RMI TITANIUM CO, S-2/A, 1994-06-15

RMI TITANIUM CO
S-2/A, 1994-06-15
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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 15, 1994

REGISTRATION NO. 33-52341
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------

AMENDMENT NO. 2

ON FORM S-2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------

RMI TITANIUM COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C>
OHIO 31-0875005
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
</TABLE>

1000 WARREN AVENUE, NILES, OHIO 44446 (216) 544-7604
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

TIMOTHY G. RUPERT
SENIOR VICE PRESIDENT & CHIEF FINANCIAL OFFICER
1000 WARREN AVENUE
NILES, OHIO 44446
(216) 544-7700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

COPIES TO:

R. E. HILTON, ESQ.
ASSISTANT GENERAL COUNSEL--U.S. STEEL GROUP
USX CORPORATION
600 GRANT STREET
PITTSBURGH, PENNSYLVANIA 15219-4776
(412) 433-2868
RAYMOND W. WAGNER, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 455-2568

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. /X/

If the Registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this form, check the following box. / /
CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
- ----------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value xxxx shares (2)(3) $x.xx(3) $30,000,000 $10,345(4)
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Rights to Purchase Common Stock xxxx Rights (3) (5) NA NA
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</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933.
(2) Represents the maximum number of shares of Common Stock, $.01 par value,
issuable upon the exercise of the Rights to be distributed in connection
with the Rights Offering described herein.
(3) To be supplied by amendment.
(4) Previously paid.
(5) To be issued pro rata to holders of the Company's Common Stock for no
consideration.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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<PAGE> 2

CROSS REFERENCE SHEET

Cross Reference Sheet Pursuant to Item 501(b) of Regulation S-K
Showing Location in Prospectus of Information Required by Items of Form S-2

<TABLE>
<CAPTION>
FORM S-2 ITEM NUMBER LOCATION IN PROSPECTUS
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<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of
Prospectus.............................. Front Cover Page; Cross Reference Sheet
2. Inside Front and Outside Back Cover Pages
of Prospectus........................... Inside Front Cover Page; Outside Back
Cover Page
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges...... Summary; The Company; Risk Factors
4. Use of Proceeds........................... Use of Proceeds
5. Determination of Offering Price........... The Rights Offering
6. Dilution.................................. Inapplicable
7. Selling Security Holders.................. Inapplicable
8. Plan of Distribution...................... Front Cover Page; The Rights Offering
9. Description of Securities to be
Registered.............................. Front Cover Page; Summary; The Rights
Offering; Description of Capital Stock
10. Interests of Named Experts and Counsel.... Legal Matters
11. Information with Respect to the Registrant
Description of Business................. Summary; The Company; Selected Financial
Information; Financial Statements;
Business; Management's Discussion and
Analysis of Financial Condition and
Results of Operations
Financial Statements...................... Financial Statements
Industry Segments......................... Financial Statements
Market Price of and Dividends on the
Registrant's Common Equity and Related
Stockholder Matters..................... Front Cover Page; Price Range of Common
Stock and Dividends; Description of
Capital Stock
Selected Financial Data................... Selected Financial Information
Supplementary Financial Information....... Financial Statements
Management's Discussion and
Analysis of Financial Condition and
Results of Operations................... Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Disagreements with Accountants............ Inapplicable
12. Incorporation of Certain Information by
Reference............................... Incorporation of Certain Documents by
Reference
13. Disclosure of Commission Position on
Indemnification for Securities
Act Liabilities......................... Inapplicable
</TABLE>
<PAGE> 3

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, JUNE , 1994

PROSPECTUS

[RMI LOGO]
Common Stock
($.01 par value)
Subscription Price $ per share
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The shares of Common Stock, $.01 par value per share ("Common Stock") of RMI
Titanium Company ("RMI" or the "Company"), are being offered to holders of
record of the Common Stock ("Record Date Holders") at the close of business on
June , 1994 (the "Record Date") pursuant to transferable Rights to
Purchase Common Stock of RMI (the "Rights") (the "Rights Offering" or the
"Offering"). Each such Record Date Holder is receiving Rights for
each share of Common Stock held of record on the Record Date. Holders of Rights
("Rights Holders" or "Holders") will be able to exercise their Rights during a
period (the "Subscription Period") commencing with the distribution of the
Rights and ending at 5:00 p.m., New York City time, on July , 1994, unless
extended by RMI to a time (the "Expiration Time") not later than August ,
1994. Each Right entitles the Rights Holder to subscribe for one share of Common
Stock (the "Basic Subscription Privilege"). Each Right also entitles the Rights
Holder exercising the Basic Subscription Privilege in full to subscribe for
additional shares of Common Stock that are not otherwise subscribed for pursuant
to the exercise of the Basic Subscription Privilege, subject to proration and
reduction by RMI under certain circumstances (the "Oversubscription Privilege").
Once a Rights Holder has exercised the Basic Subscription Privilege or the
Oversubscription Privilege, such exercise may not be revoked. The Rights are
evidenced by transferable subscription warrants (the "Subscription Warrants").
See "The Rights Offering."

The Rights Offering is not conditioned upon the exercise of any minimum
number of Rights. However, RMI has been advised by USX Corporation ("USX"), the
owner of 750,000 shares of Common Stock, constituting approximately 50.8% of all
Common Stock outstanding as of the Record Date, that USX intends to exercise the
Basic Subscription Privilege, but not the Oversubscription Privilege, with
respect only to the Rights issued to it, and does not intend to purchase or
otherwise acquire any other Rights. Assuming USX so exercises only the Rights
issued to it, and no other Rights are exercised, the Rights Offering would
result in approximately $ million in net proceeds for RMI and USX would own a
total of shares of Common Stock, constituting % of all such shares
outstanding. Holders of shares of Common Stock who do not exercise their Rights
will experience a decrease in their proportionate interest in the equity
ownership and voting power of RMI.

The Common Stock is traded on the New York Stock Exchange, Inc. (the "NYSE")
under the symbol "RTI". It is anticipated that the Rights will trade on the NYSE
under the symbol "RTI RT" until the close of business on the last trading day
preceding the day on which the Expiration Time occurs. There has, however, been
no prior market for the Rights, and no assurance can be given that a market will
develop or, if a market develops, that it will remain available throughout the
Subscription Period, or as to the price at which the Rights will trade. On June
, 1994, the last sales price of the Common Stock on the NYSE was $
per share. See "Price Range of Common Stock and Dividends."
------------------

AFTER THE EXPIRATION TIME, THE RIGHTS WILL NO LONGER BE EXERCISABLE AND WILL
HAVE NO VALUE. ACCORDINGLY, RIGHTS HOLDERS ARE STRONGLY URGED TO EITHER EXERCISE
OR SELL THEIR RIGHTS.

A purchase of Common Stock involves substantial risks. See "Risk Factors" for a
discussion of certain factors that should be considered in connection with an
investment in the Common Stock offered hereby.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>

<CAPTION>
<S> <C> <C> <C>
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UNDERWRITING
SUBSCRIPTION DISCOUNTS AND PROCEEDS TO
PRICE COMMISSIONS(1) RMI(2)(3)
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Per Share $ None $
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Total $ None $
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</TABLE>

(1) Lehman Brothers Inc. ("Lehman Brothers") will receive a financial advisory
fee equal to 2 1/2% of the aggregate proceeds to RMI from the Rights
Offering. In addition, RMI has agreed to reimburse Lehman Brothers for its
expenses in connection with the Rights Offering and to indemnify Lehman
Brothers against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "The Rights Offering--Financial
Advisor."

(2) Before deducting estimated expenses of $1,250,000 payable by RMI.

(3) RMI has been advised by USX, the owner of 750,000 shares of Common Stock,
that USX intends to exercise the Basic Subscription Privilege, but not the
Oversubscription Privilege, with respect only to the Rights issued to it,
and does not intend to purchase or otherwise acquire any other Rights.
------------------
The date of this Prospectus is June , 1994.
<PAGE> 4

AVAILABLE INFORMATION

RMI is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith,
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information filed by RMI can be inspected and copied at the Public Reference
Room of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the public reference facilities maintained by the Commission
at Seven World Trade Center, New York, New York 10048, and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Common Stock is listed on the NYSE, and such reports,
proxy statements and other information can also be inspected at the offices of
the NYSE, 20 Broad Street, New York, New York 10005.

RMI has filed a Registration Statement on Form S-2 (the "Registration
Statement") with the Commission pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the shares of Common Stock
offered pursuant to the Rights Offering. This Prospectus does not contain all
the information set forth in the Registration Statement and the exhibits
thereto, to which reference is hereby made.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents heretofore filed by RMI with the Commission (file
no. 1-10319) are incorporated herein by reference:

(a) Annual Report on Form 10-K for the year ended December 31, 1993.

(b) Quarterly Report on Form 10-Q for the quarter ended March 31, 1994.

Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated or deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.

RMI undertakes to provide without charge to each person to whom a
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the information incorporated by reference in this Prospectus,
other than exhibits to such information (unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates). Requests for such copies should be directed to the
Director-Investor Relations, RMI Titanium Company, 1000 Warren Avenue, Niles,
Ohio 44446 (telephone 216-544-7622).
------------------------

As used in this Prospectus, the terms "RMI" and "Company" mean RMI Titanium
Company, its predecessors and consolidated subsidiaries, taken as a whole,
unless the context indicates otherwise.

3
<PAGE> 5

SUMMARY

The following summary is not intended to constitute a complete description
of RMI or of all material features of the Rights Offering and is qualified in
its entirety by reference to the detailed information set forth elsewhere in or
incorporated by reference into this Prospectus.

Effective March 31, 1994, RMI amended its Articles of Incorporation to
effect a one-for-ten reverse stock split. Unless otherwise noted, all Common
Stock share amounts and per share data set forth in this Prospectus have been
adjusted to give effect to this amendment.

THE COMPANY

RMI is a leading domestic producer of titanium mill products. Titanium, the
world's fourth most abundant metal, is extracted from ore through a chemical
reduction process to form titanium sponge which, along with alloying agents, is
melted into an ingot. The ingot is then converted into various mill product
shapes. Titanium mill products, which are used primarily in the aerospace
industry, constituted 76% of RMI's sales in 1993, 81% in 1992 and 78% in 1991.
Approximately 70% of RMI's 1993 mill product sales were aerospace related,
compared to 76% in 1992 and 80% in 1991. Approximately 30% of RMI's aerospace
mill product sales were associated with military programs in all three years.

RMI's related products and services are used in aerospace, oil and gas
production, chemical, pulp and paper and other processing industries. Related
products accounted for 16%, 13% and 10% of RMI's sales in 1993, 1992 and 1991,
respectively.

In 1993 RMI reported net sales of $127.4 million, an operating loss of
$10.8 million and a net loss of $28.9 million (which reflects a $16.9 million
cumulative effect charge relating to a change in an accounting principle). In
1992 and 1991, RMI reported net losses of $14.1 million and $57.1 million,
respectively. The 1991 results reflect a $37.1 million charge resulting from the
closure of RMI's sponge production facilities. The 1993, 1992 and 1991 results
reflect aggressive international competition, declining military spending,
reduced commercial airline demand for new aircraft and an uncertain world
economy. Domestic industry shipments of titanium mill products in 1991 were
approximately 34 million pounds, a decrease of 35% from 1990 shipments of 53
million pounds, the largest single one year decrease in the history of the
industry. Shipments remained at that level in each of 1992 and 1993, and are not
expected to increase significantly in 1994. During the three-year period RMI was
able to reduce its net losses from $20 million in 1991 to $14 million in 1992
and $12 million in 1993 (excluding the effects of the 1993 change in accounting
principle and the 1991 plant closing charge) by reducing RMI's administrative
costs and significant reductions in RMI's cost of raw materials. During the
first quarter ended March 31, 1994 RMI reported net sales of $36.4 million, an
operating loss of $2.2 million and a net loss of $4.3 million (which included a
$1.2 million charge for a change in accounting principle), compared to 1993
first quarter net sales of $32.1 million, an operating loss of $2.4 million and
a net loss of $19.8 million (which included a $16.9 million charge resulting
from a cumulative effect accounting change).

Further improvement in RMI's results of operations will depend largely on
increased commercial aerospace activity. However, in an effort to lessen its
dependence on the aerospace market, RMI is devoting significant efforts and
resources to developing new markets and applications for its products, including
those described below. RMI believes that these new markets offer significant
potential. RMI is currently working closely with several oil companies and
engineering concerns to evaluate a number of potential projects in these
markets. RMI, however, cannot give any assurances as to the extent to which it
will be able to develop these markets, including those described below, or as to
the time required for such development. If RMI is able to develop successfully
such markets, RMI expects to face competition.

RMI's efforts to develop these new markets and applications have focused on
demonstrating that not only does titanium outperform alternate materials in many
applications, but that it is more cost efficient, especially when viewed on a
total project basis, principally due to its superior corrosion and erosion
resistance and high strength-to-weight ratio. For example, steel pipe used in
geothermal applications, where wells bring hot brine from deep in the earth to
the surface for power generation, may need to be replaced every 6 to 18 months,

4
<PAGE> 6

while titanium pipe will last for the 30-40 year life of the project and thus
not only eliminate the cost of replacement pipe, but also the time and expense
of taking the well out of service. In addition, the use of titanium in riser
systems, which are suspended from offshore floating platforms, can allow oil and
gas producers to design smaller platforms, reducing weight and significantly
reducing total platform costs.

RMI is assisting energy companies in evaluating titanium applications and
is actively marketing the custom design, engineering and production of titanium
product systems, including the following:

- Drilling Riser--Heavy-walled tubular structure, connected at the top to
an offshore oil platform and at the bottom to the ocean floor, inside of
which the drill pipe operates. In October 1993, RMI received a contract to
supply the world's first high-pressure titanium drilling riser for use by
Conoco Norway in the Heidrun project in the Norwegian North Sea. When
assembled, the riser will be about 1,500 feet in length and will weigh
approximately 250,000 pounds. Based on the quantity of the material to be
provided under the contract, and the contract prices for such material,
RMI expects to receive approximately $15 million in revenues from the
contract.

- Production Riser--Structure similar to a drilling riser in which the oil
and gas flow to the platform after a well is drilled.

- Export Riser--Structure similar to a drilling riser in which oil and gas
flow from the platform to a pipeline for transmission onshore.

- Geothermal Pipe--Heavy walled pipe placed in deep land-based wells which
brings hot brine to the surface for use in generating electricity.
RMI-supplied well strings have been in successful service for several
years and RMI is working with the field operator on a major expansion of
this project.

- Welded Pipe--Pipe formed from flat-rolled titanium and welded along its
length. Used in numerous applications to transport liquids and to form
structural members. Principal product of Permipipe Titanium AS, RMI's
Norwegian joint venture, which, when operational in the first half of
1994, will be capable of producing up to 3 million pounds of pipe per
year.

- Coiled Tubing--Tube formed in similar manner to welded pipe on a
continuous basis and coiled onto spools much like cable products. Used in
numerous applications including subsea umbilical lines which operate
hydraulic equipment on the ocean floor, subsea flow lines which carry oil
and gas and workover strings used to inject various materials into
existing wells. The continuous nature of coiled tubing eliminates the need
to join lengths of tube together.

RMI believes that its expertise in manufacturing and fabrication, as well
as its capabilities in project management and subcontract administration, give
it an advantage over its competitors in the titanium industry. In addition, RMI
believes that it is the only titanium company with petroleum and design
engineering capabilities. RMI maintains a complete project management and
support group to administer its projects.

RMI has over 728,000 square feet of manufacturing facilities, most of which
are owned. RMI's equipment and facilities are well maintained and its products
meet the most stringent quality standards, including ISO-9002. RMI's principal
manufacturing plant is located in Niles, Ohio. Other manufacturing operations
are located in Pennsylvania, Missouri and Utah. RMI's facilities have a rated
capacity of melting 36 million pounds of ingot and producing 22 million pounds
of mill products, although practical capacity may be less. At March 31, 1994,
RMI's ingot and mill product facilities were being utilized at approximately 47%
and 52%, respectively, of rated capacities. RMI's products are marketed
worldwide through its internal sales organization and a network of distributors.

RMI's principal executive offices are located at 1000 Warren Avenue, Niles,
Ohio 44446, and its telephone number is (216) 544-7604.

5
<PAGE> 7

BACKGROUND AND PURPOSES OF THE RIGHTS OFFERING

The Board of Directors of RMI has determined that RMI should seek to raise
up to $30 million through the Rights Offering. Net proceeds of the Rights
Offering will be used by RMI for general corporate purposes, including working
capital for the development of new markets and applications for its products.
Development of RMI's new market opportunities, together with the lack of
recovery in RMI's traditional markets, will place greater pressure on its
limited financial resources. Specific expenditures and the amounts thereof
related to the development of RMI's new market opportunities cannot be
determined at this time. Expenditures for new technology and facilities are not
expected to be significant. However, potential projects are generally large
relative to RMI's present working capital position, necessitating the need for
additional capital.

RMI has recently amended its $75 million revolving credit facility (the
"Existing Credit Facility") to establish new financial covenants and to relate
the maximum amount of available credit thereunder to a borrowing-base formula.
Based on the values of the collateral as of March 31, 1994, RMI would be able to
borrow the entire $75 million available under the Existing Credit Facility, as
amended. In addition, RMI has obtained a separate commitment from such banks to
enter into a second revolving credit facility (the "EXIM Bank Credit Facility")
providing for up to an additional $15 million of available credit which would be
guaranteed by the Export Import Bank. RMI has applied to the Export Import Bank
for such a guarantee, and its application is currently being reviewed. However,
RMI can give no assurances its application will be approved. The EXIM Bank
Credit Facility would increase RMI's credit availability through utilization of
foreign accounts receivable and inventory. RMI's reliance on the EXIM Bank
Credit Facility will depend on a number of factors, including RMI's level of
export business, the number and size of the new projects, and the proceeds from
the Rights Offering. However, RMI currently believes that it will be able to
continue development of new markets even if the EXIM Bank guarantee is not
obtained. Borrowings under the EXIM Bank Credit Facility would be subject
generally to the same conditions as borrowings under the Existing Credit
Facility, as amended, and also to the condition that RMI receive at least $15
million in gross proceeds, of which at least $14.7 million is new equity, as a
result of the Rights Offering by July 29, 1994.

RMI would be in default under the Existing Credit Facility, as amended, if
it fails to receive at least $15 million in gross proceeds, of which at least
$14.7 million is new equity, as a result of the Rights Offering by July 29,
1994. See "Risk Factors--Increasingly High Leverage; Liquidity Concerns" and
"Capitalization--Revolving Credit Facilities" below.

RMI has been advised by USX, the owner of 750,000 shares of Common Stock,
constituting approximately 50.8% of all Common Stock outstanding as of the
Record Date, that USX intends to exercise the Basic Subscription Privilege, but
not the Oversubscription Privilege, with respect only to the Rights issued to
it, and does not intend to purchase or otherwise acquire any other Rights.
Exercise of the Basic Subscription Privilege by USX with respect to such Rights
will result in the receipt of approximately $ million by RMI (after
deduction of expenses) and the issuance to USX of additional shares of
Common Stock, which will result in USX owning a total of shares of Common
Stock. If no other Rights are exercised, USX would own % of all shares
outstanding.

6
<PAGE> 8

RMI TITANIUM COMPANY

SUMMARY SELECTED FINANCIAL INFORMATION

The following summary selected financial information has been derived from
the consolidated financial statements of RMI for each of the five years in the
period ended December 31, 1993 and the condensed consolidated financial
statements of RMI for the quarters ended March 31, 1994 and 1993. The
information set forth below should be read in connection with the Consolidated
Financial Statements, the Condensed Consolidated Financial Statements and the
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations" related thereto, included elsewhere herein. The summary selected
quarterly information has been prepared by RMI without audit and reflects all
adjustments, consisting of only normal recurring adjustments, which are, in the
opinion of management, necessary for a fair statement of the results of
operations for the interim periods covered.

<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
----------------------- ------------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE AND PRICE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS STATEMENT DATA:
Sales:
Mill Products................ $ 25,754 $ 26,987 $ 96,453 $110,509 $128,803 $208,058 $184,251
Related Products and
Services................... 7,948 3,610 20,512 16,745 17,260 16,397 19,931
Other(1)..................... 2,658 1,537 10,432 8,353 19,505 30,840 37,832
-------- -------- -------- -------- -------- -------- --------
Total.................... 36,360 32,134 127,397 135,607 165,568 255,295 242,014
Operating income (loss)........ (2,216) (2,359) (10,764) (11,387) (52,712)(2) 32,773 30,088
Income (loss) before cumulative
effect of a change in
accounting principle......... (2,929) (2,897) (11,955) (14,062) (57,085)(2) 28,126 26,544
Cumulative effect of a change
in accounting principle...... (1,202)(3) (16,938)(4) (16,938)(4) -- -- -- --
Net income (loss).............. (4,131) (19,835) (28,893) (14,062) (57,085) 28,126 26,544
Cash dividends per common
share(5)..................... -- -- -- -- .75 .75 --
NET LOSS PER COMMON SHARE:(5)
Before change in accounting
principle.................... $ (1.99) $ (1.98) $ (8.14) -- -- -- --
Net loss per common share...... (2.80) (13.58) (19.67) $ (9.66) $ (39.17) -- --
PRO FORMA DATA:(6)
Pro forma net income........... -- -- -- -- -- $ 27,274 $ 21,959
Pro forma net income per common
share(5)..................... -- -- -- -- -- 18.17 14.64
Pro forma book value per common
share(5)..................... -- -- -- -- -- -- 74.11
BALANCE SHEET DATA: (at end of
period)
Working capital................ $ 66,517 $ 66,319 $ 72,229 $ 79,820 $109,044 $102,666
Total assets................... 153,841 152,471 153,257 173,888 228,605 217,549
Long-term debt due after one
year......................... 68,530 66,660 62,280 58,800 61,205 38,503
Equity......................... 23,939 27,861 63,302 77,705 136,569 141,158
Book value per common
share(5)..................... 16.23 18.89 43.34 53.36 92.61 --
% Total debt to total
capitalization............... 74% 71% 50% 43% 31% 22%
OPERATING DATA:
Mill products shipments
(thousands of pounds):
Aerospace.................... 1,951 2,002 7,619 8,699 9,379 12,898 12,237
Nonaerospace................. 892 815 3,406 2,585 1,938 3,913 3,612
-------- -------- -------- -------- -------- -------- --------
Total.................... 2,843 2,817 11,025 11,284 11,317 16,811 15,849
Average mill product sales
price (per pound)............ $ 9.46 $ 10.38 $ 9.60 $ 10.20 $ 11.69 $ 12.58 $ 11.81
Mill product capacity (millions
of pounds)(7)................ 22.0 22.0 22.0 22.0 22.0
Ingot capacity (millions of
pounds):(7).................. 36.0 36.0 36.0 36.0 36.0
Ingot melt................... 14.6 14.7 14.0 22.9 24.2
% Utilization................ 41% 41% 39% 64% 67%
Active employees at December
31,.......................... 782 843 1,172 1,660 1,650
</TABLE>

7
<PAGE> 9

- ---------

(1) Includes sales of discontinued products of $2.6 million, $13.2 million,
$22.9 million and $29.7 million in 1992, 1991, 1990 and 1989, respectively.

(2) Includes a charge of $37.1 million relating to the closing of RMI's sponge
production facilities. See Note 4 to the Consolidated Financial Statements
included elsewhere herein.

(3) Reflects the January 1, 1994 adoption of Statement of Financial Accounting
Standards ("SFAS") No. 112. See Note 4 to the Condensed Consolidated
Financial Statements included elsewhere herein.

(4) Reflects immediate recognition of the transition obligation determined as of
the January 1, 1993 adoption of SFAS No. 106. See Note 11 to the
Consolidated Financial Statements included elsewhere herein.

(5) Amounts retroactively restated to reflect the one-for-ten reverse stock
split effective March 31, 1994. See Note 17 to the Consolidated Financial
Statements included elsewhere herein.

(6) Reflects the change to RMI's capital structure effective April 20, 1990 (see
Note 1 to Consolidated Financial Statements included elsewhere herein) and
certain adjustments to historical partnership income.

(7) Rated annual capacity; practical capacity may be less.

CURRENT OPERATIONS

RMI's volume of shipments and revenues have generally remained unchanged
from the first quarter of 1994. Based on interim results for April and May, as
well as expectations for June, 1994, RMI believes that it will report second
quarter results from operations similar to those recorded in the first quarter
of 1994. RMI's $4.1 million net loss in the first quarter included a $1.2
million one-time charge representing the cumulative effect of adopting SFAS No.
112, "Employees Accounting for Postemployment Benefits."

SUMMARY CAPITALIZATION

The following table sets forth in summary form the consolidated
capitalization of RMI as of March 31, 1994. The data should be read in
conjunction with the Consolidated Financial Statements, the Condensed
Consolidated Financial Statements and the "Management's Discussion and Analysis
of Financial Condition and Results of Operations" related thereto, included
elsewhere herein.

<TABLE>
<CAPTION>
MARCH 31, 1994
(DOLLARS IN THOUSANDS)
<S> <C>
Total debt............................................................ $ 68,650
Total shareholders' equity............................................ 23,939(1)
----------
Total capitalization.................................................. $ 92,589(1)
==========
</TABLE>

- ---------

(1) If the Basic Subscription Privilege is exercised in full, Total
shareholders' equity and Total capitalization would be $ and $
, respectively. If USX exercises only the Basic Subscription
Privilege with respect only to the Rights issued to it (which USX has
advised RMI that USX intends to do) and does not purchase or otherwise
acquire any other Rights, and no other Rights are exercised, Total
shareholders' equity and Total capitalization would be $ and $ ,
respectively.

8
<PAGE> 10

THE RIGHTS OFFERING

<TABLE>
<S> <C>
RIGHTS........................... Each record holder of Common Stock ("Record Date Holder")
at the close of business on June , 1994 (the "Record
Date") is receiving transferable Rights to Purchase
Common Stock of RMI ("Rights") for each share of Common
Stock held of record on the Record Date (the "Rights
Offering" or "Offering"). An aggregate of Rights
is being issued. Each Right entitles the holder thereof (a
"Holder" or "Rights Holder") to purchase from RMI one
share of Common Stock (an "Underlying Share") for a price
of $ per share (the "Subscription Price"). The
Rights are evidenced by transferable subscription warrants
(the "Subscription Warrants"). No Rights will be issued
with respect to any treasury shares of Common Stock held
by RMI.
BASIC SUBSCRIPTION PRIVILEGE..... Until the Expiration Time, Rights Holders are entitled to
purchase, at the Subscription Price, one Underlying Share
for each Right held (the "Basic Subscription Privilege").
Certificates representing shares purchased pursuant to the
Basic Subscription Privilege will be mailed or available
for pick-up as soon as practicable after exercise and
receipt of payment therefor by the Subscription Agent (as
defined below). See "The Rights Offering--Subscription
Privileges--Basic Subscription Privilege."
OVERSUBSCRIPTION PRIVILEGE....... Each Holder who elects to exercise the Basic Subscription
Privilege in full may also subscribe, at the Subscription
Price, for additional Underlying Shares available after
satisfaction of all subscriptions pursuant to the Basic
Subscription Privilege (the "Oversubscription Privilege").
If an insufficient number of Underlying Shares is
available to satisfy fully all exercises of the
Oversubscription Privilege, then the available Underlying
Shares will be prorated (subject to the elimination of
fractional shares) among Holders who exercise their
Oversubscription Privilege based upon the respective
number of Underlying Shares each Rights Holder has
purchased pursuant to the Basic Subscription Privilege.
Certificates representing shares purchased pursuant to the
Oversubscription Privilege will be mailed or available for
pick-up as soon as practicable after the Expiration Time
and after all prorations and adjustments contemplated by
the Rights Offering have been made and payment therefor
has been received by the Subscription Agent. Any funds
received by the Subscription Agent from a Holder with
respect to the Oversubscription Privilege that are not
applied as a result of a proration will be returned by
mail, without interest or deduction, promptly after all
prorations and adjustments have been effected. See "The
Rights Offering--Subscription Privileges--Oversubscription
Privilege."
USE OF PROCEEDS.................. RMI will use the net proceeds of the Rights Offering for
general corporate purposes, including working capital for
the development of new markets for its products. Assuming
USX exercises the Basic Subscription Privilege with
respect only to the Rights issued to it (which USX has
advised RMI that USX intends to do), and does not purchase
or acquire any other Rights, and no other Rights are
exercised, the Rights Offering will result in
approximately $ million in net proceeds to RMI, after
deduction of estimated
</TABLE>

9
<PAGE> 11

<TABLE>
<S> <C>
expenses. If all of the Rights are exercised, such net
proceeds will be $ million.
PROCEDURE FOR EXERCISING
RIGHTS......................... The Basic Subscription Privilege and the Oversubscription
Privilege may be exercised by properly completing the
Subscription Warrant and forwarding it (or following the
Guaranteed Delivery Procedures), with payment of the
Subscription Price for each Underlying Share subscribed
for pursuant to the Basic Subscription Privilege and
Oversubscription Privilege, to the Subscription Agent,
which must receive such payment in the appropriate manner
and such Subscription Warrant (or a Notice of Guaranteed
Delivery) at or prior to the Expiration Time. If
Subscription Warrants are sent by mail, Rights Holders are
urged to use insured, registered mail. For the procedure
to be followed for exercising Rights held through The
Depository Trust Company, see "The Rights
Offering--Procedures for DTC Participants."
Funds paid by uncertified check may take at least five
business days to clear. Accordingly, Rights Holders who
wish to pay the Subscription Price by means of uncertified
check are urged to make payment sufficiently in advance of
the Expiration Time to ensure that the payment is received
and clears by that time, and are urged to consider, in the
alternative, payment by means of certified or cashier's
check, money order or wire transfer of funds.
If the aggregate Subscription Price paid by an exercising
Rights Holder is insufficient to purchase the number of
Underlying Shares that the Rights Holder indicates are
being subscribed for, or if no number of Underlying Shares
to be purchased is specified, then the Rights Holder will
be deemed to have exercised the Basic Subscription
Privilege to purchase Underlying Shares to the full extent
of the payment tendered. If the aggregate Subscription
Price paid by an exercising Holder exceeds the amount
necessary to purchase the number of Underlying Shares for
which the Holder has indicated an intention to subscribe,
then the Holder will be deemed to have exercised the
Oversubscription Privilege to the full extent of the
excess payment tendered. See "The Rights
Offering--Exercise of Rights and Subscription Agent."
ONCE A RIGHTS HOLDER HAS EXERCISED THE BASIC SUBSCRIPTION
PRIVILEGE OR THE OVERSUBSCRIPTION PRIVILEGE, THE EXERCISE
MAY NOT BE REVOKED. RIGHTS NOT EXERCISED PRIOR TO THE
EXPIRATION TIME WILL EXPIRE AND WILL NO LONGER BE
EXERCISABLE BY ANY HOLDER.
TRANSFERABILITY OF RIGHTS........ The Rights are transferable and it is anticipated that
they will trade on the NYSE until the close of business on
the last NYSE trading day preceding the day on which the
Expiration Time occurs. There can be no assurance,
however, that any market for the Rights will develop or,
if a market develops, that the market will remain
available throughout the period during which Rights may be
exercised, or as to the price at which the Rights will
trade.
The Subscription Agent will endeavor to sell Rights for
Rights Holders who have so requested and have delivered a
Subscription Warrant, with the instructions for sale
properly executed, to the Subscription Agent at or prior
to 11:00 a.m., New York City time,
</TABLE>

10
<PAGE> 12

<TABLE>
<S> <C>
two NYSE trading days preceding the day on which the
Expiration Time occurs. If the Rights cannot be sold by
the Subscription Agent prior to 5:00 p.m., New York City
time, one NYSE trading day preceding the day on which the
Expiration Time occurs, they will be returned promptly by
mail to the Rights Holder or, if so arranged, held by the
Subscription Agent for pick-up.
A Rights Holder wishing to sell Rights must submit the
Subscription Warrant evidencing those Rights to the
Subscription Agent, accompanied by instructions setting
forth the action to be taken with respect to the Rights
not to be sold. If so instructed, a new Subscription
Warrant will be issued to the submitting Rights Holder,
but only if the Subscription Agent receives the properly
endorsed Subscription Warrant no later than 5:00 p.m., New
York City time, on the fifth NYSE trading day preceding
the day on which the Expiration Time occurs. No new
Subscription Warrants will be issued with respect to
Subscription Warrants submitted after such time and date.
Accordingly, after such time and date a Rights Holder
selling or exercising less than all of its Rights will
lose the power to sell or exercise its remaining Rights.
See "The Rights Offering-- Method of Transferring Rights."
RECORD DATE...................... Close of business on June , 1994.
EXPIRATION TIME.................. 5:00 p.m., New York City time, July , 1994, unless
extended by RMI from time to time, in its sole discretion,
to a time (the "Expiration Time") not later than August
, 1994. See "The Rights Offering--Expiration Time."
PERSONS HOLDING COMMON STOCK,
OR WISHING TO EXERCISE RIGHTS,
THROUGH OTHERS................. Persons holding shares of Common Stock through a broker,
dealer, commercial bank, trust company or other nominee,
as well as persons holding certificates for Common Stock
personally who would prefer to have such institutions
effect transactions relating to the Rights on their
behalf, should contact the appropriate institution or
nominee and request it to effect the transactions for
them. See "The Rights Offering--Exercise of Rights and
Subscription Agent."
PROCEDURE FOR EXERCISING RIGHTS
BY FOREIGN SHAREHOLDERS........ Subscription Warrants will not be mailed to Rights Holders
whose addresses are outside the United States, but will be
held by the Subscription Agent for their account. To
exercise such Rights, such Rights Holders must notify the
Subscription Agent on or prior to 11:00 a.m., New York
City time, two NYSE trading days preceding the day on
which the Expiration Time occurs, at which time (if no
instructions have been received) the Subscription Agent
will attempt to sell such Rights. The net proceeds, if
any, from the sale of those Rights will be remitted to
such holders by the Subscription Agent. See "The Rights
Offering--Foreign and Certain Other Stockholders."
PROCEDURES FOR DTC
PARTICIPANTS................... It is anticipated that the Rights will be eligible for
transfer through, and that the exercise of the Basic
Subscription Privilege (but not the Oversubscription
Privilege) may be effected through, the facilities of The
Depository Trust Company ("DTC"). Rights with respect to
</TABLE>

11
<PAGE> 13

<TABLE>
<S> <C>
which the Basic Subscription Privilege has been exercised
through DTC are referred to as "DTC Exercised Rights." A
holder of DTC Exercised Rights may exercise the
Oversubscription Privilege in respect thereof by properly
executing and delivering to the Subscription Agent, at or
prior to the Expiration Time, a DTC Participant
Oversubscription Exercise Form and a Nominee Holder
Certification, together with payment of the appropriate
Subscription Price for the number of Underlying Shares for
which the Oversubscription Privilege is to be exercised.
Copies of the DTC Participant Oversubscription Exercise
Form and the Nominee Holder Certification may be obtained
from either the Information Agent or RMI at the addresses
and telephone numbers included elsewhere herein.
ISSUANCE OF COMMON STOCK......... Common Stock certificates representing shares of Common
Stock purchased pursuant to the exercise of the Basic
Subscription Privilege will be mailed or available for
pick-up as soon as practicable after exercise and receipt
of payment therefor. Certificates representing shares
purchased pursuant to the Oversubscription Privilege will
be mailed or available for pick-up as soon as practicable
after the Expiration Time and all prorations and
adjustments contemplated by the terms of the Rights
Offering have been effected and payment therefor has been
received by the Subscription Agent. See "The Rights
Offering--Subscription Privileges."
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES................... For United States federal income tax purposes, Record Date
Holders generally will not recognize taxable income in
connection with the issuance to them or exercise by them
of Rights. See "The Rights Offering--Certain Federal
Income Tax Consequences--Record Date Holder
Considerations."
SUBSCRIPTION AGENT............... Mellon Securities Trust Company (the "Subscription
Agent"). The Subscription Agent's telephone number is
(800) 777-3674.
INFORMATION AGENT................ Questions and requests for copies of applicable documents
and for assistance concerning the exercise or transfer of
Rights should be directed to Corporate Investor
Communications, Inc. (the "Information Agent"). The
Information Agent's telephone number is (800) 242-4410.
SOLICITING AGENT(S).............. RMI may engage one or more soliciting agents to assist it
in arranging the sale of shares of Common Stock through
the exercise of Rights. The fees to be paid to the
Soliciting Agent(s), if any, will be negotiated by RMI,
but in no event will such fees exceed % of the
purchases arranged by such agent(s). RMI may also agree to
indemnify such agent(s) against certain liabilities under
the Securities Act.
EFFECT ON STOCK OPTION, STOCK
OWNERSHIP AND EMPLOYEE SAVINGS
AND INVESTMENT PLANS........... The Rights Offering will result in certain adjustments to
outstanding employee stock options. Rights will also be
issued with respect to all shares issued and outstanding
under various employee benefit plans. RMI has agreed to
lend, interest free, to Messrs. Gieg, Odle and Rupert (the
President and Chief Executive Officer, Senior Vice
</TABLE>

12
<PAGE> 14

<TABLE>
<S> <C>
President - Commercial and Senior Vice President & Chief
Financial Officer of RMI, respectively) sufficient funds
to permit them to exercise the Basic Subscription
Privilege (but not the Oversubscription Privilege) with
respect to Rights issued to them other than Rights issued
with respect to shares of Common Stock credited to their
accounts in RMI's Employee Savings and Investment Plan.
</TABLE>

FOR COPIES OF THIS PROSPECTUS, THE INSTRUCTIONS AND APPLICABLE FORMS
CONTACT RMI BY CALLING (800) 869-6304.

13
<PAGE> 15

RISK FACTORS

A purchase of Common Stock involves substantial risks. Potential purchasers
of Rights and Rights Holders determining whether to exercise Rights to purchase
Common Stock should carefully consider, in addition to the other information set
forth or incorporated herein, the following risk factors:

CERTAIN COMPANY CONSIDERATIONS

DEPRESSED TRADITIONAL AEROSPACE MARKETS. The cyclical nature of the
aerospace industry has been the principal cause of the fluctuations in
performance of companies engaged in the titanium industry. Prior to 1989-1990,
the last peak in the titanium industry cycle occurred during the 1979-1982
period. From 1987 through late 1990, average unit prices for RMI's mill products
increased steadily. Domestic industry shipment volumes in 1989 increased to 55
million pounds from 50 million in 1988, then decreased to 53 million pounds in
1990. Shipments for 1991 decreased to approximately 34 million pounds, a
decrease of 35% from 1990 levels, the largest single one year decrease in the
history of the industry. Domestic industry shipments amounted to approximately
35 million pounds in 1992 and approximately 36 million pounds in 1993. Domestic
industry shipment volumes for 1994 are not expected to increase significantly
from 1993 levels. A declining U.S. military budget and production cutbacks at
Boeing, McDonnell Douglas and Airbus Industrie resulting from reduced commercial
airline demand for new aircraft continue to negatively impact the demand for
titanium mill products. During the three months ended March 31, 1994, RMI's
ingot and mill products facilities were being utilized at approximately 47% and
52%, respectively, of their rated capacities (which may be higher than their
practical capacities). Improvement in RMI's results of operations will largely
depend on increased commercial aerospace activity. If commercial aerospace
activity does not increase, RMI will be more dependent upon nonaerospace markets
and the development of new markets.

TITANIUM INDUSTRY HIGHLY COMPETITIVE. The titanium industry is highly
competitive on a worldwide basis. Competition is primarily on the basis of
price, quality and delivery. In recent years the industry has been suffering
from excess production capacity, which has intensified price competition for
available business. Integrated and nonintegrated producers of mill products are
located primarily in the U.S., Japan, the Commonwealth of Independent States
("CIS"), Europe and China. Following closure of RMI's sponge facilities in 1992,
there are two remaining integrated producers in the United States. There are
also a number of domestic nonintegrated producers, of which RMI is the largest,
which produce mill products from purchased sponge, scrap or ingot. Imports of
titanium mill products from countries that receive the most-favored-nation
tariff rate ("MFN") are subject to a 15% tariff. The tariff rate applicable to
imports from countries that do not receive MFN treatment is 45%. Japanese
producers, which benefit from MFN treatment, participate significantly in the
European market, but historically have not been a major factor in the U.S. mill
products market. The United States does not currently grant MFN treatment to
imports, including titanium mill product imports, from the CIS countries, except
Russia. However, effective October 18, 1993, the United States government
extended the benefits of the Generalized System of Preferences ("GSP") to
Russia. Under GSP, the United States grants duty-free access to semifinished and
agricultural products from developing countries and territories. Certain
titanium mill products are covered by GSP. While countries within the CIS,
including Russia, have not participated to any significant degree in the U.S.
market for titanium mill products, they have the largest titanium production
capacity in the world and could materially affect competition if their exports
were to increase significantly.

RECENT LOSSES. RMI's current financial condition and results of operations
for the period 1991-1993 reflect the severe downturn in market conditions
experienced generally by the titanium industry over that period. RMI incurred
net losses of $28.9 million, $14.1 million and $57.1 million in 1993, 1992 and
1991, respectively. The 1993 results reflect a $16.9 million cumulative effect
charge relating to SFAS No. 106, and the 1991 results reflect a $37.1 million
charge resulting from the closure of RMI's sponge production facilities. RMI
incurred a net loss of $4.3 million in the first quarter of 1994, compared to a
net loss of $19.8 million in the first quarter of 1993. The 1994 first quarter
results reflect a $1.2 million cumulative effect charge related to the adoption
of SFAS No. 112 and the 1993 first quarter results reflect the $16.9 million
cumulative effect charge related to the adoption of SFAS No. 106. Exclusive of
these charges, the losses over the three-year period and the first quarter of
1994 were primarily due to soft demand and competitive pressures. RMI

14
<PAGE> 16

believes a number of factors are responsible for this situation, including
aggressive international competition, declining military spending, reduced
commercial airline demand for new aircraft and an uncertain world economy.
Domestic industry shipments of titanium mill products are not expected to
increase significantly in 1994 from the level of shipments in each of 1992 and
1993.

INCREASINGLY HIGH LEVERAGE; LIQUIDITY CONCERNS. For the quarter ended March
31, 1994 and the year ended December 31, 1993, RMI's cash flow requirements for
operating losses and capital spending were funded primarily by working capital
reductions and borrowings under RMI's Existing Credit Facility. As of March 31,
1994, RMI had borrowed $67.5 million of the $75 million available under the
Existing Credit Facility. Aggressive cost-cutting efforts, combined with
improved operating efficiencies, the sale of non-strategic assets and borrowings
under such facility, have enabled RMI to maintain operations during the current
industry downturn. However, the timing and extent of any recovery in RMI's
traditional aerospace markets are uncertain.

RMI has received commitments from participating banks to its Existing
Credit Facility to amend the facility to establish new financial covenants and
relate the maximum amount of available credit thereunder to a borrowing-base
formula. The Existing Credit Facility, as amended, will include a covenant to
maintain a minimum balance of total shareholders' equity. Also, an event of
default would occur under the Existing Credit Facility, as amended, if RMI does
not receive at least $15 million in gross proceeds, of which at least $14.7
million is new equity, as a result of the Rights Offering by July 29, 1994. RMI
has also received from the banks which are parties to the Existing Credit
Facility a separate commitment to enter into the EXIM Bank Credit Facility,
which provides for up to $15 million of available credit in addition to amounts
available under the Existing Credit Facility. Prior to any borrowings under the
EXIM Bank Credit Facility, RMI would be required to receive at least $15 million
in gross proceeds, of which at least $14.7 million is new equity, as a result of
the Rights Offering by July 29, 1994. See "Certain Offering
Considerations--Proceeds from Offering" below. Furthermore, the EXIM Bank Credit
Facility is conditioned upon obtaining a guarantee by the Export Import Bank of
amounts outstanding thereunder. RMI has applied to the Export Import Bank for
such a guarantee and its application is being reviewed. RMI can give no
assurances its application will be approved.

