dealer hereunder with respect to the issue or issues of Notes to which such Claim relates. The respective economic interests shall be calculated by reference to the aggregate proceeds to the Issuer of the Notes issued hereunder and the aggregate commissions and fees earned by the Dealer hereunder. Section 6. Definitions. 6.1 "Claim" shall have the meaning set forth in Section 5.1. 6.2 "Company Information" at any given time shall mean the Private Placement Memorandum together with, to the extent applicable, (i) the Issuer's most recent report on Form 10-K filed with the SEC and each report on Form 10-Q or 8-K filed by the Issuer with the SEC since the most recent Form 10-K, (ii) the Issuer's most recent annual audited financial statements and each interim financial statement or report prepared subsequent thereto, if not included in item (i) above, (iii) the Issuer's and its affiliates' other publicly available recent reports, including, but not limited to, any publicly available filings or reports provided to their respective shareholders, (iv) any other information or disclosure prepared pursuant to Section 4.3 hereof and (v) any information prepared or approved by the Issuer for dissemination to investors or potential investors in the Notes. 6.3 "Dealer Information" shall mean material concerning the Dealer provided by the Dealer in writing expressly for inclusion in the Private Placement Memorandum. 6.4 "DTC" shall mean The Depository Trust Company. 6.5 "Exchange Act" shall mean the U.S. Securities Exchange Act of 1934, as amended. 6.6 "Indemnitee" shall have the meaning set forth in Section 5.1. 6.7 "Institutional Accredited Investor" shall mean an institutional investor that is an accredited investor within the meaning of Rule 501 under the Securities Act and that has such knowledge and experience in financial and business matters that it is capable of evaluating and bearing the economic risk of an investment in the Notes, including, but not limited to, a bank, as defined in Section 3(a)(2) of the Securities Act, or a savings and loan association or other institution, as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary capacity. 6.8 "Issuing and Paying Agency Agreement" shall mean the issuing and paying agency agreement described on the cover page of this Agreement, as such agreement may be amended or supplemented from time to time. 6.9 "Issuing and Paying Agent" shall mean the party designated as such on the cover page of this Agreement, as issuing and paying agent under the Issuing and Paying Agency Agreement, or any successor thereto in accordance with the Issuing and Paying Agency Agreement. 6.10 "Non-bank fiduciary or agent" shall mean a fiduciary or agent other than (a) a bank, as defined in Section 3(a)(2) of the Securities Act, or (b) a savings and loan association, as defined in Section 3(a)(5)(A) of the Securities Act. 6.11 "Private Placement Memorandum" shall mean offering materials prepared in accordance with Section 4 (including materials referred to therein or incorporated by reference therein) provided to purchasers and prospective purchasers of the Notes, and shall include amendments and supplements thereto which may be prepared from time to time in accordance with this Agreement (other than any amendment or supplement that has been completely superseded by a later amendment or supplement). 6.12 "Qualified Institutional Buyer" shall have the meaning assigned to that term in Rule 144A under the Securities Act. 6.13 "Rule 144A" shall mean Rule 144A under the Securities Act. 6.14 "SEC" shall mean the U.S. Securities and Exchange Commission. 6.15 "Securities Act" shall mean the U.S. Securities Act of 1933, as amended. 6.16 "Sophisticated Individual Accredited Investor" shall mean an individual who (a) is an accredited investor within the meaning of Regulation D under the Securities Act and (b) based on his or her pre-existing relationship with the Dealer, is reasonably believed by the Dealer to be a sophisticated investor (i) possessing such knowledge and experience (or represented by a fiduciary or agent possessing such knowledge and experience) in financial and business matters that he or she is capable of evaluating and bearing the economic risk of an investment in the Notes and (ii) having a net worth of at least $5 million. 6.17 "Regulation D" shall mean Regulation D (Rules 501 et seq.) under the Securities Act. Section 7. General 7.1 Unless otherwise expressly provided herein, all notices under this Agreement to parties hereto shall be in writing and shall be effective when received at the address of the respective party set forth in the Addendum to this Agreement. 7.2 This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to its conflict of laws provisions. 7.3 The Issuer agrees that any suit, action or proceeding brought by the Issuer against the Dealer in connection with or arising out of this Agreement or the Notes or the offer and sale of the Notes shall be brought solely in the United States federal courts located in the Borough of Manhattan or the courts of the State of New York located in the Borough of Manhattan. EACH OF THE DEALER AND THE ISSUER WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 7.4 This Agreement may be terminated, at any time, by the Issuer, upon one business day's prior notice to such effect to the Dealer, or by the Dealer upon one business day's prior notice to such effect to the Issuer. Any such termination, however, shall not affect the obligations of the Issuer under Sections 3.7, 5 and 7.3 hereof or the respective representations, warranties, agreements, covenants, rights or responsibilities of the parties made or arising prior to the termination of this Agreement. 7.5 This Agreement is not assignable by either party hereto without the written consent of the other party; provided, however, that the Dealer may assign its rights and obligations under this Agreement to any affiliate of the Dealer. 7.6 This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 7.7 This Agreement is for the exclusive benefit of the parties hereto, and their respective permitted successors and assigns hereunder, and shall not be deemed to give any legal or equitable right, remedy or claim to any other person whatsoever. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date and year first above written. ALLEGHENY TECHNOLOGIES INCORPORATED, AS ISSUER By: /s/ R. S. Park ---------------------------------- Name: Title: CHASE SECURITIES INC., AS DEALER By: /s/ Eugene Pickens ---------------------------------- Name: Eugene Pickens Title: Managing Director ADDENDUM The following additional clauses shall apply to the Agreement and be deemed a part thereof when the respective parties have placed their initials in the left margin beside the respective paragraph number. 1. The other dealers referred to in clause (b) of Section 1.2 of the Agreement are Goldman, Sachs & Co. 2. The addresses of the respective parties for purposes of notices under Section 7.1 are as follows: For the Issuer: Allegheny Technologies Incorporated Address: 1000 Six PPG Place Pittsburgh, Pennsylvania Attention: R.S. Park, Vice President and Treasurer Telephone number: (412) 394-2822 Fax number: (412) 394-3034 For the Dealer: Chase Securities Inc. Address: 270 Park Avenue, 9th Floor New York, New York 10017 Attention: Money Markets Division Telephone number: (212) 834-5070 Fax number: (212) 834-6560 EXHIBIT A FORM OF LEGEND FOR PRIVATE PLACEMENT MEMORANDUM AND NOTES THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW, AND OFFERS AND SALES THEREOF MAY BE MADE ONLY IN COMPLIANCE WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. BY ITS ACCEPTANCE OF A NOTE, THE PURCHASER WILL BE DEEMED TO REPRESENT THAT IT HAS BEEN AFFORDED AN OPPORTUNITY TO INVESTIGATE MATTERS RELATING TO THE ISSUER AND THE NOTES, THAT IT IS NOT ACQUIRING SUCH NOTE WITH A VIEW TO ANY DISTRIBUTION THEREOF AND THAT IT IS EITHER (A) AN INSTITUTIONAL INVESTOR OR HIGHLY SOPHISTICATED INDIVIDUAL INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a) UNDER THE ACT AND WHICH, IN THE CASE OF AN INDIVIDUAL, (i) POSSESSES SUCH KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT HE OR SHE IS CAPABLE OF EVALUATING AND BEARING THE ECONOMIC RISK OF AN INVESTMENT IN THE NOTES AND (ii) HAS A NET WORTH OF AT LEAST $5 MILLION (AN "INSTITUTIONAL ACCREDITED INVESTOR" OR "SOPHISTICATED INDIVIDUAL ACCREDITED INVESTOR", RESPECTIVELY) AND THAT EITHER IS PURCHASING NOTES FOR ITS OWN ACCOUNT, IS A U.S. BANK (AS DEFINED IN SECTION 3(a)(2) OF THE ACT) OR A SAVINGS AND LOAN ASSOCIATION OR OTHER INSTITUTION (AS DEFINED IN SECTION 3(a)(5)(A) OF THE ACT) ACTING IN ITS INDIVIDUAL OR FIDUCIARY CAPACITY OR IS A FIDUCIARY OR AGENT (OTHER THAN A U.S. BANK OR SAVINGS AND LOAN) PURCHASING NOTES FOR ONE OR MORE ACCOUNTS EACH OF WHICH IS SUCH AN INSTITUTIONAL ACCREDITED INVESTOR OR SOPHISTICATED INDIVIDUAL ACCREDITED INVESTOR (i) WHICH ITSELF POSSESSES SUCH KNOWLEDGE AND EXPERIENCE OR (ii) WITH RESPECT TO WHICH SUCH PURCHASER HAS SOLE INVESTMENT DISCRETION; OR (B) A QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE MEANING OF RULE 144A UNDER THE ACT WHICH IS ACQUIRING NOTES FOR ITS OWN ACCOUNT OR FOR ONE OR MORE ACCOUNTS, EACH OF WHICH IS A QIB AND WITH RESPECT TO EACH OF WHICH THE PURCHASER HAS SOLE INVESTMENT DISCRETION; AND THE PURCHASER ACKNOWLEDGES THAT IT IS AWARE THAT THE SELLER MAY RELY UPON THE EXEMPTION FROM THE REGISTRATION PROVISIONS OF SECTION 5 OF THE ACT PROVIDED BY RULE 144A. BY ITS ACCEPTANCE OF A NOTE, THE PURCHASER THEREOF SHALL ALSO BE DEEMED TO AGREE THAT ANY RESALE OR OTHER TRANSFER THEREOF WILL BE MADE ONLY (A) IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE ACT, EITHER (1) TO THE ISSUER OR TO CHASE SECURITIES INC. OR ANOTHER PERSON DESIGNATED BY THE ISSUER AS A PLACEMENT AGENT FOR THE NOTES (COLLECTIVELY, THE "PLACEMENT AGENTS"), NONE OF WHICH SHALL HAVE ANY OBLIGATION TO ACQUIRE SUCH NOTE, (2) THROUGH A PLACEMENT AGENT TO AN INSTITUTIONAL ACCREDITED INVESTOR, SOPHISTICATED INDIVIDUAL ACCREDITED INVESTOR OR A QIB, OR (3) TO A QIB IN A TRANSACTION THAT MEETS THE REQUIREMENTS OF RULE 144A AND (B) IN MINIMUM AMOUNTS OF $250,000. EXHIBIT B FURTHER PROVISIONS RELATING TO INDEMNIFICATION (a) The Issuer agrees to reimburse each Indemnitee for all expenses (including reasonable fees and disbursements of internal and external counsel) as they are incurred by it in connection with investigating or defending any loss, claim, damage, liability or action in respect of which indemnification may be sought under Section 5 of the Agreement (whether or not it is a party to any such proceedings). (b) Promptly after receipt by an Indemnitee of notice of the existence of a Claim, such Indemnitee will, if a claim in respect thereof is to be made against the Issuer, notify the Issuer in writing of the existence thereof; provided that (i) the omission so to notify the Issuer will not relieve the Issuer from any liability which it may have hereunder unless and except to the extent it did not otherwise learn of such Claim and such failure results in the forfeiture by the Issuer of substantial rights and defenses, and (ii) the omission so to notify the Issuer will not relieve it from liability which it may have to an Indemnitee otherwise than on account of this indemnity agreement. In case any such Claim is made against any Indemnitee and it notifies the Issuer of the existence thereof, the Issuer will be entitled to participate therein, and to the extent that it may elect by written notice delivered to the Indemnitee, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnitee; provided that if the defendants in any such Claim include both the Indemnitee and the Issuer, and the Indemnitee shall have concluded that there may be legal defenses available to it which are different from or additional to those available to the Issuer, the Issuer shall not have the right to direct the defense of such Claim on behalf of such Indemnitee, and the Indemnitee shall have the right to select separate counsel to assert such legal defenses on behalf of such Indemnitee. Upon receipt of notice from the Issuer to such Indemnitee of the Issuer's election so to assume the defense of such Claim and approval by the Indemnitee of counsel, the Issuer will not be liable to such Indemnitee for expenses incurred thereafter by the Indemnitee in connection with the defense thereof (other than reasonable costs of investigation) unless (i) the Indemnitee shall have employed separate counsel in connection with the assertion of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the Issuer shall not be liable for the expenses of more than one separate counsel (in addition to any local counsel in the jurisdiction in which any Claim is brought), approved by the Dealer, representing the Indemnitee who is party to such Claim), (ii) the Issuer shall not have employed counsel reasonably satisfactory to the Indemnitee to represent the Indemnitee within a reasonable time after notice of existence of the Claim or (iii) the Issuer has authorized in writing the employment of counsel for the Indemnitee. The indemnity, reimbursement and contribution obligations of the Issuer hereunder shall be in addition to any other liability the Issuer may otherwise have to an Indemnitee and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Issuer and any Indemnitee. The Issuer agrees that without the Dealer's prior written consent, it will not settle, compromise or consent to the entry of any judgment in any Claim in respect of which indemnification may be sought under the indemnification provision of the Agreement (whether or not the Dealer or any other Indemnitee is an actual or potential party to such Claim). EXHIBIT 4.6 COMMERCIAL PAPER DEALER AGREEMENT 4(2) PROGRAM BETWEEN ALLEGHENY TECHNOLOGIES INCORPORATED, AS ISSUER AND GOLDMAN, SACHS & CO., AS DEALER 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 DATED AS OF NOVEMBER 2, 2000 COMMERCIAL PAPER DEALER AGREEMENT 4(2) PROGRAM This agreement ("Agreement") sets forth the understandings between the Issuer and the Dealer, each named on the cover page hereof, in connection with the issuance and sale by the Issuer of its short-term promissory notes (the "Notes") through the Dealer. Certain terms used in this Agreement are defined in Section 6 hereof. The Addendum to this Agreement, and any Annexes or Exhibits described in this Agreement or such Addendum, are hereby incorporated into this Agreement and made fully a part hereof. Section 1. Offers, Sales and Resales of Notes. 1.1 While (i) the Issuer has and shall have no obligation to sell the Notes to the Dealer or to permit the Dealer to arrange any sale of the Notes for the account of the Issuer, and (ii) the Dealer has and shall have no obligation to purchase the Notes from the Issuer or to arrange any sale of the Notes for the account of the Issuer, the parties hereto agree that in any case where the Dealer purchases Notes from the Issuer, or arranges for the sale of Notes by the Issuer, such Notes will be purchased or sold by the Dealer in reliance on the representations, warranties, covenants and agreements of the Issuer contained herein or made pursuant hereto and on the terms and conditions and in the manner provided herein. 1.2 So long as this Agreement shall remain in effect, and in addition to the limitations contained in Section 1.7 hereof, the Issuer shall not, without the consent of the Dealer, offer, solicit or accept offers to purchase, or sell, any Notes except (a) in transactions with one or more dealers which may from time to time after the date hereof become dealers with respect to the Notes by executing with the Issuer one or more agreements which contain provisions substantially identical to those contained in Section 1 of this Agreement, of which the Issuer hereby undertakes to provide the Dealer prompt notice or (b) in transactions with the other dealers listed on the Addendum hereto, which are executing agreements with the Issuer which contain provisions substantially identical to Section 1 of this Agreement contemporaneously herewith. In no event shall the Issuer offer, solicit or accept offers to purchase, or sell, any Notes directly on its own behalf in transactions with persons other than broker-dealers as specifically permitted in this Section 1.2. 1.3 The Notes shall be in a minimum denomination of $250,000 or integral multiples of $1,000 in excess thereof, will bear such interest rates, if interest bearing, or will be sold at such discount from their face amounts, as shall be agreed upon by the Dealer and the Issuer, shall have a maturity not exceeding 366 days from the date of issuance (exclusive of days of grace) and shall not contain any provision for extension, renewal or automatic "rollover." 1.4 The authentication and issuance of, and payment for, the Notes shall be effected in accordance with the Issuing and Paying Agency Agreement, and the Notes shall be either individual physical certificates or book-entry notes evidenced by a Master Note registered in the name of DTC or its nominee, in the form or forms annexed to the Issuing and Paying Agency Agreement. 1.5 If the Issuer and the Dealer shall agree on the terms of the purchase of any Note by the Dealer or the sale of any Note arranged by the Dealer (including, but not limited to, agreement with respect to the date of issue, purchase price, principal amount, maturity and interest rate (in the case of interest-bearing Notes) or discount thereof (in the case of Notes issued on a discount basis), and appropriate compensation for the Dealer's services hereunder) pursuant to this Agreement, the Issuer shall cause such Note to be issued and delivered in accordance with the terms of the Issuing and Paying Agency Agreement and payment for such Note shall be made by the purchaser thereof, either directly or through the Dealer, to the Issuing and Paying Agent, for the account of the Issuer. Except as otherwise agreed, in the event that the Dealer is acting as an agent and a purchaser shall either fail to accept delivery of or make payment for a Note on the date fixed for settlement, the Dealer shall promptly notify the Issuer, and if the Dealer has theretofore paid the Issuer for the Note, the Issuer will promptly return such funds to the Dealer against its return of the Note to the Issuer, in the case of a certificated Note, and upon notice of such failure in the case of a book-entry Note. If such failure occurred for any reason other than default by the Dealer, the Issuer shall reimburse the Dealer on an equitable basis for the Dealer's loss of the use of such funds for the period such funds were credited to the Issuer's account. 1.6 The Dealer and the Issuer hereby establish and agree to observe the following procedures in connection with offers, sales and subsequent resales or other transfers of the Notes: (a) Offers and sales of the Notes by or through the Dealer shall be made only to: (i) investors reasonably believed by the Dealer to be Qualified Institutional Buyers, Institutional Accredited Investors or Sophisticated Individual Accredited Investors and (ii) non-bank fiduciaries or agents that will be purchasing Notes for one or more accounts, each of which is reasonably believed by the Dealer to be an Institutional Accredited Investor or Sophisticated Individual Accredited Investor. (b) Resales and other transfers of the Notes by the holders thereof shall be made only in accordance with the restrictions in the legend described in clause (e) below. (c) No general solicitation or general advertising shall be used in connection with the offering of the Notes. Without limiting the generality of the foregoing, without the prior written approval of the Dealer, the Issuer shall not issue any press release or place or publish any "tombstone" or other advertisement relating to the Notes. (d) No sale of Notes to any one purchaser shall be for less than $250,000 principal or face amount, and no Note shall be issued in a smaller principal or face amount. If the purchaser is a non-bank fiduciary acting on behalf of others, each person for whom such purchaser is acting must purchase at least $250,000 principal or face amount of Notes. (e) Offers and sales of the Notes by the Issuer through the Dealer acting as agent for the Issuer shall be made in accordance with Rule 506 under the Securities Act, and shall be subject to the restrictions described in the legend appearing on Exhibit A hereto. A legend substantially to the effect of such Exhibit A shall appear as part of the Private Placement Memorandum used in connection with offers and sales of Notes hereunder, as well as on each individual certificate representing a Note and each Master Note representing book-entry Notes offered and sold pursuant to this Agreement. (f) The Dealer shall furnish or shall have furnished to each purchaser of Notes for which it has acted as the Dealer a copy of the then-current Private Placement Memorandum unless such purchaser has previously received a copy of the Private Placement Memorandum as then in effect. The Private Placement Memorandum shall expressly state that any person to whom Notes are offered shall have an opportunity to ask questions of, and receive information from, the Issuer and the Dealer and shall provide the names, addresses and telephone numbers of the persons from whom information regarding the Issuer may be obtained. (g) The Issuer agrees, for the benefit of the Dealer and each of the holders and prospective purchasers from time to time of the Notes that, if at any time the Issuer shall not be subject to Section 13 or 15(d) of the Exchange Act, the Issuer will furnish, upon request and at its expense, to the Dealer and to holders and prospective purchasers of Notes information required by Rule 144A(d)(4)(i) in compliance with Rule 144A(d). (h) In the event that any Note offered or to be offered by the Dealer would be ineligible for resale under Rule 144A, the Issuer shall immediately notify the Dealer (by telephone, confirmed in writing) of such fact and shall promptly prepare and deliver to the Dealer an amendment or supplement to the Private Placement Memorandum describing the Notes that are ineligible, the reason for such ineligibility and any other relevant information relating thereto. (i) The Issuer represents that it is not currently issuing commercial paper in the United States market in reliance upon, and in compliance with, the exemption provided by Section 3(a)(3) of the Securities Act. In that connection, the Issuer agrees that in the event that it shall, after the date hereof, issue commercial paper in the United States in reliance upon the exemption provided by Section 3(a)(3) of the Securities Act, (a) the proceeds from the sale of the Notes will be segregated from the proceeds of the sale of any such commercial paper by being placed in a separate account; (b) the Issuer will institute appropriate corporate procedures to ensure that the offers and sales of notes issued by the Issuer pursuant to the Section 3(a)(3) exemption are not integrated with offerings and sales of Notes hereunder; and (c) the Issuer will comply with each of the requirements of Section 3(a)(3) of the Act in selling commercial paper or other short-term debt securities other than the Notes in the United States. (j) The Issuer hereby agrees that, not later than 15 days after the first sale of Notes as contemplated by this Agreement, it will file with the SEC a notice on Form D in accordance with Rule 503 under the Securities Act and that it will thereafter file such amendments to such notice as Rule 503 may require. 1.7 The Issuer hereby represents and warrants to the Dealer, in connection with offers, sales and resales of Notes, as follows: (a) Issuer hereby confirms to the Dealer that (except as permitted by Section 1.6(i)) within the preceding six months neither the Issuer nor any person other than the Dealer or the other dealers referred to in Section 1.2 hereof acting on behalf of the Issuer has offered or sold any Notes, or any substantially similar security of the Issuer (including, without limitation, medium-term notes issued by the Issuer), to, or solicited offers to buy any such security from, any person other than the Dealer or the other dealers referred to in Section 1.2 hereof. The Issuer also agrees that (except as permitted by Section 1.6(i)), as long as the Notes are being offered for sale by the Dealer and the other dealers referred to in Section 1.2 hereof as contemplated hereby and until at least six months after the offer of Notes hereunder has been terminated, neither the Issuer nor any person other than the Dealer or the other dealers referred to in Section 1.2 hereof (except as contemplated by Section 1.2 hereof) will offer the Notes or any substantially similar security of the Issuer for sale to, or solicit offers to buy any such security from, any person other than the Dealer or the other dealers referred to in Section 1.2 hereof, it being understood that such agreement is made with a view to bringing the offer and sale of the Notes within the exemption provided by Section 4(2) of the Securities Act and Rule 506 thereunder and shall survive any termination of this Agreement. The Issuer hereby represents and warrants that it has not taken or omitted to take, and will not take or omit to take, any action that would cause the offering and sale of Notes hereunder to be integrated with any other offering of securities, whether such offering is made by the Issuer or some other party or parties. (b) In the event that the Dealer purchases Notes as principal and does not resell such Notes on the day of such purchase, to the extent necessary to comply with Regulation T and the interpretations thereunder, the Dealer will sell such Notes either (i) only to offerees it reasonably believes to be QIBs or to QIBs it reasonably believes are acting for other QIBs, in each case in accordance with Rule 144A or (ii) in a manner which would not cause a violation of Regulation T and the interpretations thereunder. Section 2. Representations and Warranties of Issuer. The Issuer represents and warrants that: 2.1 The Issuer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all the requisite power and authority to execute, deliver and perform its obligations under the Notes, this Agreement and the Issuing and Paying Agency Agreement. 2.2 This Agreement and the Issuing and Paying Agency Agreement have been duly authorized, executed and delivered by the Issuer and constitute legal, valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 2.3 The Notes have been duly authorized, and when issued as provided in the Issuing and Paying Agency Agreement, will be duly and validly issued and will constitute legal, valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 2.4 The offer and sale of Notes in the manner contemplated hereby do not require registration of the Notes under the Securities Act, pursuant to the exemption from registration contained in Section 4(2) thereof and Regulation D thereunder, and no indenture in respect of the Notes is required to be qualified under the Trust Indenture Act of 1939, as amended. 2.5 The Notes will rank at least pari passu with all other unsecured and unsubordinated indebtedness of the Issuer. 2.6 No consent or action of, or filing or registration with, any governmental or public regulatory body or authority, including the SEC, is required to authorize, or is otherwise required in connection with the execution, delivery or performance of, this Agreement, the Notes or the Issuing and Paying Agency Agreement, except as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Notes. 