EX-10.22



 







Exhibit 10.22









The Annual Incentive Plan

For Year 2006




 









 













	 	 	 	 	 
	Contents	 	Page	 
	At a Glance
	 	 	1	 
	What is the Annual Incentive Plan?
	 	 	1	 
	Who is Eligible for This Plan?
	 	 	1	 
	How Does the Annual Incentive Plan Work?
	 	 	1	 
	 
	 	 	 	 
	Calculation of the Annual Incentive Plan Award
	 	 	2	 
	Target Bonus Percentage
	 	 	2	 
	Performance Goals and the Target Bonus Percentage
	 	 	2	 
	2006 Performance Goals
	 	 	3	 
	 
	 	 	 	 
	How the AIP Incentive Award is Calculated When All Goals
Are 100% Achieved
	 	 	4	 
	 
	 	 	 	 
	How the AIP Incentive Award is Calculated for Other Achievement Levels
	 	 	5	 
	Maximums and Minimums
	 	 	5	 
	 
	 	 	 	 
	Additional Guidelines for the Annual Incentive Plan
	 	 	6	 
	Discretionary Adjustments
	 	 	6	 
	Some Special Circumstances
	 	 	6	 
	Making Payments
	 	 	6	 
	 
	 	 	 	 
	Administration Details
	 	 	7	 







 









 








At a Glance




What is the Annual Incentive Plan?




The Annual Incentive Plan (the “AIP” or the “Plan”) provides key managers of Allegheny Technologies
Incorporated (“Allegheny Technologies” or the “Company”) and its operating companies with the
opportunity to earn an incentive award when certain pre-established goals are met at the corporate
and operating company levels.



Who is Eligible for This Plan?




Generally, key managers who have a significant impact on the company’s operations will be eligible
to participate in the Plan. Individuals eligible for participation are determined annually, based
on recommendations of the operating company presidents, if applicable, and the Company’s chief
executive officer, with the approval of the Personnel and Compensation Committee of the Company’s
Board of Directors (the “Committee”).



How Does the Annual Incentive Plan Work?




Under the Plan, key managers may earn an incentive award based on a percentage of their base
salary, depending on the extent to which pre-established operating company and/or corporate
performance goals have been achieved.




	•	 	For purposes of the Plan, base salary is generally the manager’s
annual base salary rate as of the end of the year, excluding any
commission or other incentive pay. For some special circumstances
affecting the amount of base salary used in the Plan, see page 6.
	 
	•	 	A target bonus percentage is used in calculating the incentive
award. It is explained on the next page. Each participating
manager will have a target bonus percentage.
	 
	•	 	The target bonus percentage will be adjusted (upward or downward)
based on the extent to which various performance goals are
achieved. Under the plan for 2006, all of the adjustment will be
based on company performance.





Incentive award payments will generally be distributed in cash after the year-end audit is
complete.



Page 1









 





Calculation of the Annual Incentive Plan Award




Target Bonus Percentage




The Plan establishes an incentive opportunity for each Plan participant, calculated as a percentage
of the manager’s base salary. Each participant will be provided with an initial percentage,
referred to as a “target bonus percentage.”



Generally, the target bonus percentage is the percentage of base salary that can be earned as an
award under the Plan if 100% of the various performance goals are achieved. For 2006, if 100% of
the performance goals are achieved, 100% of the target bonus percentage can be earned.



If there is a change in the key manager’s job position during the year that changes the manager’s
target bonus percentage, the target bonus percentage used in the award calculation will be
determined as follows:




	•	 	If the individual has at least six months of service in the new
position, the newly adjusted target bonus percentage will be used
in calculating the individual’s award for the full year.
	 
	•	 	If the individual has less than six months of service in the new
position, the individual’s award for the year will be calculated
on a pro-rata basis using the two different target bonus
percentages weighted by length of service in each position during
the year.





The Committee may change the goals and objectives for the Plan at any time.



Performance Goals and the Target Bonus Percentage




An AIP award is based on the extent to which specified, preestablished performance objectives are
achieved. For 2006, AIP awards will be based on the extent to which the participant’s company
achieves specified levels of achievement as to:




	•	 	Operating Earnings
	 
	•	 	Operating Cash Flow
	 
	•	 	Manufacturing Improvements
	 
	•	 	Safety and Environmental Improvements
	 
	•	 	Customer Responsiveness Improvements





For operating company presidents, 80% of the goals’ overall weight will be based on the performance
of the president’s operating company, and 20% of the goals’ overall weight will be based on
corporate level performance.



For corporate staff employees, performance will be measured completely at the corporate level.



Page 2









 





At the end of the year, the Company will measure actual performance against each of the
preestablished objectives.



The achievements attributable to each performance goal as noted above, then will be added together,
and that sum will be multiplied by: (1) the individual’s target bonus percentage, times (2) the
individual’s annual base salary, to produce the amount, if any, of the incentive award for 2006.



Note that potential adjustments are described on page 6.



2006 Performance Goals




	 	 	 	 	 	 	 
	The performance goals for 2006 generally consist of:	 	 	 	 
	•

	 	Operating Earnings
	 	 	40	%
	•

	 	Operating Cash Flow
	 	 	30	%
	•

	 	Manufacturing Improvements
	 	 	10	%
	•

	 	Safety and Environmental Improvements
	 	 	10	%
	•

	 	Customer Responsiveness Improvements
	 	 	10	%






Targeted achievements as to each performance goal above have been set for each operating company
and for corporate staff. Together the above goals comprise 100% of the target bonus percentage.



No annual incentive will be paid if the achievement of Operating Earnings is less than the
established applicable minimum of Operating Earnings, notwithstanding the achievements as to the
other applicable performance goals for 2006.