Continued losses from operations or other charges could result in
noncompliance with the minimum total shareholders' equity covenant of the
Existing Credit Facility, as amended. If RMI were unable to comply with any
covenant in either of such credit facilities, RMI might not be able to borrow
additional amounts under either the Existing Credit Facility, as amended, or the
EXIM Bank Credit Facility, or both, and the banks which are parties to the two
credit facilities could demand payment of all amounts outstanding thereunder. In
the event the banks would demand payment of such amounts, RMI would be required
to seek alternative financing. RMI has no commitments or other understandings
with respect to any such alternative financing. See "Capitalization--Revolving
Credit Facilities."

RMI's shareholders' equity declined to $23.9 million at March 31, 1994 from
$27.9 million at December 31, 1993 and $136.6 million at December 31, 1990, due
to the net losses described above and a $7.5 million minimum pension liability
adjustment recorded at December 31, 1993. Long-term debt increased from $61.2
million to $68.5 million over the same period.

The percentage of RMI's total debt to total capitalization has increased
from 31% in 1990 to 74% at March 31, 1994. This increase reflects primarily the
net losses and the pension liability adjustment described above.

NO ASSURANCES AS TO NEW PRODUCT AND MARKET DEVELOPMENT. In an effort to
lessen its dependence on the aerospace market and to increase its participation
in other markets, RMI is devoting significant efforts and resources to
developing new markets and applications for its products, principally in the
energy industry. RMI cannot give any assurances as to the extent to which it
will be able to develop new markets for its products, or as to the time required
for such development. If RMI is able to develop successfully such markets, RMI
expects to face competition.

15
<PAGE> 17

These emerging market opportunities, together with the lack of recovery in
RMI's traditional markets, will place an even greater pressure on RMI's limited
financial resources.

UNDERFUNDED PENSION AND POSTRETIREMENT OBLIGATIONS. As indicated in Note 10
to the Consolidated Financial Statements included elsewhere herein, RMI has
substantial underfunded obligations related to its pension and other
postretirement benefit programs. As of December 31, 1993, the actuarial present
value of the accumulated benefit obligation for the defined benefit pension
plans of RMI was approximately $67.4 million, and the fair market value of the
pension fund assets available to pay such benefit obligation was approximately
$49.6 million. Also, as of December 31, 1993, RMI's unfunded accumulated
postretirement benefit obligations were $22.4 million. At December 31, 1993, RMI
recorded in noncurrent pension liabilities an additional minimum pension
liability of $12.9 million, and a related adjustment to reduce shareholders'
equity by $7.5 million, primarily as a result of a reduction in the assumed
discount rate used to measure benefit obligations. RMI is unable to predict
whether it may be required to record additional similar liabilities and
adjustments in the future. However, under the Existing Credit Facility, as
amended, minimum pension liability adjustments charged to shareholders' equity
in accordance with SFAS No. 87 do not affect compliance with the minimum total
shareholders' equity covenant.

ENVIRONMENTAL CONTINGENCIES. RMI is involved in investigative or cleanup
projects under federal or state environmental laws at a number of waste disposal
sites, including a Superfund site. Given the status of the proceedings with
respect to these sites, ultimate investigative and remediation costs cannot
presently be accurately predicted, but could, in the aggregate, be material.

In 1992, the Environmental Protection Agency ("EPA") proposed a $1.4
million civil penalty for alleged failure by RMI to comply with the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"). RMI is contesting
the complaint. Based on the preliminary nature of the proceeding, RMI is
currently unable to determine the ultimate liability, if any, that may arise
from this matter.

Based on the information available regarding the current ranges of
estimated remediation costs at currently active sites, and what RMI believes
will be its ultimate share of such costs, provisions for environmental-related
costs have been recorded, including $2.7 million in 1991. These provisions are
in addition to amounts which have previously been accrued for RMI's share of
environmental study costs. At March 31, 1994, the amount accrued for future
environmental-related costs was $2.9 million. Based on available information,
RMI believes that its share of potential environmental-related costs, before
expected contributions from third parties, will be in the range of $4.2-$6.1
million in the aggregate. As these proceedings continue toward final resolution,
amounts in excess of those already provided may be necessary to discharge RMI
from its obligations for these projects.

The ultimate resolution of these environmental matters could, individually
or in the aggregate, be material to the consolidated financial statements.
However, management believes that RMI will remain a viable and competitive
enterprise even though it is possible that these matters could be resolved
unfavorably.

LIMITATION ON USE OF TAX LOSSES. At December 31, 1993, RMI had net
operating loss carryforwards of approximately $75 million and certain other
unrealized future deductions that could be subject to an annual limitation on
their deductibility if certain substantial changes in its ownership should occur
over any three-year period, as provided under Section 382 of the Internal
Revenue Code. While RMI has not reflected a benefit in its December 31, 1993
consolidated financial statements with respect to these tax attributes, the
potential annual limitation could restrict RMI's ability to use them to reduce
future income tax liabilities. Although RMI does not expect the Rights Offering
to result in an ownership change that would cause the annual limitation to
apply, there is no assurance that an ownership change will not result from the
Rights Offering or from other equity transactions of RMI and USX. Further, the
Rights Offering significantly increases the likelihood that future equity
transactions by RMI or USX, or by either of these companies' significant current
or future shareholders in the three years following the Rights Offering (some of
which will not be within the control of RMI), could cause the annual limitation
to apply. See "The Rights Offering--Certain Federal Income Tax
Considerations--Company Considerations."

16
<PAGE> 18

PRINCIPAL SHAREHOLDER. USX was the owner of 750,000 shares of RMI's Common
Stock as of the Record Date, constituting approximately 50.8% of all Common
Stock then outstanding. RMI has been advised by USX that USX intends to exercise
the Basic Subscription Privilege, but not the Oversubscription Privilege, with
respect only to the Rights issued to it, and does not intend to purchase or
otherwise acquire any other Rights. Assuming USX so exercises only the Rights
issued to it, and no other Rights are exercised, additional shares of
Common Stock will be owned by USX, increasing its ownership to approximately
% of all shares of Common Stock outstanding immediately after completion of
the Offering.

USX intends to enter into a Voting Trust Agreement promptly following the
completion of the Rights Offering, pursuant to which it will deposit with Mellon
Bank, N.A., as Trustee, sufficient shares of RMI's Common Stock, including any
shares acquired as a result of the exercise of Rights, so that the shares held
by USX outside of the trust do not exceed 49% of all shares of Common Stock
outstanding and are at least one share less than the number of such shares owned
by holders other than USX. Shares held by the Trustee will be voted on any
matter voted on by RMI's shareholders in the same proportion as all other shares
of Common Stock are voted on such matter.

It is possible that USX could be in a position involving a conflict of
interest with RMI. Possible conflicts of interest could include a sale by USX of
a substantial portion or all of its Common Stock, which might trigger a change
in ownership in RMI, as provided under Section 382 of the Internal Revenue Code.
See "Limitations on Use of Tax Losses" above. When such interests diverge, there
can be no assurance that such conflicts will be resolved in favor of RMI.
Certain directors and/or officers of USX are also directors and/or officers of
RMI. When such persons act in their capacity as directors and/or officers of
RMI, they have a fiduciary duty to RMI and its shareholders, which includes a
duty of loyalty to RMI and its shareholders.

ARTICLES AND REGULATIONS PROVISIONS. RMI is authorized to issue up to five
million shares of Preferred Stock, the relative rights and preferences of which
may be fixed by RMI's Board of Directors. While RMI has no present plans to
issue any shares of Preferred Stock, the future issuance thereof may have the
effect of delaying, deferring or preventing a change in control of RMI or the
payment of dividends on Common Stock. In addition, RMI's Board of Directors is
classified, which also may have the effect of delaying, deferring or preventing
a change in control of RMI. RMI's Amended Articles of Incorporation provide that
certain extraordinary transactions, such as certain mergers and consolidations,
a sale or disposition of all or substantially all of the assets, a dissolution
of RMI and any amendment to the Amended Articles of Incorporation, require a
two-thirds vote of the shareholders. See "Description of Capital Stock."

CERTAIN OFFERING CONSIDERATIONS

OWNERSHIP DILUTION TO CURRENT SHAREHOLDERS. The Rights entitle the Rights
Holders to purchase shares of Common Stock at a price below the market price of
the Common Stock immediately prior to the commencement of the Rights Offering.
Holders of shares of Common Stock who exercise their Rights will preserve, and
through the Oversubscription Privilege may increase, their proportionate
interest in their equity ownership and voting power of RMI. Holders who do not
exercise their Rights will experience a decrease in their proportionate interest
in the equity ownership and voting power of RMI. The sale of the Rights may not
compensate a Holder for all or any part of any reduction in the market value of
such shareholder's shares of Common Stock resulting from the Rights Offering.
SHAREHOLDERS WHO DO NOT EXERCISE OR SELL THEIR RIGHTS WILL RELINQUISH ANY VALUE
INHERENT IN THE RIGHTS.

The number of shares of Common Stock which will be issued pursuant to the
Rights Offering depends on how many Rights Holders exercise the Basic
Subscription Privilege and Oversubscription Privilege with respect to their
Rights. Assuming all Rights are exercised, additional shares of Common
Stock will be issued, representing over % of the total outstanding shares
immediately after the Offering. If USX exercises the Basic Subscription
Privilege with respect only to the Rights issued to it (which USX has advised
RMI that USX intends to do), and does not purchase or otherwise acquire any
other Rights, and no other Rights are exercised, additional shares of
Common Stock will be issued, representing over % of the total which will then
be outstanding, and USX will own shares, or % of all shares
outstanding.

17
<PAGE> 19

USX has advised RMI that it does not intend to exercise its Oversubscription
Privilege or to purchase or otherwise acquire any other Rights.

NO MINIMUM EXERCISE OF RIGHTS REQUIRED. The Rights Offering is not
conditioned upon the exercise of any minimum number of Rights. However, as
stated under "Ownership Dilution to Current Shareholders" above, USX has advised
RMI that it intends to exercise the Basic Subscription Privilege with respect
only to the Rights issued to it.

POSSIBLE EXTENSION OF EXPIRATION TIME. RMI has reserved the right to extend
the Expiration Time from time to time, in its sole discretion, to a time not
later than August , 1994. Funds deposited in payment of the Subscription Price
may not be withdrawn and no interest will be paid thereon to Holders. In no
event will the Expiration Time be extended beyond August , 1994.

PROCEEDS FROM OFFERING. The amount of net proceeds RMI will receive as a
result of the Rights Offering will depend on the number of Rights which are
exercised. There can be no assurance the net proceeds will be sufficient to
provide RMI with adequate working capital to develop new markets and
applications for its products or to continue to satisfy its liquidity
requirements. RMI has been advised by USX that USX intends to exercise the Basic
Subscription Privilege with respect only to the Rights issued to it, and does
not intend to purchase or otherwise acquire any other Rights. If USX were to so
exercise its Rights, and no other Rights are exercised, the Rights Offering
would result in approximately $ million in net proceeds for RMI, after
deduction of estimated expenses, and USX's ownership would increase to
approximately % of all shares of Common Stock outstanding immediately after
completion of the Offering. RMI must receive at least $15 million in gross
proceeds, of which at least $14.7 million is new equity, from the Rights
Offering by July 29, 1994 to satisfy the requirements of the Existing Credit
Facility, as amended, and the EXIM Bank Credit Facility.

MARKET CONSIDERATIONS. There can be no assurance that the market price of
the Common Stock will not decline during or after the Rights Offering or that,
following the issuance of the Rights and the sale of the shares of Common Stock
upon exercise of the Basic Subscription Privilege or the Oversubscription
Privilege, a subscribing Rights Holder will be able to sell shares purchased as
a result of the Rights Offering at a price equal to or greater than the
Subscription Price. The election of a Rights Holder to exercise Rights in the
Rights Offering is irrevocable. Moreover, until certificates representing shares
of Common Stock purchased as a result of the exercise of Rights are delivered,
subscribing Rights Holders may not be able to sell the shares of Common Stock
that they have purchased pursuant to the Basic Subscription Privilege or the
Oversubscription Privilege. Certificates representing shares of Common Stock
purchased pursuant to the exercise of the Basic Subscription Privilege will be
mailed or available for pick-up as soon as practicable after exercise and
receipt of payment of the Subscription Price. Certificates representing shares
purchased pursuant to the Oversubscription Privilege will be mailed or available
for pick-up as soon as practicable after the Expiration Time and all prorations
and adjustments contemplated by the terms of the Rights Offering have been
effected and payment therefor has been received. There can be no assurance that
the market price of the Common Stock purchased pursuant to the exercise of
Rights will not decline below the Subscription Price before certificates
representing such shares of Common Stock are delivered.

The market price for RMI's Common Stock has substantially decreased over
the last two years. See "Price Range of Common Stock and Dividends." There can
be no assurance that the market price for the Common Stock may not decrease or
be subject to significant fluctuations in the future.

It is anticipated that the Rights will trade on the NYSE until the end of
trading on the last NYSE trading day preceding the day on which the Expiration
Time occurs. However, there has been no prior market for the Rights and no
assurance can be given that a market will develop or, if a market develops, that
it will continue until the Expiration Time, or as to the price at which the
Rights will trade. In the event a market develops, there can be no assurance
that the market price for the Rights will not be subject to significant
fluctuations prior to the Expiration Time. The shares of Common Stock to be
issued upon the exercise of Rights will be approved for listing on the NYSE
after delivery of certificates representing such shares to Rights Holders who
have exercised their Rights. See "The Rights Offering--Method of Transferring
Rights."

18
<PAGE> 20

CONSIDERATIONS RELATING TO OHIO LAW. The provisions of the Merger
Moratorium Act (the "Merger Moratorium Act"), which is contained in Sections
1704.01 et. seq. of the Ohio Revised Code, and the Ohio Control Shares
Acquisition Act (the "Control Share Act"), which is contained in Section
1701.831 of the Ohio Revised Code, are applicable to RMI and its shareholders.
The Merger Moratorium Act regulates certain transactions between RMI and certain
holders of in excess of 10% of the outstanding Common Stock. The Board of
Directors has approved the acquisition of Common Stock pursuant to the exercise
of the Rights, for purposes of the Merger Moratorium Act, with the result that
persons acquiring in excess of 10% of the outstanding Common Stock by reason of
the exercise of the Rights will not be subject to the restrictions of the Merger
Moratorium Act. The Control Share Act prohibits the acquisition of shares of
Common Stock that would entitle the holder to exercise voting power in the
election of Directors of RMI in certain ranges, with the lowest range starting
at 20%. Depending on the number of holders of Rights exercising the Basic
Subscription Privilege and the Oversubscription Privilege, it is possible that
the exercise of the Rights would result in a person exercising the Rights
consummating a "control share acquisition" without compliance with the Control
Share Act. The Control Share Act does not specify a remedy for violation of the
Act. However, in at least one situation, a court has set aside an acquisition
made in violation of the Control Share Act.

19
<PAGE> 21

USE OF PROCEEDS

RMI will use the net proceeds of the Rights Offering for general corporate
purposes, including working capital for the development of new markets and
applications for its products. Pending such use, such net proceeds will be
applied to reduce the amount outstanding under RMI's Existing Credit Facility.
Assuming USX exercises the Basic Subscription Privilege with respect only to
Rights issued to it (which USX has advised RMI that USX intends to do) and does
not purchase or otherwise acquire any other Rights, and no other Rights are
exercised, the Rights Offering will result in approximately $ million in net
proceeds to RMI, after deduction of estimated expenses. If all of the Rights are
exercised, such net proceeds will be $ million.

CAPITALIZATION

The following table sets forth the consolidated capitalization of RMI as of
March 31, 1994. The data should be read in conjunction with the Consolidated
Financial Statements, the Condensed Consolidated Financial Statements and the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" related thereto, included elsewhere herein.

<TABLE>
<CAPTION>
MARCH 31, 1994
(DOLLARS IN THOUSANDS)
<S> <C>
Debt
Existing Credit Facility......................................... $ 67,500
Industrial revenue bond.......................................... 1,150
--------
Total debt.................................................. 68,650
--------
Shareholders' equity
Preferred Stock, no par value; 5,000,000 shares authorized; no
shares outstanding.............................................. --
Common Stock, $0.01 par value; 30,000,000 shares authorized;
2,037,582 shares issued; xxx shares issued as adjusted(1)(2)... 15 (2)
Additional paid-in capital(1).................................... 124,720 (2)
Accumulated deficit.............................................. (90,285)(2)
Minimum pension liability adjustment............................. (7,520)(2)
Treasury Common Stock at cost 562,536 shares..................... (2,991)(2)
Employee loans receivable(3)..................................... --
--------
Total shareholders' equity.................................. 23,939
--------
Total capitalization.................................................. $ 92,589
=========
</TABLE>

- ---------

(1) Common Stock, Additional paid-in capital and the shares of Common Stock
issued reflect the one-for-ten reverse stock split effective March 31, 1994.
See Note 3 to the Condensed Consolidated Financial Statements included
elsewhere herein.

(2) Pursuant to the Rights Offering, RMI has issued Rights to all
shareholders on a pro rata basis. If the Basic Subscription Privilege
related to the Rights were exercised in full, RMI would issue
additional shares of Common Stock, and Common Stock, Additional paid-in
capital, Total shareholders' equity and Total capitalization would be
$ , $ , $ and $ , respectively. If USX exercises only the
Basic Subscription Privilege with respect only to the Rights issued to it
(which USX has advised RMI that USX intends to do) and does not purchase or
otherwise acquire any other Rights, and no other Rights are exercised, RMI
would issue additional shares of Common Stock, and Common Stock,
Additional paid-in-capital, Total shareholders' equity and Total
capitalization would be $ , $ , $ and $ ,
respectively.

(3) Represents interest free loans to certain of RMI's employees to permit them
to exercise the Basic Subscription Privilege, but not the Oversubscription
Privilege, with respect to the Rights issued to them. See "The Rights
Offering--Effect of Rights on RMI Stock Option, Stock Ownership and Employee
Savings and Investment Plans" included elsewhere herein.

20
<PAGE> 22

REVOLVING CREDIT FACILITIES

RMI has recently amended the Existing Credit Facility to establish new
financial covenants and relate the maximum amount of available credit thereunder
to a borrowing-base formula. Pursuant to the terms of the amended Existing
Credit Facility, RMI can borrow up to the lesser of $75 million or an amount
equal to the sum of the products of the aggregate value of each of various
categories of collateral and an advance rate established by the banks for each
such category of collateral, plus an available overadvance. Based on the values
of the collateral as of March 31, 1994, RMI would be able to borrow the entire
$75 million available under the Existing Credit Facility, as amended. If RMI
receives cash equity investments as a result of the Rights Offering of $25
million or greater by July 29, 1994, the borrowing base formula would no longer
limit borrowings, unless RMI's total shareholders' equity were to decline by
more than $10 million when compared to its total shareholders' equity determined
immediately after completion of the Rights Offering. The Existing Credit
Facility, as amended, includes a covenant to maintain a minimum balance of total
shareholders' equity beginning June 30, 1994 and at all times thereafter equal
to an amount not less than the sum of (i) $27.9 million, which was RMI's total
shareholders' equity at December 31, 1993, as set forth in RMI's consolidated
balance sheet, (ii) any new cash equity investments in RMI resulting from the
Rights Offering, (iii) any increase in shareholders' equity resulting from any
change in RMI's method of accounting for inventories, (iv) any noncash charges
or credits to total shareholders' equity subsequent to December 31, 1993,
resulting from the adoption or application of SFAS No. 87 "Employers Accounting
for Pensions," SFAS No. 106 "Employers Accounting for Postretirement Benefits
Other Than Pensions," and SFAS No. 112 "Employers Accounting for Postemployment
Benefits," and (v) the permitted cumulative reduction to total shareholders'
equity for the period as set forth below:

<TABLE>
<CAPTION>
PERIOD COMMENCING AMOUNT
-----------
<S> <C>
June 30, 1994................................................. $ 7,900,000
September 30, 1994............................................ 11,255,000
December 31, 1994............................................. 12,160,000
March 31, 1995................................................ 15,520,000
June 30, 1995................................................. 17,800,000
September 30, 1995............................................ 16,201,000
December 31, 1995 and thereafter.............................. 11,321,000
</TABLE>

As of March 31, 1994, the results of operations for the first quarter of
1994 had reduced RMI's total shareholders' equity, for purposes of the minimum
total shareholders' equity covenant, by $2.9 million when compared to RMI's
total shareholders' equity at December 31, 1993. Based on interim results for
April and May, and its expectations for June, RMI expects its second quarter,
1994 results from operations to reduce its total shareholders' equity, for
purposes of the covenant, by an amount similar to the first quarter reduction.

Under the Existing Credit Facility, as amended, neither RMI nor any of its
subsidiaries may incur, assume or pay any Indebtedness for Borrowed Money (as
defined) other than amounts borrowed under the Existing Credit Facility, as
amended, the EXIM Bank Credit Facility and RMI's existing obligations relating
to an industrial revenue bond. An event of default would occur under the
Existing Credit Facility, as amended, if RMI does not receive at least $15
million in gross proceeds, of which at least $14.7 million is new equity, as a
result of the Rights Offering by July 29, 1994. Also under the Existing Credit
Facility, as amended, if USX were to cease to beneficially own at least 48% of
RMI's voting equity securities, its terms would be subject to renegotiation and,
in such case, failure by RMI and the banks to reach agreement on appropriate
amendments would constitute an event of default.

RMI has also received from the banks which are parties to the Existing
Credit Facility a separate commitment to enter into the EXIM Bank Credit
Facility providing for up to $15 million of available credit, in addition to
amounts available under the Existing Credit Facility, as amended. The EXIM Bank
Credit Facility would permit borrowings up to the lesser of $15 million or an
amount determined pursuant to a borrowing base formula substantially similar to
that used for the Existing Credit Facility, as amended, but which would include
only certain collateral related to, or arising out of, RMI's export sales. Prior
to any borrowings under the EXIM Bank Credit Facility, RMI would be required to
receive at least $15 million in

21
<PAGE> 23

gross proceeds, of which at least $14.7 million is new equity, as a result of
the Rights Offering by July 29, 1994. The EXIM Bank Credit Facility is
conditioned upon obtaining a guarantee by the Export Import Bank of amounts
outstanding thereunder. RMI has applied to the Export Import Bank for such a
guarantee, and its application is being reviewed. However, RMI can give no
assurances its application will be approved.

If RMI were unable to comply with any covenant in either of such credit
facilities, RMI might not be able to borrow additional amounts under either the
Existing Credit Facility, as amended, or the EXIM Bank Credit Facility, or
both, and the banks which are parties to the two credit facilities could demand
payment of all amounts outstanding thereunder. In the event the banks would
demand payment of such amounts, RMI would be required to seek alternative
financing. RMI has no commitments or other understandings with respect to any
such alternative financing.

Immediately subsequent to the Rights Offering, RMI will apply the net
proceeds to reduce amounts outstanding under its Existing Credit Facility until
such funds are employed for working capital purposes.

PRICE RANGE OF COMMON STOCK AND DIVIDENDS

The Common Stock is traded on the NYSE. Set forth below are the high and
low sales prices, regular way, for the Common Stock on the NYSE for the periods
indicated. The last sales price of the Common Stock on a recent date is set
forth on the cover page of this Prospectus.

<TABLE>
<CAPTION>
1992
QUARTER HIGH LOW
------- ---- ----
<S> <C> <C>
First............................................. $42 1/2 $27 1/2
Second............................................ 32 1/2 26 1/4
Third............................................. 31 1/4 22 1/2
Fourth............................................ 27 1/2 16 1/4

1993
QUARTER
-------
First............................................. $ 20 $ 15
Second............................................ 25 15
Third............................................. 22 1/2 16 1/4
Fourth............................................ 20 15

1994
QUARTER
-------
First............................................. $ 20 $16 1/4
Second (through June ) .................
</TABLE>

As of March 31, 1994, the Common Stock was held by 1,005 holders of record.

RMI has not paid dividends on its Common Stock since the second quarter of
1991 and does not intend to consider the payment of cash dividends on the Common
Stock until industry fundamentals and RMI's earnings improve significantly.

RMI has agreed with the banks which are parties to its Existing Credit
Facility, as amended, not to pay any dividend or distribution or make any other
payment in respect of shares of its capital stock, including the Common Stock,
or redeem, purchase or otherwise acquire for any consideration any such shares,
except for annual redemptions not exceeding $200,000 in the aggregate; provided,
however, that if there is then no default under the Existing Credit Facility, as
amended, and RMI has had positive net income for any fiscal quarter and the next
preceding fiscal quarter, it may pay dividends in such fiscal quarter equal to
25% of the sum of its net income for such fiscal quarter and the next preceding
fiscal quarter. The EXIM Bank Credit Facility will contain a covenant concerning
dividends identical to that set forth in the Existing Credit Facility, as
amended.

22
<PAGE> 24

THE RIGHTS OFFERING

DETERMINATION OF STRUCTURE OF RIGHTS OFFERING

RMI's Board of Directors has considered the financial position of RMI and
current conditions in the titanium industry, and has concluded that RMI should
continue its efforts to develop new markets and applications for its products.
The Board has considered the working capital requirements for development of the
new markets and applications and, with the advice of Lehman Brothers, acting as
its financial advisor ("Financial Advisor"), the alternative means of raising
the necessary capital and has concluded that debt financing and various other
equity financing alternatives are not feasible, and that the necessary funds
should be raised by the Rights Offering.

The Subscription Price was determined by RMI with the assistance of the
Financial Advisor. In determining the structure of the Rights Offering and
establishing the Subscription Price, the Board of Directors sought to obtain the
amount of net proceeds from the Rights Offering believed necessary in order to
finance the development of new markets and applications while maintaining the
liquidity of RMI and providing the existing shareholders of RMI with the
opportunity to make an additional investment in RMI and thus reduce the dilution
of their proportionate ownership position in RMI. Some of the factors considered
by the Board of Directors included:

- The capital requirements of developing the new markets and applications
for RMI's titanium products and the adverse consequences of the failure
to develop such markets and applications.

- Strategic alternatives available to RMI for the raising of capital.

- The market price of the Common Stock.

- RMI's business prospects.

- The general condition of the securities markets.

THE RIGHTS

RMI is issuing Rights to each Record Date Holder as of the close of
business on June , 1994 (the "Record Date") at no charge to the Record Date
Holders. Record Date Holders will receive Rights for each share of Common
Stock held on the Record Date. An aggregate of Rights are being issued.
The Rights will be evidenced by transferable Subscription Warrants, which are
being issued to each Record Date Holder contemporaneously with the delivery of
this Prospectus. Upon execution of a Subscription Warrant, each Rights Holder
will agree that the exercise of Rights will be made on the terms and subject to
the conditions specified in this Prospectus. The Information Agent, the
Subscription Agent and RMI will each provide a copy of this Prospectus to any
person so requesting. Requests should be made to the Information Agent, the
Subscription Agent or RMI at the addresses and telephone numbers set forth
elsewhere herein.

No fractional Rights or cash in lieu thereof will be issued or paid. No
Subscription Warrant may be divided in such a way as to permit the Rights Holder
to receive a greater number of Rights than the number to which such Subscription
Warrant entitles its Holder, except that a depository, bank, trust company or
securities broker or dealer holding shares of Common Stock on the Record Date
for more than one beneficial owner may, upon proper showing to the Subscription
Agent, exchange its Subscription Warrant to obtain Subscription Warrants for the
number of Rights to which all such beneficial owners in the aggregate would have
been entitled.

EXPIRATION TIME

The ability of Holders to exercise the Basic Subscription Privilege and the
Oversubscription Privilege will expire at 5:00 p.m., New York City time, on July
, 1994, unless extended by RMI from time to time in its sole discretion, to a
time (the "Expiration Time"), not later than 5:00 p.m., New York City time, on
August , 1994. Rights not exercised prior to the Expiration Time will expire
at that time automatically, without further action by the Rights Holders, and
thereafter will no longer be exercisable by any Holder. RMI

23
<PAGE> 25

will not be obligated to honor any purported exercise of Rights by Rights
Holders received by the Subscription Agent after the Expiration Time, regardless
of when the documents relating to that exercise were sent, except pursuant to
the Guaranteed Delivery Procedures described below. RMI will not be obligated to
give the Rights Holders any notice of any extension of the Expiration Time.

SUBSCRIPTION PRIVILEGES

Basic Subscription Privilege. Each Right will entitle the Rights Holder to
purchase at the Subscription Price one Underlying Share (the "Basic Subscription
Privilege"). Each Rights Holder is entitled to subscribe for all, or any
portion, of the Underlying Shares that may be acquired through the exercise of
its Basic Subscription Privilege. Certificates representing Underlying Shares
purchased pursuant to the Basic Subscription Privilege will be mailed or
available for pick-up as soon as practicable after exercise and receipt of
payment therefor by the Subscription Agent.

Oversubscription Privilege. Subject to the allocation and possible
reduction described below, Holders who fully exercise their Basic Subscription
Privilege with respect to all Rights held by them in the same capacity will also
be eligible to subscribe, at the Subscription Price, for any additional
Underlying Shares which are available after satisfaction of all subscriptions
pursuant to the Basic Subscription Privilege (the "Oversubscription Privilege").
Only such Holders who so exercise the Basic Subscription Privilege in full will
be entitled to exercise the Oversubscription Privilege. For purposes of
determining if a Holder has fully exercised the Basic Subscription Privilege,
all Basic Subscription Privileges held by the Holder in the same capacity will
be considered. For example, a Holder holding Rights as an individual need not
fully exercise all Basic Subscription Privileges held in respect of Rights held
jointly with the Holder's spouse or in respect of Rights held in an Individual
Retirement Account. By completing the portion of the Subscription Warrant
exercising the Oversubscription Privilege, a Holder will be deemed to have
certified that it has fully exercised all Basic Subscription Privileges received
in respect of Rights held by it in the same capacity. A HOLDER'S ELECTION TO
EXERCISE ITS OVERSUBSCRIPTION PRIVILEGE MUST BE MADE AT THE TIME SUCH HOLDER
EXERCISES ITS BASIC SUBSCRIPTION PRIVILEGE IN FULL.

Underlying Shares will be available for purchase pursuant to the
Oversubscription Privilege only to the extent that any Underlying Shares are not
subscribed for through the Basic Subscription Privilege. If the Underlying
Shares not subscribed for through the Basic Subscription Privilege (the "Excess
Shares") are not sufficient to satisfy all subscriptions pursuant to the
Oversubscription Privilege, the Excess Shares will generally be allocated pro
rata (subject to the elimination of fractional shares) among those Holders
exercising the Oversubscription Privilege in proportion to the number of Rights
with respect to which each such Holder exercised the Basic Subscription
Privilege relative to the number of Rights so exercised by all Holders
exercising the Oversubscription Privilege. If this pro rata allocation results
in any Holder being allocated a greater number of Excess Shares than the Holder
subscribed for pursuant to the exercise of that Holder's Oversubscription
Privilege, then the Holder will be allocated only that number of Excess Shares
for which the Holder oversubscribed, and the remaining Excess Shares will be
allocated among all other Holders exercising the Oversubscription Privilege on
the same pro rata basis outlined above. This proration process will be repeated
until all Excess Shares have been allocated to the full extent of the
Oversubscription Privileges exercised. Payments for oversubscriptions will be
deposited upon receipt by the Subscription Agent and held in escrow pending a
final determination of the number of Underlying Shares to be issued pursuant to
the Oversubscription Privilege. If a proration of the Excess Shares results in a
Holder receiving fewer Excess Shares than the Holder subscribed for pursuant to
the Oversubscription Privilege, then the excess funds paid by that Holder as the
Subscription Price for shares not issued will be returned by mail promptly after
the Expiration Time, and after all prorations and adjustments have been
effected, without interest or deduction. Certificates representing Underlying
Shares purchased pursuant to the Oversubscription Privilege will be mailed or
available for pick-up as soon as practicable after the Expiration Time and after
all prorations and adjustments contemplated by the terms of the Rights Offering
have been made and payment therefor has been received by the Subscription Agent.

To illustrate the proration procedure, assume that there are 160 Rights
held by six Rights Holders; that Holders A, B, C and D have each exercised their
Basic Subscription Privilege to purchase 30, 30, 40 and 10

24
<PAGE> 26

shares of Common Stock, respectively; and Holders E and F have not exercised
their Basic Subscription Privilege to purchase any shares, leaving a total of 50
Excess Shares. Assume further that only Holders A, B and C exercise their
Oversubscription Privileges to purchase 50, 40 and 10 additional shares,
respectively. The exercise of the Oversubscription Privilege by Holders A, B and
C will be prorated because there are only 50 Excess Shares available for
purchase pursuant to the Oversubscription Privileges and Holders A, B and C have
exercised their Oversubscription Privileges to purchase 100 Excess Shares.
Holders A and B initially will each receive 30% of the Excess Shares (15 shares
each) because they each exercised the Basic Subscription Privilege with respect
to 30 shares of Common Stock representing 30% of the aggregate shares so
purchased by all the Holders exercising the Oversubscription Privilege. Applying
the same analysis, Holder C would initially be entitled to receive 40% of the
Excess Shares (20 shares), but Holder C will only be entitled to receive 10
Excess Shares because Holder C has only subscribed for 10 shares pursuant to the
Oversubscription Privilege. The remaining unallocated 10 Excess Shares will be
divided evenly between Holders A and B (bringing their Excess Share entitlement
to 20 shares each), which represents 50% of the unallocated Excess Shares
because each exercised the Basic Subscription Privilege to purchase 30 shares
representing 50% of the aggregate shares so purchased by Holders A and B.

In order to exercise the Oversubscription Privilege, banks, brokers and
other nominee Holders who exercise the Oversubscription Privilege on behalf of a
beneficial owner of Rights will be required to certify (a "Nominee Holder
Certification") to the Subscription Agent and RMI as to the number of shares
held on the Record Date on behalf of such beneficial owner of Rights, the number
of Rights as to which the Basic Subscription Privilege has been exercised on
behalf of such beneficial owner, that all such beneficial owner's Basic
Subscription Privileges held in the same capacity have been exercised in full
and the number of Underlying Shares subscribed for pursuant to the
Oversubscription Privilege by such beneficial owner, and to record certain other
information received from such beneficial owner.

NO MINIMUM EXERCISE OF RIGHTS REQUIRED

The Rights Offering is not conditioned upon the exercise of any minimum
number of Rights. However, USX, the owner of 750,000 shares of Common Stock, has
advised RMI that it intends to exercise the Basic Subscription Privilege, but
not the Oversubscription Privilege, with respect only to the Rights issued to
it, and does not intend to purchase or otherwise acquire any other Rights.

SUBSCRIPTION PRICE

The Subscription Price is $ per Underlying Share subscribed for
pursuant to the Basic Subscription Privilege and the Oversubscription Privilege,
payable in cash, which represents a discount of % from the last sales price of
$ per share for the Common Stock on the NYSE on June , 1994.

EXERCISE OF RIGHTS AND SUBSCRIPTION AGENT

Rights Holders may exercise their Rights by delivering to Mellon Securities
Trust Company (the "Subscription Agent"), at any of its addresses specified
below, at or prior to the Expiration Time, the properly completed and executed
Subscription Warrant(s) evidencing those Rights, with any signatures guaranteed
as required, together with payment in full of the Subscription Price for each
Underlying Share subscribed for pursuant to the Basic Subscription Privilege and
the Oversubscription Privilege. Payment in full must be made by (i) check or
bank draft drawn upon a United States bank, or postal, telegraphic or express
money order, payable to Mellon Securities Trust Company, as Subscription Agent,
or (ii) wire transfer of funds to the account maintained by the Subscription
Agent for the purpose of accepting subscriptions at Mellon Bank, N.A.,
Pittsburgh, Pennsylvania, ABA number 043000261, account number 102-331, Mellon
Financial Services Corporation, #17, Reorg. Account, Attention: RMI Rights,
Evelyn O'Connor. The Subscription Price will be deemed to have been received by
the Subscription Agent only upon (i) clearance of any uncertified check, (ii)
receipt by the Subscription Agent of any certified or cashier's check or bank
draft drawn upon a United States bank or of any postal, telegraphic or express
money order, or (iii) receipt of collected funds in the Subscription Agent's
account designated above. FUNDS PAID BY UNCERTIFIED CHECK MAY TAKE AT LEAST FIVE
BUSINESS DAYS TO CLEAR. ACCORDINGLY, RIGHTS HOLDERS WHO WISH TO PAY THE
SUBSCRIPTION PRICE BY

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<PAGE> 27

MEANS OF UNCERTIFIED CHECK ARE URGED TO MAKE PAYMENT SUFFICIENTLY IN ADVANCE OF
THE EXPIRATION TIME TO ENSURE THAT THE PAYMENT IS RECEIVED AND CLEARS BY THAT
TIME, AND ARE URGED TO CONSIDER IN THE ALTERNATIVE PAYMENT BY MEANS OF CERTIFIED
OR CASHIER'S CHECK, MONEY ORDER OR WIRE TRANSFER OF FUNDS. Pending disbursement
to RMI upon issuance of related shares of Common Stock, all funds received in
payment of the Subscription Price shall be held by the Subscription Agent and
invested at the direction of RMI in short-term certificates of deposit,
short-term obligations of the United States, any state or any agency thereof, or
money market mutual funds investing in the foregoing instruments. The account in
which these funds will be held is not insured by the FDIC. Any interest earned
on these funds will be retained by RMI, whether or not any or all of the
Underlying Shares are issued.

A Holder's election to exercise its Oversubscription Privilege must be made
at the time such Record Date Holder exercises its Basic Subscription Privilege
in full.

The Subscription Agent's addresses, which are the addresses to which the
Subscription Warrants and payment of the Subscription Price should be delivered,
as well as the addresses to which Nominee Holder Certifications and Notices of
Guaranteed Delivery and DTC Participant Oversubscription Exercise Forms (each as
described below) must be delivered, are:

<TABLE>
<S> <C> <C>
IF BY MAIL: IF BY OVERNIGHT COURIER: IF BY HAND:
Mellon Securities Trust Mellon Securities Trust Mellon Securities Trust
Company Company Company
P.O. Box 768 85 Challenger Road 120 Broadway
Midtown Station Overpeck Centre 33rd Floor
New York, NY 10018 Ridgefield Park, NJ 07660 New York, New York
Attention: Reorg. Dept.
</TABLE>

The Subscription Agent's telephone number is (800) 777-3674 and its
facsimile telecopier number is (201) 296-4062.

RMI will pay the fees and expenses of the Subscription Agent (except for
fees, applicable brokerage commissions, taxes and other expenses relating to the
sale of Rights by the Subscription Agent, all of which will be shared pro rata
by all Holders who sell Rights through the Subscription Agent on the same day)
and has also agreed to indemnify the Subscription Agent against certain
liabilities, including liabilities under the Securities Act, that it may incur
in connection with the services rendered by it.

For the procedure to be followed for exercising Rights held through The
Depository Trust Company, see "The Rights Offering--Procedures for DTC
Participants", below.

GUARANTEED DELIVERY PROCEDURES. If a Rights Holder wishes to exercise
Rights, but time will not permit the Holder to cause the Subscription Warrant(s)
evidencing those Rights to reach the Subscription Agent prior to the Expiration
Time, the Rights may nevertheless be exercised if all of the following
conditions (the "Guaranteed Delivery Procedures") are met:

(i) the Rights Holder has caused payment in full of the Subscription
Price for each Underlying Share being subscribed for pursuant to the Basic
Subscription Privilege and, if applicable, the Oversubscription Privilege
to be received (in the manner set forth above) by the Subscription Agent at
or prior to the Expiration Time;

(ii) the Subscription Agent receives, at or prior to the Expiration
Time, a guarantee notice (a "Notice of Guaranteed Delivery"), substantially
in the form provided with the Instructions as to Use of RMI Titanium
Company Subscription Warrants (the "Instructions") distributed with the
Subscription Warrants, from a member firm of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. ("NASD"), or from a commercial bank or trust company having
an office or correspondent in the United States (each, an "Eligible
Institution"), stating the name of the exercising Rights Holder, the number
of Rights represented by the Subscription Warrant(s) held by the exercising
Rights Holder, the number of Underlying Shares being subscribed for
pursuant to the Basic Subscription Privilege and, if any, pursuant to the
Oversubscription Privilege and guaranteeing the

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<PAGE> 28

delivery to the Subscription Agent of the Subscription Warrant(s)
evidencing those Rights and, if applicable for a nominee Holder, the
related Nominee Holder Certification, no later than 5:00 p.m., New York
City time, on the fifth NYSE trading day following the day on which the
Expiration Time occurs; and

(iii) the properly completed Subscription Warrant(s) and, if
applicable for a nominee Holder, the related Nominee Holder Certification,
with any signatures guaranteed as required, is received by the Subscription
Agent no later than 5:00 p.m., New York City time. on the fifth NYSE
trading day following the day on which the Expiration Time occurs.

The Notice of Guaranteed Delivery may be delivered to the Subscription
Agent in the same manner as Subscription Warrants at any of the addresses set
forth above, by telegram or by facsimile transmission to the facsimile
telecopier number set forth above. Additional copies of the Notice of Guaranteed
Delivery are available upon request from the Information Agent and RMI, whose
addresses and telephone numbers are set forth elsewhere herein.

If an exercising Rights Holder does not indicate the number of Rights being
exercised, or does not make full payment, in the manner set forth above, of the
aggregate Subscription Price for the number of Rights that the Rights Holder
indicates are being exercised, then the Rights Holder will be deemed to have
exercised the Basic Subscription Privilege with respect to the maximum number of
Rights that may be exercised for the aggregate Subscription Price payment so
made by the Rights Holder, and to the extent that the aggregate Subscription
Price payment so made by the Rights Holder exceeds the product of the
Subscription Price multiplied by the number of Rights evidenced by the
Subscription Warrants delivered by the Rights Holder (such excess being the
"Subscription Excess"), the Rights Holder will be deemed to have exercised the
Oversubscription Privilege to purchase, to the extent available, that number of
whole Excess Shares equal to the quotient obtained by dividing the Subscription
Excess by the Subscription Price. Any amount remaining after application of the
foregoing procedures shall be returned to the Rights Holder by the Subscription
Agent as soon as practicable after the Expiration Time by mail without interest
or deduction.

Pending issuance of certificates representing shares of Common Stock, funds
received for the exercise of Basic Subscription Privileges and, if applicable,
Oversubscription Privileges, will be held by the Subscription Agent in a
segregated escrow account. If shares are not issued pursuant to the Basic
Subscription Privilege, or if a Holder exercising the Oversubscription Privilege
is allocated less than all of the Underlying Shares for which that Holder
subscribed pursuant to the Oversubscription Privilege, then the funds held in
escrow paid by that Rights Holder as the Subscription Price for shares not
issued or for Excess Shares not allocated to such Rights Holder shall be
returned by mail without interest or deduction promptly after the Expiration
Time and after all prorations and adjustments contemplated by the terms of the
Rights Offering have been made. The Subscription Agent will turn over to RMI
funds received for the exercise of Rights upon issuance of the certificates
representing the shares of Common Stock.