2.7 Neither the execution and delivery of this Agreement and the Issuing and Paying Agency Agreement, nor the issuance of the Notes in accordance with the Issuing and Paying Agency Agreement, nor the fulfillment of or compliance with the terms and provisions hereof or thereof by the Issuer, will (i) result in the creation or imposition of any mortgage, lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Issuer, or (ii) violate or result in a breach or a default under any of the terms of the Issuer's charter documents or by-laws, any contract or instrument to which the Issuer is a party or by which it or its property is bound, or any law or regulation, or any order, writ, injunction or decree of any court or government instrumentality, to which the Issuer is subject or by which it or its property is bound, which breach or default might have a material adverse effect on the condition (financial or otherwise), operations or business prospects of the Issuer or the ability of the Issuer to perform its obligations under this Agreement, the Notes or the Issuing and Paying Agency Agreement. 2.8 There is no litigation or governmental proceeding pending, or to the knowledge of the Issuer threatened, against or affecting the Issuer or any of its subsidiaries which might result in a material adverse change in the condition (financial or otherwise), operations or business prospects of the Issuer or the ability of the Issuer to perform its obligations under this Agreement, the Notes or the Issuing and Paying Agency Agreement. 2.9 The Issuer is not an "investment company" or an entity "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 2.10 Neither the Private Placement Memorandum nor the Company Information contains any 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, in light of the circumstances under which they were made, not misleading. 2.11 Each (a) issuance of Notes by the Issuer hereunder and (b) amendment or supplement of the Private Placement Memorandum shall be deemed a representation and warranty by the Issuer to the Dealer, as of the date thereof, that, both before and after giving effect to such issuance and after giving effect to such amendment or supplement, (i) the representations and warranties given by the Issuer set forth above in this Section 2 remain true and correct on and as of such date as if made on and as of such date, (ii) in the case of an issuance of Notes, the Notes being issued on such date have been duly and validly issued and constitute legal, valid and binding obligations of the Issuer, enforceable against the Issuer in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law) and (iii) in the case of an issuance of Notes, since the date of the most recent Private Placement Memorandum, there has been no material adverse change in the condition (financial or otherwise), operations or business prospects of the Issuer which has not been disclosed to the Dealer in writing. Section 3. Covenants and Agreements of Issuer. The Issuer covenants and agrees that: 3.1 The Issuer will give the Dealer prompt notice (but in any event prior to any subsequent issuance of Notes hereunder) of any amendment to, modification of or waiver with respect to, the Notes or the Issuing and Paying Agency Agreement, including a complete copy of any such amendment, modification or waiver. 3.2 The Issuer shall, whenever there shall occur any change in the Issuer's condition (financial or otherwise), operations or business prospects or any development or occurrence in relation to the Issuer that would be material to holders of the Notes or potential holders of the Notes (including any downgrading or receipt of any notice of intended or potential downgrading or any review for potential change in the rating accorded any of the Issuer's securities by any nationally recognized statistical rating organization which has published a rating of the Notes), promptly, and in any event prior to any subsequent issuance of Notes hereunder, notify the Dealer (by telephone, confirmed in writing) of such change, development or occurrence. 3.3 The Issuer shall from time to time furnish to the Dealer such information as the Dealer may reasonably request, including, without limitation, any press releases or material provided by the Issuer to any national securities exchange or rating agency, regarding (i) the Issuer's operations and financial condition, (ii) the due authorization and execution of the Notes and (iii) the Issuer's ability to pay the Notes as they mature. 3.4 The Issuer will take all such action as the Dealer may reasonably request to ensure that each offer and each sale of the Notes will comply with any applicable state Blue Sky laws; provided, however, that the Issuer shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation in any jurisdiction in which it is not so qualified or subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. 3.5 The Issuer will not be in default of any of its obligations hereunder, under the Notes or under the Issuing and Paying Agency Agreement, at any time that any of the Notes are outstanding. 3.6 The Issuer shall not issue Notes hereunder until the Dealer shall have received (a) an opinion of counsel to the Issuer, addressed to the Dealer, satisfactory in form and substance to the Dealer, (b) a copy of the executed Issuing and Paying Agency Agreement as then in effect, (c) a copy of resolutions adopted by the Board of Directors of the Issuer, satisfactory in form and substance to the Dealer and certified by the Secretary or similar officer of the Issuer, authorizing execution and delivery by the Issuer of this Agreement, the Issuing and Paying Agency Agreement and the Notes and consummation by the Issuer of the transactions contemplated hereby and thereby, (d) prior to the issuance of any Notes represented by a book-entry note registered in the name of DTC or its nominee, a copy of the executed Letter of Representations among the Issuer, the Issuing and Paying Agent and DTC and (e) such other certificates, opinions, letters and documents as the Dealer shall have reasonably requested. 3.7 The Issuer shall reimburse the Dealer for all of the Dealer's out-of-pocket expenses related to this Agreement, including expenses incurred in connection with its preparation and negotiation, and the transactions contemplated hereby (including, but not limited to, the printing and distribution of the Private Placement Memorandum), and, if applicable, for the reasonable fees and out-of-pocket expenses of the Dealer's counsel. Section 4. Disclosure. 4.1 The Private Placement Memorandum and its contents (other than the Dealer Information) shall be the sole responsibility of the Issuer. The Private Placement Memorandum shall contain a statement expressly offering an opportunity for each prospective purchaser to ask questions of, and receive answers from, the Issuer concerning the offering of Notes and to obtain relevant additional information which the Issuer possesses or can acquire without unreasonable effort or expense. 4.2 The Issuer agrees to promptly furnish the Dealer the Company Information as it becomes available. 4.3 (a) The Issuer further agrees to notify the Dealer promptly upon the occurrence of any event relating to or affecting the Issuer that would cause the Company Information then in existence to include an untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they are made, not misleading. (b) In the event that the Issuer gives the Dealer notice pursuant to Section 4.3(a) and the Dealer notifies the Issuer that it then has Notes it is holding in inventory, the Issuer agrees promptly to supplement or amend the Private Placement Memorandum so that the Private Placement Memorandum, as amended or supplemented, shall not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and the Issuer shall make such supplement or amendment available to the Dealer. (c) In the event that (i) the Issuer gives the Dealer notice pursuant to Section 4.3(a), (ii) the Dealer does not notify the Issuer that it is then holding Notes in inventory and (iii) the Issuer chooses not to promptly amend or supplement the Private Placement Memorandum in the manner described in clause (b) above, then all solicitations and sales of Notes shall be suspended until such time as the Issuer has so amended or supplemented the Private Placement Memorandum, and made such amendment or supplement available to the Dealer. Section 5. Indemnification and Contribution. 5.1 The Issuer will indemnify and hold harmless the Dealer, each individual, corporation, partnership, trust, association or other entity controlling the Dealer, any affiliate of the Dealer or any such controlling entity and their respective directors, officers, employees, partners, incorporators, shareholders, servants, trustees and agents (hereinafter the "Indemnitees") against any and all liabilities, penalties, suits, causes of action, losses, damages, claims, costs and expenses (including, without limitation, fees and disbursements of counsel) or judgments of whatever kind or nature (each a "Claim"), imposed upon, incurred by or asserted against the Indemnitees arising out of or based upon (i) any allegation that the Private Placement Memorandum, the Company Information or any information provided by the Issuer to the Dealer included (as of any relevant time) or includes an untrue statement of a material fact or omitted (as of any relevant time) or omits to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or (ii) arising out of or based upon the breach by the Issuer of any agreement, covenant or representation made in or pursuant to this Agreement. This indemnification shall not apply to the extent that the Claim arises out of or is based upon Dealer Information. 5.2 Provisions relating to claims made for indemnification under this Section 5 are set forth on Exhibit B to this Agreement. 5.3 In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in this Section 5 is held to be unavailable or insufficient to hold harmless the Indemnitees, although applicable in accordance with the terms of this Section 5, the Issuer shall contribute to the aggregate costs incurred by the Dealer in connection with any Claim in the proportion of the respective economic interests of the Issuer and the Dealer; provided, however, that such contribution by the Issuer shall be in an amount such that the aggregate costs incurred by the Dealer do not exceed the aggregate of the commissions and fees earned by the Dealer hereunder with respect to the issue or issues of Notes to which such Claim relates. The respective economic interests shall be calculated by reference to the aggregate proceeds to the Issuer of the Notes issued hereunder and the aggregate commissions and fees earned by the Dealer hereunder. Section 6. Definitions. 6.1 "Claim" shall have the meaning set forth in Section 5.1. 6.2 "Company Information" at any given time shall mean the Private Placement Memorandum together with, to the extent applicable, (i) the Issuer's most recent report on Form 10-K filed with the SEC and each report on Form 10-Q or 8-K filed by the Issuer with the SEC since the most recent Form 10-K, (ii) the Issuer's most recent annual audited financial statements and each interim financial statement or report prepared subsequent thereto, if not included in item (i) above, (iii) the Issuer's and its affiliates' other publicly available recent reports, including, but not limited to, any publicly available filings or reports provided to their respective shareholders, (iv) any other information or disclosure prepared pursuant to Section 4.3 hereof and (v) any information prepared or approved by the Issuer for dissemination to investors or potential investors in the Notes. 6.3 "Dealer Information" shall mean material concerning the Dealer provided by the Dealer in writing expressly for inclusion in the Private Placement Memorandum. 6.4 "DTC" shall mean The Depository Trust Company. 6.5 "Exchange Act" shall mean the U.S. Securities Exchange Act of 1934, as amended. 6.6 "Indemnitee" shall have the meaning set forth in Section 5.1. 6.7 "Institutional Accredited Investor" shall mean an institutional investor that is an accredited investor within the meaning of Rule 501 under the Securities Act and that has such knowledge and experience in financial and business matters that it is capable of evaluating and bearing the economic risk of an investment in the Notes, including, but not limited to, a bank, as defined in Section 3(a)(2) of the Securities Act, or a savings and loan association or other institution, as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary capacity. 6.8 "Issuing and Paying Agency Agreement" shall mean the issuing and paying agency agreement described on the cover page of this Agreement, as such agreement may be amended or supplemented from time to time. 6.9 "Issuing and Paying Agent" shall mean the party designated as such on the cover page of this Agreement, as issuing and paying agent under the Issuing and Paying Agency Agreement, or any successor thereto in accordance with the Issuing and Paying Agency Agreement. 6.10 "Non-bank fiduciary or agent" shall mean a fiduciary or agent other than (a) a bank, as defined in Section 3(a)(2) of the Securities Act, or (b) a savings and loan association, as defined in Section 3(a)(5)(A) of the Securities Act. 6.11 "Private Placement Memorandum" shall mean offering materials prepared in accordance with Section 4 (including materials referred to therein or incorporated by reference therein) provided to purchasers and prospective purchasers of the Notes, and shall include amendments and supplements thereto which may be prepared from time to time in accordance with this Agreement (other than any amendment or supplement that has been completely superseded by a later amendment or supplement). 6.12 "Qualified Institutional Buyer" shall have the meaning assigned to that term in Rule 144A under the Securities Act. 6.13 "Rule 144A" shall mean Rule 144A under the Securities Act. 6.14 "SEC" shall mean the U.S. Securities and Exchange Commission. 6.15 "Securities Act" shall mean the U.S. Securities Act of 1933, as amended. 6.16 "Sophisticated Individual Accredited Investor" shall mean an individual who (a) is an accredited investor within the meaning of Regulation D under the Securities Act and (b) based on his or her pre-existing relationship with the Dealer, is reasonably believed by the Dealer to be a sophisticated investor (i) possessing such knowledge and experience (or represented by a fiduciary or agent possessing such knowledge and experience) in financial and business matters that he or she is capable of evaluating and bearing the economic risk of an investment in the Notes and (ii) having a net worth of at least $5 million. 6.17 "Regulation D" shall mean Regulation D (Rules 501 et seq.) under the Securities Act. Section 7. General 7.1 Unless otherwise expressly provided herein, all notices under this Agreement to parties hereto shall be in writing and shall be effective when received at the address of the respective party set forth in the Addendum to this Agreement. 7.2 This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to its conflict of laws provisions. 7.3 The Issuer agrees that any suit, action or proceeding brought by the Issuer against the Dealer in connection with or arising out of this Agreement or the Notes or the offer and sale of the Notes shall be brought solely in the United States federal courts located in the Borough of Manhattan or the courts of the State of New York located in the Borough of Manhattan. EACH OF THE DEALER AND THE ISSUER WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 7.4 This Agreement may be terminated, at any time, by the Issuer, upon one business day's prior notice to such effect to the Dealer, or by the Dealer upon one business day's prior notice to such effect to the Issuer. Any such termination, however, shall not affect the obligations of the Issuer under Sections 3.7, 5 and 7.3 hereof or the respective representations, warranties, agreements, covenants, rights or responsibilities of the parties made or arising prior to the termination of this Agreement. 7.5 This Agreement is not assignable by either party hereto without the written consent of the other party; provided, however, that the Dealer may assign its rights and obligations under this Agreement to any affiliate of the Dealer. 7.6 This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 7.7 This Agreement is for the exclusive benefit of the parties hereto, and their respective permitted successors and assigns hereunder, and shall not be deemed to give any legal or equitable right, remedy or claim to any other person whatsoever. ---------------------------- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date and year first above written. ALLEGHENY TECHNOLOGIES INCORPORATED, AS ISSUER By: /s/Robert S. Park -------------------------------------- Name: Title: GOLDMAN, SACHS & CO., AS DEALER By: /s/W. R. Harrison -------------------------------------- Name: Title: ADDENDUM The following additional clauses shall apply to the Agreement and be deemed a part thereof. 1. The other dealers referred to in clause (b) of Section 1.2 of the Agreement are Chase Securities, Inc. 2. The addresses of the respective parties for purposes of notices under Section 7.1 are as follows: For the Issuer: Allegheny Technologies Incorporated Address: 1000 Six PPG Place Pittsburgh, Pennsylvania Attention: R.S. Park, Vice President and Treasurer Telephone number: (412) 394-2822 Fax number: (412) 394-3034 For the Dealer: Goldman, Sachs & Co. Address: 85 Broad Street New York, New York 10004 Attention: Money market Origination Telephone number: (212) 902-2525 Fax number: (212) 902-0683 EXHIBIT A FORM OF LEGEND FOR PRIVATE PLACEMENT MEMORANDUM AND NOTES THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW, AND OFFERS AND SALES THEREOF MAY BE MADE ONLY IN COMPLIANCE WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. BY ITS ACCEPTANCE OF A NOTE, THE PURCHASER WILL BE DEEMED TO REPRESENT THAT IT HAS BEEN AFFORDED AN OPPORTUNITY TO INVESTIGATE MATTERS RELATING TO THE ISSUER AND THE NOTES, THAT IT IS NOT ACQUIRING SUCH NOTE WITH A VIEW TO ANY DISTRIBUTION THEREOF AND THAT IT IS EITHER (A) AN INSTITUTIONAL INVESTOR OR HIGHLY SOPHISTICATED INDIVIDUAL INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a) UNDER THE ACT AND WHICH, IN THE CASE OF AN INDIVIDUAL, (i) POSSESSES SUCH KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT HE OR SHE IS CAPABLE OF EVALUATING AND BEARING THE ECONOMIC RISK OF AN INVESTMENT IN THE NOTES AND (ii) HAS A NET WORTH OF AT LEAST $5 MILLION (AN "INSTITUTIONAL ACCREDITED INVESTOR" OR "SOPHISTICATED INDIVIDUAL ACCREDITED INVESTOR", RESPECTIVELY) AND THAT EITHER IS PURCHASING NOTES FOR ITS OWN ACCOUNT, IS A U.S. BANK (AS DEFINED IN SECTION 3(a)(2) OF THE ACT) OR A SAVINGS AND LOAN ASSOCIATION OR OTHER INSTITUTION (AS DEFINED IN SECTION 3(a)(5)(A) OF THE ACT) ACTING IN ITS INDIVIDUAL OR FIDUCIARY CAPACITY OR IS A FIDUCIARY OR AGENT (OTHER THAN A U.S. BANK OR SAVINGS AND LOAN) PURCHASING NOTES FOR ONE OR MORE ACCOUNTS EACH OF WHICH IS SUCH AN INSTITUTIONAL ACCREDITED INVESTOR OR SOPHISTICATED INDIVIDUAL ACCREDITED INVESTOR (i) WHICH ITSELF POSSESSES SUCH KNOWLEDGE AND EXPERIENCE OR (ii) WITH RESPECT TO WHICH SUCH PURCHASER HAS SOLE INVESTMENT DISCRETION; OR (B) A QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE MEANING OF RULE 144A UNDER THE ACT WHICH IS ACQUIRING NOTES FOR ITS OWN ACCOUNT OR FOR ONE OR MORE ACCOUNTS, EACH OF WHICH IS A QIB AND WITH RESPECT TO EACH OF WHICH THE PURCHASER HAS SOLE INVESTMENT DISCRETION; AND THE PURCHASER ACKNOWLEDGES THAT IT IS AWARE THAT THE SELLER MAY RELY UPON THE EXEMPTION FROM THE REGISTRATION PROVISIONS OF SECTION 5 OF THE ACT PROVIDED BY RULE 144A. BY ITS ACCEPTANCE OF A NOTE, THE PURCHASER THEREOF SHALL ALSO BE DEEMED TO AGREE THAT ANY RESALE OR OTHER TRANSFER THEREOF WILL BE MADE ONLY (A) IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE ACT, EITHER (1) TO THE ISSUER OR TO __________________________ OR ANOTHER PERSON DESIGNATED BY THE ISSUER AS A PLACEMENT AGENT FOR THE NOTES (COLLECTIVELY, THE "PLACEMENT AGENTS"), NONE OF WHICH SHALL HAVE ANY OBLIGATION TO ACQUIRE SUCH NOTE, (2) THROUGH A PLACEMENT AGENT TO AN INSTITUTIONAL ACCREDITED INVESTOR, SOPHISTICATED INDIVIDUAL ACCREDITED INVESTOR OR A QIB, OR (3) TO A QIB IN A TRANSACTION THAT MEETS THE REQUIREMENTS OF RULE 144A AND (B) IN MINIMUM AMOUNTS OF $250,000. EXHIBIT B FURTHER PROVISIONS RELATING TO INDEMNIFICATION (a) The Issuer agrees to reimburse each Indemnitee for all expenses (including reasonable fees and disbursements of internal and external counsel) as they are incurred by it in connection with investigating or defending any loss, claim, damage, liability or action in respect of which indemnification may be sought under Section 5 of the Agreement (whether or not it is a party to any such proceedings). (b) Promptly after receipt by an Indemnitee of notice of the existence of a Claim, such Indemnitee will, if a claim in respect thereof is to be made against the Issuer, notify the Issuer in writing of the existence thereof; provided that (i) the omission so to notify the Issuer will not relieve the Issuer from any liability which it may have hereunder unless and except to the extent it did not otherwise learn of such Claim and such failure results in the forfeiture by the Issuer of substantial rights and defenses, and (ii) the omission so to notify the Issuer will not relieve it from liability which it may have to an Indemnitee otherwise than on account of this indemnity agreement. In case any such Claim is made against any Indemnitee and it notifies the Issuer of the existence thereof, the Issuer will be entitled to participate therein, and to the extent that it may elect by written notice delivered to the Indemnitee, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnitee; provided that if the defendants in any such Claim include both the Indemnitee and the Issuer, and the Indemnitee shall have concluded that there may be legal defenses available to it which are different from or additional to those available to the Issuer, the Issuer shall not have the right to direct the defense of such Claim on behalf of such Indemnitee, and the Indemnitee shall have the right to select separate counsel to assert such legal defenses on behalf of such Indemnitee. Upon receipt of notice from the Issuer to such Indemnitee of the Issuer's election so to assume the defense of such Claim and approval by the Indemnitee of counsel, the Issuer will not be liable to such Indemnitee for expenses incurred thereafter by the Indemnitee in connection with the defense thereof (other than reasonable costs of investigation) unless (i) the Indemnitee shall have employed separate counsel in connection with the assertion of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the Issuer shall not be liable for the expenses of more than one separate counsel (in addition to any local counsel in the jurisdiction in which any Claim is brought), approved by the Dealer, representing the Indemnitee who is party to such Claim), (ii) the Issuer shall not have employed counsel reasonably satisfactory to the Indemnitee to represent the Indemnitee within a reasonable time after notice of existence of the Claim or (iii) the Issuer has authorized in writing the employment of counsel for the Indemnitee. The indemnity, reimbursement and contribution obligations of the Issuer hereunder shall be in addition to any other liability the Issuer may otherwise have to an Indemnitee and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Issuer and any Indemnitee. The Issuer agrees that without the Dealer's prior written consent, it will not settle, compromise or consent to the entry of any judgment in any Claim in respect of which indemnification may be sought under the indemnification provision of the Agreement (whether or not the Dealer or any other Indemnitee is an actual or potential party to such Claim). EXHIBIT 10.4 ALLEGHENY TECHNOLOGIES INCORPORATED 2000 INCENTIVE PLAN ADMINISTRATIVE RULES FOR THE ALLEGHENY TECHNOLOGIES INCORPORATED STOCK ACQUISITION AND RETENTION PROGRAM EFFECTIVE AS OF DECEMBER 13, 2000 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 pursuant to the authority reserved in Section 3.01 of the Allegheny Technologies Incorporated 2000 Incentive Plan (the "Plan"). Capitalized terms used but not defined in these rules shall have the same meanings as in the Plan. 1.02 PURPOSE. The purpose of the Allegheny Technologies Incorporated Stock Acquisition and Retention Program (the "SARP") is to assist the Corporation and its subsidiaries in retaining and motivating selected key management employees who will contribute to the success of the Corporation and its subsidiaries. The SARP encourages eligible employees to hold a proprietary interest in the Corporation by offering them an opportunity to receive grants of restricted shares of Stock which, in accordance with the terms and conditions set forth below, will vest only if the employees retain, for a specified period of time, ownership of (i) shares of Stock purchased pursuant to the SARP or (ii) already-owned shares of Stock which such employees identify as being subject to the SARP. Awards under the SARP will act as an incentive to participating employees to achieve long-term objectives which will inure to the benefit of all stockholders of the Corporation. 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 an award of Restricted Stock granted to a Participant pursuant to Article VII of these rules. 2.02 BOARD means the Board of Directors of the Corporation. 2.03 BUSINESS DAY means any day on which the New York Stock Exchange shall be open for trading. 2.04 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. 2.05 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 30% 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, 1998 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, 1998; 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. 2.06 COMMITTEE means the Stock Incentive Award Subcommittee of the Board, in the case of individuals who are "officers" of the Corporation as defined in Rule 16a-1(f) as promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, as such Rule may be amended from time to time, and the Personnel and Compensation Committee of the Board, in the case of individuals who are not such officers of the Corporation. 2.07 CORPORATION means Allegheny Technologies Incorporated, a Delaware corporation, and its successors. 2.08 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. 2.09 DATE OF GRANT means the date as of which an award of Restricted Stock is granted in accordance with Article VII of these rules. 2.10 DESIGNATED STOCK means shares of Stock already owned by a Participant that the Participant identifies as being subject to the SARP, thereby triggering the grant of Restricted Stock to such Participant pursuant to Article VII of these rules. 2.11 DESIGNATION NOTICE means a written notice, in a form acceptable to the Committee, by which a Participant designates previously-acquired shares of Stock as Designated Stock. 2.12 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 SARP. 2.13 EFFECTIVE DATE means December 13, 2000. 2.14 EXCHANGE ACT means the Securities Exchange Act of 1934, as amended. 2.15 FAIR MARKET VALUE means, as of any given date, the average of the high and low trading prices of the Stock on such date as reported on the New York Stock Exchange or, if the Stock is not then traded on the New York Stock Exchange, on such other national securities exchange on which the Stock is admitted to trade, or, if none, on the National Association of Securities Dealers Automated Quotation System if the 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 Stock. 2.17 PARTICIPANT means any person selected by the Committee, pursuant to Section 5.01 of these rules, as eligible to participate under the SARP. 2.18 PERMITTED TRANSFEREE means a Participant's spouse, or (by blood, adoption or marriage) parent, child, stepchild, descendant or sibling, or the estate, any guardian, custodian, conservator or committee of, or any trust for the benefit of, the Participant or any of the foregoing persons. 