-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HIWJpDIa6SINA8x1e8nsbE30Pp9Cm367EloArVgW0G4O1Y/vQjgHfGFFvaVVpDBk 0PhKxKGJr/0+YTDo/Untew== 0000068366-99-000023.txt : 19990428 0000068366-99-000023.hdr.sgml : 19990428 ACCESSION NUMBER: 0000068366-99-000023 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990427 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CORDANT TECHNOLOGIES INC CENTRAL INDEX KEY: 0000068366 STANDARD INDUSTRIAL CLASSIFICATION: GUIDED MISSILES & SPACE VEHICLES & PARTS [3760] IRS NUMBER: 362678716 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06179 FILM NUMBER: 99601333 BUSINESS ADDRESS: STREET 1: 15 W. SOUTH TEMPLE STREET 2: SUITE 1600 CITY: SALT LAKE CITY STATE: UT ZIP: 84101 BUSINESS PHONE: 8019334000 MAIL ADDRESS: STREET 1: 15 W SOUTH TEMPLE STREET 2: SUITE 1600 CITY: SALT LAKE CITY STATE: UT ZIP: 84101 FORMER COMPANY: FORMER CONFORMED NAME: THIOKOL CORP /DE/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: MORTON THIOKOL INC DATE OF NAME CHANGE: 19890705 FORMER COMPANY: FORMER CONFORMED NAME: MORTON NORWICH PRODUCTS INC/DE DATE OF NAME CHANGE: 19821004 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 1999 OR [ ] 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 1-6179 CORDANT TECHNOLOGIES INC. Incorporated in the State of Delaware IRS Employer Identification No. 36-2678716 15 West S. Temple, Suite 1600, Salt Lake City, Utah 84101-1532 Telephone Number: (801) 933-4000 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $1.00 par value, outstanding at March 31, 1999: 36,578,820 1 CORDANT TECHNOLOGIES INC. QUARTERLY REPORT ON FORM 10-Q March 31, 1999 INDEX Page
PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Consolidated Statements of Income - Three months ended March 31, 1999 and 1998 3 Consolidated Balance Sheets - March 31, 1999 and December 31, 1998 4-5 Consolidated Statements of Cash Flows - Three months ended March 31, 1999 and 1998 6 Consolidated Statements of Stockholders' Equity- Three months ended March 31, 1999 and 1998 7 Notes to Consolidated Financial Statements 8-13 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14-26 ITEM 3. Quantitative and Qualitative Disclosure about Market Risk 27 PART II. OTHER INFORMATION ITEM 5. Other Information 28 ITEM 6. Exhibits and Reports on Form 8-K 28-29 SIGNATURES 29
2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) CORDANT TECHNOLOGIES INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN MILLIONS, EXCEPT PER SHARE DATA)
Three Months Ended March 31 ------------------------------------ 1999 1998 - ----------------------------------------------------------------------------------------------------------------- Net sales $634.1 $562.7 Operating expenses: Cost of sales 490.7 436.7 Selling, general and administrative 51.4 46.0 Research and development 8.2 8.4 - ----------------------------------------------------------------------------------------------------------------- Total operating expenses 550.3 491.1 - ----------------------------------------------------------------------------------------------------------------- Income from operations 83.8 71.6 Interest income 2.7 2.7 Interest expense (9.5) (5.8) Other, net (.2) (.9) - ----------------------------------------------------------------------------------------------------------------- Income before income taxes and minority interest 76.8 67.6 Income taxes (22.5) (26.0) - ----------------------------------------------------------------------------------------------------------------- Income before minority interest 54.3 41.6 Minority interest (7.1) (8.8) - ----------------------------------------------------------------------------------------------------------------- Net income $ 47.2 $ 32.8 ================================================================================================================= Net Income per share: Basic $ 1.29 $ .90 Diluted $ 1.26 $ .87 ================================================================================================================= Dividends per share $ .10 $ .10 ================================================================================================================= See notes to consolidated financial statements.
3 CORDANT TECHNOLOGIES INC. CONSOLIDATED BALANCE SHEETS (IN MILLIONS)
March 31 1999 December 31 (Unaudited) 1998 - ------------------------------------------------------------------------------------------------------------------------ Assets Current assets Cash and cash equivalents $ 18.8 $ 45.3 Receivables 280.9 240.0 Inventories 261.4 252.3 Deferred income taxes and prepaid expenses 56.3 60.8 Restricted Trust (a) 716.4 - ------------------------------------------------------------------------------------------------------------------------ Total current assets 617.4 1,314.8 Property, plant and equipment, at cost less allowances for depreciation 679.2 672.3 Other assets Costs in excess of net assets of businesses acquired, net 856.0 561.7 Patents and other intangible assets, net 124.8 128.3 Other noncurrent assets 132.0 132.8 - ------------------------------------------------------------------------------------------------------------------------ Total other assets 1,112.8 822.8 - ------------------------------------------------------------------------------------------------------------------------ Total assets $2,409.4 $2,809.9 ======================================================================================================================== (a) The Restricted Trust held a note receivable from Pechiney S.A. and related letters of credit that secured Pechiney S.A.'s agreement to repay the Pechiney Notes. Pechiney S.A. (Howmet's previous owner) paid the notes on January 4, 1999, and the Restricted Trust was terminated. No Howmet or Cordant funds were used in the payment of the Notes. See notes to consolidated financial statements.
4 CORDANT TECHNOLOGIES INC. CONSOLIDATED BALANCE SHEETS (IN MILLIONS)
March 31 1999 December 31 (Unaudited) 1998 - ------------------------------------------------------------------------------------------------------------------------ Liabilities and stockholders' equity Current liabilities Short-term debt $ 130.3 $ 80.1 Accounts payable 122.0 139.8 Accrued compensation 85.9 81.6 Other accrued expenses 205.4 202.1 Pechiney Notes (a) 716.4 - ------------------------------------------------------------------------------------------------------------------------ Total current liabilities 543.6 1,220.0 Noncurrent liabilities Accrued retiree benefits 170.8 169.0 Deferred income taxes 52.6 52.3 Accrued interest and other noncurrent liabilities 230.5 234.2 Long-term debt 644.3 324.5 - ------------------------------------------------------------------------------------------------------------------------ Total noncurrent liabilities 1,098.2 780.0 Minority interest 61.1 142.0 Stockholders' equity Common stock (par value $1.00 per share) Authorized - 200 shares Issued - 41.1 shares at March 31, 1999 and 41.1 41.1 December 31, 1998 (includes treasury shares) Additional paid-in capital 46.9 47.4 Retained earnings 702.3 658.8 Accumulated other comprehensive income (loss) (10.1) (3.9) - ------------------------------------------------------------------------------------------------------------------------ 780.2 743.4 Less common stock in treasury, at cost 4.5 shares, March 31, 1999 and 4.6 shares, December 31, 1998 (73.7) (75.5) - ------------------------------------------------------------------------------------------------------------------------ Total stockholders' equity 706.5 667.9 - ------------------------------------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $2,409.4 $2,809.9 ======================================================================================================================== a) The Restricted Trust held a note receivable from Pechiney S.A. and related letters of credit that secured Pechiney S.A.'s agreement to repay the Pechiney Notes. Pechiney S.A. (Howmet's previous owner) paid the notes on January 4, 1999, and the Restricted Trust was terminated. No Howmet or Cordant funds were used in the payment of the Notes. See notes to consolidated financial statements.
5 CORDANT TECHNOLOGIES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN MILLIONS)
Three Months Ended March 31 ------------------------------------- 1999 1998 - ---------------------------------------------------------------------------------------------------------------------- Operating Activities Net income $ 47.2 $ 32.8 Adjustments to reconcile net income to net cash provided by operating activities: Minority interest 7.1 8.8 Depreciation 19.5 17.8 Amortization 8.6 7.7 Changes in operating assets and liabilities: Receivables (45.8) (36.2) Inventories (11.2) 4.8 Accounts payable and accrued expenses (27.2) (24.4) Income taxes 21.0 18.4 Other 4.8 (3.4) - ---------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 24.0 26.3 Investing Activities Acquisitions (385.0) Purchases of property, plant and equipment (31.1) (23.3) - ---------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (416.1) (23.3) Financing Activities Net change in short-term debt 50.7 (1.1) Long-term borrowings 450.0 156.4 Repayment of long-term debt (130.1) (116.1) Dividends paid (3.7) (3.6) Purchase of common stock for treasury (10.8) Stock option transactions 1.3 2.7 - ---------------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 368.2 27.5 Foreign currency rate changes (2.6) .1 - ---------------------------------------------------------------------------------------------------------------------- (Decrease) increase in cash and cash equivalents (26.5) 30.6 Cash and cash equivalents at beginning of year 45.3 45.6 - ---------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 18.8 $ 76.2 ====================================================================================================================== See notes to consolidated financial statements.
6 CORDANT TECHNOLOGIES INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) (IN MILLIONS)
Accumulated Additional Other Total Common Paid-In Retained Treasury Comprehensive Stockholders' Stock Capital Earnings Stock Income Equity - ---------------------------------------------------------------------------------------------------------------------- Three months ended March 31, 1998 Balance, December 31, 1997 $20.5 $46.0 $ 552.0 $(64.5) $ (3.5) $ 550.5 Comprehensive income Net income 32.8 32.8 Other comprehensive income Cumulative translation adjustment .1 .1 ----------- Total comprehensive income 32.9 =========== Dividends paid (3.6) (3.6) Stock dividend (2.2 treasury shares and 20.6 common shares) 20.6 (20.6) Treasury stock purchases (.3 shares) (10.8) (10.8) Stock options exercised and related income tax benefits (.1 shares) .9 1.8 2.7 - -------------------------------------------------------------------------------------------------------------------- Balance, March 31, 1998 $41.1 $46.9 $ 560.6 $(73.5) $ (3.4) $ 571.7 ==================================================================================================================== - -------------------------------------------------------------------------------------------------------------------- Three months ended March 31, 1999 Balance, December 31, 1998 $41.1 $47.4 $ 658.8 $(75.5) $ (3.9) $ 667.9 Comprehensive income Net income 47.2 47.2 Other comprehensive income Minimum pension liability .9 .9 Cumulative translation adjustment (7.1) (7.1) ----------- Total comprehensive income 41.0 =========== Dividends paid (3.7) (3.7) Stock options exercised and related income tax benefits (.1 shares) (.5) 1.8 1.3 - -------------------------------------------------------------------------------------------------------------------- Balance, March 31, 1999 $41.1 $46.9 $ 702.3 $(73.7) $(10.1) $ 706.5 ==================================================================================================================== See notes to consolidated financial statements.
7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Basis of Presentation The accompanying interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The balance sheet at December 31, 1998 reflects the Company's audited consolidated balance sheet at that date. In management's opinion, all adjustments considered necessary for a fair presentation have been included. Operating results for the three-months ended March 31, 1999 are not necessarily indicative of the results to be expected for the year ending December 31, 1999. The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1999 Notice of Annual Meeting and Proxy Statement, Financial Information, incorporated by reference in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. Certain reclassifications were made to the 1998 financial statements to conform to the 1999 presentation. Receivables The components of receivables are as follows:
March 31 1999 December 31 (in millions) (Unaudited) 1998 --------------------------------------------------------------------------------------- Trade Receivables: Trade accounts receivable $164.5 $159.0 Retained receivables 54.6 32.0 Allowance for doubtful accounts (8.7) (7.8) --------------------------------------------------------------------------------------- Total Trade Receivables 210.4 183.2 Receivables under U.S. Government contracts and subcontracts 70.5 56.8 --------------------------------------------------------------------------------------- $280.9 $240.0 =======================================================================================
Receivables under government contracts and subcontracts include unbilled costs and accrued profits. Such amounts are billed based on contract terms and delivery schedules. Cost and incentive-type contracts and subcontracts are subject to government audit and review. It is anticipated that adjustments, if any, will not have a material effect on the Company's results of operations or financial condition. 8 Cost management award fees totaling $128.1 million, at March 31, 1999, have been recognized on the current Buy 3 Space Shuttle Reusable Solid Rocket Motor (RSRM) contract. Realization of such fees is reasonably assured based on actual and anticipated contract cost performance. However, all cost management award fees remain at risk until contract completion and final NASA review. The Buy 3 RSRM contract is expected to be completed during 2001. Unanticipated program problems which erode cost management performance could cause some or all of the recognized cost management award fees to be reversed and would be offset against receivable amounts from the government or may be directly reimbursed. Circumstances which could erode cost management performance, and materially impact Company profitability and cash flow, include failure of a Company-supplied component, performance problems with the RSRM leading to a major redesign and/or requalification effort, manufacturing problems, including supplier problems which result in RSRM production interruptions or delays, and major safety incidents. Trade accounts receivable primarily relate to sales to well established corporations and historically, bad debt expense has been minor. Howmet has an agreement to sell, on a revolving basis, an undivided interest in a defined pool of accounts receivable. Howmet has received $55 million from the sale of such receivables and has deducted this amount from accounts receivable at March 31, 1999. The $54.6 million retained receivables, shown in the March 31, 1999 balance sheet, represents the receivables set aside to replace sold receivables in the event they are not fully collected. Inventories Inventories are stated at the lower of cost or market. Inventories for the fastening systems segment are determined by the first-in, first-out (FIFO) method. Inventories for the investment castings segment are determined by both the FIFO and last-in, first-out (LIFO) method. Propulsion Systems inventories include estimated recoverable costs related to long-term fixed price contracts including direct production costs and allocable indirect costs, less related progress payments received. In accordance with industry practice, such costs include amounts that are not expected to be realized within one year. The government may acquire title to, or a security interest in, certain inventories as a result of progress payments made on contracts and programs. 9 The components of inventories are as follows:
March 31 1999 December 31 (in millions) (Unaudited) 1998 --------------------------------------------------------------------------------------------------- Raw materials and work-in-process $189.7 $161.8 Finished Goods 66.1 87.6 Inventoried costs related to U.S. Government and other long-term contracts 35.1 28.8 Progress payments received on long-term contracts (26.7) (22.6) LIFO valuation adjustment (2.8) (3.3) ---------------------------------------------------------------------------------------------------- $261.4 $252.3 ====================================================================================================
At March 31, 1999 and December 31, 1998, inventories include $114.9 and $111.8 million, respectively, that are valued using LIFO. The LIFO valuation adjustment approximates the difference between the LIFO carrying value and current replacement cost. Purchase of Additional Howmet International Inc. Common Stock On February 8, 1999, the Company acquired for $385 million the remaining 22.65 million shares of Howmet International Inc. common stock owned by Carlyle Blade Acquisition Partners, L.P. (Carlyle) and entered into a new Standstill Agreement and extended an existing covenant not to compete. With this purchase of the Carlyle shares, the Company's ownership of Howmet International Inc. common stock increases to approximately 84.6 million shares representing 84.6 percent of Howmet's outstanding voting common stock. The remaining 15.4 percent of Howmet common stock is publicly owned. The acquisition was financed with borrowings under an unsecured bank line of credit established in conjunction with the stock purchase. The interest rate on this facility is based on LIBOR plus a spread, and was 5.75 percent at the time of the transaction. As a result of this acquisition, a one-time tax adjustment was recorded in the first quarter of 1999 reversing $7.1 million or $.19 per share of a previously accrued accumulated dividend tax. Additional detailed financial information on Howmet is available in it's current form 10-Q and in Howmet's Notice of 1999 Annual Meeting and Proxy Statement, Exhibit B, incorporated by reference in Howmet's Annual Report on Form 10-K for the year ended December 31, 1998. 10 FINANCING ARRANGEMENTS Long term debt is summarized as follows:
March 31 1999 December 31 (in millions) (Unaudited) 1998 - --------------------------------------------------------------------------------------------------- Cordant Technologies 6.625% senior notes $150.0 $150.0 Cordant Technologies senior revolving credit facilities 400.0 110.0 Howmet senior revolving credit facility 90.0 60.0 Other 12.4 13.1 - --------------------------------------------------------------------------------------------------- 652.4 333.1 Less current portion 8.1 8.6 - --------------------------------------------------------------------------------------------------- $644.3 $324.5 ===================================================================================================
The Company, excluding Howmet, has credit commitments from a group of banks aggregating $500 million under revolving credit facilities, of which $100 million was available at March 31, 1999. The funds available under the credit facilities may be used for any corporate purpose and are available through May 1999 ($50 million), November 1999 ($300 million) and May 2001 ($150 million). The Company has the option to extend up to $400 million for an additional nine months. The interest rate on the revolving credit facilities is based on LIBOR plus a spread, and was 5.6 and 5.9 percent at March 31, 1999 and December 31, 1998, respectively. The credit agreements and senior notes contain covenants restricting, among other things, the Company's ability to incur funded debt, limitations on liens, sale and leaseback transactions, and the sale of assets. Howmet has credit commitments from a group of banks aggregating $300 million under a revolving credit agreement, of which $202.4 million was available at March 31, 1999. Howmet had $7.6 million in Letters of Credit outstanding at March 31, 1999 under the revolving credit facility. The funds available under the credit facility may be used for any corporate purpose and are available through December 2002. The interest rate on the facility is based on LIBOR plus a spread, and was 5.2 and 5.8 percent at March 31, 1999 and December 31, 1998, respectively. Terms of the revolving credit facility require Howmet to meet certain interest coverage and leverage ratios and maintain certain minimum net worth amounts. In addition, there are restrictions that limit indebtedness, the sale of assets, and payments for acquisitions or investments. Cordant does not have access to Howmet cash balances except through Howmet's declaring a cash dividend to its shareholders, which availability may be restricted under the terms of its revolving credit facility. Howmet does not currently intend to pay dividends. On February 17, 1999, Howmet paid $66.4 million to redeem all of its 9 percent preferred stock. The payment was made to Cordant Technologies, the sole preferred stockholder. Howmet borrowed under its existing revolving credit facility to make this payment and Cordant Technologies used the proceeds to reduce debt under its revolving credit facilities. 11 The current portion of long-term debt is classified in "short-term debt" on the balance sheets. Earnings per share The following table sets forth the computation of basic and diluted earnings per share:
Three-Months Ended March 31 ---------------------------------- 1999 (In millions, except per share data) (Unaudited) 1998 - ----------------------------------------------------------------------------------------------------- Numerator for basic and diluted earnings per share: Net Income $47.2 $32.8 ====================================================================================================== Denominator: Denominator for basic earnings per share -- weighted-average shares 36.5 36.4 Effect of dilutive securities Employee stock options .9 1.2 - ----------------------------------------------------------------------------------------------------- Denominator for diluted earnings per share -- weighted-average shares and assumed exercises 37.4 37.6 - ----------------------------------------------------------------------------------------------------- Net income per share: Basic $ 1.29 $ .90 Diluted $ 1.26 $ .87 =====================================================================================================
Segment Information The Company has three reportable segments: Investment Castings, Fastening Systems, and Propulsion Systems. The Company's reportable segments manufacture and distribute distinct products with different production processes. The Company evaluates performance and allocates resources based on operating income, which is pre-tax income before interest income and expense, and excludes any equity income and other non-operating expenses. In accordance with industry practice, a proportionate share of Corporate general and administrative expense is allocated and reimbursed through Propulsion Systems contracts. Intersegment sales and transfers are not significant. 12 Summary unaudited segment information for the three-months ended March 31 follows:
(in millions) 1999 1998 - --------------------------------------------------------------------------------------------------- Sales: Investment Castings $ 372.7 $ 328.4 Fastening Systems 121.2 90.1 Propulsion Systems 140.2 144.2 - --------------------------------------------------------------------------------------------------- Total sales $ 634.1 $562.7 =================================================================================================== Operating income: Investment Castings $ 55.0 $ 43.8 Fastening Systems 18.3 13.2 Propulsion Systems 17.8 18.4 Unallocated corporate expense (7.3) (3.8) - --------------------------------------------------------------------------------------------------- Total operating income 83.8 71.6 Interest income 2.7 2.7 Interest expense (9.5) (5.8) Other, net (.2) (.9) - --------------------------------------------------------------------------------------------------- Consolidated income before income taxes and minority interest $ 76.8 $ 67.6 ===================================================================================================
13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) Results of Operations All of the following discussion reflects diluted earnings per share. Income for the First Quarter Net income for the first quarter ended March 31, 1999, was $47.2 million, or $1.26 per share, an increase of 44 percent, compared to the prior year's quarter net income of $32.8 million or $.87 per share. The current quarter's net income included a Stock Appreciation Rights (SAR) benefit at Howmet of $1.3 million or $.03 per share, resulting from Howmet's stock price decline below the $15 per share ceiling at the end of the quarter. Net income for the current quarter also included a $7.1 million or $.19 per share tax benefit from reversing a dividend tax previously recorded on the Company's share of Howmet's income. Excluding the unusual items listed above, net income of $38.8 million or $1.04 increased 18 percent over the prior year's quarter. The SAR benefit was caused by a decline in Howmet's common stock price. Compensation expense increases or decreases (benefit) as the market value of the stock fluctuates below a $15 per share ceiling, and also is determined based on employee SAR vesting to date. At March 31, 1999, Howmet's common stock price was $14.31, which resulted in the $1.3 million, or $.03 per share benefit to the Company. SAR benefit or expense is recognized each quarter based on the market value at the end of the quarter compared to the market price at the previous quarter end subject to the $15 per share ceiling limit. 14 Summary unaudited financial information for the three-months ended March 31 follows:
Better Percent (in millions, except per share data) 1999 1998 (Worse) Change - ------------------------------------------------------------------------------------------------------------------ Sales: Investment Castings $372.7 $328.4 $ 44.3 13 Fastening Systems 121.2 90.1 31.1 35 Propulsion Systems 140.2 144.2 (4.0) (3) - ------------------------------------------------------------------------------------------------------------------ Total sales $634.1 $562.7 $ 71.4 13 ================================================================================================================== Operating income: Investment Castings $ 55.0 $ 43.8 $ 11.2 26 Fastening Systems 18.3 13.2 5.1 39 Propulsion Systems 17.8 18.4 (.6) (3) Unallocated corporate expense (7.3) (3.8) (3.5) (92) - ------------------------------------------------------------------------------------------------------------------ Total operating income 83.8 71.6 12.2 17 Interest income 2.7 2.7 Interest expense (9.5) (5.8) (3.7) (64) Other, net (.2) (.9) .7 78 Income taxes (22.5) (26.0) 3.5 13 - ------------------------------------------------------------------------------------------------------------------ Income before minority interest 54.3 41.6 12.7 31 Minority interest (7.1) (8.8) 1.7 19 - ------------------------------------------------------------------------------------------------------------------ Net income $ 47.2 $ 32.8 $ 14.4 44 ================================================================================================================== Net income per share: Basic $ 1.29 $ .90 $ .39 43 Diluted $ 1.26 $ .87 $ .39 45
Selected Unaudited Financial Data
Three Months Ended March 31 --------------------------------------------------------------------------------------------- 1999 1998 ------------------------------------------- ---------------------------------------------- (in millions) Cordant Howmet Consolidated Cordant Howmet Consolidated - --------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities $14.2 $ 9.8 $ 24.0 $ 31.7 $ (5.4) $26.3 Capital expenditures (7.8) (23.3) (31.1) (6.7) (16.6) (23.3) Dividends (3.7) (3.7) (3.6) (3.6) - --------------------------------------------------------------------------------------------------------------------------- $ 2.7 $(13.5) $(10.8) $ 21.4 $(22.0) $ (.6) ===========================================================================================================================
15 BUSINESS SEGMENT SALES AND INCOME FOR THE QUARTER Investment Castings The following unaudited information summarizes Howmet's results, as separately reported to its shareholders, for the three-months ended March 31:
(in millions) 1999 1998 -------------------------------------------------------------------- Net sales $372.7 $328.4 Cost of goods sold 284.6 252.7 Gross profit 88.1 75.7 Operating income 57.2 44.8 Net income $ 34.8 $ 24.5 --------------------------------------------------------------------
Following is a reconciliation of Howmet's contribution to the Company's income for the three-months ended March 31:
(in millions) 1999 1998 - ---------------------------------------------------------------------------------------------- Howmet net income $34.8 $24.5 Less preferred paid-in-kind dividend (1) (.8) (1.4) - ---------------------------------------------------------------------------------------------- Income available to common shareholders 34.0 23.1 - ---------------------------------------------------------------------------------------------- Company's interest in Howmet income (2) 26.8 14.3 Add preferred paid-in-kind dividend .8 1.4 - ---------------------------------------------------------------------------------------------- Howmet's contribution to the Company's income 27.6 15.7 Less the Company's 7 percent tax on Howmet income (1.1) Add the Company's cumulative 7 percent tax reversal on Howmet income 7.1 - ---------------------------------------------------------------------------------------------- Howmet's total after-tax contribution to the Company's income $34.7 $14.6 ============================================================================================== (1) Howmet's 9 percent paid-in-kind preferred stock owned by the Company was redeemed on February 17, 1999 for $66.4 million. (2) On February 8, 1999, the Company increased its ownership in Howmet from 62 percent to 84.6 percent.