Certificates representing shares of Common Stock subscribed for and issued
pursuant to the Basic Subscription Privilege will be mailed or available for
pick-up as soon as practicable after exercise and receipt of payment by the
Subscription Agent. Certificates representing such shares subscribed for and
issued pursuant to the Oversubscription Privilege will be mailed or available
for pick-up as soon as practicable after the Expiration Time and after all
prorations and adjustments contemplated by the terms of the Offering have been
made and payment therefor received by the Subscription Agent. Unless otherwise
instructed in the Subscription Warrant, certificates for shares of Common Stock
issued pursuant to the exercise of Rights will be registered in the name of the
Rights Holder exercising such Rights.

A Rights Holder who subscribes for fewer than all of the shares represented
by its Subscription Warrants may, under certain circumstances, (i) direct the
Subscription Agent to attempt to sell its remaining Rights, or (ii) receive from
the Subscription Agent a new Subscription Warrant representing the unused
Rights. See "The Rights Offering--Method of Transferring Rights" below.

Unless a Subscription Warrant (i) provides that the Underlying Shares to be
issued pursuant to the exercise of the Rights represented thereby are to be
issued to the registered Holder of such Rights as indicated

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<PAGE> 29

in the Subscription Warrant, or (ii) is submitted for the account of an Eligible
Institution, signatures on each Subscription Warrant must be guaranteed by a
member of an approved Signature Guarantee Medallion Program.

Record Date Holders who hold shares of Common Stock for the account of
others, such as brokers, trustees or depositories for securities (a "Nominee
Record Date Holder"), should contact the respective beneficial owners of such
shares as soon as possible to ascertain those beneficial owners' intentions and
to obtain instructions and certain beneficial owner certifications with respect
to their Rights, all in the manner described in the Instructions, which
Instructions should be promptly distributed by Nominee Record Date Holders to
beneficial owners. If a beneficial owner so instructs, the Nominee Record Date
Holder should complete appropriate Subscription Warrants and, in the case of any
exercise of the Oversubscription Privilege, the related Nominee Holder
Certification, and submit them to the Subscription Agent with the proper
payment. In addition, beneficial owners of Common Stock or Rights held through
such a Nominee Record Date Holder should contact the Nominee Record Date Holder
and request the Nominee Record Date Holder to effect transactions in accordance
with the beneficial owner's instructions.

THE INSTRUCTIONS ACCOMPANYING THE SUBSCRIPTION WARRANTS SHOULD BE READ
CAREFULLY AND FOLLOWED IN DETAIL. SUBSCRIPTION WARRANTS SHOULD BE SENT WITH
PAYMENT TO THE SUBSCRIPTION AGENT. DO NOT SEND SUBSCRIPTION WARRANTS OR PAYMENTS
TO RMI OR THE INFORMATION AGENT.

THE METHOD OF DELIVERY OF SUBSCRIPTION WARRANTS AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND RISK OF
THE RIGHTS HOLDERS. If Subscription Warrants and payments are sent by mail,
Rights Holders are urged to send these materials by registered mail, properly
insured, with return receipt requested, and are urged to allow a sufficient
number of days to ensure delivery to the Subscription Agent and clearance of
payment prior to the Expiration Time. Because uncertified checks may take at
least five business days to clear, Rights Holders are strongly urged to pay, or
arrange for payment, by means of certified or cashier's check, money order or
wire transfer of funds.

All questions concerning the timeliness, validity, form and eligibility of
any exercise of Rights, including the method and timeliness of payment, will be
determined by RMI, whose determinations will be final and binding. RMI, in its
sole discretion, may waive any defect or irregularity, or permit a defect or
irregularity to be corrected within such time as it may determine, or reject the
purported exercise of any Right because of any defect or irregularity.
Subscription Warrants will not be deemed to have been received or accepted until
all irregularities have been waived or cured within such time as RMI determines,
in its sole discretion. Neither RMI nor the Subscription Agent will be under any
duty to give notification of any defect or irregularity in connection with the
submission of Subscription Warrants or any other required document or incur any
liability for failure to give such notification. RMI reserves the right to
reject any exercise if such exercise is not in accordance with the terms of the
Rights Offering or not in proper form or if the acceptance thereof or the
issuance of shares of Common Stock pursuant thereto could be deemed unlawful or
materially burdensome. All questions as to the interpretation of the terms of
this Rights Offering, the Subscription Warrants, the Instructions, the DTC
Participant Oversubscription Exercise Form, the Nominee Holder Certification or
the Notice of Guaranteed Delivery shall be decided by RMI, in its sole
discretion, whose determination shall be final and binding.

Any questions or requests for assistance concerning the method of
exercising Rights or requests for additional copies of this Prospectus, the
Instructions, the DTC Participant Oversubscription Exercise Form, the Nominee
Holder Certification or the Notice of Guaranteed Delivery should be directed to
the Information Agent at its address set forth under "Information Agent", below
(telephone (800) 242-4410).

NO REVOCATION

ONCE A RIGHTS HOLDER HAS EXERCISED THE BASIC SUBSCRIPTION PRIVILEGE OR THE
OVERSUBSCRIPTION PRIVILEGE, THE EXERCISE MAY NOT BE REVOKED.

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<PAGE> 30

METHOD OF TRANSFERRING RIGHTS

Rights may be purchased or sold through usual investment channels. It is
anticipated that the Rights will trade on the NYSE until the close of business
on the last NYSE trading day preceding the day on which the Expiration Time
occurs. There has, however, been no prior market for the Rights, and no
assurance can be given that a market will develop or, if a market develops, that
the market will remain available throughout the Subscription Period, or as to
the price at which the Rights will trade.

The Rights evidenced by a single Subscription Warrant may be transferred in
whole by endorsing the Subscription Warrant for transfer in accordance with the
accompanying Instructions. A portion of the Rights evidenced by a single
Subscription Warrant (but not fractional Rights) may be transferred by
delivering to the Subscription Agent the Subscription Warrant properly endorsed
for transfer, with instructions to register that portion of the Rights indicated
therein in the name of the transferee and to issue a new Subscription Warrant to
the transferee evidencing the transferred Rights. In that event, a new
Subscription Warrant evidencing the balance of the Rights will be issued to the
Rights Holder or, if the Rights Holder so instructs, to an additional
transferee, or will be sold by the Subscription Agent in the manner described
below upon appropriate instruction from the Rights Holder.

The Rights evidenced by a Subscription Warrant may be sold, in whole or in
part, through the Subscription Agent by delivering to the Subscription Agent the
Subscription Warrant properly executed for sale by the Subscription Agent. If
only a portion of the Rights evidenced by a single Subscription Warrant is to be
sold by the Subscription Agent, that Subscription Warrant must be accompanied by
instructions setting forth the action to be taken with respect to the Rights
that are not to be sold. Promptly following the settlement of such sale, the
Subscription Agent will send the Rights Holder a check for the proceeds from the
sale of any Rights sold, less any applicable brokerage commissions, taxes and
other direct expenses of sales. Upon settlement, a Rights Holder for which the
Subscription Agent sells Rights on any given day will receive for each of its
Rights so sold the net weighted average sale price of all Rights sold on that
day by the Subscription Agent. The net weighted average sale price will be
calculated by dividing the total proceeds from all sales realized by the
Subscription Agent on the day of sale by the total number of Rights sold by the
Subscription Agent on that day and then subtracting a pro rata portion of any
applicable brokerage commissions, taxes and other expenses. No assurance,
however, can be given that a market will develop for the Rights, that the
Subscription Agent will be able to sell any Rights, or as to the price at which
the Rights will trade. RMI will pay the fees charged by the Subscription Agent
for effecting such sales. Orders to sell Rights must be received by the
Subscription Agent at or prior to 11:00 a.m., New York City time, two NYSE
trading days preceding the day on which the Expiration Time occurs. The
Subscription Agent's obligation to execute orders is subject to its ability to
find buyers. If the Rights cannot be sold by the Subscription Agent by 5:00
p.m., New York City time, one NYSE trading day preceding the day on which the
Expiration Time occurs, they will be returned promptly by mail to the Rights
Holder or, if so arranged, held by the Subscription Agent for pick-up.

Holders wishing to transfer all or a portion of their Rights (but not
fractional Rights) should allow a sufficient amount of time prior to the
Expiration Time for (i) the transfer instructions to be received and processed
by the Subscription Agent, and (ii) the Rights evidenced by the new Subscription
Warrants to be exercised or sold by the recipients thereof. Such amount of time
could range from two to ten business days, or more, depending upon the method by
which delivery of the Subscription Warrants and payment is made and the number
of transactions which the Rights Holder instructs the Subscription Agent to
effect. Neither RMI nor the Subscription Agent shall have any liability to a
transferee or transferor of Rights if Subscription Warrants or any other
required documents are not received in time for exercise or sale prior to the
Expiration Time.

A new Subscription Warrant will be issued to a submitting Rights Holder
upon the partial exercise or sale of Rights only if the Subscription Agent
receives a properly endorsed Subscription Warrant no later than 5:00 p.m., New
York City time, on the fifth NYSE trading day preceding the day on which the
Expiration Time occurs. No new Subscription Warrants will be issued with respect
to Subscription Warrants submitted after such time and date. Accordingly, after
such time and date a Rights Holder exercising less than all of its

29
<PAGE> 31

Rights will lose the power to sell or exercise its remaining Rights. A new
Subscription Warrant will be sent by first class mail to the submitting Rights
Holder if the Subscription Agent receives the properly completed Subscription
Warrant by 5:00 p.m., New York City time, on the seventh NYSE trading day
preceding the day on which the Expiration Time occurs. Unless the submitting
Rights Holder makes other arrangements with the Subscription Agent, a new
Subscription Warrant issued after 5:00 p.m., New York City time, on the seventh
NYSE trading day preceding the day on which the Expiration Time occurs will be
held for pick-up by the submitting Rights Holder at the Subscription Agent's
hand delivery address provided above. All deliveries of newly issued
Subscription Warrants will be at the risk of the submitting Rights Holder.
Except for the fees charged by the Subscription Agent (which will be paid by RMI
as described above), all commissions, fees and other expenses (including
brokerage commissions and transfer taxes) incurred in connection with the
purchase, sale or exercise of Rights will be for the account of the transferor
of the Rights, and none of such commissions, fees or expenses will be paid by
RMI or the Subscription Agent.

A Rights Holder may make arrangements with the Subscription Agent for
Subscription Warrants to be held for pick-up at the Subscription Agent's address
for hand deliveries set forth above under "Exercise of Rights and Subscription
Agent."

THOSE RIGHTS NOT EXERCISED BY A RIGHTS HOLDER PRIOR TO THE EXPIRATION TIME
WILL EXPIRE AUTOMATICALLY AT THE EXPIRATION TIME WITHOUT FURTHER ACTION BY THE
RIGHTS HOLDER AND WILL THEREAFTER NO LONGER BE EXERCISABLE OR HAVE ANY VALUE.

PROCEDURES FOR DTC PARTICIPANTS

It is anticipated that the Rights will be eligible for transfer through,
and that the exercise of the Basic Subscription Privilege (but not the
Oversubscription Privilege) may be effected through, the facilities of The
Depository Trust Company ("DTC"). Rights exercised as part of the Basic
Subscription Privilege through DTC are referred to as "DTC Exercised Rights." A
holder of DTC Exercised Rights may exercise the Oversubscription Privilege in
respect thereof by properly executing and delivering to the Subscription Agent,
at or prior to the Expiration Time, a DTC Participant Oversubscription Exercise
Form and a Nominee Holder Certification, together with payment of the
appropriate Subscription Price for the number of Underlying Shares for which the
Oversubscription Privilege is to be exercised. Copies of the DTC Participant
Oversubscription Exercise Form and the Nominee Holder Certification may be
obtained from either the Information Agent or RMI.

INFORMATION AGENT

RMI has appointed Corporate Investors Communications, Inc. as Information
Agent for the Rights Offering. Any questions or requests for assistance
concerning the exercise or transfer of Rights or for additional copies of this
Prospectus, the Instructions, the Notice of Guaranteed Delivery, the Nominee
Holder Certification or the DTC Participant Oversubscription Exercise Form may
be directed to the Information Agent at the address and telephone number below:

Corporate Investors Communications, Inc.
111 Commerce Road
Carlstadt, NJ 07072-2586
(800) 242-4410

RMI will pay the fees and expenses of the Information Agent and has also
agreed to indemnify the Information Agent from certain liabilities, including
liabilities under the Securities Act, which it may incur in connection with the
services rendered by it.

SOLICITING AGENT(S)

RMI may engage one or more soliciting agents to assist it in arranging the
exercise of Rights. The fees to be paid to the Soliciting Agent(s), if any, will
be negotiated by RMI, but in no event will such fees exceed % of the gross
proceeds from the exercise of Rights arranged by such agent(s). RMI may also
agree to

30
<PAGE> 32

indemnify each such agent against certain liabilities, including liabilities
under the Securities Act, which it may incur in connection with the services
rendered by it.

FINANCIAL ADVISOR

RMI has entered into a letter agreement with Lehman Brothers whereby the
Financial Advisor will provide financial advisory services to RMI concerning the
financing and structuring of certain corporate transactions, including the
Rights Offering. Pursuant to this letter agreement, RMI will pay the Financial
Advisor a financial advisory fee equal to 2.5% of the gross proceeds to RMI from
the Rights Offering and will reimburse the Financial Advisor for its reasonable
expenses thereunder, including fees and expenses of counsel. In addition, RMI
has agreed to indemnify the Financial Advisor against certain liabilities,
including liabilities under the Securities Act, which it may incur in connection
with the services rendered by it.

FOREIGN AND CERTAIN OTHER SHAREHOLDERS

Subscription Warrants will not be mailed to Record Date Holders or to any
subsequent transferees of any Subscription Warrants whose addresses are outside
the United States or who have APO or FPO addresses, but will be held by the
Subscription Agent for such Holders' accounts. To exercise their Rights, such
Holders must notify the Subscription Agent prior to 11:00 a.m., New York City
time, two NYSE trading days preceding the day on which the Expiration Time
occurs, at which time (if no contrary instructions have been received) the
Rights represented thereby will be sold, subject to the Subscription Agent's
ability to find a purchaser. Any such sales will be at prevailing market prices.
See "The Rights Offering--Method of Transferring Rights." If the Rights can be
sold, a check for the proceeds from the sale of any Rights, less any applicable
brokerage commissions, taxes and other expenses, will be remitted to such
Holders by mail. The proceeds, if any, resulting from sales of Rights of Holders
whose addresses are not known by the Subscription Agent or to whom delivery
cannot be made will be held by the Subscription Agent in a non-interest bearing
account. Any amount remaining unclaimed on the second anniversary of the
Expiration Time will be turned over by the Subscription Agent to RMI and, after
such date, any person claiming such proceeds will, as an unsecured general
creditor of RMI, be able to look only to RMI for payment thereof. The ability of
all Holders, including Holders whose addresses are outside the United States or
who have APO or FPO addresses, to exercise Rights will expire at the Expiration
Time.

EFFECT OF RIGHTS OFFERING ON RMI STOCK OPTION, STOCK OWNERSHIP AND EMPLOYEE
SAVINGS AND INVESTMENT PLANS

The number of shares subject to, and the per share exercise price of,
outstanding stock options issued under RMI's 1989 Stock Option Incentive Plan,
and the aggregate number of shares reserved under the plan, will be adjusted to
reflect the Rights Offering. After consummation of the Rights Offering, RMI will
notify the holders of such stock options of the adjustments. Rights will be
issued with respect to all shares issued and outstanding under RMI's 1989
Non-Employee Director Restricted Stock Award Plan, including shares subject to
transfer restriction and vesting requirements, as well as shares credited to the
accounts of participants in RMI's Employee Savings and Investment Plan and its
Bargaining Unit Employee Savings and Investment Plan. RMI has waived all
remaining restrictions applicable to shares granted under its 1989 Employee
Restricted Stock Award Plan, and has distributed to participants in that plan
all shares awarded, free of any restriction. RMI has agreed to lend, interest
free, to Messrs. Gieg, Odle and Rupert (the President and Chief Executive
Officer, Senior Vice President - Commercial and Senior Vice President & Chief
Financial Officer of the Company, respectively) sufficient funds to permit them
to exercise the Basic Subscription Privilege (but not the Oversubscription
Privilege) with respect to Rights issued to them other than Rights issued with
respect to shares of Common Stock credited to their accounts in the Employee
Savings and Investment Plan.

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<PAGE> 33

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

RECORD DATE HOLDER CONSIDERATIONS

The following summary describes certain United States federal income tax
considerations applicable to Record Date Holders upon the issuance of Rights,
and to Rights Holders upon the exercise, disposition or lapse of the Rights.
This summary is based upon laws, regulations, rulings and decisions currently in
effect. This summary does not discuss all aspects of federal income taxation
that may be relevant to a particular investor or to certain types of investors
subject to special treatment under the federal income tax laws (for example,
banks, dealers in securities, life insurance companies, tax exempt organizations
and foreign taxpayers), nor does it discuss any aspect of state, local or
foreign tax laws. This summary is limited to taxpayers that will hold the Rights
as a "capital asset" (generally, property held for investment) within the
meaning of Section 1221 of the Code.

ISSUANCE OF THE RIGHTS. Record Date Holders generally will not recognize
taxable income, for federal income tax purposes, in connection with the issuance
of Rights.

BASIS AND HOLDING PERIOD OF THE RIGHTS. Upon exercise or sale of the
Rights, a Rights Holder's basis in his or her Common Stock will be allocated
between such Common Stock and the Rights in proportion to the fair market values
of each on the date of issuance of the Rights. However, the basis of the Rights
issued to a Record Date Holder will be zero if the fair market value on the date
of issuance of the Rights is less than 15% of the fair market value (on such
date of issuance) of the Common Stock with respect to which they are issued
unless the Rights Holder elects, in his or her federal income tax return for the
taxable year in which the Rights are issued, to allocate part of the basis of
such Common Stock to the Rights. Also, the basis of the Rights will be zero if
the Rights are not exercised by a Rights Holder prior to the Expiration Time and
thus expire. The holding period of Rights received by a Record Date Holder will
include the holding period for the Common Stock with respect to which the Rights
were issued. In the case of a purchaser of Rights, the tax basis of such Rights
will be equal to the purchase price paid therefor, and the holding period for
such Rights will commence on the day following the date of the purchase.

SALE OF THE RIGHTS. Any gain or loss on the sale of Rights will be treated
as capital gain or loss if the Rights are a capital asset in the hands of the
seller and such gain or loss will be long-term capital gain or loss if the
Rights are deemed to have been held for more than one year at the time of the
sale. Rights issued to a Record Date Holder generally will be a capital asset in
the hands of such Record Date Holder if the Common Stock with respect to which
the Rights were issued was a capital asset in the hands of the Record Date
Holder.

EXPIRATION OF THE RIGHTS. If the Rights are not exercised by a Rights
Holder prior to the Expiration Time and thus expire, no gain or loss will be
recognized unless the Rights were acquired by purchase, in which case the Rights
Holder will recognize a loss equal to its basis in such Rights. Any such loss
recognized with respect to Rights acquired by purchase will be a capital loss if
the Rights were a capital asset in the hands of such purchaser.

EXERCISE OF THE RIGHTS; BASIS AND HOLDING PERIOD OF UNDERLYING SHARES.
Rights Holders will not recognize any gain or loss upon the exercise of such
Rights. The basis of Common Stock acquired upon exercise of Rights will be equal
to the sum of such Rights Holder's basis in the Rights exercised and the amount
paid upon exercise of those Rights. The holding period for Common Stock acquired
upon exercise of Rights will begin on the date the Rights are exercised.

THE FOREGOING IS ONLY A SUMMARY OF APPLICABLE FEDERAL INCOME TAX
CONSEQUENCES AND DOES NOT ADDRESS ANY STATE, LOCAL OR FOREIGN TAX CONSEQUENCES
TO RIGHTS HOLDERS. RECORD DATE HOLDERS AND RIGHTS HOLDERS SHOULD CONSULT THEIR
TAX ADVISORS CONCERNING THE TAX CONSEQUENCES IN THEIR PARTICULAR CIRCUMSTANCES.

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<PAGE> 34

COMPANY CONSIDERATIONS

LIMITATION ON USE OF TAX LOSSES. At December 31, 1993, RMI had net
operating loss carryforwards of approximately $75 million and certain other
unrealized future deductions that could be subject to an annual limitation on
their deductibility if certain substantial changes in its ownership should occur
over any three-year period, as provided under Section 382 of the Internal
Revenue Code. While RMI has not reflected a benefit in its December 31, 1993
financial statements with respect to these tax attributes, the potential annual
limitation could restrict RMI's ability to use them to reduce future income tax
liabilities. Although RMI does not expect the Rights Offering to result in an
ownership change that would cause the annual limitation to apply, there can be
no assurance that an ownership change will not result from the Rights Offering
or from other equity transactions of RMI and USX. Further, the Rights Offering
may significantly increase the likelihood that future equity transactions by RMI
or USX, or by either of these companies' significant current or future
shareholders in the three years following the Rights Offering (some of which
will not be within the control of RMI), could cause the annual limitation to
apply. See Note 8 to Consolidated Financial Statements included elsewhere
herein.

Section 382 generally provides that if a corporation undergoes an
"ownership change," the amount of taxable income that the corporation may offset
after the date of the ownership change (the "Change Date") with net operating
loss carryforwards and certain built-in losses existing on the Change Date will
be subject to an annual limitation. In general, the annual limitation equals the
product of (i) the fair market value of the corporation's equity on the Change
Date (with certain adjustments including an adjustment excluding capital
contributions made in the two years preceding the Change Date), and (ii) a
long-term tax exempt bond rate of return published monthly by the Internal
Revenue Service.

The built-in losses that may be limited under Section 382 are those that
exist on the Change Date and are recognized within five years after the Change
Date. However, the total amount of recognized built-in losses that are subject
to limitation cannot exceed the corporation's net built-in loss (the excess of
the aggregate tax basis of the corporation's assets over their aggregate fair
market value) on the Change Date. The built-in losses of a corporation will be
subject to limitation under Section 382 only if the net built-in loss of the
corporation exceeds 15% of the fair market value of the corporation's assets or
$10,000,000, whichever is less. Certain deductions that have accrued
economically on the Change Date, but are allowed only after the Change Date, are
treated as built-in losses.

Generally, an "ownership change" occurs with respect to a corporation if
shareholders who own, directly or indirectly through shareholders such as USX,
five percent or more of the capital stock of the corporation ("5-percent
shareholders") increase their aggregate percentage ownership of such stock by
more than 50 percentage points over the lowest percentage of such stock owned by
such shareholders at any time during a prescribed testing period. In applying
Section 382, under a special rule, newly issued stock generally is considered to
be acquired by a new 5-percent shareholder even if no person acquiring the stock
in fact owns as much as five percent of the issuer's stock. Recently adopted
Treasury regulations limit the extent to which stock newly issued for cash to
shareholders owning individually less than five percent of the issuer's stock is
treated as acquired by a new 5-percent shareholder. The regulations thus reduce
the extent to which such an issuance (including stock issued as a result of the
exercise of rights such as the Rights) causes a change in shareholdings that
counts toward an ownership change. However, such Treasury regulations do not
apply to any new shareholder or Record Date Holder who acquires and exercises
sufficient rights to become an actual 5 percent shareholder.

33
<PAGE> 35

BUSINESS

THE COMPANY

The Company is a leading domestic producer of titanium mill products.
Titanium mill products are used principally in the aerospace industry in
commercial and military aircraft, with major nonaerospace applications in
chemical processing equipment, mesh for bridge and deck repair, tubular products
for oil and gas production, pulp and paper production facilities and medical
implants.

The Company is a successor to entities that have been operating in the
titanium industry since 1958. The Company is an Ohio corporation, originally
incorporated in Ohio in 1975. In April, 1990, USX Corporation ("USX") and
Quantum Chemical Corporation ("Quantum") transferred their entire ownership
interest in the Company's immediate predecessor, RMI Company, an Ohio general
partnership, to the Company in exchange for shares of the Company's Common Stock
(the "Reorganization"). Quantum then sold its shares to the public. USX has
retained ownership of its shares. At December 31, 1993, approximately 50.8% of
the Company's outstanding common stock was owned by USX.

INDUSTRY OVERVIEW

Titanium is one of the newest industrial metals. It possesses physical
characteristics such as high strength-to-weight ratio, high temperature
performance and superior corrosion and erosion resistance. The first major
commercial application of titanium occurred in the early 1950's when it was used
as a component in aircraft gas turbine engines. Subsequent applications were
developed to use the material in airframe construction. Historically,
approximately 75-80% of the U.S. titanium industry's output has been used in
aerospace applications. However, the decline in aerospace demand in recent years
has resulted in an increased emphasis on nonaerospace products.

There are two distinct types of participants in the domestic titanium
market: integrated and nonintegrated producers. Integrated producers produce
both titanium sponge and mill products. Nonintegrated producers acquire their
titanium sponge from third parties. By virtue of the Company's decision in 1992
to discontinue its production of titanium sponge, two integrated producers
remain in the U.S. There are also a number of domestic nonintegrated producers,
of which the Company is the largest. Internationally, there are a number of
companies in the titanium industry producing sponge and/or mill products.

The cyclical nature of the aerospace industry has been the principal cause
of the fluctuations in performance of companies engaged in the titanium
industry. Prior to 1989-1990, the last peak in the titanium industry cycle
occurred during the 1979-1982 period. From 1987 through late 1990, average unit
prices for the Company's mill products increased steadily. Domestic industry
shipment volumes in 1989 increased to 55 million pounds from 50 million in 1988,
then decreased to 53 million pounds in 1990. Shipments for 1991 decreased to
approximately 34 million pounds, a decrease of 35% from 1990 levels, the largest
single one year decrease in the history of the industry. Domestic industry
shipments amounted to approximately 35 million pounds in 1992 and were
approximately 36 million pounds in 1993. The Company's shipments of mill
products in 1993 and the first quarter of 1994 were virtually unchanged from the
comparable immediately prior periods. Domestic industry shipping volumes for
1994 are not expected to increase significantly from 1993 levels. In response to
competitive price pressures caused by reduced demand, the Company's average
selling prices for mill products in 1993 decreased 6% from 1992. While excess
titanium inventories at prime aerospace contractors appear to have decreased, a
declining U.S. military budget and production cutbacks at Boeing, McDonnell
Douglas and Airbus Industrie resulting from reduced commercial airline demand
for new aircraft continue to negatively impact the demand for mill products.

Aerospace demand originates from two sectors: military and commercial.
Since 1987 commercial aerospace has become the dominant factor in titanium
demand. The commercial aerospace sector is expected to continue to dominate the
demand for titanium because of such factors as the need to repair and replace
aging fleets, and growth of worldwide air traffic. However, reduced commercial
airline profitability and consolidation of major commercial carriers are having
a continuing negative impact on the commercial aerospace industry. Military
aerospace demand, which remained relatively stable through 1989, dropped

34
<PAGE> 36

sharply between 1990 and 1991 and with the exception of a few specific programs,
is expected to remain relatively flat.

The following table highlights the cyclical nature of the titanium industry
by setting forth the total pounds of U.S. mill products shipped during 1975-1993
as well as the Company's shipments and average mill product prices.

<TABLE>
<CAPTION>
Measurement Period RMI Avg.
(Fiscal Year Covered) Price
<S> <C>
'75 27
'76 25
'77 21
'78 23
'79 38
'80 50
'81 65
'82 70
'83 45
'84 41
'85 42
'86 37
'87 35
'88 42
'89 51
'90 55
'91 50
'92 47
'93 44
</TABLE>

PRODUCTS AND MARKETS

The Company operates in a single business segment: Titanium Metal Products
and Related Products and Services. Titanium Metal Products consist principally
of mill products such as ingot, slab, bloom, billet, bar, plate, sheet, strip,
pipe and tube. Related Products and Services include hot-formed and
superplastically formed parts for aerospace applications, cut shapes and
titanium metal powders. Revenues from a titanium drilling riser contract, which
commenced in 1993, are included in Related Products and Services. The Company
also provides processing or conversion services for customer owned materials.
Additionally, the Company acts as contractor for the U.S. Department of Energy
("DOE") for the remediation and restoration of the Company's former Extrusion
Plant located in Ashtabula, Ohio. Revenue from the DOE contract is included in
the Other category. Prior to 1992, the Company also produced its own titanium
sponge, some of which was sold to domestic nonintegrated producers, as well as
sodium chloride, metallic sodium and sodium hypochlorite, which are classified
as Discontinued Products.

35
<PAGE> 37

The amount of sales and percentage of consolidated sales represented by
individual product classifications during each of the years beginning in 1989
was as follows:

RMI SALES
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------------------------
1993 1992 1991 1990 1989
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mill Products.............. $ 96.5 76% $110.5 81% $128.8 78% $208.1 81% $184.3 76%
Related Products and
Services................. 20.5 16 16.7 13 17.3 10 16.4 6 19.9 8
Other(1)................... 10.4 8 5.8 4 6.3 4 7.9 4 8.1 4
Discontinued Products(2)... -- -- 2.6 2 13.2 8 22.9 9 29.7 12
------ --- ------ --- ------ --- ------ --- ------ ---
Total.................. $127.4 100% $135.6 100% $165.6 100% $255.3 100% $242.0 100%
====== ==== ====== ==== ====== ==== ====== ==== ====== ====
</TABLE>

- ---------

(1) Includes DOE remediation and restoration contract and preliminary
restoration activity.

(2) Discontinued Products includes titanium sponge, sodium chloride, sodium
hypochlorite and metallic sodium, which are no longer manufactured.

MILL PRODUCTS

The Company produces a full range of titanium mill products which are used
in both the aerospace and nonaerospace markets.

AEROSPACE BUSINESS. Approximately 70% of the Company's 1993 mill product
sales were aerospace related compared with approximately 76% in 1992. The
Company's products are certified and approved for use by all major domestic and
most international manufacturers of commercial and military aircraft and jet
engines. Products such as sheet, plate, strip, bar, billet and ingot, as well as
related products such as hot-formed or superplastically formed parts, are
utilized in aircraft bulkheads, tail sections, wing support and carry-through
structures and various engine components, including rotor blades, vanes, discs,
rings and engine cases.

The leading manufacturers of commercial aircraft, Boeing Company, McDonnell
Douglas Corporation and Airbus Industrie, have reported an aggregate of
approximately 2,025 planes under order and deliverable over the next five years.
The comparable backlog in 1992 amounted to 2,500 planes. Other industry sources
have reported that these companies have an aggregate backlog of approximately
3,000 planes under both firm orders and purchase options. However, the impact of
an uncertain world economy and instability in the commercial airline industry
may cause these manufacturers to re-evaluate aircraft orders and options.
Deliveries of commercial aircraft by the above manufacturers totaled 546 in
1993, 738 in 1992, and 753 in 1991.

36
<PAGE> 38

The following table presents the estimated titanium mill product
requirements of selected commercial and military aircraft:

ESTIMATED TITANIUM MILL PRODUCT REQUIREMENTS
PER AIRCRAFT

<TABLE>
<CAPTION>
BUY-WEIGHT(1)(2)
AIRCRAFT ------------------------
(IN THOUSANDS OF POUNDS)
<S> <C>
COMMERCIAL:
Airbus Industrie
A320................................. 10-15
A330................................. 23-28
A340................................. 32
Boeing
737.................................. 17
747.................................. 60-82
757.................................. 33-37
767.................................. 36
777.................................. 66
McDonnell Douglas.........................
MD-11................................ 63
MILITARY:
General Dynamics
F-16 Falcon.......................... 6-10
McDonnell Douglas
F-15 Eagle........................... 62
F/A-18 Hornet........................ 16
C-17................................. 94
Sikorsky
Blackhawk............................ 6
Super Stallion....................... 19
Seahawk.............................. 5
</TABLE>

- ---------

(1) Due to yield loss during production, only a portion of the titanium
buy-weight is ultimately used in the aircraft and engines.

(2) Ranges refer to aircraft with variable engine configurations.

SOURCE: RMI ESTIMATES.

NONAEROSPACE BUSINESS. Principal nonaerospace mill products include
commercially pure (unalloyed) strip, tube and plate used for chemical
processing, oil refining, pulp and paper equipment and mesh for bridge and deck
repair. Bar is sold for the production of medical implants where the Company
enjoys a significant market share. The Company is also a leading supplier of
commercially pure titanium plate and strip, which offers superior corrosion
resistance and ductility for critical forming and metal expansion. Nonaerospace
sales in 1993 accounted for approximately 30% of the Company's mill product
sales and 24% in 1992. Since the Company's entry into strip production in 1984
and tube production in 1986, sales of these two products have grown to a
majority of the Company's total nonaerospace mill product sales.

37
<PAGE> 39

EXISTING AND DEVELOPING NONAEROSPACE APPLICATIONS

<TABLE>
<CAPTION>
MARKET PRODUCT APPLICATION
------ ------- -----------
<S> <C> <C>
Automotive....................... Bar/Powder Engine components, suspension and
structural components
Bridge and Deck Repair........... Strip Corrosion protection of
reinforced
concrete
Downhole......................... Pipe/Tubing High temperature sour gas
production
lines
Environmental (Flue gas
desulfurization, wet
oxidation/disposal)............ Strip/Plate/Pipe Scrubbers and heat exchangers
Gas Transmission................. Pipe/Tubing Sour gas lines
Geothermal....................... Pipe High temperature brine well
strings
Marine/Offshore.................. All Risers, joints, fittings,
umbilical
systems, subsea flow lines,
production tubulars
Medical Implants................. Bar/Plate Implants
Naval............................ All Heat exchangers, tubing, pumps
Nuclear and Toxic Waste.......... Plate/Strip Transportation and storage
containers
Nuclear Power Plants............. Plate/Strip/Tubing Heat exchangers and storage
vessels
Ordnance......................... Bar/Billet/Pipe Armor and barrels
</TABLE>

In addition, the Company has entered into a joint venture in an effort to
increase its participation in the nonaerospace sectors. The venture, Permipipe
Titanium AS, formed with Permascand AB, of Sweden, was finalized in January
1993. The venture will be located in Norway and manufacture heavy-wall welded
titanium tube and pipe for the oil and gas, petrochemical, pulp and paper, and
other process industries. Manufacturing operations are expected to commence in
the first half of 1994. RMI will supply input material to both joint ventures.

RMI has received certification under ISO-9002 by Bureau Veritas Quality
International for all four of its titanium mill product manufacturing
facilities. ISO-9002 is an international quality management standard recognized
by 90 countries and requires a stringent assessment of all phases of a company's
quality system. RMI is the first, and to date, the only domestic titanium mill
products manufacturer to receive ISO certification.

RELATED PRODUCTS AND SERVICES

Related Products and Services include cut shapes, hot-formed and
superplastically formed parts for aerospace applications, and titanium powders.
The Company also provides conversion services for other titanium and specialty
metals producers. Titanium powders are used for alloy additions,
superconductors, grain refinement of other metals and titanium powder metal
parts.

The Company has devoted significant resources and effort to develop new
applications and markets for titanium in the energy extraction and chemical
process industries. During 1993, the Company executed an agreement under which
it will supply the world's first high-pressure titanium drilling riser for use
in the Conoco Norway, Inc. Heidrun Project located in the Norwegian sector of
the North Sea. Work commenced on the project in the third quarter of 1993, with
deliveries scheduled to begin in the fourth quarter of 1994. When assembled, the
riser will be about 1,500 feet in length and weigh approximately 250,000 pounds.
RMI expects to receive approximately $15 million in revenues from the contract.

38
<PAGE> 40

OTHER REVENUE

During the fourth quarter of 1993, the Company entered into a long-term
agreement with the DOE covering the remediation and restoration of the Company's
former Extrusion Plant located in Ashtabula, Ohio, for which the DOE is
responsible as a result of work performed there for the government. The Company
will serve as prime contractor during the remediation and restoration period.
The total amount of revenues to be recognized, which will be included in the
Other category, are not determinable at this time. Revenues will vary
year-to-year depending on DOE funding. In 1993, the Company recognized $10.4
million in such revenues. As the prime contractor, RMI will provide management
services necessary to complete assessment, clean-up and remediation activities
required to complete environmental remediation and restoration of the site and
facilities.

EXPORTS

Including revenues recognized in connection with the titanium drilling
riser contract, approximately 19% of consolidated sales in 1993 were generated
by exports, primarily to the European market, where the Company believes it is a
leader in supplying alloy flat-rolled titanium mill products as well as rotating
quality billet. Export sales comprised approximately 23% and 22% of consolidated
sales in 1992 and 1991, respectively. As a result of the overall decrease in
world demand for titanium, particularly in the European aerospace sector, the
Company's export sales in 1993 decreased approximately 24% from 1992. Export
sales in 1992 decreased approximately 12% from 1991. Through its distributors,
contracts have been secured to furnish titanium mill products to major European
aerospace manufacturers. In order to enhance its presence in the European
market, in 1992 the Company acquired a 40% ownership interest in its French
distributor, Reamet, SA. Most of the Company's exports consist of titanium mill
products used in aerospace markets. The Company's exports also consist of slab,
commercially pure strip, and plate and welded tubing used in nonaerospace
markets.

COMPETITION AND OTHER MARKET FACTORS

The Company is one of the major producers of titanium mill products in the
world. The titanium metals industry is highly competitive on a worldwide basis.
Competition is primarily on the basis of price, quality and delivery.

Integrated and nonintegrated producers of mill products are located
primarily in the U.S., Japan, the Commonwealth of Independent States ("CIS"),
Europe and China. Following closure of the Company's sponge facilities in 1992,
there are two remaining integrated producers in the United States. There are
also a number of domestic nonintegrated producers which along with the Company
produce mill products from purchased sponge, scrap or ingot. However, none of
the Company's nonintegrated competitors produce as full a line of mill products
as does RMI.

Imports of titanium mill products from countries that receive the
most-favored-nation tariff rate ("MFN") are subject to a 15% tariff. The tariff
rate applicable to imports from countries that do not receive MFN treatment is
45%. Japanese producers, which benefit from MFN treatment, participate
significantly in the European market, but historically have not been a major
factor in the U.S. mill products market. The United States does not currently
grant MFN treatment to imports, including titanium mill product imports, from
the CIS countries except Russia. However, effective October 18, 1993, the United
States government extended the benefits of the Generalized System of Preferences
("GSP") to Russia. Under GSP, the United States grants duty-free access to
semifinished and agricultural products from developing countries and
territories. Certain titanium mill products are covered by GSP. However,
titanium sponge has not been afforded GSP treatment. While countries within the
CIS, including Russia, have not participated to any significant degree in the
U.S. market for titanium mill products, they have the largest titanium
production capacity in the world and could materially affect competition if
their exports were to increase significantly. Several of the Company's
competitors together challenged the granting of GSP benefits to Russian titanium
mill products, but recently withdrew their petition. The Company was not a party
to this challenge. RMI anticipates that the GSP situation will provide the
Company with additional opportunities for metallics

39
<PAGE> 41

supplies. The Company has conducted preliminary discussions with several Russian
companies regarding potential cooperative ventures.

MARKETING AND DISTRIBUTION

RMI markets its titanium mill products and related products and services
worldwide. Approximately 80% of the Company's consolidated sales are made
through its internal sales organization. RMI's domestic sales force has offices
in Niles, Ohio; Houston, Texas; Brea, California; Washington, Missouri; and Salt
Lake City, Utah. Technical marketing personnel are available to service these
offices and to assist in new product applications and development. In addition,
the Company's Customer Technical Service and Research and Development
Departments, both located in Niles, Ohio, provide extensive customer support.

Independent distributors, while accounting for only a small portion of
sales, are an important channel of distribution for the Company. The use of
distributors allows RMI to service customers who require off-the-shelf titanium
mill products without an investment by the Company in inventories, facilities
and additional sales staff.

In the U.S., RMI maintains an exclusive domestic distributorship
arrangement with A.M. Castle and Co. ("AMC"), one of the nation's largest
independent metal service centers, having numerous domestic locations. AMC
possesses special expertise in titanium, including cutting and warehousing
capability.

Internationally, RMI maintains a sales office in England and has a
worldwide network of independent sales representatives and distributors. In
1992, in an exchange of common stock, the Company acquired a 40% ownership
interest in its French distributor, Reamet, SA. As a leading supplier of alloy
flat-rolled titanium mill products to the European market, the Company has
worked through its distributors to secure contracts to furnish mill products to
the major European aerospace manufacturers. As a result, the Company has export
sales to customers in France, the United Kingdom and Germany. International
sales representation is also available for the Netherlands, Italy, Israel,
Spain, Sweden, Brazil, Belgium, Norway and Australia.

RESEARCH, TECHNICAL AND PRODUCT DEVELOPMENT

The Company conducts research, technical and product development activities
at facilities in Niles. The principal goals of the Company's research program
are maintaining technical expertise in the production of titanium metal and
related products and providing technical support in the development of new
markets and products. Beyond the Company's own funding, certain major customers
have assisted in funding the Company's development of specific titanium
applications. Research, technical and product development costs totaled $2.4
million in 1993, $2.4 million in 1992, and $6.1 million in 1991. Customer
assisted funding, which is treated as a reduction of research and development
spending, reduced research and development expense to $1.5 million, $1.6
million, and $3.5 million, in 1993, 1992 and 1991, respectively.

The Company has research laboratories in Niles which contain melting, metal
processing and metal testing facilities and a corrosion laboratory for support
of the nonaerospace markets.

PATENTS AND TRADEMARKS

The Company possesses a substantial body of technical know-how and trade
secrets and owns ten U.S. patents applicable primarily to product formulations
and uses. The Company considers its know-how, trade secrets and patents
important to its business, although no individual item is considered to be
material to current business. Patents related to alloy formulations have been
cross-licensed with another titanium producer resulting in a small current
royalty income.

EMPLOYEE RELATIONS

As of March 31, 1994, the Company and its subsidiaries employed 826 people,
177 of whom were classified as administrative and sales personnel. Approximately
44 of the 826 employees were on temporary or extended layoff status and 111 were
directly involved with the DOE remediation and restoration contract at the
Company's former Extrusion Plant.

40
<PAGE> 42

Hourly, clerical and technical employees at the Niles Manufacturing Plant
and the hourly employees at the former Extrusion Plant are represented by the
United Steel Workers of America ("USWA"). Other than remaining hourly workers at
the Sodium Plant, who are represented by the Oil, Chemicals and Atomic Workers
Union, the remaining employees are not represented by a union. In October 1992,
a three year labor agreement was reached with the USWA unit at Niles. The hourly
employees at the former Extrusion Plant agreed to a three year contract in
January 1993. The Company believes its relationships with its employees to be
good.

RAW MATERIALS

Following the closure of its sponge production facilities in early 1992,
the Company began purchasing its titanium sponge from outside sources. The
Company has entered into two long-term sponge supply arrangements, each with
pricing below the cost of sponge which was produced at the Company's own
facilities. In addition, the Company has supplemented its metallics requirements
with additional sponge and raw material purchases from other suppliers, both
foreign and domestic.

The Company purchases titanium tetrachloride, the primary raw material used
in the manufacture of titanium sponge, from SCM Chemicals, Inc. ("SCM").
Titanium tetrachloride is shipped to one of the Company's long-term sponge
suppliers where it is used in providing sponge for the Company.

The Company believes it has adequate sources for alloying agents and other
miscellaneous raw materials.

PROPERTIES

The Company's principal products together with the location of its
principal manufacturing plants and aggregate capacity are set forth below.