2.19 PLAN means the Allegheny Technologies Incorporated 2000 Incentive Plan, as the same may be amended from time to time. 2.20 PURCHASE AMOUNT means the dollar amount that a Participant specifies in a Purchase Notice with respect to a particular Purchase Date. 2.21 PURCHASE DATE means, the date on which the Corporation receives the Purchase Notice or, if such date is not a Business Day, the Business Day immediately preceding the date on which such Notice is received. 2.22 PURCHASED STOCK means Stock purchased by a Participant pursuant to Article VI of these rules, which triggers the grant of Restricted Stock to such Participant pursuant to Article VII of these rules. 2.23 PURCHASE LOAN means a loan provided to a Participant by the Corporation to facilitate the Participant's purchase of Stock pursuant hereto. 2.24 PURCHASE NOTICE means a written notice, in a form acceptable to the Committee, by which a Participant may elect to purchase Stock as of a Purchase Date in accordance with Section 6.01 of these rules. 2.25 RELATED STOCK means, with respect to any three-quarters of a share of Restricted Stock, the one share of Purchased Stock or Designated Stock, as the case may be, which entitles such Participant to receive such three-quarters of a share of Restricted Stock pursuant to Article VII of these rules. 2.26 RESTRICTED STOCK means shares of Stock awarded to a Participant subject to restrictions as described in Article VII of these rules. 2.27 SARP means the Stock Acquisition and Retention Program, as the same may be amended from time to time. 2.28 SARP YEAR means each of the calendar years during the term the SARP remains in effect, or such other period of time as the Committee may establish at the time that the designation of participants for such period are made. 2.29 STOCK means the common stock, par value $0.10 per share, of the Corporation. ARTICLE III. ADMINISTRATION The SARP shall be administered by the Committee, which shall have exclusive and final authority and discretion in each determination, interpretation or other action affecting the SARP and its Participants. The Committee shall have the sole and absolute authority and discretion to interpret the SARP, to modify these administrative rules for the SARP, to select, in accordance with Section 5.01 of these rules, the persons who will be Participants hereunder, 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 SARP as it may deem necessary or advisable. ARTICLE IV. STOCK ISSUABLE UNDER THE SARP 4.01 SHARES OF STOCK ISSUABLE. The Stock to be offered under the SARP 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 7.02 of these rules may again be issued under the SARP. ARTICLE V. PARTICIPATION 5.01 DESIGNATION OF PARTICIPANTS. Participants in the SARP shall be such officers and senior executives of the Corporation and its subsidiaries whose actions most directly affect the long-term success of the Corporation as the Committee, in its sole discretion, after consultation with the Chief Executive Officer, may designate as eligible to participate in the SARP. The Committee shall designate the Participants who are eligible to participate in the SARP during a SARP Year which designation will generally be made prior to or within ninety days after the commencement of such SARP Year. The Committee's designation of a Participant with respect to any SARP Year shall not require the Committee to designate such person as a Participant with respect to any other SARP Year. 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. The designation of a person as a Participant with respect to a SARP Year shall permit such person to elect to submit one or more Purchase Notices and/or Designation Notices during such SARP Year. 5.02 PARTICIPANT ELECTIONS. A person who is designated as a Participant in accordance with Section 5.01 of these rules shall be entitled to purchase Stock by delivering one or more Purchase Notices in accordance with Article VI of these rules, and such Stock purchases shall result in the award of Restricted Stock to such Participant in accordance with Article VII of these rules. In addition, a Participant shall be entitled to designate as Designated Stock, in one or more Designation Notices delivered to the Corporation at any time during a SARP Year, any number of shares of Stock then owned by the Participant, other than shares of Purchased Stock, shares of Stock credited to the Participant's account under a company-sponsored defined contribution plan and shares of Stock subject to outstanding and as yet unexercised stock options, such that, in accordance with Section 7.01, a whole number of Restricted Stock, and no fractions of a share of Restricted Stock, shall be issuable with respect to such Designated Stock. Such designation of shares as Designated Stock shall result in the award of Restricted Stock to the Participant in accordance with Article VII of these rules. The sum of (i) the aggregate Purchase Amounts elected by a Participant pursuant to one or more Purchase Notices submitted within any one SARP Year and (ii) the Fair Market Value of the Designated Stock designated by the Participant pursuant to one or more Designation Notices submitted within such SARP Year (such Fair Market Value being determined as of the date the applicable Designation Notice is delivered), shall not exceed such Participant's gross annual salary as in effect on the first day of such SARP Year; provided, however, that, for any SARP Year, the Committee may establish such greater or lesser dollar limit as it deems appropriate. ARTICLE VI. STOCK PURCHASES 6.01 STOCK PURCHASE ELECTIONS. A Participant shall have the right to purchase Stock in accordance with the terms of this Article VI of these rules. A Participant may elect to purchase Stock under this SARP by delivering to the Corporation a Purchase Notice and cash and/or a promissory note executed by the Participant in an amount equal to the purchase price designated in such Participant's Purchase Notice. Such Purchase Notice shall set forth, among other things, the Purchase Amount elected by the Participant. Such promissory note which shall evidence such Participant's Purchase Loan in accordance with Section 6.03 of these rules, shall be in a principal amount equal to the Purchase Amount designated in such Participant's Purchase Notice and shall by its terms become effective as of the applicable Purchase Date. All elections under this Section 6.01 shall be irrevocable. Each election shall take effect as of the Purchase Date. 6.02 ISSUANCE OF AND PAYMENT FOR STOCK. As of each Purchase Date, the Corporation shall credit to each Participant the number of shares of Purchased Stock purchased pursuant to the Purchase Notice submitted by such Participant. The number of shares of Purchased Stock to be so credited shall be determined by dividing the Purchase Amount designated by such Participant in his or her Purchase Notice by a purchase price per share equal to the Fair Market Value on the Purchase Date. As of any Purchase Date, the number of shares that can be purchased by a Participant shall be a number that will result in the issuance of a whole number of shares of Restricted Stock; in no event shall the Corporation be required to issue fractional shares of Purchased Stock or fractional shares of Restricted Stock. The Purchase Amount elected by a Participant, and the principal amount of the related promissory note, shall be automatically reduced (and if the entire Purchase Amount is paid in cash, cash shall be returned to the Participant) to the minimum extent necessary so that only a whole number of shares of Restricted Stock will be issued with respect to the Related Stock. The purchase price for shares of Purchased Stock credited to a Participant as of a Purchase Date shall be paid in cash and/or by means of a Purchase Loan made by the Corporation to the Participant in accordance with Section 6.03 of these rules. The Participant shall have all of the rights of a stockholder with respect to the shares of Purchased Stock credited to him under this Section 6.02 including, but not limited to, the right to vote such shares and the right to receive dividends (or dividend equivalents) paid with respect to such shares. 6.03 TERMS OF PURCHASE LOAN. (a) Purchase Loan. The promissory note delivered to the Corporation by a Participant in accordance with Section 6.01 of these rules shall evidence a Purchase Loan in principal amount equal to such Participant's Purchase Amount reduced by the amount of cash paid, if any. Unless the Committee shall otherwise determine prior to the applicable Purchase Date, each Purchase Loan shall have a term not to exceed ten years, and be secured by the shares of Purchased Stock acquired with such Purchase Loan. (b) Interest on Purchase Loan. Until the Participant's Purchase Loan is paid in full, or otherwise satisfied or discharged in full, interest on the outstanding balance of the Purchase Loan shall accrue at a fixed rate per annum equal to the minimum rate required to avoid imputed interest under the applicable provisions of the Internal Revenue Code of 1986. (c) Repayment of Purchase Loan. No principal or interest payments with respect to a Purchase Loan shall be required prior to the fifth anniversary of the date such Purchase Loan is made; provided, however, that prior to such fifth anniversary, cash dividends on shares of Purchased Stock held as security for such Purchase Loan, and on the related shares of Restricted Stock, shall be applied to pay accrued interest on the Purchase Loan (any non-cash dividends shall remain as part of the collateral securing such Purchase Loan). After such fifth anniversary, level monthly payments of principal and accrued interest with respect to a Purchase Loan shall be required for the remaining term thereof. Unless otherwise determined by the committee, all outstanding principal and interest on a Participant's Purchase Loan shall be immediately due and payable in full upon termination of the Participant's employment with the Corporation and its affiliates. All or any portion of the principal and/or interest with respect to a Purchase Loan may, at the election of the Participant, be paid by the delivery to the Corporation of whole shares of Stock, other than (i) shares of Stock credited to the Participant's account under a company-sponsored defined contribution plan or (ii) shares of Stock subject to outstanding and as yet unexercised stock options. For purposes of the immediately preceding sentence, shares of Stock shall be valued at the Fair Market Value of such shares on the Business Day immediately preceding the date such shares are delivered to the Corporation. (d) Other Terms. The promissory notes evidencing the Purchase Loans shall contain such other terms and conditions as the Committee may determine, including, without limitation, any special terms relating to the retirement of a Participant prior to the expiration of the term of one or more Purchase Loans. 6.04 STOCK CERTIFICATES. As promptly as administratively feasible after each Purchase Date, the Corporation shall deliver to each Participant one or more stock certificates for the number of shares of Stock purchased by such Participant as of such Purchase Date in accordance with this Article VI. The Participant shall then deliver certificates representing a number of shares with a value equal to the principal amount of the Purchase Loan to the Corporation in pledge for the related Purchase Loan along with an executed security agreement in such form as the Committee shall specify. Upon satisfaction in full of the Purchase Loan, the certificates shall be delivered to the Participant free and clear of any restrictions except for any restrictions that may be imposed by law. ARTICLE VII. RESTRICTED STOCK 7.01 RESTRICTED STOCK AWARDS. Beginning with the 2001 SARP Year, as of each Purchase Date, there shall automatically be granted to any Participant who purchases Purchased Stock as of such Purchase Date pursuant to Article VI of these rules an award of three-fourths of a share of Restricted Stock for each one share of Purchased Stock. The Purchase Date shall be the Date of Grant of such Restricted Stock. Beginning with the 2001 SARP Year, as of any date that a Participant delivers a Designation Notice to the Corporation, in accordance with Section 5.02 of these rules, designating shares of Stock as Designated Stock, there shall automatically be granted to such Participant an award of three-fourths of a share of Restricted Stock for each one share of Designated Stock. The date of delivery of such Designation Notice shall be the Date of Grant of such Restricted Stock. The terms of all such Restricted Stock awards shall be set forth in an Award Agreement between the Corporation and the Participant which shall contain such forfeiture periods and conditions, restrictions and other provisions, not inconsistent with these rules, as shall be determined by the Committee. (a) Issuance of Restricted Stock. As soon as practicable after the Date of Grant of Restricted Stock, the Corporation shall cause to be transferred on the books of the Corporation shares of Stock, registered on behalf of the Participant, evidencing such Restricted Stock, but subject to forfeiture to the Corporation retroactive to the Date of Grant if an Award Agreement delivered to the Participant by the Corporation with respect to the Restricted Stock is not duly executed by the Participant and timely returned to the Corporation. Until the lapse or release of all restrictions applicable to an award of Restricted Stock, the stock certificates representing such Restricted Stock shall be held in custody by the Corporation or its designee. (b) Stockholder Rights. Beginning on the Date of Grant of the Restricted Stock and subject to execution of the Award Agreement as provided in Section 7.01(a) of these rules, the Participant shall become a stockholder of the Corporation with respect to all Stock subject to the Award Agreement and shall have all of the rights of a stockholder, including, but not limited to, the right to vote such Stock and the right to receive dividends (or dividend equivalents) paid with respect to such Stock; provided, however, that any Stock distributed as a dividend or otherwise with respect to any Restricted Stock as to which the restrictions have not yet lapsed shall be subject to the same restrictions as such Restricted Stock and shall be held as prescribed in Section 7.01(a) of these rules. (c) Restriction on Transferability. None of the Restricted Stock may be assigned, transferred (other than by will or the laws of descent and distribution), pledged, sold or otherwise disposed of prior to lapse or release of the restrictions applicable thereto. (d) Delivery of Stock Upon Release of Restrictions. Upon expiration or earlier termination of the forfeiture period without a forfeiture, the satisfaction of the Purchase Loan, if any, for the Related Stock and the satisfaction of or release from any other conditions prescribed by the Committee, the restrictions applicable to the Restricted Stock shall lapse. As promptly as administratively feasible thereafter, subject to the requirements of Section 8.02 of these rules, the Corporation shall deliver to the Participant, or, in case of the Participant's death, to the Participant's legal representatives, one or more stock certificates for the appropriate number of shares of Stock, free of all such restrictions, except for any restrictions that may be imposed by law. 7.02 TERMS OF RESTRICTED STOCK. (a) Forfeiture of Restricted Stock. Subject to Section 7.02(b) of these rules, all Restricted Stock shall be forfeited and returned to the Corporation and all rights of the Participant with respect to such Restricted Stock shall cease and terminate in their entirety if during the forfeiture period (i) the Participant transfers, sells or otherwise disposes of the Related Stock other than to a Permitted Transferee or in a transaction constituting a Change in Control or (ii) the employment of the Participant with the Corporation and its affiliates terminates for any reason or (iii) the Participant defaults on the Purchase Loan, if any, for the Related Stock. Unless the Committee, in its sole discretion, provides otherwise in the applicable Award Agreement, the forfeiture period for any shares of Restricted Stock shall be five years from the Date of Grant of such Restricted Stock. Notwithstanding the foregoing, in the event of the discharge by the Corporation and its subsidiaries of a Participant without Cause or termination of a Participant's employment by reason of death, Disability or retirement pursuant to the retirement policy of the Corporation or its applicable subsidiaries, all forfeiture restrictions imposed on Restricted Stock shall immediately and fully lapse. In addition, upon the occurrence of a Change in Control, all forfeiture restrictions imposed on Restricted Stock shall immediately and fully lapse. (b) Waiver of Forfeiture Period. Notwithstanding anything contained in this Article VII to the contrary, the Committee may, in its sole discretion, waive the forfeiture conditions set forth in any Award Agreement under appropriate circumstances and subject to such terms and conditions (including forfeiture of a proportionate number of the shares of Restricted Stock) as the Committee may deem appropriate, provided that the Participant shall at that time have completed at least one year of employment after the Date of Grant. ARTICLE VIII. MISCELLANEOUS 8.01 LIMITATIONS ON TRANSFER. The rights and interest of a Participant under the SARP may not be assigned or transferred other than by will or the laws of descent and distribution. During the lifetime of a Participant, only the Participant personally may exercise rights under the SARP. 8.02 TAXES. The Corporation shall be entitled to withhold (or secure payment from the Participant in lieu of withholding) the amount of any withholding or other tax required by law to be withheld or paid by the Corporation with respect to any Stock issuable under the SARP, or with respect to any income recognized upon the lapse of restrictions applicable to Restricted Stock, and the Corporation may defer issuance of Stock hereunder until and unless indemnified to its satisfaction against any liability for any such tax. The amount of such withholding or tax payment shall be determined by the Committee or its delegate and shall be payable by the Participant at such time as the Committee determines. The Committee shall prescribe in each Award Agreement one or more methods by which the Participant will be permitted to satisfy his or her tax withholding obligation, which methods may include, without limitation, the payment of cash by the Participant to the Corporation and the withholding, at the appropriate time, of shares of Stock otherwise issuable to the Participant in a number sufficient, based upon the Fair Market Value of such Stock, to satisfy such tax withholding requirements. 8.03 LEGENDS. All certificates for Stock delivered under the SARP shall be subject to such transfer restrictions set forth in these rules and such other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Stock is then listed and any applicable federal or state securities law, and the Committee may cause a legend or legends to be endorsed on any such certificates making appropriate references to such restrictions. 8.04 AMENDMENT AND TERMINATION. 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 SARP may, without the consent of the Participant to whom any award shall theretofore have been granted under the SARP, 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. EXHIBIT 10.22 FORM OF AMENDED AND RESTATED CHANGE IN CONTROL SEVERANCE AGREEMENT (SENIOR MANAGEMENT) 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 -2- 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) 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 -3- 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, 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; -4- (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) 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 three 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. -5- (b) The Executive shall receive the Accrued Obligations. (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) Financial planning assistance and 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. In addition to the foregoing, the Executive shall be considered a retiree under all retiree health, life or other welfare benefit plans then in effect, whether or not the Executive is then eligible to retire under the terms of any plan, -6- commencing at a time elected by the Executive but no earlier than the last day upon which the Company has an obligation to provide welfare benefits at an active employee rate under this paragraph. If the Executive is employed by a third party after his termination of service with the Company, he shall be eligible to commence such retiree welfare benefit coverage from the Company at a time chosen by the Executive (or if applicable, his spouse or dependent) at any time after his employment with such third party ceases. In the event that the value of any retiree welfare plan coverage is determined to be discriminatory under the Code, the Company shall make the Executive whole for federal, state and local income tax consequences by paying to the Executive (or his spouse or dependents, if applicable) cash payments, no less frequently than quarterly, in amounts equal to the sum of the federal, state and local income tax consequences of receiving a discriminatory benefit, including the federal, state and local income tax consequences of such cash payments. (f) The Executive shall be entitled to reimbursement for actual payments made for professional outplacement services or job search not to exceed $25,000 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 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 the 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 pension plan from such plan when such amounts otherwise become due. -7- (h) With regard to the automobile provided by the Company to the Executive at the Effective Date of Termination, within thirty (30) days of the Effective Date of Termination, the Company shall acquire title to such automobile if it does not then have title, satisfy any lease obligation, lien or encumbrance related to such automobile and transfer to the Executive, free and clear of all encumbrances, the title to the automobile. (i) 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. 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 -8- 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"), 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 -9- 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 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 -10- 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 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 -11- 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). 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 -12- 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. 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. -13- 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 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. -14- 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: Title: EXECUTIVE: ---------------------------------------- Name: Address: -15- EXHIBIT 10.27 ALLEGHENY TECHNOLOGIES INCORPORATED EXECUTIVE DEFERRED COMPENSATION PLAN (Revised 10/10/00) as amended and restated as of July 9, 1994, further amended and restated as of December 31, 1998, further amended and restated as of December 7, 1999, and further amended and restated as of September 18, 2000 1 Purpose. The Allegheny Technologies Incorporated Executive Deferred Compensation Plan, formerly known as the Allegheny Teledyne Incorporated Executive Deferred Compensation Plan which in turn was the successor to the Teledyne, Inc. Executive Deferred Compensation Plan, is an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees, within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). 2 Definitions. 2.1 "Account" shall mean the bookkeeping account maintained by the Committee for each Participant that is credited with (1) the portion of the Participant's Salary that he/she elects to defer, (2) the portion of the Participant's Bonus that he/she elects to defer, (3) portions of the Participant's account balance under the Prior Plan and (4) earnings on such amounts. 2.2 "Beneficiary" shall mean the person or persons, trustee, or other legal entity or entities last designated by the Participant on a form approved by the Director of Human Resources or his/her designee to receive the benefits specified hereunder in the event of the Participant's death. If the Participant has not designated a beneficiary or if no person designated as a beneficiary survives the Participant, the payment of the Participant's benefits under this Plan following his/her death shall be made (a) to the Participant's spouse, if living, (b) if his/her spouse is not then living, to his/her then living issue by right of representation, (c) if neither his/her spouse nor his/her issue are then living, to his/her then living parents, or (d) if none of the above are then living, to his/her estate. Notwithstanding the foregoing, the Beneficiary of an Insurable Participant under the Plan must be the same as the beneficiary designated with respect to the benefit provided under Article 8 hereof if the Insurable Participant dies prior to his/her Payment Eligibility Date. 2.3 "Bonus" shall mean the award or awards payable (i) under the Allegheny Technologies Incorporated Annual Incentive Plan (or the comparable annual incentive plan of a subsidiary, if applicable, and any predecessor or successor program to any such annual incentive plan) or (ii) as a special bonus under a written employment agreement between the Company or a subsidiary and a Participant. 2.4 "Code" shall mean the Internal Revenue Code of 1986, as amended. 2.5 "Committee" shall mean the administrative committee appointed pursuant to Section 9.1 of the Plan. 2.6 "Company" shall mean Allegheny Technologies Incorporated, a Delaware corporation, and any corporation which is a subsidiary of the corporation (within the meaning of Code Section 424(f)) of Allegheny Technologies Incorporated, unless the context requires otherwise. - 1 - 2.7 "Compensation" shall mean the Salary and Bonus paid by the Company to a Participant. 2.8 "Director of Human Resources" shall mean the Director, Human Resources Administration - Pension and Benefits of Allegheny Technologies Incorporated located at 1000 Six PPG Place, Pittsburgh, Pennsylvania 15222-5479 or such other person as the Committee may from time to time designate. 2.09 "Effective Date" shall mean September 1, 1994. 2.10 "Eligible Employee" shall mean: 2.10.1 For a Plan Year other than the Plan Years described in Sections 2.10.2, 2.10.3 and 2.10.4, each employee of the Company who: (a) as of December 1 of the preceding Plan Year holds the title of president of an operating company; or (b) received Compensation during the preceding Plan Year at least equal to $100,000. 2.10.2 For the first Plan Year of the Plan, each employee of the Company who: (a) as of the Effective Date holds the title of president of an operating company; or (b) for employees of Teledyne, Inc. who were participants in the Plan prior to July 9, 1998, received or is expected to receive Compensation during the applicable calendar year at least equal to the amount specified in Section 4.14(q)(1)(B) of the Code, as such amount is adjusted for such calendar year by the Secretary of the Treasury for increases in the cost of living. 2.10.3 For the first Plan Year in which employees of Allegheny Teledyne Incorporated and Allegheny Ludlum Corporation could have participated in the Plan, each employee of the Company who: (a) as of July 9, 1998 holds the title of president of an operating company; or (b) received or is expected to receive Compensation during calendar year 1998 at least equal to the amount specified in Section 4.14(q)(1)(B) of the Code, as such amount is adjusted for such calendar year by the Secretary of the Treasury for increases in the cost of living. 