Howmet's sales increased $44.3 million or 13 percent over the prior year's quarter. The sales increase came from the industrial gas turbine (IGT) market. 16 Howmet's net income was $34.8 million for the quarter, a 42 percent increase from $24.5 million in the prior year's quarter. The principle reason for the higher income was the increased revenue in the IGT market and improved operating margins. The current quarter also includes the aforementioned $1.3 million after-tax SAR benefit which will reverse in future periods if Howmet's stock price increases above $15 per share. Interest expense was $1.9 million lower than the prior year's quarter due to lower debt levels and lower interest rates in the current quarter. Starting in late 1998, Howmet discovered certain product testing and specification non-compliance issues at two of Cercast's facilities. Howmet notified customers, is actively cooperating with them and government agencies in the investigation of these matters, and is implementing remedial action. In addition, Cercast has been, and expects to continue for some time to be, late in delivery of products to certain customers. Data collection and analysis must be completed before a definitive estimate of Howmet's cost to resolve these matters can be completed. Howmet knows of no in-service problems associated with these issues. Based on preliminary evaluation, however, Howmet recorded an estimated loss of $4 million in its consolidated statement of income for the year ended December 31, 1998. Based on currently known facts, the Company believes that additional cost to Howmet beyond $4 million, if any, would not have a material adverse effect on the Company's financial position, cash flow, or annual operating results. However, additional cost when and if accrued may have a material adverse impact on the quarter in which it may be accrued. On March 3, 1999, Howmet received from the U.S. Air Force a Notice of Proposed Debarment from future government contracts and subcontracts directed at Howmet Corporation and its Cercast Canadian subsidiary. The Air Force terminated the proposed debarment with respect to Howmet Corporation by letter to it on March 10, 1999, thus permitting Howmet Corporation to resume accepting U.S. government contracts and subcontracts. The continuing proposed debarment with respect to Howmet's Cercast Canadian subsidiary is based on the product testing and specification non-compliance issues discussed above, and improper vendor payments previously disclosed. Debarment does not affect existing Cercast contracts, other than extensions. Howmet is negotiating an Administrative Agreement with the Air Force under which the Notice of Proposed Debarment would be terminated. In the unlikely event a debarment were imposed for an extended period of time, such action would negatively impact sales and profits in future periods. However, the Company believes that such impact would be immaterial to Howmet's results of operations. 17 Fastening Systems Fastening Systems sales and operating income for the quarter were $31.1 and $5.1 million higher, respectively, than in the prior year's quarter, reflecting both the addition of Jacobson Manufacturing's results and continued strength in the industrial markets. Operating income increased 39 percent over last year's quarter. Operating margins for the quarter were 15.1 percent, compared to 14.7 percent last year. Margins continue to benefit from continuing cost control initiatives and increased revenues. Aerospace sales were lower than the prior year's quarter primarily as a result of lower domestic demand. Excluding Jacobson's results, Huck's total sales and operating income both decreased 7 percent over the prior year due to declining aerospace sales. Fastening systems book-to-bill ratios, defined as period orders divided by period shipments, for the three months ended March 31, were as follows:
1999 1998 --------------------------------------------------------------------- Aerospace .59 1.04 Industrial 1.06 1.05 --------------------------------------------------------------------- Fastening Systems Total .90 1.05 =====================================================================
Book to bill ratios are used as an indicator of future sales, but as with all indicators, such ratios have inherent limitations and actual results may be different. Since the book to bill ratio is not a generally accepted accounting principle disclosure, other companies may calculate this ratio differently and utilize the ratio for different purposes. Propulsion systems Propulsion systems sales and operating income for the quarter decreased 3 percent compared to the prior year due primarily to lower activity in the commercial launch motor and flare programs. Space Shuttle Reusable Solid Rocket Motor (RSRM) and Missile Defense sales increased slightly. RSRM operating margins experienced a small increase over the prior year. Propulsion systems operating margins were 12.7 percent in the current quarter compared to 12.8 percent in 1998. During the quarter, the RSRM contract accounted for approximately 15 percent of the Company's consolidated net sales and 16 percent of consolidated operating income. Current year RSRM sales are expected to approximate the prior year's sales. The current NASA Buy 3 cost-plus-award-fee contract provides for Company production of the Space Shuttle solid rocket motors through 2001. Buy 3 profit margins are expected to improve through 2001 as the contract approaches completion. The Company has negotiated a Buy 4 agreement that extends the program into 2005. 18 RSRM Buy 4 In December 1998, an agreement was reached with NASA outlining all significant contractual issues for the RSRM Buy 4 contract. The final contract signing is expected in the second quarter of 1999. The Buy 4 contract type is a cost-plus-incentive/performance/award-fee. The Buy 4 contract includes 35 flight sets, or 70 motors, and three flight support motors. Contract completion is expected during 2005. Currently, the Company anticipates follow-on contracts for RSRM motors through the life of the Space Shuttle program. The Space Shuttle program is expected to continue in service through approximately 2010. Long lead material procurement and production has begun under the Buy 4 agreement. The contract is subject to annual Congressional funding. While the Buy 4 agreement is similar in structure and profit potential to the Buy 3 contract, until performance incentives are met, Buy 4 profit margins will be lower than margins currently being recognized on Buy 3. On February 9, 1999 the Company was notified that NASA intends to consolidate the Company's RSRM contract into the Space Flight Operations Contract with United Space Alliance (U.S.A.). This change will mean the Company will perform RSRM activities under a subcontract to U.S.A. instead of as a prime contractor to NASA. The target date established by NASA for the transition is October 1, 2000. The Company does not anticipate any significant change to its RSRM contract terms or profit potential as a result of the change. OTHER MATTERS Selling, general and administrative For the quarter ended March 31, 1998, selling, general and administrative expenses increased $5.4 million or 12 percent compared to the prior year. Goodwill amortization increased $2.3 million for the quarter, due to the purchase of an additional 22.6 percent of Howmet common stock in February, and the purchase of Jacobson in June 1998. Selling, general and administrative expenses for the three-month period increased $2.4 million due to the addition of Jacobson's selling, general and administrative expenses and to increased corporate costs and marketing efforts. Corporate unallocated costs increased due to increased costs noted above and fewer costs being allocated to Propulsion systems contracts. Increased sales in the commercial segments reduced the amount of corporate costs allocable to that business. Interest Expense Interest expense increased $3.7 million over the prior year's quarter due to Cordant's increased borrowings related to the 22.6 percent purchase of Howmet and the Jacobson acquisition. 19 Income Taxes The Company had an effective income tax rate of 29 percent, compared with 38 percent for the same three-month period in the prior year. The effective income tax rate for the quarter was 38.5 percent before reversal of the $7.1 million or $.19 per share dividend tax previously recorded on the Company's share of Howmet income. Beginning in February 1999, Howmet's taxable income will be included in the Company's consolidated Federal income tax return, and a dividend tax will no longer be accrued on the Company's share of Howmet results. YEAR 2000 REMEDIATION The Company has a decentralized Information Systems (I.S.) function, wherein each of its three business segments operates autonomously with its own I.S. organization. Accordingly, each segment is conducting its own Year 2000 project that is unique to its particular operating environment. Each of the business segment projects is similarly organized into four distinct categories of effort. These four categories include the following: Business Information Systems Remediation; Embedded Processor Systems Remediation; Customer and Supplier Readiness; and Risk Assessment, Worst Case Scenarios and Contingency Planning. Investment Castings Business Information Systems Remediation: Investment Castings I.S. organization has identified virtually all date logic problems on its central mainframe and distributed server production systems and remediation is currently in process. This portion of the Year 2000 remediation project, which began in 1996, is scheduled, with minor exceptions, to be completed by June of 1999. All central systems will be placed under restrictive change control procedures to ensure that corrected systems are not inadvertently impacted by further changes. System-wide testing activity will be conducted periodically throughout 1999. The central I.S. Year 2000 project team also provides oversight for the sixteen small, local I.S. groups located at Howmet plant facilities. These plant teams have each completed a Year 2000 readiness assessment that identified all local business systems or equipment requiring corrective action or replacement. This remediation work is currently underway at all plants and is scheduled for completion by June of 1999. Embedded Processor Systems Remediation: The central I.S. organization has provided each plant facility with guidance and support for embedded processor identification, evaluation, testing and remediation, where required. All plant teams are scheduled to complete this project category by June of 1999. 20 Customer and Supplier Readiness: Howmet I.S. and procurement personnel have communicated with several hundred of their key customers, suppliers and third parties regarding their respective Year 2000 readiness status and plans. These communications have included written inquiries or questionnaires and, in some instances, on-site meetings. Any electronic interfaces with individual business associates will be addressed on a case-by-case basis. Management has also responded appropriately to Year 2000 readiness inquiries from Howmet customers, suppliers and third parties. Howmet is not aware of any significant readiness issues at this time. Risk Assessment, Worst Case Scenarios and Contingency Planning: Howmet Castings management believes the most likely worst case scenario would be a one or two week shutdown of individual pieces of critical equipment or computer systems at one or two manufacturing facilities, disrupting but not totally eliminating production at those plants. Workaround procedures would be established by the end of that period. Total remediation of the underlying problem could stretch over a six-month period. Management further believes that this is more likely to occur at its foreign facilities than its U.S. plants. Even in this eventuality, management believes that any loss of revenue during the period involved would be substantially recovered in later periods due to deferral rather than cancellation of orders or deliveries. Howmet is currently developing Year 2000 Contingency Plans in three areas: 1) business systems processing at Howmet's primary data center; 2) procurement activities for critical raw materials and services, including transportation; and 3) local manufacturing processes and systems at each facility. These plans are expected to be completed during the third quarter of 1999. Howmet expects to employ various methods of risk mitigation such as: devising alternate manual processes for critical applications; installing a generator at Howmet's central computing facility; establishing a corporate command post and providing full staffing of I.S. and plant maintenance personnel during the year-end weekend; conducting extensive future date testing; developing an inventory build-up strategy; imposing extra product quality testing during the new year; validating customer and supplier electronic interfaces; scheduling shutdowns of critical equipment on December 31, 1999; and active monitoring, measuring, and auditing of plant compliance. While every effort has been made to anticipate and mitigate risks, it is possible that the inability of the Company or certain of its suppliers, customers or third parties to implement solutions to their respective Year 2000 issues on a timely and cost effective basis could have a material adverse effect on the Company. 21 Cost Information: The estimated cost at completion for all phases of the Howmet Castings project is $16.6 million. An estimated $6.1 million (37 percent) of this amount is for I.S. labor and miscellaneous project costs; these costs are being expensed as routine I.S. systems maintenance as incurred over the three-year duration of the project. Another $7.6 million (46 percent) is for software package purchase and implementation costs for applications that were installed or expedited for Year 2000 purposes. An additional $2.9 million (17 percent) has been spent for infrastructure upgrades or replacement. Approximately $11.9 million (72 percent) had been expended as of March 31, 1999; the estimated $4.7 million (28 percent) in remaining costs will be expended during the remainder of 1999. No major information systems initiatives have been adversely affected due to staffing constraints or expenditures needed to remedy Year 2000 issues. Management has concluded that it will substantially benefit from these efforts because of the elimination of numerous old systems, implementation of several new state-of-the-art applications, new and thorough documentation of many older systems, and the creation of updated and improved business continuity plans. Propulsion Systems Business Information Systems Remediation: Thiokol Propulsion has completed its renovation on all major production applications. The objective of the project, which began in early 1996, was to identify all date-related program logic, to renovate, replace or eliminate all date processing problems, to validate the results via integrated system testing, and to implement into production the corrected application software. All systems that were replaced or renovated have been moved into production. The production environment will then be maintained under restrictive change control procedures to ensure that corrected systems are not inadvertently impacted by further changes. System-wide testing activity will be conducted periodically throughout 1999. In addition, all computer and internal telecommunications hardware systems have been evaluated, upgraded and tested, as required, and are presently being moved into production. This activity will be completed in June of 1999 with the replacement of a telephone PBX system at an offsite location. Embedded Processor Systems Remediation: Cross-functional teams at each Thiokol Propulsion facility have inventoried, evaluated, replaced or renovated, and tested all embedded processor systems with potential Year 2000 readiness risks. Systems evaluated include programmable process controllers, recording devices, data collection devices, security and alarm systems, pumps and pumping stations, power metering systems, elevators, HVAC timers, protective relays and card readers. To date 99 percent have been corrected or replaced with only minor issues remaining to be resolved. The scheduled completion for this category of effort is June of 1999. 22 Customer and Supplier Readiness: Thiokol Propulsion is actively communicating with its key customers, suppliers and third parties to help ensure that its supply chain dependencies and interfaces are or will be Year 2000 ready. This initiative, which will continue throughout 1999, involves written inquiries or questionnaires to these business associates regarding the status of their respective Year 2000 readiness efforts. For certain key customers, critical suppliers (i.e. railways, sole sources, critical materials and utilities) and third parties, on-premise meetings have been conducted to review detailed project plans and timetables. Thiokol has also responded appropriately upon receipt of such inquiries from its customers, suppliers and third parties. Management is not aware of any significant readiness issues at this time. Risk Assessment, Worst Case Scenarios and Contingency Planning: Risk assessment and contingency planning for the Company's business information systems and embedded processor systems are expected to be completed by June of 1999. Additional categories of risk assessment and contingency planning focus on the external influences that the Company does not directly control. The outcomes of ongoing external renovation activities will be rigorously monitored with risks assessed and contingency plans put in place as required. The critical supplier chain has been addressed and contingency plans put into place, mitigating the risk of disruption to manufacturing operations for lack of materials or finished components. The NASA-critical solid rocket motor program risk has been assessed as minimal. With five flights planned for 1999 and ongoing production, five flight sets of hardware will be in inventory at Kennedy Space Flight Center by December 1999. This inventory will support the shuttle launch schedule through August 2000. Additionally, in December 1999, 3.6 flight sets of hardware will be in inventory at Thiokol Propulsion facilities. Risk assessment and contingency planning will be a dynamic activity and as such will be monitored and acted upon on a continual basis as risks are identified. Cost Information: The estimated cost at completion for all phases of the Thiokol Propulsion project is $9.0 million. These costs are recorded as incurred over the three-year duration of the project. Approximately $8.3 million (92 percent) had been expended through March 31, 1999, and the $ .7 million (8 percent) in estimated remaining costs will be expended during the remainder of 1999. Of the total estimated project cost, 58 percent is labor and miscellaneous project-related expense, 12 percent is for I.S. infrastructure upgrades and replacement, and 30 percent is for software package implementations that were performed or expedited to address Year 2000 issues. No major information systems initiatives have been adversely affected due to staffing constraints or expenditures needed to remedy Year 2000 issues. On average, Year 2000 project spending has consumed only 7.5 percent of the annual I.S. budget and 10-12 percent of I.S. staffing. Thiokol Propulsion management has concluded that it will substantially benefit from these efforts because of the elimination of several old systems, the implementation of new state-of-the-art applications, new and thorough documentation of many older systems, and the creation of updated and improved business continuity plans. 23 Fastening Systems Business Information Systems Remediation: Huck Fasteners is employing a dual approach to Year 2000 readiness for its business application systems. For many years most Huck locations have used a standard commercial, vendor-supported application software product. As of March 31, 1999, approximately one-half of those locations had been upgraded to a version of the software product that addresses virtually all Year 2000 readiness issues. All remaining Huck locations, including its international sites and headquarters offices, are implementing a recently purchased Enterprise Resource Planning (ERP) software product that is both Year 2000 and Euro ready. The ERP implementation is presently underway at eight sites, with 50 percent of the sites and 65 percent of the user base already operational. The new system will be operational at the remainder of the sites by June 1999. Additional local and system-wide testing activity is being conducted during the remainder of 1999. Embedded Processor Systems Remediation: Huck Fasteners has a dedicated Year 2000 program office that supports each site in establishing a cross-functional team to identify, evaluate, test and, where needed, to modify or replace embedded processor systems. To date, formal inventories have been completed, criticality assessments have been made and evaluation of the individual devices is underway. Project work on this category is scheduled for completion during September 1999. Customer and Supplier Readiness: Huck Fasteners has submitted written inquiries or questionnaires to all major customers, critical suppliers and certain third parties to determine their respective Year 2000 readiness status and plans. Any electronic interfaces will be coordinated with these business associates on a case-by-case basis. Management has also responded appropriately to Year 2000 inquiries made by any of its customers, suppliers and third parties. Huck is not aware of any significant Year 2000 readiness issues at this time. Risk Assessment, Worst Case Scenarios and Contingency Planning: Using the approach of certain major Huck customers, management has contracted with independent assessors to audit its progress against plan and with respect to industry benchmarks. Additionally, several customers have provided assessment teams to evaluate individual sites and Huck's overall Year 2000 readiness and plans. These independent assessments have addressed both the Industrial and Aerospace businesses and the feedback is being used to refine Huck's approach to risk assessment and contingency planning. Work on worst case scenarios and formal contingency planning is underway, and is expected to be completed during June of 1999. 24 Cost Information: The estimated total cost at completion for all phases of the Huck Year 2000 project is $11.9 million. Approximately $6.4 million (54 percent) of that total amount will be capitalized. The estimated $5.5 million (46 percent) in remaining cost is classified as routine I.S. maintenance and is being expensed as incurred over the three-year life of the project. Approximately $7.9 million (67 percent) had been expended as of March 31, 1999, and the estimated $4.0 million (33 percent) in remaining costs will be expended in 1999. No major I.S. initiatives have been adversely affected due to staffing constraints or expenditures needed to remedy Year 2000 issues. Huck management has concluded that it will substantially benefit from these efforts because of the elimination of several old systems, the implementation of new state-of-the-art applications, and the creation of updated and improved business continuity plans. Euro Conversion The Company is assessing the impact of the Euro conversion on its business operations and is currently implementing a strategy which will allow it to operate in a Euro environment during the transition period, January 1, 1999 - - December 31, 2001, and after full Euro conversion post July 1, 2002. The Company does not anticipate any material impact from the Euro conversion on its computer software plans. Computer software changes necessary to comply with the Year 2000 issue are generally compliant with the Euro conversion issue. Enterprise Resource Planning (ERP) software being implemented at Huck as a part of Year 2000 readiness will be Euro compliant. No additional costs related to Euro compliance are expected for the ERP software. Some expense is anticipated for minor system modifications, but is not expected to be significant. The Company's payroll system has not yet been examined and will require modifications to be Euro compliant. The cost of payroll systems modifications is also undetermined. The Company expects no Euro conversion impact to its Thiokol Propulsion business segment. The Company expects no significant impact to its contracting policies or competitive position related to its three business segments as a result of the Euro conversion. The Company is reviewing the impact of the Euro conversion on its foreign exchange exposure and has determined a modest increase in this exposure due to the Company's United Kingdom operation's acceptance of Euro denominated contracts. The Company does not expect any significant changes to its current hedging policy and does not expect any significant increases in its foreign exchange exposure. Liquidity and Capital Resources For the current three-month period, consolidated net cash flows from operating activities were $24 million compared to $26.3 million last year. Compared to the prior year, the higher net income in the current period was offset by higher cash used for an increase in receivables and inventories. The increase in receivables resulted from collection timing issues related to both Howmet's retained receivables and Propulsion systems balances. The increase in inventories was primarily from the Investment Castings segment. 25 Acquisition activity included $385 million for the purchase of 22.6 percent of Howmet common stock. Consolidated capital spending on property, plant and equipment used $31.1 million in the current period compared to $23.3 million in the prior year. Howmet used $23.3 million in capital expenditures, mainly for capacity expansions to serve the core business as well as additional expenditures to support new products and process enhancement activities. Financing activities for the three-month period provided $368.2 million of cash compared to $27.5 million of cash provided in the prior year period. In February, the Company borrowed $385 million to finance the Howmet common stock purchase. During the period the Company repaid a total of $130.1 million of debt, $35 million being repaid by Howmet. On February 17, 1999, Howmet paid $66.4 million to redeem all of its 9 percent paid-in-kind preferred stock. The payment was made to Cordant Technologies, the sole preferred stockholder. Howmet borrowed under its existing senior revolving credit facility to make this payment and Cordant Technologies used the proceeds to reduce debt under its senior revolving credit facilities. During the three-month period, Cordant did not repurchase any shares of common stock. In the prior year period, Cordant repurchased 265,200 shares of it's common stock for $10.8 million. There are approximately 2.4 million shares available for repurchase under the current share repurchase authorization. Cordant will repurchase shares when, and in amounts as it deems appropriate. Cordant does not have access to Howmet cash balances except through Howmet declaring a cash dividend to its shareholders. Howmet is limited as to the amount of dividends it can declare under the terms of Howmet's financing agreements. Howmet does not currently intend to pay dividends. At December 31, 1998, the Company's balance sheet includes $716.4 million of Pechiney Notes and a related $716.4 million Restricted Trust asset. On January 4, 1999, Pechiney, S.A. (Howmet's previous owner) repaid the Pechiney Notes in full. As a result, the Restricted Trust, which secured Pechiney, S.A's agreement to repay the notes was terminated. No Howmet or Cordant funds were used in the payment of the Notes. At March 31, 1999, Cordant had $500 million in revolving credit facilities with $100 million available for additional use. In addition, on March 31, 1999, Howmet had a $300 million revolving credit facility with $202.4 million available for additional borrowing and/or letters of credit. Howmet has an agreement to sell, on a revolving basis, an undivided interest in a defined pool of accounts receivable. Howmet has received $55 million from the sale of such receivables and has deducted this amount from accounts receivable at March 31, 1999. The $54.6 million retained receivables, shown in the March 31, 1998 balance sheet, represents the receivables set aside to replace sold receivables in the event they are not fully collected. 26 The Company's liquidity ratio's were as follows:
March 31 December 31 1999 1998 - --------------------------------------------------------------------------- Working Capital (in millions) $73.8 $94.8 Current Ratio 1.1 1.2 Debt-to-equity 109.6% 60.6% Debt-to-total capital 54.0% 40.8% - ---------------------------------------------------------------------------
All of the above ratios for 1998 exclude the Pechiney Notes and the Restricted Trust terminated with Pechiney S.A.'s payment of its Notes on January 4, 1999. The debt-to-total-capital ratio includes the $55 million receivable facility at Howmet. The current ratio and working capital decreases resulted primarily from increased short-term debt levels. Estimated future cash flows from operations, current financial resources, and available credit facilities are expected to be adequate to fund the Company's anticipated working capital requirements, capital expenditures, dividend payments, and stock repurchase program on both a short and long-term basis. The Company expects that its senior revolving credit facilities will be renegotiated, restructured, or replaced and continually reviews its options for other types of long-term financing. Since December 31, 1998, the cumulative translation adjustment, which is included in stockholder's equity, changed by $7.1 million. The change is primarily due to the strengthening of the U.S. dollar relative to the French franc. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK There have been no significant changes in market risks since the end of the Company's December 31, 1998 year. For more information, please read the consolidated financial statements and notes thereto included in the Company's 1999 Notice of Annual Meeting and Proxy Statement, Financial Information, incorporated by reference in the Annual Report on Form 10-K for the year ended December 31, 1998. 27 PART II - OTHER INFORMATION ITEM 5. OTHER INFORMATION The Company's "Cautionary Statements" with respect to certain statements herein that the Company believes are "forward looking statements" under the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 are set forth in Item 7, Management's Discussion and Analysis of Financial Conditions and Operations of the Company's Annual Report on Form 10-K for the year ended December 31, 1999. Many of the factors described herein are discussed in both current and prior Company Securities and Exchange Commission filings and to the extent not otherwise discussed in forward-looking statements should be considered in assessing the various risks associated with the Company's conduct of its business and financial condition. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Exhibits
Exhibit 10 Material Contracts 10.1 Credit Agreement dated as of February 5, 1999 among Cordant Technologies Inc. and The First National Bank of Chicago, individually and as Administrative Agent, First Chicago Capital Markets, Inc., as arranger, and the lending institutions party hereto. 10.2 Form of Amended and Restated Employment Agreement dated March 1, 1999 by and among Cordant Technologies Inc. and Messrs. James R. Wilson, Richard L. Corbin, James E. McNulty, Bruce M. Zorich and certain other executive officers of the Company. 10.3 Form Cordant Technologies Inc. 1999 Stock Option Grant Agreement Incentive Stock Option. 10.4 Form Cordant Technologies Inc. 1999 Stock Option Grant Agreement Non Qualified Stock Option. Exhibit 27.1 Financial Data Schedule.