<TABLE>
<CAPTION>
PRODUCT ANNUAL CAPACITY LOCATION
------- --------------- --------
<S> <C> <C>
Ingot....................................... 36 Million Pounds (1) Niles, OH
Mill Products............................... 22 Million Pounds (1) Niles, OH
Hermitage, PA
Sharon, PA
Hot-Formed and Superplastically Formed Washington, MO
Components................................ 21 Thousand Press Hours Sullivan, MO
Titanium Metal Powders...................... 1.5 Million Pounds Salt Lake City, UT
</TABLE>

- ---------

(1) Rated capacity based on current product mix and yields; practical capacity
may be less.

In total, the Company has over 728,000 square feet of manufacturing
facilities exclusive of office space, located primarily in Niles, Ohio. The
Company owns all of the foregoing facilities, except for the Sharon,
Pennsylvania and Sullivan, Missouri sites, and certain buildings and property at
Washington, Missouri, all of which are leased. The plants have been constructed
at various times over a long period. Many of the buildings have been remodeled
or expanded and additional buildings have been constructed from time to time.
Much of the equipment at the various locations has likewise been replaced or
remodeled and new equipment has been added at various times. The Company
believes that the plants are adequate and suitable for its operating needs. At
March 31, 1994, the Company's ingot and mill products facilities were being
utilized at approximately 47% and 52%, respectively, of rated capacities, which
may exceed practical capacities.

LEGAL PROCEEDINGS

From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. Such claims
against the Company are generally covered by insurance. Given the critical
nature of many of the aerospace end uses for the Company's products, including
specifically their use in critical rotating parts of gas turbine engines, the
Company maintains aircraft products liability insurance of $250 million, which
includes an aggregate $100 million grounding liability.

41
<PAGE> 43

GENERAL. The Company has been named as a defendant in a number of cases
arising from the aircraft crash at Sioux City, Iowa, which occurred on July 19,
1989. In its final report, issued November 1, 1990, the National Transportation
Safety Board ("NTSB") concluded that the titanium used to manufacture the fan
disc which ultimately failed, leading to the crash, was supplied by a major
competitor of the Company. Based on the conclusions contained in the NTSB report
and the coverage provided by aircraft products liability insurance, the Company
does not anticipate any adverse financial exposure as a result of these actions.

In connection with the closing of the Sodium and Metals Reduction Plants,
the Oil, Chemical and Atomic Workers Union, Local 729, has brought an action
against the Company alleging violation of the notification provisions of the
Worker Adjustment and Retraining Notification Act ("WARN"). Three classes of
former employees of the Company's Sodium and Metals Reduction plants have
alleged that they did not receive the appropriate warnings of their pending
layoffs or layoffs as required under WARN. This case is currently in the
discovery phase. The Company believes that it has complied with the provisions
of WARN and that the claims are substantially without merit.

ENVIRONMENTAL. The Company is subject to extensive federal, state and local
laws and regulations concerning environmental matters. During 1993, the Company
spent approximately $0.9 million for environmental-related expenditures, and
$0.7 million in each of 1992 and 1991. The Company broadly estimates
environmental-related expenditures, including capital items and compliance
costs, will total approximately $2.0 million during the 1994-1995 period.

In connection with the Reorganization, the Company assumed all
responsibility for environmental matters relating to RMI Company and its
immediate predecessor, Reactive Metals, Inc., which commenced business on April
1, 1964, and agreed to indemnify Quantum and USX against any liability relating
to such environmental matters. Quantum and USX have been named as potentially
responsible parties in connection with the Fields Brook Superfund site discussed
below. In addition, Quantum initially acquired the Company's now closed
Ashtabula facilities in 1950, which it owned until 1964, when they were acquired
by Reactive Metals, Inc. Although the Company believes it may have claims with
respect to possible remediation and other costs against Quantum for the pre-1964
period, ultimate apportionment of any liability between the Company and Quantum
has not been finally agreed upon.

ACTIVE INVESTIGATIVE OR CLEANUP SITES. The Company is involved in
investigative or cleanup projects at certain waste disposal sites, which are
discussed below.

FIELDS BROOK SUPERFUND SITE. The Company, together with 31 other
companies has been identified by the U.S. Environmental Protection Agency
("EPA") as a potentially responsible party ("PRP") with respect to a
Superfund site defined as the Fields Brook watershed in Ashtabula, Ohio,
which includes the Company's now closed Ashtabula facilities. The EPA's
1986 estimate of the cost of remediation of the Fields Brook sediment
operable unit was $48 million. The actual cost of remediation may vary from
the estimate depending upon a number of factors such as extent of
contamination, method of remediation, required cleanup standards, timing of
the work, effect of inflation and development of remediation technology.

The EPA, in March 1989, ordered 19 of the PRPs to conduct a predesign
and design phase study for the sediment operable unit and a source control
study, which studies are currently estimated to cost $16.5 million. The
Company, working cooperatively with twelve others in accordance with two
separate agreements, is complying with the order. The Company has accrued
and is currently paying a portion of the cost of complying with the EPA's
order, which includes the studies. It is anticipated that the study will be
completed no earlier than late 1994. Actual cleanup would not commence
prior to that time. It is not possible to determine accurately the
Company's share in any final allocation formula with respect to the study
or the cleanup; however, on the basis of its current knowledge, the Company
believes its share of the ultimate costs will be in the range of 5% to 11%.

In September 1989, EPA sued a number of the then nonparticipating PRPs
seeking recovery of costs incurred by the EPA related to study of the
Fields Brook site. The defendant PRPs later brought several third-party
actions against differing combinations of certain of the cooperating PRPs
and Quantum, in

42
<PAGE> 44

addition to a counterclaim against the EPA. A consent decree between
the EPA and the defendant PRPs has resolved the original suit and the
counterclaim. In 1993, USX was added as a defendant PRP.

Thirteen of the PRPs, including the Company, plus several others have
agreed to a nonbinding arbitration process to allocate the cost of
complying with the March 1989 order. The arbitration is an alternative to
the costly litigation which would otherwise have developed. No significant
new facts have been discovered as a result of this process.

The Ohio Environmental Protection Agency ("Ohio EPA") has notified the
PRPs of its intention to undertake a Natural Resource Damage Assessment
("NRDA") for the Fields Brook site which could lead to a Natural Resource
Damage Claim ("NRDC") against the PRPs. Presently, some portions of the
assessment are being conducted. The assessment could lead to a claim
against the PRPs for residual damages after the clean up is completed. The
Company believes and the Ohio EPA has acknowledged in part, that any
actions to pursue an NRDA or NRDC are premature until the remediation of
the Fields Brook watershed is complete. It is not possible to predict, at
this time, the cost to the Company, if any, as a result of the NRDA and any
NRDC that might be brought.

RESOURCE CONSERVATION AND RECOVERY ACT OF 1976 ("RCRA")
PROCEEDINGS--ASHTABULA SODIUM PLANT. The Company, through its independent
environmental consultant, has identified and reported to EPA the presence
of metals and hazardous organic materials on portions of its now closed
Sodium Plant in Ashtabula, Ohio. As to the organic material, the consultant
has determined it originates from an off-site source, and the Company does
not anticipate it will be required to clean up this material.

A Corrective Measures Study report prepared for the Company by the
consultant states that the presence of metals would not be expected to have
an adverse impact on humans or the environment, and, after conducting a
detailed analysis of cleanup alternatives, the study recommended that
metals contaminated fill material be consolidated at an on-site landfill
and contained in place, at an estimated cost of $1 million. The Company has
responded to comments received and is awaiting final approval of the study.
An amount has been accrued by the Company regarding this matter.

ASHTABULA RIVER. The Ashtabula River and Harbor has been designated
one of 43 Areas of Concern on the Great Lakes by the International Joint
Commission. Fields Brook empties into the Ashtabula River, which in turn
flows into Lake Erie. The State of Ohio has appropriated $7 million in
state funds to the Ashtabula River dredging project to assist in securing
at least $18 million in federal funds needed to conduct the dredging.

The Company believes it is most appropriate to use public funds to
cleanup a site with regional environmental and economic development
implications such as the Ashtabula River and Harbor. However, it is
possible that EPA could determine that the Ashtabula River and Harbor
should be designated as an extension of the Fields Brook Superfund site,
or, alternatively, as a separate Superfund site. It is not possible at this
time to predict the methods or responsibility for any remediation and
whether the Company will have any liability for any costs incurred in
cleaning up the Ashtabula River and Harbor. In 1989, the Company and four
other companies entered into an Administrative Order By Consent with EPA
and the Ohio EPA providing for a study to evaluate the nature and extent of
sediment contamination of the Ashtabula River and Harbor and to investigate
potential sources of such contamination and its effect on the water supply
of the City of Ashtabula. The study, which showed no effect on the water
supply, was completed for approximately $1.7 million, of which the
Company's share was $0.4 million. The study report has not yet been
finalized with the EPA and Ohio EPA.

In a May 1993 public meeting on Fields Brook, the EPA reiterated that
the best remedy for the Ashtabula River and Harbor might be to perform a
partial dredging and leave the deep sediments in place, thereby reducing
the cost. The EPA also stated that if the river is not remediated by some
other mechanism, eventually it may be forced to pursue remediation under
Superfund.

With respect to each of the above sites, all of which are located in Ohio,
the State of Ohio may assert its interests and rights independent of those of
the EPA. The Company has notified all its insurers relative to the environmental
claims reported above and has demanded that the insurers assume the Company's
defense of

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<PAGE> 45

such claims and indemnify the Company against such claims. During 1993 the
Company settled a claim with one insurer for $0.4 million. None of the remaining
insurers have agreed to defend or indemnify the Company, and several have denied
coverage. However, the Company continues to pursue these claims with its
insurers.

Alleged RCRA Violation. On October 9, 1992 the EPA filed a complaint
alleging certain violations of RCRA at the Company's now closed Sodium Plant in
Ashtabula, Ohio. The EPA's determination is based on information gathered during
inspections of the facility in 1991. Under the complaint the EPA proposed to
assess a civil penalty of approximately $1.4 million for alleged failure to
comply with RCRA. The Company is contesting the complaint. It is the Company's
position that it has complied with the provisions of RCRA and that the EPA's
assessment of penalties is inappropriate. A formal hearing has been requested
and informal discussions with the EPA to settle this matter are ongoing. Based
on the preliminary nature of the proceedings, the Company is currently unable to
determine the ultimate liability, if any, that may arise from this matter.

Given the status of the proceedings at certain of these sites, and the
evolving nature of environmental laws, regulations, and remediation techniques,
the Company's ultimate obligation for investigative and remediation costs cannot
be predicted. It is the Company's policy to recognize in its financial
statements environmental costs as an obligation becomes probable and a
reasonable estimate of exposure can be determined. At March 31, 1994, the amount
accrued for future environmental-related costs was $2.9 million. Based on
available information, RMI believes that its share of potential
environmental-related costs, before expected contributions from third parties,
will be in the range of $4.2-$6.1 million in the aggregate. The amount accrued
is net of expected contributions from third parties (other than insurers) of
approximately $1.6 million which the Company believes are probable. The Company
has been receiving contributions from such third parties for a number of years
as partial reimbursement for costs incurred by the Company. As these proceedings
continue toward final resolution, amounts in excess of those already provided
may be necessary to discharge the Company from its obligations for these sites.

The ultimate resolution of the foregoing contingencies could, individually
or in the aggregate, be material to the consolidated financial statements.
However, management believes that RMI will remain a viable and competitive
enterprise even though it is possible these matters could be resolved
unfavorably.

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<PAGE> 46

RMI TITANIUM COMPANY

SELECTED FINANCIAL INFORMATION

The following selected financial information has been derived from the
consolidated financial statements of RMI for each of the five years in the
period ended December 31, 1993 and the condensed financial statements of RMI for
the quarters ended March 31, 1994 and 1993. The information set forth below
should be read in connection with the Consolidated Financial Statements, the
Condensed Consolidated Financial Statements and the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" related thereto,
included elsewhere herein. The selected quarterly information has been prepared
by the Company without audit and reflects all adjustments, consisting only of
normal recurring adjustments, which are, in the opinion of management, necessary
for a fair statement of the results of operations for the interim periods
covered.

<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31, YEAR ENDED DECEMBER 31,
---------------------- --------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE
AND PRICE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS STATEMENT DATA:
Sales:
Mill Products................... $ 25,754 $ 26,987 $ 96,453 $110,509 $128,803 $208,058 $184,251
Related Products and Services... 7,948 3,610 20,512 16,745 17,260 16,397 19,931
Other(1)........................ 2,658 1,537 10,432 8,353 19,505 30,840 37,832
-------- -------- -------- -------- -------- -------- --------
Total....................... 36,360 32,134 127,397 135,607 165,568 255,295 242,014
Operating income (loss)........... (2,216) (2,359) (10,764) (11,387) (52,712)(2) 32,773 30,088
Income (loss) before cumulative
effect of a change in accounting
principle....................... (2,929) (2,897) (11,955) (14,062) (57,085)(2) 28,126 26,544
Cumulative effect of a change in
accounting principle............ (1,202)(3) (16,938)(4) (16,938)(4) -- -- -- --
Net income (loss)................. (4,131) (19,835) (28,893) (14,062) (57,085) 28,126 26,544
Cash dividends per common
share(5)........................ -- -- -- -- .75 .75 --
NET LOSS PER COMMON SHARE:(5)
Before change in accounting
principle....................... $ (1.99) $ (1.98) $ (8.14) -- -- -- --
Net loss per common share......... (2.80) (13.58) (19.67) $ (9.66) $ (39.17) -- --
PRO FORMA DATA:(6)
Pro forma net income.............. -- -- -- -- -- $ 27,274 $ 21,959
Pro forma net income per common
share(5)........................ -- -- -- -- -- 18.17 14.64
Pro forma book value per common
share(5)........................ -- -- -- -- -- -- 74.11
BALANCE SHEET DATA: (at end of
period)
Working capital................... $ 66,517 $ 66,319 $ 72,229 $ 79,820 $109,044 $102,666
Total assets...................... 153,841 152,471 153,257 173,888 228,605 217,549
Long-term debt due after one
year............................ 68,530 66,660 62,280 58,800 61,205 38,503
Equity............................ 23,939 27,861 63,302 77,705 136,569 141,158
Book value per common share(5).... 16.23 18.89 43.34 53.36 92.61 --
% Total debt to total
capitalization.................. 74% 71% 50% 43% 31% 22%
OPERATING DATA:
Mill product shipments
(thousands of pounds):
Aerospace....................... 1,951 2,002 7,619 8,699 9,379 12,898 12,237
Nonaerospace.................... 892 815 3,406 2,585 1,938 3,913 3,612
-------- -------- -------- -------- -------- -------- --------
Total....................... 2,843 2,817 11,025 11,284 11,317 16,811 15,849
Average mill product sales price
(per pound)..................... $ 9.46 $ 10.38 $ 9.60 $ 10.20 $ 11.69 $ 12.58 $ 11.81
Mill product capacity (millions of
pounds)(7)...................... 22.0 22.0 22.0 22.0 22.0
Ingot capacity (millions of
pounds):(7)..................... 36.0 36.0 36.0 36.0 36.0
Ingot melt...................... 14.6 14.7 14.0 22.9 24.2
% Utilization................... 41% 41% 39% 64% 67%
Active employees at December
31,............................. 782 843 1,172 1,660 1,650
</TABLE>

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<PAGE> 47

- ---------

(1) Includes sales of discontinued products of $2.6 million, $13.2 million,
$22.9 million and $29.7 million in 1992, 1991, 1990 and 1989, respectively.

(2) Includes a charge of $37.1 million relating to the closing of the Company's
sponge production facilities. See Note 4 to the Consolidated Financial
Statements, included elsewhere herein.

(3) Reflects the January 1, 1994 adoption of SFAS No. 112. See Note 4 to the
Condensed Consolidated Financial Statements included elsewhere herein.

(5) Amounts retroactively restated to reflect the one-for-ten reverse stock
split effective March 31, 1994. See Note 17 to the Consolidated Financial
Statements included elsewhere herein.

(6) Reflects the change to the Company's capital structure effective April 20,
1990 (see Note 1 to Consolidated Financial Statements included elsewhere
herein) and certain adjustments to historical partnership income.

(7) Rated annual capacity; practical capacity may be less.

46
<PAGE> 48

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with "Selected
Financial Data" and the Consolidated Financial Statements and Notes thereto and
the Condensed Consolidated Financial Statements and Selected Notes thereto of
the Company included elsewhere herein.

OVERVIEW

The cyclical nature of the aerospace industry has been the principal cause
of the fluctuations in performance of companies engaged in the titanium
industry. Prior to 1989-1990, the last peak in the titanium industry cycle
occurred during the 1979-1982 period. From 1987 through late 1990, average unit
prices for the Company's mill products increased steadily. Domestic industry
shipment volumes in 1989 increased to 55 million pounds from 50 million in 1988,
then decreased to 53 million pounds in 1990. Shipments for 1991 decreased to
approximately 34 million pounds, a decrease of 35% from 1990 levels, the largest
single one year decrease in the history of the industry. Domestic industry
shipments amounted to approximately 35 million pounds in 1992 and approximately
36 million pounds in 1993. Domestic industry shipping volumes for 1994 are not
expected to increase significantly from 1993 levels. While excess titanium
inventories at prime aerospace contractors appear to have decreased, a declining
U.S. military budget and production cutbacks at Boeing, McDonnell Douglas and
Airbus Industrie resulting from reduced commercial airline demand for new
aircraft, continue to negatively impact the demand for titanium mill products.

In response to these industry-wide conditions, the Company closed its
sponge production facilities in early 1992, which allowed the Company to
immediately stem significant losses generated at these plants, as well as
maintain the flexibility to purchase titanium sponge and other raw materials,
such as foreign or domestic scrap at opportunistic prices. The Company entered
into two long-term titanium sponge supply arrangements which will assure supply
of a significant portion of its sponge requirements at costs below the cost of
sponge which had been produced at its own facilities. These actions have reduced
the Company's raw material costs by approximately 18% since 1991, and will
continue to improve the Company's future competitive position.

In addition, the Company has substantially reduced administrative costs,
including a 58% reduction in salaried personnel since the beginning of 1991.

Further improvement in results of the Company's operations, however, will
depend largely on increased commercial aerospace activity and new market
applications. The Company is currently unable to accurately predict when demand
for its products will improve. In order to lessen its dependence on the
aerospace market and to increase its participation in commercial applications,
the Company has devoted significant efforts to developing new applications and
markets for titanium in the energy extraction and chemical process industries.
The Company's successful bid to supply the world's first titanium drilling riser
for the Conoco Norway Heidrun project is one of several opportunities in this
market that the Company is currently pursuing. In addition, the Company has
entered into two joint ventures, one for the marketing of titanium coiled tubing
for the downhole and offshore markets of the petroleum industry and the second
to manufacture heavy-wall tube and pipe for use in oil and gas, petrochemical,
pulp and paper, and other process industries. Further, the Company has signed an
agreement with an engineering company specializing in the design of offshore
structures for deep water drilling. The agreement provides for the Company to be
the exclusive supplier of titanium risers and stress joint components to the
engineering company's clients. The Company is currently working with other
companies to develop and expand opportunities for titanium in the energy field.

RESULTS OF OPERATIONS

YEARS 1993, 1992 AND 1991

NET SALES. Net sales in 1993 decreased by $8.2 million or 6% from 1992.
This decrease resulted primarily from lower selling prices of titanium mill
products combined with a continuing market driven shift in mix toward
semifinished products and away from higher margin mill products. Net sales
decreased 18% in 1992 from 1991. This decrease reflects both reduced shipments
and selling prices for titanium mill products.

47
<PAGE> 49

Average selling prices for mill products in 1993 decreased 6% from 1992, and in
1992 decreased by 13% from 1991.

Sales of mill products in 1993 decreased by $14.0 million or 13% from 1992.
This decrease results from the shift in product mix combined with the decrease
in average selling prices mentioned above. The Company and the domestic titanium
industry in general have seen a weakening in mill product prices corresponding
closely to reduced demand. Prices on recent incoming orders continue to reflect
soft demand for titanium metal products.

Sales of related products and services in 1993 increased $3.7 million or
22% from 1992. This increase resulted primarily by the inclusion of revenues
from the titanium drilling riser contract partially offset by reduced demand for
hot formed parts, cut shapes and powders. Sales of related products and services
decreased by $.5 million from 1991 to 1992 primarily because of lower demand for
hot formed products and powders.

Other revenue in 1993 is represented by the DOE remediation and restoration
contract. Revenue relating to preliminary restoration activities in 1992 and
1991 is also included in other revenue.

GROSS PROFIT. Gross margin improved slightly in 1993. This improvement
reflects decreased operating costs due to the closure of the sponge facilities
in 1992 and other cost reduction programs, largely offset by lower selling
prices and reduced product shipments.

Gross margin improved during 1992 to a loss of $0.4 million compared to a
loss of $1.4 million in 1991. This improvement reflects decreased operating
costs resulting from the closure of the sponge facilities, partially offset by
lower selling prices and a less favorable product mix.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A"). SG&A decreased to
$9.1 million for 1993 from $9.4 million in 1992, while SG&A expenses in 1992
decreased by $1.3 million from $10.7 million in 1991. The decreases in each year
are due primarily to reduced employment levels consistent with lower operating
rates and other cost containment efforts.

RESEARCH, TECHNICAL AND PRODUCT DEVELOPMENT EXPENSES. The Company's total
research spending amounted to $2.4 million in each of 1993 and 1992 and $6.1
million in 1991. The spending levels in 1993 and 1992 were set with an objective
of maintaining the Company's technical expertise in titanium production,
providing customer technical support, and developing new products and markets,
in spite of poor economic conditions. The decrease from 1991 to 1992 resulted
primarily from the cessation of activities relating to the development of an
electrolytic sponge process which was discontinued with the closing of the
Company's sponge facilities in early 1992. Certain major customers have assisted
in funding the Company's overall product development effort. Such funding, which
is reflected as a reduction of research expense, reduced the Company's portion
of research expense to $1.5 million, $1.6 million and $3.5 million in 1993, 1992
and 1991, respectively.

OPERATING LOSS. The operating loss for 1993 was $10.7 million compared to a
loss of $11.4 million in 1992. The operating loss amounted to $15.6 million in
1991. The improvement in 1993 resulted from decreased costs for raw materials
resulting from the closing of the Company's sponge facilities and lower
operating expenditures offset by reduced selling prices and a less favorable
product mix. The improvement in 1992 from 1991 stemmed from lower operating
costs partially offset by lower selling prices.

OTHER INCOME (EXPENSE). Other income (expense), net for 1993 includes a
$1.4 million gain on sales and retirements of equipment and facilities. Amounts
for 1991 include a loss of $0.5 million on disposals of facilities and a loss of
$0.1 million pertaining to settlement of litigation.

NET LOSS. In 1993, the Company recorded a net loss of $28.9 million
compared to a net loss of $14.1 million in 1992. The 1993 results were affected
by a $16.9 million cumulative effect charge for adopting the provisions of SFAS
No. 106 "Employers Accounting for Postretirement Benefits Other than Pensions."
See Note 11 to Consolidated Financial Statements included elsewhere herein. The
net loss in 1992 amounted to $14.0 million compared to a net loss of $57.1
million in 1991. The 1991 results were impacted by a $37.1 million charge
resulting from the closing of its sponge production facilities. See Note 4 to
the

48
<PAGE> 50

Consolidated Financial Statements included elsewhere herein. Net interest
expense amounted to $2.7 million in 1993 and 1992. Interest expense in 1991
amounted to $3.5 million. While average borrowings increased in 1993 from 1992,
interest expense remained flat due to lower overall interest rates. The decrease
in 1992 from 1993 resulted from lower interest rates partially offset by
increased borrowings. In accordance with income tax accounting principles, no
income tax benefit was recorded in relation to pretax losses in 1993, 1992 and
1991. See Note 8 to the Consolidated Financial Statements included elsewhere
herein.

THREE MONTHS ENDED MARCH 31, 1994 AND 1993

NET SALES. Net sales increased by $4.2 million, or 13%, for the three
months ended March 31, 1994 compared to the corresponding 1993 period. This
increase is due primarily to the recognition of $2.7 million in revenue under
the titanium drilling riser contract in 1994. Additionally, revenues under the
DOE remediation and restoration contract increased by $1.1 million in the first
quarter of 1994, or 73%, from the same period in 1993. Sales of hot formed parts
and cut shapes during the first quarter of 1994 increased approximately $.5
million or 15% from 1993 first quarter levels. Shipments of titanium mill
products increased slightly from first quarter 1993 shipments. Because of a less
favorable product mix and a continuation of intense price competition, average
selling prices on mill products in 1994 decreased by approximately 9% from 1993
first quarter levels; however, by comparison to the fourth quarter of 1993,
average selling prices on mill products in 1994 increased approximately 2%.
Overall demand and pricing for titanium mill products remains weak.

GROSS PROFIT. Gross profit amounted to $.5 million for the quarter ended
March 31, 1994 compared to a gross profit of $.4 million for the comparable 1993
period. The 1994 results were favorably impacted by the titanium drilling riser
contract and the DOE remediation and restoration contract.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A amounted to $2.4 million
for the quarter ended March 31, 1994 compared to $2.3 million in the first
quarter of 1993. Although the Company has achieved administrative cost
reductions through its cost containment measures, 1994 first quarter
administrative costs were adversely impacted by an additional charge of $.1
million resulting from the recognition of deferred compensation expenses related
to the early vesting of awards previously granted under the Company's 1989
Employee Restricted Stock Award Plan. Additionally, reimbursable administrative
expenses associated with the DOE remediation and restoration contract increased
by $.1 million from 1993 first quarter levels. Research, technical and product
development expenses amounted to $.3 million in the first quarter of 1994
compared to $.4 million in the first quarter of 1993.

OPERATING LOSS. The operating loss for the three months ended March 31,
1994 and 1993 amounted to $2.2 million and $2.4 million, respectively.

NET LOSS. Because of increased overall interest rates and a higher level of
borrowings, interest expense increased to $.7 million in the first quarter of
1994 from $.6 million in 1993.

Net loss for the first quarter of 1994 reflects a charge of $1.2 million
resulting from the cumulative effect of adopting SFAS No. 112. See Note 4 to the
Condensed Consolidated Financial Statements included elsewhere herein. The
comparable 1993 period reflects a charge of $16.9 million representing the
cumulative effect of adopting SFAS No. 106.

BUSINESS OUTLOOK-BACKLOG

Including the remainder of the titanium drilling riser contract referred to
above, the Company's total order backlog as of March 31, 1994 was approximately
$70 million, compared to $71 million at December 31, 1993 and $53 million at
December 31, 1992. As a result of soft demand and competitive pressures, the
average selling prices on incoming orders for mill products have decreased over
the last several years. The Company believes a number of factors are responsible
for this situation. Among these factors are aggressive international
competition, declining military spending, lack of commercial airline profits,
and an uncertain world economy. Many aerospace contractors have adopted
just-in-time inventory practices or have demanded significantly shorter lead
times. Additionally, contractors are waiting until the last minute to place
orders in an effort to obtain the best possible pricing. The titanium industry
is also suffering from excess production capacity, which

49
<PAGE> 51

has intensified price competition for available business. The Company is
currently unable to accurately predict when demand or prices for its products
will improve. Any improvement will be dependent on increased commercial
aerospace activity and new market applications. See "Summary--Current
Operations".

LIQUIDITY AND CAPITAL RESOURCES

Working capital amounted to $66.5 million at March 31, 1994, compared to
$66.3 million at December 31, 1993 and $72.2 million at December 31, 1992. The
decrease in working capital from 1992 to 1993 reflects a reduction in
inventories and a net increase in current liabilities partially offset by an
increase in accounts receivable resulting from a $3.8 million progress billing
on the titanium drilling riser contract, which was collected in January 1994.
The Company's working capital requirements are not seasonal.

For the quarter ended March 31, 1994 and the year ended December 31, 1993,
the Company's cash flow requirements for operating losses and capital spending
were funded primarily by working capital reductions and borrowings under the
Company's Existing Credit Facility. In 1992, the Company's cash flow
requirements were also funded by borrowings and reductions in working capital.
In 1991, cash provided from operating activities of $15 million was generated
primarily through working capital reductions.

At March 31, 1994 and December 31, 1993, the Company had borrowings of
$67.5 million and $65.6 million, respectively, under the Existing Credit
Facility. Included in the balance outstanding at December 31, 1993 is
approximately $4.8 million borrowed to finance working capital invested in the
titanium drilling riser contract. Other long-term debt consisted of $1.0 million
in industrial revenue bonds. As of March 31, 1994, the Company was in compliance
with the covenants and terms of the Existing Credit Facility.

RMI's shareholders' equity declined to $23.9 million at March 31, 1994,
from $136.6 million at December 31, 1990, due to the net losses described above
and a $7.5 million minimum pension liability adjustment recorded at December 31,
1993. Long-term debt increased from $61.2 million to $68.5 million over the same
period. The percentage of RMI's total debt to total capitalization has increased
from 31% in 1990 to 74% at March 31, 1994. This increase reflects primarily the
net losses and the pension liability adjustment described above.

The Company, along with the rest of the titanium industry, has experienced
a severe downturn in its traditional markets since 1990. Significant reductions
in demand for the Company's products and reduced prices have resulted in the
Company incurring losses in 1991, 1992, 1993 and the first quarter of 1994.
These losses have eroded the Company's equity base and impeded the generation of
cash, forcing increasing reliance on the Existing Credit Facility. Aggressive
cost-cutting efforts, combined with improved operating efficiencies, the sale of
nonstrategic assets and borrowings under the Existing Credit Facility have
enabled the Company to maintain operations during this difficult period.
However, the timing and extent of any recovery in the Company's traditional
aerospace markets is uncertain.

Emerging market opportunities as described above, together with the lack of
recovery in the Company's traditional markets, will place an even greater
pressure on the Company's limited financial resources. Accordingly, the Board of
Directors has determined that the Company should seek to raise up to $30 million
through the Rights Offering. Net proceeds of the Rights Offering will be used by
the Company for general corporate purposes, including working capital for the
development of new markets for its products. Specific expenditures and the
amounts thereof related to the development of the Company's new market
opportunities cannot be determined at this time. Expenditures for new technology
and facilities are not expected to be significant. However, potential projects
are generally large relative to the Company's present working capital position,
necessitating the need for additional capital. Additionally, the Company has
obtained a commitment from participating banks to amend its Existing Credit
Facility to establish new financial covenants and relate the maximum amount of
available credit thereunder to a borrowing-base formula and has also obtained a
commitment from such banks to enter into the EXIM Bank Credit Facility providing
for up to an additional $15 million of available credit. The Existing Credit
Facility, as amended, will include a covenant to maintain a minimum balance of
total shareholders' equity. Also, an event of default would occur under the
facility, as amended, if RMI does not receive at least $15 million in gross
proceeds, of which at least $14.7 million is new equity, as a result of the
Rights Offering by July 29, 1994. Continued losses from operations could result
in

50
<PAGE> 52

noncompliance with the minimum total shareholders' equity covenant of the
Existing Credit Facility, as amended. If the Company were unable to comply with
any covenant in either of the credit facilities, the Company might not be able
to borrow additional amounts thereunder, and the banks which are parties to the
two credit facilities could demand payment of all amounts outstanding
thereunder. In the event the banks would demand payment of such amounts, the
Company would be required to seek alternative financing. RMI has no commitments
or other understandings with respect to any such alternative financing. For
information concerning the Existing Credit Facilities, as amended, and the EXIM
Bank Credit Facility, see "Capitalization--Revolving Credit Facilities." The
Company believes that cash flow from operations, together with capital raised
from the Rights Offering, supplemented as necessary with funds available from
credit facilities, will be adequate to satisfy future liquidity requirements.

On March 31, 1994, the Company's shareholders approved an amendment to the
Articles of Incorporation of the Company effecting a one-for-ten reverse stock
split. A Certificate of Amendment to the Articles of Incorporation was filed
with the Ohio Secretary of State on March 31, 1994, and the reverse stock split
became effective on that date. Pursuant to the reverse split, each certificate
representing shares of common stock outstanding immediately prior to the reverse
split is deemed to represent one-tenth the number of shares of common stock
immediately prior to the reverse split.

NEW ACCOUNTING STANDARDS

For information regarding the effect of newly-adopted accounting standards,
see Note 11 to the Consolidated Financial Statements and Note 4 to the Condensed
Consolidated Financial Statements included elsewhere herein.

ENVIRONMENTAL MATTERS

The Company is subject to pervasive environmental laws and regulations as
well as various health and safety laws and regulations that are subject to
frequent modifications and revisions. While the costs of compliance for these
matters has not had a material adverse impact on RMI in the past, it is
impossible to predict accurately the ultimate effect these changing laws and
regulations may have on the Company in the future. During 1993, the Company
spent approximately $0.9 million for environmental-related expenditures,
compared to $0.7 million in each of 1992 and 1991. The Company broadly estimates
environmental-related expenditures, including capital items and compliance
costs, will total approximately $2.0 million during the 1994-1995 period.

In 1992, the EPA proposed a $1.4 million civil penalty for alleged failure
to comply with RCRA. The Company is contesting the complaint. Based on the
preliminary nature of the proceeding the Company is currently unable to
determine the ultimate liability, if any, that may arise from this matter.

Based on the information available regarding the current ranges of
estimated remediation costs at currently active sites, and what the Company
believes will be its ultimate share of such costs, provisions for
environmental-related costs have been recorded, including $2.7 million in 1991.
These provisions are in addition to amounts which have previously been accrued
for the Company's share of environmental study costs. At March 31, 1994, the
amount accrued for future environmental-related costs was $2.9 million. Based on
the information available, RMI believes that its share of potential
environmental-related costs, after expected contributions from third parties,
will be in the range of $2.6-4.5 million in the aggregate. The amount accrued is
net of expected contributions from third parties (other than insurers) of
approximately $1.6 million, which the Company believes are probable. The Company
has been receiving contributions from such third parties for a number of years
as partial reimbursement for costs incurred by the Company. As these proceedings
continue toward final resolution, amounts in excess of those already provided
may be necessary to discharge the Company from its obligations for these
projects.

51
<PAGE> 53

The ultimate resolution of these environmental matters could individually
or in the aggregate, be material to the consolidated financial statements.
However, management believes that the Company will remain a viable and
competitive enterprise even though it is possible that these matters could be
resolved unfavorably. For additional information on environmental matters, see
"Business--Legal Proceedings."

CAPITAL EXPENDITURES AND JOINT VENTURES

Capital expenditures for the quarters ended March 31, 1994 and 1993
amounted to $.1 million in each period. Capital expenditures for 1993, 1992 and
1991 amounted to $1.0 million, $4.2 million and $8.9 million, respectively. The
Company has budgeted capital spending of approximately $1.0 million in 1994.
Although the Company's capital spending has been reduced in order to conserve
cash, the Company's capital spending levels are adequate to maintain its
facilities while continuing to improve product quality. The Company anticipates
that it can fund this spending using cash provided from operations, supplemented
as necessary by available credit resources. Additionally, in the quarter ended
March 31, 1994 and during the year 1993, the Company invested $.2 million and
$1.2 million, respectively, in joint venture arrangements. These investments
will enable the Company to increase its participation in the developing
nonaerospace markets, principally in Europe.

52
<PAGE> 54

DESCRIPTION OF CAPITAL STOCK

RMI is authorized to have outstanding 30,000,000 shares of Common Stock,
$.01 par value per share, and 5,000,000 shares of Preferred Stock, no par value
("Preferred Stock"). As of the Record Date, there were 1,475,285 shares of
Common Stock outstanding. All of the shares of Common Stock issued and
outstanding as of the Record Date are, and any shares of Common Stock to be
issued upon exercise of the Rights will be, fully paid and nonassessable. The
Preferred Stock is issuable in one or more series, with such designations,
dividend rates, dates at which dividends shall be payable and from which they
shall cumulate, redemption rights and prices, sinking fund requirements,
liquidation prices, conversion rights and restrictions as the Board of Directors
shall fix. No shares of Preferred Stock have been issued.

Each holder of shares of Common Stock is entitled to one vote for each
share upon all matters presented to shareholders. Each holder of Preferred Stock
is entitled to one vote for each share thereof and generally votes together with
the Common Stock as one class on all matters, except that Preferred Stock is
entitled to vote separately to elect two additional Directors in the event of a
default in the payment in six quarters of dividends on any series of such class
until no quarterly dividend is in default. In addition, under Ohio law, holders
of Preferred Stock have the right to vote separately as a class on specified
matters.

The Common Stock is not subject to redemption and has no conversion rights.
Upon liquidation, holders of Common Stock are entitled to receive pro rata all
assets of RMI remaining after payment of debts and liquidation preferences
relating to the Preferred Stock.

No holder of Common Stock or Preferred Stock has any preemptive rights or
cumulative voting rights.

Holders of Common Stock are entitled to receive such dividends as may be
declared from time to time by the Board of Directors of RMI out of funds legally
available for the payment of dividends. Dividends on Preferred Stock may be
cumulative in preference to holders of Common Stock at such rates and from such
dates as shall be set by the Directors. Dividend payments are prohibited to the
holders of Common Stock, unless all accrued and unpaid dividends have been paid
to the holders of the Preferred Stock.

RMI's Amended Articles of Incorporation may be amended by the affirmative
vote of two-thirds of the voting power to vote on the amendment and if required
by applicable law, two-thirds of the outstanding Preferred Stock.

CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK

Under RMI's Amended Articles of Incorporation, there will be, immediately
after the Expiration Time, and assuming the Rights are fully exercised,
authorized and unissued shares of Common Stock and five million shares of
undesignated Preferred Stock. The unissued shares of Common Stock, to the extent
not reserved for issuance pursuant to RMI's Stock Option Plan and Restricted
Stock Plans, may be utilized for a variety of corporate purposes, including
future public offerings to raise additional capital or to make corporate
acquisitions. Except for the issuance of Common Stock pursuant to certain
director and employee benefit plans, RMI does not currently have any plans to
issue additional shares of Common Stock or any shares of Preferred Stock.

One of the effects of the existence of unissued and unreserved Common Stock
and undesignated Preferred Stock may be to enable the Board of Directors to
render more difficult or to discourage an attempt to obtain control of the
Company by means of a merger, tender offer, proxy contest or otherwise, and
thereby to protect the continuity of RMI's management. If, in the due exercise
of its fiduciary obligations, for example, the Board of Directors were to
determine that a takeover proposal were not in RMI's best interest, such shares
could be issued by the Board of Directors without shareholder approval in one or
more private placements or other transactions that might prevent or render more
difficult or costly the completion of the takeover transaction by diluting the
voting or other rights of the proposed acquiror or insurgent shareholder group,
by creating a substantial voting block in institutional or other hands that
might undertake to support the position of the incumbent Board of Directors, by
effecting an acquisition that might complicate or preclude the takeover, or
otherwise. In this regard, except with respect to voting rights, RMI's Amended
Articles of Incorporation grants the Board of Directors broad power to establish
the rights and preferences of the

53
<PAGE> 55

authorized and unissued Preferred Stock, including the power to convert
Preferred Stock into a larger number of shares of Common Stock or other
securities, to demand redemption at a specified price under prescribed
circumstances related to a change of control, or to exercise other powers to
impede a takeover. The issuance of shares of Preferred Stock pursuant to the
Board's authority described above may adversely affect the rights of the holders
of the Common Stock. It should be noted that, although Ohio law and RMI's
Amended Articles of Incorporation would not require shareholder approval to
issue authorized shares, historically the NYSE on which the Common Stock is
listed, has prohibited certain issuances and has required shareholder approval
of certain other issuances as a condition of listing the additional shares or,
in some instances, of continued listing of the outstanding shares.

In addition, certain other charter provisions, which are described below,
may have the effect, alone or in combination with each other or with the
existence of authorized but unissued capital stock, of rendering more difficult
or discouraging an acquisition of RMI deemed undesirable by the Board of
Directors.

CERTAIN PROVISIONS OF RMI'S ARTICLES OF INCORPORATION AND REGULATIONS

CLASSIFIED BOARD OF DIRECTORS. RMI's Regulations provide for the Board of
Directors to be divided into up to three classes of directors, each class to
have at least three members and to be nearly equal in number of directors as
possible, serving staggered terms.

SIZE OF BOARD OF DIRECTORS; REMOVAL OF DIRECTORS; FILLING OF VACANCIES ON
THE BOARD OF DIRECTORS. RMI's Regulations provide that the number of directors
shall be fixed from time to time but shall not be fewer than three nor more than
twelve. Under Ohio law, unless the articles of incorporation or regulations
otherwise provide, a director on a classified board may be removed by the
shareholders with or without cause. RMI's Regulations specifically provide that
directors may be removed only for cause. RMI's Regulations also provide that
vacancies on the Board of Directors that may occur between annual meetings shall
be filled only by the Board of Directors. In addition, these provisions specify
that any director elected to fill a vacancy on the Board will serve for the
balance of the term of the replaced director.

CALLING OF MEETINGS OF SHAREHOLDERS. RMI's Regulations provide that
special meetings of shareholders may be called by a shareholder or shareholders
only if they hold 50% of the shares of stock entitled to vote.

CERTAIN VOTING PROVISIONS. RMI's Amended Articles of Incorporation provide
that the approval of holders of two-thirds of the voting power of RMI (and, if
required by applicable law, a class vote of preferred holders) is required to
approve a merger or consolidation if under Ohio law such merger or consolidation
would have to be submitted to RMI's shareholders, a sale or disposition of all
or substantially all the assets of RMI or a dissolution of RMI.

CERTAIN PROVISIONS OF OHIO LAW

RMI is subject to certain provisions of Ohio law that may discourage or
render more difficult an unsolicited takeover of RMI. The Merger Moratorium Act
prohibits certain mergers, sales of assets, issuances or purchases of
securities, liquidation or dissolution, or reclassifications of the
then-outstanding shares of an Ohio corporation involving, or for the benefit of,
certain holders of stock representing 10% or more of the voting power of the
corporation, unless (i) the transaction is approved by the directors prior to
the time that the 10% shareholder became such, (ii) the acquisition of 10% of
the voting power is approved by the directors prior to the time that the 10%
shareholder became such or (iii) the transaction involves a 10% shareholder that
has been such for at least three years and (a) the transaction is approved by
holders of 2/3 of the voting power of the corporation and the holders of a
majority of the voting power not owned by 10% shareholders, or (b) certain
minimum price and form of consideration requirements are met. The Board of
Directors has approved the acquisition of Common Stock pursuant to the exercise
of the Rights for purposes of the Merger Moratorium Act, with the result that
persons acquiring in excess of 10% of the outstanding Common Stock by reason of
the exercise of the Rights, and USX, if USX increases its proportionate
ownership of the Common Stock as a result of the exercise of its Rights, will
not be subject to the restrictions of the Merger Moratorium Act.

54
<PAGE> 56

The Control Share Act provides that the acquisition of shares entitling the
holder to exercise voting power in certain ranges (one-fifth or more, one-third
or more, or a majority) can be made only with the prior authorization of (i) the
holders of at least a majority of the total voting power and (ii) the holders of
at least a majority of the total voting power held by shareholders other than
the proposed acquirer, officers of the corporation elected or appointed by the
directors, and directors of the corporation who are also employees and excluding
certain shares that are transferred after the announcement of the proposed
acquisition and prior to the vote with respect to the proposed acquisition. The
Control Share Act does not specify a remedy for violation of the Act. However,
in at least one situation, a court has set aside an acquisition made in
violation of the Control Share Act. The Profit Disgorgement Act, which is
contained in Section 1707.043 of the Ohio Revised Code, provides Ohio
corporations, or in certain circumstances the shareholders of an Ohio
corporation, a cause of action to recover profits realized under certain
circumstances by persons who dispose of securities of a corporation within 18
months of proposing to acquire such corporation.