2.10.4 For any Plan Year beginning after December 1, 1998 which includes an employee's date of hire, each employee of the Company who: (a) as of the employee's date of hire holds the title of president of an operating company; or (b) receives Compensation during such Plan Year at least equal to $100,000. For purposes of this Section 2.10.4 only, Compensation shall include Salary that would be paid if the employee's Salary were paid for the full Plan Year, and shall include a Bonus, if any, that would have been paid at 100% of the target bonus amount for performance during said Plan Year. 2.11 "Fund" or "Funds" shall mean one or more of the mutual funds, investment portfolios or contracts selected by the Committee pursuant to Section 4.3.2. - 2 - 2.12 "Initial Election Period" shall mean the first thirty days of the first Plan Year during which an employee of the Company is an Eligible Employee or, in the case of an employee who is an Eligible Employee on his/her date of hire after the Effective Date, the first thirty days after such date of hire; provided, however, that the Initial Election Period for employees of Allegheny Teledyne Incorporated and Allegheny Ludlum Corporation on July 9, 1998 shall mean the period from July 9, 1998 through July 31, 1998, unless the Committee shall determine to extend such Initial Election Period to a date no later than August 30, 1998. 2.13 "Insurable Participant" shall mean a Participant who satisfies underwriting standards for the issuance of life insurance determined by the insurance company selected by the Company to provide the pre-distribution death benefit described in Article 8. 2.14 "Interest Rate" shall mean, for each Fund, an amount equal to the net rate, expressed as a percent, of gain or loss on the assets of such Fund during a month, reduced for calendar years beginning before December 31, 1998, with respect to Funds selected by Insurable Participants, by .0833 percent. If a Participant satisfied the definition of an Insurable Participant (as set forth in Section 2.14) prior to December 31, 1998 AND at the time he/she becomes a Participant, but fails to satisfy such definition thereafter, the .0833 percent reduction described in the preceding sentence shall apply only to that portion of the net rate of gain or loss credited to the Participant's Account as: (1) the Participant's Account balance on the last of the month in which such failure occurs bears to (2) the Participant's Account balance on the last day of the month preceding the month for which such gain or loss is allocated. Effective January 1, 1999, the Interest Rate shall be, for each Fund, the net rate, expressed as a percent, of gain or loss on the assets of such Fund for the applicable period. 2.15 "Participant" shall mean any Eligible Employee who, prior to the Effective Date, has not announced his/her intention to retire and who (a) elects to defer Compensation in accordance with Section 4.1, or (b) has an account balance under the Prior Plan. 2.16 "Payment Eligibility Date" shall mean: 2.16.1 The date selected by an Eligible Employee on his/her Deferred Election form with respect to (i) compensation deferred for all Plan Years prior to 1999, and (ii) compensation deferred for each given Plan Year after 1998. 2.16.2 If a Payment Eligibility Date is: (i) elected after the Participant's termination of employment, the Participant may choose only from the first day of the month following the end of the calendar quarter, (a) in which said termination occurs, (b) in which occurs the fifth, tenth or fifteenth anniversary of such event, or (c) in which the Participant attains the previously designated age after such event; and (ii) if elected prior - 3 - to the Participant's termination of employment (such an election under this clause (ii) may not be made for compensation deferred for a Plan Year prior to 1999), distribution will occur in January of the designated Plan Year, and the designated Plan Year must begin at least three calendar years after the end of the Plan Year for which such election is made. 2.16.3 A Participant may change his/her Payment Eligibility Date under Section 2.16.2. (ii) above only twice and such change is subject to the following conditions: (a) the existing Payment Eligibility Date must be at least one year from the date of the election to change, and (b) the second change is subject to the approval of the Committee. 2.16.4 In the event no election is made, the Payment Eligibility Date shall be the first day of the month following the end of the calendar quarter in which a Participant terminates employment. 2.16.5 A Participant receiving benefits under the Company's short-term disability plan or on an approved leave of absence shall not be deemed to have terminated employment for purposes of the Plan. 2.16.6 The Payment Eligibility Date shall be no later than the first day of the month following the end of the calendar quarter in which the Participant's death occurs. 2.17 "Plan" shall mean the Allegheny Technologies Incorporated Executive Deferred Compensation Plan as set forth herein, or as amended from time to time. The Plan was formerly known as the Allegheny Teledyne Incorporated Executive Deferred Compensation Plan which in turn was the successor plan to the Teledyne, Inc. Executive Deferred Compensation Plan. 2.18 "Plan Year" shall mean the calendar year, except that the initial Plan Year shall be the period from the Effective Date through December 31, 1994 for employees of Teledyne, Inc. and its subsidiaries, and the initial Plan Year shall be the period from August 1, 1998 through December 31, 1998 for employees of Allegheny Teledyne Incorporated and Allegheny Ludlum Corporation. 2.19 "Prior Plan" shall mean the nonqualified plan or arrangement maintained by the Company for deferral of bonuses prior to the Effective Date. 2.20 "Retirement" shall mean the date as of which a Participant commences to receive a benefit under a pension plan maintained by the Company, the date as of which a Participant commences to receive disability benefits under the Company's long-term disability plan or, in the case of a Participant who is not entitled to benefits under the Company's long-term disability plan, the date the Committee determines is the first date the Participant satisfies the definition of disability set forth in that plan. 2.21 "Salary" shall mean the base rate of pay that an employee is entitled to receive for services rendered to the Company. - 4 - 3 Participation. An Eligible Employee who, prior to the Effective Date, has not announced his/her intention to retire shall become a Participant in the Plan on (a) the first day of the first pay period for which he/she elects to defer a portion of his/her Compensation in accordance with Section 4.1, or (b) the Effective Date if he/she has an account balance under the Prior Plan. 4 Deferral Elections. 4.1 Elections to Defer Compensation. For calendar years beginning on or after January 1, 1999, an Eligible Employee may elect to defer, in increments of 1% and subject to the limitation set forth herein, a portion of his/her Salary and, separately, a portion of his/her Bonus for the calendar year following the calendar year in which a written election, on a form approved by the Director of Human Resources or his/her designee, to defer Salary and/or Bonus is delivered to the Director of Human Resources or his/her designee. Each election to defer Salary and/or Bonus shall be effective for only the next succeeding calendar year, shall expire on the last day of the calendar year next following its delivery and shall specify the Participant's elections as to distribution time and form from among those then permitted under the Plan. No election may be for less than 5% of the Salary or Bonus payment, respectively, and no election shall exceed an amount which would prevent the Eligible Employee from making required or elected contributions under employee benefit plans or to have required federal, state and local income or payroll tax payments made or such other amounts as determined appropriate by the Committee. An election to defer Salary or Bonus with respect to services rendered during a calendar year must be filed with the Director of Human Resources or his/her designee on or before December 1 of the preceding calendar year. For calendar years ending before January 1, 1999, deferrals shall be governed by the Plan as in effect as of that date. 4.1.1 Initial Election Period. Each Eligible Employee may elect to defer Compensation by filing with the Director of Human Resources or his/her designee an election, on a form approved by the Director of Human Resources or his/her designee, no later than the last day of his/her Initial Election Period. An election to defer Compensation during the Initial Election Period shall be effective with respect to the Participant's Salary earned during the first pay period beginning after the election and with respect to the portion of the Participant's Bonus attributable to the portion of the calendar year following the election. 4.1.2 Elections other than Elections during the Initial Election Period. Subject to the limitations of Section 4.1 above, any Eligible Employee who fails to elect to defer Compensation during his/her Initial Election Period may subsequently elect to defer Compensation, by filing with the Director of Human Resources or his/her designee an election, on a form approved by the Director of Human Resources or his/her designee, to defer Compensation as described in Section 4.1 above. An election to defer Salary payable during a calendar year must be filed with the Director of Human Resources or his/her designee on or before December 1 of the preceding calendar year. An election to defer Bonus payable with respect to services rendered during a calendar year must be filed with the Director of Human Resources or his/her designee on or before December 1 of the preceding calendar year. - 5 - 4.2 Duration of Elections. 4.2.1 Duration of Salary Deferral Election. Any Salary deferral election made under Section 4.1.1 or Section 4.1.2 shall be irrevocable and shall apply only to the Salary earned during the calendar year for which the election is made. For each subsequent calendar year, an Eligible Employee must make a new election, subject to the limitations set forth in Section 4.1, to defer a percentage of his/her Salary. Such an election shall be made on a form approved by the Director of Human Resources or his/her designee, on or before December 1 of the preceding calendar year. 4.2.2 Duration of Bonus Deferral Election. Any Bonus deferral election made under Section 4.1.1 or Section 4.1.2 shall be irrevocable and shall apply only to the Bonus payable with respect to services performed during the calendar year for which the election is made. For each subsequent calendar year, an Eligible Employee must make a new election, subject to the limitations set forth in Section 4.1, to defer a percentage of his/her Bonus. Such an election shall be made on a form approved by the Director of Human Resources or his/her designee, on or before December 1 of the calendar year preceding the calendar year in which the services that are to result in the Bonus are performed. 4.2.3 Extension of Election Deadline. Notwithstanding the foregoing provisions of this Section 4.2, the Committee may extend the deadline for filing elections set forth herein from December 1 of a particular calendar year as the Committee shall determine. The Committee shall give notice of such extension to all Eligible Employees. 4.3 Investment Elections. 4.3.1 Investment Options. The Committee shall select from time to time the types of mutual funds, investment portfolios underlying universal life products or contracts in which Participants' Accounts shall be deemed to be invested. At the time an Eligible Employee first becomes a Participant, the Participant shall file with the Director of Human Resources or his/her designee a form provided by the Committee designating which of such types of mutual funds, investment portfolios or contracts the Participant's Account shall be deemed to be invested in for purposes of determining the amount of earnings to be credited to such Account. In making the designation pursuant to this Section 4.3.1, the Participant may specify that all or any portion of his/her Account, designated in whole percentages, be deemed to be invested in one or more of the types of mutual funds, investment portfolios or contracts selected by the Committee. A Participant may change monthly the designation made under this Section 4.3.1 by filing with the Director of Human Resources or his/her designee an election, on a form provided by the Committee, at any time during a month, with such change to be effective as of the first day of the month immediately succeeding the date on which such form is filed. If a Participant fails to elect a type of fund under this Section 4.3.1, any prior election shall remain in effect or, if there is no prior election of types of funds, any deferral election - 6 - made by the Participant shall be void. If a Participant who receives allocations to his/her Account only pursuant to Sections 5.3 and 5.4 fails to elect a type of fund under this Section 4.3.1, he/she shall be deemed to have elected the fund or contract designated by the Committee as the default fund. 4.3.2 Committee Selection of Funds. Although the Participant may designate the type of mutual funds, investment portfolios or contracts pursuant to Section 4.3.1, the Committee shall select from time to time, in its sole discretion, a commercially available fund, portfolio or contract of each of the types selected pursuant to Section 4.3.1 to be the Funds. The Interest Rate of each such Fund shall be used to determine the amount of earnings to be credited to Participants' Accounts under Section 5.4. 5 Participant Accounts. The Committee shall establish and maintain an Account for each Participant under the Plan. Each Participant's Account shall be further divided into separate subaccounts ("subaccounts"), each of which corresponds to a mutual fund, investment portfolio or contract elected by the Participant in accordance with Section 4.3. A Participant's Account shall be credited as follows: 5.1 Salary Credits. As of the last day of each month, the Committee shall credit the subaccounts of the Participant's Account with an amount equal to Salary deferred by the Participant during each pay period ending in that month in accordance with the Participant's election under Section 4.2; that is, the portion of the Participant's deferred Salary that the Participant has elected to be deemed to be invested in a certain type of Fund shall be credited to the subaccount corresponding to that Fund. 5.2 Bonus Credits. As of the last day of the month in which the Bonus is payable, the Committee shall credit the subaccounts of the Participant's Account with an amount equal to the portion of the Bonus deferred by the Participant in accordance with the Participant's election under Section 4.2; that is, the portion of the Participant's deferred Bonus that the Participant has elected to be deemed to be invested in a particular type of Fund shall be credited to the subaccount corresponding to that Fund. 5.3 Prior Plan Credits. As of the Effective Date, the Committee shall credit the subaccounts of the Participant's Account with an amount equal to 25 percent of the Participant's account balance under the Prior Plan as of the Effective Date. As of September 1 of each of the following years, the Committee shall credit the subaccounts of the Participant's Account with an amount equal to the percentage set forth below of the Participant's account balance under the Prior Plan as of such date: 1995 33-1/3 1996 50 1997 100 - 7 - Notwithstanding the foregoing, as of a Participant's Payment Eligibility Date prior to September 1, 1997, the Committee shall credit the subaccounts of the Participant's Account with an amount equal to any unpaid balance then remaining in the Participant's account under the Prior Plan. 5.4 Earnings Credits. As of the last day of each month in which any amount remains credited to a Participant's Account, each subaccount of a Participant's Account shall be credited with earnings in an amount equal to that determined by multiplying the balance credited to such subaccount as of the last day of the preceding month by the Interest Rate for that month for the corresponding Fund selected by the Company pursuant to Section 4.3. 6 Vesting. A Participant's Account shall be 100 percent vested at all times. 7 Distributions. 7.1 Amount and Time of Distribution. 7.1.1 Payment as of Payment Eligibility Date. Each Participant (or, in the case of his/her death, his/her Beneficiary) shall be entitled to receive a distribution of benefits under this Plan as soon as practicable following his/her Payment Eligibility Date. The amount payable to a Participant shall be the amount credited to the Participant's Account as of his/her Payment Eligibility Date. 7.1.2 Payment Prior to Payment Eligibility Date. A Participant may elect by filing with the Director of Human Resources or his/her designee, on a form approved by the Director of Human Resources or his/her designee, to receive (at any time prior to his/her Payment Eligibility Date) an amount equal to ninety percent of his/her Account balance. If the Participant makes an election described in this Section 7.1.2, then (i) the balance of the Participant's Account not distributed to the Participant shall be forfeited to the Company; (ii) the amount to which he/she is entitled under this Section 7.1.2 shall be distributed to the Participant in a single lump sum within thirty days following such election; (iii) the Participant shall be prohibited from participating in the Plan for the balance of the Plan Year in which this distribution is made and the following Plan Year; and (iv) any elections previously made pursuant to Article 4 of this Plan shall cease to be effective. 7.2 Form of Distribution. 7.2.1 Pre-Retirement Distributions. If a Participant's Payment Eligibility Date occurs prior to the date of his/her termination of employment, the Participant's Account shall be paid to such Participant in the form of a single lump sum. 7.2.2 Post-Retirement Distributions. If a Participant's Payment Eligibility Date occurs on or after the date of his/her termination of employment, the Participant's Account shall be paid to such Participant or, in the event of the Participant's death on or after his/her Payment Eligibility Date, his/her Beneficiary, in the form of sixty quarterly - 8 - installments. Such installment payments shall commence on the Participant's Payment Eligibility Date or as soon thereafter as is practicable and shall continue on the first day of each of the 59 calendar quarters thereafter. 7.2.3 Election of Optional Form of Distributions. Notwithstanding the provisions of Section 7.2.2, a Participant whose Payment Eligibility Date occurs on or after the date of his/her termination of employment may elect to receive distribution of his/her Account balance with respect to (i) compensation deferred for all Plan Years prior to 1999, and (ii) compensation deferred for each given Plan Year after 1998 in a single lump sum, twenty quarterly installments, forty quarterly installments or sixty quarterly installments provided that at least one year prior to his/her Payment Eligibility Date, the Director of Human Resources or his/her designee receives from the Participant a notice, on a form approved by the Director of Human Resources or his/her designee, that the Participant elects to receive payment in one of such optional forms. Any such payment shall be made or commence to be made as of the Participant's Payment Eligibility Date with respect to compensation deferred for the given Plan Year(s). Any election made pursuant to this Section 7.2.3 may be revoked by filing notice of such revocation with the Director of Human Resources or his/her designee on or before the date which is one year prior to the Participant's Payment Eligibility Date. A Beneficiary of a Participant whose death occurs after his/her termination of employment shall continue to receive the remaining quarterly installments until exhausted, or if such installments have not begun or if a single lump sum were elected by the Participant, distribution to the Beneficiary shall be in the form of a single lump sum. 7.2.4 Method for Calculating Installments. If a Participant or Beneficiary receives payment of his/her Account balance in installments pursuant to Section 7.2.2 or 7.2.3, the amount of each quarterly installment payable during the Plan Year which includes the Participant's Payment Eligibility Date shall equal the Participant's Account balance on the Payment Eligibility Date divided by the total number of installments the Participant or Beneficiary is scheduled to receive. The amount of each quarterly installment payable during each succeeding Plan Year, other than the last Plan Year in which the Participant or Beneficiary receives installment payments under the Plan, shall equal the Participant's Account balance on September 30 of the preceding Plan Year divided by the number of installments remaining to be paid after the last day of such preceding Plan Year. The amount of each quarterly installment payable during the last Plan Year in which the Participant or Beneficiary receives installment payments under the Plan shall equal the Participant's Account balance on the last day of the second preceding calendar quarter divided by the number of installments remaining to be paid after the last day of the preceding calendar quarter, except that the final quarterly installment shall be equal to the remaining balance in the Participant's Account. 7.2.5 Small Account Balances. Notwithstanding any other provision of this Section 7.2, if a Participant's Account balance on his/her Payment Eligibility Date is $10,000 or less, such Account balance shall be paid in a single lump sum. For calendar years beginning on or after January 1, 1999, $30,000 shall be substituted for $10,000 in - 9 - the preceding sentence, with respect to each separate form of distribution having a different Payment Eligibility Date. 8 Pre-Distribution Death Benefit. 8.1 Amount of Benefit. The Company shall own and maintain one or more life insurance policies on the life of each Insurable Participant (collectively, the "Policy") each with a death benefit no less than the death benefit payable under this Section 8.1. Until an employee of the Company (other than a Participant who has already been determined not to be an Insurable Participant) completes an application for the Policy, any deferral elections made by the employee pursuant to Article 4 hereof shall be void. If an Insurable Participant shall die at least sixty days following the first day of the month in which allocations pursuant to Article 5 of the Plan are first made to his/her Account and prior to his/her termination of employment, his/her Beneficiary shall receive directly from the insurance company issuing the Policy in a single lump sum an amount equal the lesser of (a) or (b), where (a) equals the greatest of (i) the amount of insurance coverage in effect on December 31, 1998, (ii) the Participant's Account balance as of a relevant time or (iii) $1,000,000 and (b) equals the greater of: (i) ten times the amounts allocated to the Insurable Participant's Account pursuant to Sections 5.1 and/or 5.2 during the first twelve months in which the Insurable Participant receives allocations to his/her Account; or (ii) two times the Insurable Participant's Account balance as of his/her date of death if the Insurable Participant has not attained age 56 at the date of death or, if the Insurable Participant is age 56 or older at death, 1.5 times the Insurable Participant's Account balance as of his/her date of death. 8.2 Other Rules. 8.2.1 Reduction of Account Balance. Notwithstanding anything contained herein to the contrary, any benefits otherwise payable with respect to an Insurable Participant under this Plan shall be reduced by the value of benefits received by the Insurable Participant's Beneficiary under the Policy. 8.2.2 Death on or After Termination of Employment. If an Insurable Participant shall die on or after his/her termination of employment, his/her Beneficiary shall receive no benefits under the Policy and any death benefits thereunder shall be paid to the Company. 8.2.3 Effect of Account Distribution Prior to Termination of Employment. If an Insurable Participant receives a distribution pursuant to Section 7.1.2, for purposes of Section 8.1, the first twelve months in which he/she receives allocations to his/her Account shall be deemed to be the first Plan Year after such distribution in which he/she receives allocations under Section 5.1 or 5.2 and, for purposes of Section 8.1, the Insurable Participant's Account shall include only amounts allocated to the Insurable Participant's Account following such distribution and prior to his/her date of death. 8.2.4 Death Prior to Eligibility for Pre-Distribution Death Benefit. If a Participant should die before completing the sixty-day eligibility period for the pre-distribution - 10 - death benefit set forth in Section 8.1, his/her Beneficiary shall receive only the balance in the Participant's Account as of the Participant's Payment Eligibility Date. 8.2.5 Failure to Remain Insurable. Notwithstanding the foregoing provisions of this Article 8, if a Participant satisfies the definition of an Insurable Participant (as set forth in Section 2.13) at the time he/she becomes a Participant, but fails to satisfy such definition thereafter, the pre-distribution death benefit payable to the Participant's Beneficiary shall equal the lesser of: (1) the pre-distribution death benefit determined under the foregoing provisions of this Article 8; or (2) the death benefit under the Policy payable to the Participant's Beneficiary at the time the Participant fails to satisfy the definition of an Insurable Participant. 9 Administration. 9.1 Committee Action. The Plan shall be administered by the Committee, consisting of at least three members, appointed by and holding office at the pleasure of the Personnel and Compensation Committee of the Board of Directors of the Company or, in the absence of a specific designation by the Personnel and Compensation Committee of the Board of Directors of the Company, the Plan Administrative Committee of the Company as then constituted. The Committee shall act at meetings by an affirmative vote of a majority of the members of the Committee. Any action permitted to be taken at a meeting may be taken without a meeting if all members of the Committee sign a written consent to the action and such written consent is filed with the minutes of the proceedings of the Committee. A member of the Committee shall not vote or act upon any matter that relates solely to himself as a Participant. The Chairman or any other member or members of the Committee designated by the Chairman may execute any certificate or other written direction on behalf of the Committee. 9.2 Powers and Duties of the Committee. The Committee, on behalf of the Participants and their Beneficiaries, shall enforce the Plan in accordance with its terms, shall be charged with the general administration of the Plan, and shall have all powers necessary to accomplish its purposes, including, but not by way of limitation, the following: 9.2.1 To determine all questions relating to the eligibility of employees to participate; 9.2.2 To construe and interpret the terms and provisions of this Plan; 9.2.3 To compute and certify to the amount and kind of benefits payable to Participants and their Beneficiaries; 9.2.4 To maintain all records that may be necessary for the administration of the Plan; - 11 - 9.2.5 To provide for the disclosure of all information and the filing or provision of all reports and statements to Participants, Beneficiaries or governmental agencies as shall be required by law; 9.2.6 To make and publish such rules for the regulation of the Plan and procedures for the administration of the Plan as are not inconsistent with the terms hereof; and 9.2.7 To appoint a plan administrator or, any other agent, and to delegate to such person such powers and duties in connection with the administration of the Plan as the Committee may from time to time prescribe. 