28 Reports on Form 8-K On February 9, 1999, a Form 8-K was filed. Included therein was Item 2, "Acquisition or Disposition of Assets" disclosing the Company's acquisition of 22,650,000 shares of Howmet International Inc. common stock owned by the Carlyle Group. Included in Item 5, "Other Events" was the text of the announcement of earnings for the quarter and year-ended December 31, 1998, summary financial information was included. SIGNATURES Pursuant to the requirements 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. CORDANT TECHNOLOGIES INC. (Registrant) Date: April 27, 1999. /s/ Richard L. Corbin____________ Richard L. Corbin, Senior Vice President and Chief Financial Officer (Principal Financial Officer) /s/ Michael R. Ayers_____________ Michael R. Ayers, Vice President and Controller (Principal Accounting Officer) 29 EX-10 2 CORDANT TECHNOLOGIES INC. 1999 G R A N T A G R E E M E N T INCENTIVE STOCK OPTION AGREEMENT, made this ____ day of ______ 199_ between Cordant Technologies Inc., a Delaware corporation ("Company") and the Employee ("Employee") whose name appears on the Notice of Grant of Stock of Stock Option ("Notice of Grant") attached hereto and incorporated by reference herein. WHEREAS, the Committee (as defined in Section 1.5), has determined that it would be to the advantage and best interest of the Company and its stockholders to grant the stock option provided for herein to the Employee in consideration of Employee's services to the Company or Affiliate and as an incentive for increased efforts during the Employee's service to the Company or Affiliate, and has advised the Company thereof and instructed the undersigned officers to issue said Option; WHEREAS, the stock option subject to this agreement is granted pursuant to the terms of the Cordant Technologies Inc. Amended and Restated 1996 Stock Awards Plan or the 1989 Stock Awards Plan, as the case may be. NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows: ARTICLE I DEFINITIONS Whenever the following terms are used in this Agreement, they shall have the meaning specified below unless the context clearly indicates to the contrary. Capitalized terms which are not defined below shall have the meaning specified in the Plan. SECTION 1.1 - AFFILIATE "Affiliate" shall mean any entity in which the Company has a direct or indirect equity interest which is so designated by the Committee. - ------------------------ Note: An Incentive Stock option must be exercised within three months of the date of termination of employment or retirement, the tax status of the option changes to that of a Nonqualified option. Special ISO rules apply to death and disability. Consult your tax advisor concerning tax consequences of this Stock Option Grant. SECTION 1.2 - BENEFICIARY "Beneficiary" shall mean the person or persons properly designated by the Employee, including his spouse or heirs at law, to exercise such Employee's rights under the Plan in the event of the Employee's death, or if the Employee has not designated such person or persons, or such person or persons shall all have pre-deceased the Employee, the executor or administrator of the Employee's estate. Designation, revocation and redesignation of Beneficiaries must be made in writing in accordance with rules established by the Committee and shall be effective upon delivery to the Committee. SECTION 1.3 - BOARD "Board" shall mean the Board of Directors of the Company. SECTION 1.4 - CODE "Code" shall mean the Internal Revenue Code of 1986, as amended. SECTION 1.5 - COMMITTEE "Committee" shall mean the Committee of the Board appointed as provided in the Plan. SECTION 1.6 - COMPANY "Company" shall mean Cordant Technologies Inc., a Delaware corporation. SECTION 1.7 - DATE OF GRANT "Date of Grant" shall mean the date set forth on the Notice of Grant on which the Board grants the option hereunder and from which the Anniversary Date set forth in the Vesting Schedule shall be determined. SECTION 1.8 - EXCHANGE ACT "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. SECTION 1.9 - OPTION "Option" shall mean the incentive stock option to purchase Common Stock of the Company granted under this Agreement. -2- SECTION 1.10 - PLAN "Plan" shall mean either the Cordant Technologies Inc. Amended and Restated 1996 Stock Awards Plan or the 1989 Stock Awards Plan as set forth on the face of the Notice of Grant. SECTION 1.11 - RULE 16B-3 "Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as such Rule may be amended in the future. SECTION 1.12 - SECURITIES ACT "Securities Act" shall mean the Securities Act of 1933, as amended. ARTICLE II GRANT OF OPTION SECTION 2.1 - GRANT OF OPTION. In consideration of Employee's services to the Company or Affiliate, as the case may be, Cordant Technologies Inc. grants to Employee the option to purchase shares of its Common Stock (par value $1 per share) at a purchase price set forth on the Notice of Stock attached hereto (the fair market value of such shares on the Date of Grant), subject to the conditions of this Agreement. SECTION 2.2 - ADJUSTMENTS IN OPTION. Subject to Section 5.3, in the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Common Stock, other securities or property) of a reorganization, recapitalization, spin-off, stock dividend, stock split, combination, reclassification, reverse stock split, merger, consolidation, split-up, spin-off, repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Common Stock or other securities of the Company, or other similar corporate transaction or event or other increase or reduction in the number of issued shares of Common Stock, affects the Common Stock such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available with respect to the Option the Committee may, in order to prevent the dilution or enlargement of rights under awards, make such adjustments in any and all of the number and type of shares covered by the option, or with respect to which payments are measured under, outstanding awards and the exercise price specified herein as may be determined to be appropriate and equitable, to the end that after such event the optionees' proportionate interest shall be maintained as before the occurrence of such event.. Such adjustment in the Option shall be made without change in the total price applicable to the unexercised portion of the Option (except for any change in the aggregate price resulting from rounding-off of share quantities or prices) and with any necessary corresponding adjustment in the Option price per share; PROVIDED, HOWEVER, -3- that each such adjustment shall be made in such manner as not to constitute a "modification" within the meaning of Section 424(h)(3) of the Code. Any such adjustment made by the Committee shall be final and binding upon the Employee, the Company, and all other interested persons. ARTICLE III PERIOD OF EXERCISABILITY SECTION 3.1 - COMMENCEMENT OF EXERCISABILITY (a) This Option shall become exercisable (vested) as follows: OPTION VESTING SCHEDULE FIRST BUSINESS DAY FOLLOWING PORTION OF THE OPTION BECOME THE ANNIVERSARY DATE FROM THE EXERCISABLE DATE OF GRANT (VESTED) ON SUCH ANNIVERSARY DATE ------------- --------------------------------- One year from date of grant 25 percent Two years from date of grant 50 percent Three years from date of grant 75 percent Four years from date of grant 100 percent No fractional share of a vested option is exercisable until such anniversary date from the date of grant as the remainder of such fractional share becomes exercisable. No part of the Option will be exercisable prior to the first business day following the expiration of one year from the Date of Grant set forth on the Notice of Grant of Stock attached hereto. (b) No portion of the Option (including any portion of the Option not yet vested under Section 3.1(a) which is unexercisable at termination of employment) shall thereafter become exercisable except with respect to retirement under Section 3.3(b); death Section 3.3(c); or disability Section 3.3(d). SECTION 3.2 - DURATION OF EXERCISABILITY. After any portion of the Option becomes exercisable pursuant to Section 3.1(a), the Option shall remain exercisable until it has been exercised or until it becomes unexercisable under Section 3.3. -4- SECTION 3.3 - EXPIRATION OF OPTION. (a) The Option (or any portion of the Option not yet vested under Section 3.1(a) as the case may be) may not be exercised to any extent by anyone after the first to occur of the following events ("Expiration Date"): (i) The expiration of ten (10) years from the date the Option was granted; or (ii) Except in the event of a Change in Control of the Company as defined in Section 3.4 below or as otherwise provided herein, the expiration of three (3) months from the date of the employee's termination of employment unless such termination of employment results from Employee's retirement pursuant to the terms of a pension plan of the Company; death or permanent and total disability; PROVIDED, HOWEVER, if during the first two years following a Change in Control of the Company Employee's, employment terminates other than pursuant to the terms of a pension plan of a Company and Employee's Option was exercisable on the date of termination of Employee's employment, it will remain exercisable for a period of six months and one day after termination of Employee's employment, or until the Expiration Date, whichever occurs first; or (iii)The effective date of the Committee's action under Section 5.3(ii), (iii) or (iv) (except in the case of an action providing for assumption of the Option). (b) If Employee's employment with the Company terminates prior to the Expiration Date because of Employee's retirement pursuant to the terms of a pension plan of the Company, the Employee's Option will remain exercisable until the Expiration Date. Any portion of the Option not yet vested at the Employee's date of retirement will automatically vest with the passage of time (as if the retired Employee had remained actively employed) pursuant to the Option vesting schedule set forth in Section 3.1(a). In the event of a retired employees' death prior to the Expiration Date of this option, this option shall become 100% vested and such retired Employee's beneficiary shall have two years from the date of death or the Expiration Date, whichever date is the earliest, to exercise this option. (c) If an Employee's employment with the Company terminates prior to the Expiration Date due to death, the option to the extent not yet vested shall become 100% vested on the date of death and shall remain exercisable by such Employee's beneficiary until the Expiration Date. (d) If the Employee's employment with the Company terminates prior to the Expiration Date due to the Employee's permanent and total disability -5- ("Disability"), such option shall remain exercisable until the Expiration Date so long as such Disability is continuing. To the extent such option is not vested on the date of Disability, the option shall automatically vest with the passage of time (as if the Disabled Employee has remained actively employed) pursuant to the vesting schedule in Section 3.1(a). The Committee shall have the sole discretion to determine if an Employee is disabled for the purposes of this option and such determination shall be binding and conclusive on the Employee. In the event such Employee ceases to be disabled, this option shall terminate within three months of the date of determination by the Committee that such disability no longer exists or the Expiration Date, whichever date is the earliest to occur. SECTION 3.4 - ACCELERATION OF EXERCISABILITY UPON CHANGE IN CONTROL OF THE COMPANY. Notwithstanding any provision herein to the contrary, to the extent the Employee's Option has not been exercised previously or any portion of such Option has not yet vested under Section 3.(a), Employee's Option shall be exercisable from and after the occurrence of a Change in Control of the Company; PROVIDED, HOWEVER, that this acceleration of exercisability shall not take place if this Option becomes unexercisable under Section 3.3 prior to the occurrence of a Change of Control of the Company; and PROVIDED, FURTHER, that no Option shall be exercisable by any Employee who is then subject to Section 16 of the Exchange Act until the expiration of the period ending six months and one day after the later of date the Option is granted or deemed regranted. A Change of Control of the Company shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 3.4; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual -6- were a member of he Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% 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, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. ARTICLE IV EXERCISE OF OPTION SECTION 4.1 - PERSON ELIGIBLE TO EXERCISE. During Employee's lifetime, Employee's option is exercisable only by Employee unless it has been disposed of pursuant to a Qualified Domestic Relations Order (?QDRO?). After the death of the Employee, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3, be exercised by his Beneficiary. -7- SECTION 4.2 - PARTIAL EXERCISE. Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part prior to the time when the Option or portion thereof becomes unexercisable under Section 3.3. SECTION 4.3 - PROCEDURE FOR EXERCISE. The Option may be exercised with respect to shares of the Company's Common Stock granted to Employee in the amount specified ("Option Shares") at any time from the date that any portion of the Option described in the Vesting Schedule set forth in Section 3.1(a) becomes exercisable pursuant to Section 3.1(a) or 3.4 until the Option expires pursuant to Section 3.3 by: (i) delivery of written notification of exercise and payment in full either in cash or in Common Stock of the Company delivered to the Corporate Secretary of the Company for all Option Shares being purchased plus the amount of any federal and state income taxes required to be withheld by reason of the exercise of Employee's option; and (ii) if requested, within the specified time set forth in any such request, delivery to the Company of such written representations and undertakings as may, in the opinion of the Company's legal counsel, be necessary or desirable to comply with federal and state tax and securities laws and (iii) if requested, a bona fide written representation and agreement, in a form satisfactory to the Committee, signed by the Employee or other person then entitled to exercise such Option or portion, stating that the shares of stock are being acquired for his own account, for investment and without any present intention of distributing or reselling said shares or any of them except as may be permitted under the Securities Act and then applicable rules and regulations thereunder, and that the Employee or other person then entitled to exercise such Option or portion will indemnify the Company against and hold it free and harmless from any loss, damage, expense or liability resulting to the Company if any sale or distribution of the shares by such person is contrary to the representation and agreement referred to above. In the event the Option or portion shall be exercised pursuant to Section 4.1 by any person or persons other than the Employee, appropriate proof of the right of such person or persons to exercise the Option. The Committee may, in its absolute discretion, take whatever additional actions it deems appropriate to insure the observance and performance of such representations, undertakings and agreements and to effect compliance with the Securities Act and any other federal or state securities laws or regulations. Without limiting the generality of the foregoing, the Committee may require an opinion of counsel acceptable to it to the effect that any subsequent transfer of shares acquired on an Option exercise does not violate the Securities Act, and may issue stop-transfer orders covering such shares. Share certificates evidencing stock issued on exercise of this Option shall bear an appropriate legend referring to the provisions of this subsection and the representations, undertakings and agreements referenced herein. SECTION 4.4 - SECURITIES LAW RESTRICTIONS. Employee understands and acknowledges that applicable securities laws govern and may restrict Employee's right to offer, sell, or otherwise dispose of any Option Shares. Employee may not offer, sell or otherwise dispose of any Option Shares unless Employee's offer, sale or other disposition thereof is registered under the Securities Act of 1933 (the "1933 Act") or an exemption from the registration requirements of the 1933 Act, such as the exemption afforded by Rule 144 -8- of the Securities and Exchange Commission ("SEC"), is available. Employee further understands and acknowledges that one of the requirements of Rule 144 is that there shall be available adequate current public information with respect to the Company at the time of the proposed disposition of the Option Shares, and that the Company is not obligated hereunder to file reports with the SEC or otherwise make current public information available for such purpose or to take any other action to make available an exemption from the registration requirements of the 1933 Act. Employee agrees that Employee will not offer, sell or otherwise dispose of any Option Shares in any manner which would (i) require the Company to file any registration statement with the SEC; (ii) require the Company to amend or supplement any registration statement which the Company at any time may have on file with the SEC; or (iii) violate the 1933 Act, the rules and regulations promulgated thereunder or any other state or federal law. SECTION 4.5 - CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The shares of stock deliverable upon the exercise of the Option, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. Such shares shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the following conditions: (a) The admission of such shares to listing on all stock exchanges on which such class of stock is then listed; and (b) The completion of any registration or other qualification of such shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Committee shall, in its sole and absolute discretion, deem necessary or advisable; and (c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its sole and absolute discretion, determine to be necessary or advisable; and (d) The payment to the Company (or other employer corporation) of all amounts which, under federal, state or local tax law, it is required to withhold upon exercise of the Option; and (e) The lapse of such reasonable period of time following the exercise of the Option as the Committee may from time to time establish for reasons of administrative convenience. SECTION 4.6 - RIGHTS AS STOCKHOLDER. The holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any shares purchasable upon the exercise of any part of the Option unless and until certificates representing such shares shall have been issued by the transfer agent on behalf of the Company. -9- ARTICLE V OTHER PROVISIONS SECTION 5.1 - ADMINISTRATION. The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon the Employee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Option. In its sole and absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan and this Agreement except with respect to matters which under Rule 16b-3 or Section 162(m) of the Code are required to be determined in the sole discretion of the Committee. SECTION 5.2 - NON-TRANSFERABILITY. Employee's option is personal to Employee and shall not be transferable by Employee otherwise than by will or the laws of descent and distribution or pursuant to a QDRO. Neither the Option nor any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Employee or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; PROVIDED, HOWEVER, that this Section 5.2 shall not prevent transfers by will or by the applicable laws of descent and distribution or pursuant to QDRO. SECTION 5.3 - CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY, ACQUISITION OR LIQUIDATION OF THE COMPANY AND OTHER CORPORATE EVENTS. Subject to the provisions of this Section 5.3, in the event of any transaction or event described in Section 2.2, a change in control, or similar transaction by the Company or any unusual or nonrecurring transactions or events affecting the Company, any Affiliate of the Company, or the financial statements of the Company or any Affiliate, or of changes in applicable laws, regulations, or accounting principles, if the Committee determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to the Option to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles, the Committee in its discretion is hereby authorized to provide for such terms as it deems appropriate by action taken prior to the occurrence of such transaction or event: (i) for adjustments to the Option in order to prevent the dilution or enlargement of rights thereunder or to provide for acceleration of benefits thereunder; (ii) for either the purchase of the Option for an amount of cash equal to the amount that could have been attained upon the exercise of such option or realization of the Participant's rights had the Option been currently exercisable or payable or fully vested or the replacement of such Option with other rights or property selected by the Committee in its sole discretion; (iii) that it cannot be exercised after such event; (iv) -10- that upon such event, the Option be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices. No adjustment or action described in this Section 5.3 or in any other provision of this Agreement shall be authorized to the extent that such adjustment or action would cause the Agreement or the Plan or the Option to violate Section 422(b)(1) of the Code or would cause the Option to fail to so qualify under Section 162(m), as the case may be, or any successor provisions thereto. Furthermore, no such adjustment or action shall be authorized to the extent such adjustment or action would result in short-swing profits liability under Section 16 or violate the exemptive conditions or Rule 16b-3 unless the Committee determines that the option or other award is not to comply with such exemptive conditions. SECTION 5.4 - SHARES TO BE RESERVED. The Company shall at all times during the term of the Option reserve and keep available such number of shares of stock as will be sufficient to satisfy the requirements of this Agreement. SECTION 5.5 - NOTICES. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Corporate Secretary, and any notice to be given to the Employee shall be addressed to him at the address maintained by the Corporation in its business records. By a notice given pursuant to this Section 5.5, either party may hereafter designate a different address for notices to be given to him. Any notice which is required to be given to the Employee shall, if the Employee is then deceased, be given to the Employee's personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 5.5. Any notice shall be deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service. SECTION 5.6 - TITLES. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement. SECTION 5.7 - NOTIFICATION OF DISPOSITION. The Employee shall give prompt notice to the Company of any disposition or other transfer of any shares of stock acquired under this Agreement if such disposition or transfer is made (a) within two (2) years from the date of granting the Option with respect to such shares or (b) within one (1) year after the transfer of such shares to him. Such notice shall specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by the Employee in such disposition or other transfer. SECTION 5.8 - GOVERNING LAW. This Grant Agreement and the Plan shall be construed in accordance with and governed by the laws of the State of Utah. SECTION 5.9 - CONFORMITY TO SECURITIES LAWS. The Employee acknowledges that the -11- Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, including without limitation Rule 16b-3. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. SECTION 5.10 - AMENDMENTS. This Agreement and the Plan may be amended without the consent of the Optionee provided that such amendment would not impair any rights of the Optionee under this Agreement. No amendment of this Agreement shall, without the consent of the Optionee, impair any rights of the Optionee under this Agreement. SECTION 5.11 - CONFORMITY WITH PLAN. Employee's option is intended to conform in all respects with the Plan, a copy of which is attached hereto. Inconsistencies between this Grant Agreement and the Plan shall be resolved in accordance with the terms of the Plan. All definitions stated in the Plan shall be fully applicable to this Grant Agreement. SECTION 5.12 - EMPLOYMENT AND SUCCESSORS. Nothing herein or in the Plan confers any right or obligation on Employee to continue in the employ of the Company or Company Subsidiary or shall affect in any way Employee's right or the right of the Company or Company Subsidiary, as the case may be, which are hereby expressly reserved, to terminate Employee's employment at any time. Employee agrees that Employee is an Employee at will and can be terminated by the Company or Company Subsidiary, as the case may be, at any time. Nothing herein or in the Plan is to be interpreted as an express or implied contract of employment. This Grant Agreement and the Plan shall be binding upon any successor or successors of the Company. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of this ___ day of _______ 199__. CORDANT TECHNOLOGIES INC. EMPLOYEE By: ___________________________ By: _____________________ Vice President and Corporate Secretary -12- EX-10 3 CORDANT TECHNOLOGIES INC. 1999 G R A N T A G R E E M E N T NONQUALIFIED STOCK OPTION AGREEMENT, made this ____ day of _______ 199_ between Cordant Technologies Inc., a Delaware corporation ("Company") and the Employee ("Employee") whose name appears on the Notice of Grant of Stock Option ("Notice of Grant") attached hereto and incorporated by reference herein. WHEREAS, the Committee (as defined in Section 1.5), has determined that it would be to the advantage and best interest of the Company and its stockholders to grant the stock option provided for herein to the Employee in consideration of Employee's services to the Company or Affiliate and as an incentive for increased efforts during the Employee's service to the Company or Affiliate, and has advised the Company thereof and instructed the undersigned officers to issue said Option; WHEREAS, the stock option subject to this agreement is granted pursuant to the terms of the Cordant Technologies Inc. Amended and Restated 1996 Stock Awards Plan or the 1989 Stock Awards Plan as the case may be. NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows: ARTICLE I DEFINITIONS Whenever the following terms are used in this Agreement, they shall have the meaning specified below unless the context clearly indicates to the contrary. Capitalized terms which are not defined below shall have the meaning specified in the Plan. SECTION 1.1 - AFFILIATE "Affiliate" shall mean any entity in which the Company has a direct or indirect equity interest which is so designated by the Committee. SECTION 1.2 - BENEFICIARY "Beneficiary" shall mean the person or persons properly designated by the Employee, including his spouse or heirs at law, to exercise such Employee's rights under the Plan in the event of the Employee's death, or if the Employee has not designated such person or persons, or such person or persons shall all have pre- -1- deceased the Employee, the executor or administrator of the Employee's estate. Designation, revocation and redesignation of Beneficiaries must be made in writing in accordance with rules established by the Committee and shall be effective upon delivery to the Committee. SECTION 1.3 - BOARD "Board" shall mean the Board of Directors of the Company. SECTION 1.4 - CODE "Code" shall mean the Internal Revenue Code of 1986, as amended. SECTION 1.5 - COMMITTEE "Committee" shall mean the Committee of the Board appointed as provided in the Plan. SECTION 1.6 - COMPANY "Company" shall mean Cordant Technologies Inc., a Delaware corporation. SECTION 1.7 - DATE OF GRANT "Date of Grant" shall mean the date set forth on the Notice of Grant on which the Board grants the option hereunder and from which the Anniversary Date set forth in the Vesting Schedule shall be determined. SECTION 1.8 - EXCHANGE ACT "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. SECTION 1.9 - OPTION "Option" shall mean the nonqualified stock option to purchase Common Stock of the Company granted under this Agreement. SECTION 1.10- PLAN "Plan" shall mean either the Cordant Technologies Inc. Amended and Restated 1996 Stock Awards Plan or the 1989 Stock Awards Plan as set forth on the face of the Notice of Grant. -2- SECTION 1.11 - RULE 16B-3 "Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as such Rule may be amended in the future. SECTION 1.12 - SECURITIES ACT "Securities Act" shall mean the Securities Act of 1933, as amended. ARTICLE II GRANT OF OPTION SECTION 2.1 - GRANT OF OPTION. In consideration of Employee's services to the Company, or affiliate, as the case may be, Cordant Technologies Inc. grants to Employee the option to purchase shares of its Common Stock (par value $1 per share) at a purchase price set forth on the Notice of Grant attached hereto (the fair market value of such shares on the Date of Grant), subject to the conditions of this Agreement. SECTION 2.2 - ADJUSTMENTS IN OPTION. Subject to Section 5.3, in the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), a reorganization, recapitalization, spin-off, stock dividend, stock split, combination, reclassification, reverse stock split, merger, consolidation, split-up, spin-off, repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Common Stock or other securities of the Company, or other similar corporate transaction or event or other increase or reduction in the number of issued shares of Common Stock affects the Commons Stock such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available with respect to the Option, the Committee may, in order to prevent the dilution or enlargement of rights under awards, make such adjustments in any and all of the number and type of shares covered by the Option and the exercise price specified herein as may be determined to be appropriate and equitable, to the end that after such event the Optionee's proportionate interest shall be maintained as before the occurrence of such event. Such adjustment in the Option shall be made without change in the total price applicable to the unexercised portion of the Option (except for any change in the aggregate price resulting from rounding-off of share quantities or prices) and with any necessary corresponding adjustment in the Option price per share. Any such adjustment made by the Committee shall be final and binding upon the Employee, the Company and all other interested persons. -3- ARTICLE III PERIOD OF EXERCISABILITY SECTION 3.1 - COMMENCEMENT OF EXERCISABILITY (a) This Option shall become exercisable (vested) as follows: OPTION VESTING SCHEDULE FIRST BUSINESS DAY FOLLOWING PORTION OF THE OPTION BECOME THE ANNIVERSARY DATE FROM THE EXERCISABLE DATE OF GRANT (VESTED) ON SUCH ANNIVERSARY DATE ------------- --------------------------------- One year from date of grant 25 percent Two years from date of grant 50 percent Three years from date of grant 75 percent Four Years from date of grant 100 percent No fractional share of a vested option is exercisable until such anniversary date from the date of grant as the remainder of such fractional share becomes exercisable. No part of the Option will be exercisable prior to the first business day following the expiration of one year from the Date of Grant set forth on the Notice of Grant of Stock attached hereto. (b) No portion of the Option (including any portion of the Option not yet vested under Section 3.1(a) which is unexercisable at termination of employment) shall thereafter become exercisable except with respect to retirement under Section 3.3(b); death Section 3.3(c); or disability Section 3.3(d). SECTION 3.2 - DURATION OF EXERCISABILITY. After any portion of the Option becomes exercisable pursuant to Section 3.1(a), the Option shall remain exercisable until it has been exercised or until it becomes unexercisable under Section 3.3. SECTION 3.3 - EXPIRATION OF OPTION. (a) The Option (or any portion of the Option not yet vested under Section 3.1(a) as the case may be) may not be exercised to any extent by anyone after the first to occur of the following events ("Expiration Date"): -4- (i) The expiration of ten (10) years from the date the Option was granted; or (ii) Except in the event of a Change in Control of the Company as defined in Section 3.4 below or as otherwise provided herein, the expiration of three (3) months from the date of the employee's termination of employment unless such termination of employment results from Employee's retirement pursuant to the terms of a pension plan of the Company; death or permanent and total disability; PROVIDED, HOWEVER, if during the -------- ------- first two years following a Change in Control of the Company Employee's, employment terminates other than pursuant to the terms of a pension plan of a Company and Employee's Option was exercisable on the date of termination of Employee's employment, it will remain exercisable for a period of six months and one day after termination of Employee's employment, or until the Expiration Date, whichever occurs first; or (iii)The effective date of the Committee's action under Section 5.3(ii), (iii) or (iv) (except in the case of an action providing for assumption of the Option). (b) If Employee's employment with the Company terminates prior to the Expiration Date because of Employee's retirement pursuant to the terms of a pension plan of the Company, the Employee's Option will remain exercisable until the Expiration Date. Any portion of the Option not yet vested at the Employee's date of retirement will automatically vest with the passage of time (as if the retired Employee had remained actively employed) pursuant to the Option vesting schedule set forth in Section 3.1(a). In the event of a retired employees' death prior to the Expiration Date of this option, this option shall become 100% vested and such retired Employee's beneficiary shall have two years from the date of death or the Expiration Date, whichever date is the earliest, to exercise this option. (c) If an Employee's employment with the Company terminates prior to the Expiration Date due to death, the option to the extent not yet vested shall become 100% vested on the date of death and shall remain exercisable by such Employee's beneficiary until the Expiration Date. (d) If the Employee's employment with the Company terminates prior to the Expiration Date due to the Employee's permanent and total disability ("Disability"), such option shall remain exercisable until the Expiration Date so long as such Disability is continuing. To the extent such option is not vested on the date of Disability, the option shall automatically vest with the passage of time (as if the Disabled Employee has remained actively employed) pursuant to the vesting schedule in Section 3.1(a). The Committee shall have the sole discretion to determine if an Employee is -5- disabled for the purposes of this option and such determination shall be binding and conclusive on the Employee. In the event such Employee ceases to be disabled, this option shall terminate within three months of the date of determination by the Committee that such disability no longer exists or the Expiration Date, whichever date is the earliest to occur. SECTION 3.4 - ACCELERATION OF EXERCISABILITY UPON CHANGE IN CONTROL OF THE COMPANY. Notwithstanding any provision herein to the contrary, to the extent the Employee's Option has not been exercised previously or any portion of such Option has not yet vested under Section 3.(a), Employee's Option shall be exercisable from and after the occurrence of a Change in Control of the Company; PROVIDED, HOWEVER, that this acceleration of exercisability shall not take place if this Option becomes unexercisable under Section 3.3 prior to the occurrence of a Change of Control of the Company; and PROVIDED, FURTHER, that no Option shall be exercisable by any Employee who is then subject to Section 16 of the Exchange Act until the expiration of the period ending six months and one day after the later of date the Option is granted or deemed regranted. A Change of Control of the Company shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 3.4; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or -6- (c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% 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, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. ARTICLE IV EXERCISE OF OPTION SECTION 4.1 - PERSON ELIGIBLE TO EXERCISE. During Employee's lifetime, Employee's option is exercisable only by Employee unless it has been disposed of pursuant to a Qualified Domestic Relations Order ("QDRO"). After the death of the Employee, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3, be exercised by his Beneficiary. SECTION 4.2 - PARTIAL EXERCISE. Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part prior to the time when the Option or portion thereof becomes unexercisable under Section 3.3. -7- SECTION 4.3 - PROCEDURE FOR EXERCISE. The Option may be exercised with respect to shares of the Company's Common Stock granted to Employee in the amount specified ("Option Shares") at any time from the date that any portion of the Option described in 3.1(a) becomes exercisable pursuant to Section 3.1(a) or 3.4 until the Option expires pursuant to Section 3.3 by: (i) delivery of written notification of exercise and payment in full either in cash or in Common Stock of the Company delivered to the Corporate Secretary of the Company for all Option Shares being purchased plus the amount of any federal and state income taxes required to be withheld by reason of the exercise of Employee's option; and (ii) if requested, within the specified time set forth in any such request, delivery to the Company of such written representations and undertakings as may, in the opinion of the Company's legal counsel, be necessary or desirable to comply with federal and state tax and securities laws and (iii) a bona fide written representation and agreement, in a form satisfactory to the Committee, signed by the Employee or other person then entitled to exercise such Option or portion, stating that the shares of stock are being acquired for his own account, for investment and without any present intention of distributing or reselling said shares or any of them except as may be permitted under the Securities Act and then applicable rules and regulations thereunder, and that the Employee or other person then entitled to exercise such Option or portion will indemnify the Company against and hold it free and harmless from any loss, damage, expense or liability resulting to the Company if any sale or distribution of the shares by such person is contrary to the representation and agreement referred to above. In the event the Option or portion shall be exercised pursuant to Section 4.1 by any person or persons other than the Employee, appropriate proof of the right of such person or persons to exercise the Option. The Committee may, in its absolute discretion, take whatever additional actions it deems appropriate to insure the observance and performance of such representations, undertakings and agreements and to effect compliance with the Securities Act and any other federal or state securities laws or regulations. Without limiting the generality of the foregoing, the Committee may require an opinion of counsel acceptable to it to the effect that any subsequent transfer of shares acquired on an Option exercise does not violate the Securities Act, and may issue stop-transfer orders covering such shares. Share certificates evidencing stock issued on exercise of this Option shall bear an appropriate legend referring to the provisions of this subsection and the representations, undertakings and agreements referenced herein. SECTION 4.4 - SECURITIES LAW RESTRICTIONS. Employee understands and acknowledges that applicable securities laws govern and may restrict Employee's right to offer, sell, or otherwise dispose of any Option Shares. Employee may not offer, sell or otherwise dispose of any Option Shares unless Employee's offer, sale or other disposition thereof is registered under the Securities Act of 1933 (the "1933 Act") or an exemption from the registration requirements of the 1933 Act, such as the exemption afforded by Rule 144 of the Securities and Exchange Commission ("SEC"), is available. Employee further understands and acknowledges that one of the requirements of Rule 144 is that there shall be available adequate current public information with respect to the Company at the time of the proposed disposition of the Option Shares, and that the Company is not obligated hereunder to file reports with the SEC or otherwise make current public -8- information available for such purpose or to take any other action to make available an exemption from the registration requirements of the 1933 Act. Employee agrees that Employee will not offer, sell or otherwise dispose of any Option Shares in any manner which would (i) require the Company to file any registration statement with the SEC; (ii) require the Company to amend or supplement any registration statement which the Company at any time may have on file with the SEC; or (iii) violate the 1933 Act, the rules and regulations promulgated thereunder or any other state or federal law. SECTION 4.5 - CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The shares of stock deliverable upon the exercise of the Option, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. Such shares shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the following conditions: (a) The admission of such shares to listing on all stock exchanges on which such class of stock is then listed; and (b) The completion of any registration or other qualification of such shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Committee shall, in its sole and absolute discretion, deem necessary or advisable; and (c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its sole and absolute discretion, determine to be necessary or advisable; and (d) The payment to the Company (or other employer corporation) of all amounts which, under federal, state or local tax law, it is required to withhold upon exercise of the Option; and (e) The lapse of such reasonable period of time following the exercise of the Option as the Committee may from time to time establish for reasons of administrative convenience. SECTION 4.6 - RIGHTS AS STOCKHOLDER. The holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any shares purchasable upon the exercise of any part of the Option unless and until certificates representing such shares shall have been issued by the transfer agent on behalf of the Company. ARTICLE V OTHER PROVISIONS SECTION 5.1 - ADMINISTRATION. The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and -9- application of the Plan as are consistent therewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon the Employee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Option. In its sole and absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan and this Agreement except with respect to matters which under Rule 16b-3 or Section 162(m) of the Code are required to be determined in the sole discretion of the Committee. SECTION 5.2 - NON-TRANSFERABILITY. Employee's option is personal to Employee and shall not be transferable by Employee otherwise than by will or the laws of descent and distribution or pursuant to a QDRO. Neither the Option nor any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Employee or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; PROVIDED, HOWEVER, that this Section 5.2 shall not prevent transfers by will or by the applicable laws of descent and distribution or pursuant to QDRO. SECTION 5.3 - CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY, ACQUISITION OR LIQUIDATION OF THE COMPANY AND OTHER CORPORATE EVENTS. Subject to the provisions of this Section 5.3, in the event of any transaction or event described in Section 2.2, a change in control, or similar transaction by the Company or any unusual or nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the financial statements of the Company or any affiliate, or of changes in applicable laws, regulations, or accounting principles, if the Committee determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to the Option to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles, the Committee in its discretion is hereby authorized to provide for such terms and conditions as it deems appropriate, by action taken prior to the occurrence of such transaction or event: (i) for adjustments to such award in order to prevent the dilution or enlargement of rights thereunder or to provide for acceleration of benefits thereunder; (ii) for either the purchase of the Option for an amount of cash equal to the amount that could have been attained upon the exercise of the Option or realization of the Participant's rights had such option been currently exercisable or the replacement of such option, right or award with other rights or property selected by the Committee in its sole discretion; (iii) that it cannot be exercised after such event; (iv) that upon such event, such option, right or award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares -10- and prices. No adjustment or action described in this Section 5.3 or in any other provision of the Agreement shall be authorized to the extent that such adjustment or action would cause the Option to fail to qualify under Section 162(m), as the case may be, or any successor provisions thereto. Furthermore, no such adjustment or action shall be authorized to the extent such adjustment or action would result in short-swing profits liability under Section 16 or violate the exemptive conditions or Rule 16b-3 unless the Committee determines that the option or other award is not to comply with such exemptive conditions. SECTION 5.4 - SHARES TO BE RESERVED. The Company shall at all times during the term of the Option reserve and keep available such number of shares of stock as will be sufficient to satisfy the requirements of this Agreement. SECTION 5.5 - NOTICES. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Corporate Secretary, and any notice to be given to the Employee shall be addressed to him at the address maintained by the Corporation in its business records. By a notice given pursuant to this Section 5.5, either party may hereafter designate a different address for notices to be given to him. Any notice which is required to be given to the Employee shall, if the Employee is then deceased, be given to the Employee's personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 5.5. Any notice shall be deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service. SECTION 5.6 - TITLES. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement. SECTION 5.7 - NOTIFICATION OF DISPOSITION. The Employee shall give prompt notice to the Company of any disposition or other transfer of any shares of stock acquired under this Agreement if such disposition or transfer is made (a) within two (2) years from the date of granting the Option with respect to such shares or (b) within one (1) year after the transfer of such shares to him. Such notice shall specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by the Employee in such disposition or other transfer. SECTION 5.8 - GOVERNING LAW. This Grant Agreement and the Plan shall be construed in accordance with and governed by the laws of the State of Utah. SECTION 5.9 - CONFORMITY TO SECURITIES LAWS. The Employee acknowledges that the Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, including without limitation Rule 16b-3. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a manner as to conform to -11- such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. SECTION 5.10 - AMENDMENTS. This Agreement and the Plan may be amended without the consent of the Optionee provided that such amendment would not impair any rights of the Optionee under this Agreement. No amendment of this Agreement shall, without the consent of the Optionee, impair any rights of the Optionee under this Agreement. SECTION 5.11 - CONFORMITY WITH PLAN. Employee's option is intended to conform in all respects with the Plan, a copy of which is attached hereto. Inconsistencies between this Grant Agreement and the Plan shall be resolved in accordance with the terms of the Plan. All definitions stated in the Plan shall be fully applicable to this Grant Agreement. SECTION 5.12 - EMPLOYMENT AND SUCCESSORS. Nothing herein or in the Plan confers any right or obligation on Employee to continue in the employ of the Company or any Affiliate or shall affect in any way Employee's right or the right of the Company or any Affiliate, as the case may be, which are hereby expressly reserved, to terminate Employee's employment at any time. Employee agrees that Employee is an Employee at will and can be terminated by the Company or any Affiliate at any time. Nothing herein or in the Plan is to be interpreted as an express or implied contract of employment. This Grant Agreement and the Plan shall be binding upon any successor or successors of the Company. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of this ___day of ______ 199__. CORDANT TECHNOLOGIES INC. EMPLOYEE By: __________________________ By:________________________ Vice President and Corporate Secretary -12- EX-10 4 3/1/99 AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement is made by and between CORDANT TECHNOLOGIES INC. (the "Company") and ____________________ (the "Executive"), and is dated as of the 1st day of March 1999. The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat, or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Amended and Restated Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1 . CHANGE OF CONTROL DATE. The "Change of Control Date" shall be the first date on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and the Company has terminated the Executive's employment (other than under circumstances which would constitute Cause or Disability (as defined below)) or the Executive has -1- terminated his employment under circumstances which would constitute Good Reason hereunder if such termination occurred the day after the Change of Control Date, and if (A) it is reasonably demonstrated by the Executive (i) that such termination of employment was at the request of a third party who has taken steps reasonably calculated to effect the Change of Control or (ii) that the Company's actions otherwise arose in connection with or anticipation of the Change of Control or (B) such termination is within six months of the Change of Control Date, then for all purposes of this Agreement the "Change of Control Date" shall mean the date immediately prior to the date of such termination of employment. 2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change of Control" shall mean: (a) the acquisition by any individual, entity or group (within the meaning of sections 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "exchange act")) (a "person") of beneficial ownership (within the meaning of rule 13d-3 promulgated under the exchange act) of 20% or more of either (i) the then outstanding shares of common stock of the company (the "outstanding company common stock") or (ii) the combined voting power of the then outstanding voting securities of the company entitled to vote generally in the election of directors (the "outstanding company voting securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a change of control: (i) any acquisition directly from the company, (ii) any acquisition by the company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the company or any corporation controlled by the company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this section 2; or -2- (b) individuals who, as of the date hereof, constitute the board (the "incumbent board") cease for any reason to constitute at least a majority of the board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the company's shareholders, was approved by a vote of at least a majority of the directors then comprising the incumbent board shall be considered as though such individual were a member of the incumbent board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the board; or (c) consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the company (a "business combination"), in each case, unless, following such business combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding company common stock and outstanding company voting securities immediately prior to such business combination beneficially own, directly or indirectly, more than 50% 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, as the case may be, of the corporation resulting from such business combination (including, without limitation, a corporation which as a result of such transaction owns the company or all or substantially all of the company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such business combination of the outstanding company common stock and outstanding company voting securities, as the case may be, (ii) no -3- person (excluding any corporation resulting from such business combination or any employee benefit plan (or related trust) of the company or such corporation resulting from such business combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such business combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the business combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such business combination were members of the incumbent board at the time of the execution of the initial agreement, or of the action of the board, providing for such business combination; or (d) approval by the shareholders of the company of a complete liquidation or dissolution of the company. 3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, for the period commencing on the Change of Control Date and ending on the third anniversary of such date (the "Employment Period"). 4. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting relationships), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 90-day period immediately preceding the Change of Control Date and (B) the Executive's services shall be performed at the location (the "Principal Business Location") where the Executive was employed immediately preceding the Change of Control Date or at any office or location which does not result in a material increase in the distance or time of commutation between the Executive's -4- place of primary residence at the Change of Control Date and the Executive's Principal Business Location, or materially adversely affect the mode of such commutation. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to Discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Change of Control Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Change of Control Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) COMPENSATION, BENEFITS AND SUPPORT STAFF. (i) BASE SALARY. During the Employment Period, the Executive shall receive in accordance with the Company's payroll practices at the Change of Control Date an annual base salary ("Annual Base Salary"), at least equal to twelve times the highest monthly base salary paid or payable to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Change of Control Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed at least annually and shall be increased at any time and from time to time as shall be substantially consistent with increases in base salary awarded in the ordinary course of business to other peer executives of the Company and its affiliated -5- companies but in no event shall the annual increase in Base Salary be less than a percentage at least equal to the increase, if any, in the cost-of-living shown on the Consumer Price Index for the area in which the Principal Business Location is located, published by the Bureau of Labor Statistics of the United States Department of Labor for the immediately preceding twelve-month period (or, if no such Consumer Price Index is then published, any successor index thereto). Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" includes any company controlled by, controlling or under common control with the Company. (ii) BONUS. (A) In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year beginning or ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the highest annualized (for any fiscal year consisting of less than twelve full months or with respect to which the Executive has been employed by the Company for less than twelve full months) bonus paid or payable (including any amount subject to a deferral election) to the Executive by the Company and its affiliated companies in respect of the three fiscal years immediately preceding the fiscal year in which the Change of Control Date occurs (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. (B) In addition to Annual Base Salary and the Annual Bonus, the Executive shall be paid, for each fiscal year beginning or ending during the Employment Period, a long-term bonus (the "long-term Bonus") in cash at least equal to the average long-term incentive bonus (the "Recent Long-Term Bonus") paid or payable to the Executive by the Company under the Company's Long-Term Incentive Compensation -6- Plan (or any predecessor or successor plan thereto (the "LTIP") in respect of the last three completed performance cycles ending with the performance cycle ending in the fiscal year preceding the fiscal year in which the Change of Control Date occurs (or, if less, in respect of the number of completed performance cycles for which the Executive has received a long-term bonus). If the Executive was not a participant in the LTIP in one of such cycles, but is, at the Change of Control Date, a participant in the LTIP, the Recent long-term Bonus shall be equal to the amount payable to such Executive under the LTIP upon a Change of Control, divided by the number of performance cycles in which the Executive was participating at such time. For the fiscal year in which the Change of Control Date occurs and for the next two fiscal years, any such payment may be reduced (but not below zero) by the amount payable to the Executive under the terms of the LTIP with respect to the performance cycle that otherwise would have ended in such fiscal year upon the Change of Control. Each such long-term Bonus shall be paid pursuant to a plan which has three-year performance cycles and is otherwise substantially similar to the LTIP and shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the long-term Bonus is awarded, unless the Executive shall elect to defer the receipt of such long-term Bonus. (iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. In addition to Annual Base Salary, Annual Bonus and Long-term Bonus payable as hereinabove provided, the Executive shall be entitled to participate during the Employment Period in all other incentive, savings and retirement plans, practices, policies and programs applicable to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive, savings and retirement benefits opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 90-day period immediately preceding the Change of Control Date. -7- (iv) WELFARE BENEFIT PLANS. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) and applicable to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect at any time during the 90-day period immediately preceding the Change of Control Date. (v) EXPENSES. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect at any time during the 90-day period immediately preceding the Change of Control Date or, if more favorable to the Executive, as in effect at ANY time thereafter with respect to other peer executives of the Company and its affiliated companies. (vi) OTHER EXECUTIVE BENEFITS. During the Employment Period, the Executive shall be entitled to other executive benefits including, without limitation, club memberships and annual physicals, in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect at any time during the 90-day period immediately preceding the Change of Control Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other peer executives of the Company and its affiliated companies. -8- (vii) OFFICE, COMPANY CAR AND SUPPORT STAFF. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, to exclusive personal secretarial and other assistance, and to a Company-provided car, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 90-day period immediately preceding the Change of Control Date or, if more favorable to the Executive, as provided at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (viii) VACATION. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect at any time during the 90-day period immediately preceding the Change of Control Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other peer executives of the Company and its affiliated companies with similar lengths of service. 5. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of "Disability" set forth below), it may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Change of Control Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" means the absence of the Executive from the Executive's duties with the Company on a Full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness -9- which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative (such agreement as to acceptability not to be withheld unreasonably). (b) CAUSE. The Company may terminate the Executive's employment during the Employment Period for "Cause." For purposes of this Agreement, "Cause" means (i) an act or acts of personal dishonesty taken by the Executive and intended to result in substantial personal enrichment of the Executive at the expense of the Company, (ii) repeated violations by the Executive of the Executive's obligations under Section 4(a) of this Agreement which are demonstrably willful and deliberate on the Executive's part and which are not remedied in a reasonable period of time after receipt of written notice from the Company or (iii) the conviction of the Executive of a felony involving moral turpitude. For purposes of this Section 5(b), no act, or failure to act, on the Executive's part shall be considered "willful" unless done, or omitted to be done, by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Executive a copy of a resolution, duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for the purpose (after reasonable notice to the Executive and an opportunity for him, together with his counsel, to be heard before the Board), finding that in the good faith opinion of the Board, the Executive was guilty of conduct set forth above in clause (i), (ii), or (iii) of the second sentence of this Section 5(b) and specifying the particulars thereof in detail. (c) GOOD REASON. The Executive's employment may be terminated during the Employment Period by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" means: -10- (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting relationships), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) the Company's requiring the Executive to be based at any office or location other than that described in Section 4(a)(i)(B) hereof; (iv) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (v) any failure by the Company to comply with and satisfy Section 11(c) of this Agreement. For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a termination by the Executive for any reason during the 30-day period immediately following the first anniversary of the Change of Control Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement. -11- (d) 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 hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets 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 and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than fifteen days after the giving of such notice). The failure by the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason shall not waive any right of the Executive hereunder or preclude the Executive from asserting such fact or circumstance in enforcing the Executive's rights hereunder. (e) DATE OF TERMINATION. "Date of Termination" means the date of receipt of the Notice of Termination or any later date specified therein, as the case may be; provided, however, that (i) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (ii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Change of Control Date, as the case may be. 6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) DEATH. If the Executive's employment terminates by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than the following obligations: (i) the Executive's Annual Base Salary -12- through the Date of Termination, to the extent not theretofore paid, (ii) any amount payable to the Executive pursuant to Section 4(b)(ii) hereof in respect of the most recently completed fiscal year, to the extent not theretofore paid, (iii) if the Change of Control Date occurred after the end of the most recently completed fiscal year and no Annual Bonus was paid to the Executive in respect of such period, an amount equal to the Recent Annual Bonus, (iv) the product of the greater of the Annual Bonus paid or payable (and annualized for any fiscal year consisting of less than twelve full months or for which the Executive has been employed for less than twelve full months) to the Executive for the most recently completed fiscal year during the Employment Period, if any, or the Recent Annual Bonus (such greater amount hereafter referred to as the "Highest Annual Bonus") and a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365, (v) for each performance cycle under the LTIP or any successor thereto which has commenced on or after the Change of Control Date, the product of the greater of the Long-term Bonus paid or payable to the Executive for the most recently completed performance cycle during the Employment Period, if any, or the Recent Long-Term Bonus (such greater amount hereafter referred to as the "Greater Long-Term Bonus") and a fraction, the numerator of which is the number of days which have elapsed in the performance cycle through the Date of Termination, and the denominator of which is 1095, and (vi) any compensation previously deferred by the Executive (together with any accrued interest thereon) and not yet paid by the Company and any accrued vacation pay not yet paid by the Company (the amounts described in paragraphs (i) through (vi) hereof are hereinafter referred to as "Accrued Obligations"). All Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. Anything in this Agreement to the contrary notwithstanding, the Executive's family shall be entitled to receive benefits at least equal to the most favorable benefits provided by the Company and any of its affiliated companies to surviving families of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to family death benefits, if any, as in effect with respect to other peer -13- executives and their families at any time during the 90-day period immediately preceding the Change of Control Date or, if more favorable to the Executive and/or the Executive's family, as in effect on the date of the Executive's death with respect to other peer executives of the Company and its affiliated companies and their families. (b) DISABILITY. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations. All Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. Anything in this Agreement to the contrary notwithstanding, the Executive shall be entitled after the Disability Change of Control Date to receive disability and other benefits at least equal to the most favorable of those provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect with respect to other peer executives and their families at any time during the 90-day period immediately receding the Change of Control Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families. (c) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment shall be terminated for Cause during the Employment Period or if the Executive terminates employment during the Employment Period other than for Good Reason, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive Annual Base Salary through the Date of Termination plus the amount of any compensation previously deferred by the Executive and accrued vacation pay, in each case to the extent theretofore unpaid. (d) GOOD REASON; OTHER THAN FOR CAUSE OR DISABILITY. If, during the Employment Period, the Company shall terminate the Executive's employment other -14- than for Cause or Disability, or if the Executive shall terminate employment under this Agreement for Good Reason: (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: A. the product of (x) three and (y) the sum of (i) Annual Base Salary, (ii) the Highest Annual Bonus and (iii) the Greater Long-Term Bonus; and B. all Accrued Obligations; and C. the Executive shall be entitled to receive a lump-sum retirement benefit equal to the difference between (a) the actuarial equivalent of the benefit under the Cordant Technologies Inc. Pension Plan and the Cordant Technologies Inc. Excess Pension Plan as in effect on the Change of Control Date or any successor plan which provides more favorable benefits to the Executive (the "Retirement Plans") which the Executive would receive if the Executive's employment continued at the compensation level provided for in Sections 4(b)(i) and 4(b)(ii) of this Agreement for three years, assuming for this purpose that all accrued benefits are fully vested, and (b) the actuarial equivalent of the Executive's actual benefit (paid or payable), if any, under the Retirement Plans; and (ii) for the remainder of the Employment Period, or such longer period as any plan, program, practice or policy may provide, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(iv) and (vi) of this Agreement if the Executive's employment had not been terminated in accordance with the most favorable plans, -15- practices, programs or policies of the Company and its affiliated companies applicable to other peer executives and their families during the 90-day period immediately preceding the Change of Control Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families. For purposes of determining the Executive's age and length of service at the time of his termination of employment in order to determine eligibility of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until the end of the Employment Period and to have terminated employment on the last day of such period; provided, however, that the Executive shall be entitled to the more favorable of the retiree benefits in effect on the Date of Termination or the retiree benefits in effect on the date that would have been the last date of the Employment Period if the Executive had remained employed. 7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plans, programs, policies or practices, provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any other agreements with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program except as explicitly modified by this Agreement. 8. FULL PAYMENTS. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be -16- obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement. The Company agrees to pay, from time to time promptly upon invoice, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest, question or controversy (regardless of the outcome thereof and whether or not litigation is involved) by the Company, the Executive or others over the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to Section 9 of this Agreement). 9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any 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 any other compensation plan, program or arrangement including but not limited to the proceeds from the exercise of stock option grants the Executive is entitled to receive on the date of a Change of Control or otherwise, but determined without regard to any additional payments required under this Section 9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any interest or penalties are incurred by the Executive 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 without limitation, any income taxes (and any interest and penalties imposed with -17- respect thereto) and 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 9(c) below, all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Ernst & Young (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving (or has, during the three years preceding the Effective Date, served) as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five 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 a written opinion that failure to report the Excise Tax on the Executive's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. 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 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting -18- Firm shall determine the amount of 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 business days after the Executive is informed in writing of such claim 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 30-day period following the date on which it 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 it 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, and (iv) permit the Company to participate in any Proceedings relating to such claim; -19- 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 on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo 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 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 further provided that any extension of the statute of limitations 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 9(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 9(c)) promptly pay to the Company the -20- 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 9(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 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. CONFIDENTIAL INFORMATION. (a) During the period of his employment hereunder, the Executive shall not, without the written consent of the Chief Executive Officer, disclose to any person, other than an employee of the Company or another person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Executive of his duties as an executive of the Company, any material confidential information obtained by him while in the employ of the Company with respect to any of the Company's products, improvements, formulas, designs or styles, processes, customers, methods of distribution or methods of manufacture, the disclosure of which he knows will be materially damaging to the Company; PROVIDED, HOWEVER, that confidential information shall not include any information known generally to the public (other than as a result of unauthorized disclosure by the Executive) or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that conducted by the Company. For the period ending two years following the Date of Termination, the Executive shall not disclose any confidential information of the type described above except as determined by him to be reasonably necessary in connection with any business or activity in which he is then engaged. (b) Any and all inventions made, developed or created by the Executive (whether at the request or suggestion of the Company or otherwise, whether alone or in conjunction with others, and whether during regular hours of work or -21- otherwise) during the period of his employment by the Company, which may be directly or indirectly useful in, or relate to, the business of or research and development being carried out by the Company or any of its subsidiaries or affiliates, will be promptly and fully disclosed by the Executive to an appropriate executive officer of the Company and shall be the Company's exclusive property as against the Executive, and the Executive will promptly deliver to an appropriate executive officer of the Company all papers, drawings, models, data and other material relating to any invention made, developed or created by him as aforesaid. (c) The Executive will, upon the Company's request and without any payment therefor, execute any documents necessary or advisable in the opinion of the Company's counsel to direct issuance of patents to the Company with respect to such inventions as are to be the Company's exclusive property as against the Executive under Section 10(b) above or to vest in the Company title to such inventions as against the Executive, PROVIDED, HOWEVER, that the expense of securing any such patent will be borne by the Company. (d) The foregoing provisions of this Section 10 shall be binding upon the Executive's heirs, successors and legal representatives. (e) In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 11. SUCCESSORS. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. -22- (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 12. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: IF TO THE EXECUTIVE: Home address as currently shown on Human Resource Department records of Executive's business unit. IF TO THE COMPANY: -23- Cordant Technologies Inc. 15 W. South Temple, Suite 1600 Salt Lake City, UT 84101-1532 Attention: Corporate Secretary or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's failure to insist upon strict compliance with any provision hereof shall not be deemed to be a waiver of such provision or any other provision thereof. (f) This Agreement contains the entire understanding of the Company and the Executive with respect to the subject matter hereof. (g) Anything in this Agreement to the contrary notwithstanding, the Executive and the Company acknowledge that the employment of the Executive by the Company is "at will", and, except as provided in Section 1 hereof, prior to the Change of Control Date, the employment of the Executive may be terminated by either the Executive or the Chief Executive Officer of the Company at any time. Upon a termination of the Executive's employment prior to the Change of Control Date, except as provided in Section 1 hereof, there shall be no further rights under this Agreement. -24- IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. CORDANT TECHNOLOGIES INC. by __________________________________ James R. Wilson Chairman of the Board, President, and Chief Executive Officer by:__________________________________ (name) EX-10 5 EXECUTION COPY CREDIT AGREEMENT Dated as of February 5, 1999 among CORDANT TECHNOLOGIES INC. and THE FIRST NATIONAL BANK OF CHICAGO, Individually and As Administrative Agent, FIRST CHICAGO CAPITAL MARKETS, INC., As Arranger, and THE LENDING INSTITUTIONS PARTY HERETO