THE RMI VOTING TRUST AGREEMENT

USX intends to enter into the RMI Titanium Company Voting Trust Agreement
("Voting Trust Agreement") with RMI, promptly following the completion of the
Rights Offering. Mellon Bank, N.A., will also be a party to the Voting Trust
Agreement in its capacity as Trustee. Pursuant to the Voting Trust Agreement,
USX will deposit with the Trustee, immediately after completion of the Rights
Offering, sufficient shares of Common Stock, including any shares acquired as a
result of the exercise of Rights, so that the shares held by USX outside of the
trust do not exceed 49% of all shares of Common Stock then outstanding and are
at least one share less than the number of such shares owned by holders other
than USX and all of its Affiliates (as defined in Rule 405 of the Commission).
In addition, USX has agreed that if at any time during the term of the Voting
Trust Agreement (a) the sum of the number of shares of Common Stock owned by USX
and all of its Affiliates increases above the number of such shares so owned
immediately after completion of the Rights Offering, or (b) the number of shares
of Common Stock outstanding decreases below the number then outstanding, then in
each such event USX will promptly deposit with the Trustee such number of
additional shares of Common Stock, if any, as is necessary to reduce the sum of
the number of shares of Common Stock owned by USX and not held by the Trustee in
the voting trust ("USX Non-Trust Stock") and by all of USX's Affiliates to no
more than 49% of all shares of Common Stock then outstanding and at least one
share less than the total number of shares of Common Stock owned by holders
other than USX and its Affiliates (the "Public Stock"). USX may, but is not
obligated to, deposit in the trust additional shares of Common Stock from time
to time.

Pursuant to the Voting Trust Agreement, the Trustee is obligated to cause
the shares of Common Stock which are deposited with it in the voting trust ("the
Trust Stock") to be present for purposes of determining a quorum at every
meeting of the holders of Common Stock. Whenever any vote of the holders of the
Common Stock is conducted at such a meeting, the Trustee is required not to vote
any of the Trust Stock with respect to any election of directors. With respect
to each matter on which a vote of the holders of Common Stock is conducted at
such meeting, other than the election of directors, the Trustee is required to
cause the Trust Stock to be voted "for," "against," or to abstain from voting,
in the same proportion as all shares of Common Stock, other than the Trust
Stock, are validly voted "for," "against," or abstain, as the case may be, with
respect to such matter. The Trustee is similarly required to consent in writing
to the taking of any action by the shareholders of RMI with respect to such
number of shares of the Trust Stock as equals the proportion of all shares of
Common Stock, other than the Trust Stock, as validly consents to such action.
RMI has agreed to recognize any proxy or written consent properly delivered by
the Trustee to it in connection with any such meeting or such action and
consistent with the Voting Trust Agreement as effective. Except as set forth
above, the Trustee shall not possess or be entitled to exercise any right or
power with respect to the Trust Stock, but shall instead act solely as directed
by USX from time to time with respect to the Trust Stock. In particular, but not
in limitation of the foregoing, USX may from time to time direct the Trustee to
tender shares of Trust Stock in connection with any tender, exchange or other
offer and to distribute the consideration received for such shares in any such
tender, exchange or other offer directly to USX free of the trust (unless such
consideration is shares of stock of RMI having ordinary voting power, in which
case such shares shall be

55
<PAGE> 57

retained by the Trustee and deemed to be Trust Stock to the extent described
above), and to exercise or sell for USX's benefit and as USX shall direct any
options, rights or warrants issued to the holders of the Common Stock. USX may
also direct the Trustee to sell shares of the Trust Stock at any time in
accordance with USX's directions, and any such shares sold shall be sold free of
the voting trust, provided that such sale shall be a bona fide sale to a person
other than an Affiliate of USX and that USX is not then in default of any of its
obligations under the Voting Trust Agreement. Any cash dividends declared and
paid upon the Trust Stock shall be paid to USX.

The Voting Trust Agreement and the voting trust created thereby shall
terminate on April 1, 2004, and are expressly declared to be irrevocable, except
that the Agreement and the voting trust may be terminated at any time (i) by USX
by written notice to the Trustee and RMI in the event the sum of the number of
shares of Common Stock owned by USX, including all the Trust Stock, and all of
its Affiliates, is less than 49% of all shares of Common Stock then outstanding,
(b) the total number of shares of Common Stock owned by USX, including all the
Trust Stock, is 80% or more of all shares of Common Stock then outstanding, or
(c) any person shall acquire more than 75% of the Public Stock, and (ii) by the
written election of the Trustee in its sole and absolute discretion in the event
it determines that the purpose for which the Voting Trust Agreement has been
entered and the voting trust has been created is no longer applicable and that
the continuation of the same serves no substantial purpose. In the event RMI
issues any of its currently authorized Preferred Stock, which is entitled to
ordinary voting rights in the same manner as the Common Stock, such shares shall
also be subject to the Voting Trust Agreement, and the Trustee shall be required
to act with respect to such shares, in the same manner and to the same extent as
Common Stock owned by USX.

LEGAL MATTERS

The validity of the shares of the Common Stock to be issued upon exercise
of the Rights will be passed upon for RMI by Robert E. Hilton, Assistant General
Counsel of the U.S. Steel Group of USX. The Law Department of the U.S. Steel
Group acts as counsel to RMI. Mr. Hilton is an employee of USX and participates
in benefit plans provided to employees of USX.

EXPERTS

The financial statements as of December 31, 1993 and 1992 and for each of
the three years in the period ended December 31, 1993 included and incorporated
by reference in this Prospectus have been so included and incorporated in
reliance on the report of Price Waterhouse, independent accountants, given on
the authority of said firm as experts in auditing and accounting.

56
<PAGE> 58

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Independent Accountants................................................ F-2

CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Statement of Operations for the years ended
December 31, 1993, 1992 and 1991.......................................... F-3
Consolidated Balance Sheet at December 31, 1993 and 1992.................... F-4
Consolidated Statement of Cash Flows for the years ended
December 31, 1993, 1992 and 1991.......................................... F-5
Consolidated Statement of Shareholders' Equity for the years ended
December 31, 1993, 1992 and 1991.......................................... F-6
Notes to Consolidated Financial Statements.................................. F-7

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Condensed Consolidated Statement of Operations for the quarters ended
March 31, 1994 and 1993 (unaudited)....................................... F-18
Condensed Consolidated Balance Sheet at March 31, 1994 (unaudited) and
December 31, 1993......................................................... F-19
Condensed Consolidated Statement of Cash Flows for the quarters
ended March 31, 1994 and 1993 (unaudited)................................. F-20
Condensed Consolidated Statement of Shareholders' Equity for the year ended
December 31, 1993 and the quarter ended March 31, 1994 (unaudited)......... F-21
Selected Notes to Condensed Consolidated Financial Statements............... F-22
</TABLE>

F-1
<PAGE> 59

REPORT OF INDEPENDENT ACCOUNTANTS

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF RMI TITANIUM COMPANY

In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of RMI Titanium Company and its subsidiaries at December 31, 1993 and
1992, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

As discussed in Note 2, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
other than Pensions," and Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," in 1993.

PRICE WATERHOUSE
Pittsburgh, Pennsylvania
January 31, 1994,
except for Note 17,
which is as of
March 31, 1994.

F-2
<PAGE> 60

RMI TITANIUM COMPANY

CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Sales.................................................. $ 127,397 $ 135,607 $ 165,568
Operating costs:
Cost of sales........................................ 127,486 135,985 166,963
Selling, general and administrative expenses......... 9,133 9,365 10,687
Research, technical and product development
expenses.......................................... 1,542 1,644 3,507
Plant closing charge (Note 4)........................ -- -- 37,123
---------- ---------- ----------
Total operating costs........................... 138,161 146,994 218,280
---------- ---------- ----------
Operating loss......................................... (10,764) (11,387) (52,712)
Other income (expense)--net............................ 1,554 178 (735)
Interest expense....................................... (2,745) (2,746) (3,538)
---------- ---------- ----------
Loss before income taxes............................... (11,955) (13,955) (56,985)
Provision for income taxes (Note 8).................... -- 107 100
---------- ---------- ----------
Loss before cumulative effect of change in accounting
principle............................................ (11,955) (14,062) (57,085)
Cumulative effect of change in accounting principle
(Note 11)............................................ (16,938) -- --
---------- ---------- ----------
Net loss............................................... $ (28,893) $ (14,062) $ (57,085)
========= ========= =========
Net loss per common share: (Note 17)
Before cumulative effect of change in accounting
principle............................................ $ (8.14) $ (9.66) $ (39.17)
Cumulative effect of change in accounting
principle......................................... (11.53) -- --
---------- ---------- ----------
Net loss................................ $ (19.67) $ (9.66) $ (39.17)
========= ========= =========
Weighted average shares outstanding.................. 1,468,885 1,456,203 1,457,516
========= ========= =========
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

F-3
<PAGE> 61

RMI TITANIUM COMPANY

CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1993 1992
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............................................. $ 293 $ 270
Receivables, less allowance for doubtful accounts of $940 and $1,050... 29,940 26,797
Inventories............................................................ 57,492 58,824
Other current assets................................................... 1,540 1,520
-------- --------
Total current assets.............................................. 89,265 87,411
Property, plant and equipment, net of accumulated depreciation......... 54,956 59,453
Other noncurrent assets................................................ 8,250 6,393
-------- --------
Total assets...................................................... $152,471 $153,257
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt...................................... $ 120 $ 120
Accounts payable....................................................... 11,770 8,889
Accrued wages and other employee costs................................. 6,383 4,390
Other accrued liabilities.............................................. 4,673 1,783
-------- --------
Total current liabilities......................................... 22,946 15,182
Long-term debt......................................................... 66,660 62,280
Accrued postretirement benefit cost.................................... 15,938 --
Noncurrent pension liabilities......................................... 17,056 10,401
Other noncurrent liabilities........................................... 2,010 2,092
-------- --------
Total liabilities................................................. 124,610 89,955
-------- --------
Contingencies (Note 15)................................................

SHAREHOLDERS' EQUITY:
Preferred Stock, no par value; 5,000,000 shares authorized;
no shares outstanding................................................ -- --
Common Stock, $0.01 par value; 30,000,000 shares authorized;
15,312,995 and 15,154,856 shares issued (Note 17).................... 153 152
Additional paid-in capital (Note 17)................................... 124,578 124,306
Accumulated deficit.................................................... (86,154) (57,261)
Deferred compensation.................................................. (205) (249)
Minimum pension liability adjustment................................... (7,520) (677)
Treasury Common Stock at cost 562,536 and 550,472 shares............... (2,991) (2,969)
-------- --------
Total shareholders' equity........................................ 27,861 63,302
-------- --------
Total liabilities and shareholders' equity........................ $152,471 $153,257
======== ========
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

F-4
<PAGE> 62

RMI TITANIUM COMPANY

CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
CASH PROVIDED FROM (USED IN) OPERATIONS:
Net loss................................................... $(28,893) $(14,062) $(57,085)
Adjustment for items not affecting cash:
Cumulative effect of change in accounting principle...... 16,938 -- --
Plant closing charge..................................... -- -- 37,123
Depreciation............................................. 6,298 6,506 10,789
(Gain) loss on disposal of facilities.................... (1,436) -- 320
Other noncash charges, net............................... 943 1,757 1,939
-------- -------- --------
(6,150) (5,799) (6,914)
-------- -------- --------
CHANGES IN ASSETS AND LIABILITIES (EXCLUDING CASH):
Receivables................................................ (3,792) 8,058 8,935
Inventories................................................ 1,332 6,261 13,850
Accounts payable........................................... 2,881 (519) (1,743)
Deferred tax asset......................................... -- 2,844 --
Other current liabilities.................................. 2,475 (11,685) (1,824)
Other assets............................................... (801) (623) 1,553
Noncurrent liabilities..................................... (82) (480) 1,006
Other...................................................... (92) (619) 186
-------- -------- --------
1,921 3,237 21,963
-------- -------- --------
Cash (used in) provided from operations............. (4,229) (2,562) 15,049

CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in joint ventures............................ (1,216) -- --
Proceeds from sale of facilities......................... 2,124 1,783 153
Capital expenditures..................................... (1,014) (4,227) (8,952)
-------- -------- --------
Cash used in investing activities................... (106) (2,444) (8,799)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit agreement.............. 4,500 3,600 500
Debt repayments.......................................... (120) (120) (3,074)
Common Stock repurchased................................. (22) (82) (1,149)
Dividends................................................ -- -- (1,095)
-------- -------- --------
Cash provided from (used in) financing activities... 4,358 3,398 (4,818)
-------- -------- --------
Increase (decrease) in cash and cash equivalents........... 23 (1,608) 1,432
Cash and cash equivalents at beginning of period........... 270 1,878 446
-------- -------- --------
Cash and cash equivalents at end of period................. $ 293 $ 270 $ 1,878
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest (net of amounts capitalized)........ $ 2,548 $ 2,829 $ 3,573
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

F-5
<PAGE> 63

RMI TITANIUM COMPANY

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
MINIMUM
ADDT'L. RETAINED TREASURY PENSION
SHARES COMMON DEFERRED PAID-IN EARNINGS COMMON LIABILITY
OUTSTANDING STOCK COMPENSATION CAPITAL (DEFICIT) STOCK ADJUSTMENT
----------- ------ ------------ -------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1990............ 14,745,900 $151 $ (841) $124,068 $ 14,981 $ (1,790) --
Shares issued for Restricted
Stock Award Plans..................... 22,700 -- (129) 129 -- -- --
Reinvestment of dividends on
Restricted Stock Awards............... 2,081 -- -- 13 -- -- --
Treasury Common Stock purchases at
cost.................................. (208,900) -- -- -- -- (1,149) --
Compensation expense recognized......... -- -- 452 -- -- -- --
Net loss................................ -- -- -- -- (57,085) -- --
Cash dividends declared................. -- -- -- -- (1,095) -- --
----------- ------ ------------ -------- --------- -------- ----------
Balance outstanding at December 31,
1991.................................. 14,561,781 151 (518) 124,210 (43,199) (2,939) --
Compensation expense recognized......... -- -- 366 -- -- -- --
Treasury Common Stock reissued.......... 24,500 -- -- -- -- 52 --
Shares issued for Restricted
Stock Award Plans..................... 38,475 1 (97) 96 -- -- --
Treasury Common Stock purchases at
cost.................................. (20,372) -- -- -- -- (82) --
Net loss................................ -- -- -- -- (14,062) -- --
Minimum pension liability adjustment.... -- -- -- -- -- -- $ (677)
----------- ------ ------------ -------- --------- -------- ----------
Balance at December 31, 1992............ 14,604,384 152 (249) 124,306 (57,261) (2,969) (677)
Compensation expense recognized......... -- -- 245 -- -- -- --
Shares issued for Restricted Stock Award
Plans................................. 122,700 1 (201) 200 -- -- --
Shares issued for Directors'
compensation.......................... 35,439 -- -- 72 -- -- --
Treasury Common Stock purchases at
cost.................................. (12,064) -- -- -- -- (22) --
Minimum pension liability adjustment.... -- -- -- -- -- -- (6,843)
Net loss................................ -- -- -- -- (28,893) -- --
----------- ------ ------------ -------- --------- -------- ----------
Balance at December 31, 1993*........... 14,750,459 $153 $ (205) $124,578 $ (86,154) $ (2,991) $ (7,520)
========== ======= =========== ========= ========= ======== =========
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

* See Note 17 to the Consolidated Financial Statements.

F-6
<PAGE> 64

RMI TITANIUM COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--ORGANIZATION AND OPERATIONS:

The consolidated financial statements of RMI Titanium Company (the
"Company") include the financial position and results of operations for the
Company and its immediate predecessor, RMI Company, a partnership organized
under the laws of Ohio. The partnership was 50% owned by Quantum Chemical
Corporation ("Quantum") and 50% owned by USX Corporation ("USX").

Pursuant to the Reorganization Agreement entered into by Quantum, USX and
the Company on April 20, 1990, Quantum and USX transferred their partnership
interest in RMI Company to the Company in exchange for 7.5 million shares each
of the Company's common stock (the "Reorganization"). Concurrent with this
reorganization, Quantum, in a secondary offering, sold its shares to the public.
USX has retained its 7.5 million shares of the Company's common stock. Partners'
equity as of the date of the Reorganization was reclassified to common stock and
additional paid-in capital. At December 31, 1993, approximately 51% of the
outstanding common stock was owned by USX.

The Company's operations are conducted primarily in one business segment,
the production and marketing of titanium metal and related products. In 1993, no
single customer accounted for more than 10% of consolidated revenues. In the
years ended December 31, 1993, 1992 and 1991, export sales were $24.2 million,
$31.7 million, and $36.1 million, respectively, principally to customers in
Western Europe.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION:

The consolidated financial statements include the accounts of RMI Titanium
Company and its majority-owned subsidiaries. All significant intercompany
accounts and transactions are eliminated.

INVENTORIES:

Inventories are valued at cost as determined by the last-in, first-out
(LIFO) method which, in the aggregate, is lower than market. Inventory costs
generally include materials, labor costs and manufacturing overhead (including
depreciation).

DEPRECIATION AND AMORTIZATION:

In general, depreciation and amortization of properties is determined using
the straight-line method over the estimated useful lives of the various classes
of assets.

RETIREMENT AND DISPOSAL OF PROPERTIES:

The cost of properties, together with the accumulated depreciation provided
thereon, is eliminated from the accounts when such properties are retired or
otherwise disposed of. The net gain or loss is recognized in other income and
expense.

MAINTENANCE AND REPAIRS:

Routine maintenance, repairs and replacements are charged to operations.
Expenditures that materially increase values, change capacities or extend useful
lives are capitalized.

REVENUE AND COST RECOGNITION:

Revenues from the sale of commercial products are recognized upon passage
of title to the customer, which in most cases coincides with shipment. Revenues
from long-term, fixed-price contracts are recognized on the
percentage-of-completion method, measured based on the achievement of certain
milestones in the

F-7
<PAGE> 65

production and fabrication process. Such milestones have been weighted based on
the critical nature of the operation performed, which management believes is the
best available measure of progress on these contracts. Revenues related to
cost-plus-fee contracts are recognized on the basis of costs incurred during the
period plus the fee earned.

Contract costs comprise all direct material and labor costs, including
outside processing fees, and those indirect costs related to contract
performance. Provisions for estimated losses on uncompleted contracts are made
in the period in which such losses are determined.

Contract costs and estimated earnings on uncompleted contracts, net of
progress billings, are included in the consolidated balance sheet under
"Inventories."

PENSIONS:

The Company and its subsidiaries have a number of noncontributory pension
plans which cover substantially all employees. Most employees are covered by
defined benefit plans in which benefits are based on years of service and annual
compensation. Contributions to the defined benefit plans, as determined by an
independent actuary in accordance with regulations, provide not only for
benefits attributed to date but also for those expected to be earned in the
future.

The Company's policy is to fund pension costs at amounts equal to the
minimum funding requirements of ERISA plus additional amounts as may be approved
from time to time.

POSTRETIREMENT BENEFITS:

The Company provides certain health care benefits and life insurance
coverage for certain of its employees and their dependents. Under the Company's
current plans, certain of the Company's employees will become eligible for those
benefits if they reach retirement age while working with the Company.

Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 "Employers' Accounting for Postretirement Benefits
Other Than Pensions," (SFAS 106). The new standard requires accrual accounting
for postretirement benefits, similar to accounting for pensions, rather than
recognizing cost as claims are paid, which was the method the Company previously
used. As permitted by SFAS 106, the Company elected to recognize the accumulated
postretirement benefit obligation at adoption (transition obligation)
immediately as the cumulative effect of a change in accounting principle.

INCOME TAX:

In connection with the Reorganization, the tax basis of the Company's
assets at that time reflected the fair market value of the common stock then
issued by the Company. The new tax basis was allocated to all assets of the
Company based on federal income tax rules and regulations, and the results of an
independent appraisal. For financial statement purposes, the Company's assets
are carried at historical cost. As a result, the tax basis of a significant
portion of the Company's assets exceeds the related book values and depreciation
and amortization for tax purposes exceeds the corresponding financial statement
amounts.

Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." Under
the liability method specified by SFAS 109, deferred tax assets and liabilities
are determined based on the difference between the financial statement and tax
bases of assets and liabilities as measured by the enacted tax rates which will
be in effect when these differences reverse. Prior to the adoption of SFAS 109,
the Company accounted for income taxes pursuant to Statement of Financial
Accounting Standards No. 96 (SFAS 96) "Accounting for Income Taxes." The change
from SFAS 96 to SFAS 109 did not have a material effect on the financial
position, results of operations or cash flows of the Company. As permitted under
SFAS 109, prior year financial statements have not been restated.

F-8
<PAGE> 66

CASH FLOWS:

For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.

NOTE 3--LONG-TERM CONTRACTS

During 1993, the Company executed an agreement to supply all the titanium
components for the world's first titanium high-pressure drilling riser for use
by a major oil company in development of a project in the Norwegian sector of
the North Sea (the "Riser Contract"). Work commenced on the Riser Contract
during the third quarter of 1993 and deliveries are scheduled to begin late in
1994. During 1993, the Company recorded an estimate of the revenue earned under
the Riser Contract of $4.3 million. At December 31, 1993, there was $1.3 million
included in the consolidated balance sheet under "Inventories," which represents
the amount of cost incurred on the Riser Contract, plus estimated earnings, less
progress billings receivable of $3.9 million (see Notes 5 and 6). There were no
unapproved change orders, claims or other items included as contract costs at
December 31, 1993 for which the realization under the contract was considered to
be uncertain.

In October 1993, the Company executed a long-term contract with the U.S.
Department of Energy ("DOE") covering the remediation and restoration of the
Company's former Extrusion Plant in Ashtabula, Ohio. The contract calls for the
Company to earn fees on cost-plus-fee basis, and acknowledges the DOE's
responsibility for the remediation of the site. During 1993 the Company
recognized revenues, including fees, of $10.4 million under the contract. Total
estimated revenues under this contract are not determinable.

NOTE 4--PLANT CLOSING CHARGE:

In connection with its continuing efforts to reduce input metallic costs,
the Company's Board of Directors approved a program which resulted in the
closing of the Company's Sodium and Metals Reduction facilities located in
Ashtabula, Ohio. The resulting charge, which was recorded in 1991, includes
$28.1 million in connection with fixed assets, $5.4 million in employee related
costs, and $3.6 million in other costs.

NOTE 5--INVENTORIES:

<TABLE>
<CAPTION>
DECEMBER 31
(IN THOUSANDS)
---------------------
1993 1992
-------- --------
<S> <C> <C>
Raw materials and supplies............................ $ 18,366 $ 14,009
Work-in-process and finished goods.................... 52,151 56,341
Adjustment to LIFO values............................. (13,025) (11,526)
-------- --------
$ 57,492 $ 58,824
======== ========
</TABLE>

Included in work-in-process at December 31, 1993 are costs relating to the
Riser Contract. Contract costs, plus estimated earnings, less progress billings
rendered at December 31, 1993 totalled $1.3 million.

During 1993 and 1992 LIFO inventory quantities, which were carried at lower
costs prevailing in prior years as compared with the cost of 1993 and 1992
purchases, were reduced. The effect of this reduction was to reduce cost of
sales for 1993 by $0.1 million and 1992 by $0.7 million.

F-9
<PAGE> 67

NOTE 6--ACCOUNTS RECEIVABLE:

<TABLE>
<CAPTION>
DECEMBER 31
(IN THOUSANDS)
---------------------
1993 1992
-------- --------
<S> <C> <C>
Trade and commercial customers........................ $ 26,373 $ 27,847
Progress billings on uncompleted contract............. 3,866 --
U.S. Government-DOE................................... 641 --
-------- --------
30,880 27,847
Less allowance for doubtful accounts.................. (940) (1,050)
-------- --------
$ 29,940 $ 26,797
======== ========
</TABLE>

NOTE 7--PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment is stated at cost and consists of the
following:

<TABLE>
<CAPTION>
DECEMBER 31
(IN THOUSANDS)
---------------------
1993 1992
-------- --------
<S> <C> <C>
Land.................................................. $ 882 $ 882
Buildings and improvements............................ 54,605 55,699
Machinery and equipment............................... 113,048 114,717
Other................................................. 14,523 14,583
Construction in progress.............................. 8,683 9,298
-------- --------
191,741 195,179
Less--Accumulated depreciation........................ 136,785 135,726
-------- --------
$ 54,956 $ 59,453
======== ========
</TABLE>

Interest is capitalized in connection with the construction of major
facilities and other capital projects. The capitalized interest is recorded as a
part of the asset to which it relates and is amortized over the asset's
estimated useful life. In 1993 and 1992, $0.2 million of interest cost was
capitalized each year.

NOTE 8--INCOME TAXES:

As discussed in Note 2, effective January 1, 1993, the Company adopted the
provisions of SFAS 109. Under the provisions of SFAS 109 or the previous income
tax accounting standard, SFAS 96, no tax benefits were recognized in connection
with the 1993, 1992 and 1991 pretax losses. The provisions for income taxes in
1992 and 1991 result primarily from certain state income taxes and taxes of a
subsidiary not consolidated for tax purposes.

F-10
<PAGE> 68

Deferred taxes result from the following at December 31, 1993 (in
thousands):

<TABLE>
<S> <C>
Deferred tax assets:
Federal income tax loss carryforwards
($75,000, expiring in 2006 through 2008)..................... $ 27,050
Inventories..................................................... 5,966
Property, plant and equipment................................... 5,082
Intangible assets............................................... 2,305
Other postretirement benefit costs.............................. 5,609
Other employment related items.................................. 5,992
Other........................................................... 1,622
Valuation allowance............................................. (53,626)
--------
Total deferred tax assets.................................... --
--------
Deferred tax liabilities.......................................... --
--------
Net deferred taxes........................................... $ --
========
</TABLE>

SFAS 109 requires a valuation allowance when it is "more likely than not
that some portion or all of the deferred tax assets will not be realized." It
further states that "forming a conclusion that a valuation allowance is not
needed is difficult when there is negative evidence such as cumulative losses in
recent years." The ultimate realization of this deferred income tax asset
depends on the Company's ability to generate sufficient taxable income in the
future. While the Company believes that the deferred income tax asset will be
fully or partially realized by future operating results, losses in recent years
and a desire to be conservative make it appropriate to record a valuation
allowance.

If the Company achieves sufficient profitability, the valuation allowance
will be reduced through a credit to income tax expense, thereby increasing
shareholders' equity.

If certain substantial changes in the Company's ownership should occur,
there would be an annual limitation on the amount of the Federal income tax loss
carryforward and other deductions which could be utilized.

NOTE 9--LONG-TERM DEBT:

In June 1993, the Company and participating banks completed a new three
year, $75 million revolving credit facility which replaced the previous $100
million facility. The new credit facility provides for an increase in
LIBOR-based borrowing rates, maintenance of a minimum net worth, and USX's
commitment to maintain its majority ownership of the Company's voting stock. It
is secured by inventory, accounts receivable and certain other assets. Interest
rates in effect at December 31, 1993 ranged from 4.41% to 4.73%. A commitment
fee of 1/8% is charged for the unused portion of the facility. As of December
31, 1993, the Company was in compliance with the covenants and terms of the new
credit facility. However, continued losses from operations could result in
noncompliance with the minimum net worth covenant in 1994. In light of these
developments, the Company is currently negotiating with its banks in an effort
to refinance or restructure its existing debt, and to expand its borrowing
capacity (see "Subsequent Event (Unaudited)" below in this Note 9). At December
31, 1993, the available and unused portion of the facility amounted $9.4
million.

F-11
<PAGE> 69

The previous $100 million facility provided for the rates based on the
prime rate or at negotiated rates derived from the bank's short-term rate or
LIBOR rate. Interest rates in effect at December 31, 1992 ranged from 4.01% to
4.99%.

<TABLE>
<CAPTION>
DECEMBER 31
(IN THOUSANDS)
-------------------
1993 1992
------- -------
<S> <C> <C>
Bank Credit Agreement dated June 1993................... $65,600 --
Bank Credit Agreement dated December 1990............... -- $61,100
Industrial revenue bond bearing interest at floating
rates based on weekly tax exempt market rates (3.4%
and 4.5% at December 31, 1993 and 1992, respectively)
payable in annual sinking fund payments of $120 over
15 years from October 1988............................ 1,180 1,300
Current portion of long-term debt....................... (120) (120)
------- -------
$66,660 $62,280
======= =======
</TABLE>

The minimum principal payments on long-term debt outstanding at December
31, 1993 for the succeeding five years are as follows (in thousands):

SUBSEQUENT EVENT (UNAUDITED):

On April 19, 1994, the participating banks entered into a commitment to
amend the terms of the $75 million revolving credit facility. The terms and
conditions of the $75 million credit facility, as amended, are described in
"Capitalization--Revolving Credit Facilities" on pages 18-19 of this Prospectus.

NOTE 10--PENSION PLANS:

Pension expense was determined assuming an expected rate of return on plan
assets of 10% for 1993 and 1992, and 8.5% for 1991. The components of pension
expense for the three years ended December 31, 1993 are summarized as follows
(in thousands):

<TABLE>
<CAPTION>
1993 1992 1991
------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost....................... $ 1,092 $ 1,314 $ 1,288
Interest cost (1993-8%; 1992-8%
and 1991-9%...................... 4,940 4,858 4,643
Return on plan assets:
Actual........................... $(3,460) $(1,675) $(8,990)
Deferred gain (loss)............. (1,595) (5,055) (3,079) (4,754) 4,869 (4,121)
------- ------- -------
Net amortization and deferral...... 611 635 645
------- ------- -------
$ 1,588 $ 2,053 $ 2,455
======= ======= =======
</TABLE>

F-12
<PAGE> 70

FUNDS' STATUS--The benefit obligations at December 31, 1993 and 1992 were
determined using weighted average discount rates of approximately 7% and 8%,
respectively, and an assumed rate of compensation increase of 5.75% for both
years.

<TABLE>
<CAPTION>
DECEMBER 31
(IN THOUSANDS)
-----------------------
1993 1992
-------- --------
<S> <C> <C>
Fair value of plan assets........................................... $ 49,587 $ 51,545
Projected benefit obligation (PBO).................................. (70,674) (64,468)
-------- --------
Plan assets less than PBO........................................... (21,087) (12,923)
Unrecognized net loss............................................... 11,221 3,721
Unrecognized transition obligation.................................. 2,096 2,405
Unrecognized prior service cost..................................... 2,878 3,228
Adjustment required to recognize minimum liability.................. (12,922) (6,255)
-------- --------
Net pension liability............................................. $(17,814) $ (9,824)
======== ========
Accumulated benefit obligation...................................... $(67,398) $(61,048)
======== ========
Vested benefit obligation........................................... $(63,626) $(57,955)
======== ========
</TABLE>

As of December 31, 1993, approximately 27% of the plans' assets are
invested in equity securities, and 36% in government debt instruments and the
balance in cash equivalents or debt securities.

Pursuant to the provisions of Statement of Financial Accounting Standards
No. 87 "Employers Accounting for Pensions," the Company recorded in noncurrent
pension liabilities an additional minimum pension liability adjustment of $12.9
million and $6.3 million as of December 31, 1993 and 1992, respectively,
representing the amount by which the accumulated benefit obligation exceeded the
fair value of plan assets plus accrued amounts previously recorded. The
reduction in the discount rate as of December 31, 1993 resulted in an increase
in the adjustment required to recognize the additional minimum pension liability
of approximately $6.7 million.

As a result of staff reduction actions, the Company recognized a $0.8
million curtailment loss in 1992.

NOTE 11--POSTRETIREMENT HEALTH CARE BENEFITS AND OTHER EMPLOYEE BENEFITS:

As discussed in Note 2, RMI adopted SFAS 106 effective January 1, 1993. The
Company elected to recognize immediately the transition obligation determined at
the date of adoption of the new accounting standard. The cumulative effect of
this change in accounting principle resulted in a charge of $16.9 million to the
Company's 1993 results.

Net periodic postretirement benefit cost for 1993 included the following
components (in thousands):

<TABLE>
<S> <C>
Service cost........................................................ $ 316
Interest cost....................................................... 1,337
------
$1,653
======
</TABLE>

The cash cost of providing these benefits in 1992 and 1991 amounted to $1.4
million and $1.5 million, respectively.

F-13
<PAGE> 71

The following table sets forth the plans' status reconciled with the amount
reported in the Company's balance sheet at December 31, 1993 (in thousands):

<TABLE>
<S> <C>
Accumulated Postretirement Benefit Obligation ("APBO")
attributable to:
Retirees........................................................ $(13,338)
Active participants............................................. (9,071)
--------
Total APBO................................................. $(22,409)
========
Accrued liability included in balance sheet, including transition
obligation...................................................... $(17,238)
Unrecognized net loss............................................ (5,171)
--------
Total APBO................................................. $(22,409)
========
</TABLE>

For measurement purposes, a 5% annual rate of increase in the per capita
cost of postretirement medical benefits was assumed beginning in 1993. The
ultimate costs of certain of the Company's retiree health care plans are capped
at contractually determined out-of-pocket spending limits. The annual rate of
increase in the per capita costs for these plans is limited to the contractually
determined spending cap. The health care cost trend rate assumption has a
significant affect on the amounts reported. For example, increasing the health
care cost trend rate by one percentage point in each year would increase the
accumulated postretirement benefit obligation at December 31, 1993 by $2.4
million and increase net periodic expense by $0.2 million. The discount rate
used in determining the accumulated postretirement benefit obligation at
December 31, 1993 was approximately 7%.

In November 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 112 (SFAS 112), "Employers Accounting for
Postemployment Benefits." The statement will require accrual accounting for
certain postemployment benefits. The effective date for compliance with the
statement is 1994. The Company intends to adopt SFAS 112 effective January 1,
1994. The effect of adopting SFAS 112 is estimated to be approximately $1.2
million.

NOTE 12--OPERATING LEASES:

The Company and its subsidiaries have entered into various operating leases
for the use of certain equipment, principally office equipment and vehicles. The
leases generally contain renewal options and provide that the lessee pay
insurance and maintenance costs. The total rental expense under operating leases
amounted to $1.4 million in 1993, $1.6 million in 1992, and $1.8 million in
1991. Future commitments under operating leases are considered to be immaterial.

NOTE 13--TRANSACTIONS WITH RELATED PARTIES:

The Company, in the ordinary course of business, purchases goods and
services from USX. The cost of such transactions to the Company in 1993, 1992,
and 1991 amounted to $0.1 million in each year, and were transacted on terms no
less favorable to the Company than those obtained from other parties. On August
2, 1993 the United States Steel and Carnegie Pension Fund (the "Pension Fund")
was appointed as the trustee of the Company's pension plans. The Pension Fund
has for many years acted as trustee of USX Corporation's employee benefit plans.
The Pension Fund is a registered investment advisor under the Investment
Advisors Act of 1940, and receives a negotiated fee for such services. Other
transactions with related parties are incidental to the Company's business and
are not significant.

NOTE 14--OTHER INCOME STATEMENT INFORMATION:

Costs incurred for repairs and maintenance of plant and equipment totaled
$2.8, $4.5, and $7.3 million, for the years ended December 31, 1993, 1992, and
1991, respectively.

Real and personal property taxes amounted to $1.5, $1.8, and $2.5 million,
for the years ended December 31, 1993, 1992, and 1991, respectively.

F-14
<PAGE> 72

Other income (expense) for 1993 includes a $1.4 million gain on sales and
retirements of equipment and facilities. Amounts for 1991 include a loss of $0.5
million on disposals of facilities and a loss of $0.1 million pertaining to
settlement of litigation.

NOTE 15--CONTINGENCIES:

In connection with the Reorganization Agreement, the Company has agreed to
indemnify USX and Quantum against liabilities related to their ownership of the
RMI Company and its immediate predecessor, Reactive Metals, Inc., which was
formed by USX and Quantum in 1964.

AIRCRAFT PRODUCT LIABILITY

The Company has been named as a defendant in a number of cases arising from
the aircraft crash at Sioux City, Iowa, which occurred on July 19, 1989. In its
final report, issued November 1, 1990, the National Transportation Safety Board
("NTSB") concluded that the titanium used to manufacture the fan disc which
ultimately failed, leading to the crash, was supplied by a major competitor of
the Company.

The Company maintains an aircraft products liability insurance program.
Based on the conclusions contained in the NTSB report and the coverage provided
by aircraft products liability insurance, the Company does not anticipate any
liability as a result of these actions.

ENVIRONMENTAL MATTERS

In the ordinary course of business, the Company is subject to pervasive
environmental laws and regulations concerning the production, handling, storage,
transportation, emission, and disposal of waste materials and is also subject to
other federal and state laws and regulations regarding health and safety
matters. These laws and regulations are constantly evolving, and it is not
currently possible to predict accurately the ultimate effect these laws and
regulations will have on the Company in the future.

On October 9, 1992 the U.S. Environmental Protection Agency ("EPA") filed a
complaint alleging certain violations of the Resource Conservation and Recovery
Act of 1976, as amended ("RCRA") at the Company's now closed Sodium Plant in
Ashtabula, Ohio. The EPA's determination is based on information gathered during
inspections of the facility in February, March and June of 1991. Under the
complaint the EPA proposes to assess a civil penalty of approximately $1.4
million for alleged failure to comply with RCRA. The Company is contesting the
complaint. It is the Company's position that it has complied with the provisions
of RCRA and that the EPA's assessment of penalties is inappropriate. A formal
hearing has been requested and informal discussions with the EPA to settle this
matter are ongoing. Based on the preliminary nature of the proceedings, the
Company is currently unable to determine the ultimate liability, if any, that
may arise from this matter.

The Company, together with a number of unrelated companies, is involved in
investigative or cleanup projects under federal or state environmental laws at
certain waste disposal sites, including the Fields Brook Superfund Site and the
Ashtabula River and Harbor Area (designated an Area of Concern on the Great
Lakes by the International Joint Commission). The Company is also involved in
investigative and cleanup projects at certain of its own facilities. Given the
status of the proceedings at certain of these projects, and the evolving nature
of environmental laws, regulations, and remediation techniques, the Company's
ultimate obligation for investigative and remediation costs cannot be predicted.

Based on the information available regarding the current ranges of
estimated remediation costs at currently active projects, and what the Company
believes will be its ultimate share of such costs, provisions for
environmental-related costs were recorded, including $2.7 million in 1991. These
provisions are in addition to amounts which have previously been provided for
the Company's share of environmental study costs. At December 31, 1993 the
amount accrued for future environmental-related costs was $2.9 million. Based
on available information, RMI believes that its share of potential
environmental-related costs, before expected contributions from third parties,
will be in the range of $4.2-$6.1 million in the aggregate. The amount accrued
is net of expected contributions from third parties (other than insurers) of
approximately $1.6 million which

F-15
<PAGE> 73

the Company believes are probable. The Company has been receiving contributions
from such third parties for a number of years as partial reimbursement for costs
incurred by the Company. As these proceedings continue toward final resolution,
amounts in excess of those already provided may be necessary to discharge the
Company from its obligations for these projects.

NOTE 16--STOCK OPTION AND RESTRICTED STOCK AWARD PLANS:

1989 STOCK OPTION INCENTIVE PLAN:

The 1989 Stock Option Incentive Plan authorizes the granting of options to
purchase up to 750,000 shares of Common Stock to eligible officers and key
management employees at not less than the market value on the date the options
are granted. No option may be granted after August 14, 1999. Options granted may
include stock appreciation rights. The option period may not exceed ten years
from the date of the grant. The Organization and Compensation Committee of the
Board of Directors may approve surrender of any option and payment, in cash or
Common Stock, of the difference between the option exercise price and the market
value of the shares covered by the option surrendered. The Company has granted
options (which include stock appreciation rights) to employees to purchase
150,000 shares of Common Stock at the initial public offering price of $12.50,
90,000 shares at $5.875, 149,500 shares at $3.00, and 100,000 shares at $1.625.

To date, none of these options to purchase have been exercised.

1989 EMPLOYEE RESTRICTED STOCK AWARD PLAN:

The 1989 Restricted Stock Award Plan authorizes the granting of up to
300,000 shares of Common Stock to employees who have made significant
contribution to the success of the Company. No grant of such shares may be made
after December 31, 1994. Shares awarded are subject to such restrictions and
conditions as the Organization and Compensation Committee of the Board of
Directors may deem appropriate for carrying out the plan.

In 1993, 1992, and 1991, respectively, 134,000, 35,775 and 22,000 shares of
Common Stock were awarded under the plan. Compensation expense equivalent to the
fair market value of the shares on the date of the grant is being recognized
over the vesting periods during which the restrictions lapse. In November of
1992, in connection with the labor settlement at the Niles Plant, 35,775 shares
were awarded to unionized employees as a signing bonus. The restrictions on
these shares lapse over a two-year period.

NON-EMPLOYEE DIRECTOR RESTRICTED STOCK AWARD PLAN:

The Non-Employee Director Restricted Stock Award Plan authorizes the
granting of up to 15,000 shares of Common Stock of the Company to directors who
are not and have never been officers or employees of the Company. Shares awarded
are subject to a restriction providing that a participant shall not be permitted
to sell, transfer, pledge or assign awarded shares during the period commencing
with the date of an award and ending upon the participant retiring from the
Board of Directors. On the date of the Company's Annual Meeting of Shareholders
each calendar year, each eligible director shall be awarded 300 restricted
shares. No grant of such shares may be made after December 31, 1994.

During 1993, 1992 and 1991, 2,700 restricted shares of Common Stock were
awarded annually under the plan. Compensation expense equivalent to the fair
market value of the shares on the date of the grant has been recognized.

NOTE 17--SUBSEQUENT EVENT

On January 28, 1994, the Company's Board of Directors approved and
recommended for approval by the shareholders a proposal to amend the Articles of
Incorporation of the Company to implement a one-for-ten

F-16
<PAGE> 74

reverse stock split. On March 31, 1994, the Company's shareholders approved this
amendment and the reverse stock split became effective on that same date. Common
Stock, additional paid-in capital, and the shares of Common Stock issued and
outstanding prior to the effective date of the reverse stock split have not been
restated. All per share and weighted average share amounts have been
retroactively restated to reflect the reduction in the shares of Common Stock
outstanding as a result of the reverse stock split.

NOTE 18--SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED):

The following table sets forth selected quarterly financial data for 1993
and 1992 (in thousands).