9.3 Construction and Interpretation. The Committee shall have full discretion to construe and interpret the terms and provisions of this Plan, which interpretation or construction shall be final and binding on all parties, including but not limited to the Company and any Participant or Beneficiary. The Committee shall administer such terms and provisions in a uniform and nondiscriminatory manner and in full accordance with any and all laws applicable to the Plan. 9.4 Information. To enable the Committee to perform its functions, the Company shall supply full and timely information to the Committee on all matters relating to the Compensation of all Participants, their death or other cause of termination, and such other pertinent facts as the Committee may require. 9.5 Compensation, Expenses and Indemnity. 9.5.1 The members of the Committee shall serve without compensation for their services hereunder. 9.5.2 The Committee is authorized at the expense of the Company to employ such legal counsel as it may deem advisable to assist in the performance of its duties hereunder. The Company shall pay expenses and fees in connection with the administration of the Plan. 9.5.3 The Company shall indemnify and save harmless the Committee and each member thereof, and the Chief Financial Officer, the Director of Human Resources or his/her designee, and any delegate of the Committee who is an employee of the Company against any and all expenses, liabilities and claims, including legal fees to defend against such liabilities and claims, arising out of their discharge of responsibilities under or incident to the Plan, other than expenses and liabilities arising out of willful misconduct. This indemnity shall not preclude such further indemnities as may be available under insurance purchased by the Company or provided by the Company under any bylaw, agreement or otherwise, as such indemnities are permitted under applicable law. 9.6 Quarterly Statements. Under procedures established by the Committee, a Participant shall receive quarterly statements with respect to such Participant's Account. - 12 - 10 Miscellaneous. 10.1 Unsecured General Creditor. Participants and their Beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, claims, or interest in any specific property or assets of the Company. No assets of the Company shall be held in any way as collateral security for the fulfilling of the obligations of the Company under this Plan. The Company's obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Company to pay money in the future, and the rights of the Participants and Beneficiaries shall be no greater than those of unsecured general creditors. The Plan is intended to be unfunded for tax purposes and for purposes of Title I of ERISA. 10.2 Restriction Against Assignment. The Company shall pay all amounts payable hereunder only to the person or persons designated by the Plan and not to any other person or corporation. No part of a Participant's Account shall be liable for the debts, contracts, or engagements of any Participant, his/her Beneficiary, or successors in interest, nor shall a Participant's Account be subject to execution by levy, attachment, or garnishment or by any other legal or equitable proceeding, nor shall any such person have any right to alienate, anticipate, commute, pledge, encumber, or assign any benefits or payments hereunder in any manner whatsoever. 10.3 No Right to Continued Employment. Neither an employee's participation in the Plan, nor his/her rights to his/her Account shall confer upon such employee any right with respect to continuance of employment by or receipt of Bonuses from the Company, nor shall such items interfere in any way with the right of the Company to terminate such employee's employment or alter such employee's Compensation at any time. 10.4 Withholding. There shall be deducted from each payment made under the Plan or, if such payment is not large enough, from any other funds payable to the Participant, all taxes which the Company determines are required to be withheld with respect to such payment under the Plan. The Company shall have the right to reduce any payment by the amount of cash sufficient to provide the amount of said taxes. 10.5 Amendment, Modification, Suspension or Termination. The Committee may at any time amend, modify, suspend or terminate the Plan in whole or in part, subject to ratification by the Personnel and Compensation Committee of the Company's Board of Directors, except that no amendment, modification, suspension or termination shall reduce any amounts then credited to a Participant's Account. The Company shall provide notice of such action to all Participants and Beneficiaries of deceased Participants. In the event that one or more subsidiaries of the Company are spun off to shareholders of the Company and a spun off company agrees to sponsor a plan substantially similar to this Plan, the Company may, in its discretion, cause a transfer of all, but not less than all, liabilities with respect to employees of such new company to the new plan adopted by that new company and, upon such transfer, the Company shall be released of liability with respect to employees of the new company with respect to whom liabilities have been transferred. - 13 - 10.6 Governing Law. Except to the extent that it is preempted by federal law, this Plan shall be construed, governed and administered in accordance with the laws of the State of Delaware. 10.7 Receipt or Release. Any payment to a Participant or the Participant's Beneficiary in accordance with the provisions of the Plan, including but not limited to any payment from an insurance company, shall, to the extent thereof, be in full satisfaction of all claims under the Plan against the Committee and the Company. Any payment, whether by the Company or an insurance company, to a Participant or the Participant's Beneficiary of an amount described in Section 5.3 shall, to the extent thereof, be in full satisfaction of all claims to such amount which the Participant or his/her Beneficiary or any beneficiary designated in accordance with the Prior Plan may have against the Company or any other person under the Prior Plan. The Committee may require such Participant or Beneficiary, as a condition precedent to such payment, to execute a receipt and release to such effect. 10.8 Payments on Behalf of Minors. In the event that any amount becomes payable under the Plan to a minor or a person who, in the sole judgment of the Committee, is considered by reason of physical or mental condition to be unable to give a valid receipt therefore, the Committee may direct that such payment be made only to the conservator or the guardian of the estate of such person appointed by a court of competent jurisdiction or such other person or in such other manner as the Committee determines is necessary to assure that the payment will legally discharge the Plan's obligation to such person. Any payment made pursuant to such determination shall constitute a full release and discharge of the Committee and the Company. 10.9 Miscellaneous. All pronouns and any variations thereof contained herein shall be deemed to refer to masculine or feminine, singular or plural, as the identity of the person or persons may require. The headings used in this Plan are for convenience only and shall not be construed in interpreting this Plan. - 14 - EXHIBIT 10.31 THIS AGREEMENT CONTAINS A WAIVER OF CERTAIN OF YOUR LEGAL RIGHTS. YOU ARE ADVISED TO CONSULT WITH AN ATTORNEY PRIOR TO SIGNING SETTLEMENT AGREEMENT AND RELEASE This Settlement Agreement and Release is made as of February 15, 2001, by and between THOMAS A. CORCORAN (hereinafter referred to as "Employee") and ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation, which includes, for purposes of this Settlement Agreement and Release, its subsidiaries and related organizations and, collectively, all of its and their officers, directors, employees, trustees, agents, representatives, predecessors, successors and assigns, and compensation plans and programs sponsored or established by any of the foregoing (hereinafter collectively referred to as the "Corporation"). WHEREAS, Employee was an employee of the Corporation, was terminated from employment with Corporation without cause on December 6, 2000 and has been offered the payments and severance benefits set forth herein upon his termination of employment in exchange for a release of all claims and his agreement not to sue the Corporation; and WHEREAS, the parties desire to reach a mutually satisfactory and legally binding compromise of any and all claims which have been made, or which could be made, arising out of, or related to, Employee's employment with, or separation of employment from, the Corporation, including, but not limited to, claims arising from or under that certain Employment Agreement by and between the Corporation and the Employee dated August 17, 1999 (the "Employment Agreement"); NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and intending to be legally bound hereby, it is understood and agreed as follows: 1. SEVERANCE PAYMENTS AND BENEFITS Subject to Sections 1(k) and 2: a. Severance Payments. On the eighth day after the Corporation receives a fully executed copy of this Settlement Agreement and Release and, if the execution by the Employee of this Settlement Agreement and Release has not then been revoked (the "Effective Date"), the Corporation will pay to the Employee, in a lump sum payment, $3,894,621, that is, the sum of (i) amount determined by multiplying $800,000, his regular base monthly pay at the rate in effect as of the date of this Settlement Agreement and Release, by 3.6, the number of whole and partial years remaining in the term of the Employment Agreement, (ii) $750,000, the sum of unpaid special bonuses under Section 4(b)(ii) of the Employment Agreement and (iii) $264,621 with respect to calendar year 2000 under the Corporation's Annual Incentive Plan. b. Supplemental Pension Agreement. The Corporation and the Employee shall comply with all terms of the Supplemental Pension Agreement by and between the Corporation and the Employee dated September 16, 1999 (the "Supplemental Pension Agreement"). Without intending to limit the Supplemental Pension Agreement, the Corporation shall pay to the Employee (or his beneficiary) 12 monthly payments of $33,000 each commencing on the first day of the month next following the month in which the Employee attains (or would have attained) age 62 if the Employee had not at any time after the date of this Settlement Agreement and Release and before attaining age 62 been employed by an employer which is not exempt from federal income taxation. c. Continuation of Life, Health and Long Term Disability Coverages. The Corporation will continue until July 16, 2004, to pay its cost toward life, health and disability coverage of the Employee and his dependents enrolled as of December 6, 2000 under the Corporation's employee benefits plans providing life, health and disability coverages as in effect on December 6, 2001. The Employee shall pay the Employee portion of such cost at the rate in effect from time to time and if he fails to make such payments within thirty (30) days of the date due, the obligations of the Corporation to provide coverage hereunder shall cease. The Employee acknowledges and agrees that his rights under the Consolidated Omnibus Budget Reconciliation Act ("COBRA") have been explained to him and that this section satisfies the obligations of the Corporation to the Employee and his dependents under COBRA. If any claims by the Employee or dependents for benefits under the Corporation's health plan have been denied on or before the Effective Date for reasons of lack of coverage, the Corporation shall cause such claims to be paid or reimburse the Executive for amounts actually paid to the service provider within thirty (30) days of the Effective Date. d. Retiree Medical Coverage. The Employee shall participate in the Corporation's medical plan for retirees as applied to senior corporate officers from time to time and as set forth in the letter to the Employee from the Corporation dated July 24, 2000, subject to the terms and conditions of such plan as the same may be amended from time to time including, but not limited to, the precondition that the Employee attain retirement age and not then have retiree medical coverage from a subsequent employer. e. Lapse of Restrictions on Restricted Shares. On the Effective Date, the restrictions on transferability on the 75,000 shares of the Corporation's common stock issued in connection with that certain Restricted Stock Agreement by and between the Corporation and the Employee dated September 16, 1999 shall lapse and the Corporation shall promptly issue to the Employee, upon satisfaction of the Corporation's withholding and payroll tax obligations, in exchange for such restricted shares, certificates without restrictive legends evidencing 75,000 shares of Corporation common stock. f. Stock Acquisition and Retention Plan ("SARP"). On the Effective Date, the Corporation shall waive the restrictions applicable to each and any share of Corporation common stock made subject by the Employee to restrictions under the Corporation's SARP and the Corporation shall promptly issue to the Employee certificates without restrictive legends evidencing such shares. -2- g. Stock Options. Notwithstanding the terms of any Stock Option Agreement between the Corporation and the Employee, the Employee shall be permitted to exercise any option to the extent vested on December 6, 2000 at any time prior to the close of business on March 15, 2001. As of the close of business on March 15, 2001, such option held by the Employee shall be void and of no force and effect. h. Pay in lieu of vacation. Pursuant to the policies and practices of the Corporation, the Corporation shall pay the Employee an amount equal to the number of his vacation days remaining as of December 6, 2000 multiplied by his base pay per working day. i. Executive Deferred Compensation Plan. As of the Effective Date, the Employee has an accrued benefit of $572,591 under and subject to the terms and conditions of the Corporation's Executive Deferred Compensation Plan as in effect on the Effective Date. Such amount shall be paid to him in accordance with the terms of that plan and elections made by the Employee or elections he is entitled to make under the terms of that plan. j. ERISA Rights. Except as provided in Section 1(c), nothing in this Settlement Agreement and Release is intended to surrender or waive any right the Employee may have under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), including, but not limited to, any vested and accrued balances under the Allegheny Technologies Incorporated Pension Plan or the Allegheny Technologies Retirement Savings Plan. k. Applicable Taxes. Notwithstanding any provision of this Settlement Agreement and Release, the Corporation shall withhold from each and any payment under this Settlement Agreement and Release and any ancillary agreement, policy, practice or plan the amount determined in good faith by the Corporation to be required to be withheld for applicable federal, state and/or local taxes or to be paid by the Employee as federal, state or local payroll taxes. Such obligations shall be satisfied with respect to distribution of securities by withholding from the number of such securities the number with a value equal to the withholding and payroll tax obligation determined using the closing trading price reported on the New York Stock Exchange for the day prior to the day upon which distribution is made. Any such withholding shall be made prior to the reduction provided in Section 2. 2. REDUCTION FOR EXCESS CHARGES BY EMPLOYEE The Corporation shall deduct from the amounts otherwise due and payable under Section 1, and after the application of Section 1(k) to each such amount, $135,418 representing the aggregate of charges asserted by the Corporation to have been unreimbursed and personal in nature. -3- 3. SEPARATION FROM EMPLOYMENT AND NO RE-EMPLOYMENT Effective December 6, 2000, the Employee's separation from service was effective and from and after that date he is and was no longer an employee of the Corporation. To the extent not delivered prior to the date described in Section 1(a), the Corporation shall pay the Employee his regular base salary through December 6, 2000. The Employee agrees that he has no claim for re-employment, and further agrees that he will not at any time after her execution of this Settlement Agreement and Release apply for employment with the Corporation and that, if he does so, the Corporation may refuse to hire him (for any reason or for no reason) and he will not initiate any proceeding of claim of any kind on account of such refusal. 4. RELEASE OF LIABILITY AND COVENANT NOT TO SUE (a) Employee, on behalf of himself, his heirs, dependents, and administrators, absolutely, irrevocably and unconditionally releases and forever discharges the Corporation from any and all claims, known and unknown, under federal, state or municipal law (including all common law claims) and all federal, state (including Pennsylvania and Maryland) and local statutes, ordinances and regulations including, but not limited to, claims relating to breach of contract, breach of promise, misrepresentation, wrongful discharge, discrimination on account of age, race, sex, religion, national origin, military status, disability or other such characteristics protected by law, that he may have against the Corporation relating to, or arising out of, his employment with, or separation from employment with the Corporation, whether now apparent or yet to be discovered or which may hereafter develop based on events that have transpired from the beginning of time to the date of his execution of this Settlement Agreement and Release, whether or not any action, claim, complaint, grievance or charge has been filed by Employee or on his behalf (collectively "Civil Rights Provisions"). Further, Employee specifically releases the Corporation from any and all claims arising under the following Civil Rights Provisions, in each case as amended and in effect: (i) Title VII of the Civil Rights Act of 1964, as amended; (ii) the Americans With Disabilities Act of 1990; as amended (iii) the Age Discrimination in Employment Act, as amended; and (iv) any same or similar state or local law, ordinance or regulation prohibiting such discrimination in employment. The Employee specifically recognizes that a portion of the amount set forth in Section 1 above is in full satisfaction of any claim the Employee may or could make against the Corporation in connection with the Employment Agreement, the Corporation's Annual Incentive Plan, Performance Share Plan or any other compensation and deferred compensation plan or program of the Corporation applicable to senior or executive employees or employees generally, and the foregoing release is intended to release each and all such obligations and plans. -4- The foregoing shall not prevent the Employee from filing charges with the Equal Employment Opportunity Commission but the Employee agrees he shall not financially benefit from such charges. (b) If Employee violates this Settlement Agreement and Release by filing a claim against or suing the Corporation, Employee agrees to pay all costs and expenses of defending against such claims incurred by the Corporation or in prosecuting any counterclaim or cross claim based on this Settlement Agreement and Release, including reasonable attorney's fees and all other costs and expenses associated therewith. (c) Except as provided below in this subsection, the Corporation absolutely, irrevocably and unconditionally releases and forever discharges the Employee from any and all claims, known and unknown, under federal, state or municipal law (including common law claims) and all federal, state and local statutes, including, but not limited to, claims related to breach of contract, that it may have against the Employee relating to, or arising out of, his employment with, or separation from, employment with the Corporation whether now apparent or yet to be discovered or which may hereafter develop based on events that have transpired from the beginning of time to the date of execution of this Settlement Agreement and Release. The Corporation does not hereby release or discharge the Employee from liability from or the cost of defense of any claim, action suit or demand brought by a party other than the Corporation and, if a claim is bought against the Corporation by a third party, the Corporation may join the Employee as an additional defendant, cross claim, make claim for indemnity or contribution and/or take other actions with regard to the Employee as permitted under the then prevailing rules of court. The Corporation specifically reserves the right to file a claim or take any other action it deems necessary or appropriate to void its obligations under this Settlement Agreement and Release and, in particular under this subsection, if it determines that the Affidavit provided by the Executive, attached hereto as Exhibit A and made a part hereof, is false or misleading in any material respect, such Affidavit being a material inducement to the Corporation to enter into this Settlement Agreement and Release. (d) If the Corporation violates the provisions of subsection 4(c), the Corporation agrees to pay all costs and expenses of defending against claims violating subsection 4(c) incurred by the Employee or in prosecuting any counterclaim or cross claim based on this Settlement Agreement and Release, including reasonable attorneys' fees and all other expenses associated therewith. 5. WAIVER OF RELIEF This Settlement Agreement and Release encompasses all relief, no matter how called, whether now apparent or yet to be discovered, including but not limited to: wages, front pay, back pay, compensatory damages, pension or retirement benefits, punitive damages, liquidated damages, damages for pain, suffering, mental anguish and loss of enjoyment of life, and, costs and attorney's fees. Without limiting the foregoing, it is expressly agreed that the Corporation shall have no obligation to pay or reimburse the Employee for payment of attorney's fees for review and/or negotiation of this Settlement Agreement and Release. Further, Employee agrees -5- that he will not be entitled to any benefit from any claim or proceeding filed on his behalf with any agency or court. 6. NO ADMISSION OF LIABILITY Execution of this Settlement Agreement and Release and compliance with its terms, as provided above, do not constitute an admission by the Corporation that (i) it has treated the Employee or any other person unfairly or unlawfully or (ii) that it engaged in any breach of contract or violation of any Civil Rights Provision or other employment discrimination statute, or any other legal provision, regulation, ordinance order or rule of common law. 7. MUTUAL CONFIDENTIALITY OF AGREEMENT AND NON-DISPARAGEMENT COMMITMENTS (a) Employee agrees to keep confidential and not to disclose to any person (other than members of the Employee's immediate family and Employees' attorney) the terms of this Settlement Agreement and Release; provided, however, that this Settlement Agreement and Release may be used as evidence in any claim or litigation alleging breaches hereof. Any immediate family member or attorney to whom Employee discloses information concerning this Settlement Agreement and Release shall also be bound by the terms of this sub-section and Employee shall be responsible for any breaches of confidentiality by such persons. Employee agrees that, in the event he makes any disclosure that constitutes a violation of this Settlement Agreement and Release (including, without limitation the amount or approximate amount of the severance payment made pursuant to Section 1), a court may direct Employee to cease and desist, to compensate the Corporation for all damages it has incurred as a consequence, and to pay the Corporation its reasonable costs and expenses, including reasonable attorney's fees, incurred in connection with its efforts to enforce this Settlement Agreement and Release. Recognizing that damages may be difficult to calculate, Employee agrees that the appropriate award of damages for his violation of this subsection shall be no less than one hundred thousand dollars ($100,000), without prejudice to the right of the Corporation to request and recover actual damages in a larger amount should they be proven. (b) Except for disclosure required under any law or regulation, including, but not limited to disclosure in connection with soliciting proxies, the Corporation agrees to keep confidential and not to disclose to any person (other than employees or agents who approve or implement this Settlement Agreement and Release) the terms of this Settlement Agreement and Release; provided, however, that this Settlement Agreement and Release may be used as evidence by the Corporation in any claim or litigation alleging breaches hereof. (c) Employee states that he has returned to the Corporation all records relating to the Corporation and its business in whatever medium and agrees not to disclose or divulge, directly or indirectly, any business secret or other confidential or proprietary information of the Corporation to any person, firm, partnership, venture or corporation, except as required by law. (d) Employee and Corporation agree that he and it will not, in any way, disparage one another to any person(s) or organization(s), including, without limitation, any employee of the Corporation. -6- (e) The Corporation will respond to all references inquiries concerning the Employee by confirming the dates of his employment with the Corporation. 8. COOPERATION Employee agrees to cooperate with the Corporation in the prosecution or defense of claims asserted by or against the Corporation. Such cooperation shall include meeting with representatives of the Corporation or the Corporation's attorneys, or both, divulging to the Corporation any information that the Corporation may request for possible use in litigation, arbitration, or other legal proceeding, and testifying on behalf of the Corporation at the Corporation's request. 