TABLE OF CONTENTS PAGE ARTICLE I: DEFINITIONS 1 ARTICLE II: THE CREDITS 10 2.1. Advances 10 2.1.1. Commitments to Make Revolving Loans 10 2.1.2. Ratable Loans 10 2.1.3. Rate Options 11 2.1.4. Method of Selecting Rate Options and Interest Periods for Advances 11 2.1.5. Conversion and Continuation of Outstanding Advances 11 2.2. Term Loan Extension Option. 12 2.2.1. Option 12 2.2.2. Extension Request. 12 2.2.3. Conditions Precedent to Extension 12 2.2.4. Repayment of Term Loans 13 2.2.5. Rate Options 13 2.2.6. Conversion and Continuation of Outstanding Advances consisting of Term Loans 13 2.3. General Facility Terms 14 2.3.1. Method of Borrowing 14 2.3.2. Minimum Amount of Each Advance 14 2.3.3. Termination; Required Payments 14 2.3.4. Optional Principal Payments 14 2.3.5. Commitment Fees and Voluntary Reduction of Commitments 14 2.3.6. Changes in Interest Rate, etc. 15 2.3.7. Ratings Change Rate Increase; Rate after Maturity 15 2.3.8. Interest Payment Dates; Interest and Fee Basis. 15 2.3.9. Method of Payment 16 2.3.10. Notes; Telephonic Notices 16 2.3.11. Notification of Advances, Interest Rates, Prepayments and Commitment Reductions 17 2.3.12. Lending Installations 17 2.3.13. Non-Receipt of Funds by the Administrative Agent. 17 2.3.14. Withholding Tax Exemption 18 ARTICLE III: CHANGE IN CIRCUMSTANCES; INDEMNIFICATION 18 3.1. Yield Protection. 18 3.2. Changes in Capital Adequacy Regulations 19 3.3. Availability of Interest Rate. 20 3.4. Failure to Pay or Borrow on Certain Dates 20 3.5. Bank Certificates; Survival of Indemnity 20 i ARTICLE IV: CONDITIONS PRECEDENT 21 4.1. Initial Advance 21 4.2. Each Advance 22 ARTICLE V: REPRESENTATIONS AND WARRANTIES. 22 5.1. Corporate Existence and Standing 22 5.2. Authorization and Validity 22 5.3. Compliance with Laws and Contracts 23 5.4. Financial Statements 23 5.5. Material Adverse Change 23 5.6. Taxes 23 5.7. Litigation 24 5.8. ERISA 24 5.9. Defaults and Prepayment Event 24 5.10. Accuracy of Information 24 5.11. Regulation U. 24 5.12. Pari Passu. 24 5.13. Investment Company 24 5.14. Material Laws. 25 5.15. Material Agreements 25 5.16. Subsidiaries 25 5.17. Ownership of Properties 25 ARTICLE VI: COVENANTS 25 6.1. Affirmative Covenants 25 6.1.1. Financial Reporting 26 6.1.2. Use of Proceeds 27 6.1.3. Notice of Default and Prepayment Event 28 6.1.4. Conduct of Business 28 6.1.5. Payment of Taxes 28 6.1.6. Insurance 28 6.1.7. Compliance with Laws 28 6.1.8. Maintenance of Properties 29 6.1.9. Inspection 29 6.2. Negative Covenants 29 6.2.1. Dividends 29 6.2.2. Indebtedness of Subsidiaries 29 6.2.3. Merger 29 6.2.4. Sale of Assets 30 6.2.5. Sale and Leaseback 30 6.2.6. Liens 30 6.2.7. Funded Debt/EBITDA Ratio 31 ii 6.2.8. Affiliates; Howmet 31 ARTICLE VII: DEFAULTS 32 ARTICLE VIII: ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES 34 8.1. Acceleration; Allocation of Payments after Default or Prepayment Event 34 8.2. Amendments 34 8.3. Preservation of Rights 35 ARTICLE IX: GENERAL PROVISIONS 35 9.1. Survival of Representations 35 9.2. Governmental Regulation 35 9.3. Taxes 35 9.4. CHOICE OF LAW 36 9.5. CONSENT TO JURISDICTION 36 9.6. WAIVER OF JURY TRIAL 36 9.7. Headings 36 9.8. Entire Agreement 36 9.9. Several Obligations 36 9.10. Expenses. 37 9.12. Numbers of Documents 37 9.13. Confidentiality 37 ARTICLE X: THE ADMINISTRATIVE AGENT 38 10.1. Appointment 38 10.2. Powers 38 10.3. General Immunity 38 10.4. No Responsibility for Loans, Recitals, etc 38 10.5. Right to Indemnity 38 10.6. Action on Instructions of Banks 38 10.7. Employment of Agents and Counsel. 38 10.8. Reliance on Documents; Counsel. 39 10.9. Administrative Agent's Reimbursement 39 10.10. Rights as a Bank 39 10.11. Bank Credit Decision. 39 10.12. Successor Administrative Agent 39 10.13. Distribution of Information 40 10.14. Disclosure 40 ARTICLE XI: SETOFF; RATABLE PAYMENTS 41 11.1. Setoff 41 11.2. Ratable Payments 41 iii ARTICLE XII: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS 41 12.1. Successors and Assigns 41 12.2. Participations 42 12.2.1. Permitted Participants; Effect 42 12.2.2. Voting Rights 42 12.3. Assignments. 42 12.3.1. Permitted Assignments 42 12.3.2. Substitution of Bank 43 12.3.3. Effect; Effective Date 43 12.4. Dissemination of Information 44 12.5. Tax Treatment 44 ARTICLE XIII: NOTICES 44 13.1. Giving Notice 44 13.2. Change of Address 44 ARTICLE XIV: COUNTERPARTS 45 EXHIBIT "A":EXTENSION REQUEST 48 EXHIBIT "B": FORM OF PROMISSORY NOTE 49 EXHIBIT "C": OPINION OF COUNSEL 51 EXHIBIT "D": LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION 54 EXHIBIT "E": ASSIGNMENT AGREEMENT 55 SCHEDULE "1": SUBSIDIARIES 65 SCHEDULE "2": INDEBTEDNESS OF SUBSIDIARIES 66 SCHEDULE "3": LIENS 67
iv CORDANT TECHNOLOGIES INC. CREDIT AGREEMENT This Credit Agreement dated as of February 5, 1999 is among Cordant Technologies Inc., a Delaware corporation, each of the undersigned banks and The First National Bank of Chicago, individually and as agent for such banks. The parties hereto agree as follows: ARTICLE I DEFINITIONS As used in this Agreement: "Advance" means a borrowing hereunder consisting of the aggregate amount of the several Loans made by the Banks to the Company at the same time, at the same Rate Option and for the same Interest Period. Unless the context otherwise expressly states otherwise, from and after the Revolving Credit Termination Date if the Revolving Loans shall have been converted to Term Loans, "Advance" shall mean the borrowings consisting of the aggregate amount of the several Term Loans. "Administrative Agent" means The First National Bank of Chicago in its capacity as agent for the Banks pursuant to Article X, and not in its individual capacity as a Bank, and any successor Administrative Agent appointed pursuant to Article X. "Affiliate" of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person owns 10% or more of any class of voting securities (or other ownership interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise. "Aggregate Available Commitment" means, at any time prior to the Revolving Credit Termination Date, the Aggregate Commitment at such time less the Outstandings at such time. "Aggregate Commitment" means the aggregate of the Commitments of all the Banks hereunder. "Aggregate Outstanding Credit Exposure" means, as of any day, the aggregate of the Outstanding Credit Exposure of all the Banks. Page 1 "Agreement" means this credit agreement, as it may be amended from time to time. "Arranger" means First Chicago Capital Markets, Inc. "Article" means an article of this Agreement unless another document is specifically referenced. "Authorized Representative" means the Chief Financial Officer or the Treasurer of the Company or any other officer or employee of the Company designated in writing as an "Authorized Representative" under this Agreement by the Chief Financial Officer or the Treasurer of the Company. "Bankruptcy Code" means Title 11, United States Code Sections 1 ET SEQ., as the same may be amended from time to time, and any successor thereto or replacement therefor which may be hereafter enacted. "Banks" means the banks listed on the signature pages of this Agreement and their respective successors and assigns. "Base Eurodollar Rate" means, with respect to a Eurodollar Rate Advance for the relevant Interest Period, the rate determined by the Administrative Agent to be the rate at which deposits in U.S. Dollars are offered by First Chicago to first-class banks in the London interbank market at approximately 11 a.m. (London time) two Business Days prior to the first day of such Interest Period, in the approximate amount of First Chicago's relevant Eurodollar Rate Loan and having a maturity approximately equal to such Interest Period. "Borrowing Date" means a date on which an Advance is made hereunder. "Borrowing Notice" is defined in Section 2.1.4. "Business Day" means (a) with respect to borrowing, payment or rate selection of Eurodollar Rate Advances, a day (other than a Saturday or Sunday) on which banks generally are open for business in Chicago and New York for the conduct of substantially all of their commercial lending activities and on which dealings in U.S. Dollars are carried on in the London interbank market and (b) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open for business in Chicago and New York for the conduct of substantially all of their commercial lending activities. "Capitalized Lease" of any Person means any lease or lease agreement which creates a Capitalized Lease Obligation of such Person. Page 2 "Capitalized Lease Obligation" of any Person means the obligation of such Person, as lessee, to pay rent for the letting, use or hire of real or personal property which in accordance with GAAP is required to be presented on the balance sheet of such Person as a liability. "Commitment" means, for each Bank, the obligation of the Bank to make Loans not exceeding the amount set forth opposite its signature below, as such amount may be modified from time to time. "Company" means Cordant Technologies Inc., a Delaware corporation. "Consolidated EBITDA" means, for any period, Consolidated Net Income PLUS interest expense and provision for taxes based on income (in each case to the extent deducted in determining Consolidated Net Income), adjusted by adding thereto the amount of (i) all amortization of intangibles and depreciation and (ii) Receivables Facility Financing Costs (to the extent not otherwise included). "Consolidated Funded Debt" means all Indebtedness of the Company and its Consolidated Subsidiaries which, on the date of determination, would be required to be shown on the Company's consolidated balance sheet prepared in accordance with GAAP, PLUS all Receivables Facility Attributed Indebtedness of the Company and its Consolidated Subsidiaries on the date of determination regardless of its treatment under GAAP. "Consolidated Net Income" means, for any period, the consolidated net after-tax income of the Company and its Consolidated Subsidiaries determined in accordance with GAAP. "Consolidated Subsidiary" means any Subsidiary that is consolidated on a balance sheet of the Company in accordance with GAAP; PROVIDED, THAT, notwithstanding anything in this Agreement to the contrary, for purposes of the definitions of Consolidated EBITDA, Consolidated Funded Debt, Consolidated Net Income and all components of each of the foregoing, Howmet and its Subsidiaries shall be included as Consolidated Subsidiaries of the Company. "Consolidated Total Assets" means, as at any date of determination, the aggregate value of assets of the Company and its Consolidated Subsidiaries determined in accordance with GAAP. "Conversion/Continuation Notice" is defined in Section 2.1.5. "Corporate Base Rate" means a rate per annum equal to the corporate base rate of interest announced by First Chicago from time to time, changing when and as said corporate base rate changes. "Default" means an event described in Article VII. Page 3 "Dollars" and "$" mean lawful money of the United States of America. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "Effective Date" means any Business Day on which the Company has complied with all of the terms and conditions of Section 4.1, the Company has paid all requisite fees to the Administrative Agent, the Company, the Administrative Agent and the Banks have executed this Agreement, and the Administrative Agent has notified the Company and the Banks that all such events have occurred. "Eurodollar Margin" means (a) for the period from the Effective Date until the date that is 180 days thereafter, 0.875% per annum; (b) for the period beginning 181 days after the Effective Date until the Revolving Credit Termination Date, 1.0% per annum; and (c) from and after the Revolving Credit Termination Date, 1.25% per annum. "Eurodollar Rate" means, with respect to a Eurodollar Rate Advance for the relevant Interest Period, a per annum rate equal to the sum of (a) the quotient of (i) the Base Eurodollar Rate applicable to that Interest Period, divided by (ii) one minus the Reserve Requirement (expressed as a decimal) applicable to that Interest Period, if any, plus (b) the Eurodollar Margin, changing when and as said Eurodollar Margin changes. The Eurodollar Rate shall be rounded, if necessary, to the next higher 1/100th of 1%. "Eurodollar Rate Advance" means an Advance which bears interest at a Eurodollar Rate. "Eurodollar Rate Loan" means a Loan which bears interest at a Eurodollar Rate. "Extension Request" means a notice in substantially the form of Exhibit "A" hereto, with appropriate insertions, duly executed and delivered to the Administrative Agent by the Company. "Federal Funds Rate" means, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10 a.m. (Chicago time) on such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by the Administrative Agent in its sole discretion. "First Chicago" means The First National Bank of Chicago in its individual capacity and not as agent hereunder. Page 4 "Floating Rate" means, for any day, a rate per annum equal to the higher of (a) the Corporate Base Rate for such day and (b) the Federal Funds Rate for such day plus .5% per annum. "Floating Rate Advance" means an Advance which bears interest at the Floating Rate. "Floating Rate Loan" means a Loan which bears interest at the Floating Rate. "Funded Debt/EBITDA Ratio" means, as at the last day of any fiscal quarter of the Company, the ratio of (i) Consolidated Funded Debt as of such day to (ii) Consolidated EBITDA for the four consecutive fiscal quarters ending on such day. "GAAP" means generally accepted principles of accounting as in effect at the time of application to the provisions hereof, except as provided with regard to Howmet pursuant to the definition of "Subsidiary" set forth herein. "Guaranty" of any Person means any agreement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes liable upon, the obligation of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person or otherwise assure any creditor of such other Person against loss, and shall include, without limitation, the contingent liability of such Person under or with respect to any Letter of Credit. "Howmet" means Howmet International, Inc., a Delaware corporation. "Indebtedness" of any Person means, without duplication, (a) the obligations of such Person (i) for borrowed money, (ii) under or with respect to notes payable and drafts accepted which represent extensions of credit (whether or not representing obligations for borrowed money) to such Person or (iii) reimbursement obligations with respect to letters of credit issued for the account of such Person or (iv) for the deferred purchase price of property or services other than current accounts payable arising in the ordinary course of business on terms customary in the trade, (b) the obligations of others, whether or not assumed, secured by Liens on property of such Person or payable out of the proceeds of or production from property now or hereafter owned or acquired by such Person, (c) the Capitalized Lease Obligations of such Person, (d) the obligations of such Person under Guaranties by such Person of any Indebtedness (other than obligations for borrowed money incurred to finance the purchase of property leased to such Person pursuant to a Capitalized Lease of such Person) of any other Person, (e) all Receivables Facility Attributed Indebtedness of such Person on the date of determination and (f) Off Balance Sheet Liabilities of such Person. "Interest Period" means, with respect to a Eurodollar Rate Advance, a period of one, two, three or six months commencing on a Business Day selected by the Company pursuant to this Agreement. Such Interest Period shall end on the day in the succeeding calendar month which Page 5 corresponds numerically to the beginning day of such Interest Period; PROVIDED, HOWEVER, that if there is no such numerically corresponding day in such succeeding month, such Interest Period shall end on the last Business Day of such succeeding month. If an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day; PROVIDED, HOWEVER, that if said next succeeding Business Day falls in a new month, such Interest Period shall end on the immediately preceding Business Day. "Lending Installation" means, for each type of Loan, any office, branch, subsidiary or affiliate of any Bank. "Letter of Credit" of any Person means a letter of credit or similar instrument which is issued upon the application of such Person or upon which such Person is account party or for which such Person is in any way liable. "Lien" means, with respect to the property of any Person, any security interest, mortgage, pledge, lien, claim, charge, encumbrance, conditional sale agreement, title retention agreement, lessor's interest under a Capitalized Lease or analogous instrument, in, of or on any of the property of such Person. "Loan" means, with respect to a Bank, such Bank's portion of any Advance or, during the Term Loan Period, such Bank's Term Loan. "Loan Documents" means this Agreement and the Notes. "Note" means a promissory note in substantially the form of Exhibit "B" hereto, with appropriate insertions, duly executed and delivered to the Administrative Agent by the Company and payable to the order of a Bank in the amount of its Commitment, including any amendment, modification, renewal or replacement of such promissory note. "Obligations" means all unpaid principal and accrued and unpaid interest under the Notes, all accrued and unpaid commitment and extension fees and all other obligations of the Company or any Subsidiary to the Banks or to any Bank or the Administrative Agent arising under the Loan Documents. "Off-Balance Sheet Liability" of a Person means (i) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (ii) any liability under any sale and leaseback transaction which does not create a liability on the balance sheet of such Person, (iii) any liability under any financing lease or so-called "synthetic lease" transaction entered into by such Person, or (iv) any obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheets of such Person, but excluding Operating Leases. Page 6 "Operating Lease" of a Person means any lease of Property (other than a Capitalized Lease) by such Person as lessee which has an original term (including any required renewals and any renewals effective at the option of the lessor) of one year or more. "Outstanding Credit Exposure" means, as to any Bank at any time, the aggregate principal amount of its Loans outstanding at such time . "Outstandings" means at any time the aggregate of the principal amounts of all outstanding Advances. "Participants" is defined in Section 12.2.1. "Payment Date" shall mean the last Business Day of each quarter, commencing March 31, 1999. "Permitted Lien" means any lien described in clauses (a) through (i) of Section 6.2.6. "Person" means any corporation, natural person, firm, joint venture, partnership, trust, unincorporated organization, government or any department or agency of any government. "Plan" means a defined benefit pension plan as such term is defined in Section 3(35) of ERISA for the unfunded liabilities of which upon termination the Company or any Subsidiary could be held liable by the Pension Benefit Guaranty Corporation. "Plan Year" means a plan year as defined in Section 3(39) of ERISA. "Prepayment Event" means the earliest to occur of (a) the date of a public announcement that a Person or group of affiliated or associated Persons (an "Acquiring Person") has acquired, or has obtained the right to acquire, legal or beneficial ownership of more than 50% of the outstanding shares of the Voting Stock of the Company, (b) the date of the commencement of a tender offer or exchange offer that would result in an Acquiring Person legally or beneficially owning more than 50% of the outstanding shares of the Voting Stock of the Company, and (c) the date an Acquiring Person acquires all or substantially all of the assets of the Company. "Rate Option" means the Eurodollar Rate or the Floating Rate. "Receivables Facility Attributed Indebtedness" means the amount of obligations outstanding under a receivables purchase facility on any date of determination that would be characterized as principal if such facility were structured as a secured lending transaction rather than as a purchase. "Receivables Facility Financing Costs" means all cash fees, service charges, and other costs, as well as all collections or other amounts retained by purchasers of receivables pursuant to Page 7 a receivables purchase facility, which are in excess of amounts paid to the Company and its Consolidated Subsidiaries under any receivables purchase facility for the purchase of receivables pursuant to such facility. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System from time to time in effect and shall include any successor or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System from time to time in effect and shall include any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System. "Reportable Event" means a reportable event as defined in Section 4043 of ERISA. "Required Banks" means Banks in the aggregate having at least 51% of the Aggregate Commitment or, if the Aggregate Commitment has been terminated, Banks in the aggregate holding at least 51% of the Aggregate Outstanding Credit Exposure. "Reserve Requirement" means, with respect to an Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on Eurocurrency liabilities. "Revolving Credit Termination Balance" means the aggregate principal amount of Advances outstanding on the Revolving Credit Termination Date after giving effect to any Advances made or repaid on such date. "Revolving Credit Termination Date" means November 5, 1999 or any earlier date on which the Aggregate Commitment is reduced to zero or otherwise terminated pursuant to the terms hereof. "Revolving Loan" is defined in Section 2.1.1. "Section" means a numbered section of this Agreement, unless another document is specifically referenced. "Security" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended. "Stock Acquisition" means the acquisition by the Company of all outstanding shares of capital stock of Howmet owned by The Carlyle Group for an aggregate purchase price not to Page 8 exceed the amount set forth in the disclosure letter dated of even date herewith from the Company to the Agent and the Banks. "Subsidiary" of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, association, joint venture, limited liability company or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a "Subsidiary" shall mean a Subsidiary of the Company, PROVIDED THAT, except for the limited purposes as set forth in the definition of Consolidated Subsidiary, Howmet shall not be deemed a Subsidiary of the Company for any purposes under this Agreement. "Term Loan" is defined in Section 2.2.1. "Term Loan Period" means the period from the Revolving Credit Termination Date to the date that is nine-months after the Revolving Credit Termination Date. "Termination Date" means (1) (a) if the conversion of the Revolving Credit Termination Balance to Term Loans does not occur, the Revolving Credit Termination Date or (b) if the conversion of the Revolving Credit Termination Balance to Term Loans occurs, the date that is nine months after the Revolving Credit Termination Date, or (2) any earlier date on which the Commitments are canceled by the Company or otherwise terminated pursuant to this Agreement. "Transferee" is defined in Section 12.4. "Type" means, with respect to any Advance, its nature as a Floating Rate Advance or Eurodollar Rate Advance. "Unfunded Liabilities" means the amount (if any) by which the excesses of the accumulated benefit obligations as determined under Financial Accounting Standard Board Statement 87 exceeds the fair value of all such Plan assets allocable to such benefits, as reported each year in the Company's Annual Report to Stockholders. "Unmatured Default" means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default. "Voting Stock" means Securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect the corporate directors (or Persons performing similar functions). Page 9 "Wholly-Owned Subsidiary" means any Subsidiary of which all of the outstanding voting securities or ownership interests having ordinary voting power are owned or controlled, directly or indirectly, by the Company or one or more Wholly-Owned Subsidiaries, or by the Company and one or more Wholly-Owned Subsidiaries, or any similar business organization which is so owned or controlled. "Year 2000 Issues" means anticipated costs, problems and uncertainties associated with the inability of certain computer applications to effectively handle data including dates on and after January 1, 2000, as such inability affects the business, operations and financial condition of the Company and its Subsidiaries and of the Company's and its Subsidiaries' material customers, suppliers and vendors. "Year 2000 Program" is defined in Section 5.19. The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms. ARTICLE II THE CREDITS 2.1. ADVANCES. 2.1.1. COMMITMENTS TO MAKE REVOLVING LOANS. From and including the Effective Date and prior to the Revolving Credit Termination Date, each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans (individually a "Revolving Loan" and collectively the "Revolving Loans") to the Company from time to time in amounts not to exceed in the aggregate at any one time outstanding the amount of its Commitment, PROVIDED that in no event may the Outstandings at any one time exceed the Aggregate Commitment as in effect at such time. Subject to the terms of this Agreement, the Company may borrow, repay and reborrow at any time prior to the Revolving Credit Termination Date. Subject to the terms and conditions set forth in Section 2.2 and at the option of the Borrower, the Revolving Loans outstanding as of the Revolving Credit Termination Date shall be converted to Term Loans and shall be repaid in accordance with the terms of Section 2.2. 2.1.2. RATABLE LOANS. Each Advance hereunder shall consist of Revolving Loans made from the several Banks ratably in proportion to the ratios that their respective Commitments bear to the Aggregate Commitment. Page 10 2.1.3. RATE OPTIONS. The Advances may be Floating Rate Advances or Eurodollar Rate Advances, or a combination thereof, selected by the Company in accordance with Sections 2.1.4 and 2.1.5; PROVIDED that there shall be no more than ten (10) Interest Periods in effect with respect to all of the Loans at any time. 2.1.4. METHOD OF SELECTING RATE OPTIONS AND INTEREST PERIODS FOR ADVANCES. The Company shall select the Rate Options and Interest Periods applicable to each Advance from time to time. The Company shall give the Administrative Agent irrevocable notice (a "Borrowing Notice") not later than 10:00 a.m. Chicago time on the Borrowing Date of each Floating Rate Advance and at least three Business Days before the Borrowing Date for each Eurodollar Rate Advance, specifying: (a) the Borrowing Date, which shall be a Business Day, of such Advance, (b) the aggregate amount of such Advance, which shall be less than or equal to the Aggregate Available Commitment, (c) the Rate Option selected for such Advance, and (d) in the case of each Eurodollar Rate Advance, the Interest Period applicable thereto. 2.1.5. CONVERSION AND CONTINUATION OF OUTSTANDING ADVANCES. Floating Rate Advances shall continue as Floating Rate Advances unless and until such Floating Rate Advances are converted into Eurodollar Rate Advances. Each Eurodollar Rate Advance shall continue as a Eurodollar Rate Advance until the end of the then applicable Interest Period therefor, at which time such Eurodollar Rate Advance shall be automatically converted into a Floating Rate Advance unless the Company shall have given the Administrative Agent a Conversion/Continuation Notice requesting that, at the end of such Interest Period, such Eurodollar Rate Advance continue as a Eurodollar Rate Advance for the same or another Interest Period. Subject to the terms of Section 2.3.2, the Company may elect from time to time to convert all or any part of an Advance of any Type into any other Type or Types of Advances; provided that (i) any conversion of any Eurodollar Rate Advance shall be made on, and only on, the last day of the Interest Period applicable thereto, and (ii) no Advance may be continued as or converted into a Eurodollar Rate Advance at such times as a Default or Unmatured Default has occurred and is continuing. The Company shall give the Administrative Agent irrevocable notice (a "Conversion/Continuation Notice") of each conversion of an Advance or continuation of a Eurodollar Rate Advance not later than 10:00 a.m. Chicago time on the date of the requested conversion into a Floating Rate Advance and at least three Business Days, in the case of a conversion into or continuation of a Eurodollar Advance, prior to the date of the requested conversion or continuation, specifying: (i) the requested date, which shall be a Business Day, of such conversion or continuation; Page 11 (ii) the aggregate amount and Type of the Advance which is to be converted or continued; and (iii)the amount and Type(s) of Advance(s) into which such Advance is to be converted or continued and, in the case of a conversion into or continuation of a Eurodollar Rate Advance, the duration of the Interest Period applicable thereto. 2.2. TERM LOAN EXTENSION OPTION. 2.2.1. OPTION. During the period that is not less than 5 Business Days prior to the Revolving Credit Termination Date and that is not greater than 30 days prior to the Revolving Credit Termination Date, the Company may request the Banks to convert the Revolving Loans outstanding on the Revolving Credit Termination Date into term loans (individually, a "Term Loan" and, collectively, the "Term Loans") and, subject to the terms and conditions contained in this Section 2.2, the Revolving Credit Termination Balance will be converted on the Revolving Credit Termination Date into Term Loans. 2.2.2. EXTENSION REQUEST. When the Company wishes to request conversion of the Revolving Loans into Term Loans, it shall transmit to the Administrative Agent by telecopy or telefacsimile an Extension Request so as to be received no later than noon Chicago time at least five (5) Business Days prior to the Revolving Credit Termination Date. Promptly upon receipt of an Extension Request, the Administrative Agent shall send to the Banks by telecopy or telefacsimile a copy of such Extension Request. 2.2.3. CONDITIONS PRECEDENT TO EXTENSION. No Bank shall be required to convert its Revolving Loans to Term Loans on the Revolving Credit Termination Date unless: (a) An Extension Request shall have been delivered to the Administrative Agent in accordance with the terms of Section 2.2; (b) No Default or Unmatured Default shall have occurred and be continuing under Section 7.2, 7.3, 7.6, 7.7, 7.8 or 7.11; (c) No Prepayment Event has occurred; (d) On or prior to the Revolving Credit Termination Date, the Company has paid to the Administrative Agent an extension fee in the amount of .10% of the Revolving Credit Termination Balance for the ratable benefit of the Banks and any other fees due and owing to the Administrative Agent and the Banks as at the Revolving Credit Termination Date. Page 12 Submission by the Company of an Extension Request shall constitute a representation and warranty by the Company that the conditions contained in Section 2.2.3 have been satisfied. If the conditions precedent to conversion contained in this Section 2.2.3 have not been satisfied or waived, the Revolving Loans shall be due payable on the Revolving Credit Termination Date. 2.2.4. REPAYMENT OF TERM LOANS. The outstanding principal balance of each Term Loan shall be paid in full by the Company on the Termination Date. Amounts repaid with respect to the Term Loans may not be reborrowed. 2.2.5. RATE OPTIONS. The Revolving Loans converted to Term Loans on the Revolving Credit Termination Date shall initially continue as the Type or Types of Advances, with the Interest Periods then applicable as are outstanding on the Revolving Credit Termination Date and shall be continued as or converted into Floating Rate Advances or Eurodollar Rate Advances, or a combination thereof, selected by the Company in accordance with Sections 2.2.6. 2.2.6. CONVERSION AND CONTINUATION OF OUTSTANDING ADVANCES CONSISTING OF TERM LOANS. Floating Rate Advances shall continue as Floating Rate Advances unless and until such Floating Rate Advances are converted into Eurodollar Rate Advances. Each Eurodollar Rate Advance shall continue as a Eurodollar Rate Advance until the end of the then applicable Interest Period therefor, at which time such Eurodollar Rate Advance shall be automatically converted into a Floating Rate Advance unless the Company shall have given the Administrative Agent a Conversion/Continuation Notice requesting that, at the end of such Interest Period, such Eurodollar Rate Advance continue as a Eurodollar Rate Advance for the same or another Interest Period. Subject to the terms of Section 2.3.2, the Company may elect from time to time to convert all or any part of an Advance of any Type into any other Type or Types of Advances; provided that (i) any conversion of any Eurodollar Rate Advance shall be made on, and only on, the last day of the Interest Period applicable thereto, and (ii) no Advance may be continued as or converted into a Eurodollar Rate Advance at such times as a Default or Unmatured Default has occurred and is continuing. The Company shall give the Administrative Agent a Conversion/Continuation Notice of each conversion of an Advance or continuation of a Eurodollar Rate Advance not later than 10:00 a.m. Chicago time on the date of the requested conversion into a Floating Rate Advance and at least three Business Days, in the case of a conversion into or continuation of a Eurodollar Advance, prior to the date of the requested conversion or continuation, specifying: (i) the requested date, which shall be a Business Day, of such conversion or continuation; (ii) the aggregate amount and Type of the Advance which is to be converted or continued; and (iii)the amount and Type(s) of Advance(s) into which such Advance is to be converted or continued and, in the case of a conversion into or continuation of a Eurodollar Rate Advance, the duration of the Interest Period applicable thereto. 