<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
1993 QUARTER QUARTER QUARTER QUARTER
------- ------- ------- --------
<S> <C> <C> <C> <C>
Sales............................................. $32,134 $30,730 $32,151 $ 32,382
Gross profit...................................... 362 704 (545) (610)
Operating loss.................................... (2,359) (2,281) (3,124) (3,000)
Cumulative effect of change in accounting
principle....................................... (16,938) -- -- --
Net loss.......................................... (19,835) (2,867) (3,812) (2,379)
Net loss per common share (Note 17)
Before change in accounting principle............. (1.98) -- -- --
Net loss.......................................... (13.58) (1.95) (2.59) (1.55)
</TABLE>

<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
1992 QUARTER QUARTER QUARTER QUARTER
------- ------- ------- --------
<S> <C> <C> <C> <C>
Sales............................................. $35,791 $35,392 $34,722 $ 29,702
Gross profit...................................... 347 1,406 (177) (1,954)
Operating loss.................................... (2,442) (1,564) (3,006) (4,375)
Net loss.......................................... (3,093) (2,249) (3,684) (5,036)
Net loss per common share (Note 17)............... (2.12) (1.54) (2.53) (3.47)
</TABLE>

F-17
<PAGE> 75

RMI TITANIUM COMPANY

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
----------------------
1994 1993
------- --------
<S> <C> <C>
Sales............................................................... $36,360 $ 32,134
Operating costs:
Cost of sales..................................................... 35,833 31,772
Selling, general and administrative expenses...................... 2,406 2,338
Research and development expenses................................. 337 383
------- --------
Total operating costs.......................................... 38,576 34,493
------- --------
Operating loss...................................................... (2,216) (2,359)
Other income--net................................................... 15 73
Interest expense.................................................... (728) (610)
------- --------
Loss before income taxes and cumulative effect of change in
accounting principle.............................................. (2,929) (2,896)
Provision for income taxes.......................................... -- 1
------- --------
Loss before cumulative effect of change in accounting principle..... (2,929) (2,897)
Cumulative effect of change in accounting principle (Note 4)........ (1,202) (16,938)
------- --------
Net loss............................................................ $(4,131) $(19,835)
======= ========
Net loss per common share: (Note 3)
Before cumulative effect of change in accounting principle..... $ (1.99) $ (1.98)
Cumulative effect of change in accounting principle............ (.81) $ (11.60)
------- --------
Net loss.................................................. $ (2.80) $ (13.58)
======= ========
Weighted average shares outstanding............................ 1,457,049 1,460,438
========= =========
</TABLE>

The accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.

F-18
<PAGE> 76

RMI TITANIUM COMPANY

CONDENSED CONSOLIDATED BALANCE SHEET

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1994 1993
---------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 348 $ 293
Receivables--less allowance for doubtful accounts of $1,219 and
$940.............................................................. 29,096 29,940
Inventories......................................................... 60,851 57,492
Other current assets................................................ 1,388 1,540
-------- --------
Total current assets......................................... 91,683 89,265
-------- --------
Property, plant and equipment, net of accumulated depreciation.... 53,487 54,956
Other noncurrent assets........................................... 8,671 8,250
-------- --------
Total assets................................................. $153,841 $152,471
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt................................. $ 120 $ 120
Accounts payable.................................................. 13,267 11,770
Accrued wages and other employee costs............................ 7,690 6,383
Other accrued liabilities......................................... 4,089 4,673
--------- --------
Total current liabilities.................................... 25,166 22,946
--------- --------
Long-term debt...................................................... 68,530 66,660
Other employee benefit liabilities.................................. 17,140 15,938
Noncurrent pension liabilities...................................... 17,056 17,056
Other noncurrent liabilities........................................ 2,010 2,010
--------- --------
Total liabilities............................................ 129,902 124,610
--------- --------
Contingencies (Note 5)..............................................
Shareholders' equity:
Preferred Stock, no par value; 5,000,000 shares authorized;
no shares outstanding.......................................... -- --
Common Stock, $0.01 par value; 30,000,000 shares authorized;
2,037,821 and 15,312,995 shares issued (Note 3)................ 15 153
Additional paid-in capital (Note 3)............................... 124,720 124,578
Retained deficit.................................................. (90,285) (86,154)
Deferred compensation............................................. -- (205)
Minimum pension liability adjustment.............................. (7,520) (7,520)
Treasury Common Stock at cost 562,536 shares...................... (2,991) (2,991)
--------- --------
Total shareholders' equity................................... 23,939 27,861
--------- --------
Total liabilities and shareholders' equity................... $153,841 $152,471
======== ========
</TABLE>

The accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.

F-19
<PAGE> 77

RMI TITANIUM COMPANY

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
----------------------
1994 1993
------- --------
<S> <C> <C>
CASH PROVIDED FROM (USED IN) OPERATIONS:
Net loss............................................................. $(4,131) $(19,835)
Adjustment for items not affecting funds from operations:
Depreciation....................................................... 1,560 1,619
Cumulative effect of change in accounting principle................ 1,202 16,938
Other noncash charges, net......................................... 578 503
------- --------
(791) (775)
------- --------
Changes in assets and liabilities (excluding cash):
Receivables.......................................................... 565 (3,022)
Inventories.......................................................... (3,359) 3,888
Accounts payable..................................................... 1,497 (1,762)
Other current liabilities............................................ 633 18
Other assets......................................................... (97) (388)
Other................................................................ -- (185)
------- --------
(751) (1,451)
Cash used in operating activities............................. (1,552) (2,226)
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of facilities................................... 7 --
Capital expenditures............................................... (98) (50)
Investment in joint venture........................................ (172) --
------- --------
Cash used in investing activities............................. (263) (50)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit agreements................................. 1,900 2,500
Debt repayments.................................................... (30) (30)
------- --------
Cash provided from financing activities............................ 1,870 2,470
------- --------
INCREASE IN CASH AND CASH EQUIVALENTS................................ 55 194
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD..................... $ 293 $ 270
------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD........................... $ 348 $ 464
======= ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest (net of amounts capitalized)................ $ 738 $ 588
======= ========
</TABLE>

The accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.

F-20
<PAGE> 78

RMI TITANIUM COMPANY

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
MINIMUM
ADD'TL. RETAINED TREASURY PENSION
SHARES COMMON DEFERRED PAID-IN EARNINGS COMMON LIABILITY
OUTSTANDING STOCK COMPENSATION CAPITAL (DEFICIT) STOCK ADJUSTMENT
----------- ------ ------------ -------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1992........................ 14,604,384 $ 152 $ (249) $124,306 $ (57,261) $(2,969) $ (677)
Compensation expense
recognized................. -- -- 245 -- -- -- --
Shares issued for Restricted
Stock Award Plans.......... 122,700 1 (201) 200 -- -- --
Shares issued in lieu of
Directors' compensation.... 35,439 -- -- 72 -- -- --
Treasury common stock
purchases-at cost.......... (12,064) -- -- -- -- (22) --
Minimum pension liability
adjustment................. -- -- -- -- -- -- (6,843)
Net loss..................... -- -- -- -- (28,893) -- --
----------- ---- ----- -------- -------- ------- -------
Balance at December 31,
1993....................... 14,750,459 153 (205) 124,578 (86,154) (2,991) (7,520)
Compensation expense
recognized................. -- -- 205 -- -- -- --
One-for-ten reverse stock
split effective March 31,
1994 (Note 3).............. (13,275,414) (138) -- 138 -- -- --
Shares issued for Restricted
Stock Award Plans.......... 240 -- -- 4 -- -- --
Net loss..................... -- -- -- -- (4,131) -- --
----------- ----- ------ -------- -------- ------- -------
Balance at March 31, 1994.... 1,475,285 $ 15 $ -- $124,720 $(90,285) $(2,991) $(7,520)
=========== ===== ====== ======== ======== ======= =======
</TABLE>

The accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.

F-21
<PAGE> 79

RMI TITANIUM COMPANY

SELECTED NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1--GENERAL

The condensed consolidated financial statements include the accounts of RMI
Titanium Company and its majority-owned subsidiaries. The condensed consolidated
financial statements included herein have been prepared by RMI Titanium Company
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. The financial information presented reflects all
adjustments, consisting only of normal recurring adjustments, which are, in the
opinion of management, necessary for a fair statement of the results for the
interim periods presented. The results for the interim periods are not
necessarily indicative of the results to be expected for the year.

The Company's operations are conducted primarily in one business segment,
the production and marketing of titanium metal and related products.

NOTE 2--ORGANIZATION

On April 20, 1990, Quantum Chemical Corporation ("Quantum") and USX
Corporation ("USX") transferred their 50% partnership interests in RMI Company
(the immediate predecessor of the Company) to the Company in exchange for shares
of the Company's common stock (the "Reorganization"). Concurrent with the
Reorganization, Quantum completed a sale of its 7,500,000 shares of the
Company's common stock to the public. USX has retained its 7.5 million shares of
the Company's common stock. At March 31, 1994 approximately 51% of the Company's
outstanding common stock was owned by USX.

NOTE 3--REVERSE STOCK SPLIT

At its Annual Meeting held on March 31, 1994, the Company's shareholders
approved an amendment to the Articles of Incorporation of the Company effecting
a one-for-ten reverse stock split. A Certificate of Amendment to the Articles of
Incorporation was filed with the Ohio Secretary of State on March 31, 1994, and
the reverse split became effective on that date. Pursuant to the reverse split,
each certificate representing shares of common stock outstanding immediately
prior to the reverse split is deemed to represent one-tenth the number of shares
of common stock after the reverse split. Per share and weighted average share
amounts reported herein have been retroactively restated to reflect the reverse
stock split. Common Stock and additional paid-in capital have also been adjusted
at March 31, 1994 to reflect the reverse split. Treasury Common Stock was not
affected by the reverse split.

NOTE 4--NEW ACCOUNTING STANDARDS

Effective January 1, 1994 the Company adopted the provisions of Statement
of Financial Accounting Standards No. 112 ("SFAS No. 112"), "Employer's
Accounting for Postemployment Benefits." The results for the period ended March
31, 1994 reflect a one-time charge of $1.2 million representing the cumulative
effect of adopting the new standard. The liabilities recorded pursuant to SFAS
No. 112 relate principally to workers compensation, will have no effect on cash
flow. Effective January 1, 1993 the Company adopted the provisions of Statement
of Financial Accounting Standards No. 106 ("SFAS No. 106") "Employers'
Accounting for Postretirement Benefits Other than Pensions." The results for the
three months ended March 31, 1993 reflect a one-time charge of $16.9 million
representing the cumulative effect of recognizing the entire SFAS No. 106
transition obligation. Additionally, effective January 1, 1993 the Company
adopted the provisions of Statement of Financial Accounting Standards No. 109
(SFAS No. 109), "Accounting for Income Taxes." Prior to the adoption of SFAS No.
109, income tax expense was determined under Statement of Financial Accounting
Standards No. 96 (SFAS No. 96), "Accounting for Income Taxes." Under the
provisions of SFAS No. 109 and SFAS No. 96, no tax benefits were recognized for
the 1994 and 1993 pretax losses. The provision for taxes in the first quarter of
1993 results from certain state income taxes.

F-22
<PAGE> 80

NOTE 5--CONTINGENCIES

The Company is involved in investigative or cleanup projects under federal
or state environmental laws at a number of waste disposal sites, including a
Superfund site. Given the status of the proceedings with respect to these sites,
ultimate investigative and remediation costs cannot presently be accurately
predicted, but could, in the aggregate, be material. Based on the information
available regarding the current ranges of estimated remediation costs at
currently active sites, and what the Company believes will be its ultimate share
of such costs, provisions for environmental-related costs have been recorded.
These provisions are in addition to amounts which have previously been accrued
for the Company's share of environmental study costs. At March 31, 1994, the
amount accrued for future environmental-related costs was $2.9 million. Based on
available information, RMI believes that its share of potential
environmental-related costs, before expected contributions from third parties,
will be in the range of $4.2-$6.1 million in the aggregate. The amount accrued
is net of expected contributions from third parties (other than insurers) of
approximately $1.6 million, which the Company believes are probable. The Company
has been receiving contributions from such third parties for a number of years
as partial reimbursement for costs incurred by the Company. As these proceedings
continue toward final resolution, amounts in excess of those already provided
may be necessary to discharge the Company from its obligations for these
projects.

The Company is also the subject of, or a party to, a number of other
pending or threatened legal actions involving a variety of matters.

The ultimate resolution of the foregoing contingencies could individually
or in the aggregate, be material to the consolidated financial statements.
However, management believes that the Company will remain a viable and
competitive enterprise even though it is possible that these matters could be
resolved unfavorably.

NOTE 6--INVENTORIES

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
MARCH 31, 1994 DECEMBER 31, 1993
-------------- ------------------
(UNAUDITED)
<S> <C> <C>
Raw material and supplies........................ $ 15,395 $ 18,366
Work-in-process and finished goods............... 58,481 52,151
Adjustments to LIFO values....................... (13,025) (13,025)
-------- --------
$ 60,851 $ 57,492
======== ========
</TABLE>

Included in work-in-process are costs relating to a drilling riser
contract, which is being accounted for as a long-term contract. Contract costs,
plus estimated earnings, less progress billings at March 31, 1994 and December
31, 1993 amounted to $4.0 million and $1.3 million, respectively.

F-23
<PAGE> 81

- ------------------------------------------------------
- ------------------------------------------------------

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY RMI. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO BUY ANY SECURITIES OTHER THAN THOSE TO WHICH RELATES OR AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION
WHERE SUCH AN OFFER OR SOLICITATION WOULD BE IS UNLAWFUL. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.

------------------
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................ 3
Incorporation of Certain Documents by
Reference.......................... 3
Summary.............................. 4
Use of Proceeds...................... 20
Capitalization....................... 20
Price Range of Common Stock and
Dividends.......................... 22
The Rights Offering.................. 23
Business............................. 34
Selected Financial Information....... 45
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 47
Description of Capital Stock......... 53
The RMI Voting Trust Agreement....... 55
Legal Matters........................ 56
Experts.............................. 56
Index to Financial Statements........ F-1
</TABLE>

- ------------------------------------------------------
- ------------------------------------------------------

------------------

Common Stock
of
RMI TITANIUM COMPANY

------------------

PROSPECTUS

June , 1994

------------------

- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 82

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION(1)

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............ $ 10,345
Blue Sky fees and expenses..................................... 5,000
Costs of printing and engraving................................ 100,000
Legal fees and expenses........................................ 55,000
Financial Advisor fees and expenses............................ 875,000
Subscription Agent fees and expenses........................... 10,000
Information Agent fees......................................... 7,500
Accounting fees and expenses................................... 125,000
Stock Exchange listing fee..................................... 45,000
Miscellaneous expenses......................................... 17,155
----------
Total..................................................... $1,250,000
==========
</TABLE>

- ---------

(1) Assumes the Basic Subscription Privilege related to all the Rights is
exercised in full. If USX exercises only the Basic Subscription Privilege
with respect only to the Rights issued to it (which USX has advised RMI that
USX intends to do) and does not purchase or otherwise acquire any other
Rights, and no other Rights are exercised, Financial Advisor fees and
expenses would be $506,000, Stock Exchange listing fee would be $25,000 and
the Total would be $861,000.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Ohio law contains numerous provisions concerning the responsibilities of
the officers and directors of Ohio corporations, such as the Company, including
provisions that have the effect of limiting the potential liability of such
officers and directors. The latter provisions are discussed below.

In general terms and subject to certain limitations, under Ohio law an Ohio
corporation is explicitly authorized to indemnify its directors, officers,
employees and agents who are parties or threatened to be made parties to any
threatened, pending or completed civil, criminal, administrative or
investigative action, suit or proceeding against expenses, including attorney's
fees, or any judgment, fines or settlement amounts issued against or incurred by
them, provided that they acted in good faith and in a manner reasonably believed
to be in or not opposed to the corporation's best interests. An Ohio corporation
is also specifically authorized (1) to provide indemnification to an even
greater extent than that described above, and (2) to purchase and maintain
insurance for or on behalf of its directors, officers, employees and agents
against liability arising out of their service, even if indemnification would
not be permitted under the circumstances. Ohio law concerning director
responsibilities was amended in 1990 to provide that a director shall be liable
in damages only if it is proved by clear and convincing evidence that his action
or failure to act arose out of deliberate intent to harm the corporation or out
of reckless disregard for the corporation's best interests, subject to certain
limitations and exceptions. Moreover, Ohio law makes clear that directors may
legitimately consider the interests of persons and groups such as employees and
local and national economic and other interests, in addition to interests of
shareholders, in connection with matters on which they may act.

The Company's Regulations provide that its directors and officers shall be
indemnified to the full extent permitted by law against liability and expenses.
In addition, the Company has obtained insurance covering liability of its
directors and officers for their actions as such. The Company will essentially
be a self-insurer with respect to any director and officer indemnification claim
not covered by the insurance policy.

II-1
<PAGE> 83

ITEM 16. EXHIBITS

EXHIBITS

<TABLE>
<S> <C>
4.1 --Form of Subscription Warrant with Instructions***
5 --Opinion of R.E. Hilton, Assistant General Counsel of the U.S. Steel Group--USX
Corporation, regarding legality of the securities being offered**
10.1 --Agreement for the sale and purchase of titanium tetrachloride between SCM
Chemicals, Inc., and RMI Titanium Company dated March 9, 1993, incorporated by
reference to Exhibit 10.13 to the Company's Form 10-K Annual Report for the year
ended December 31, 1992.+
10.2 --Agreement for the supply, purchase and sale of chlorine between SCM Chemicals,
Inc., and RMI Titanium Company dated as of November 13, 1990, incorporated by
reference to Exhibit 10.3 to the Company's Form 10-K Annual Report for the year
ended December 31, 1990.
10.3 --Bank credit agreement between Society National Bank, PNC Bank, National
Association, and NBD Bank, N.A., as Banks, Society National Bank as Agent, and
RMI Titanium Company dated as of June 13, 1994.*
10.4 --RMI Company Annual Incentive Compensation Plan, incorporated by reference to
Exhibit 10.3 to the Company's Registration Statement on Form S-1 No. 33-30667
Amendment No. 2 filed with the Securities and Exchange Commission on October 10,
1989.
10.5 --RMI Titanium Company 1989 Stock Option Incentive Plan, incorporated by reference
to Exhibit 10.4 to the Company's Registration Statement on Form S-1 No. 33-30667
Amendment No. 2 filed with the Securities and Exchange Commission on October 10,
1989.
10.6 --RMI Titanium Company Supplemental Pension Plan effective August 1, 1987, and
amended as of December 12, 1990, incorporated by reference to Exhibit 10.8 to the
Company's form 10-K Annual Report for the year ended December 31, 1990.
10.7 --RMI Titanium Company 1989 Employee Restricted Stock Award Plan, incorporated by
reference to Exhibit 10.6 to the Company's Registration Statement on Form S-1,
No. 33-30667 Amendment No. 2 filed with the Securities and Exchange Commission on
October 10, 1989.
10.8 --Amendment to RMI Titanium Company 1989 Employee Restricted Stock Award Plan
incorporated by reference to Exhibit 10.10 to the Company's Form 10-K Annual
Report for the year ended December 31, 1990.
10.9 --RMI Titanium Company 1989 Non-Employee Director Restricted Stock Award Plan,
incorporated by reference to Exhibit 10.7 to the Company's Registration Statement
on Form S-1, No. 33-30667 Amendment No. 2 filed with the Securities and Exchange
Commission on October 10, 1989.
10.10 --RMI Titanium Company Excess Benefits Plan effective July 18, 1991, incorporated
by reference to Exhibit 10.11 to the Company's Form 10-K Annual Report for the
year ended December 31, 1991.
10.11 --Agreement for the supply of titanium sponge between Oregon Metallurgical
Corporation and RMI Titanium Company dated as of February 26, 1992 (without
exhibits), incorporated by reference to Exhibit 10.12 to the Company's Form 10-K
Annual Report for the year ended December 31, 1991.+
</TABLE>

II-2
<PAGE> 84

<TABLE>
<S> <C>
23.1 --Consent of Price Waterhouse*
23.2 --Consent of R.E. Hilton, Assistant General Counsel of the U.S. Steel Group--USX
Corporation (included in Exhibit 5)**
24 --Powers of Attorney.***
</TABLE>

- ---------
* filed herewith
** to be filed by amendment
*** previously filed

+ Confidential treatment has been requested.

All other schedules are omitted because they are not applicable or the
required information is contained in the financial statements or notes thereto.

ITEM 17. UNDERTAKINGS

(a) The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;

(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;

PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference herein.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

(b) The undersigned registrant hereby undertakes to supplement the
prospectus set forth in this registration statement, after the expiration of the
subscription period, to set forth the results of the subscription offer.

(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 15 above or
otherwise, the registrant has been advised that in the opinion of the
Commission, such indemnification is against public policy as expressed in such
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

II-3
<PAGE> 85

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-2 AND HAS DULY CAUSED THIS AMENDMENT NO. 2 TO
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF PITTSBURGH, COMMONWEALTH OF PENNSYLVANIA, ON
JUNE 15, 1994.

<TABLE>
<S> <C>
RMI TITANIUM COMPANY
*
By ----------------------------------------
L. Frederick Gieg, Jr.
President and Chief
Executive Officer
</TABLE>

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON JUNE 15, 1994.

<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------- --------------------------------------------------
<S> <C>
* President and Chief Executive Officer and Director
- --------------------------------------------------
L. Frederick Gieg, Jr. Senior Vice President and Chief Financial Officer;

/s/ T. G. RUPERT Chief Accounting Officer
- --------------------------------------------------
Timothy G. Rupert
* Director
- --------------------------------------------------
Craig R. Andersson
* Director
- --------------------------------------------------
Neil A. Armstrong
* Director
- --------------------------------------------------
Charles C. Gideon
* Director
- --------------------------------------------------
Dan F. Huebner
* Chairman of the Board and Director
- --------------------------------------------------
R. M. Hernandez
* Director
- --------------------------------------------------
William E. Lewellen
* Director
- --------------------------------------------------
Wesley W. von Schack
* Director
- --------------------------------------------------
Louis A. Valli

*By: /s/ T. G. RUPERT
- --------------------------------------------------
T. G. Rupert
Attorney-in-fact
</TABLE>

II-4

<PAGE> 1

EXHIBIT 10.3

SECOND
AMENDED AND RESTATED
CREDIT AGREEMENT

by and among

RMI TITANIUM COMPANY

as Borrower

and

SOCIETY NATIONAL BANK,
PNC BANK, NATIONAL ASSOCIATION, AND
NBD BANK, N.A.

as Banks

and

SOCIETY NATIONAL BANK, as Agent

Dated June 13, 1994
<PAGE> 2
TABLE OF CONTENTS

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ARTICLE I
DEFINITIONS; ACCOUNTING TERMS; AMENDMENTS

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Section 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.02 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . 21
Section 1.03 Accounting Principles . . . . . . . . . . . . . . . . . . . 21

ARTICLE II
THE LOAN

Section 2.01 Amount of the Loan . . . . . . . . . . . . . . . . . . . . . 21
Section 2.02 Letters of Credit . . . . . . . . . . . . . . . . . . . . . 22
Section 2.03 Termination Date . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.04 Advances . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.05 Reduction . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.06 Security Agreement; Pledge
Agreement; Mortgages . . . . . . . . . . . . . . . . . . 23
Section 2.07 Repayment of the Loan; The Notes . . . . . . . . . . . . . . 23
Section 2.08 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.09 Interest on the Loan . . . . . . . . . . . . . . . . . . . . 24
Section 2.10 Election of Fixed Rate Interest
Option for the Loan . . . . . . . . . . . . . . . . . . . 25
Section 2.11 Interest Calculations . . . . . . . . . . . . . . . . . . . 26
Section 2.12 Post-Default Rate . . . . . . . . . . . . . . . . . . . . . 26
Section 2.13 Compensation; Illegality . . . . . . . . . . . . . . . . . . 27
Section 2.14 Event of Default or Possible
Default . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.15 Pro Rata; Commitments . . . . . . . . . . . . . . . . . . . 29
Section 2.16 Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.17 Agency Fee . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.18 Letter of Credit Fee . . . . . . . . . . . . . . . . . . . . 30
Section 2.19 Purpose of the Loan . . . . . . . . . . . . . . . . . . . . 30
Section 2.20 Delivery of Advances and Payments . . . . . . . . . . . . . 30

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE BORROWER

Section 3.01 Organization of the Borrower;
Capital Structure . . . . . . . . . . . . . . . . . . . . 30
Section 3.02 Authorization; Validity . . . . . . . . . . . . . . . . . . 31
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Section 3.03 Financial Statements . . . . . . . . . . . . . . . . . . . . 31
Section 3.04 Financial Condition at Date of
Credit Agreement . . . . . . . . . . . . . . . . . . . . 31
Section 3.05 No Adverse Changes . . . . . . . . . . . . . . . . . . . . . 32
Section 3.06 Title to Properties, Patents,
Trade Marks, etc. . . . . . . . . . . . . . . . . . . . . 32
Section 3.07 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 3.08 Compliance with Other Instruments . . . . . . . . . . . . . 33
Section 3.09 Material Restrictions . . . . . . . . . . . . . . . . . . . 33
Section 3.10 Correctness of Data Furnished . . . . . . . . . . . . . . . 33
Section 3.11 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 3.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 3.13 Compliance with Laws . . . . . . . . . . . . . . . . . . . . 35
Section 3.14 Environmental Matters . . . . . . . . . . . . . . . . . . . 35
Section 3.15 Regulation U, etc. . . . . . . . . . . . . . . . . . . . . . 36
Section 3.16 Holding Company Act . . . . . . . . . . . . . . . . . . . . 37
Section 3.17 Securities Act, etc. . . . . . . . . . . . . . . . . . . . . 37
Section 3.18 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 3.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 3.20 Receivables . . . . . . . . . . . . . . . . . . . . . . . 38

ARTICLE IV

CONDITIONS TO BORROWING

Part I - Conditions Precedent to the Loan . . . . . . . . . . . . . . . . . . . . . . . . 38

Section 4.01 Representations and Warranties . . . . . . . . . . . . . . . 38
Section 4.02 No Defaults. . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.03 Performance . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.04 Opinions of Counsel for the
Borrower . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.05 Corporate Proceedings . . . . . . . . . . . . . . . . . . . 39
Section 4.06 Payment of Expenses . . . . . . . . . . . . . . . . . . . . 40
Section 4.07 Security Agreement; Pledge
Agreement . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.08 Mortgages; Surveys; Title Insurance . . . . . . . . . . . . 40
Section 4.09 Cash Collateral Agreement . . . . . . . . . . . . . . . . . 40
Section 4.10 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.11 Collateral Disclosure List . . . . . . . . . . . . . . . . . 40
Section 4.12 Other Documents . . . . . . . . . . . . . . . . . . . . . . 40

Part II - Conditions Precedent to the Subsequent
Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Section 4.13 No Defaults . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 4.14 Performance . . . . . . . . . . . . . . . . . . . . . . . . 41
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Section 4.15 Representations and Warranties . . . . . . . . . . . . . . . 41
Section 4.16 Certificate . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 4.17 Other Documents . . . . . . . . . . . . . . . . . . . . . . 41

ARTICLE V

AFFIRMATIVE COVENANTS OF THE BORROWER

Section 5.01 Payment of Amounts Due . . . . . . . . . . . . . . . . . . . 42
Section 5.02 Existence, Business, etc. . . . . . . . . . . . . . . . . . 42
Section 5.03 Maintenance of Properties . . . . . . . . . . . . . . . . . 42
Section 5.04 Payment of Taxes, etc. . . . . . . . . . . . . . . . . . . 42
Section 5.05 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.06 Accounts and Reports of the
Borrower . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.07 Further Reporting Regarding
Receivables . . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.08 Further Reporting Regarding
Inventory . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 5.09 Disputes and Claims Regarding
Receivables . . . . . . . . . . . . . . . . . . . . . . . 45
Section 5.10 Lock Box . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 5.11 Demand Deposit Account; Cash
Collateral Account . . . . . . . . . . . . . . . . . . . 47
Section 5.12 Information and Inspection . . . . . . . . . . . . . . . . . 47
Section 5.13 Notice of Litigation . . . . . . . . . . . . . . . . . . . . 48
Section 5.14 Pension Plans . . . . . . . . . . . . . . . . . . . . . . . 48
Section 5.15 Banking Relationships . . . . . . . . . . . . . . . . . . . 49
Section 5.16 Required Entity . . . . . . . . . . . . . . . . . . . . . . 49
Section 5.17 Post-Closing Items . . . . . . . . . . . . . . . . . . . . . 49
Section 5.18 Further Assurances . . . . . . . . . . . . . . . . . . . . . 49
Section 5.19 Payment of New Equity . . . . . . . . . . . . . . . . . . . 50

ARTICLE VI

NEGATIVE COVENANTS OF THE BORROWER

Section 6.01 Limitation on Liens . . . . . . . . . . . . . . . . . . . . 50
Section 6.02 Liquidation, Merger, or
Consolidation . . . . . . . . . . . . . . . . . . . . . . 51
Section 6.03 Amendment of Articles of
Incorporation and/or By-Laws . . . . . . . . . . . . . . . 52
Section 6.04 Distributions of Profits; Purchases
or Redemption of Stock; Dividends . . . . . . . . . . . . 52
Section 6.05 Limitation on Investments. . . . . . . . . . . . . . . . . 52
Section 6.06 Disposition of Assets . . . . . . . . . . . . . . . . . . 53
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Section 6.07 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 6.08 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 6.09 Regulation U . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 6.10 Environmental Compliance . . . . . . . . . . . . . . . . . . 54
Section 6.11 Limitation of Indebtedness
for Borrowed Money . . . . . . . . . . . . . . . . . . . 55

ARTICLE VII

WAIVERS AND AMENDMENTS . . . . . . . 55

ARTICLE VIII

DEFAULTS

Section 8.01 Principal Default . . . . . . . . . . . . . . . . . . . . . 55
Section 8.02 Interest Default . . . . . . . . . . . . . . . . . . . . . . 56
Section 8.03 Other Payment Defaults . . . . . . . . . . . . . . . . . . . 56
Section 8.04 Article VI Defaults and Certain
Article V Defaults . . . . . . . . . . . . . . . . . . . 56
Section 8.05 Other Provision Default . . . . . . . . . . . . . . . . . . 56
Section 8.06 Representation and Warranty . . . . . . . . . . . . . . . . 56
Section 8.07 Financial Difficulties . . . . . . . . . . . . . . . . . . . 56
Section 8.08 ERISA Termination . . . . . . . . . . . . . . . . . . . . . 57
Section 8.09 Accumulated Funding Deficiency . . . . . . . . . . . . . . . 58
Section 8.10 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 8.11 Cross-Default . . . . . . . . . . . . . . . . . . . . . . . 58
Section 8.12 Material Adverse Change . . . . . . . . . . . . . . . . . . 58
Section 8.13 Restraint on Business . . . . . . . . . . . . . . . . . . . 58
Section 8.14 Stock Transfers by USX Corporation . . . . . . . . . . . . . 58
Section 8.15 New Equity . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 8.16 Deficiency . . . . . . . . . . . . . . . . . . . . . . . . . 59

ARTICLE IX

REMEDIES

Section 9.01 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 9.02 Recovery of Amounts . . . . . . . . . . . . . . . . . . . . 60
Section 9.03 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . 60
Section 9.04 Cost of Collection . . . . . . . . . . . . . . . . . . . . . 60
Section 9.05 No Advances, etc. . . . . . . . . . . . . . . . . . . . . . 61

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ARTICLE X

THE AGENT

Section 10.01 Authorization . . . . . . . . . . . . . . . . . . . . . . . 61
Section 10.02 Powers and Duties . . . . . . . . . . . . . . . . . . . . . 61
Section 10.03 Consultation with Counsel . . . . . . . . . . . . . . . . . 62
Section 10.04 Documents . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 10.05 The Agent and Affiliates . . . . . . . . . . . . . . . . . . 63
Section 10.06 Knowledge of Default . . . . . . . . . . . . . . . . . . . . 63
Section 10.07 Action by the Agent . . . . . . . . . . . . . . . . . . . . 63
Section 10.08 Notice of Event of Default,
Waivers, Covenants, Approvals,
etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 10.09 Indemnification . . . . . . . . . . . . . . . . . . . . . . 64
Section 10.10 Resignation or Removal of Agent . . . . . . . . . . . . . . 65
Section 10.11 Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 65

ARTICLE XI

MISCELLANEOUS

Section 11.01 Payment of Expenses . . . . . . . . . . . . . . . . . . . . 65
Section 11.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 11.03 Survival of Representations and
Warranties . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 11.04 Entire Agreement; Amendment . . . . . . . . . . . . . . . . 67
Section 11.05 Parties in Interest . . . . . . . . . . . . . . . . . . . . 67
Section 11.06 Waiver of Counterclaims; Waiver
of Jury Trial . . . . . . . . . . . . . . . . . . . . . . 68
Section 11.07 Set-Off Provision . . . . . . . . . . . . . . . . . . . . . 68
Section 11.08 Severability of Provisions . . . . . . . . . . . . . . . . . 69
Section 11.09 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 11.10 Consent to Jurisdiction . . . . . . . . . . . . . . . . . . 69
Section 11.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 69
Section 11.12 Ratable Sharing . . . . . . . . . . . . . . . . . . . . . . 69
Section 11.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 70

LIST OF SCHEDULES AND EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
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SECOND
AMENDED AND RESTATED
CREDIT AGREEMENT
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THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(the "Credit Agreement"), dated as of June 13, 1994, is by and among:

(i) RMI TITANIUM COMPANY, an Ohio corporation (the "Borrower");

(ii) SOCIETY NATIONAL BANK (hereinafter referred to
as "SNB"), PNC BANK, NATIONAL ASSOCIATION (hereinafter referred to as
"PNC"), and NBD BANK, N.A. (hereinafter referred to as "NBD"), (the
foregoing lenders being hereinafter individually sometimes referred to
as a "Bank" and collectively as the "Banks"); and

(iii) SNB as agent for itself and the other Banks
(SNB in its capacity as agent is hereinafter referred to as the
"Agent").

W I T N E S S E T H:
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WHEREAS, the Borrower, the Banks, and the Agent
entered into a Credit Agreement, dated as of December 4, 1990 (the "Original
Agreement");

WHEREAS, the Borrower, the Banks, and the Agent
entered into an Amended and Restated Credit Agreement, dated as of June 3, 1993
(the "Amended Agreement") that amended and restated the Original Agreement;

WHEREAS, the Borrower executed an Amended and
Restated Promissory Note in favor of SNB in connection with the Amended
Agreement, in the original maximum principal amount of $37,500,000, dated as of
June 3, 1993; the Borrower executed an Amended and Restated Promissory Note in
favor of PNC in connection with the Amended Agreement, in the original maximum
principal amount of $22,500,000, dated as of June 3, 1993; and the Borrower
executed an Amended and Restated Promissory Note in favor of NBD in connection
with the Amended Agreement, in the original maximum principal amount of
$15,000,000, dated as of June 3, 1993 (collectively, the "Notes");

WHEREAS, the Borrower, the Banks, and the Agent
desire to further amend and restate the Amended Agreement to provide for a
revolving loan with a maximum principal amount at any time outstanding
(including the aggregate Letter of Credit Face Amount for all outstanding
Letters of Credit, each as

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defined herein) of $75,000,000 (the "Loan"), all
upon the terms and conditions set forth in this Credit Agreement; and

WHEREAS, the Borrower, the Banks, and the Agent
intend for the Loan to continue to be further evidenced by the Notes;

NOW, THEREFORE, in consideration of the mutual
covenants herein contained, the Borrower, the Banks, and the Agent agree as
follows:

In addition to terms defined elsewhere in this Credit
Agreement, certain terms used herein are defined in Section 1.01 hereof.

ARTICLE I
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DEFINITIONS; ACCOUNTING TERMS; AMENDMENTS
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Section 1.01 DEFINITIONS. As used herein and in the
other Loan Documents, the following terms shall have the following meanings,
unless otherwise expressly provided:

"Additional Cash Collateral Agreements" has the
meaning given to such term in Section 5.11 of this Credit Agreement.

"Advances" means advances of cash proceeds obtained
by the Borrower in respect of the Loan.

"Affiliate" means, with respect to any Person, any
other Person controlling, controlled by or under common control with
such Person, whether such common control is direct or indirect.
Without limiting the generality of the immediately preceding sentence,
all of the Borrower's key employees, officers, directors, Subsidiaries
and joint ventures in which it is a joint venturer shall be deemed to
be Borrower's Affiliates for purposes of this Credit Agreement.

"Amended Agreement" has the meaning given to such
term in the recitals to this Credit Agreement.

"Availability" means, as at any time, an amount
equal to the difference of:

(i) the lesser of (a) the Maximum Loan Amount, or
(b) an amount equal to the then

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Borrowing Base (if the Borrowing Base is then applicable in
accordance with the provisions of Section 2.01 of this Credit
Agreement); and

(ii) the then outstanding principal amount of the
Loan (including the aggregate Letter of Credit Face Amount for
all outstanding Letters of Credit).

"Availability Deficiency" means the occurrence when
the Availability is less than zero Dollars.

"BofW" has the meaning given to such term in Section
5.10 of this Credit Agreement.

"Borrowing Base" means, at any time:

(i) eighty percent (80%) of the amount of domestic
Eligible Receivables of the Borrower and Micron; PLUS

(ii) eighty-five percent (85%) of the amount of
domestic Eligible Receivable of Tradco; PLUS

(iii) the sum of the products of (a) the amount of
domestic Eligible Inventory of the Borrower, Tradco and Micron
of each category described in the "Inventory Calculation"
included in Exhibit 5.07 (determined in accordance with the
FIFO method) MULTIPLIED BY (b) each such category's advance
rate as described in that "Inventory Calculation"; PLUS

(iv) thirty percent (30%) of the amount of dedicated
foreign Eligible Inventory that is located in the United
States and that is subject to the Agent's and the Bank's
perfected first priority security interest; PROVIDED, HOWEVER,
that such Inventory shall be deemed Eligible Inventory only
until such time as the Borrower enters into the EXIM Bank
Facility; PLUS

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(v) eighty percent (80%) of the appraised value of
the Eligible Equipment; PLUS

(vi) fifty percent (50%) of the appraised value of
the Eligible Real Property; PLUS

(vii) natural gas reserves to the extent described
on Exhibit 1.01; PLUS

(viii) the Overadvance; MINUS

(ix) the aggregate amount (without duplication) of
the obligations of any Person other than the Borrower, Tradco,
Micron, or NaTi, contingent or otherwise, that the Borrower or
any of its Subsidiaries has Guaranteed;

The Borrowing Base, and any one or more of the percentages of the
Borrowing Base, may be changed by the Banks based on such credit and
collateral considerations as they deem reasonably appropriate at any
time upon written notice to the Borrower. For purposes of this
definition, "domestic" refers to Eligible Receivables that arise from
sales to account debtors located in the United States or Ontario,
Canada and to Eligible Inventory located in and destined for sale in
the United States. For purposes of this definition, "dedicated
foreign" refers to Eligible Inventory identified to a specific
contract and to be shipped outside the United States.

"Borrowing Base Certificate" has the meaning given
to such term in Section 5.07 of this Credit Agreement.

"Business Day" means any day in respect of which (i)
dealings are carried on in the London Interbank eurodollar market and
(ii) is not a Saturday, Sunday or other day on which banks in
Cleveland, Ohio, are authorized to close.

"Capitalized Lease Obligations" means, as to any
Person, the obligations of such Person to pay rent or other amounts
under leases of, or other agreements conveying the right to use real
and/or personal property, to the extent such obligations are required

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to be classified and accounted for as capital leases on a balance
sheet of such Person, prepared in accordance with GAAP (including the
Statement of Financial Accounting Standards No. 13 of the Financial
Accounting Standards Board).

"Cash Collateral Account" has the meaning given to
such term in Section 5.11 of this Credit Agreement.

"Cash Collateral Agreement" has the meaning given to
such term in Section 5.11 of this Credit Agreement.

"Closing Date" means the date of this Credit
Agreement.

"Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute, and the rules
and regulations promulgated thereunder.

"Collateral" means "Collateral" and "Mortgaged
Property" as defined in the Security Agreement, the Pledge Agreement
and the Mortgages.

"Collateral Disclosure List" has the meaning given
to such term in Section 4.11 of this Credit Agreement.

"Commitments" has the meaning given to such term in
Section 2.15 of this Credit Agreement.

"Consolidated" or "consolidated" means, with
reference to any term defined herein, that term as applied to the
accounts of the Borrower and its Subsidiaries that are consolidated in
accordance with GAAP.

"Deficiency" means (collectively and individually) an
Availability Deficiency, a Letter of Credit Deficiency, or a Maximum
Loan Amount Deficiency.

"Disposition," or "Dispose" means, any "sale and
leaseback" or similar arrangement, or any sale, lease or other
disposition of assets.

"Dollars" and "$" means United States dollars or such
coin or currency of the United States of America as at the time of
payment shall be legal tender

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for the payment of public and private debts in the United States.

"Domestic Lock Box" has the meaning given to such
term in Section 5.10 of this Credit Agreement.

"Draw" has the meaning given to such term in
Section 2.02 of this Credit Agreement.

"Eligible Equipment" means "Equipment" as defined in
the Security Agreement that is (i) described in the Appraisal Report,
dated February 1, 1994, by American Appraisal Associates (or any
subsequent appraisal satisfactory to the Agent and the Banks) and (ii)
subject to the Agent's and the Banks' perfected first priority
security interest, and the "appraised value" of Eligible Equipment
means the appraised value thereof as described in the latest of the
reports described in clause (i), above.

"Eligible Inventory" means certain of the Borrower's,
Tradco's and Micron's Inventory which the Banks deem to be Eligible
Inventory, based on such credit and collateral considerations as they
deem reasonably appropriate consistent with the "Inventory
Calculation" example included in Exhibit 5.07. Without limiting the
foregoing, the following shall not be deemed Eligible Inventory:
Inventory, to the extent that it (i) is not readily saleable or usable
in the owner's business (including without limitation Inventory for
which reserves for obsolescence have been provided for in the
financial statements or for which obsolescence reserves are required
in accordance with GAAP), (ii) is destined for delivery to a location
outside the United States (except as provided in the definition of the
Borrowing Base) or is located outside the United States, (iii) is, or
any accounts or other proceeds resulting from the sale or other
disposition thereof are, subject to any lien, encumbrance, security
interest, lease or similar claim in favor of any Person other than the
Agent or the Banks, or could be subject to any statutory lien,
encumbrance, security interest, or similar claim in favor of any
Person other than the Agent or the Banks, including any sale on
approval or sale and return transaction or any consignment, (iv) is
located on premises not owned or leased by the Borrower, Tradco or
Micron or is in the possession of any other Person (unless the Agent
and the Banks are satisfied that they have a perfected first priority

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security interest therein not subject to any statutory or other lien
of any other Person), (v) is subject to any trademark, trade name or
licensing arrangement, or any law, rule or regulation, that could
limit or impair the ability of the Agent and the Banks to promptly
exercise any of their rights with respect thereto, (vi) with respect
to which insurance proceeds, if any, are not payable to the Agent and
the Banks as mortgagee or loss payee, (vii) consists of general
supplies or maintenance supplies, cartons and packaging or sodium or
(viii) can be classified as "Eligible Inventory" under the EXIM Bank
Facility. The Eligible Inventory will be valued at the lower of cost
or market value, determined in accordance with the Borrower's usual
cost accounting system, consistently applied, except with respect to
purchased sponge which will be adjusted to reflect lower of cost or
market.

"Eligible Real Property" means real property that is
(i) described in the Appraisal Report, dated February 1, 1994, by
American Appraisal Associates (or any subsequent appraisal
satisfactory to the Agent and the Banks) and (ii) subject to the
Agent's and the Bank's perfected first priority lien, and the
"appraised value" of Eligible Real Property means the appraised value
thereof as described in the latest of the reports described in clause
(i), above.