9. NON-COMPETITION AGREEMENT Employee acknowledges and agrees that Section 6 of the Employment Agreement imposes on him certain restrictions, including, but not limited to, Non-competition, Nondisclosure and Nonsolicitation, and that such restrictions survive the termination of his employment under the Employment Agreement for a period of one year. The Employee acknowledges and reaffirms that until after January 3, 2002, he shall keep and observe in all particulars the provisions and the restrictions under Section 6 of the Employment Agreement which is incorporated herein as if set forth at length. Employee agrees that any breach or threatened breach of any covenants contained in Section 6 of the Employment Agreement and incorporated herein would cause immediate, material and irreparable harm to the Corporation and that money damages would not provide an adequate remedy to the Corporation. The Corporation shall have all of the rights and remedies available under law or equity, including, but not limited to, injunctive relief, available to any party enforcing any such covenant. Each of the rights and remedies shall be independent of the other and shall be severally enforceable including, but not limited to, the right to have the covenants specifically enforced by any court of competent jurisdiction by any court of competent jurisdiction and the right to require Employee to account for and pay over to the Corporation all benefits derived or received by him as a result of any such breach of covenant and Employee shall not raise a defense to the granting of any such relief that the Corporation has an adequate remedy at law. 10. ENTIRE AGREEMENT This Settlement Agreement and Release constitutes the entire agreement and understanding of the parties and supersedes all prior negotiations, understandings and agreements, proposed or otherwise, written or oral, concerning the subject matters hereof. Furthermore, no modification of this Settlement Agreement and Release shall be binding unless in writing signed by each of the parties hereto. -7- 11. SEVERABILITY Should any provision of this Settlement Agreement and Release be declared illegal or unenforceable by any court of competent jurisdiction and if such provision cannot be modified to be enforceable (including the general release language), such provision shall immediately become null and void, leaving the remainder of this Settlement Agreement and Release in full force and effect. However, if any portion of the general release language in Section 3 or 4 are ruled unenforceable for any reason, the Corporation and Employee agree to use their best efforts to negotiate in good faith an enforceable general release. 12. GOVERNING LAW This Settlement Agreement and Release shall be governed by, and construed and enforced in accordance with, the laws of the Commonwealth of Pennsylvania, the state in which the Corporation's principal office is located, without regard to its principles or provisions of conflicts of laws. Any action brought under this Settlement Agreement and Release shall be brought in a court of competent jurisdiction with venue in Allegheny County, Pennsylvania. 13. JUDICIAL ENFORCEMENT This Settlement Agreement and Release may be specifically enforced in judicial proceedings brought in equity in a court of competent jurisdiction with venue in Allegheny County, Pennsylvania. 14. VOLUNTARY AND UNDERSTANDING EXECUTION Employee agrees and acknowledges that he has read it and fully understands the terms and conditions of the Settlement Agreement and Release, including the release of claims and waiver of rights, that he has consulted with his attorney, or, if he has not consulted with their attorneys, he has chosen not to consult with an attorney after having been advised to do so with ample opportunity to do so, and that he enters into this Settlement Agreement and Release knowingly, voluntarily, free from duress and as a result of his own free will. 15. EFFECT OF SETTLEMENT AGREEMENT AND RELEASE ON CHANGE IN CONTROL AGREEMENT Without limiting the general applicability of Section 9, the Employee specifically agrees that this Settlement Agreement and Release supersedes in its entirety the Change in Control Agreement, as amended, by and between the Corporation and the Employee (the "Change in Control Agreement") and that the shall not be entitled to any payments under the Change in Control Agreement under any circumstances now or in the future. -8- 16. CONSIDERATION AND REVOCATION PERIODS (A) EMPLOYEE ACKNOWLEDGES THAT HE HAS BEEN ADVISED BY THIS WRITING AND PREVIOUSLY BY THE CORPORATION TO CONSULT WITH AN ATTORNEY OF HIS CHOOSING CONCERNING HIS RIGHTS IN CONNECTION WITH HIS TERMINATION FROM EMPLOYMENT AND THE TERMS AND CONDITIONS OF THIS SETTLEMENT AGREEMENT AND RELEASE, INCLUDING THE RELEASE OF ALL CLAIMS CONTAINED HEREIN. (B) EMPLOYEE ACKNOWLEDGES THAT HE HAS BEEN ADVISED THAT HE HAS A LEGAL RIGHT TO USE ALL OR ANY PART OF TWENTY-ONE (21) DAYS TO CONSIDER, IN CONSULTATION WITH HIS ATTORNEY, WHETHER TO SIGN THIS SETTLEMENT AGREEMENT AND RELEASE AND THAT, DURING SUCH PERIOD OF CONSIDERATION, THE CORPORATION SHALL NOT REVOKE ITS OFFER TO ENTER INTO THIS SETTLEMENT AGREEMENT AND RELEASE ON THE TERMS AND CONDITIONS SET FORTH HEREIN. (C) EMPLOYEE ACKNOWLEDGES THAT HE HAS BEEN ADVISED THAT, IF HE SIGNS THIS SETTLEMENT AGREEMENT AND RELEASE, HE CAN THEREAFTER REVOKE HIS EXECUTION OF THIS SETTLEMENT AGREEMENT AND RELEASE ON OR BEFORE THE CLOSE OF BUSINESS ON THE SEVENTH DAY AFTER HIS EXECUTION HEREOF BY DELIVERING A WRITTEN REVOCATION TO THE CORPORATION, ATTENTION, JON D. WALTON, SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY, 10TH FLOOR, SIX PPG PLACE, PITTSBURGH, PA 15222-5479. IN WITNESS WHEREOF, the aforesaid parties have hereunto set their hands and seals as of the date written below. WITNESS THOMAS A CORCORAN /s/ Catherine A. Mehrters /s/ Thomas A. Corcoran ------------------------------ ------------------------------------ Date: February 15, 2001 Date: February 15, 2001 ------------------------ ------------------------------- ALLEGHENY TECHNOLOGIES INCORPORATED ATTEST: /s/ J. D. Walton By: /s/ James L. Murdy ------------------------------ --------------------------------- Title Executive Vice President ------------------------------ Date: February 20, 2001 ------------------------------- -9- EXHIBIT 10.32 ALLEGHENY TECHNOLOGIES INCORPORATED 2000 INCENTIVE PLAN ADMINISTRATIVE RULES FOR THE PERFORMANCE SHARE PROGRAM FOR KEY EMPLOYEES OF ALLEGHENY TECHNOLOGIES INCORPORATED AND SUBSIDIARIES ARTICLE I. Adoption and Purpose of the Program 1.1 Adoption. These rules are adopted by the Personnel and Compensation Committee and the Stock Incentive Award Subcommittee of the Board of Directors pursuant to the authority reserved in the Allegheny Technologies Incorporated 2000 Incentive Plan (the "Plan"), effective as of January 1, 2000. Capitalized terms used but not defined herein shall have the same meanings as in the Plan. 1.2 Purpose. The purposes of the Performance Share Program For Key Employees of Allegheny Technologies Incorporated and Subsidiaries are to (1) provide a structure and framework for certain awards made under the Plan, (2) establish rules for certain awards under the Plan, and (3) further the Plan's purpose of promoting the growth and profitability of Allegheny Technologies Incorporated and its subsidiaries, providing key employees with an incentive to achieve long-term corporate objectives and attracting and retaining key employees of outstanding competence. ARTICLE II. Definitions For purposes of these rules, the capitalized terms set forth below shall have the following meanings: 2.1 "Award" shall mean the grant of a Performance Award evidenced by this Agreement. 2.2 "Award Period" shall mean the time period established by the Committee pursuant to Article IV of the PSP for the purpose of measuring attainment of performance objectives. 2.3 "Board of Directors" shall mean the Board of Directors of the Corporation. 2.4 "Chief Executive Officer" shall mean the chief executive officer of the Corporation. 2.5 "Committee" shall mean the Stock Incentive Award Subcommittee of the Board of Directors, in the case of individuals who are Statutory Insiders of the Corporation, and the Personnel and Compensation Committee of the Board of Directors, in the case of individuals who are not Statutory Insiders, in each case as such Subcommittee or Committee which may be appointed from time to time by the Board of Directors, subject to the provisions of Section 3.1(a) hereof. 2.6 "Common Stock" shall mean common stock, $0.10 par value per share, of the Corporation. 2.7 "Corporation" shall mean Allegheny Technologies Incorporated. 2.8 "Disability" shall mean the total and permanent disability of the Grantee as determined by the Committee in its sole discretion. 2.9 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 2.10 "Fair Market Value" shall mean, as of any given date, the average of the high and low quoted sales prices of the Common Stock on the relevant date or, if there were no - 2 - sales of Common Stock on such date, on the next preceding date on which shares of Common Stock were sold on the New York Stock Exchange. 2.11 "Grantee" shall mean a Key Employee to whom an Award or Awards designated as a Performance Award have been granted. 2.12 "Key Employee" shall mean (a) an employee of the Corporation or a Subsidiary who is a Statutory Insider (subject to the second sentence of this subsection) and (b) any other employee of the Corporation or a Subsidiary who is, in the judgment of the Chief Executive Officer, responsible to a material extent for the profitability and continued growth of the Corporation and its Subsidiaries. Directors of the Corporation who are not otherwise officers or employees of the Corporation and directors who are members of the Committee may not be designated as Key Employees. 2.13 "PSP" shall mean the Performance Share Program, as the same may be amended from time to time. 2.14 "Performance Awards" shall mean Awards granted under the PSP in accordance with Article VIII of the Plan. 2.15 "Performance Award Agreement" shall mean a written agreement between the Corporation and a Key Employee or a written acknowledgment from the Corporation to a Key Employee specifically setting forth the terms and conditions of the Performance Award. 2.16 "Retirement" shall mean early or normal retirement under a pension plan or arrangement of the Corporation or one of its Subsidiaries. 2.17 "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the Securities and Exchange Commission under the Exchange Act, as in effect from time to time. - 3 - 2.18 "Section 162(m)" shall mean Section 162(m) of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. 2.19 "Statutory Insider" shall mean an "officer" of the Corporation as defined in Rule 16a-1(f) as promulgated by the Securities and Exchange Commission under the Exchange Act, as such Rule may be amended from time to time. 2.20 "Subsidiary" shall mean any corporation at least a majority of whose outstanding voting shares shall at the time be owned by the Corporation or by one or more Subsidiaries. ARTICLE III. General 3.1 Administration. (a) The PSP shall be administered by the Committee which shall have all necessary power and authority to interpret the PSP and take all action necessary or appropriate in connection with the PSP. The Committee will be constituted so as to qualify Awards for exemption under Rule 16b-3 and as "performance-based compensation" for the purposes of Section 162(m), with respect to participation of Statutory Insiders in the PSP. (b) The Committee at its discretion but after consultation with the Chief Executive Officer shall (i) identify employees who, in addition to Statutory Insiders, are Key Employees; (ii) grant Awards pursuant to the PSP; (iii) prescribe such limitations and restrictions as the Committee shall deem appropriate; and (iv) interpret the PSP, adopt, amend and rescind rules and regulations relating to - 4 - the PSP, and make all other determinations and take all other action necessary or advisable for the implementation and administration of the PSP. (c) All such actions shall be final, conclusive and binding upon the Key Employees. Neither the Chief Executive Officer nor any member of the Committee shall be liable for any action taken or decision made in good faith relating to the PSP or any award thereunder. 3.2 Grant of Award. The Committee shall select from among the Key Employees those individuals who shall be granted Awards under the PSP. The Committee shall determine the form, value and denomination of the Performance Award to be granted to a Grantee. In granting such Performance Awards and determining their form, value and denomination, consideration shall be given to the recommendations of the Chief Executive Officer, the functions and responsibilities of the Grantee, the Grantee's potential contributions to the profitability and sound growth of the Corporation and such other factors as shall be deemed relevant. ARTICLE IV. Establishment of Corporate Objectives The Committee, after discussion with the Chief Executive Officer, shall determine whether to establish an Award Period commencing with the beginning of a fiscal year with respect to which this determination is made and the appropriate length of the Award Period. If the Committee establishes an Award Period, the Committee, in consultation with the Chief Executive Officer, shall determine the financial objectives of the Corporation and its Subsidiaries to be achieved during such Award Period, the basis on which awards granted for such Award Period shall vest upon either partial achievement of the corporate objectives or upon the meeting - 5 - or surpassing of the corporate objectives, and the number of shares and/or dollars comprising each award. The performance goals shall meet the requirements of an objective formula under Section 162(m), unless the Committee determines otherwise. ARTICLE V. Grant of Awards 5.1 Grant of Awards. The Committee, subject to the provisions of the PSP, may grant Performance Awards to Key Employees and determine (and the Performance Award Agreement shall state) the form, value and denomination of the Performance Awards granted to the respective Grantees and such other terms and conditions as the Committee may consider appropriate. In taking such action, consideration shall be given to the recommendations of the Chief Executive Officer. 5.2 Performance Award Agreements. Performance Awards granted to a Key Employee shall be evidenced by a written Performance Award Agreement to be entered into between the Corporation and the Key Employee and to contain such terms and conditions as the Committee may consider appropriate in each case. 5.3 Grantee Account. At such time as it shall be determined by the Committee that the objectives for such Award Period shall have been fully or partially achieved or surpassed, the Corporation shall establish and maintain a bookkeeping account for each Grantee who shall have been granted Performance Awards for such Award Period and shall credit to such account a dollar amount and/or the number of shares of Common Stock equal to the dollar value and/or the number of shares of Common Stock of the Performance Award to which the Grantee becomes entitled pursuant to his Performance Award Agreement. - 6 - 5.4 Payment of Grantee Account. The dollar amount and/or the number of shares of Common Stock credited to a Grantee's bookkeeping account shall be paid to the Grantee in installments; provided, however, that a Grantee must be then and have continuously been an employee of the Corporation or any of its Subsidiaries from the date of the grant of the award to the date of each installment payment. The installment payments shall be in the amount and/or the number of shares of Common Stock as follows: thirty-three and one-third percent (33-1/3%) of the total dollar amount and number of shares of Common Stock credited to the Grantee's account on or before the first day of the calendar month following the calendar month in which the amount was credited to the account and an additional thirty-three and one-third percent (33-1/3%) on or before the first business day of January of each succeeding calendar year thereafter, until such amount is completely distributed. Fractional shares shall not be distributed but shall be aggregated and paid in the last maturing installment. 5.5 Termination of Employment. Notwithstanding the provisions of these Rules, including Section 5.4 hereof, if a Grantee terminates employment with the Corporation or any Subsidiary because of Retirement, death or Disability, the Performance Award shall be prorated based on the number of full months of employment during the Award Period divided by the total number of months in the Award Period and the Performance Award shall be paid at the time and in the same form as Performance Awards are paid to active participants. If a Grantee terminates employment for any other reason or no reason, any unvested or unpaid installment shall be forfeited unless determined otherwise by the Committee in its sole discretion. - 7 - ARTICLE VI. Miscellaneous 6.1 General Restriction. Any Performance 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 of the granting a Performance 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. 6.2 Non-Assignability. No Performance Award shall be assignable or transferable by the recipient thereof, except by will or by the laws of descent and distribution. During the life of the recipient, any installment of a Performance Award shall be paid only to such individual. No purported assignment or transfer of a Performance Award, of the rights represented thereby or of a Grantee's contingent interest in the bookkeeping account described in Section 5.3, whether voluntary or involuntary, by operation of law or otherwise (except by will or the laws of descent and distribution), shall vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon such assignment or transfer the Performance Awards shall terminate and become of no further effect. 6.3 Withholding Taxes. Whenever the Corporation makes payments under the PSP, in whole or in part, the Corporation shall notify the Grantee of the amount of withholding tax, if any, which must be paid under federal and, where applicable, state and local law. The Corporation shall, in the discretion of the Corporation, but with the consent of the Committee, arrange for payment for such withholding taxes in any one or combination of the following ways: (i) acceptance of an amount in cash paid by the Grantee, (ii) deduction of amounts for - 8 - withholding taxes from amounts of cash payable as an installment under the PSP, (iii) reduction in the number of shares to be issued in an installment by that number of shares having a Fair Market Value equal to the amount which the Corporation is required to withhold and/or (iv) acceptance of whole shares of Common Stock already owned by the Grantee, having a Fair Market Value equal to the amount the Corporation is required to withhold. If the full amount of the withholding tax is not recovered in the above manner, the Grantee shall, forthwith upon receipt of notice, remit the deficiency to the Corporation. No certificates for shares of Common Stock shall be issued or delivered to a Grantee under the PSP until all applicable taxes shall have been satisfied in full. 6.4 Delivery of Certificates. As soon as practicable after compliance by a Grantee with all applicable conditions, the Corporation will issue and deliver by mail, or cause delivery by mail to the Grantee at the address specified, certificates registered in the name of the Grantee for the number or shares of Common Stock which the Grantee is entitled to receive (subject to reduction for withholding tax as provided in Section 6.3 hereof) under the provisions of the PSP and the Performance Award Agreement. 6.5 No Right to Employment. Nothing in the PSP or in any agreement entered into pursuant to the PSP shall confer upon any employee or Grantee the right to continue in the employ of the Corporation or any Subsidiary or affect any right which the Corporation or a Subsidiary may have to terminate the employment of any employee or Grantee. 6.6 Non-Uniform Determinations. The actions and recommendations of the Chief Executive Officer, the determinations by the Committee under the PSP (including without limitation the determinations by the Chief Executive Officer and the Committee of the persons to receive Performance Awards, and the determinations by the Committee of the form, value and - 9 - denomination of such awards, and the terms and provisions of such Awards) need not be uniform and may be made by the Chief Executive Officer or the Committee, as the case may be, selectively among persons who receive, or are eligible to receive Performance Awards under the PSP, whether or not such persons are similarly situated. 6.7 Amendment or Termination of the PSP. The Board may at any time terminate the PSP or any part thereof and may from time to time amend the PSP as it may deem advisable; provided, however, that without stockholder approval, the Board of Directors may not (i) increase the aggregate number of shares of Common Stock which may be issued under the PSP (other than increases permitted under Paragraph 6.10 hereof), (ii) extend the term of the PSP, or (iii) extend the period during which Performance Awards may be granted. The termination or amendment of the PSP shall not, without the consent of a Grantee, affect such Grantee's rights under a previous grant of Performance Awards. 6.8 Investment Representation. Each Performance Award Agreement may provide that the Grantee shall deliver to the Committee, upon demand by the Committee, at the time of any payment of an installment which contains shares of Common Stock a written representation that the shares to be acquired are to be acquired for investment and not for resale or with a view to the distribution thereof. Upon such demand, delivery of such representation prior to delivery of any shares shall be a condition precedent to the right of the Grantee to receive any shares. 6.9 No Rights as Stockholders. Recipients of Performance Awards denominated in Common Stock shall have no rights as stockholders of the Corporation with respect thereto unless and until certificates for shares of Common Stock are issued to them. - 10 - 6.10 Adjustment of Awards. In the event of any change or changes in the outstanding Common Stock of the Corporation by reason of any stock dividend, recapitalization, reorganization, merger, consolidation, split-up, combination or exchange of shares or any rights offering to purchase a substantial amount of Common Stock at below fair market value or of any similar change affecting the Common Stock, any of which takes effect after the first grant of a Performance Award, the Committee may, in its discretion, appropriately adjust the number and kind of shares which may be issued under the PSP, the number and kind of shares subject to Performance Awards theretofore granted, and any and all other adjustments deemed appropriate by the Committee to prevent substantial dilution or enlargement of the rights granted under a Performance Award Agreement in such manner as the Committee shall deem appropriate. 6.11 Awards Not a Bar to Corporate Event. The existence of the Performance Awards granted hereunder shall not affect in any way the right or the power of the Corporation or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Corporation's capital structure or its business, or any merger or consolidation of the Corporation, or any issue of bonds, debentures, preferred or prior preference stocks ahead of or affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Corporation, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. ARTICLE VII. Rule 16b-3 Compliance It is intended, unless the Committee shall determine otherwise, that the PSP comply with Rule 16b-3, and that all interpretations of the PSP relating to Statutory Insiders shall be consistent with such Rule and the Exchange Act. In order to maintain compliance with such - 11 - Rule and the Exchange Act and to facilitate and promote the conformity of the transactions of Statutory Insiders under the PSP with such Rule, the Committee may adopt such rules and policies as it deems advisable, including, but not limited to, rules and policies restricting the timing of the reduction in the number of shares to be issued in an installment pursuant to Section 6. 3 hereof, and any related rules or policies delaying payments pursuant to Section 5. 4 hereof, and any election with respect thereto. ARTICLE VIII. Section 162(m) Compliance It is intended, unless the Committee shall determine otherwise, that the PSP comply with Section 162(m), and that all interpretations of the PSP relating to Statutory Insiders who are "covered employees" as defined in Section 162(m) shall be consistent with such Section. In order to maintain compliance with such Section, the Committee may adopt such rules and policies as it deems advisable. - 12 - FORM OF ALLEGHENY TECHNOLOGIES INCORPORATED PERFORMANCE AWARD AGREEMENT Allegheny Technologies Incorporated (the "Company") and the performance award recipient named below ("Participant") enter into this Performance Award Agreement effective as of January 31, 2000. Participant: PARTICIPANT TO COMPLETE THE FOLLOWING CHART (Please print) -------------------------------- ----------------------------------------------- Street Address -------------------------------- ----------------------------------------------- City/State/Zip Code -------------------------------- ----------------------------------------------- Social Security Number -------------------------------- ----------------------------------------------- WHEREAS, the Company desires to promote its growth and profitability and to induce Participant to remain a key employee of the Company and to achieve long-term objectives by making the performance award evidenced by this Agreement to Participant pursuant to the Allegheny Technologies Incorporated 2000 Incentive Plan (the "Plan") and the Performance Share Program for Key Employees of the Company (the "PSP") adopted thereunder and Participant, having read and understood this Performance Award Agreement and the attached Terms and Conditions of Performance Award incorporated herein by reference, is willing to enter into this Performance Award Agreement. NOW THEREFORE, in consideration of the covenants and agreements contained herein, and intending to be legally bound, the parties hereto agree as follows: Subject to the attainment of the Performance Objectives described below and to the terms and conditions of the Plan, the PSP and the Terms and Conditions of Performance Award attached hereto and incorporated herein by reference, by which Participant agrees to be bound, the Company awards to Participant the Performance Award described below, with respect to the Award Period described below: AWARD PERIOD: January 1, 2000 through December 31, 2002 TARGET PERFORMANCE AWARD A. Target Number of Shares Awarded shares of Common Stock [equals: base salary at 1/1/00 X 2/3 X 300% (which is Participant's target opportunity as a percent of salary) divided by $22.25 (which is the average closing price for the trading days after November 29, 1999 and prior to the beginning of the 3-year award period that began 1/1/00)] PLUS B. Target Cash Award: [equals: base salary at 1/1/00 X 1/3 X 300% (which is Participant's target opportunity as a percent of salary)] PERFORMANCE OBJECTIVES--AT TARGET: 1. Revenue and Earnings Component: --------------------------------- ------------------------- ------------------------------------------- Objective Weight Amount --------------------------------- ------------------------- ------------------------------------------- Revenue in Year 2002 33% $3.125 billion in Year 2002 --------------------------------- ------------------------- ------------------------------------------- Earnings per Share 67% Cumulative $7.90 per Share --------------------------------- ------------------------- ------------------------------------------- AND 2. Return on Average Capital Employed: Average of 12% for 3 year award period In making calculations, acquisitions are included and divestitures are excluded. THE ACTUAL PERFORMANCE AWARD CREDITED TO PARTICIPANT'S ACCOUNT WILL EQUAL THE TARGET PERFORMANCE AWARD (ON THE FIRST PAGE OF THIS AGREEMENT) TIMES THE APPLICABLE PERCENTAGE BELOW: o For achievement equal to 100% of the Performance Objectives, the Performance Award equals the product of: (a) the Target Performance Award, times (b) 100%. o For achievement of over 100% and up to 120% of Performance Objectives, the Performance Award equals the product of: (a) the Target Performance Award, times (b) [(Percentage of Performance Objectives Achieved minus 100%) times 5] plus 100%. o The maximum Target Performance Award will be equal the product of: (a) the Target Performance Award (on the first page of this Agreement), times (b) 200%. o