2.3. GENERAL FACILITY TERMS. 2.3.1. METHOD OF BORROWING. Not later than 1:00 p.m. Chicago time on each Borrowing Date, each Bank shall make available its Loan or Loans in funds immediately available in Chicago, to the Administrative Agent at its address specified pursuant to Article XII. The Administrative Agent will make the funds so received from the Banks available to the Company at the Administrative Agent's aforesaid address. Notwithstanding the foregoing provisions of this Section 2.3.1 but subject to Section 2.1.5, to the extent that a Loan made by a Bank matures on the Borrowing Date of a requested Loan, such Bank shall first apply the proceeds of the Loan it is then making to the repayment of the maturing Loan. Page 13 2.3.2. MINIMUM AMOUNT OF EACH ADVANCE. Each Advance shall be in the minimum amount of $5,000,000 (and in integral multiples of $1,000,000 if in excess thereof), PROVIDED, HOWEVER, that any Floating Rate Advance may be in the aggregate amount of the Aggregate Available Commitment. 2.3.3. TERMINATION; REQUIRED PAYMENTS. The Commitments to lend hereunder shall expire on the Revolving Credit Termination Date. Unless converted to Term Loans in accordance with the provisions of Section 2.2, any outstanding Revolving Loans and all other unpaid Obligations (other than the Term Loans) shall be paid in full by the Company on the Revolving Credit Termination Date or, at the election of the Required Banks in accordance with Section 8.1, upon the occurrence of a Prepayment Event. Any outstanding Term Loans and all other unpaid Obligations shall be paid in full by the Company on the Termination Date or, at the election of the Required Banks in accordance with Section 8.1, upon the occurrence of a Prepayment Event. 2.3.4. OPTIONAL PRINCIPAL PAYMENTS. The Company may from time to time pay all outstanding Floating Rate Advances, or, in a minimum aggregate amount of $5,000,000, or any integral multiple of $1,000,000 in excess thereof, any portion of the outstanding Floating Rate Advances upon one Business Day's prior notice to the Administrative Agent without penalty or premium. A Eurodollar Rate Advance may be paid prior to the last day of the applicable Interest Period upon three Business Days' prior notice to the Administrative Agent; PROVIDED, HOWEVER, that the Company shall indemnify each Bank for any loss or cost incurred by it resulting therefrom in accordance with Section 3.4. 2.3.5. COMMITMENT FEES AND VOLUNTARY REDUCTION OF COMMITMENTS. (a) The Company agrees to pay to the Administrative Agent for the account of each Bank a commitment fee payable on the average daily unborrowed portion of such Bank's Commitment from the Effective Date to but not including the Revolving Credit Termination Date, equal to .15% per annum, such fee payable in arrears on each Payment Date hereafter and on the Revolving Credit Termination Date. (b) The Company may permanently reduce the Aggregate Commitment in whole, or in part ratably among the Banks in integral multiples of $5,000,000, upon at least three Business Days' written notice to the Administrative Agent, which shall be irrevocable and shall specify the amount of any such reduction; PROVIDED, HOWEVER, that the amount of the Aggregate Commitment may not be reduced below the Outstandings at the time such reduction is to take effect. All accrued commitment fees shall be payable on the effective date of any termination of the obligations of the Banks to make Revolving Loans hereunder. Page 14 2.3.6. CHANGES IN INTEREST RATE, ETC. Each Floating Rate Advance shall bear interest on the outstanding principal amount thereof, for each day from and including the date such Advance is made or is converted from a Eurodollar Rate Advance into a Floating Rate Advance pursuant to Section 2.1.5 or Section 2.2.6 to but excluding the date it becomes due or is converted into a Eurodollar Rate Advance pursuant to Section 2.1.5 or Section 2.2.6 hereof, at a rate per annum equal to the Floating Rate for such day. Changes in the rate of interest on that portion of any Advance maintained as a Floating Rate Advance will take effect simultaneously with each change in the Floating Rate. Each Eurodollar Rate Advance shall bear interest from and including the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such Eurodollar Rate Advance. Prior to the Revolving Credit Termination Date, no Interest Period may end after the Revolving Credit Termination Date. In the event the Revolving Loans are converted to Term Loans in accordance with the terms of Section 2.2, thereafter no Interest Period may end after the Termination Date. 2.3.7. RATINGS CHANGE RATE INCREASE; RATE AFTER MATURITY. 2.3.7.1. RATE INCREASE WITH RATINGS CHANGE. If at any time the Company's senior unsecured debt rating is below BBB- as determined by Standard and Poor's Ratings Group (or its successors or assigns) or below Baa3 as determined by Moody's Investors Service (or its successors and assigns), the interest rates applicable to the Loans shall automatically be increased by 0.25% per annum. 2.3.7.2. RATE AFTER MATURITY. Except as provided in the next sentence, any Advance not paid at maturity, whether by acceleration or otherwise, shall bear interest until paid in full at a rate per annum equal to the Floating Rate plus 2% per annum. In the case of a Eurodollar Rate Advance the maturity of which is accelerated pursuant to Section 8.1, such Eurodollar Rate Advance shall bear interest until paid in full for the remainder of the applicable Interest Period at the rate otherwise applicable to such Interest Period plus 2% per annum and thereafter at the Floating Rate plus 2% per annum. 2.3.8. INTEREST PAYMENT DATES; INTEREST AND FEE BASIS. Interest accrued on each Floating Rate Advance shall be payable on each Payment Date, on any date on which the Floating Rate Advance is prepaid, whether due to acceleration or otherwise, and at maturity. Interest accrued on each Eurodollar Rate Advance shall be payable on the last day of its applicable Interest Period and on any date on which such Advance is prepaid, whether due to acceleration or otherwise. Interest accrued on each Eurodollar Rate Advance having an Interest Period longer than three months shall also be payable on the last day of each three-month interval during such Interest Period. Interest on Eurodollar Rate Advances and commitment fees shall be calculated for the actual number of days elapsed on the basis of a year consisting of 360 days. Interest on Floating Rate Advances shall be calculated for the actual number of days elapsed on the basis of a year consisting of 365, or when appropriate 366, days. Interest shall be payable for the day an Advance is made but not for the day of any payment on the amount paid if payment is received prior to 1:00 p.m. (Chicago time) at the place of payment. In the event any such payment is made with the proceeds of an Advance, such payment shall be deemed to have been Page 15 made prior to 1:00 p.m. (Chicago time) on the day such Advance is made. If any payment of principal of or interest on an Advance or any payment of fees shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment or a payment of fees, such extension of time shall be included in computing interest in connection with such principal payment or in computing the amount of such payment of fees, as the case may be. 2.3.9. METHOD OF PAYMENT. All payments of principal, interest, and fees hereunder shall be made in immediately available funds to the Administrative Agent at the Administrative Agent's address specified pursuant to Article XIII or at any other Lending Installation of the Administrative Agent specified in writing by the Administrative Agent to the Company by noon (local time) on the date when due. Subject to Section 8.1(b), each such payment shall be applied to any Advances and other amounts then due in accordance with the written instructions from the Company to the Administrative Agent before or accompanying such payment and shall be applied ratably among those Banks for whom any payment is then due in proportion to the type of Advance or other payment then due. Each payment delivered to the Administrative Agent for the account of any Bank shall be delivered promptly by the Administrative Agent to such Bank in the same type of funds which the Administrative Agent received at its address specified pursuant to Article XIII or at any Lending Installation specified in a notice received by the Administrative Agent from such Bank. The Administrative Agent is hereby authorized to charge the account of the Company at the office of the Administrative Agent for each payment of principal, interest and fees as it becomes due hereunder. 2.3.10. NOTES; TELEPHONIC NOTICES. The Loans shall be evidenced by the Notes. Each Bank is hereby authorized to record on the schedule attached to its Notes, or otherwise record in accordance with its usual practice, the date and amount of each of its Loans of the type evidenced by such Note; PROVIDED, HOWEVER, that any failure to so record shall not affect the Company's obligations under any Note. The Company hereby authorizes the Banks and the Administrative Agent to extend Advances and effect Rate Option selections based on telephonic notices made by any person or persons the Administrative Agent or any Bank in good faith believes to be an Authorized Representative acting on behalf of the Company. The Company agrees to deliver promptly to the Administrative Agent a written confirmation of each telephonic notice signed by Page 16 an Authorized Representative. If the written confirmation differs in any material respect from the action taken by the Administrative Agent and the Banks, the records of the Administrative Agent and the Banks shall govern absent demonstrable error. 2.3.11. NOTIFICATION OF ADVANCES, INTEREST RATES, PREPAYMENTS AND COMMITMENT REDUCTIONS. Promptly after receipt thereof, the Administrative Agent will notify each Bank of the contents of each commitment reduction notice, Borrowing Notice, Conversion/Continuation Notice, Extension Request and repayment notice received by it hereunder. The Administrative Agent will notify each Bank of the interest rate applicable to each Eurodollar Rate Advance promptly upon determination of such interest rate and will give each Bank prompt notice of each change in the Corporate Base Rate. 2.3.12. LENDING INSTALLATIONS. Each Bank may book the Loans at any Lending Installation selected by the Bank and may change the Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Notes shall be deemed held by each Bank for the benefit of such Lending Installation. Each Bank may, by written notice to the Administrative Agent and the Company, designate a Lending Installation through which Loans are made by it and for whose account Loan payments are to be made. Each Bank shall use its best efforts to minimize any additional cost (if any) to the Company, under Section 3.3 or otherwise, as a result of a change of Lending Installation (including, if appropriate, a return to a prior Lending Installation at such time as the circumstances giving rise to a change of Lending Installation are no longer in effect), but no Bank shall be required to take or omit to take any action which action or omission would be economically or legally disadvantageous to such Bank. In the event that any Bank has booked its outstanding Eurodollar Rate Loans at such a designated Lending Installation, the Company hereby agrees, upon the written request of such Bank and receipt of such Bank's applicable Note, to execute and deliver to such Bank for the account of such Bank's existing Lending Installation and the account of such designated Lending Installation, respectively, both: (i) as the case may be, a new Note which shall exclusively evidence all of such Bank's Floating Rate Loans then and thereafter outstanding and (ii) as the case may be, a new Note which shall exclusively evidence all of such Bank's Eurodollar Rate Loans then and thereafter outstanding, each of said new Notes to be in substantially the form of Exhibit "B" hereto with such appropriate changes in either case as may be agreed to by such Bank, the Company and the Administrative Agent and each of their respective legal counsel. Upon such Bank's receipt of its new Notes, it is hereby authorized and instructed by the Company to record on the respective schedules attached thereto all of such Bank's Loans then outstanding of the type evidenced by each such Note. 2.3.13. NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT. Unless the Company or a Bank, as the case may be, notifies the Administrative Agent prior to the date on which it is scheduled to make payment to the Administrative Agent of (a) in the case of a Bank, the proceeds of a Loan or (b) in the case of the Company, a payment of principal, interest or fees to the Administrative Agent for the account of the Banks, that it does not intend to make such payment, the Administrative Agent may assume that such payment has been made. The Administrative Page 17 Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption. If such Bank or the Company, as the case may be, has not in fact made such payment to the Administrative Agent, the recipient of such payment shall, on demand by the Administrative Agent, repay to the Administrative Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Administrative Agent until the date the Administrative Agent recovers such amount at a rate per annum equal to (a) in the case of payment by a Bank, the Federal Funds Rate for such day or (b) in the case of payment by the Company, the interest rate applicable to the relevant Loan. 2.3.14. WITHHOLDING TAX EXEMPTION. At least five Business Days prior to the first date on which interest or fees are payable hereunder for the account of any Bank, each Bank that is not incorporated under the laws of the United States of America, or a state thereof, agrees that it will deliver to each of the Company and the Administrative Agent two duly completed copies of United States Internal Revenue Service Form 1001 or 4224, certifying in either case that such Bank is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes. Each Bank which so delivers a Form 1001 or 4224 further undertakes to deliver to each of the Company and the Administrative Agent two additional copies of such form (or a successor form) on or before the date that such form expires (currently, three successive calendar years for Form 1001 and one calendar year for Form 4224) or becomes obsolete or after the occurrence of any event requiring a change in the most recent forms so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by the Company or the Administrative Agent, in each case certifying that such Bank is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Bank from duly completing and delivering any such form with respect to it and such Bank advises the Company and the Administrative Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax. ARTICLE III CHANGE IN CIRCUMSTANCES; INDEMNIFICATION 3.1. YIELD PROTECTION. If any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) which becomes effective after the date hereof, or any interpretation thereof, or compliance of any Bank with such, Page 18 (i) subjects any Bank or any applicable Lending Installation to any tax, duty, charge or withholding on or from payments due from the Company (excluding taxation of the overall net income of any Bank or applicable Lending Installation), or changes the basis of taxation of payments to any Bank in respect of its Loans or other amounts due it hereunder, or (ii) imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank or any applicable Lending Installation (other than reserves and assessments taken into account in determining the interest rate applicable to Eurodollar Rate Advances), or (iii) imposes any other condition the result of which is to increase the cost to any Bank or any applicable Lending Installation of making, funding or maintaining loans or reduces any amount receivable by any Bank or any applicable Lending Installation in connection with loans, or requires any Bank or any applicable Lending Installation to make any payment calculated by reference to the amount of loans held or interest received by it, by an amount deemed material by such Bank, then, within 15 days of demand by such Bank, the Company shall pay such Bank that portion of such increased expense incurred or reduction in an amount received which such Bank determines is attributable to making, funding and maintaining its Loans and its Commitment. 3.2. CHANGES IN CAPITAL ADEQUACY REGULATIONS. If a Bank determines the amount of capital required or expected to be maintained by such Bank, any Lending Installation of such Bank or any corporation controlling such Bank is increased as a result of a Change, then, within 15 days of demand by such Bank, the Company shall pay such Bank the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Bank determines is attributable to this Agreement, its Loans or its obligation to make Loans hereunder (after taking into account such Bank's policies as to capital adequacy). No Bank shall be entitled to demand payment under this Section 3.2 to the extent that such payment relates to a period of time more than 90 days prior to the date upon which such Bank first notified the Company of the occurrence of the event entitling such Bank to such payment. "Change" means (i) any change after the date of this Agreement in the Risk-Based Capital Guidelines or (ii) any adoption of or change in any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the date of this Agreement which affects the amount of capital required or expected to be maintained by any Bank or any Lending Installation or any corporation controlling any Bank. "Risk-Based Capital Guidelines" means (i) the risk-based capital guidelines in effect in the United States on the date of this Agreement, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States implementing the July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices Entitled Page 19 "International Convergence of Capital Measurements and Capital Standards," including transition rules, and any amendments to such regulations adopted prior to the date of this Agreement. 3.3. AVAILABILITY OF INTEREST RATE. If any Bank determines that maintenance of its Eurodollar Rate Loans at a suitable Lending Installation would violate any applicable law, rule, regulation, or directive, whether or not having the force of law, or if the Required Banks determine that (i) deposits of a type and maturity appropriate to match fund Eurodollar Rate Advances are not available or (ii) a Eurodollar Rate does not accurately reflect the cost of making or maintaining a Eurodollar Rate Advance, then the Administrative Agent shall suspend the availability of the affected Rate Option and (subject to the next sentence) require any Eurodollar Rate Advances outstanding under an affected Rate Option to be converted to an unaffected Rate Option. Notwithstanding anything in the preceding sentence to the contrary, the Company shall not be required to pay or convert any outstanding Eurodollar Rate Loan or Eurodollar Rate Advance unless such payment or conversion is legally required in accordance with the circumstances causing such unavailability. Subject to the provisions of Article II hereof, the Company may select any unaffected Rate Option to apply to such affected Advances. If the Company fails to select a new Rate Option, the affected Advances shall be Floating Rate Advances. 3.4. FAILURE TO PAY OR BORROW ON CERTAIN DATES. If any payment of a Eurodollar Rate Advance occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment or otherwise, or a Eurodollar Rate Advance is not made on the date specified by the Company for any reason other than default by the Banks, the Company will indemnify each Bank for any loss or cost incurred by it resulting therefrom, including, without limitation, any loss or cost in liquidating or employing deposits acquired to fund or maintain the Eurodollar Rate Advance. 3.5. BANK CERTIFICATES; SURVIVAL OF INDEMNITY. To the extent reasonably possible, each Bank shall designate an alternate Lending Installation with respect to its Eurodollar Rate Loans to reduce any liability of the Company to such Bank under Sections 3.1 and 3.2 or to avoid the unavailability of a Rate Option under Section 3.3, so long as such designation is not disadvantageous to such Bank as determined by such Bank in its sole discretion. A certificate of a Bank as to the amount due, if any, under Sections 3.1, 3.2, or 3.4 shall be final, conclusive and binding on the Company in the absence of manifest error. Such certificate shall set forth in reasonable detail the basis of the determination of amounts due under such Sections. Determination of amounts payable under such Sections in connection with a Eurodollar Rate Loan shall be calculated as though each Bank funded its Eurodollar Rate Loan through the purchase of a deposit of the type and maturity corresponding to the deposit used as a reference in determining the Eurodollar Rate applicable to such Loan, whether in fact that is the case or not. Unless otherwise provided herein, the amount specified in the certificate shall be payable on demand after receipt by the Company of the certificate. The obligations of the Company under Sections 3.1, 3.2, and 3.4 shall survive payment of the Obligations and termination of this Agreement. Page 20 ARTICLE IV CONDITIONS PRECEDENT 4.1. INITIAL ADVANCE. No Bank shall be required to make its initial Revolving Loan hereunder unless the Company has furnished to the Administrative Agent with sufficient copies for the Banks: (a) Copies of the Articles of Incorporation of the Company, together with all amendments, and a certificate of good standing, both certified on or within 15 days prior to the Effective Date by the Secretary of State of Delaware. (b) Copies, certified on the Effective Date by the Secretary or Assistant Secretary of the Company, of its By-Laws and of its Board of Directors' resolutions (and resolutions of other bodies, if any are deemed necessary by counsel for any Bank) authorizing the execution of the Loan Documents. (c) An incumbency certificate, certified on the Effective Date by the Secretary or Assistant Secretary of the Company, which shall identify by name and title and bear the signature of the officers of the Company authorized to sign the Loan Documents and to make borrowings hereunder, upon which certificates the Banks shall be entitled to rely until informed of any change in writing by the Company. (d) A written opinion of the counsel to the Company, addressed to the Banks, in substantially the form of Exhibit "C" hereto. (e) A certificate, dated the Effective Date, signed by the Chief Financial Officer of the Company, stating that on the Effective Date (i) no Default or Unmatured Default has occurred and is continuing; (ii) the Company will be utilizing the proceeds to consummate the Stock Acquisition on the date of such Advance and (iii) no Prepayment Event has occurred and setting forth the determination of the Company's Funded Debt/EBITDA Ratio for the last day of the most recently ended fiscal quarter. (f) A Note payable to the order of each of the Banks. (g) Payment to the Agent of all fees due and owing to the Administrative Agent and the Banks as at the Effective Date. Page 21 (h) Written money transfer instructions, in substantially the form of Exhibit "D" hereto, addressed to the Administrative Agent and signed by an Authorized Officer, together with such other related money transfer authorizations as the Administrative Agent may have reasonably requested. (i) Such other documents as any Bank or its counsel may have reasonably requested. 4.2. EACH ADVANCE. No Bank shall be required to make any Advance unless on the applicable Borrowing Date: (a) There exists no Default or Unmatured Default or Prepayment Event. (b) The representations and warranties contained in Article V, except the representation and warranty contained in Section 5.5, are true and correct in all material respects as of such Borrowing Date as if made on such Borrowing Date except for changes in the Schedules hereto reflecting transactions permitted by this Agreement. (c) All legal matters incident to the making of such Advance shall be satisfactory to the Banks and their counsel. Each Borrowing Notice with respect to each such Advance shall constitute a representation and warranty by the Company that the conditions contained in Sections 4.2(a) and (b) have been satisfied. ARTICLE V REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to the Banks that: 5.1. CORPORATE EXISTENCE AND STANDING. Each of the Company and the Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and each is duly qualified and in good standing in each jurisdiction where, because of the nature of its activities or properties, such qualification is required and the failure so to qualify would materially and adversely affect its business, assets, financial condition, operations or prospects of the Company and its Subsidiaries taken as a whole. 5.2. AUTHORIZATION AND VALIDITY. The Company has the corporate power and authority and legal right to execute and deliver the Loan Documents and perform its obligations thereunder. Page 22 The execution and delivery by the Company of the Loan Documents and the performance of its obligations thereunder have been duly authorized by proper corporate proceedings and the Loan Documents constitute legal, valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally. 5.3. COMPLIANCE WITH LAWS AND CONTRACTS. Neither the execution and delivery by the Company of the Loan Documents, the consummation of the transactions therein contemplated, nor compliance with the provisions thereof will violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Company or any Subsidiary or the Company's or any Subsidiary's charter, articles or certificate of incorporation or by-laws or the provisions of any material indenture, instrument or agreement to which the Company or any Subsidiary is a party or is subject, or by which it, or its property, is bound, or conflict with or constitute a default thereunder, or result in the creation or imposition of any Lien pursuant to the terms of any such indenture, instrument or agreement. No order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required as of the date hereof in connection with the execution, delivery and performance of, or the legality, validity, binding effect or enforceability of, any of the Loan Documents. 5.4. FINANCIAL STATEMENTS. The June 30, 1998 audited consolidated financial statements of the Company and its Subsidiaries heretofore delivered to the Banks were prepared in accordance with GAAP in effect on the date such statements were prepared and fairly present the consolidated financial condition and operations of the Company and its Subsidiaries at such date and the consolidated results of their operations for the period then ended. 5.5. MATERIAL ADVERSE CHANGE. No material adverse change in the business, condition (financial or otherwise), operations, performance, or properties of the Company and its Subsidiaries taken as a whole has occurred since the date of the audited financial statements referred to in Section 5.4. The Borrower has made a full and complete assessment of the Year 2000 Issues and has a realistic and achievable program for remediating the Year 2000 Issues on a timely basis (the "Year 2000 Program"). Based on such assessment and on the Year 2000 Program the Borrower does not reasonably anticipate that Year 2000 Issues will have a Material Adverse Effect. 5.6. TAXES. The Company and the Subsidiaries have filed all United States federal tax returns and all other tax returns which are required to be filed and have paid all taxes due pursuant to said returns or pursuant to any assessment received by the Company or any Subsidiary, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided. Except as provided in Section 6.2.6(a), no material tax liens have been filed and no claims are being asserted with respect to any such taxes. The charges, accruals and reserves on the books of the Company and the Subsidiaries in respect of any taxes or other governmental charges are adequate. Page 23 5.7. LITIGATION. Except as disclosed in the Company's Form 10-K for the year ended June 30, 1998, there is no litigation or proceeding pending or, to the knowledge of any of their officers, threatened against the Company or any Subsidiary which would reasonably be expected to have a material adverse affect on the condition of the Company or the ability of the Company to perform its obligations under the Loan Documents. 5.8. ERISA. The Unfunded Liabilities of all Plans do not in the aggregate exceed an amount equal to 5 percent of the value (as of any date of determination) of all Plan assets allocable to Plan benefits guaranteed under ERISA. Each Plan complies in all material respects with all applicable requirements of law and regulations, neither the Company nor any of its Subsidiaries has withdrawn from any Plan or initiated steps to do so, no steps have been taken to terminate any Plan, and no Reportable Event has occurred with respect to any Plan, the cumulative effect of which could have a material adverse effect on the business, operations, properties, assets or conditions (financial or otherwise) of the Company and the Subsidiaries, taken as a whole. 5.9. DEFAULTS AND PREPAYMENT EVENT. No Default or Unmatured Default has occurred and is continuing. No Prepayment Event has occurred. 5.10. ACCURACY OF INFORMATION. No information, exhibit or report furnished by the Company or any Subsidiary in writing to the Administrative Agent or to any Bank in connection with the negotiation of the Loan Documents contained any material misstatement of fact or omitted to state any fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. 5.11. REGULATION U. Neither the Company nor any Subsidiary is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying "margin stock" (as defined in Regulation U). No part of the proceeds of any Loan will be used in a manner which would violate, or result in a violation of, Regulation U. No part of the proceeds of any Loan will be used for "purchasing" or "carrying" "margin stock" (each as defined in Regulation U). 5.12. PARI PASSU. All the payment obligations of the Company arising under or pursuant to the Loan Documents will at all times rank pari passu with all other unsecured and unsubordinated payment obligations and liabilities (including contingent obligations and liabilities) of the Company (other than those which are mandatorily preferred by laws or regulations of general application). 5.13. INVESTMENT COMPANY. The Company is not, and after giving effect to any Advance will not be, an "investment company" within the meaning of the United States Investment Company Act of 1940, as amended. Page 24 5.14. MATERIAL LAWS. Neither the Company nor any Subsidiary has received any notice to the effect that its operations are not in material compliance with any of the requirements of applicable federal, state and local environmental, health and safety statutes and regulations with respect to, or the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a release into the environment of, any toxic or hazardous waste or physical substance, which non-compliance or remedial action could have a material adverse effect on the business, operations, properties, assets or conditions (financial or otherwise) of the Company and the Subsidiaries, taken as a whole. 5.15. MATERIAL AGREEMENTS. Neither the Company nor any Subsidiary is a party to any agreement or instrument or subject to any charter or other corporate restriction materially and adversely affecting its business, properties or assets, operations or condition (financial or otherwise). Neither the Company nor any Subsidiary is in default in the performance, observance of fulfillment or any of the obligations, covenants or conditions contained in any agreement to which it is a party or any agreement or instrument evidencing or governing Indebtedness, which default might have a material adverse effect on the business, properties, financial condition, or results of operations, of the Company and its Subsidiaries, taken as a whole. 5.16. SUBSIDIARIES. Schedule "1" hereto contains an accurate list of all of the presently existing Subsidiaries of the Company, setting forth their respective jurisdictions of incorporation and the percentage of their respective capital stock owned by the Company or other Subsidiaries (which in the case of Howmet shall be calculated after taking into account the Stock Acquisition). All of the issued and outstanding shares of capital stock of such Subsidiaries have been duly authorized and issued and are fully paid and non-assessable. Schedule "2" hereto accurately describes all Indebtedness of the Subsidiaries existing on the date of this Agreement. 5.17. OWNERSHIP OF PROPERTIES. Except as permitted by Section 6.2.6., on the date of this Agreement, the Company and its Subsidiaries will have good title, free of all Liens, to all of the properties and assets reflected in the financial statements referred to in Section 5.4 as owned by the Company and its Subsidiaries. ARTICLE VI COVENANTS During the term of this Agreement, unless the Required Banks shall otherwise consent in writing: 6.1. AFFIRMATIVE COVENANTS. Page 25 6.1.1. FINANCIAL REPORTING. The Company will maintain, for itself and the Consolidated Subsidiaries, a system of accounting established and administered in accordance with GAAP, and furnish to the Banks: (a) Within 90 days after the close of each of its fiscal years, an unqualified audit report certified by independent certified public accountants of recognized national standing, acceptable to the Banks, prepared in accordance with generally accepted accounting principles on a consolidated basis for itself and the Consolidated Subsidiaries, including balance sheets as of the end of such period, related profit and loss statements, a statement of shareholders' equity, and a statement of cash flow, accompanied by any management letter prepared by said accountants. (b) Within 45 days after the close of the first three quarterly periods of each of its fiscal years, for itself and the Consolidated Subsidiaries, consolidated unaudited balance sheets as at the close of each such period and consolidated profit and loss statements, a statement of shareholders' equity, and a statement of cash flow for the period from the beginning of such fiscal year to the end of such quarter (subject to normal year-end audit adjustments), all certified by its Chief Financial Officer or Treasurer. (c) Together with the financial statements required hereunder, a certificate signed by its Chief Financial Officer or Treasurer (i) stating that no Default or Unmatured Default exists, or if any Default or Unmatured Default exists, stating the nature and status thereof, and stating the steps the Company is taking to cure such Default or Unmatured Default and (ii) stating that no Prepayment Event has occurred. (d) As soon as available, and in any event within 45 calendar days after the end of each quarter of each fiscal year of the Company, a schedule, certified as being accurate by the Company's Chief Financial Officer, Treasurer or Controller, showing, as of the end of each such quarter, the Company's calculation, in form and detail satisfactory to the Administrative Agent, of the calculations required to be made to determine compliance with Section 6.2.7. The schedule delivered within 45 calendar days after the end of the fourth quarter of each fiscal year shall set forth a preliminary determination subject to adjustment upon receipt of audited annual financial statements and shall not be deemed to constitute a misrepresentation or breach if prepared in good faith and the audited numbers differ from the unaudited fourth quarter results. Page 26 (e) Promptly upon becoming available, copies of: (i) All financial statements, reports, notices and proxy statements sent by the Company or any Consolidated Subsidiary to the stockholders of the Company. (ii) All prospectuses of the Company or any Consolidated Subsidiary filed with the Securities and Exchange Commission or any other governmental agency succeeding to the jurisdiction thereof. (iii)All regular and periodic reports filed by the Company or any Consolidated Subsidiary with any securities exchange or with the Securities and Exchange Commission or any other governmental agency succeeding to the jurisdiction thereof. (f) As soon as possible and in any event within 10 days after receipt by the Company, a copy of (i) any notice or claim to the effect that the Company or any Subsidiary is or may be liable to any Person as a result of the release by the Company, any of its Subsidiaries, or any other Person of any toxic or hazardous waste or physical substance into the environment, and (ii) any notice alleging any violation of any federal, state or local environmental, health or safety law or regulation with respect to any toxic or hazardous waste or physical substance by the Company or any Subsidiary, which would, in either case, have a material adverse effect upon the operations of the Company and the Subsidiaries, taken as a whole. (g) As to each Plan, within 270 days after the close of each Plan Year of such Plan, a statement of the Unfunded Liabilities of such Plan, certified as correct by an actuary enrolled under ERISA. (h) As soon as possible and in any event within 10 days after the Company knows that any Reportable Event has occurred with respect to any Plan, a statement, signed by the chief financial officer of the Company, describing said Reportable Event and the action which the Company proposes to take with respect thereto. (i) Together with the financial statements required under Section 6.1.1(a) hereinabove, a copy of the Company's annual operating plan. (j) Such other information (including non-financial information) as the Administrative Agent or any Bank may from time to time reasonably request. 