"Eligible Receivables" means those Receivables of the
Borrower, Tradco and Micron that (i) arise out of sales in the
ordinary course of their respective businesses to a Person who is not
an Affiliate of any of them, (ii) the terms of sale of which are
ordinary terms and require payment in full within not more than 30,
60, or 90 days from the date of invoice depending on the customer,
(iii) do not violate any warranty with respect to Eligible Receivables
set forth in Section 3.20 of this Credit Agreement and (iv) are not
more than sixty (60) days beyond the due date therefor in the case of
the Borrower or ninety (90) days in the case of Tradco or Micron;
PROVIDED, HOWEVER, that no Receivable shall be an Eligible Receivable
if (a) the account debtor or any Affiliate of the account debtor has
filed a petition in bankruptcy or for reorganization, had filed
against it a petition in bankruptcy or for reorganization that is not
dismissed, made an assignment for the benefit of creditors, or failed,
suspended business operations, has become insolvent or had or suffered
a receiver or a

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<PAGE> 14
trustee to be appointed for a significant portion of its assets or
affairs, (b) the account debtor is also a supplier to, or a vendor or
a creditor of Borrower (but only to the extent of any potential offset
existing from time to time), (c) the sale is to an account debtor
located outside the United States or Ontario, Canada, (d) twenty-five
percent (25%) or more of the Receivables from the account debtor and
its Affiliates are ineligible for any reason, (e) the account debtor
is the federal or any state government or any agency or department
thereof, unless with respect to such Receivable the Assignment of
Claims Act or comparable state statute or regulation has been complied
with, (f) the Receivable consists of finance charges, interest on
delinquent accounts, proceeds of consigned Inventory, employee or
officer receivables, service charges, debit memoranda, or legal fees
(but only to the extent of such amounts comprised therein), (g) the
Receivable arises from a contract which contains a prohibition of
assignment thereof, (h) the Receivable is evidenced by a promissory
note or chattel paper, (i) the Receivable is generated by a sale on
approval, a bill and hold sale, a sale on consignment, or other type
of conditional sale, (j) the Receivable is not subject to the first
priority security interest of the Agent and the Banks or is otherwise
subject to any statutory lien in favor of any other Person, (k) the
account debtor is located in New Jersey, unless the Borrower shall
have properly qualified to do business in New Jersey or shall have
filed a Notice of Business Activities Report with the New Jersey
Division of Taxation for the then current year, (l) the account debtor
is located in Minnesota, unless the Borrower shall have properly
qualified to do business in Minnesota or shall have filed a Notice of
Business Activities Report with the Minnesota Division of Taxation for
the then current year, (m) the Receivable has been pre-billed, (n) the
account debtor has sold or is selling substantially all of its assets,
(o) the account debtor is incompetent or has died, or (p) it can be
classified as an "Eligible Receivable" under the EXIM Bank Facility or
(q) the Agent or the Banks reasonably believe that the collection of
such Receivable is insecure, or that such Receivable may not be paid
by reason of the account debtor's financial inability to pay, or deems
such Receivable to be ineligible based on such other credit and/or
collateral considerations as they deem reasonably appropriate.

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<PAGE> 15
"Environmental Claim" means any demand in writing for
a sum certain with regard to any Hazardous Discharge or any violation
or alleged violation of any Environmental Law affecting the Borrower's
or any of its Material Subsidiaries' facilities or the Borrower's or
any of its Material Subsidiaries' interest therein.

"Environmental Complaint" means any notice of
violation, request for information or notification that the Borrower
or any of its Material Subsidiaries is potentially responsible for
investigation or cleanup of environmental conditions at any of their
respective facilities, demand letter or complaint, order, citation or
other notice with regard to any Hazardous Discharge or any other
violation or alleged violation of any Environmental Law affecting the
Borrower's or any of its Material Subsidiaries' facilities or the
Borrower's or any of its Material Subsidiaries' interest therein.

"Environmental Law" means any and all current or
future statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees, policies, permits, concessions, grants, franchises,
licenses, agreements or other governmental restrictions relating to
the protection of the environment.

"ERISA" means the Employee Retirement Income Security
Act of 1974 and the regulations thereunder, each as amended from time
to time.

"ERISA Affiliate" means, as applied to any Person,
any other Person (whether or not incorporated) that would be
aggregated with the such Person for any purpose relevant to ERISA or
the Code relating to any Plan.

"Event of Default" has the meaning given to such
term in Article VIII of this Credit Agreement.

"Exhibits" and "Schedules" means and refers
collectively to the documents attached to this Credit Agreement and
labeled as Exhibits or Schedules hereto.

"EXIM Bank Facility" means the proposed $15,000,000
revolving credit facility to be guaranteed by the Export-Import Bank
of the United States.

"FASB Mandated Change" means any non-cash change in
Total Shareholders' Equity occurring after

- 9 -
<PAGE> 16
December 31, 1993 and resulting from the Borrower's adoption of or
subsequent application of one or more of the accounting principles
described in FAS 87, FAS 112, and FAS 106 promulgated by the Financial
Accounting Standards Board. The Banks, in their sole discretion, may
consider, from time to time, including other similar financial
accounting standards within the definition of FASB Mandated Change.

"FIFO Adjustment" means any one time increase in
Total Shareholders' Equity resulting from the change in the Borrower's
Inventory accounting method from LIFO to FIFO.

"First California" has the meaning given to such
term in Section 5.10 of this Credit Agreement.

"First Utah" has the meaning given to such term in
Section 5.10 of this Credit Agreement.

"Fixed Rate" means either the Libor Rate or the
Short Term Rate.

"federal", "state", or "local" means and relates to
the United States, its political divisions or states, and respective
political subdivisions, and equivalents thereof.

"Foreign Lock Box" has the meaning given to such
term in Section 5.10 of this Credit Agreement.

"GAAP" means generally accepted accounting principles
applied in the United States as in effect from time to time.

"Guaranteed" or to "Guarantee" as applied to any
obligation means and includes (a) a guarantee or guaranty (other than
by endorsement of negotiable instruments for collection or deposit in
the ordinary course of business), directly or indirectly, in any
manner, of any part or all of such obligation and (b) an agreement,
direct or indirect, contingent or otherwise, and whether or not
constituting a guaranty, the practical effect of which is to assure
the payment or performance (or payment of damages in the event of
non-performance) of any part or all of such obligation whether by (i)
the purchase of securities or obligations, (ii) the purchase, sale or
lease (as lessee or lessor) of property or the purchase or sale

- 10 -
<PAGE> 17
of services primarily for the purpose of enabling the obligor with
respect to such obligation to make any payment or performance (or
payment of damages in the event of non-performance) of or on account
of any part or all of such obligation, or to assure the owner of such
obligation against loss, (iii) the supplying of funds to or in any
other manner investing in the obligor with respect to such obligation,
(iv) repayment of amounts drawn down by beneficiaries of letters of
credit or (v) the supplying of funds to or investing in a Person on
account of all or any part of such Person's obligation under a
Guarantee of any obligation or indemnifying or holding harmless, in
any way, such Person against any part or all of such obligation.

"Hazardous Discharge" means a Release or threat of
Release of Hazardous Substances at the Borrower's facilities.

"Hazardous Substances" means any toxic substances or
related materials, including, without limitation, asbestos and any
substances defined as or included in the definition of "hazardous
substances", "hazardous waste", "hazardous materials", or "toxic
substances" under any applicable law or regulation of any state,
province, country or local government (which include without
limitation, the Comprehensive Environmental Responses, Compensation
and Liability Act of 1980, as amended, the Hazardous Materials
Transportation Act, the Resource Conservation and Recovery act, and
the Occupational Health and Safety Act).

"Indebtedness" as applied to any Person, including
the Borrower means, at any time, without duplication:

(i) All items (except items of capital stock or
capital or earned surplus or of contingency reserves, reserves
or allowances for deferred income taxes or reserves or
allowances for unearned revenues and trade accounts payable
for goods or services purchased in the ordinary course of
business and that are not the subject of a conditional sales
contract or Capitalized Lease Obligation) which in accordance
with GAAP applied on a consistent basis would be included in
determining total liabilities as

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<PAGE> 18
shown on the liability side of a balance sheet of such Person
at such date; and

(ii) All indebtedness of others within the meaning
of (i) above which such Person has Guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary
course of business), discounted with recourse or agreed
(contingently or otherwise) to purchase or repurchase or
otherwise acquire or become liable for, or in respect of which
such Person has entered into any agreement for the purchase or
other acquisition of any product, materials, or supplies, or
for the making of shipments, or for the payment for services,
if in any such case payment therefor is to be made regardless
of the nondelivery of the product, materials, or supplies or
the nonfurnishing of the transportation or services.

"Indebtedness for Borrowed Money" of any Person means
at any date, without duplication, (i) all obligations of such Person
for borrowed money, including, without limitation, all borrowings
under insurance policies, (ii) all obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase
price for property or services, except accounts payable arising in the
ordinary course of business, (iv) all Capitalized Lease Obligations of
such Person, (v) all Indebtedness for Borrowed Money of others secured
by a Lien on any asset of such Person, whether or not such
Indebtedness for Borrowed Money is assumed by such Person, and (vi)
all Indebtedness for Borrowed Money of others Guaranteed by such
Person.

"Indicated Spread" means 125 basis points for the
Libor Rate, 150 basis point for the Short Term Rate and zero basis
points for the SNB Prime Rate.

"Initial TSE" means Total Shareholders' Equity
determined as of the close of business on the date on which the
Borrower issues shares of its common stock pursuant to the exercise of
the Oversubscription Privilege in connection with the rights offering
contemplated in the Registration Statement (but in no case later than
July 29, 1994).

- 12 -
<PAGE> 19
"Interest Options" means the SNB Prime Rate, the
Libor Rate and the Short Term Rate.

"Interest Period" means, with respect to any portion
of the Loan for which the interest is being determined at a Fixed
Rate, the period commencing on the date such Loan is made, continued,
or converted and ending on the last day of such period as selected by
the Borrower pursuant to the provisions below and, thereafter, each
subsequent period commencing on the last day of the immediately
preceding Interest Period and ending on the last day of such period as
selected by the Borrower pursuant to the provisions below. The
duration of each Interest Period for any portion of the Loan for which
the interest is being determined at a Short Term Rate shall be 7, 14,
or 21 days, in each case as the Borrower may select upon notice, as
set forth in Section 2.10, and the duration of each Interest Period
for any portion of the Loan for which the interest is being determined
at a Libor Rate shall be 1 month, 2 months, 3 months or 6 months, in
each case as the Borrower may select upon notice, as set forth in
Section 2.10, provided that:

(i) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the
last day of such Interest Period shall occur on the next
succeeding Business Day, provided that if such extension of
time would cause the last day of such Interest Period for any
portion of the Loan for which the interest is being determined
at a Fixed Rate to occur in the next following calendar month,
the last day of such Interest Period shall occur on the next
preceding Business Day;

(ii) if the Borrower fails to so select the duration
of any Interest Period, the duration of such Interest Period
shall be 7 days in the case of any portion of the Loan for
which the interest is being determined at a Short Term Rate
and shall be 2 months in the case of any portion of the Loan
for which the interest is being determined at a Libor Rate;
and

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<PAGE> 20
(iii) the Borrower may not select any Interest
Period which ends after the Termination Date.

"Inventory" shall mean "Inventory" as defined in the
Security Agreement.

"Investment" means any Guarantee, loan, advance,
extension of credit (excluding accounts receivable arising in the
ordinary course of business and endorsements of negotiable instruments
for collection or deposit in the ordinary course of business) or
contribution of capital to any Person or purchase or other acquisition
of the stock or any notes, debentures or other securities of, or any
equity interest in, any other Person.

"Letter of Credit Availability" means, at any time,
an amount equal to the lesser of (a) the difference of Fifteen Million
Dollars ($15,000,000)less the aggregate Letter of Credit Face Amount
for all outstanding Letters of Credit, or (b) the Availability.

"Letter of Credit Deficiency" means the occurrence
when the Letter of Credit Availability is less than zero Dollars.

"Letter of Credit Face Amount" of any Letter of
Credit means, at any time, the face amount of such Letter of Credit,
after giving effect to all drawings paid thereunder and other
reductions of such face amount and to all reinstatements of such face
amount effected, pursuant to the terms of such Letter of Credit, prior
to such time.

"Letter of Credit Related Documents" means any
agreements or instruments relating to a Letter of Credit.

"Letters of Credit" has the meaning given to such
term in Section 2.02 of this Credit Agreement.

"Libor Rate" means, with respect to any portion of
the Loan with respect to which the Borrower has elected a Libor Rate
Interest Option, the result of (i) the average of the respective rates
of interest per annum (rounded upwards to the next higher whole
multiple of 1/16% if such rate is not such a multiple) determined by
each of the Banks two Business Days

- 14 -
<PAGE> 21
before the date that the Borrower's election of such Interest Option
is to be effective that each Bank would have to pay in the eurodollar
inter-bank market for inter-bank deposits of United States dollars
with a maturity equal to the Interest Period selected by the Borrower
for the use of such rate and in an amount equal to the amount of each
Bank's pro rata share of the outstanding principal balance of the Loan
on which interest will be determined by such Libor Rate divided by
(ii) the number equal to 1.00 minus the Libor Reserve Requirement;
however, the Libor Rate shall be increased appropriately, in all
instances and without duplication, to compensate for (i) all taxes
(other than taxes measured solely on the Banks' income), duties,
charges, reserve requirements and provisions for capital adequacy, if
any, applicable to the Banks for such deposits and (ii) the amount, if
any, required to be paid by the Banks for insuring such deposits.

"Libor Reserve Requirement" means that percentage
(expressed as a decimal) which is in effect on the date immediately
prior to the first day of the applicable Interest Period of the
aggregate (without duplication) of the maximum reserve requirements
(whether basic, supplemental, marginal, emergency, or otherwise)
prescribed by the Board of Governors of the Federal Reserve System (or
any successor) with respect to liabilities or assets consisting of or
including "Eurocurrency liabilities" (as defined in Regulation D of
the Board of Governors of the Federal Reserve System) having a term
equal to such Interest Period.

"Lien" as applied to any property of any Person
means: (a) any mortgage, lien, pledge, charge, lease constituting a
Capitalized Lease Obligation, conditional sale or other title
retention agreement, or other security interest or encumbrance of any
kind in respect of such property, or upon the income or profits
therefrom; (b) any arrangement, express or implied, under which such
property is transferred, sequestered or otherwise identified for the
purpose of subjecting the same to the payment of Indebtedness for
Borrowed Money in priority to the payment of the general, unsecured
creditors of such Person; (c) any Indebtedness which is unpaid more
than 60 days after the same shall have become due and payable and
which if unpaid would by law (including but not limited to bankruptcy
and insolvency laws), or otherwise, be given any priority whatsoever
with respect to such

- 15 -
<PAGE> 22
property over general unsecured creditors of such Person; and (d) the
filing of, or any agreement to give, with respect to such property any
financing statement under the Uniform Commercial Code or its
equivalent of any jurisdiction in respect of Indebtedness for Borrowed
Money.

"Loan" has the meaning given to such term in the
recitals to this Credit Agreement.

"Loan Documents" means and includes this Credit
Agreement, the Notes, the Security Agreement, the Mortgages, the
Pledge Agreement, the Cash Collateral Agreement, the Additional Cash
Collateral Agreements, the Letter of Credit Related Documents, the
Collateral Disclosure List and any financing statements and other
documents or instruments executed or delivered in connection with any
of the foregoing.

"Lock Boxes" means the Domestic Lock Box, the Foreign
Lock Box, the Micron Lock Box, the Tradco Lock Box and the West Coast
Lock Box.

"Major Indebtedness" has the meaning given to such
term in Section 8.11 of this Credit Agreement.

"Material Subsidiaries" means Tradco, Micron and
NaTi, any other Subsidiary of the Borrower that becomes a party to any
Loan Document and any other Subsidiary of the Borrower in existence
from time to time whose assets account for five percent (5%) or more
of the Borrower's "Total assets" or of the Borrower's "Total
liabilities," in each case, as set forth on the Borrower's
consolidated balance sheet prepared in accordance with GAAP
consistently applied.

"Maximum Loan Amount" means the lesser of (a)
$75,000,000, or (b) an amount equal to the then Commitments after
reduction thereof.

"Maximum Loan Amount Deficiency" means the occurrence
when the outstanding principal amount of the Loan (including the
aggregate Letter of Credit Face Amount for all outstanding Letters of
Credit) exceeds the Maximum Loan Amount.

"Micron" means RMI Metals, Inc., a Utah corporation.

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<PAGE> 23
"Micron Lock Box" has the meaning given to such term
in Section 5.10 of this Credit Agreement.

"Mortgages" has the meaning given to such term in
Section 2.06 hereof.

"NaTi" means NaTi Gas Co., an Ohio corporation.

"Net Income" means consolidated net income of the
Borrower and its consolidated Subsidiaries as determined in accordance
with GAAP, consistently applied.

"New Equity" means all sums added to Total
Shareholders' Equity after December 31, 1993 resulting from the sale
for cash of common stock of the Borrower resulting from the rights
offering contemplated in the Registration Statement.

"Notes" means collectively the amended and restated
promissory notes dated as June 3, 1993 which continue to further
evidence the Borrower's indebtedness to the Banks under this Credit
Agreement.

"Obligations" means all Indebtedness (whether for
principal, interest, fees, expenses, or charges) owing from time to
time by the Borrower to the Banks or to the Agent as provided in the
Loan Documents.

"Overadvance" means $26,840,000.

"PBGC" means the Pension Benefit Guaranty
Corporation and any successor thereto.

"Permitted Exceptions" has the meaning given to
such term in Section 6.01 of this Credit Agreement.

"Person" means a corporation, an association, a
partnership, an organization, a trust or business trust, an
individual, a government or political subdivision thereof or a
governmental agency or other entity.

"Plan" means any pension plan which is covered by
Title IV of ERISA in respect of which the Borrower or any ERISA
Affiliate is an "employer" as defined in Section 3(5) of ERISA.

- 17 -
<PAGE> 24
"Pledge Agreement" has the meaning given to such
term in Section 2.06 hereof.

"Possible Default" means any condition, event, act or
omission which, with (a) the lapse of time or (b) the giving of notice
or (c) both, would unless cured or waived constitute an Event of
Default.

"Post-Default Rate" means, as of any time, a per
annum rate of interest equal to three and one-half percent (3-1/2%)
above the SNB Prime Rate in effect at such time.

"Profitability" means, at any time, positive Net
Income at the end of, and for, each of the two most recently completed
consecutive fiscal quarters.

"Pro rata" has the meaning given to such term
in Section 2.15 of this Credit Agreement.

"Receivable" has the meaning given to "Accounts
Receivable" in the Security Agreement.

"Registration Statement" means the Borrower's
Registration Statement on Form S-2 as filed with the Securities and
Exchange Commission on April 22, 1994, including the prospectus
contained therein, all supplements, pre-effective and post-effective
amendments, and exhibits thereto.

"Release" means any release which requires notice in
accordance with the Comprehensive Environmental Response Compensation
and Liability Act, Title III, Section 30, Emergency Notification.

"Remittances" has the meaning given to such term
in Section 5.10 of this Credit Agreement.

"Reportable Event" means any of the events set forth
in Section 4043(b) of ERISA or the regulations thereunder, in each
case where reporting requirements have not been waived and which event
could or would give rise to the termination of any Plan, the
appointment of a trustee for such Plan or otherwise impose any
liability on the Borrower including without limitation as described in
Department of Labor Regulations sections 2615.11, 2615.12 or 2615.15
through 2615.17.

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<PAGE> 25
"Required Banks" means at any time such number of the
Banks holding at least sixty-six and two-thirds percent (66.66667%) of
the aggregate unpaid amount of the Notes then outstanding, or if no
amounts are then outstanding on the Notes, then Banks with at least
sixty-six and two-thirds percent (66.66667%) of the aggregate
Commitments at such time.

"Security Agreement" has the meaning given to such
term in Section 2.06 of this Credit Agreement.

"Short Term Rate" means, with respect to any portion
of the Loan with respect to which the Borrower has elected a Short
Term Rate Interest Option, the average of the respective rates of
interest per annum determined by each of the Banks on the date that
the election by the Borrower of such Interest Option is effective for
the use of such rate in determining the interest to be charged on each
Bank's pro rata share of the outstanding principal balance of the Loan
on which interest will be determined by such Short Term Rate; however,
the Short Term Rate shall be increased appropriately, in all instances
and without duplication, to compensate for (i) all taxes (other than
taxes measured solely on the Banks' income), duties, charges, reserve
requirements and provisions for capital adequacy, if any, applicable
to the Banks for such deposits and (ii) the amount, if any, required
to be paid by the Banks for insuring such deposits.

"SNB Prime Rate" means at any time the greater of (a)
that interest rate established at such time by SNB as SNB's prime
rate, whether or not such rate is publicly announced or (b) the
highest Libor Rate applicable at such time to any Libor Rate Interest
Period plus the Indicated Spread for the Libor Rate. The SNB Prime
Rate may not be the lowest interest rate charged by SNB for commercial
or other extensions of credit. Changes in the rate of interest on the
portion of the Loan bearing interest at the SNB Prime Rate shall take
effect simultaneously with each change in the SNB prime rate.

"Subsidiaries" means any corporation, association, or
other business entity, the majority (by number of votes cast for the
election of directors or persons performing similar functions) of the
stock of any class or classes of which is at the time owned or
controlled by the Borrower or by any of its

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<PAGE> 26
Subsidiaries, if the holders of the stock of such class or classes (i)
are ordinarily, in the absence of contingencies, entitled to vote for
the election of a majority of the directors (or persons performing
similar functions) of the issuer thereof, even though the right so to
vote has been suspended by the happening of any contingency, or (ii)
are at the time entitled, as such holders, to vote for the election of
a majority of the directors (or persons performing similar functions)
of the issuer thereof, whether or not the right so to vote exists by
reason of the happening of a contingency.

"Taxes" means all federal, state and local or foreign
income, payroll, withholding, excise, sales, use, real and personal
property, use and occupancy, business and occupation, mercantile, real
estate, capital stock and franchise or other taxes, including interest
and penalties thereon, and including estimated taxes thereof.

"Termination Date" has the meaning given to such
term in Section 2.03 hereof.

"Total Shareholders' Equity" means "Total
Shareholders' Equity" as set forth on the Borrower's consolidated
balance sheet prepared in accordance with GAAP consistently applied.

"Tradco" means Tradco, Inc., a Missouri corporation.

"Tradco Lock Box" has the meaning given to such
term in Section 5.10 of this Credit Agreement.

"Unfunded Liability" means, with regard to any Plan,
the excess of the present value of accrued benefits under the Plan
over the current value of the Plan's assets. Whenever this Credit
Agreement requires the amount of any Unfunded Liability to be
determined, it shall be determined as of the end of the most recently
completed Plan year based on the final actuarial valuation prepared
for the Plan for funding purposes.

"West Coast Lock Box" has the meaning given to such
term in Section 5.10 of this Credit Agreement.

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<PAGE> 27
Whenever any agreement, promissory note, or other
instrument or document is defined in this Credit Agreement (or included in a
definition), such definition shall be deemed to mean and include, from and
after the date of an amendment, restatement, or modification thereof, such
agreement, promissory note or other instrument or document as so amended,
restated or modified. To the extent the plural of any term defined herein is
not defined in this Credit Agreement, usage of the plural in this Credit
Agreement shall mean the plural of the singular term so defined and if the
defined term is plural, usage of the singular of such term shall mean the
singular thereof, in each case as the context so requires.

Section 1.02 ACCOUNTING TERMS. Any accounting terms
used herein and not defined herein shall have the meaning ascribed to them by,
and be determined in accordance with, GAAP.
Section 1.03 ACCOUNTING PRINCIPLES. Except as
otherwise expressly provided herein, all computations made pursuant to this
Credit Agreement shall be made in accordance with GAAP consistently applied and
all balance sheets and other financial statements shall be prepared in
accordance with GAAP consistently applied.

ARTICLE II
----------

THE LOAN
--------

The Banks hereby agree to make the Loan to the
Borrower, upon the terms and conditions hereinafter stated in this Credit
Agreement, as follows:

Section 2.01 AMOUNT OF THE LOAN. Until the
Termination Date, Advances in respect of the Loan will be lent and relent from
time to time in amounts at any time outstanding up to the amount of the
Borrowing Base; provided, however, that in no event shall the Borrower permit a
Deficiency to occur. Notwithstanding the foregoing, if the Borrower obtains
New Equity equal to or greater than $25,000,000 on or before July 29, 1994,
then the Borrower may obtain Advances in respect of the Loan at any time
outstanding up to the Maximum Loan Amount so long as the Borrower maintains at
all times Total Shareholders' Equity of not less than the Initial TSE, PLUS the
amount of any FIFO Adjustment, PLUS the amount of any increase in Total
Shareholders' Equity resulting from a FASB Mandated Change, MINUS the amount of
any decrease in Total Shareholders' Equity resulting from a FASB Mandated
Change (in all cases without duplication), MINUS $10,000,000. If the Borrower
is at any time

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<PAGE> 28
not in compliance with the terms of the immediately preceding sentence, the
Borrower must again within one (1) Business Day, bring the Loan into compliance
with the Borrowing Base by eliminating any Availability Deficiency.
Thereafter, Advances in respect of the Loan will be lent and relent from time
to time in amounts at any time outstanding up to the amount of the Borrowing
Base (regardless of any subsequent change in the foregoing calculation).

Section 2.02 LETTERS OF CREDIT. Until the
Termination Date, the Agent shall issue letters of credit for the account of
the Borrower from time to time ("Letters of Credit"); provided, however, that
in no event shall the Borrower permit a Deficiency to occur. All obligations
and liabilities of the Borrower to the Agent and the Banks in respect of all
Letters of Credit are secured by all Collateral as fully as if such Letters of
Credit were Advances under this Credit Agreement, and the aggregate Letter of
Credit Face Amount for all outstanding Letters of Credit shall be treated as
outstanding principal of the Loan (except as otherwise expressly stated
herein). Each Letter of Credit shall be for an amount and a term, and shall be
subject to such other terms and conditions, as may be acceptable to the Agent,
including, without limitation, that the term of a Letter of Credit may not
extend beyond March 15, 1996. Immediately upon the issuance of each Letter of
Credit, the Agent shall sell to each Bank, and each Bank shall buy, in each
case without any further action by any party, an undivided Pro rata interest
and participation in and to each Letter of Credit and the obligations of the
Borrower in connection therewith. In the event the Agent or the Banks pay any
amount in respect of a Letter of Credit (a "Draw"), an Advance shall be deemed
to have been made to the Borrower to immediately reimburse the Agent or the
Banks for the amount of the Draw.

Section 2.03 TERMINATION DATE. The Borrower may
obtain Advances in respect of the Loan during a period commencing as of the
date of this Credit Agreement until (i) March 15, 1996 or (ii) the termination
of the Borrower's right to obtain Advances or Letters of Credit pursuant to any
provision hereof, whichever shall first elapse or occur (the "Termination
Date").

Section 2.04 ADVANCES. Subject to the terms and
conditions of this Credit Agreement, the Banks will, until the Termination
Date, make such Advances to the Borrower, in respect of the Loan, as the
Borrower may from time to time request from the Agent by telephone (promptly
confirmed in writing) no later than 11:00 a.m. on the date of a requested
Advance; provided, that in no event, shall the Borrower be able to obtain
Advances to the extent a Deficiency would occur. Each Advance borrowed,

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<PAGE> 29
repaid or reborrowed shall be in an amount not less than $500,000. Advances
may be borrowed, repaid and reborrowed until the Termination Date subject to
the terms and conditions of this Credit Agreement and all outstanding Advances
shall constitute one debt that is the Loan.

Section 2.05 REDUCTION. The Borrower shall have the
right at all times to permanently reduce the Commitments in whole or in part in
multiples of $5,000,000 (or if the Commitments are less than $5,000,000, an
amount equal to the Commitments). Concurrently with each reduction, the
Borrower shall prepay the amount, if any, together with interest thereon by
which the aggregate unpaid principal amount of the Loan exceeds the Commitments
as so reduced. On the Termination Date, the Commitments shall automatically be
reduced to zero.

Section 2.06 SECURITY AGREEMENT; PLEDGE AGREEMENT;
MORTGAGES. The Obligations shall be secured by a security interest in all of
the personal property and fixtures of the Borrower, Tradco and Micron pursuant
to one or more security agreements (collectively, the "Security Agreement") and
accompanying financing statements in form and substance satisfactory to the
Banks and the Agent and suitable for filing under the applicable state(s)
version(s) of the Uniform Commercial Code. The Obligations shall also be
secured by a pledge of all of the capital stock of Tradco, Micron and NaTi,
pursuant to an Amended and Restated Pledge Agreement (the "Pledge Agreement").
The Obligations shall also be secured by liens on all of the real property of
the Borrower pursuant to mortgages in form and substance satisfactory to the
Banks and the Agent and suitable for filing under the applicable state(s)
statutes (the "Mortgages").

Section 2.07 REPAYMENT OF THE LOAN; THE NOTES.
Subject to Section 9.01 of this Credit Agreement, all of the Obligations shall
be due and payable immediately in full on March 15, 1996. The obligation of
the Borrower to pay the principal of and interest on the Loan shall also be
evidenced by the Notes which the Borrower has previously delivered to the Banks
(excluding the Letter of Credit Face Amount with respect to any outstanding
Letters of Credit). The unpaid principal balance of and interest accrued on
the Loan shall be determined by the ledgers and records of each Bank as
accurately maintained to reflect borrowings and payments under this Credit
Agreement.

Section 2.08 PREPAYMENTS. The Borrower, at its
option, may prepay without premium or penalty any part of the Loan on which
interest is being determined on the basis of the SNB Prime Rate. The Borrower
shall pay to the Agent for the

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<PAGE> 30
account of the Banks, upon the request of any Bank, such amount or amounts as
shall reimburse such Bank for any out-of-pocket loss, cost or expense incurred
as a result of:

(a) any payment or prepayment or conversion (including by reason of
acceleration) of part of the Loan bearing interest at a Fixed Rate held by such
Bank on a date other than the last day of an Interest Period for such Loan; or

(b) any failure by the Borrower to borrow, continue, or prepay part of
the Loan bearing interest at a Fixed Rate held by such Bank on the date for
such borrowing, continuation or prepayment specified in the relevant notice of
borrowing, conversion, or prepayment;

such reimbursement will include, without limitation, amount(s) required to
liquidate deposits or certificates of deposit (as the case may be) placed
either with such Bank by prime banks in the London interbank market without
offset for sums received by such Bank prior to the date of payment, prepayment,
or conversion, but excluding loss of margin for the period after any such
payment, prepayment, or conversion, provided that the Bank shall have delivered
to the Borrower a certificate as to the amount of such loss or expense, which
certificate shall be conclusive in absence of manifest error.

Section 2.09 INTEREST ON THE LOAN.

(i) The Borrower shall pay interest on the Loan
(excluding, prior to a Draw, and thereafter only to the extent
of the Draw, the Letter of Credit Face Amount for outstanding
Letters of Credit) at the rate per annum determined on the
basis of the Interest Option(s) plus the Indicated Spread. To
the extent that the Borrower does not elect to have interest
on all or part of the Loan determined on the basis of the
Libor Rate or the Short Term Rate, interest on the Loan shall
be determined on the basis of the SNB Prime Rate (in each
case, plus the Indicated Spread).

(ii) Interest on the Loan determined in accordance
with the SNB Prime Rate will be payable on the last day of
each March, June, September and December. Interest on the
Loan

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<PAGE> 31
determined in accordance with a Fixed Rate will be paid at the
end of each respective Interest Period therefor, and, in the
case of a Libor Rate having an Interest Period of six months,
on the last Business Day of the first and second three month
periods thereof. Interest shall also be payable on all of the
Loan on the date that all remaining principal of and interest
on the Loan is due and payable, whether by reason of scheduled
or accelerated maturity of the Loan.

Section 2.10 ELECTION OF FIXED RATE INTEREST OPTION
FOR THE LOAN. Subject to the terms and conditions contained in this Section
2.10, the Borrower may elect to have the interest on all or part of the
principal of the Loan to be determined on a Fixed Rate. At any time, the
minimum principal amount of the Loan upon which interest may be determined on a
Fixed Rate shall be $1,000,000 and in no event shall there be at any time more
than five different amounts comprising the aggregate principal of Loan upon
which interest is being determined on a Fixed Rate. The Borrower shall have no
right to elect a Fixed Rate for any amount of the Loan if any Event of Default
or Possible Default shall exist at the time of election or immediately upon the
effectiveness thereof. Each election of the Libor Rate (whether in the case of
a new Advance or the election of a different Interest Option on all or part of
the principal amount of the Loan then outstanding) shall be made by notice to
the Agent received by it not later than 10:00 a.m. three Business Days before
the date the Borrower desires the Libor Rate to be effective. Each election of
a Short Term Rate (whether in the case of a new Advance or the election of a
different Interest Option on all or part of the principal amount of the Loan
then outstanding) shall be made by notice to the Agent received by it not later
than 11:00 a.m. on the date the Borrower desires the Short Term Rate to be
effective. The Agent agrees with the Banks to use its reasonable best efforts
to notify the Banks of a Libor Rate election on the same day of receipt thereof
and of a Short Term Rate election within 2 hours of receipt thereof. The
Borrower, by giving a notice of election, expressly accepts the Fixed Rate
regardless of any change in financial conditions or markets that may affect the
Fixed Rate after the giving of notice, regardless if the change occurs prior to
or after the effectiveness of the notice. Each notice of election shall
specify the principal amount of the Loan to which the Fixed Rate is applicable,
and the Interest Period for which the Fixed Rate shall be effective. The
Borrower shall have no right to rescind any such notice once given to the
Agent.

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<PAGE> 32
The right of the Borrower to elect the use of a Fixed Rate shall at
all times be subject to the following:

(I) availability of funding or its functional
equivalent to the Banks to allow the use of such Fixed Rate by the
Borrower;

(II) the Banks are generally offering to its
customers loans upon which interest will be determined on such Fixed
Rate;

(III) that the basis for determining the Fixed Rate
will adequately and fairly reflect the cost to the Banks of
maintaining or funding the Fixed Rate so elected;

(IV) each Bank believes it is not prohibited from
or otherwise restricted in allowing the Borrower to elect such Fixed
Rate; and

(V) the amount of interest and other amounts that
the Borrower will pay in respect of the Fixed Rate will include
(without duplication) amounts such as to pay or compensate the Banks
for all taxes (other than taxes measured solely on the Banks' income),
fees, duties, charges, reserve requirements, deposits, provisions for
capital adequacy and similar amounts to be paid, held or withheld or
imposed on or incurred by the Banks in respect of allowing the
election of the Fixed Rate.

Section 2.11 INTEREST CALCULATIONS. The interest
payable on the Loan shall be computed on a 360-day-per-year basis for the
actual number of days elapsed. All payments to be made by the Borrower under
this Credit Agreement and the Notes shall be made in immediately available
funds by 11:00 a.m., Cleveland time, to the Agent for the Pro rata benefit of
the Banks and any payment received after such time shall be deemed received on
the next following Business Day. If the due date for any such payment is
extended for any reason, including operation of law, or any payment is received
after a due date, interest shall accrue and be payable on demand for such
extended time.

Section 2.12 POST-DEFAULT RATE. Any payment of
principal of or interest on the Loan not paid when due shall bear interest at a
rate equal to the Post-Default Rate from and after such due date, which
interest shall be due on demand. No interest shall accrue on any interest that
is being charged on any payment of interest not paid when due.

- 26 -
<PAGE> 33
Section 2.13 COMPENSATION; ILLEGALITY. (i) If there
shall be introduced or changed any treaty, statute, law, regulation or other
governmental requirement, or there shall be any change in the interpretation or
administration thereof by any governmental authority charged with the
administration or interpretation thereof, or there shall be made any request
from any central bank or other lawful governmental authority having
jurisdiction over any of the Banks, this Credit Agreement, the Loan or the
Notes, which introduction, change or request shall, upon becoming effective,
(i) impose, modify or deem applicable any reserve or special deposit or other
requirements against assets held by or deposits in or loans by any of the Banks
or (ii) subject any of the Banks to any tax (other than taxes measured solely
on the Banks' income), duty, fee, deduction or withholding or (iii) change the
basis of taxation of payments due from the Borrower (otherwise than by a change
in taxation of the overall net income of the Banks) or (iv) impose on any of
the Banks any penalty in respect of maintaining the Loan, and any such event
increases the cost to any of the Banks to maintain the Loan or reduces the
amount of principal or interest received by a Bank in respect of this Credit
Agreement or the Loan then, upon such Bank's demand, the Borrower shall, pay
(without duplication) to such Bank(s) from time to time such additional amounts
as will compensate and reimburse such Bank(s) for such increased cost or
reduced amount. A Bank shall give the Borrower prompt notice of any facts or
event which, pursuant to the foregoing sentence, would require the Borrower to
pay material additional amounts as compensation or reimbursement, but the
failure of such Bank to give such notice shall not limit the obligation of the
Borrower to pay such compensation or reimbursement. Each demand for
compensation shall be accompanied by such Bank's certificate setting forth in
reasonable detail the amount to be paid by the Borrower and the computations
used in determining the amount, which certificate shall be presumed to be
correct as to the amount set forth therein in the absence of manifest error.
In determining any such amount, the Banks may use any reasonable averaging and
attribution methods.

(ii) In the event that any applicable law, treaty,
rule or regulation (whether domestic or foreign) now or hereafter in effect and
whether or not presently applicable to the Banks or any interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by any of the Banks
with any guideline, request or directive of any such authority (whether or not
having the force of law), affects or would affect the amount of capital
required or expected to be maintained by any of the Banks or any corporation
controlling such Bank, as the case may be, and any Bank determines that the
amount of such

- 27 -
<PAGE> 34
capital is increased by or based upon the existence of such Bank's obligations
hereunder and such increase has the effect of reducing the rate of return on
any of the Bank's or such controlling corporation's capital as a consequence of
its obligations hereunder to a level below that which such Bank or such
controlling corporation could have achieved but for such circumstances (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Bank to be material, then the Borrower shall pay (without
duplication) to such Bank, as the case may be, from time to time, upon request
by the Agent or any Bank additional amounts sufficient to compensate such Bank
for any increase in the amount of capital and reduced rate of return which such
Bank reasonably determines to be allocable to the existence of such Bank's
obligations hereunder. The Agent or the Bank, as the case may be, shall give
the Borrower prompt notice of any facts or event which, pursuant to the
foregoing sentence, would require the Borrower to pay material amounts as
compensation, but the failure of the Agent or the Bank to give such notice
shall not limit the obligation of the Borrower to pay such compensation. A
statement as to the amount of such compensation, prepared in good faith and in
reasonable detail by the Agent or the Bank, and submitted by the Agent or the
Bank to the Borrower shall be conclusive and binding for all purposes absent
manifest error in computation.

(iii) In the event that any applicable law, treaty,
rule or regulation (whether domestic or foreign) now or hereafter in effect and
whether or not presently applicable to the Banks, or any interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by any of the Banks
with any guideline, request or directive of such authority (whether or not
having the force of law), including without limitation exchange controls, shall
make it unlawful for any of the Banks to maintain or offer the Loan or make any
Advance under this Credit Agreement, the Banks may, upon the occurrence of such
an event, refuse to offer to the Borrower or maintain any Loans.

Section 2.14 EVENT OF DEFAULT OR POSSIBLE DEFAULT.
The Borrower shall not be entitled to obtain any Advances or any Letter of
Credit if at the time of so obtaining or requesting such Advance or Letter of
Credit any Event of Default or Possible Default shall then exist or immediately
thereafter would exist. Receipt by the Borrower of any Advance or any Letter
of Credit, each in and of itself, shall constitute a continuing representation
and warranty by the Borrower that the representations and warranties in Article
III continue to be accurate and that the Borrower then is entitled under this
Credit

- 28 -
<PAGE> 35
Agreement to obtain the Advance or the Letter of Credit, as the case may be.

Section 2.15 PRO RATA; COMMITMENTS. (i) As used
herein, the terms "Pro rata," "ratable," "proportionate" and words of similar
import when used with reference to the Banks mean (unless the context clearly
otherwise indicates) pro rata according to the unpaid principal amounts owing
to the respective Banks under the Notes, or, if no principal is then owing to
any Bank, according to the Commitment, as the case may be, of the respective
Banks.

(ii) As used in this Credit Agreement, the
"Commitment" of each Bank at any time means (A) the decimal figure set forth
opposite the name of such Bank below multiplied by (B) the Maximum Loan Amount
minus the then outstanding principal balance of the Loan that was advanced by
such Bank:

<TABLE>
<CAPTION>
Name of Bank Commitment
------------ ----------
<S> <C>
SNB 0.5

PNC 0.3

NBD 0.2
</TABLE>

Section 2.16 COMMITMENT FEE. Until all of the
Obligations are paid in full, the Borrower shall pay to the Agent for the Pro
rata benefit of the Banks a commitment fee as follows:

(i) the commitment fee will be based upon the
average daily Availability;

(ii) the commitment fee will be computed at the rate
of 1/8 of 1% per annum (computed on the basis of a 360 day year and
paid for the actual number of days elapsed); and

(iii) the commitment fee will be paid quarterly in
arrears on the last day of each March, June, September and December.

Section 2.17 AGENCY FEE. The Borrower shall also pay
to the Agent for its own account an agency fee of $15,000 per annum from the
date of this Credit Agreement until all principal and interest on the Loan is
paid in full, payable in quarterly installments on the last day of each
February, May, August, and November. The agency fee shall be computed on the
basis of a

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<PAGE> 36
360-day-per-year and paid for the actual number of days elapsed and shall be
refunded accordingly for partial periods.

Section 2.18 LETTER OF CREDIT FEE. The Borrower
shall pay to the Agent for the Pro rata benefit of the Banks a letter of credit
fee on the date of issuance of each Letter of Credit and each anniversary
thereof that it remains outstanding, as follows:

(i) in the case of commercial Letters of Credit, the
Agent's standard fees; and

(ii) in the case of standby Letters of Credit, the
Agent's issuance costs plus 1.5% of the Letter of Credit Face Amount
(the "Annual Percentage Fee") as of the date payable.

The Annual Percentage Fee shall be computed on the basis of a 360-day-per-year
and paid for the actual number of days elapsed and shall be refunded
accordingly for partial periods.

Section 2.19 PURPOSE OF THE LOAN. The proceeds of
the Loan shall be used by the Borrower for general corporate purposes.

Section 2.20 DELIVERY OF ADVANCES AND PAYMENTS. The
Agent shall notify the Banks promptly of the Borrower's request for an Advance,
and the Banks shall deliver to the Agent, prior to 1:00 p.m. on the date an
Advance will be made, their Pro rata portion of such Advance. The Agent shall
promptly deposit all Advances in an account of the Borrower maintained at the
Agent. The Agent shall promptly deliver to the Banks their Pro rata portion of
any payments received from the Borrower in the same kind of funds as received
from the Borrower.

ARTICLE III
-----------

REPRESENTATIONS AND WARRANTIES OF THE BORROWER
----------------------------------------------

The Borrower represents and warrants to the Banks
as follows:

Section 3.01 ORGANIZATION OF THE BORROWER; CAPITAL
STRUCTURE. The Borrower and each Subsidiary that is a party to any Loan
Document is a duly organized and validly existing corporation in good standing
under the laws of the state of its incorporation. The Borrower and each
Subsidiary that is a party to any Loan Document has all requisite power and
authority

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<PAGE> 37
to execute and deliver the Loan Documents to which it is a party and to carry
out the provisions thereof. The Borrower and each Subsidiary that is a party
to any Loan Document has full corporate power, authority, and legal right to
own and operate its respective properties and to carry on the business in which
it engages and intends to engage. The Borrower and each Subsidiary that is a
party to any Loan Document is qualified or otherwise entitled to do business
and is in good standing in each jurisdiction where the failure to so qualify
would have a material, adverse effect on its business, operations, properties,
or assets or in its condition, financial or otherwise. Schedule 3.01 is a
true, correct and complete description of the capital structure of the Borrower
and its Subsidiaries, including (i) a description of their respective equity
interests (and securities and rights convertible or exchangeable, directly or
indirectly, into equity interests) and the ownership thereof and (ii) a
description of their outstanding Indebtedness for Borrowed Money, including the
face amount of each such evidence of Indebtedness, the name of the creditor
thereof and the stated maturity thereof.