For achievement between 75% and 99.9% of Performance Objectives, the Performance Award equals the product of: (a) the Target Performance Award, times (b) [(Percentage of Performance Objectives Achieved minus 75%) times 3] plus 25%. o For achievement equal to 75% of Performance Objectives, the Performance Award equals the product of (a) the Target Performance Award, times (b) 25%. o For achievement less than 75% of Performance Objectives, no Performance Award will be payable. ILLUSTRATION OF ACHIEVEMENT LEVELS UPON PERFORMANCE AWARD For the four Target Performance Award levels on the left-hand margin below, different achievement levels during the 2000-2002 period would establish distinct Performance Awards as the following example shows: Performance Award as a Percentage of Eligible Salary for Achievement at the Following Levels of the 2000-2002 Target Performance Objectives: Performance 74.9% 120.0% Award Level or less 75.0% 90.0% 100.0% 110.0% or more -------------- ------- ----- ----- ------ ------ ------- A - 300% 0% 75.0% 210.0% 300.0% 450.0% 600.0% B - 250% 0% 62.5% 175.0% 250.0% 375.0% 500.0% C - 200% 0% 50.0% 140.0% 200.0% 300.0% 400.0% D - 150% 0% 37.5% 105.0% 150.0% 225.0% 300.0% IN WITNESS WHEREOF, the parties hereto have executed this Performance Award Agreement effective the day and year first above written. ALLEGHENY TECHNOLOGIES INCORPORATED By: WITNESS: PARTICIPANT: _______________________________ ______________________________________ TERMS AND CONDITIONS OF PERFORMANCE AWARD Section 1: Definitions Capitalized words used but not defined below or elsewhere in these Terms and Conditions shall have the meanings ascribed to them in the Plan. Administrative Rules or PSP--the Administrative Rules for the PSP adopted by the Committee effective January 31, 2000, as amended. Award--the grant of a Performance Award evidenced by this Agreement. Award Period--the period from January 1, 2000 through December 31, 2002. Committee--the Personnel and Compensation Committee of the Board of Directors for a Participant who is not a statutory insider of the Company for the purposes of Section 16 of the Securities Exchange Act of 1934 and the Stock Incentive Award Subcommittee of the Board of Directors for a Participant who is a statutory insider. Common Stock--common stock, $0.10 par value per share, of Allegheny Technologies Incorporated. Company--Allegheny Technologies Incorporated and its subsidiaries, unless the context requires otherwise. Disability--the total and permanent disability of Participant as determined by the Committee in its sole discretion. Fair Market Value--the average of the high and low quoted sales prices of the Common Stock on the relevant date or, if there were no sales of Common Stock on such date, on the next preceding date on which shares of Common Stock were sold on the New York Stock Exchange. Grantee Account--an unfunded contingent bookkeeping account entered on the Company's books and records to record the number of shares of Common Stock, the amount of cash or both to which Participant becomes entitled under, and subject to, the terms of this Agreement and the PSP. The establishment of the Grantee Account for Participant shall not be deemed to create a trust or otherwise require a segregation of assets for the benefit of Participant, or Participant's heirs, estate or personal representative and shares of Common Stock, amounts of cash or both recorded as credits to Participant's Grantee Account shall be and remain subject to the claims of the Company's creditors until paid to Participant. Installment--a partial payment of the amount of cash and/or shares of Common Stock credited to Participant's Grantee Account with respect to the Award Period according to the schedule set forth in Section 6. Performance Award--the award of dollars and shares of Common Stock made pursuant to the PSP and this Agreement. Performance Objectives--the measure of Company achievement set forth in the second page of this Agreement. Retirement--the early or normal retirement of Participant under a pension plan or arrangement of the Company or its subsidiaries in which Participant participates, or, if none (e.g., where Participant participates primarily in a defined contribution plan or an excess benefit plan related thereto), when Participant has attained at least age 55 and completed five or more years of service as of his or her date of employment termination. Section 2: Employment 2.1 Entitlement to payments under the PSP and this Agreement shall be conditioned upon the period of employment as set forth in Section 6 hereof. The existence of this Agreement and the reference to any time periods under this Agreement shall not confer on Participant the right to continue in the employ of the Company or affect any right which the Company may have to terminate the employment of Participant. Section 3: Performance Award 3.1 Subject to the attainment of the Performance Objectives and to the terms and conditions otherwise set forth in the Plan, Administrative Rules and in this Agreement, the Company awards to Participant the Performance Award described in the first two pages of this Agreement with respect to the Award Period. Section 4: Performance Objectives 4.1 The Performance Objectives applicable to the Award evidenced by this Agreement and to be used by the Committee to determine whether and to what extent the Performance Award shall be credited to Participant's Grantee Account are as set forth in the second page of this Agreement. If it is determined that actual performance has achieved the Performance Objectives in all respects for the Award Period, then 100% of the Performance Award at Target as described in the first page of this Agreement (the "Target Performance Award") shall be credited to Participant's Grantee Account. If it is determined that actual performance has exceeded the Performance Objectives in all respects for the Award Period, or that actual performance has failed to achieve the Performance Objectives but has exceeded the minimum performance level set forth on the second page of this Agreement, then the Performance Award to be credited to Participant's Grantee Account shall be an amount determined by multiplying the applicable percentage set forth in the second page of this Agreement by the Target Performance Award. If it is determined that the minimum performance level is not achieved, no Performance Award shall be credited to Participant's Grantee Account. Section 5: Credits to Grantee Account 5.1 Following the last day of the Award Period, the Committee shall determine whether and to what extent the Performance Objectives have been met for the Award Period and whether and to what extent the Performance Award, if any, shall be credited to Participant's Grantee Account with respect to the Award Period. No Performance Award shall be credited to Participant's Grantee Account with respect to the Award evidenced by this Agreement unless and until the Committee makes the determinations set forth in the preceding sentence. The Committee shall make its determinations with respect to the Award Period as soon as practicable after all information concerning the actual performance of the Company for the Award Period is made available to the Committee. Section 6: Payment of Installments 6.1 The dollar amount and/or the number of shares of Common Stock credited as a Performance Award to Participant's Grantee Account shall be paid to Participant in Installments; provided, however, that Participant must be then and have continuously been an employee of the Company from the effective date of this Agreement to the date of each such Installment. Except as provided below, in the event Participant ceases to be an employee of the Company, any then undistributed Performance Awards shall be forfeited and shall not be paid to Participant. Each installment shall be in the dollar amount and/or the number of shares of Common Stock as follows: thirty-three and one-third percent (33-1/3%) of the total dollar amount and the number of shares of Common Stock credited to Participant's Grantee Account shall be delivered to Participant on or before the first day of the calendar month following the calendar month in which the amount was credited to the Grantee Account and an additional thirty-three and one-third percent (33-1/3%) shall be delivered to Participant on or before the first business day of January of each succeeding calendar year thereafter, until such amount is completely distributed. Fractional shares shall not be distributed but shall be aggregated and paid in the last maturing installment. Notwithstanding the foregoing, in the event of the death, Disability or Retirement of Participant, the Performance Award shall be prorated based on the number of full months of employment during the Award Period divided by the total number of months in the Award Period and the Performance Award shall be paid at the time and in the same form as awards are paid to active participants. If Participant terminates employment for any other reason or no reason, any unvested or unpaid installment shall be forfeited unless determined otherwise by the Committee in its sole discretion. Section 7: Miscellaneous 7.1 General Restriction. To the extent any Performance Award is denominated in Common Stock under this Performance Award Agreement, it 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 of the issuance of shares of Common Stock or cash in satisfaction thereof, such issuance of shares of Common Stock may not be consummated unless such requirement is satisfied in a manner acceptable to the Committee. The Company shall in no event be obligated to register any securities pursuant to the Securities Act of 1933 (as the same shall be in effect from time to time) or to take any other affirmative action to cause the issuance of shares pursuant to the distribution of Performance Awards to comply with any law or regulation of any governmental authority. 7.2 Non-Assignability. No Performance Award granted under this Agreement shall be assignable or transferable by Participant, except by will or by the laws of descent and distribution. During the life of Participant, any Performance Award shall be payable only to Participant. No purported assignment or transfer of a Performance Award or of the rights represented thereby or of any rights in Participant's Grantee Account, whether voluntary or involuntary, by operation of law or otherwise (except by will or the laws of descent and distribution), shall vest in the assignee or transferee any interest or right in this Agreement whatsoever, and immediately upon such purported assignment or transfer, the Performance Awards shall terminate and become of no further effect. 7.3 Withholding Taxes. Whenever the Company makes payments under the Plan, in whole or in part, the Company shall notify Participant of the amount of withholding for tax, if any, which must be paid under federal and, where applicable, state and local law. The Company shall, in the discretion of the Company, but with the consent of the Committee, arrange for payment for such withholding for taxes in any one or combination of the following ways: (I) acceptance of an amount in cash paid by Participant; (ii) deduction of amounts for withholding from amounts of cash payable as an Installment; (iii) reduction in the number of shares to be issued in an Installment by that number of shares which, in aggregate, have a value equal to such withholding amount; and/or (iv) acceptance of whole shares of Common Stock already owned by Participant which, in aggregate, have a value equal to such withholding amount. If the full amount of the required withholding is not recovered in the above manner, Participant shall, forthwith upon receipt of notice, remit the deficiency to the Company. No cash or certificates for shares of Common Stock shall be issued or delivered to Participant (and/or Participant's designee) until all applicable withholding obligations shall have been satisfied in full. 7.4 Delivery of Certificates. As soon as practicable after compliance by Participant with all applicable conditions including, but not limited to, the satisfaction of withholding obligations, the Company will issue and deliver, or cause delivery, to Participant at the address specified by Participant in writing, certificates registered in the name of Participant (and/or Participant's designee) for the number of shares of Common Stock which Participant is entitled to receive (subject to reduction for withholding as provided in Section 7.3 hereof) under the provisions of this Agreement. 7.5 No Right to Employment. Nothing in the Plan, the PSP or this Agreement shall confer upon Participant the right to continue in the employ of the Company or any subsidiary thereof or affect any right which the Company or a subsidiary may have to terminate the employment of Participant. 7.6 Amendment or Termination of the Plan. The Board may at any time terminate the Plan, or any part thereof (including the PSP) and may, from time to time, amend the Plan or PSP as it may deem advisable; provided, however, that the termination or amendment of the Plan or PSP shall not, without the consent of Participant, affect Executive's rights under this Agreement. 7.7 Investment Representation. Participant shall deliver to the Committee, upon demand by the Committee, at the time of any payment of an Installment which contains shares of Common Stock, a written representation that the shares to be acquired are to be acquired for investment and not for resale or with a view to the distribution thereof. Upon such demand, delivery of such representation prior to delivery of any shares shall be a condition precedent to the right of Participant to receive any shares of Common Stock. 7.8 No Rights as Stockholder. Participant shall have no rights as a stockholder of the Company with respect to shares of Common Stock subject to the Award evidenced by this Agreement unless and until a certificate for shares of Common Stock is issued to Participant. 7.9 Adjustment of Award. In the event of any change or changes in the outstanding Common Stock of the Company by reason of any stock dividend, recapitalization, reorganization, merger, consolidation, split-up, combination or exchange of shares or any rights offering to purchase a substantial amount of Common Stock at a price substantially below fair market value or of any similar change affecting the Common Stock, any of which takes effect after the first grant of a Performance Award under this Agreement, the Committee may, in its discretion, appropriately adjust the number and kind of shares of common stock which may be issued under this Agreement, the number and kind of shares of common stock subject to Performance Awards under this Agreement and any and all other adjustments deemed appropriate by the Committee to prevent substantial dilution or enlargement of the rights granted to Participant in such manner as the Committee shall deem appropriate. Any adjustment so made shall be final and binding upon Participant. 7.10 Performance Award Not a Bar to Corporate Event. The existence of the Performance Award granted under this Agreement shall not affect in any way the right or the power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stocks ahead of or affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. 7.11 Not Income for Retirement or Other Plans. No amounts of income received by Participant pursuant to this Agreement shall be considered compensation for purposes of any pension or retirement plan, insurance plan or any other employee benefit plan of the Company or any of its affiliates. 7.12 Meaning of Participant. Whenever the word "Participant" is used in any provision of this Agreement under circumstances where the provision should logically be construed to apply to the executors, the administrators, or the person or persons to whom the Performance Awards may be transferred by will or by the laws of descent and distribution, the word "Participant" shall be deemed to include such person or persons. 7.13 Determinations of Committee. The actions taken and determinations of the Committee made pursuant to this Agreement and the actions and determinations of the Chief Executive Officer of the Company and of the Committee pursuant to the Plan, the PSP and the Administrative Rules shall be final, conclusive and binding upon the Company and upon Participant. Neither the Chief Executive Officer of the Company nor any member of the Committee shall be liable for any action taken or determination made relating to this Agreement, the Plan, the PSP, or the Administrative Rules if made in good faith. **** EXHIBIT 10.33 THE ANNUAL INCENTIVE PLAN FOR YEAR 2000 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, the Target Bonus Percentage and the Initial 2 Individual Award Pool Financial Performance Goals 3 Safety Improvement Performance Goals 4 Other Individual Performance Goals 4 Performance Goals Schematic 5 o For Operating Company Employees 5 o For Corporate Staff Employees 5 How the AIP Initial Award Pool is Calculated when 100% of the 6 Financial Performance Goals Are Achieved How the AIP Initial Award Pool is Calculated for Other Achievement 6 Levels o Maximums and Minimums 6 o Formulas for Weighting Financial Performance 7 Putting it Together - Two Examples 8 Additional Guidelines for the Annual Incentive Plan 11 Discretionary Adjustments 11 Some Special Circumstances 11 Making Payments 12 Administration Details 12 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") 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 company presidents, if applicable, and the 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 pages 11-12. 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 financial performance goals are achieved. Under the Plan, 80% of the incentive award payment will be based on corporate and operating company financial performance, 10% will be based on safety improvement, and 10% will be based on other individual performance. o At the end of the year, the Company will determine the individual award pool for each participating manager. The amount of the pool will be the individual's target bonus percentage, as adjusted to reflect the extent to which financial performance goals are achieved, times the individual's annual base salary rate. o Since 80% of the award is based on financial performance, each participant will receive 80% of the amount of his or her individual award pool. In addition, the participant has an opportunity to receive all or part of the remaining 20% of the pool, depending on the extent to which safety improvement and other individual performance objectives are achieved. o 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 2000, to reflect the stretch financial goals under the Plan, if 100% of the performance goals are achieved, 150% 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, THE TARGET BONUS PERCENTAGE AND THE INITIAL INDIVIDUAL AWARD POOL An AIP award is based on the extent to which specified, preestablished performance objectives are achieved. For 2000, AIP awards will be based on the extent to which: o Allegheny Technologies and its operating companies achieve specified levels of Operating Profit and Return on Capital Employed - 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. As a first step in the calculation, the Company will determine the extent to which targeted levels of Operating Profit and Return on Capital Employed have been achieved. The result achieved will be expressed as a percentage of that financial performance goal. Page 2 The Company will then establish an initial individual award pool for each participant. The amount of this pool will be calculated by multiplying: (1) the weighted percentage of each financial goal achieved, times (2) the individual's target bonus percentage, times (3) the individual's annual base salary rate. Since 80% of the actual award is based on financial performance, 80% of the initial individual award pool will be paid to the participant. For the remaining 20% of the pool, the Company will review actual safety improvements and other individual performance against the preestablished objectives to determine the amount of the award the participant has earned. o Since 10% of the actual award is based on safety improvements, the participant can earn up to 10% of the initial individual award pool based on the extent to which safety objectives are achieved. o Since 10% of the actual award is based on other individual performance, the participant can earn up to 10% of the initial individual award pool based on the extent to which other individual performance objectives are achieved. FINANCIAL PERFORMANCE GOALS The financial performance goals consist of two equal measures: Operating Profit ("OP"), and Return on Capital Employed ("ROCE"). For operating company managers, 80% of financial performance will be based on the performance of the participant's operating company, and 20% will be based on corporate level performance. For corporate staff employees, financial performance will be measured at the corporate level. In other words, the financial performance measures used to calculate the participant's initial individual award pool will be as follows: o For managers at the operating companies: -- OP achievements at the participant's operating company: 40% -- ROCE achievements at the participant's operating company: 40% -- OP achievements at Allegheny Technologies: 10% -- ROCE achievements at Allegheny Technologies: 10% o For corporate staff employees: -- OP achievements at the corporate level: 50% -- ROCE achievements at the corporate level: 50% Each year, OP and ROCE goals will be set at the corporate and operating company level based on the applicable business plan. With the concurrence of the Chief Executive Officer and the Committee, OP and ROCE 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. Page 3 SAFETY IMPROVEMENT PERFORMANCE GOALS Up to 10% of the initial individual award pool can be earned based on the extent to which preestablished 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 up to 5% of the award. Consistent with the overall business plan of Allegheny Technologies, the preestablished safety goal under the Plan is a 25% improvement in safety vs. 1999 performance. The table below shows the award percentages for various levels of improvement in the OSHA Total Recordable Incident Rate and in the Lost Workday Case Rate: ---------------------------- --------------------------------- --------------------- % OF GOAL REACHED % IMPROVEMENT IN SAFETY % AWARD ---------------------------- --------------------------------- --------------------- 32% 8% 1% ---------------------------- --------------------------------- --------------------- 60% 15% 2% ---------------------------- --------------------------------- --------------------- 80% 20% 3% ---------------------------- --------------------------------- --------------------- 92% 23% 4% ---------------------------- --------------------------------- --------------------- 100% 25% 5% ---------------------------- --------------------------------- --------------------- MAXIMUM AIP AWARD FOR SAFETY =10% It is reached if the goals for OSHA Total Recordable Incident Rate and Lost Work Day Case Rate are met. 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 25%. For corporate staff employees, the AIP award percentage for safety improvement is based on achieving a 25% safety improvement on the weighted average of all ATI operating companies. OTHER INDIVIDUAL PERFORMANCE GOALS Other individual performance will determine a grant of up to 10% of the initial individual award pool. Each year, managers will establish other individual performance goals with their immediate supervisors. The achievement of other individual performance goals will represent up to 10% of the initial individual award pool. Page 4 PERFORMANCE GOALS SCHEMATIC The charts below show the overall relationships among the various performance goals and the computed award. For Operating Company Employees: --------------------- ----------------- ----------------------- 40% OP at Up to 10% Up to 5% OSHA Operating Safety Total Recordable Company Improvement Incident Rate --------------------- --------------- ---------- ---------- ----------------- ----------------------- 40% ROCE at Weighted Target Base Up to 10% Up to 5% Lost Operating % of Goals x Bonus x Salary x Individual Workday Company Achieved % Performance Case Rate --------------------- --------------- ---------- ---------- ----------------- ----------------------- 10% OP 80% Individual Corporate Based on Performance --------------------- Financial Based Upon 10% ROCE Results Goals Set with Corporate ----------------- Supervisor --------------------- ----------------------- For Corporate Staff Employees: ---------------- ------------------ ----------------------- Up to 10% Up to 5% OSHA 50% Safety Total Recordable OP Improvement Incident Rate Corporate ---------------- --------- ---------- ------------------ ----------------------- Weighted Target Base Up to 10% Up to 5% Lost ---------------- % of Goals x Bonus x Salary x Individual Workday Achieved % Performance Case Rate 50% ---------------- --------- ---------- ------------------ ----------------------- ROCE 80% Individual Corporate Based on Performance Financial Based Upon ---------------- Results Goals Set with ------------------ Supervisor ----------------------- Page 5 HOW THE AIP INITIAL AWARD POOL IS CALCULATED WHEN 100% OF THE FINANCIAL PERFORMANCE GOALS ARE ACHIEVED For the Year 2000, if 100% of the financial performance goals are achieved, then 150% of the target bonus percentage will generally be used to calculate the initial individual award pool. In this example, assume that the operating company manager's target bonus percentage is 20%. First, the impact on the target bonus percentage is calculated at 150%: Goal % of Goal Financial Earned % of Goals Award Pool Achieved % Weighting Target * ----- ---------- ---------- --------- -------- OP - Operating Company 40% 100% 150% 60% ROCE - Operating Company 40% 100% 150% 60% OP - Corporate 10% 100% 150% 15% ROCE - Corporate 10% 100% 150% 15% --- --- Goals Total 100% 150% * Earned % of Target = Goal % of Award Pool X Financial Weighting Then, the target bonus percentage of 20% is multiplied by 150% to produce an initial individual award pool equal to 30% of base salary: Earned Percentage of Target 150% X Target Bonus Percent 20% --- Equals Percentage of Salary for Initial 30% Individual Award Pool The sections below discuss the impact of achieving more or less than 100% of the financial performance goals on the initial individual award pool, and they also discuss the impact of other potential adjustments. HOW THE AIP INITIAL AWARD POOL 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 calculating the initial individual award pool 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 performance goal is achieved, only 25% of that goal's share will be allocated to the initial individual award pools. o Where less than 75% of a financial performance goal is achieved, no amount of that goal will be allocated to the initial individual award pools. Page 6 o If less than 75% of OP is achieved at the operating company, no individual award pools will be established for participants at that operating company regardless of other financial performance. o If less than 75% of OP is achieved at the corporate level, no individual award pool will be established for participants at any operating company or for corporate staff employees regardless of other financial performance. Formulas for Weighting Financial Performance The following formulas will be used to weight financial performance under the Plan: Formula A: If 75% to 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 5, plus 25%. Formula A examples: 1. Assumption: Percentage of Goal Achieved = 90% Weighted Percent for that Goal = [(90% - 75%) x 5] + 25% = [15% x 5] + 25% = 75% + 25% = 100% 2. Assumption: Percentage of Goal Achieved = 85% Weighted Percent for that Goal = [(85% - 75%) x 5] + 25% = [10% x 5] + 25% = 50% + 25% = 75% 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 2.5, plus 150%. In all cases, the maximum Percent Earned of 200% results when 120% of that goal is achieved. Formula B examples: 1. Assumption: Percentage of Goal Achieved = 130% Weighted Percent for that Goal = [(130% - 100%) x 2.5] + 150% = [30% x 2.5] + 150% = 75% + 150% = 225% However, the maximum target bonus is capped at 200%. 