6.1.2. USE OF PROCEEDS. The Company will, and will cause each Subsidiary to, use the proceeds of the Advances to consummate the Stock Acquisition and for payment of fees and expenses in connection therewith. The Company shall use the proceeds of Advances in Page 27 compliance with all applicable legal and regulatory requirements and any use shall not result in a violation of any such applicable regulatory requirements, including, without limitation, Regulation U, and the Securities Act of 1933 and the Securities Exchange Act of 1934 and the regulations thereunder. 6.1.3. NOTICE OF DEFAULT AND PREPAYMENT EVENT. The Company will, and will cause each Subsidiary to, give prompt notice in writing to the Banks of the occurrence of any Default or Unmatured Default and of any other development related specifically to the business, properties or affairs of the Company, financial or otherwise (including, without limitation, developments with respect to Year 2000 Issues), which would be reasonably likely to materially adversely affect the Company's business, properties or affairs or the ability of the Company to repay the Obligations. The Company will give written notice to the Banks of any Prepayment Event no later than five Business Days following the occurrence of such Prepayment Event. 6.1.4. CONDUCT OF BUSINESS. The Company will carry on and conduct its business in the manner of a diversified industrial company with a commitment to the aerospace industry and will cause each Subsidiary to conduct its business in a manner consistent with the Company's objectives as such. The Company will, and will cause each Subsidiary to, do all things necessary to remain duly incorporated, validly existing and in good standing as a domestic corporation in its jurisdiction of incorporation, and maintain all requisite authority to conduct its business in each jurisdiction where, because of the nature of its activities or properties, such authority is required and the failure to maintain such authority would materially and adversely affect it business, assets, financial condition, operations or prospects. 6.1.5. PAYMENT OF TAXES. The Company will, and will cause each Subsidiary to, pay and discharge all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any property belonging to it, and all lawful claims which, if unpaid, would become a Lien, provided that neither the Company nor a Subsidiary shall be required to pay any such tax, assessment, charge, levy or claim the payment of which is being contested in good faith and by appropriate proceedings; the Company will, and will cause each Subsidiary to, make monthly accruals of all of the estimated liability of the Company and the Subsidiaries for such taxes, assessments, charges and levies, determined in accordance with GAAP, and establish adequate reserves determined in accordance with GAAP, for such thereof as may be contested, and reflect such accruals and reserves in all financial statements furnished hereunder. 6.1.6. INSURANCE. The Company will, and will cause each Subsidiary to, maintain insurance in such amounts and covering such risks as is consistent with sound business practice. 6.1.7. COMPLIANCE WITH LAWS. The Company will, and will cause each Subsidiary to, comply in all material respects with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject. Page 28 6.1.8. MAINTENANCE OF PROPERTIES. The Company will, and will cause each Subsidiary to, do all things necessary to maintain, preserve, protect and keep its properties in good repair, working order and condition, and make all necessary and proper repairs, renewals and replacements, except for properties no longer used or useful in the respective businesses of the Company or such Subsidiary. 6.1.9. INSPECTION. Except with respect to any information or activities which are classified by the United States Government or disclosure of which the Company reasonably believes would compromise matters of national security, the Company will, and will cause each Subsidiary to, permit the Banks, by their respective representatives and agents and without cost to the Company, to inspect any of the properties, corporate books and financial records of the Company and each Subsidiary, to examine and make copies of the books of accounts and other financial records of the Company and each Subsidiary, and to discuss the affairs, finances and accounts of the Company and each Subsidiary with, and to be advised as to the same by, their respective officers at such reasonable times and intervals as the Banks may designate. 6.2. NEGATIVE COVENANTS. 6.2.1. DIVIDENDS. The Company will not, nor will it permit any Subsidiary to, declare or pay any dividends on its capital stock or redeem, repurchase or otherwise acquire or retire any of its capital stock at any time outstanding, if a Default or Unmatured Default (except any Default or Unmatured Default described in Section 7.5 hereof) or Prepayment Event exists or would exist as a result of such declaration, payment or redemption. 6.2.2. INDEBTEDNESS OF SUBSIDIARIES. The Company will not permit any Subsidiary to create, incur or suffer to exist any Indebtedness, except: (a) Indebtedness existing on the date of this Agreement and refinancings of such Indebtedness; (b) Indebtedness to the Company; and (c) other Indebtedness which at any time does not exceed in the aggregate $75,000,000. 6.2.3. MERGER. The Company will not, nor will it permit any Subsidiary to, merge or consolidate with or into any other Person, except: (a) any Subsidiary may merge or consolidate with or into the Company or any Wholly-Owned Subsidiary so long as in any merger or consolidation involving the Company, the Company shall be the surviving or continuing corporation; and Page 29 (b) the Company may consolidate or merge with any other corporation if (i) the corporation which results from such merger or consolidation (the "surviving corporation") is organized under the laws of the United States or a jurisdiction thereof, (ii) the due and punctual payment of the principal of and interest on all of the Notes and the due and punctual performance and observance of all of the covenants in the Notes and this Agreement to be performed or observed by the Company are expressly assumed in writing by the surviving corporation and the surviving corporation shall furnish to the Banks an opinion of counsel satisfactory to the Banks to the effect that the instrument of assumption has been duly authorized, executed and delivered and constitutes the legal, valid and binding contract and agreement of the surviving corporation enforceable in accordance with its terms, except as enforcement of such terms may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles, and (iii) at the time of such consolidation or merger and immediately after giving effect thereto, no Default or Unmatured Default or Prepayment Event would exist. 6.2.4. SALE OF ASSETS. The Company will not, nor will it permit any Subsidiary to, lease, sell or otherwise dispose of all, or a substantial portion of, its property, assets or business to any other Person except for sales of inventory in the ordinary course of business. For purposes of this Section, "substantial portion" means assets (valued at the higher of book or fair market value) having a value in excess of 10% of the Company's Consolidated Total Assets. 6.2.5. SALE AND LEASEBACK. The Company will not, nor will it permit any Subsidiary to, sell or transfer any property, the aggregate fair market value of which at any time exceeds 10% of the Company's Consolidated Total Assets, in order to concurrently or subsequently lease as lessee such or similar property. The fair market value of any property sold or transferred pursuant to this Section 6.2.5 shall be determined as of the date of such sale or transfer. 6.2.6. LIENS. The Company will not, nor will it permit any Subsidiary to, create, incur, or suffer to exist any Lien in, of or on the property of the Company or any Subsidiary, except: (a) Liens for taxes, assessments or governmental charges or levies on its property if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings. (b) Liens imposed by law, such as carriers', warehousemen's and mechanics' liens, interests of bailors, bailees, consignors and consignees, and other similar liens arising in the ordinary course of business which secure payment of obligations not more than 60 days past due. Page 30 (c) Liens arising out of pledges or deposits under worker's compensation laws, unemployment insurance, old age pensions, or other social security or retirement benefits, or similar legislation. (d) Utility easements, building restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character and which do not in any material way affect the marketability of the same or interfere with the use thereof in the business of the Company or the Subsidiaries. (e) Liens created in favor of the United States government or any other Person who has purchased or contracted to purchase goods or services from the Company or any Subsidiary with advance or progress payments. (f) Liens existing on the date hereof and described in Schedule "3" hereto. (g) Liens of or resulting from any judgment or award, the time for the appeal or petition for rehearing of which shall not have expired, or in respect of which the Company or a Subsidiary shall at any time in good faith be prosecuting an appeal or proceeding for a review and in respect of which a stay of execution pending such appeal or proceeding for review shall have been secured. (h) Liens to secure statutory obligations, surety or appeal bonds or other liens of like general nature incurred in the ordinary course of business and not in connection with the borrowing of money, PROVIDED, in each case, the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate actions or proceedings. (i) Liens of lessors under Capitalized Leases. (j) Liens, in addition to those described in subsections (a) through (i) hereof, to secure Indebtedness of the Company or any Subsidiary in an aggregate amount not to exceed at any time 10% of the Company's Consolidated Total Assets. 6.2.7. FUNDED DEBT/EBITDA RATIO. The Company will not permit its Funded Debt/EBITDA Ratio as at the end of any fiscal quarter to exceed 3.00 to 1.0. 6.2.8. AFFILIATES; HOWMET. The Company will not, and will not permit any Subsidiary to, enter into any transaction (including, without limitation, the purchase or sale of any property or service) with, or make any payment or transfer to, any Affiliate except in the ordinary course of business and pursuant to the reasonable requirements of the Company's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary than the Company or such Subsidiary would obtain in a comparable arms-length transaction. The Page 31 Company will not, and will not permit any Subsidiary to, make any advance, distribution, or payment to or investment in Howmet or any Subsidiary of Howmet except for purposes of acquiring equity interests in Howmet. ARTICLE VII DEFAULTS The occurrence of any one or more of the following events shall constitute a Default: 7.1. Any representation or warranty made by or on behalf of the Company or any Subsidiary to the Banks under or in connection with any Loan Document shall be materially false as of the date on which made. 7.2. Nonpayment of principal of the Notes when due. 7.3. Nonpayment of interest upon the Notes or of any commitment fee, extension fee or other obligations under any of the Loan Documents within five days after the same becomes due. 7.4. The breach by the Company of any of the terms or provisions of Sections 6.1.3 or 6.2. 7.5. The breach by the Company (other than a breach which constitutes a Default under Section 7.1, 7.2, 7.3 or 7.4) of any of the terms or provisions of this Agreement which is not remedied or waived within fifteen days after written notice from the Administrative Agent or any Bank. 7.6. Failure of the Company, any Consolidated Subsidiary or Howmet to pay any Indebtedness in an aggregate principal amount in excess of $10,000,000 (or the equivalent thereof in any other currency), when due, or the default by the Company, any Consolidated Subsidiary or Howmet in the performance of any other term, provision or condition contained in any agreement or agreements under which Indebtedness in an aggregate principal amount in excess of $10,000,000 (or the equivalent thereof in any other currency) was created or is governed, the effect of which, in either case, is to cause, or to permit the holder or holders of such Indebtedness to cause, such Indebtedness to become due prior to its stated maturity; or Indebtedness in an aggregate principal amount in excess of $10,000,000 (or the equivalent thereof in any other currency) shall be declared to be due and payable or required to be prepaid (other than by a regularly scheduled payment), prior to the stated maturity thereof; or the Company, any Consolidated Subsidiary or Howmet shall not pay, or admit in writing its inability to pay, its debts generally as they become due. Page 32 7.7. The Company or any Consolidated Subsidiary shall (a) have an order for relief entered with respect to it under the Bankruptcy Code, (b) make an assignment for the benefit of creditors, (c) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any substantial part of its property, (d) institute any proceeding seeking an order for relief under the Bankruptcy Code or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (e) take any corporate action to authorize or effect any of the foregoing actions set forth in this Section 7.7 or (f) fail to contest in good faith any appointment or proceeding described in Section 7.8. 7.8. Without the application, approval or consent of the Company or any Consolidated Subsidiary, a receiver, trustee, examiner, liquidator or similar official shall be appointed for the Company or any Consolidated Subsidiary or any substantial part of its property, or a proceeding described in Section 7.7(d) shall be instituted against the Company or any Consolidated Subsidiary and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of 60 consecutive days. 7.9. The Company or any Consolidated Subsidiary shall fail within 30 days to pay, bond or otherwise discharge any judgment or order for the payment of money in excess of $10,000,000, which is not stayed on appeal or otherwise being appropriately contested in good faith. 7.10. The Unfunded Liabilities of all Plans shall exceed in the aggregate an amount equal to 5 percent of the value (as of any date of determination) of all Plan assets allocable to Plan benefits guaranteed under ERISA. 7.11. An administrator, custodian or other representative, by or pursuant to any legislative act, resolution or rule (other than the Bankruptcy Code or any similar law, state or federal, whether now or hereafter existing) or any order or decree of any court or any governmental board or agency (other than any order or decree issued pursuant to the Bankruptcy Code or any similar law, state or federal, whether now or hereafter existing) shall take possession or control of all or such portions of the property of any one or more of the Company and the Consolidated Subsidiaries as would, in the sole opinion of the Required Banks, materially interfere with the operation of the business of the Company and the Consolidated Subsidiaries, on a consolidated basis, and such possession or control shall continue for 30 calendar days. 7.12. The Company or any Subsidiary shall be the subject of any proceeding or investigation pertaining to the release by the Company or any of its Subsidiaries, or any other Person of any toxic or hazardous waste or physical substance into the environment, or any violation of any federal, state or local environmental, health or safety law or regulation with respect to any toxic or hazardous waste or physical substance, which would, in either case, have a Page 33 material adverse effect upon the operations of the Company and the Subsidiaries, taken as a whole. ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES 8.1. ACCELERATION; ALLOCATION OF PAYMENTS AFTER DEFAULT OR PREPAYMENT EVENT. (a) If any Default described in Section 7.7 or 7.8 occurs, the commitments of the Banks to make Advances hereunder shall automatically terminate and the Obligations shall immediately become due and payable without any election or action on the part of the Administrative Agent or any Bank. If any other Default or Prepayment Event occurs, the Required Banks may terminate the commitments of the Banks to make Advances hereunder, or declare the Obligations to be due and payable, whereupon the Obligations shall become immediately due and payable, or both, without presentment, demand, protest or notice of any kind, all of which the Company hereby expressly waives. If, within 14 days after acceleration of the maturity of the Obligations or termination of the obligations of the Banks to make Loans hereunder as a result of any Default (other than any Default as described in Section 7.7 or 7.8 with respect to the Company) and before any judgment or decree for the payment of the Obligations due shall have been obtained or entered, the Required Banks (in their sole discretion) shall so direct, the Administrative Agent shall, by notice to the Company, rescind and annul such acceleration and/or termination. (b) Upon the occurrence of (i) any Unmatured Default as to which the Required Banks shall have notified the Administrative Agent that the provisions of this Section 8.1(b) shall apply, (ii) any Default or (iii) any Prepayment Event, the Banks shall share all collections and recoveries of the Obligations on a pro rata basis, based on the respective amounts of Obligations (whether or not mature and currently payable) owing to each Bank in respect of principal and unpaid accrued interest, fees and indemnities hereunder as of the date of occurrence of such Default, Unmatured Default or Prepayment Event, as the case may be. 8.2. AMENDMENTS. Subject to the provisions of this Section, the Required Banks (or the Administrative Agent with the consent in writing of the Required Banks) and the Company may enter into agreements supplemental hereto for the purpose of adding any provisions to the Loan Documents or changing in any manner the rights of the Banks or the Company hereunder or waiving any Default hereunder; PROVIDED, HOWEVER, that no such supplemental agreement shall, without the consent of all of the Banks: Page 34 (a) Modify any of the provisions of this Agreement with respect to the amount of or the time for the payment of the principal of or any interest on any of the Obligations or any of the fees due hereunder, (b) Reduce the percentage specified in the definition of Required Banks. (c) Change the amount of the Commitment of any Bank hereunder or the Revolving Credit Termination Date or Termination Date. (d) Amend this Section 8.2. No amendment of any provision of this Agreement relating to the Administrative Agent shall be effective without the written consent of the Administrative Agent. 8.3. PRESERVATION OF RIGHTS. No delay or omission of the Banks or the Administrative Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Default or an acquiescence therein, and any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by the Banks required pursuant to Section 8.2, and then only to the extent in such writing specifically set forth. All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to the Administrative Agent and the Banks until the Obligations have been paid in full. ARTICLE IX GENERAL PROVISIONS 9.1. SURVIVAL OF REPRESENTATIONS. All representations and warranties of the Company contained in this Agreement shall survive delivery of the Notes and the making of the Loans herein contemplated. 9.2. GOVERNMENTAL REGULATION. Anything contained in this Agreement to the contrary notwithstanding, no Bank shall be obligated to extend credit to the Company in violation of any limitation or prohibition provided by any applicable statute or regulation. 9.3. TAXES. Any taxes (excluding income taxes whether or not such taxes are actually called "income taxes") payable or ruled payable by Federal or State authority in respect of the Loan Documents shall be paid by the Company, together with interest and penalties, if any. Page 35 9.4. CHOICE OF LAW. THE LOAN DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING 735 ILCS 105/5-1 ET SEQ. BUT OTHERWISE WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO APPLICABLE FEDERAL LAWS. 9.5. CONSENT TO JURISDICTION. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE COMPANY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY BANK TO BRING PROCEEDINGS AGAINST THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE COMPANY AGAINST THE ADMINISTRATIVE AGENT OR ANY BANK OR ANY AFFILIATE OF THE ADMINISTRATIVE AGENT OR ANY BANK INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS. 9.6. WAIVER OF JURY TRIAL. THE COMPANY, THE ADMINISTRATIVE AGENT AND EACH BANK HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER. 9.7. HEADINGS. Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents. 9.8. ENTIRE AGREEMENT. The Loan Documents embody the entire agreement and understanding among the Company, the Administrative Agent and the Banks and supersede all prior agreements and understandings among the Company, the Administrative Agent and the Banks relating to the subject matter thereof. 9.9. SEVERAL OBLIGATIONS. The respective obligations of the Banks hereunder are several and not joint and no Bank shall be the partner or agent of any other (except to the extent to which the Administrative Agent is authorized to act as such). The failure of any Bank to perform any of its obligations hereunder shall not relieve any other Bank from any of its obligations hereunder. Page 36 9.10. EXPENSES. The Company shall reimburse the Administrative Agent for any and all costs and out-of-pocket expenses (including attorneys' fees and time charges of attorneys for the Administrative Agent, which attorneys may be employees of the Administrative Agent,) paid or incurred by the Administrative Agent and the Arranger in connection with the preparation, review, execution, delivery, amendment and modification of the Loan Documents. The Company shall reimburse the Administrative Agent and the Banks for any and all costs, internal charges and out-of-pocket expenses (including attorneys' fees and time charges of attorneys for the Administrative Agent and the Banks, which attorneys may be employees of the Administrative Agent or the Banks) paid or incurred by the Administrative Agent or any Bank in connection with the collection and enforcement of the Loan Documents. The Company further agrees to indemnify the Administrative Agent, the Arranger and each Bank, its directors, officers and employees against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all expenses of litigation or preparation therefor whether or not the Administrative Agent, the Arranger, or any Bank is a party thereto) which any of them may pay or incur in connection with or arising out of or relating to this Agreement, the other Loan Documents, the transactions contemplated hereby or the direct or indirect application or proposed application of the proceeds of any Loan hereunder; PROVIDED, HOWEVER, that the Company shall not be liable for any of the foregoing to the extent that they arise from a violation of law by, or the gross negligence or willful misconduct of, the Administrative Agent, the Arranger or such Bank, as the case may be. The obligations of the Company under this Section shall survive the termination of this Agreement. 9.12. NUMBERS OF DOCUMENTS. All closing documents, notices and requests hereunder shall be furnished to the Administrative Agent with sufficient counterparts so that the Administrative Agent may furnish one to each of the Banks. 9.13. CONFIDENTIALITY. Each Bank agrees to hold any confidential information which it may receive from the Company pursuant to this Agreement in confidence, except for disclosure (i) to its Affiliates and to other Banks and their respective Affiliates, (ii) to legal counsel, accountants, and other professional advisors to that Bank or to a Transferee, (iii) to regulatory officials, (iv) to any Person as required by law, regulation, or legal process, (v) to any Person in connection with any legal proceeding to which that Bank is a party, and (vi) permitted by Section 12.4. Each Bank will notify the Company of any disclosure under clauses (iii) (other than disclosure pursuant to a request arising in the course of a bank audit, notice of which such Bank shall deliver to the Company as soon as is practicable), (iv), and (v) hereinabove before divulging such information unless such disclosure is legally prohibited by the terms of the request or demand for such information. Page 37 ARTICLE X THE ADMINISTRATIVE AGENT 10.1. APPOINTMENT. The First National Bank of Chicago is hereby appointed Administrative Agent hereunder, and each of the Banks irrevocably authorizes the Administrative Agent to act as the agent of such Bank. The Administrative Agent agrees to act as such upon the express conditions contained in this Article X. The duties of the Administrative Agent shall be administrative in nature and the Administrative Agent shall not have a fiduciary relationship in respect of any Bank by reason of this Agreement. 10.2. POWERS. The Administrative Agent shall have and may exercise such powers hereunder as are specifically delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto. The Administrative Agent shall have no implied duties to the Banks, or any obligation to the Banks to take any action hereunder except any action specifically provided by this Agreement to be taken by the Administrative Agent. 10.3. GENERAL IMMUNITY. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable to the Banks or any Bank for any action taken or omitted to be taken by it or them hereunder or in connection herewith except for its or their own gross negligence or wilful misconduct. 10.4. NO RESPONSIBILITY FOR LOANS, RECITALS, ETC. The Administrative Agent shall not be responsible to the Banks for any recitals, reports, statements, warranties or representations herein or any Loans hereunder or be bound to ascertain or inquire as to the performance or observance of any of the terms of this Agreement. 10.5. RIGHT TO INDEMNITY. The Administrative Agent shall be fully justified in failing or refusing to take any action hereunder unless it shall first be indemnified to its satisfaction by the Banks pro rata against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. 10.6. ACTION ON INSTRUCTIONS OF BANKS. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder in accordance with written instructions signed by the Required Banks, and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Banks and on all holders of Notes. 10.7. EMPLOYMENT OF AGENTS AND COUNSEL. The Administrative Agent may execute any of its duties as Administrative Agent hereunder by or through employees, agents, and attorneys-in-fact and shall not be answerable to the Banks, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The Administrative Agent Page 38 shall be entitled to advice of counsel concerning all matters pertaining to the agency hereby created and its duties hereunder. 10.8. RELIANCE ON DOCUMENTS; COUNSEL. The Administrative Agent shall be entitled to rely upon any Note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of counsel selected by the Administrative Agent. 10.9. ADMINISTRATIVE AGENT'S REIMBURSEMENT. Each Bank agrees to reimburse the Administrative Agent in the amount of such Bank's ratable share of the Commitments for any expenses not reimbursed by the Company (i) for which the Administrative Agent is entitled to reimbursement by the Company under the Loan Documents and (ii) for any other expenses, liabilities, obligations, losses, damages, penalties, costs, or disbursements of any kind incurred by the Administrative Agent on behalf of the Banks, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents; PROVIDED, HOWEVER, that no Bank shall be required to reimburse the Administrative Agent for any such expenses to the extent that they arise from a violation of law by, or the gross negligence or willful misconduct of, the Administrative Agent. The obligations of the Banks under this Section 10.9 shall survive payment of the Obligations and termination of this Agreement. 10.10. RIGHTS AS A BANK. With respect to its Commitment, Loans made by it and the Note issued to it, the Administrative Agent shall have the same rights and powers hereunder as any Bank and may exercise the same as though it were not the Administrative Agent, and the term "Bank" or "Banks" shall, unless the context otherwise indicates, include the Administrative Agent in its individual capacity. The Administrative Agent may accept deposits from, lend money to, and generally engage in any kind of banking or trust business with the Company as if it were not the Administrative Agent. 10.11. BANK CREDIT DECISION. Each Bank acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Bank and based on the financial statements referred to in Section 5.4 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. 10.12. SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign at any time by giving thirty days' written notice thereof to the Banks and the Company and may be removed at any time with or without cause by the Required Banks. Upon any such resignation or removal, the Required Banks shall have the right to appoint, on behalf of the Banks but with the consent of the Company (which consent shall not be unreasonably withheld), a successor Page 39 Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Banks and shall have accepted such appointment within thirty days after the retiring Administrative Agent's giving notice of resignation, then the retiring Administrative Agent may appoint, on behalf of the Banks but with the consent of the Company (which consent shall not be unreasonably withheld), a successor Administrative Agent. Such successor Administrative Agent shall be a commercial bank having capital and retained earnings of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Article X shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent hereunder. 10.13. DISTRIBUTION OF INFORMATION. The Company authorizes the Administrative Agent, as the Administrative Agent may elect in its sole discretion, to discuss with and furnish to the Banks or to any other Person having an interest in the Obligations (whether as a guarantor, pledgor of collateral, participant, purchaser or otherwise) all financial statements, audit reports and other information pertaining to the Company and its Subsidiaries whether such information was provided by the Company or prepared or obtained by the Administrative Agent; PROVIDED, HOWEVER, that if such information is non-public and confidential, the Administrative Agent shall obtain the consent of the Company (which shall not be unreasonably withheld) prior to delivering such information to any such Person and such Person shall have agreed to be bound by Section 9.13 of this Agreement.. Neither the Administrative Agent nor any of its employees, officers, directors or agents makes any representation or warranty regarding any audit reports or other analyses of the Company's and its Subsidiaries condition which the Administrative Agent may elect to distribute, whether such information was provided by the Company or prepared or obtained by the Administrative Agent, nor shall the Administrative Agent or any of its employees, officers, directors or agents be liable to any person or entity receiving a copy of such reports or analyses for any inaccuracy or omission contained in or relating thereto. 10.14. DISCLOSURE. The Borrower and each Bank hereby (i) acknowledge and agree that (a) one or more Affiliates of First Chicago are or may become direct or indirect equity investors in the Company or its Affiliates, (b) First Chicago is or may become a lender to, and agent bank for, the Company and/or its Affiliates, including, without limitation, pursuant to (i) the syndicated credit arrangements of Howmet in which First Chicago presently acts as administrative agent and a lender, (ii) the syndicated credit arrangements of the Company in which First Chicago presently acts as administrative agent and as a lender, and (iii) the short-term credit arrangements of the Company in which First Chicago presently acts as the administrative agent and as a lender and (c) First Chicago and/or its Affiliates from time to time may hold other investments in, make other loans to or have other relationships with the Company and its Affiliates, and (ii) waive any liability of First Chicago or such Affiliate to the Borrower or any Bank, respectively, arising out of or Page 40 resulting from such investments, loans or relationships other than liabilities arising out of the gross negligence or willful misconduct of First Chicago or its Affiliates. ARTICLE XI SETOFF; RATABLE PAYMENTS 11.1. SETOFF. In addition to, and without limitation of, any rights of the Banks under applicable law, if the Company becomes insolvent, however evidenced, or any Default or Prepayment Event occurs, any indebtedness from any Bank to the Company may be offset and applied toward the payment of the Obligations owing to such Bank, whether or not the Obligations, or any part thereof, shall then be due. 11.2. RATABLE PAYMENTS. In case at any time any Bank, whether by setoff or otherwise, has payment made to it upon its Loans in a greater proportion than received by any other Bank, such Bank so receiving such greater proportionate payment agrees to purchase a portion of the Loans held by the other Banks so that after such purchase each Bank will hold its ratable proportion of Loans. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made. The Company agrees that any Bank purchasing a participation hereunder may, to the fullest extent permitted by law, exercise all its rights of payment with respect to such participation as if such Bank were the direct creditor of the Company in the amount of the participation. ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS 12.1. SUCCESSORS AND ASSIGNS. The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Company and the Banks and their respective successors and assigns, except that (i) the Company shall not have the right to assign its rights or obligations under the Loan Documents and (ii) any assignment by any Bank must be made in compliance with Section 12.3. Notwithstanding clause (ii) of this Section, any Bank may at any time, without the consent of the Company or the Administrative Agent, assign all or any portion of its rights under this Agreement and its Notes to a Federal Reserve Bank; PROVIDED, HOWEVER, that no such assignment to a Federal Reserve Bank shall release the transferor Bank from its obligations hereunder. The Administrative Agent may treat the payee of any Note as the owner thereof for all purposes hereof unless and until such payee complies with Section 12.3 in the case Page 41 of an assignment thereof or, in the case of any other transfer, a written notice of the transfer is filed with the Administrative Agent. Any assignee or transferee of a Note agrees by acceptance thereof to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the holder of any Note, shall be conclusive and binding on any subsequent holder, transferee or assignee of such Note or of any Note or Notes issued in exchange therefor. 12.2. PARTICIPATIONS. 12.2.1. PERMITTED PARTICIPANTS; EFFECT. Any Bank may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Bank, any Note held by such Bank, any Commitment of such Bank or any other interest of such Bank under the Loan Documents. In the event of any such sale by a Bank of participating interests to a Participant, such Bank's obligations under the Loan Documents shall remain unchanged, such Bank shall remain solely responsible to the other parties hereto for the performance of such obligations, such Bank shall remain the holder of any each of its Notes for all purposes under the Loan Documents, all amounts payable by the Company under this Agreement shall be determined as if such Bank had not sold such participating interests, and the Company and the Administrative Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under the Loan Documents. 12.2.2. VOTING RIGHTS. Each agreement pursuant to which any Bank may sell such a participation shall provide that such Bank shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver with respect to any Loan or Commitment in which such Participant has an interest which forgives principal, interest or fees or reduces the interest rate or fees payable with respect to any such Loan or Commitment, postpones any date fixed for any regularly-scheduled payment of principal of, or interest or fees on, any such Loan or Commitment, releases any guarantor of any such Loan or releases any substantial portion of collateral, if any, securing any such Loan; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in Sections 8.2 (a), (c) and (d) without the consent of the Participant. 