A prerequisite to any AIP award is compliance with Allegheny Technologies’ Corporate Guidelines for
Business Conduct



Page 3









 





How the AIP Incentive Award is Calculated When All Goals are 100% Achieved




For the Year 2006, if 100% of the performance goals are achieved, then 100% of the target bonus
percentage will be credited to the participant:



	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Goal %	 	 	Goal	 	 	Earned % of	 
	Goals	 	of Target	 	 	Achieved %	 	 	Target *	 
	Operating Earnings
	 	 	40	%	 	 	100	%	 	 	40	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Operating Cash Flow
	 	 	30	%	 	 	100	%	 	 	30	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Mfg. Improvements
	 	 	10	%	 	 	100	%	 	 	10	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Safety and Envir. Improvements
	 	 	10	%	 	 	100	%	 	 	10	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Customer Resp. Improvements
	 	 	10	%	 	 	100	%	 	 	10	%
	 
	 	 	 	 	 	 	 	 	 
	Total
	 	 	100	%	 	 	 	 	 	 	100	%








 




			
	* Earned % of Target = Goal % of Target X Goal Achieved %





In this example, assume that the operating company manager’s target bonus percentage is 20%.



The target bonus percentage of 20% is then multiplied by 100% to produce a bonus award equal to 20%
of base salary:



	 	 	 	 	 
	Earned Percentage of Target

	 	 	100	%
	 
	 	 	 	 
	X Target Bonus Percent

	 	 	20	%
	 
	 	 	 	 
	 

	 	 	 	 
	Equals Percentage of Salary for Incentive Award

	 	 	20	%






The sections below discuss the impact of achieving more or less than 100% of various goals,
and they also discuss the impact of other potential adjustments.



Page 4









 





How the AIP Incentive Award is Calculated for Other Achievement Levels




The percentage of a goal achieved will determine the earned percentage of target for that
particular goal. The earned percentage of target will be interpolated for achievement between the
established minimum level and the established target level for a particular goal. Similarly, the
earned percentage of target will be interpolated for achievement between the established target
level and the established maximum level for a particular goal.



Maximums and Minimums




	•	 	Generally, the maximum percentage calculated as an earned
percentage of target for any goal is 200%, and the overall
maximum incentive award that an individual can earn under the
weighting formula is 200% of his or her target bonus
percentage.
	 
	•	 	Where the established minimum of a performance goal is
achieved, only 50% of that goal’s share will be allocated to
his or her target bonus percentage.
	 
	•	 	Where less than the established minimum of a performance goal
is achieved, no amount of that goal will be allocated to his
or her target bonus percentage.





No annual incentive will be paid if the achievement of Operating Earnings is less than the
established applicable minimum of Operating Earnings, notwithstanding the achievements as to the
other applicable performance goals for 2006.



Page 5









 





Additional Guidelines for the Annual Incentive Plan




Discretionary Adjustments




In some cases, the Plan allows for discretionary adjustments of up to +20% or –20% of an
individual’s calculated award. However, the sum of discretionary adjustments for all eligible
managers of the affected company cannot exceed +5% of the aggregate calculated awards for that
company.



Some Special Circumstances




The above formulas generally determine the amount of the incentive award for the year. Other
factors that may affect the actual award follow:




	•	 	If a manager leaves the company due to retirement, death, or
disability, an award will be calculated based on the actual base
salary earned during the year in which the manager left—so long as
the manager worked at least six months of that year.
	 
	•	 	If a manager leaves the company before the end of the plan year
for any other reason, the manager will not receive a bonus award
for that year.
	 
	•	 	If a manager voluntarily leaves the company after the end of the
year but before the award is paid, the manager would receive any
bonus due unless the employment is terminated for cause. If
employment is terminated for cause, the manager would not be
entitled to receive an award under the Plan.
	 
	•	 	Managers who are hired mid-year may earn a pro-rated award for
that year, based on the salary earned during that year. However,
managers with less than two months service in a plan year (i.e.
hired after October 31) would not be eligible for an award for
that year.
	 
	•	 	If the manager received an adjustment in base salary due to a
change in job position (i.e. other than a merit increase), the
manager’s base salary for plan purposes will be the sum of (1) the
product of the number of months prior to the adjustment times the
rate of monthly base salary immediately prior to the adjustment,
and (2) the product of the number of months after the adjustment
times the rate of monthly base salary as of the end of the Plan
Year.
	 
	•	 	A prerequisite to any AIP award is compliance with Allegheny
Technologies’ Corporate Guidelines for Business Conduct.





Making Payments




All incentive award payments will generally be paid in cash, less applicable withholding taxes,
after the year-end audit is complete. This is expected to occur by no later than March 15.



Page 6









 





Administration Details




This summary relates to the Annual Incentive Plan (AIP) of Allegheny Technologies Incorporated
and its subsidiaries. The Plan is administered by the Committee, which has full authority to:




	•	 	Interpret the Plan;
	 
	•	 	Designate eligible participants and categories of eligible participants;
	 
	•	 	Set the terms and conditions of incentive awards; and
	 
	•	 	Establish and modify administrative rules for the Plan.





Plan participants may obtain additional information about the plan and the Committee from:



Executive Vice President,

Human Resources, Chief Legal and Compliance Officer,

General Counsel and Corporate Secretary

Allegheny Technologies Incorporated

1000 Six PPG Place

Pittsburgh PA 15222 5479

Phone: 412-394-2836                     Fax: 412-394-2837




The Plan will remain in effect until terminated by the Committee. The Committee may also amend the
plan at its discretion.



The Plan is not subject to the provisions of the Employee Retirement Income Security Act of 1974
(ERISA) and is not “qualified” under Section 401(a) of the Internal Revenue Code.




Page 7