2. Assumption: Percentage of Goal Achieved = 105% Weighted Percent for that Goal = [(105% - 100%) x 2.5] + 150% = [5% x 2.5] + 150% = 12.5% + 150% = 162.5% Page 7 PUTTING IT TOGETHER Here are two examples of how the 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: o 90% of planned Operating Profit, or OP, goals at the operating company; o 130% of planned Return on Capital Employed, or ROCE, goals at the operating company; o 105% of planned Operating Profit, or OP, goals at the corporate level, and o 85% of planned Return on Capital Employed, or ROCE, goals at the corporate level. The first step in this example is to calculate the impact of the actual financial performance on the target bonus percentage and, in turn, upon the initial individual award pool. Formula A on page 7 would be used for weighting OP at the operating company and ROCE at the corporate level, because 100% or less of those goals were achieved. Formula B on page 7 would be used for weighting the ROCE goal at the operating company and OP at the corporate level, because over 100% of those goals were achieved. Following the formulas, the target bonus percentage is adjusted by 143.75%: Goal % of Goal Financial Earned % of Goals Award Pool Achieved % Weighting Target * ----- ---------- ---------- --------- ------ OP - Operating Company 40% 90% 100% (A) 40% ROCE - Operating Company 40% 130% 200% (B) 80% OP - Corporate 10% 105% 162.5% (B) 16.25% ROCE - Corporate 10% 85% 75% (A) 7.5% --- ------ Goals Total 100% 143.75% *Earned % of Target = Goal % of Award Pool X Financial Weighting The target bonus percentage of 20% is multiplied by 143.75% to produce an initial individual award pool equal to 28.75% of base salary: Earned Percentage of Target 143.75% X Target Bonus Percent 20% ------ Equals Percentage of Salary for Initial 28.75% Individual Award Pool With this first example, the initial incentive award pool would be calculated as 28.75% of the manager's base salary of $80,000, or $23,000. Page 8 The second step in this example is to determine the amount of the initial individual award pool that the manager will receive. As explained above, since 80% of the actual award is based on financial performance, 80% of the initial individual award pool will be paid to the participant. For the remaining 20% of the pool, the Company will review actual safety improvements and other individual performance against the preestablished objectives to determine the amount of the award the participant has earned. o Since 10% of the actual award is based on safety improvements, the participant can earn up to 10% of the initial individual award pool based on the extent to which safety objectives are achieved. o Since 10% of the actual award is based on other individual performance, the participant can earn up to 10% of the initial individual award pool based on the extent to which other individual performance objectives are achieved. For purposes of the safety improvement metrics, assume in this example that the operating company has achieved a 23% improvement in the OSHA Total Recordable Incident Rate ("TRIR") and a 25% improvement in the Lost Workday Case Rate ("LWCR"). Accordingly, from the table on page 4, the percentage of the safety awards based on the safety improvements would be 4% and 5%, respectively. Finally to complete this first example, assume that the manager has earned a 9% award based upon other individual performance. The total award paid in this example would therefor be $22,540: Award Award Award Allocated Allocation Criteria Percentages Pool Award ------------------- ----------- ---- ----- Financial Results 80% $23,000 $18,400 Safety Improvement - TRIR 4% $23,000 $920 Safety Improvement - LWCR 5% $23,000 $1,150 Other Individual Performance 9% $23,000 $2,070 ------ Total Paid $22,540 Example Two: Assume that the operating company manager's annual salary is again $80,000 and the manager's target bonus percentage is 20% of base salary but that the actual performance is: o 75% of planned Operating Profit, or OP, goals at the operating company, o 100% of planned Return on Capital Employed, or ROCE, goals at the operating company, o 75% of planned Operating Profit, or OP, goals at the corporate level, and o 85% of planned Return on Capital Employed, or ROCE, goals at the corporate level. Page 9 The first step in this second example is to calculate the impact of the actual financial performance on the target bonus percentage and, in turn, upon the initial individual award pool. Formula A on page 7 would be used for weighting all of the financial performance, because 100% or less of the goals were achieved. Goal % of Goal Financial Earned % of Goals Award Pool Achieved % Weighting Target * ----- ---------- ---------- --------- ------ OP - Operating Company 40% 75% 25% (A) 10% ROCE - Operating Company 40% 100% 150% (A) 60% OP - Corporate 10% 75% 25% (A) 2.5% ROCE - Corporate 10% 85% 75% (A) 7.5% --- ---- Goals Total 100% 80% * Earned % of Target = Goal % of Award Pool X Financial Weighting The target bonus percentage of 20% is multiplied by 80% to produce an initial individual award pool equal to 16% of base salary: Earned Percentage of Target 80% X Target Bonus Percent 20% --- Equals Percentage of Salary for Initial 16% Individual Award Pool With this second example, the initial incentive award pool would be calculated as 16% of the manager's base salary of $80,000, or $12,800. The second step in this example is to determine the amount of the initial individual award pool the manager will receive. As explained above, since 80% of the actual award is based on financial performance, 80% of the initial individual award pool will be paid to the participant. For the remaining 20% of the pool, the Company will review actual safety improvements and other individual performance against the preestablished objectives to determine the amount of the award the participant has earned. o Since 10% of the actual award is based on safety improvements, the participant can earn up to 10% of the initial individual award pool based on the extent to which safety objectives are achieved. o Since 10% of the actual award is based on other individual performance, the participant can earn up to 10% of the initial individual award pool based on the extent to which other individual performance objectives are achieved. Page 10 For purposes of the safety improvement metrics, assume in this example that the operating company has achieved a 25% improvement in the OSHA Total Recordable Incident Rate ("TRIR") and a 25% improvement in the Lost Workday Case Rate ("LWCR"). Accordingly, from the table on page 4, the percentage of the award based on safety improvements would be 5% and 5%, respectively. Finally to complete this second example, assume that the manager has earned a 10% award based upon other individual performance. The total award paid in this example would therefor be $12,800: Award Award Award Allocated Allocation Criteria Percentages Pool Award ------------------- ----------- ---- ----- Financial Results 80% $12,800 10,240 Safety Improvement - TRIR 5% $12,800 $640 Safety Improvement - LWCR 5% $12,800 $640 Other Individual Performance 10% $12,800 $1,280 ------ Total Paid $12,800 ADDITIONAL GUIDELINES FOR THE ANNUAL INCENTIVE PLAN In any year, a minimum Operating Profit (OP) of 75% of plan at the corporate level 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, 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. Page 11 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. 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 12 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. Financial Highlights During 2000, the Company continued to build upon its operational and financial strengths. - Sales from continuing operations improved to $2.46 billion during 2000 from $2.30 billion during 1999 due to increased revenues across all business segments. - Income from continuing operations increased 19 percent, or $21.5 million, to $132.5 million during 2000. - Return on stockholders' equity and return on average capital employed remained strong at 13.2 percent and 10.3 percent, respectively, before gains on disposal of assets, restructuring charges, discontinued operations and other special items. - The Company continued to achieve strong cash flow. Cash flow from operating activities increased 32 percent to $135.5 million in 2000. - The Company's emphasis on cost reductions continued. It achieved total cost savings from operations of approximately $92 million in 2000. - Corporate expenses declined 21 percent in 2000 to $30.6 million due to continued cost controls, including 20 percent fewer headquarter employees. - The Company repurchased 11.1 million shares of its common stock at a cost of $221.0 million, reducing its outstanding shares by 11 percent. - In 2000, pension income improved and exceeded other post-retirement benefits expense by $99.9 million due to higher pension assets as a result of strong investment performance during 1999 and reduced post-retirement benefit liabilities. - The Company utilized $40.1 million of excess pension assets in 2000 to pay for retiree medical expenses. The Company's defined benefit pension plan is fully funded with assets significantly in excess of the projected benefit obligation. - In safety, the Company's OSHA Total Recordable Incident Rate improved by 30 percent and the Lost Workday Case Rate improved by 33 percent compared to 1999. This performance exceeded the Company's 25 percent safety improvement target established for 2000. Looking ahead to the first quarter 2001, while the Company has been encouraged by Federal Reserve Board actions during December 2000 and January 2001, at the time this report is filed, the Company is concerned about continuing volatile energy costs and current market conditions in the stainless steel business. The diversification of the Company's products, the strength in certain global markets, notably aerospace, power generation, and oil and gas, and price increases and energy surcharges for certain of the Company's products combined with the Company's continued aggressive cost reductions, should provide a greater impact on the Company's financial performance during the balance of 2001. The Company remains in a strong financial position with excellent cash flow. Strong cash flow enables Allegheny Technologies to continue to pay our attractive dividend and make strategic investments that enhance our growth and cost reduction initiatives, while maintaining a strong balance sheet. In addition, the Company remains in a very strong operating position with diverse products serving growing global markets, technology leadership, and highly skilled and experienced people focused on serving our broad customer base. Results of Operations The Company's sales were $2.46 billion in 2000, $2.30 billion in 1999 and $2.40 billion in 1998. International sales represented approximately 18 percent of sales in 2000, 20 percent of sales in 1999 and 19 percent of sales in 1998. During 1999, 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. The results of companies spun-off and sold are reflected as discontinued operations for all periods presented. Allegheny Technologies operates in three business segments: Flat-Rolled Products, High Performance Metals and Industrial Products. Intersegment sales are generally recorded at full cost or market. Common services are allocated on the basis of estimated utilization. Information with respect to the Company's business segments is presented separately below and in Note 10 of the Notes to Consolidated Financial Statements. Certain amounts for 1999 and 1998 have been reclassified to conform with the 2000 presentation. ATI --- 17 Flat-Rolled Products (In millions) 2000 % Change 1999 % Change 1998 --------------------------------------------------------------------------------------------------- Sales to external customers $1,444.1 11.4% $1,296.7 8.7% $1,193.1 --------------------------------------------------------------------------------------------------- Operating profit 119.6 40.4% 85.2 (32.5)% 126.3 --------------------------------------------------------------------------------------------------- Operating profit as a percentage of sales 8.3% 6.6% 10.6% --------------------------------------------------------------------------------------------------- International sales as a percentage of sales 7.3% 7.7% 5.9% --------------------------------------------------------------------------------------------------- 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, Rome Metals, and Allegheny Ludlum's 60% interest in the Chinese joint venture company known as Shanghai STAL Precision Stainless Steel Company Limited ("STAL"). ALLEGHENY TECHNOLOGIES FLAT-ROLLED PRODUCTS SHIPPED (Thousands of Tons) At the top left-hand corner of the page appears a bar graph with the title of "Allegheny Technologies Flat-Rolled Products Shipped (Thousands of Tons)". The bar graph provides the following data: [BAR CHART] YEAR 96 536 97 542 98 538 99 593 00 606 Sales and operating profit for the Flat-Rolled Products segment increased 11.4 percent and 40.4 percent, respectively, in 2000 compared to 1999. Sales improved in 2000 compared to 1999 as 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 605,650 tons in 2000 compared to 592,550 tons in 1999. CONTINUED GROWTH IS PROJECTED STAINLESS STEEL CONSUMPTION BY REGION: SHEET, STRIP, AND PLATE (Thousands of Metric Tons) At the right-hand margin of the page appears a bar graph with the title "Continued Growth is Projected... Stainless Steel Consumption By Region: Sheet, Strip and Plate (Thousands of Metric Tons)". Text also appears describing projected growth drivers for 2001-2005 as the Asian recovery and strong demand in North America and Western Europe. The bar graph provides the following data: [BAR CHART] NORTH WESTERN YEAR AMERICA EUROPE JAPAN CHINA OTHER ASIA ---- ------- ------ ----- ----- ---------- 1995 1,839 3,185 1,710 608 1,895 2000 2,228 4,263 1,332 1,711 2,518 2005 2,572 5,539 1,472 2,710 3,239 Source: CRU International Ltd 2000 COMPARED TO 1999 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 primarily to the impact of revised raw materials surcharge base levels and an improved product mix. Higher margin product shipments (including strip, Precision Rolled Strip(R), super stainless steel, nickel alloy and titanium products) increased 13 percent in 2000. U.S. PER CAPITA CONSUMPTION OF STAINLESS STEEL (Five-Year Averages, Lbs.) At the left-hand side of the bottom of the page appears a bar graph with the title: "U.S. Per Capita Consumption of Stainless Steel (Five-Year Averages, Lbs.)". The bar graph provides the following data: [BAR CHART] YEARS 81-85 10.4 86-90 12.1 91-95 14.5 96-00 18.2 Source: Specialty Steel Industry of North America. 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 with estimated annual cost savings of $9.0 million, expected to take full effect in the third quarter of 2001. NICKEL PRICE PER POUND (Based on LME Cash Average for Quarter) At the right-hand side of the bottom of the page a bar graph appears with the title "Nickel Price Per Pound (Based on LME Cash Average For Quarter)". The bar graph provides the following data: [BAR CHART] YEAR 1999 Qtr 1 $2.10 Qtr 2 $2.38 Qtr 3 $2.90 Qtr 4 $3.53 2000 Qtr 1 $4.27 Qtr 2 $4.28 Qtr 3 $3.75 Qtr 4 $3.38 The segment's operating profit was reduced by $7.0 million due to increased natural gas costs in the fourth quarter of 2000. As a result of the higher energy costs, natural gas surcharges may be applied to certain products beginning in February 2001. The Company's ability to maintain energy surcharges depends on market conditions, including pricing by foreign competitors. The STAL joint venture in Shanghai, China completed its first year of commercial production of precision rolled stainless steel strip in 2000. 1999 COMPARED TO 1998 Sales and operating profit for the segment increased 8.7 percent and decreased 32.5 percent, respectively, in 1999 compared to 1998. ATI --- Sales improved in 1999 compared to 1998 as a result of higher demand for stainless steel products combined with the utilization of new strategic assets acquired in 1998 and 1999. Shipments of finished flat-rolled products were 592,550 tons in 1999 compared to 537,800 tons in 1998. The average selling prices of finished flat-rolled products declined to $2,081 per ton in 1999 from $2,194 per ton in 1998 due primarily to product mix. Operating profit declined due primarily to the impact of the rapid and substantial increase in nickel costs, a key raw material in the manufacture of certain grades of stainless steel. High Performance Metals (In millions) 2000 % Change 1999 % Change 1998 --------------------------------------------------------------------------------------------- Sales to external customers $735.4 1.8% $722.7 (16.0)% $860.3 --------------------------------------------------------------------------------------------- Operating profit 66.5 (23.6)% 87.0 (44.2)% 156.0 --------------------------------------------------------------------------------------------- Operating profit as a percentage of sales 9.0% 12.0% 18.1% --------------------------------------------------------------------------------------------- International sales as a percentage of sales 34.9% 36.7% 31.9% --------------------------------------------------------------------------------------------- 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 and coil forms, seamless tube forms and zirconium chemicals. The companies in this segment include Allvac, Allvac Ltd (U.K.), Wah Chang, and Titanium Industries. 2000 COMPARED TO 1999 Sales for the High Performance Metals segment increased 1.8 percent in 2000 compared to 1999. The increased sales reflect increased demand for nickel-based superalloys and specialty steel alloys from growing markets for electrical power generation turbines and biomedical products, and improving 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. ALLEGHENY TECHNOLOGIES NICKEL-BASED AND SPECIALTY STEEL ALLOYS SHIPPED (Thousands of Lbs.) At the right-hand side of the middle of the page appears a bar graph with the title "Allegheny Technologies Nickle-Based and Specialty Steel Alloys Shipped (Thousands of Lbs.)". The bar graph provides the following data: [BAR CHART] YEAR 96 28,731 97 28,546 98 44,182 99 43,905 00 46,612 Operating profit decreased 23.6 percent in 2000 compared to 1999. Increased energy costs of $9.0 million in the fourth quarter, primarily 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 is to be idled in the first half of 2001. As a result of higher energy costs, the Company announced that Allvac is implementing natural gas surcharges that may be applied to certain products beginning in February 1, 2001. The natural gas surcharge excludes orders covered by contracts that contain alternative mechanisms to handle these additional charges. The Company's ability to maintain energy surcharges depends on market conditions, including pricing by foreign competitors. The Company is constructing an electrical power cogeneration system designed to significantly reduce energy costs at its Wah Chang operation in Oregon. The Company anticipates cost savings to begin from the project in the third quarter of 2001. Other cost reduction efforts continue throughout the segment. ALLEGHENY TECHNOLOGIES TITANIUM MILL PRODUCTS SHIPPED (Thousands of Lbs.) At the left-hand side of the middle of the page appears a bar graph with the title "Allegheny Technologies Titanium Mill Products Shipped (Thousands of Lbs.)". The graph provides the following information: [BAR CHART] YEAR 96 27,113 97 29,872 98 24,739 99 22,792 00 24,872 The Company's Board of Directors has approved approximately $50.0 million in capital expenditures for 2001 designed to expand capabilities of the Allvac, Allvac Ltd and Wah Chang operations. These expenditures will focus on high growth, high value products, such as nickel-based and cobalt-based alloys and superalloys, premium titanium alloys, and high purity niobium alloys. The Company expects these projects to be completed during the first half of 2002. ALLEGHENY TECHNOLOGIES EXOTIC ALLOYS SHIPPED (Thousands of Lbs.) At the right-hand corner of the bottom of the page appears a bar graph with the title "Allegheny Technologies Exotic Alloys Shipped (Thousands of Lbs.)". The bar graph provides the following data: [BAR CHART] YEAR 96 3,292 97 4,860 98 4,690 99 3,756 00 3,781 1999 COMPARED TO 1998 Sales and operating profit for the segment decreased 16 percent and 44.2 percent, respectively, in 1999 compared to 1998. The decline in sales and operating profit resulted primarily from lower prices and lower volume for nickel-based alloys and superalloys and titanium products due to weak demand in aerospace and oil and gas markets. This weakness was partially offset by strong demand for nickel-based superalloys for large land-based power generation turbines and, in the 1999 fourth quarter, stronger demand for niobium for the medical industry and superconducting applications. The 1999 results also reflect start-up costs associated with the segment's electron beam melt facility and vacuum induction melt furnace. ATI Industrial Products (In millions) 2000 % Change 1999 % Change 1998 ---------------------------------------------------------------------------------------------- Sales to external customers $280.9 1.5% $276.7 (20.7)% $349.0 ---------------------------------------------------------------------------------------------- Operating profit 21.7 77.9% 12.2 (65.9)% 35.8 ---------------------------------------------------------------------------------------------- Operating profit as a percentage of sales 7.7% 4.4% 10.3% ---------------------------------------------------------------------------------------------- International sales as a percentage of sales 28.4% 30.3% 29.2% ---------------------------------------------------------------------------------------------- The Industrial Products segment's principal business produces tungsten powder, tungsten carbide materials and carbide cutting tools. The segment also produces large grey and ductile iron castings and carbon, alloy steel and non-ferrous forgings. The companies in this segment are Metalworking Products, including its second quarter 2000 acquisition of a tungsten carbide products operation, Casting Service and Portland Forge. 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 and the impact of cost reduction initiatives. In addition, operating results for the second half of the year reflect the acquisition of the tungsten carbide products operation. During the 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. 1999 COMPARED TO 1998 Sales and operating profit for the segment decreased 20.7 percent and 65.9 percent in 1999 compared to 1998. Reduced demand for tungsten, tungsten carbide and carbide cutting tools due to weak conditions in global metalworking, mining and machine tool markets resulted in a decrease in sales and operating profit in 1999. The 1999 results also include costs related to a workforce reduction, primarily in Europe, as part of an initiative to centralize and streamline distribution. The segment's forgings and castings businesses experienced a decrease in sales and operating profit in 1999 due primarily to weak conditions in the transportation, farm equipment and wind power generation markets. Strategic Transformation Overview In 1999, the Company completed a major transformation, announced in January 1999, 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 from Allegheny Teledyne Incorporated to Allegheny Technologies 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. In 1998, the Company acquired the stock of Oregon Metallurgical Corporation ("Oremet"), a producer and distributor of titanium ingot, mill products and castings, in exchange for Company stock. ATI --- Transformation, Merger and Restructuring Costs, Gains on Sales of Assets and Other TRANSFORMATION, MERGER AND RESTRUCTURING COSTS Transformation, merger and restructuring costs were $29.5 million, $5.6 million and $67.8 million in 2000, 1999 and 1998, respectively. The 2000 charge of $29.5 million includes costs related to the idling of high-cost titanium sponge production assets, a salaried workforce reduction at Allegheny Ludlum and costs related to changes in the Company's executive management. The 1999 net 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. Charges of $19.1 million in 1998 reflect severance, financial advisory, legal, accounting, and other costs associated with the acquisition of Oremet in 1998. The Company also recorded charges of $19.3 million in 1998 resulting primarily from special termination benefits granted to approximately 300 Allegheny Ludlum employees who were part of a planned salaried workforce reduction completed in 1998. Costs associated with exiting certain product lines and asset impairments resulting from new capital expenditure programs coming on-line resulted in a charge of $29.4 million in 1998. GAINS ON SALES OF ASSETS AND OTHER Gains on sales of assets and other includes pretax gains on the sale of real estate and certain investments, which are included in other income on the income statement, as well as charges for certain closed company expenses. These items resulted in a net charge of $4.4 million and $0.2 million in 2000 and 1999, respectively. In 1998, a net gain of $11.6 million was included. Gains on sales of assets and other does not include extraordinary gains on sales of operations of $129.6 million in 1999. These extraordinary gains are presented separately on the income statement. Corporate Expenses Corporate expenses were $30.6 million in 2000 as compared to $38.9 million in 1999 and $36.5 million in 1998. The decline in 2000 corporate expenses from both 1999 and 1998 was due to continued cost controls, including 32 percent fewer headquarter employees from 1998 employment levels. Income Taxes The Company's effective income tax rate from continuing operations was 36.5 percent, 36.3 percent and 38.0 percent in 2000, 1999 and 1998, respectively. The 2000 and 1999 rates reflect the favorable effects of tax planning initiatives. The Company has determined, based on its history of operating earnings, expectations of future operating earnings and potential tax planning strategies, that it is more likely than not that the deferred income tax assets at December 31, 2000 will be realized. Financial Condition and Liquidity In 2000, cash generated from operations of $135.5 million, proceeds from the net increase in debt of $193.7 million and proceeds from the sale of businesses of $22.2 million were used to repurchase Company common stock for $221.0 million, invest $88.3 million in capital equipment and business expansion and pay dividends of $66.0 million. Cash transactions plus cash on hand at the beginning of the year resulted in a cash position of $26.2 million at December 31, 2000. STOCK REPURCHASE PROGRAM (Millions of $) At the right-hand corner of the page appears a bar graph with the title "Stock Repurchase Program (Millions of $)". The bar graph provides the following information: [BAR CHART] YEAR 97 107.7 98 49.4 99 257.6 00 221.0 Working capital increased to $609.3 million at December 31, 2000 compared to $493.5 million at the end of 1999. The current ratio increased to 2.5 in 2000 from 1.9 in 1999. The increase in working capital was primarily due to a decrease in short-term debt. NET DEBT TO TOTAL