12.3. ASSIGNMENTS. 12.3.1. PERMITTED ASSIGNMENTS. Any Bank may, in the ordinary course of its business and in accordance with applicable law, at any time assign to one or more banks or other entities ("Purchasers") all or any part of its rights and obligations under the Loan Documents. Such assignment shall be substantially in the form of Exhibit "E" hereto or in such other form as may be agreed to by the parties thereto. The consent of the Page 42 Company and the Administrative Agent shall be required prior to an assignment becoming effective; PROVIDED, HOWEVER, that if a Default has occurred and is continuing, the consent of the Company shall not be required. Such consent shall not be unreasonably withheld or delayed. Each such assignment with respect to a Purchaser which is not a Bank or an Affiliate thereof shall (unless each of the Borrower and the Agent otherwise consents, such consent of the Borrower not being required if a Default has occurred and is continuing) be in an amount not less than the lesser of (i) $10,000,000 or (ii) the remaining amount of the assigning Bank's Commitment (calculated as at the date of such assignment) or outstanding Loans (if the applicable Commitment has been terminated). 12.3.2. SUBSTITUTION OF BANK. The Company may, at its sole expense and effort, require any Bank to transfer and assign, without recourse (in accordance with this Section 12.3) all (but not less than all) of its interests, rights and obligations under this Agreement to an assignee which shall assume such assigned obligations (which assignee may be another Bank, if a Bank accepts such assignment); PROVIDED, that (i) such assignment shall not conflict with any law, rule or regulation or order of any court or other governmental authority, (ii) the Company shall have received a written consent of the Agent in the case of an entity that is not a Bank, which consent shall not be unreasonably withheld, (iii) the Company or such assignee shall have paid to the assigning Bank in immediately available funds the principal of and interest accrued to the date of such payment on the Loans made by it hereunder and all other amounts owed to it hereunder and the fee payable to the Agent pursuant to Section 12.3.3 and (iv) nothing in the foregoing is intended or shall be construed as obligating the Administrative Agent or any Bank to locate such an assignee. 12.3.3. EFFECT; EFFECTIVE DATE. Upon (i) delivery to the Administrative Agent of a notice of assignment, substantially in the form attached as Exhibit "I" to Exhibit "E" hereto (a "Notice of Assignment"), together with any consents required by Section 12.3.1 or 12.3.2, and (ii) payment of a $3,500 fee to the Administrative Agent for processing such assignment, such assignment shall become effective on the effective date specified in such Notice of Assignment. The Notice of Assignment shall contain a representation by the Purchaser to the effect that none of the consideration used to make the purchase of the Commitment and Loans under the applicable assignment agreement are "plan assets" as defined under ERISA and that the rights and interests of the Purchaser in and under the Loan Documents will not be "plan assets" under ERISA. On and after the effective date of such assignment, such Purchaser shall for all purposes be a Bank party to this Agreement and any other Loan Document executed by the Banks and shall have all the rights and obligations of a Bank under the Loan Documents, to the same extent as if it were an original party hereto, and no further consent or action by the Company, the Banks or the Administrative Agent shall be required to release the transferor Bank with respect to the percentage of the Aggregate Commitment and Loans assigned to such Purchaser. Upon the consummation of any assignment to a Purchaser pursuant to this Section 12.3.3, the transferor Bank, the Administrative Agent and the Page 43 Company shall make appropriate arrangements so that replacement Notes are issued to such transferor Bank and new Notes or, as appropriate, replacement Notes, are issued to such Purchaser, in each case in principal amounts reflecting their respective Commitments, as adjusted pursuant to such assignment. 12.4. DISSEMINATION OF INFORMATION. The Company authorizes each Bank to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a "Transferee") and any prospective Transferee any and all information in such Bank's possession concerning the creditworthiness of the Company and its Subsidiaries; PROVIDED, HOWEVER, that if such information is non-public and confidential, such Bank shall obtain the consent of the Company (which shall not be unreasonably withheld) prior to delivering such information to such Person and such Person agrees to be bound by Section 9.13 of this Agreement. No Bank may disclose confidential information regarding the Company and its Subsidiaries to prospective Transferees without the consent of the Company. 12.5. TAX TREATMENT. If any interest in any Loan Document is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Bank shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 2.3.14. ARTICLE XIII NOTICES 13.1. GIVING NOTICE. Any notice required or permitted to be given under this Agreement may be given by (a) actual delivery to the Company, the Administrative Agent or the Banks at the addresses indicated below their signatures to this Agreement, or (b) United States mail, postage prepaid, or telecopy or telefacsimile addressed to the Company, the Banks or the Administrative Agent at the addresses indicated below their signatures to this Agreement. Each such notice shall be effective (a) if given by mail, 72 hours after such notice is deposited in the mails with first class postage prepaid, addressed as aforesaid, and (b) if given by any other means, when delivered at the address specified in accordance with this Article XIII. 13.2. CHANGE OF ADDRESS. The Company and the Banks may each change the address for service of notice upon it by a notice in writing to the other parties hereto. Page 44 ARTICLE XIV COUNTERPARTS This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement shall be effective when it has been executed by the Company, the Administrative Agent and the Banks and each party has notified the Administrative Agent by telecopy or telefacsimile or by telephone, confirmed in writing, that it has taken such action. Page 45 IN WITNESS WHEREOF, the Company, the Banks and the Administrative Agent have executed this Agreement as of the date first above written. CORDANT TECHNOLOGIES INC. By:_______________________________ Richard L. Corbin Executive Vice President and Chief Financial Officer ALL NOTICES: Cordant Technologies Inc. 15 W. South Temple Suite 1600 Salt Lake City, UT 84101 Attn: Treasury Department Telephone: 801-933-4025 Telecopy: 801-933-4014 Page 46 COMMITMENTS $400,000,000 THE FIRST NATIONAL BANK OF CHICAGO, INDIVIDUALLY AND AS ADMINISTRATIVE AGENT By:___________________________________________ Gregory Sjullie Vice President ALL NOTICES AND CREDIT MATTERS: The First National Bank of Chicago Mail Suite IL1-0374 One First National Plaza Chicago, Illinois 60670 Attn: Transportation Division, Gregory Sjullie Telephone: (312) 732-8872 Telecopy: (312) 732-3885 ALL BORROWING NOTICES: The First National Bank of Chicago Mail Suite IL1-0634 One First National Plaza Chicago, Illinois 60670 Attn: John Beirne Telephone: (312) 732-3659 Telecopy: (312) 732-3055 WIRE TRANSFER PAYMENT INSTRUCTIONS: The First National Bank of Chicago Ref: Cordant Technologies Inc. ABA #: 071 0000 13 Credit LS2OSD Money Transfer Inc. Account Number 4811-5286-0000 AGGREGATE COMMITMENT $400,000,000 Page 47 EXHIBIT "A" EXTENSION REQUEST __________, 1999 To: The First National Bank of Chicago, as agent (the "Administrative Agent") From: Cordant Technologies Inc. Re: Credit Agreement (the "Agreement") dated as of February 5, 1999 among Cordant Technologies Inc., the Banks listed on the signature pages thereof and the Administrative Agent We hereby give notice pursuant to Section 2.2.2 of the Agreement that we request conversion of the Revolving Credit Termination Balance on the Revolving Credit Termination Date to Term Loans. The Company hereby represents and warrants that as of the date hereof and as of the Revolving Credit Termination Date, all conditions precedent to the conversion of the Revolving Loans to Term Loans under Section 2.2.3 have been satisfied and (i) no Default or Unmatured Default has occurred and is continuing under the Agreement other than [______________________]; and (ii) no Prepayment Event has occurred. Terms used herein have the meanings assigned to them in the Agreement. CORDANT TECHNOLOGIES INC. By:________________________________ Title:______________________________ Page 48 EXHIBIT "B" FORM OF PROMISSORY NOTE $400,000,000 February 5, 1999 CORDANT TECHNOLOGIES INC., a Delaware corporation (the "Company"), promises to pay to the order of (the "Bank") the lesser of the principal sum of Four Hundred Million and No/100 Dollars or the aggregate unpaid principal amount of all Loans made by the Bank to the Company pursuant to Section 2.1 of the Credit Agreement ("Agreement") hereinafter referred to or converted pursuant to Section 2.2 of the Agreement, whichever is less, in immediately available funds at the main office of The First National Bank of Chicago in Chicago, Illinois, as Administrative Agent, together with interest on the unpaid principal amount hereof at the rates and on the dates set forth in the Agreement. The Company shall pay the principal of and accrued and unpaid interest on the Loans in full on the Termination Date. The Bank shall, and is hereby authorized to, record on the schedule attached hereto, or otherwise record in accordance with its usual practice, the date and amount of each Loan and the date and amount of each principal payment hereunder. This Promissory Note is one of the Notes issued pursuant to, and is entitled to the benefits of, the Credit Agreement dated as of February 5, 1999, among the Company, The First National Bank of Chicago, individually and as Administrative Agent, and the banks named therein, to which Agreement, as it may be amended from time to time, reference is hereby made for a statement of the terms and conditions under which this Promissory Note may be prepaid or its maturity date accelerated. Capitalized terms used herein and not otherwise defined herein are used with the meanings attributed to them in the Agreement. CORDANT TECHNOLOGIES INC. By:__________________________________ Richard L. Corbin Executive Vice President and Chief Financial Officer Page 49 SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL TO SYNDICATED LOANS PROMISSORY NOTE OF CORDANT TECHNOLOGIES INC. DATED FEBRUARY 5, 1999
PRINCIPAL MATURITY PRINCIPAL AMOUNT OF OF INTEREST AMOUNT UNPAID DATE LOAN PERIOD PAID BALANCE
Page 50 EXHIBIT "C" OPINION OF COUNSEL February 5, 1999 The Administrative Agent and the Banks who are parties to the Credit Agreement described below. Ladies and Gentlemen: This is in regard to the Credit Agreement dated as of February 5, 1999 among Cordant Technologies Inc. (the "Company"), the Banks named therein and The First National Bank of Chicago, as Administrative Agent (the "Credit Agreement"). Unless the context otherwise requires, all terms used in this opinion which are specifically defined in the Credit Agreement shall have the meanings given such terms in the Credit Agreement. I am the Vice President and General Counsel of the Company and have acted as such in connection with the Credit Agreement. In so acting, I have examined originals (or copies thereof certified to my satisfaction) of such corporate and other documents of the Company (including certificates of officers of the Company on which I have relied) and such statutes and regulations as I have deemed relevant and necessary in order to give the following opinion; the certificate of incorporation and by-laws of the Company and its Subsidiaries as set forth on Schedule 1 of the Credit Agreement; the corporate proceedings and other actions taken by the Company and its Subsidiaries as set forth on Schedule 1 of the Credit Agreement to qualify, and maintain its good standing, in the jurisdiction of its incorporation and in those jurisdictions in which the Company and its Subsidiaries are qualified as foreign corporations; and the corporate proceedings of the Company taken to authorize the execution, delivery and performance of the Credit Agreement and the Notes and the borrowings under the Credit Agreement. Based upon the foregoing, it is my opinion that: 1. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. The Company has all corporate power required to carry on its ordinary course of business. 2. The Company has no other subsidiaries except as set forth on Schedule 1 of the Credit Agreement. Each domestic subsidiary set forth on Schedule 1 of the Credit Agreement is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Incorporation set forth on Schedule 1. Page 51 3. The Company and its Subsidiaries are each duly qualified as a foreign corporation in good standing to do business in all jurisdictions where the failure to so qualify would have a material adverse effect on the business of the Company and the subsidiaries taken as a whole. The Company and its operating subsidiaries are duly qualified as a foreign corporation in good standing in the States listed on Schedule 1A. 4. The execution and delivery of the Credit Agreement and the Notes by the Company, the borrowings by the Company under the Credit Agreement and the performance by the Company of its obligations under the Credit Agreement and the Notes have been duly authorized by all necessary corporate action and proceedings on the part of the Company and do not at this time: (a) require any consent of the Company's shareholders; (b) contravene, or constitute a default under, any provision of any law or regulation applicable to the Company or of the certificate of incorporation or by-laws of the Company or of any material contract, agreement, judgment, order, decree, adjudication or other instrument binding upon the Company, or by which the Company or its property may be bound or affected, or result in the creation of any Lien on any property now owned by the Company or any Subsidiaries pursuant to the provisions of any agreement, indenture or other instrument binding upon it. 5. The Credit Agreement and the Notes have been duly executed and delivered by the Company and constitute the legal, valid and binding obligations of the Company enforceable in accordance with their terms, except as such enforceability may be limited by bankruptcy or similar laws and by laws and judicial decisions relating generally to the enforcement of creditors' rights and subject also to the availability of equitable remedies and to general principles of equity. 6. Except as otherwise set forth in the Company's Form 10-K as of June 30, 1998, a copy of which has been previously delivered to you, there is as of the date hereof no action, suit, proceeding or investigation of which I am aware pending or threatened against or affecting the Company or any subsidiary before any court, regulatory commission, arbitration tribunal, governmental department, administrative agency or instrumentality which, would be reasonably expected to have a material adverse effect on the business, condition (financial or otherwise) or operations of the Company and its Subsidiaries as a whole. 7. Neither the Company nor its Subsidiaries is in default or violation in any respect which would have a material adverse effect on the business or condition (financial or otherwise) of the Company and its Subsidiaries as a whole with respect to any law, rule, regulation, order, writ, judgment, injunction, decree, adjudication, determination or award presently in effect and applicable to it. Page 52 8. No approval, authorization, consent adjudication or order of any governmental authority, which has been obtained by the Company, is required to be obtained by the Company as of the date hereof in connection with the execution and delivery of the Credit Agreement, the Notes, the borrowings under the Credit Agreement or in connection with the performance by the Company of its obligations under the Credit Agreement and the Notes. 9. The Company is not engaged principally or as one of its important activities in the business of extending credit for the purpose of purchasing or carrying any "margin stock" (as such term is defined in Regulation U of the Board of Governors of the Federal Reserve System). 10. The Company is not an "investment company," within the meaning of the Investment Company Act of 1940, as currently in effect. Very truly yours, Dan Hapke Page 53 EXHIBIT "D" LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION To The First National Bank of Chicago, as Administrative Agent (the "Administrative Agent") under the Credit Agreement Described Below. Re: Credit Agreement, dated as of February 5, 1999 (as the same may be amended or modified, the "Credit Agreement"), among Cordant Technologies Inc. (the "Company"), the Administrative Agent, and the Banks NAMED THEREIN Terms used herein and not otherwise defined shall have the meanings assigned thereto in the Credit Agreement. The Administrative Agent is specifically authorized and directed to act upon the following standing money transfer instructions with respect to the proceeds of Advances or other extensions of credit from time to time until receipt by the Administrative Agent of a specific written revocation of such instructions by the Company, PROVIDED, HOWEVER, that the Administrative Agent may otherwise transfer funds as hereafter directed in writing by the Company in accordance with Section 13.1 of the Credit Agreement or based on any telephonic notice made in accordance with Section 2.3.10 of the Credit Agreement. Facility Identification Number(s) _________________________________________ Customer/Account Name ____________________________________________________ Transfer Funds To ________________________________________________________ ----------------------------------------------------------------- ------------------------------------------------------------------ For Account No. _________________________________________________________ Reference/Attention To __________________________________________________ Authorized Officer (Customer Representative) Date _________________ - -------------------------------------- ---------------------- (Please Print) Signature Bank Officer Name Date __________________________ - ------------------------------------- --------------------------------- (Please Print) Signature (Deliver Completed Form to Credit Support Staff For Immediate Processing) Page 54 EXHIBIT "E" ASSIGNMENT AGREEMENT This Assignment Agreement (this "Assignment Agreement") between __________ (the "Assignor") and _______________________ ( the "Assignee") is dated as of _______, 19__. The parties hereto agree as follows: 1. PRELIMINARY STATEMENT. The Assignor is a party to a Credit Agreement (which, as it may be amended, modified, renewed or extended from time to time is herein called the "Credit Agreement") described in Item 1 of Schedule 1 attached hereto ("Schedule 1"). Capitalized terms used herein and not otherwise defined herein shall have the meanings attributed to them in the Credit Agreement. 2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, , an interest in and to the Assignor's rights and obligations under the Credit Agreement and the other Loan Documents, such that after giving effect to such assignment the Assignee shall have purchased pursuant to this Assignment Agreement the percentage interest specified in Item 3 of Schedule 1 of all outstanding rights and obligations under the Credit Agreement and the other Loan Documents relating to the facilities listed in Item 3 of Schedule 1 and the other Loan Documents. The aggregate Commitment (or Loans, if the applicable Commitment has been terminated) purchased by the Assignee hereunder is set forth in Item 4 of Schedule 1. 3. EFFECTIVE DATE. The effective date of this Assignment Agreement (the "Effective Date") shall be the later of the date specified in Item 5 of Schedule 1 or two Business Days (or such shorter period agreed to by the Agent) after a Notice of Assignment substantially in the form of Exhibit "I" attached hereto has been delivered to the Agent. Such Notice of Assignment must include any consents required to be delivered to the Agent by Section 12.3.1 or 12.3.2 of the Credit Agreement. In no event will the Effective Date occur if the payments required to be made by the Assignee to the Assignor on the Effective Date under Sections 4 and 5 hereof are not made on the proposed Effective Date. The Assignor will notify the Assignee of the proposed Effective Date no later than the Business Day prior to the proposed Effective Date. As of the Effective Date, (i) the Assignee shall have the rights and obligations of a Bank under the Loan Documents with respect to the rights and obligations assigned to the Assignee hereunder and (ii) the Assignor shall relinquish its rights and be released from its corresponding obligations under the Loan Documents with respect to the rights and obligations assigned to the Assignee hereunder. 4. PAYMENTS OBLIGATIONS. On and after the Effective Date, the Assignee shall be entitled to receive from the Agent all payments of principal, interest and fees with respect to the interest assigned hereby. The Assignee shall advance funds directly to the Agent with respect to Page 55 all Loans and reimbursement payments made on or after the Effective Date with respect to the interest assigned hereby. [In consideration for the sale and assignment of Loans hereunder, (i) the Assignee shall pay the Assignor, on the Effective Date, an amount equal to the principal amount of the portion of all Floating Rate Loans assigned to the Assignee hereunder and (ii) with respect to each Eurodollar Rate Loan made by the Assignor and assigned to the Assignee hereunder which is outstanding on the Effective Date, (a) on the last day of the Interest Period therefor or (b) on such earlier date agreed to by the Assignor and the Assignee or (c) on the date on which any such Eurodollar Rate Loan either becomes due (by acceleration or otherwise) or is prepaid (the date as described in the foregoing clauses (a), (b) or (c) being hereinafter referred to as the "Payment Date"), the Assignee shall pay the Assignor an amount equal to the principal amount of the portion of such Eurodollar Rate Loan assigned to the Assignee which is outstanding on the Payment Date. If the Assignor and the Assignee agree that the Payment Date for such Eurodollar Rate Loan shall be the Effective Date, they shall agree to the interest rate applicable to the portion of such Loan assigned hereunder for the period from the Effective Date to the end of the existing Interest Period applicable to such Eurodollar Rate Loan (the "Agreed Interest Rate") and any interest received by the Assignee in excess of the Agreed Interest Rate shall be remitted to the Assignor. In the event interest for the period from the Effective Date to but not including the Payment Date is not paid by the Company with respect to any Eurodollar Rate Loan sold by the Assignor to the Assignee hereunder, the Assignee shall pay to the Assignor interest for such period on the portion of such Eurodollar Rate Loan sold by the Assignor to the Assignee hereunder at the applicable rate provided by the Credit Agreement. In the event a prepayment of any Eurodollar Rate Loan which is existing on the Payment Date and assigned by the Assignor to the Assignee hereunder occurs after the Payment Date but before the end of the Interest Period applicable to such Eurodollar Rate Loan, the Assignee shall remit to the Assignor the excess of the prepayment penalty paid with respect to the portion of such Eurodollar Rate Loan assigned to the Assignee hereunder over the amount which would have been paid if such prepayment penalty was calculated based on the Agreed Interest Rate. The Assignee will also promptly remit to the Assignor (i) any principal payments received from the Agent with respect to Eurodollar Rate Loans prior to the Payment Date and (ii) any amounts of interest on Loans and fees received from the Agent which relate to the portion of the Loans assigned to the Assignee hereunder for periods prior to the Effective Date, in the case of Floating Rate Loans or fees, or the Payment Date, in the case of Eurodollar Rate Loans, and not previously paid by the Assignee to the Assignor.] In the event that either party hereto receives any payment to which the other party hereto is entitled under this Assignment Agreement, then the party receiving such amount shall promptly remit it to the other party hereto. 5. FEES PAYABLE BY THE ASSIGNEE. [The Assignee shall pay to the Assignor a fee on each day on which a payment of interest or commitment fees is made under the Credit Agreement with respect to the amounts assigned to the Assignee hereunder (other than a payment of interest or commitment fees for the period prior to the Effective Date or, in the case of Eurodollar Rate Loans, the Payment Date, which the Assignee is obligated to deliver to the Page 56 Assignor pursuant to Section 4 hereof). The amount of such fee shall be the difference between (i) the interest or fee, as applicable, paid with respect to the amounts assigned to the Assignee hereunder and (ii) the interest or fee, as applicable, which would have been paid with respect to the amounts assigned to the Assignee hereunder if each interest rate was____ of 1% less than the interest rate paid by the Company or if the commitment fee was _____ of 1% less than the commitment fee paid by the Company, as applicable.] [In addition,] [t]he Assignee agrees to pay ___% of the recordation fee required to be paid to the Agent in connection with this Assignment Agreement. 6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S LIABILITY. The Assignor represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim created by the Assignor. It is understood and agreed that the assignment and assumption hereunder are made without recourse to the Assignor and that the Assignor makes no other representation or warranty of any kind to the Assignee. Neither the Assignor nor any of its officers, directors, employees, agents or attorneys shall be responsible for (i) the due execution, legality, validity, enforceability, genuineness, sufficiency or collectability of any Loan Document, including without limitation, documents granting the Assignor and the other Banks a security interest in assets of the Company or any guarantor, (ii) any representation, warranty or statement made in or in connection with any of the Loan Documents, (iii) the financial condition or creditworthiness of the Company or any guarantor, (iv) the performance of or compliance with any of the terms or provisions of any of the Loan Documents, (v) inspecting any of the Property, books or records of the Company, (vi) the validity, enforceability, perfection, priority, condition, value or sufficiency of any collateral securing or purporting to secure the Loans or (vii) any mistake, error of judgment, or action taken or omitted to be taken in connection with the Loans or the Loan Documents. 7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements requested by the Assignee and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment Agreement, (ii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Bank and based on such documents and information at it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, (iii) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto, (iv) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Bank, (v) agrees that its payment instructions and notice instructions are as set forth in the attachment to Schedule 1, (vi) confirms that none of the funds, monies, assets or other consideration being used to make the purchase and assumption hereunder are "plan assets" as defined under ERISA and that its rights, benefits and interests in Page 57 and under the Loan Documents will not be "plan assets" under ERISA, [and (vii) attaches the forms prescribed by the Internal Revenue Service of the United States certifying that the Assignee is entitled to receive payments under the Loan Documents without deduction or withholding of any United States federal income taxes]. 8. INDEMNITY. The Assignee agrees to indemnify and hold the Assignor harmless against any and all losses, costs and expenses (including, without limitation, reasonable attorneys' fees) and liabilities incurred by the Assignor in connection with or arising in any manner from the Assignee's non-performance of the obligations assumed under this Assignment Agreement. 9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee shall have the right pursuant to Section 12.3.1 of the Credit Agreement to assign the rights which are assigned to the Assignee hereunder to any entity or person, provided that (i) any such subsequent assignment does not violate any of the terms and conditions of the Loan Documents or any law, rule, regulation, order, writ, judgment, injunction or decree and that any consent required under the terms of the Loan Documents has been obtained and (ii) unless the prior written consent of the Assignor is obtained, the Assignee is not thereby released from its obligations to the Assignor hereunder, if any remain unsatisfied, including, without limitation, its obligations under Sections 4, 5 and 8 hereof. 10. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the Aggregate Commitment occurs between the date of this Assignment Agreement and the Effective Date, the percentage interest specified in Item 3 of Schedule 1 shall remain the same, but the dollar amount purchased shall be recalculated based on the reduced Aggregate Commitment. 11. ENTIRE AGREEMENT. This Assignment Agreement and the attached Notice of Assignment embody the entire agreement and understanding between the parties hereto and supersede all prior agreements and understandings between the parties hereto relating to the subject matter hereof. 12. GOVERNING LAW. This Assignment Agreement shall be governed by the internal law, and not the law of conflicts, of the State of Illinois. 13. NOTICES. Notices shall be given under this Assignment Agreement in the manner set forth in the Credit Agreement. For the purpose hereof, the addresses of the parties hereto (until notice of a change is delivered) shall be the address set forth in the attachment to Schedule 1. Page 58 IN WITNESS WHEREOF, the parties hereto have executed this Assignment Agreement by their duly authorized officers as of the date first above written. [NAME OF ASSIGNOR] By:_______________________________ Title: ___________________________ [NAME OF ASSIGNEE] By: ____________________________ Title:___________________________ Page 59 SCHEDULE 1 to Assignment Agreement 1. Description and Date of Credit Agreement: Credit Agreement by and among Cordant Technologies Inc., The First National Bank of Chicago, as Administrative Agent, and the Banks party thereto dated as of February 5, 1999. 2. Date of Assignment Agreement: ______________________ , 19__ 3. Amounts (As of Date of Item 2 above): a. Total of Commitments (Loans) under Credit Agreement $___________ b. Assignee's Percentage of Facility purchased under the Assignment Agreement ______ % c. Amount of Assigned Share in Facility purchased under the Assignment Agreement $_________ 4. Assignee's Aggregate (Loan Amount)* Commitment Amount Purchased Hereunder: $_________ 5. Proposed Effective Date: Accepted and Agreed: [NAME OF ASSIGNOR] [NAME OF ASSIGNEE] By: __________________________________ By: _______________________________ Title:________________________________ Title: ____________________________ Page 60 Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT Attach Assignor's Administrative Information Sheet, which must include notice address for the Assignor and the Assignee Page 61 EXHIBIT "I" to Assignment Agreement NOTICE OF ASSIGNMENT ____________, 19__ To: Cordant Technologies Inc. 15 W. South Temple Suite 1600 Salt Lake City, UT 84101 Attn: Treasury Department The First National Bank of Chicago Mail Suite IL1-0374 One First National Plaza Chicago, Illinois 60670 Attn: Transportation Division From: [NAME OF ASSIGNOR] (the "Assignor") [NAME OF ASSIGNEE] (the "Assignee") 1. We refer to that Credit Agreement (the "Credit Agreement") described in Item 1 of Schedule 1 attached hereto ("Schedule 1"). Capitalized terms used herein and not otherwise defined herein shall have the meanings attributed to them in the Credit Agreement. 2. This Notice of Assignment (this "Notice") is given and delivered to the Company and the Agent pursuant to Section 12.3.3 of the Credit Agreement. 3. The Assignor and the Assignee have entered into an Assignment Agreement, dated as of , 19 (the "Assignment"), pursuant to which, among other things, the Assignor has sold, assigned, delegated and transferred to the Assignee, and the Assignee has purchased, accepted and assumed from the Assignor the percentage interest specified in Item 3 of Schedule 1 of all outstandings, rights and obligations under the Credit Agreement relating to the facilities listed in Item 3 of Schedule 1. The Effective Date of the Assignment shall be the later of the date specified in Item Page 62 5 of Schedule 1 or two Business Days (or such shorter period as agreed to by the Agent) after this Notice of Assignment and any consents and fees required by Sections 12.3.1, 12.3.2, and 12.3.3 of the Credit Agreement have been delivered to the Agent, provided that the Effective Date shall not occur if any condition precedent agreed to by the Assignor and the Assignee has not been satisfied. 4. The Assignor and the Assignee hereby give to the Company and the Agent notice of the assignment and delegation referred to herein. The Assignor will confer with the Agent before the date specified in Item 5 of Schedule 1 to determine if the Assignment Agreement will become effective on such date pursuant to Section 3 hereof, and will confer with the Agent to determine the Effective Date pursuant to Section 3 hereof if it occurs thereafter. The Assignor shall notify the Agent if the Assignment Agreement does not become effective on any proposed Effective Date as a result of the failure to satisfy the conditions precedent agreed to by the Assignor and the Assignee. At the request of the Agent, the Assignor will give the Agent written confirmation of the satisfaction of the conditions precedent. 5. The Assignor or the Assignee shall pay to the Agent on or before the Effective Date the processing fee of $3,500 required by Section 12.3.3 of the Credit Agreement. 6. If Notes are outstanding on the Effective Date, the Assignor and the Assignee request and direct that the Agent prepare and cause the Company to execute and deliver new Notes or, as appropriate, replacements notes, to the Assignor and the Assignee. The Assignor and, if applicable, the Assignee each agree to deliver to the Agent the original Note received by it from the Company upon its receipt of a new Note in the appropriate amount. 7. The Assignee advises the Agent that notice and payment instructions are set forth in the attachment to Schedule 1. 8. The Assignee hereby represents and warrants that none of the funds, monies, assets or other consideration being used to make the purchase pursuant to the Assignment are "plan assets" as defined under ERISA and that its rights, benefits, and interests in and under the Loan Documents will not be "plan assets" under ERISA. Page 63 9. The Assignee authorizes the Agent to act as its agent under the Loan Documents in accordance with the terms thereof. The Assignee acknowledges that the Agent has no duty to supply information with respect to the Company or the Loan Documents to the Assignee until the Assignee becomes a party to the Credit Agreement. NAME OF ASSIGNOR NAME OF ASSIGNEE By: _____________________________ By:________________________________ Title:___________________________ Title:_____________________________ ACKNOWLEDGED AND CONSENTED TO ACKNOWLEDGED AND CONSENTED TO BY THE FIRST NATIONAL BANK BY CORDANT TECHNOLOGIES INC. OF CHICAGO By:______________________________ By:______________________________________ Title: __________________________ Title:___________________________________ [Attach photocopy of Schedule 1 to Assignment] Page 64 SCHEDULE "1" SUBSIDIARIES (SEE SECTION 5.16) (Ownership interests are 100% unless otherwise indicated.) Page 65 SCHEDULE "2" INDEBTEDNESS OF SUBSIDIARIES (SEE SECTION 5.16) Page 66 SCHEDULE "3" LIENS (SEE SECTION 6.2.6) There are no Liens outstanding by the Company or any Subsidiary except Liens permitted pursuant to Section 6.2.6 of the Credit Agreement. Page 67 EX-27 6
5 This Schedule contains summary financial information extracted from Cordant Technologies Inc. unaudited financial statements for the quarter ended March 31, 1999 and is qualified in its entirety by reference to such financial statements. 1,000,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 19 0 290 9 261 617 1140 461 2409 544 644 0 0 41 666 2409 634 637 491 550 0 0 10 77 23 47 0 0 0 47 1.29 1.26
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