Section 3.02 AUTHORIZATION; VALIDITY. The Borrower
and each Subsidiary that is a party to any Loan Document has taken all
corporate action necessary to authorize the execution, delivery and performance
by it of the Loan Documents to which it is a party. This Credit Agreement is,
and each of the other Loan Documents when executed and delivered will be,
legal, valid and binding upon the Borrower and such Subsidiaries and
enforceable against the Borrower and such Subsidiaries in accordance with their
respective terms, subject to bankruptcy and similar laws relating to creditors
rights generally and the application of general principles of equity. No
consent, approval, or authorization of, or registration or declaration with,
any governmental authority or other Person is required in connection with the
execution, delivery and performance by the Borrower or any such Subsidiaries of
any of the Loan Documents.

Section 3.03 FINANCIAL STATEMENTS. The Borrower has
furnished to the Agent its annual report on Form 10-K for the period ending
December 31, 1993 (the "10-K Report"), and its quarterly report on Form 10-Q
for the period ending March 31, 1994 (the "10-Q Report"). The 10-K Report and
the 10-Q Report are complete and correct in all material respects and fairly
present the consolidated financial condition of the Borrower as of the
respective dates, and for the respective periods, described therein.

Section 3.04 FINANCIAL CONDITION AT DATE OF CREDIT
AGREEMENT. As of the Closing Date, the Borrower (on a

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<PAGE> 38
consolidated basis) has no material amount of liabilities, contingent or
otherwise, required to be reflected in accordance with GAAP, which are not
reflected in the 10-Q Report other than those liabilities arising since March
31, 1994, in the ordinary course of business or in connection with the rights
offering contemplated in the Registration Statement. The Borrower and its
Subsidiaries have no outstanding or existing material commitments for the
purchase of land, buildings, equipment, materials, or supplies, or any
contracts for services except for those made in the ordinary course of
business.

Section 3.05 NO ADVERSE CHANGES. Since March 31,
1994, there has been no material adverse change in the consolidated condition,
financial or otherwise, of the Borrower and the Material Subsidiaries, and the
consolidated business, operations, and properties of the Borrower and each of
its Material Subsidiaries have not been substantially and adversely affected in
any way.

Section 3.06 TITLE TO PROPERTIES; PATENTS, TRADE
MARKS, ETC. The Borrower and its Material Subsidiaries have good and
marketable title to all of their respective properties and assets, including,
without limitation, the properties and assets reflected in the balance sheet
(the "Balance Sheet") contained in the 10-Q Report (excepting, however,
Inventory and immaterial amounts of other property and assets, in each case
sold or otherwise disposed of in the ordinary course of business subsequent to
March 31, 1994). There are no Liens of any nature whatsoever on any of the
properties or assets of the Borrower or its Material Subsidiaries other than
Permitted Exceptions. The Borrower and its Material Subsidiaries own or
possess sufficient rights in all the patents, trademarks, service marks, trade
names, copyrights, and licenses and rights with respect to the foregoing
necessary for the conduct of their businesses as they are now conducted,
without any known conflict with the valid rights of others which would be
inconsistent with the conduct of its business substantially as now conducted
and as currently proposed to be conducted.

Section 3.07 LITIGATION. Except as described in the
10-K Report as updated by the 10-Q Report, there are no outstanding judgments
against, or actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or any Material
Subsidiary, at law or in equity, or before or by any federal, state, local or
other governmental department, commission, board, bureau, agency, or
instrumentality including, any which involves the possibility of any judgment
or liability not fully covered by insurance or which may result in any
material, adverse change in the consolidated

- 32 -
<PAGE> 39
business, operations, properties (as a whole), or assets (as a whole) or in the
consolidated condition, financial or otherwise, of the Borrower and the
Material Subsidiaries.

Section 3.08 COMPLIANCE WITH OTHER INSTRUMENTS.
Neither the Borrower nor any of its Material Subsidiaries are in default in the
performance, observance, or fulfillment of any of the material obligations,
covenants, or conditions contained in (i) any evidence of Indebtedness for
Borrowed Money or (ii) any lease or other instrument by which such Person has
acquired an interest in real property. Neither the execution and delivery of
the Loan Documents, nor the consummation of the transactions contemplated
thereby, nor compliance with the terms and provisions thereof will violate in
any material respect the provisions of any applicable law or of any applicable
order or regulation of any governmental authority having jurisdiction over the
parties (excluding the Banks) thereto, or will conflict with any material
permit or license, or will conflict with or result in a breach of, in any
material respect, any of the terms, conditions or provisions of any restriction
or of any agreement or instrument to which the Borrower is now a party, or will
constitute a default thereunder, or will result in the creation or imposition
of any lien, charge, or encumbrance of any nature whatsoever upon any of the
properties or assets of the Borrower except in favor of the Banks.

Section 3.09 MATERIAL RESTRICTIONS. The Borrower is
not a party to any agreement or other instrument or subject to any other
restriction which materially adversely affects its business, properties (as a
whole), assets (as a whole), operations, or conditions, financial or otherwise.

Section 3.10 CORRECTNESS OF DATA FURNISHED. The Loan
Documents and all Schedules and Exhibits thereto do not contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained therein or herein not misleading; and there is no fact not
otherwise disclosed in writing to the Agent and the Banks which, to the
knowledge of the Borrower, materially affects adversely the business,
properties (as a whole) or condition (financial or otherwise) of the Borrower.

Section 3.11 ERISA. Every employee pension benefit
plan maintained by the Borrower which has been treated for federal tax purposes
as a qualified plan under Section 401(a) of the Code is so qualified, and its
related funding vehicle is tax exempt. The Borrower has not engaged in a
transaction with respect to any Plan, or any other employee benefit plan, which
has, would or could subject the Borrower to a tax or penalty

- 33 -
<PAGE> 40
imposed by either Section 4975 of the Code or Section 502(i) of ERISA, or with
or without its knowledge, has engaged in any such transactions that has, would
or could subject any of them to any such tax or penalty in excess of $100,000
in the aggregate excluding any such tax or penalty that has been paid. No Plan
has had an accumulated funding deficiency, whether or not waived. No
Reportable Event has occurred with respect to any Plan. No liability to the
PBGC has been incurred and is unpaid, or is expected to be incurred, by the
Borrower with respect to any Plan. No event or condition referred to in
Section 4042(a) of ERISA exists which presents a material risk of termination
of any Plan by the PBGC, which termination would result in liability of the
Borrower to the PBGC in excess of $100,000 in the aggregate. No proceeding or
other action has been initiated by the PBGC to terminate any Plan nor has
written notice been given to the Borrower of an intention to commence or seek
the commencement of any such proceeding or action. The Borrower has not
withdrawn nor does it expect to withdraw from any multi-employer plan or
multiple employer plan, excluding any such withdrawal that may be accomplished
without liability or any such withdrawal as to which any resulting liability
has been paid in full. The total potential withdrawal liability to the
Borrower under all multi-employer plans does not exceed $100,000 less the
aggregate Unfunded Liabilities described in the next sentence. Each employee
benefit plan maintained by the Borrower has been administered in compliance
with its terms. The term "current value" has the same meaning as in Section
4062(b)(1) of ERISA (as in effect prior to the amendment made by the
Consolidated Omnibus Budget Reconciliation Act of 1985) and the term "accrued
benefit" has the same meaning specified in Section 3(23) of ERISA. As used in
this Credit Agreement, (i) "accumulated funding deficiency" shall have the
meaning assigned to such term in Section 412 of the Code and Section 302 of
ERISA; (ii) "employee pension benefit plan," "employee benefit plan,"
"multi-employer plan" and "plan year" shall have the respective meanings
assigned to such terms in Sections 3 and 4001 of ERISA; (iii) "multiple
employer plan" means a single employer plan which has two or more contributing
sponsors at least two of whom are not under common control, within the
contemplation of Sections 4063 and 4064 of ERISA; (iv) "single employer plan"
shall have the meaning assigned to such term in Section 4001(a)(15) of ERISA;
and (v) "withdrawal liability" shall include the liabilities established by
Sections 4063, 4064 and 4201 of ERISA.

Section 3.12 TAXES. The Borrower and each of its
Subsidiaries included on the Borrower's consolidated Federal tax return have
(a) timely filed all returns required to be filed by it with respect to all
Taxes, (b) paid all Taxes shown to have become due pursuant to such returns,
and (c) paid all other Taxes

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<PAGE> 41
for which a notice of assessment or demand for payment has been received other
than Taxes that the Borrower or the Subsidiary is contesting in good faith with
appropriate proceedings. To the best of the Borrower's knowledge, all tax
returns for the Borrower and such Subsidiaries have been prepared in accordance
with all applicable laws and requirements and accurately reflect the taxable
income (or other measure of Tax) of the Person filing the same. To the best of
the Borrower's knowledge, the accruals for Taxes contained in the Balance Sheet
are adequate under GAAP to cover all liabilities for Taxes for all periods
ending on or before the date of such balance sheet and include adequate
provision for all deferred Taxes (including deferred federal Taxes), and
nothing has occurred subsequent to that date to make any of such accruals
inadequate. The Borrower and such Subsidiaries have timely filed all
information returns or reports which are required to be filed and has
accurately reported all information required to be included on such returns or
reports. The Borrower has never (i) filed any consent or agreement under
Section 341(f) of the Code, (ii) executed a waiver or consent extending any
statute of limitations for any Tax liability exceeding $100,000 which remains
outstanding, (iii) joined in or been required to join in filing a consolidated
or combined Tax return except for the consolidated return of the Borrower, (iv)
applied for a Tax ruling other than a determination letter with respect to a
qualified employee benefit plan, (v) entered into a closing agreement with any
taxing authority, or (vi) filed an election under 338(g) or Section 338(h)(10)
of the Code or caused or permitted a deemed election under Section 338(e)
thereof to occur.

Section 3.13 COMPLIANCE WITH LAWS. Except as
described in the 10-K Report as updated by the 10-Q Report, the Borrower and
its Material Subsidiaries are in compliance in all material respects with all
material laws, rules, regulations, court orders and decrees, and orders of any
governmental agency which are applicable to the Borrower or to its properties.
Except as described in the 10-K Report as updated by the 10-Q Report, neither
the Borrower nor any of its Material Subsidiaries is subject to any outstanding
or, to the knowledge of the Borrower, threatened citation by any governmental
authority having jurisdiction with respect to its operations.

Section 3.14 ENVIRONMENTAL MATTERS. Except as
described in the 10-K Report as updated by the 10-Q Report, the Borrower and
its Subsidiaries are conducting their businesses in compliance in all material
respects with all applicable federal, state, and local Environmental Laws
including but not limited to the Resource Conservation and Recovery Act, the
Clean Air Act, the Federal Water Pollution Control Act, the Toxic Substances

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<PAGE> 42
Control Act, and the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") and, except as so disclosed, there is not pending any
Environmental Complaint nor, to the best knowledge of the Borrower after
diligent investigation, any threatened (in writing), civil or criminal
litigation, notice of a material violation or lien, or administrative
proceeding relating to any Environmental Law involving the Borrower or any of
its Subsidiaries. Except as described in the 10-K Report as updated by the
10-Q Report, the Borrower and its Subsidiaries have obtained from every
federal, state, and local governmental authority, all material approvals,
consents, licenses, permits, and orders necessary to carry on their business as
currently conducted. Except as described in the 10-K Report as updated by the
10-Q Report, to the best of Borrower's knowledge, the Borrower and its
Subsidiaries have never transported Hazardous Substances or arranged for the
transportation of such Hazardous Substances to any location which is the
subject of federal, state, or local enforcement actions or other investigations
which may lead to claims against the Borrower or any of its Subsidiaries for
clean-up costs, remedial work, damages to natural resources, or for personal
injury claims exceeding, in the aggregate for all such personal injury claims,
$100,000. Except as described in the 10-K Report as updated by the 10-Q
Report, the Borrower and its Subsidiaries have never treated, stored for more
than 90 days, recycled or disposed of any Hazardous Substances on any property
now or previously owned or leased by the Borrower or any of its Subsidiaries
which under current interpretation of current federal, state, and local law
could reasonably be expected to result in a material loss or liability
(measured on a consolidated basis) to the Borrower or any of its Subsidiaries.

Section 3.15 REGULATION U, ETC. The Borrower does
not own, nor does it have any present intention of acquiring, any "margin
stock" within the meaning of Regulation U (12 CFR Part 221) of the Board of
Governors of the Federal Reserve System (herein called "margin stock"). The
proceeds of the Loan will not be used, directly or indirectly, by the Borrower
for the purpose of purchasing or carrying, or for the purpose of reducing or
retiring any indebtedness or other liability which was originally incurred to
purchase or carry, any margin stock or for any other purpose which might cause
the transactions contemplated hereby to be considered a "purpose credit" within
the meaning of said Regulation U, or which might cause this Credit Agreement to
violate Regulation G, Regulation U, Regulation T, Regulation X, or any other
regulation of the Board of Governors of the Federal Reserve System or the
Securities Exchange Act of 1934. Upon request, the Borrower will promptly
furnish the Agent with a statement in conformity with

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<PAGE> 43
the requirements of Federal Reserve Form U-1 referred to in said Regulation U.

Section 3.16 HOLDING COMPANY ACT. The Borrower is
not a "Holding Company" or a "Subsidiary Company" of a "Holding Company", or an
"Affiliate" of a "Holding Company" or of a "Subsidiary Company" of a "Holding
Company", as such terms are defined in the Public Utility Holding Company Act
of 1935, as amended.

Section 3.17 SECURITIES ACT, ETC. Neither the
registration of any security under the Securities Act of 1933, as amended, or
any other federal, state, or local securities laws, nor the qualification of
the Loan Documents under the Trust Indenture Act of 1939, as amended, is
required in connection with the Loan or the issuance and delivery of the Notes
pursuant hereto.

Section 3.18 SOLVENCY. The Borrower is solvent and
has assets having a fair value in excess of the amount required to pay its
probable liabilities on its existing debts as they become absolute and matured,
and has access to adequate capital for the conduct of its business and the
ability to pay its debts from time to time incurred in connection therewith as
such debts mature.

Section 3.19 INSURANCE. The Borrower and its
Material Subsidiaries currently have in place the insurance policies described
on Schedule 3.19. To the best of Borrower's knowledge, they have adequately
insured, by financially sound and reputable insurers (or through self-insurance
which is reasonable in amount and prudent considering the nature of the risk),
all properties of a character usually insured by business entities engaged in
the same or similar activities and business against loss or damage resulting
from fire or other risks insured against by extended coverage and public
liability insurance and against claims for personal injury, death, or property
damage occurring upon, in, or about any properties occupied or controlled by
them, or through the operation of any motor vehicles or aircraft by any of
their agents or employees, or arising in any manner out of the business carried
on by any of them. The Borrower and its Material Subsidiaries have in place
adequate business interruption insurance. The Borrower's and its Material
Subsidiaries' insurance policies contain provisions for payment of all losses
thereunder to the Agent for the Pro rata benefit of the Banks as loss payees.
Any such policies of insurance shall provide for no less than thirty (30) days
prior written cancellation notice to the Agent. Any sums received in payment
of insurance losses, returns, or unearned premiums under the

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<PAGE> 44
policies shall be paid to the Borrower or its Material Subsidiary, as the case
may be; provided, that after the occurrence and during the continuance of a
Possible Default or an Event of Default, such sums shall be paid to the Agent
for the Pro rata benefit of the Banks and the Banks (a) may apply such sums to
any Obligation, whether or not then due and payable, and, to the extent such
sums are applied to the principal of the Loan, the Banks may treat such
application as a permanent reduction of the Commitments, or (b) may deliver
such sums to the Borrower for the purpose of replacing, repairing, or restoring
its property.

Section 3.20 RECEIVABLES. Each Receivable reflected
on any Borrowing Base Certificate and each invoice representing any such
Receivable (other than proceeds of letters of credit, insurance proceeds,
contract rights, chattel paper, instruments and documents not arising directly
out of a sale or lease of goods or services) will cover a bona fide sale or
lease and delivery of merchandise usually dealt in by the Borrower, Tradco or
Micron, or the rendition by the Borrower, Tradco or Micron of services to
customers in the ordinary course of business, and will be for a liquidated
amount maturing as reflected in such Certificate and in the duplicate invoice
covering said sale, and the Agent's and the Banks' security interest therein
will not be subject to any offset, deduction, counterclaim, lien or other
condition. None of the Borrower's invoices shall be backdated, postdated or
redated and the Borrower shall make no sales on credit terms beyond that
customary in the Borrower's industry. If any warranty is breached as to any
Receivable or invoice, then the Agent and the Banks may deem ineligible any and
all Receivables owing by that customer or account debtor, but the Agent and the
Banks shall retain their security interest in all Receivables, eligible and
ineligible, until all Obligations have been fully satisfied.

ARTICLE IV
----------

CONDITIONS TO BORROWING
-----------------------

Part I

CONDITIONS PRECEDENT TO THIS CREDIT AGREEMENT. The
obligation of the Banks under this Credit Agreement shall be subject to the
satisfaction of the following conditions prior to or concurrently with the
execution of this Credit Agreement:

Section 4.01 REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained in Article III shall be true in all
material respects.

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<PAGE> 45
Section 4.02 NO DEFAULTS. There shall exist no
condition or event constituting an Event of Default or Possible Default.

Section 4.03 PERFORMANCE. The Borrower shall have
performed and complied with all material agreements and conditions contained
herein required to be performed or complied with by them prior to or at the
time of the Closing Date.

Section 4.04 OPINIONS OF COUNSEL FOR THE BORROWER.
The Banks shall have received the favorable opinions of counsel for the
Borrower in form and substance satisfactory to the Agent, substantially to the
same effect as the Borrower's representations and warranties in Sections 3.01
(except for clause (ii), 3.02, 3.07 (to such counsel's best knowledge), 3.16
and 3.17, as well as similar matters regarding the Borrower's Material
Subsidiaries. Such opinions shall also include a favorable opinion as to such
other matters relative to the transactions contemplated by the Loan Documents
as the Agent or any of the Banks may reasonably request.

Section 4.05 CORPORATE PROCEEDINGS. The Borrower
shall have delivered to the Agent and the Banks, all dated as of the Closing
Date (or as of a date recent to the Closing Date):

(i) copies of its and its Material Subsidiaries'
charters, certified by the Secretary of State of their respective
states of incorporation;

(ii) a certificate of good standing from each
jurisdiction under which it and its Material Subsidiaries are
incorporated, together with certificates of good standing or authority
to transact business or similar certificates from each state or
province where the Borrower and each of its Material Subsidiaries is
required to be qualified, in all cases from the Secretary of State or
comparable officer of such jurisdiction;

(iii) a copy of its and its Material Subsidiaries'
code of regulations (or by-laws) certified by their respective
officers;

(iv) resolutions of its and its wholly-owned
Subsidiaries' Boards of Directors authorizing the execution, delivery
and performance of the respective Loan Documents to which each such
entity is a party, certified by their respective officers; and

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<PAGE> 46
(v) incumbency certificates certifying the names of
the Borrower's and each of its Subsidiaries' officers and their
signatures, certified by their respective officers.

Section 4.06 PAYMENT OF EXPENSES. The Borrower shall
have paid, or reimbursed the Banks for, the amounts required to be paid or
reimbursed by the Borrower pursuant to this Credit Agreement and the commitment
letter dated as of April 20, 1994, including, without limitation, the
restructuring fee and the fees (in an amount not to exceed $55,000 as of the
Closing Date) and reasonable out of pocket expenses of Thompson, Hine and Flory
(to the extent requested at least one Business Day prior to the Closing Date).

Section 4.07 SECURITY AGREEMENT; PLEDGE AGREEMENT.
The Banks and the Agent shall have received (a) the executed Security Agreement
and satisfactory evidence of the filing of the related financing statements in
the appropriate jurisdictions and (b) the executed Pledge Agreement.

Section 4.08 MORTGAGES; SURVEYS; TITLE INSURANCE.
The Banks and the Agent shall have received the executed Mortgages and surveys
and title insurance for the properties reflected therein, all in form and
substance reasonably satisfactory to the Banks and the Agent.

Section 4.09 CASH COLLATERAL AGREEMENTS. The Banks
and the Agent shall have received the executed Cash Collateral Agreement and
the Additional Cash Collateral Agreements.

Section 4.10 SCHEDULES. The Banks and the Agent
shall have received, at least five business days prior to the Closing Date, and
approved (in their sole discretion) each of the Schedules attached hereto and
the disclosures contained in the 10-K Report and the 10-Q Report.

Section 4.11 COLLATERAL DISCLOSURE LIST. The Banks
and the Agent shall have received, at least five business days prior to the
Closing Date, a completed collateral disclosure list (the "Collateral
Disclosure List") in form and substance satisfactory to the Agent and the
Banks.

Section 4.12 OTHER DOCUMENTS. The Banks shall have
received such other certificates, opinions, agreements and documents as they
shall reasonably request and the Banks, in their sole discretion, shall be
satisfied with the condition, financial and otherwise, of the Borrower.

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<PAGE> 47
Part II

CONDITIONS PRECEDENT TO FUTURE ADVANCES. The
obligation of the Banks to make Advances from time to time shall be subject to
the satisfaction of the following conditions prior to or concurrently with such
action:

Section 4.13 NO DEFAULTS. There shall exist no
condition or event constituting an Event of Default or Possible Default.

Section 4.14 PERFORMANCE. The Borrower shall have
performed and complied with all material agreements and conditions contained
herein required to be performed or complied with by it prior to or at the time
of such action.

Section 4.15 REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained in Article III shall be true in all
material respects on and as of the time of such action, with the same effect as
if made on and as of such date, (unless stated as of a specific date, and after
giving effect to such updated information, as to such representation and
warranty stated as of a specific date, reflecting transactions not prohibited
by the terms of this Credit Agreement), as is necessary to make such
representations and warranties true in all material respects as of such date.

Section 4.16 CERTIFICATE. If requested by the Agent,
the Borrower shall have delivered to the Agent a certificate dated the date of
such action and signed by the chief financial officer of the Borrower,
certifying to the matters covered by the conditions specified in Sections 4.13,
4.14 and 4.15.

Section 4.17 OTHER DOCUMENTS. The Banks shall have
received such other certificates, opinions, agreements and documents as they
shall reasonably request.

ARTICLE V
---------

AFFIRMATIVE COVENANTS OF THE BORROWER
-------------------------------------

Until all principal of and interest on the Loan and
the Notes and all other Obligations, liabilities and indebtedness of the
Borrower to the Banks under this Credit Agreement have been paid in full and
the Commitments have expired or been terminated:

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<PAGE> 48
Section 5.01 PAYMENT OF AMOUNTS DUE. The Borrower
will make all payments of the principal of and interest on the Loan and the
Notes promptly as the same become due.

Section 5.02 EXISTENCE, BUSINESS, ETC. The Borrower
will cause to be done all things necessary to preserve and to keep in full
force and effect its and its Material Subsidiaries' existence and its and its
Material Subsidiaries' rights; provided, however, any of the Material
Subsidiaries may merge into the Borrower in a transaction permitted by Section
6.02 of this Credit Agreement. The Borrower will, and will cause its Material
Subsidiaries to, comply in all material respects with all federal, state, and
local laws and regulations now in effect or hereafter promulgated by any
properly constituted governmental authority having jurisdiction (other than
laws and regulations being contesting in good faith by appropriate
proceedings).

Section 5.03 MAINTENANCE OF PROPERTIES. The Borrower
will, and will cause its Material Subsidiaries to, at all times maintain,
preserve, protect, and keep its and their properties used in the conduct of its
and their business in good repair, working order, and condition, ordinary wear
and tear excepted, and, from time to time, make all needful and proper repairs,
renewals, replacements, betterments, and improvements thereto, so that the
business carried on in connection therewith may be properly conducted at all
times.

Section 5.04 PAYMENT OF TAXES, ETC. The Borrower
will, and will cause its Subsidiaries included on the Borrower's consolidated
Federal tax returns, to pay and discharge all lawful taxes, assessments, and
governmental charges or levies imposed upon it or them, or upon its or their
income or profits, or upon its properties, prior to the date that penalties
could begin to accrue, as well as all lawful claims for labor, materials, and
supplies which, if unpaid, might become a lien or charge upon such properties
or any part thereof; provided, however, the Borrower and such Subsidiaries
shall not be required to pay and discharge any such tax, assessment, charge,
levy, or claim so long as the validity thereof shall be contested in good faith
by appropriate proceedings and there shall be set aside on its or their
respective books such reserves with respect thereto as are required by GAAP.
The Borrower and such Subsidiaries will in all events pay such tax, assessment,
charge, levy or claim before the property subject thereto shall be sold to
satisfy any lien which has attached as security therefor.

Section 5.05 INSURANCE. The Borrower will, and will
cause its Material Subsidiaries to, keep in place the

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<PAGE> 49
insurance policies described on Schedule 3.19. The Borrower will deliver to
the Agent at such times as material changes may be effected in the insurance
coverage of the Borrower and its Material Subsidiaries, such changes along with
a certificate of the chief financial officer of the Borrower containing a
statement that such policies comply with the provisions of Section 3.19.

Section 5.06 ACCOUNTS AND REPORTS OF THE BORROWER.
The Borrower will maintain a standard system of accounting in accordance with
GAAP and furnish to the Banks the following reports:

(i) As soon as available, and in any event within
90 days after the end of each fiscal year of the Borrower, audited
financial statements, together with all notes thereto, prepared in
reasonable detail and certified without qualification by independent
certified public accountants of recognized national standing (the
"Accountant"), and certified by the chief financial officer of the
Borrower, which financial statements shall contain the following:
(x) a consolidated balance sheet of the Borrower, (y) a consolidated
statement of income and expense of the Borrower, and (z) a
consolidated statement of changes in financial position. The Borrower
shall also deliver a letter from the Accountant identifying the
Borrower's Material Subsidiaries and stating that the examination made
in preparing and certifying the above financial statements has not
disclosed the existence of any condition or event which constitutes an
Event of Default or Possible Default or, if such a condition or event
exists, specifying the nature thereof; and such other and further
information as the Agent may reasonably request from the Borrower;

(ii) As soon as available, and in any event within
45 days after the end of each fiscal quarter of each fiscal year of
the Borrower, the following unaudited financial statements certified
by the chief financial officer of the Borrower, (v) a consolidated
balance sheet of the Borrower as at the end of such quarter, (w) a
consolidated income and expense statement of the Borrower for such
quarter, all prepared in accordance with GAAP and (x) a consolidated
statement of changes in financial position. The Borrower shall also
deliver with such financial statements the following: (y) a
calculation of the equations contained in Section 2.01 and in Section

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<PAGE> 50
5.16, in each case in form and substance satisfactory to the Agent and
(z) a statement that the examination made in preparing and certifying
such financial statements has not disclosed the existence of any
condition or event which constitutes an Event of Default or Possible
Default, or if such a condition or event exists, specifying the nature
thereof;

(iii) As soon as available, and in any event within
30 days after the end of each fiscal month of each fiscal year of the
Borrower, the following unaudited reports: monthly financial
statements in the form of Exhibit 5.06(iii); the Borrower's monthly
reports 566, 566 "OSC," and 566F; monthly agings, broken down by
division and invoice date, of accounts receivable reconciled to the
Borrowing Base Certificate for the end of such month, and setting
forth any extensions of the maturity of, refinancing of, or other
material changes in the terms of any accounts, together with such
further information with respect thereto as the Agent and the Banks
may require; and the Borrower's conversion variance report;

(iv) As soon as available, copies of all management
letters from the Borrower's independent public accountants and copies
of all documents filed with, and material correspondence to or from,
the SEC or any securities exchange, and copies of all press releases;

(v) Immediately after Borrower becomes aware of the
occurrence of any condition or event which constitutes an Event of
Default or Possible Default, and in any event within two days after
becoming aware of such Event or Default or Possible Default, notice of
such condition or event and the action which the Borrower proposes to
take with respect thereto; and

(vi) Upon the request of the Agent or any Bank,
copies of all financial statements, audits, and reports which the
Borrower may have made of or concerning its accounts, books, or
records, or which they have provided to any third party or filed
publicly.

Section 5.07 FURTHER REPORTING REGARDING RECEIVABLES.
The Borrower shall prepare borrowing base certificates in the form of Exhibit
5.07 attached hereto and incorporated herein by reference ("Borrowing Base
Certificates")

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<PAGE> 51
as of the 15th and as of the last day of each calendar month, and shall deliver
them to the Agent, in each case, within 30 days of those dates, together with
reports of the Borrower's sales, credits to sales or credit memoranda
applicable to sales, collections and non-cash charges (from whatever source,
including, without limitation, sales and noncash journals or other credits to
Receivables). After the creation or acquisition of any Receivables, the
Borrower shall provide to the Agent, as often as it may reasonably request,
schedules in such form and substance and accompanied by such copies of original
source and background documents (including, without limitation, sales, credit
and remittance journals) as the Agent may require describing all Receivables
created or acquired.

Section 5.08 FURTHER REPORTING REGARDING INVENTORY.
Values shown on reports of Inventory shall be at the lower of cost or market
value determined in accordance with the Borrower's usual cost accounting
system, consistently applied. Notwithstanding the provisions of Section 5.07,
only the Borrowing Base Certificate prepared as of the last day of each
calendar month shall reflect changes in Inventory levels. No later than 30
days after the end of each calendar month, the Borrower shall submit to the
Agent an Inventory calculation reconciled to the Borrowing Base Certificate for
the end of such month, the Borrower's, Tradco's and Micron's Inventory records,
their trial balances and general ledgers, broken down into such detail and with
such categories as the Agent shall require (including, but not limited to, a
report indicating the type, location and amount of raw materials, work in
process and finished goods, and all other information deemed necessary by the
Agent to determine levels of that which is and is not Eligible Inventory).

Section 5.09 DISPUTES AND CLAIMS REGARDING
RECEIVABLES. The Borrower shall notify the Agent promptly of all returns and
recoveries of material amounts of merchandise sold by it, Tradco or Micron and,
upon the occurrence and during the continuance of an Event of Default, shall
deliver the merchandise returned or recovered to the Agent at a location or
locations selected by the Agent in its sole discretion, unless otherwise
directed by the Agent. The Borrower shall also notify the Agent promptly of
all material disputes and claims. After the occurrence and during the
continuance of an Event of Default, no discount, credit or allowance outside
the ordinary course of business or material, adverse extension, compromise or
settlement shall be granted to any customer or account debtor and no returns of
merchandise outside the ordinary course of business shall be accepted by the
Borrower without the Agent's consent.

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<PAGE> 52
Section 5.10 LOCK BOXES.

(i) The Borrower shall continue to rent the post
office box at _____________________ (the "Domestic Lock Box") in
accordance with an agreement with the Agent; shall continue to rent
the post office box at ______________________________ (the "West Coast
Lock Box") in accordance with an agreement with First Interstate Bank
of California ("First California"); and shall rent an additional post
office box at _____________ (the "Foreign Lock Box") in accordance
with an agreement with the Agent.

(ii) Tradco shall continue to rent the post office
box at _____________________ (the "Tradco Lock Box") in accordance
with an agreement with the Bank of Washington ("BofW").

(iii) Micron shall continue to rent the post office
box at _______________________ (the "Micron Lock Box") in accordance
with an agreement with First Interstate Bank of Utah ("First Utah").

(iv) The Borrower, Tradco and Micron have notified
all of their current customers and account debtors (and will notify
future domestic customers and account debtors) to forward all
remittances of every kind due any of them ("Remittances") to the
Domestic Lock Box, the West Coast Lock Box, the Tradco Lock Box or the
Micron Lock Box, as the case may be; and will notify all of their
foreign customers and account debtors to forward all Remittances of
every kind due the Borrower, Tradco or Micron to the Foreign Lock Box.
None of the Borrower, Tradco or Micron will alter such instructions or
such agreements without the consent of the Agent, and immediately upon
receipt thereof, the Borrower, Tradco and Micron shall deposit all
proceeds of Receivables or other Collateral into the Lock Boxes. The
Agent, on behalf of the Banks, shall have, after the occurrence and
during the continuance of an Event of Default, sole access to the Lock
Boxes and the Borrower shall take all action necessary to grant the
Agent such sole access.

(v) After the occurrence and during the continuance
of an Event of Default, none of the Borrower, Tradco or Micron shall
remove any item from the Lock Boxes without the Agent's prior written
consent, and the Borrower, Tradco and Micron shall not

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<PAGE> 53
notify any customer or account debtor to pay any Remittance to any
other place or address without the Agent's prior written consent. If
the Borrower, Tradco or Micron should neglect or refuse to notify any
customer or account debtor to pay any Remittance to the Lock Boxes,
the Agent shall be entitled to make such notification. The Borrower,
Tradco and Micron hereby grant to the Agent and the Banks an
irrevocable power of attorney, coupled with an interest to take, upon
the occurrence and during the continuance of an Event of Default, in
the Borrower's, Tradco's, or Micron's name all action necessary (i) to
grant the Agent sole access to the Lock Boxes, (ii) to contact account
debtors to pay any Remittance to the Lock Boxes, and (iii) to endorse
each Remittance delivered to the Lock Boxes for deposit in accordance
with Section 5.11.

Section 5.11 CASH COLLATERAL ACCOUNT. Upon the
occurrence and during the continuance of an Event of Default, all Remittances
and all other proceeds of Receivables and other Collateral shall be deposited
into a cash collateral account (the "Cash Collateral Account") governed by the
Cash Collateral Agreement executed in connection with this Credit Agreement
(the "Cash Collateral Agreement.") To facilitate the foregoing, the Borrower,
Tradco, Micron, the Agent, First California, BofW and First Utah will enter
into additional cash collateral agreements (the "Additional Cash Collateral
Agreements"). All costs of collection of the Borrower's, Tradco's, and
Micron's Receivables (including attorney's fees, out-of-pocket expenses,
administrative and record-keeping costs, and all service charges and costs
related to the establishment and maintenance of the Lock Boxes and the Cash
Collateral Account) shall be the sole responsibility of the Borrower, whether
the same are incurred by the Agent, the Banks or the Borrower, and the Agent
and the Banks may charge the same against the Borrower and/or any account
maintained by the Borrower with the Agent or the Banks and the same shall be
deemed part of the Obligations hereunder.

Section 5.12 INFORMATION AND INSPECTION. The
Borrower will furnish to the Agent or any Bank, from time to time, upon the
request by the Agent or any Bank, full information pertinent to any covenant,
provision, or condition of this Credit Agreement or of any other Loan Document
or to any matter in connection with its activities and business, and at all
reasonable times upon reasonable notice (prior to a Possible Default or Event
of Default) and as often as the Agent or any Bank may reasonably request,
permit any authorized representative designated by the Agent or any Bank to
visit and inspect during normal business hours any of its properties, including
its books

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<PAGE> 54
(and to take extracts therefrom) and to discuss its affairs, finances, and
accounts with its officers and employees. The chief financial officer of the
Borrower shall be available to meet with the Banks no less frequently than
quarterly and provide such information and status reports as the Banks may
reasonably request. The Borrower will cooperate with the Agent and the Banks
and their representatives in connection with quarterly asset based audits at
all locations where Collateral is maintained. The Banks shall use commercially
reasonable efforts to keep any information so obtained by them as confidential
and to utilize it solely for purposes related to the Loan.

Section 5.13 NOTICE OF LITIGATION. The Borrower will
promptly notify the Agent and each of the Banks in writing of any litigation,
legal proceeding or written threat of legal proceeding: (i) with any Person,
including, without limitation, any governmental authorities and any member of
the staff or any representative of any such Person, which if adversely
determined with regard to the Borrower would have a material adverse effect on
the Borrower, its properties, operation or condition, taken as a whole; or (ii)
involving amounts in excess of $5,000,000 affecting the Borrower or its
Material Subsidiaries, whether or not fully covered by insurance, and
regardless of the subject matter thereof (excluding, however, any actions
relating to workmen's compensation claims or negligence claims relating to use
of motor vehicles, if fully covered by insurance, subject to deductibles).

Section 5.14 PENSION PLANS. The Borrower shall (i)
keep in full force and effect any Plans which are presently in existence or
may, from time to time, come into existence under ERISA, unless such Plans can
be terminated without liability to the Borrower in connection with such
termination (as distinguished from any continuing funding obligation) in excess
of $100,000 in the aggregate, (ii) make contributions to each of the Plans and
all multi-employer plans in a timely manner and in a sufficient amount to
comply with the requirements of ERISA, (iii) comply with all material
requirements of ERISA which relate to such Plans and multi-employer plans, and
(iv) notify the Agent immediately upon receipt by the Borrower of any notice of
the institution of any proceeding or other action which may result in the
termination of any Plan. The term "multi-employer plan" shall have the meaning
assigned to it in Section 3.11. For purposes of this Credit Agreement, "ERISA
liabilities" means the aggregate liability (whether or not arising under ERISA)
of the Borrower, incurred as a result of actions inconsistent with the
covenants set forth in this Section 5.14 or that are or would be incurred
following the termination of any Plan described in Section 8.08.

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<PAGE> 55
Section 5.15 BANKING RELATIONSHIPS. The Borrower
will, and will cause its Material Subsidiaries to, at all times maintain all of
its and their bank accounts with the Banks, and promptly deposit all funds
received into such accounts; provided, however, that the Borrower and its
Material Subsidiaries may also continue to maintain (a) their current bank
accounts, and the target balances therein, as identified on the Collateral
Disclosure List and (b) such other accounts as the Banks approve, as described
on Schedule 5.15 hereto.

Section 5.16 REQUIRED EQUITY. Commencing on June 30,
1994, and at all times thereafter, the Borrower shall have and maintain Total
Shareholders' Equity of not less than $27,861,000, PLUS the amount of any New
Equity (to the extent received as of such time), PLUS the amount of any FIFO
Adjustment, PLUS the amount of any increase in Total Shareholders' Equity
resulting from a FASB Mandated Change, MINUS the amount of any decrease in
Total Shareholders' Equity resulting from a FASB Mandated Change, MINUS the
amounts expressed below during the applicable periods:

<TABLE>
<S> <C>
Period Commencing Amount
----------------- ------

June 30, 1994 $7,900,000

September 30, 1994 $11,255,000

December 31, 1994 $12,160,000

March 31, 1995 $15,520,000

June 30, 1995 $17,800,000

September 30, 1995 $16,201,000

December 31, 1995 and $11,321,000
thereafter
</TABLE>

Section 5.17 POST-CLOSING ITEMS. The Borrower will
promptly perform and complete to the satisfaction of the Agent each of the
matters, if any, set forth on Schedule 5.17 attached hereto on or before the
date set forth on Schedule 5.17 for the performance and completion thereof.

Section 5.18 FURTHER ASSURANCES. The Borrower agrees
to execute and deliver (and cause its Subsidiaries to execute and deliver) to
the Agent and the Banks any agreements,

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<PAGE> 56
documents and instruments, including, without limitation, additional Notes as
replacements or substitutions as may be reasonably required by the Banks and
additional security agreements, financing statements, pledge agreements and
mortgages, and to take such other actions as reasonably requested by the Agent
or any Bank to effect the transactions contemplated hereby and to secure in a
manner satisfactory to the Agent and the Banks the Collateral and any
after-acquired property, including real property. Without limiting the
foregoing, the Borrower shall (a) provide access to its and its Material
Subsidiaries' properties and cooperate in any future environmental assessments
and appraisals and (b) cooperate with the Agent and the Banks in making any
reasonable amendments to the Loan Documents as may be necessary or appropriate
in connection with the EXIM Bank Facility.

Section 5.19 PAYMENT OF NEW EQUITY. The Borrower
will deliver, within one (1) Business Day following receipt by the Borrower, to
the Agent the entire net cash proceeds of any New Equity obtained, all of which
shall be applied to the outstanding balance of the Loan.

ARTICLE VI
----------

NEGATIVE COVENANTS OF THE BORROWER
----------------------------------

Until all principal of and interest on the Loan and
the Notes and all other Obligations, liabilities, and indebtedness of the
Borrower to the Banks under this Credit Agreement have been paid in full and
the Commitments have expired or been terminated:

Section 6.01 LIMITATION ON LIENS. The Borrower will
not, and will not permit its Material Subsidiaries to, create, incur, assume,
or suffer to be created, or incurred, or assumed, or to exist, any Lien of any
kind on any of its assets or properties; provided, however, that the foregoing
restrictions shall not prohibit:

(i) Liens in favor of the Banks;

(ii) Liens for taxes, assessments, governmental
charges, levies, or similar claims, if payment thereof shall not yet
be due or if the obligation to pay is being contested in good faith by
appropriate proceedings and adequate reserves with respect thereto
shall have been set aside on the books of the Borrower, but in any
event only so long as the

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<PAGE> 57
sale of property subject to such lien is not imminent by reason of
non-payment;

(iii) Liens of carriers, warehousemen, mechanics,
laborers, landlords, and materialmen, in each case, incurred in the
ordinary course of business for sums not yet due or if the obligation
to pay is being contested in good faith by appropriate proceedings and
adequate reserves with respect thereto shall have been set aside on
the books of the Borrower, but in any event only so long as the sale
of property subject to such lien is not imminent by reason of
non-payment;

(iv) Liens in the ordinary course of business in
connection with worker's compensation or unemployment insurance or
social security;

(v) minor title defects consisting of minor survey
exceptions, easements or rights-of-way, building lines shown on the
street dedication plats, reservations of record and zoning or other
restrictions as to the use of real property, which title defects and
encumbrances do not, in the aggregate, materially impair the use of
such property in the operation of its activities and business; and

(vi) Capitalized Lease Obligations and purchase
money security interests on fixed assets securing amounts not in
excess of $15,000,000.

Each of the foregoing Liens, exceptions, and charges being referred to
collectively as the "Permitted Exceptions."

Section 6.02 LIQUIDATION, MERGER, OR CONSOLIDATION.
The Borrower will not and will not permit its Material Subsidiaries to dissolve
or liquidate, or consolidate with or merge with or into any person, firm,
corporation or entity or otherwise effect any business combination with any
person, firm, corporation or entity; provided, however, that the Borrower or
any of its Material Subsidiaries may effectuate a business combination if
either (i) the Borrower is the surviving entity and no Event of Default shall
have occurred and be continuing or be created thereby and no Possible Default
shall be existing or created thereby or (ii) the Required Banks have (in their
discretion) consented in writing prior to the business combination.

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<PAGE> 58
Section 6.03 AMENDMENT OF ARTICLES OF INCORPORATION
AND/OR BY-LAWS. The Borrower will not and will cause its Material Subsidiaries
not to amend, modify, or supplement its articles of incorporation or its code
of regulations in any material respect that would be detrimental to the
performance by the Borrower of its obligations under the Loan Documents or to
the rights of the Agent or the Banks thereunder.

Section 6.04 DISTRIBUTIONS OF PROFITS; PURCHASES OR
REDEMPTION OF STOCK; DIVIDENDS. The Borrower will not make or pay (or obligate
itself to make or pay) any dividend, distribution or any other payment in
respect of any of its shares of capital stock, or redeem, purchase, or
otherwise acquire for any consideration (directly or indirectly) any of the
shares of its capital stock, except for annual redemptions not exceeding
$200,000 in the aggregate consistent with past practice. Notwithstanding the
foregoing, upon the Borrower achieving Profitability, it may pay dividends to
its shareholders with respect to any fiscal quarter in which it achieves
Profitability not in excess of an amount equal to 25% of Net Income for that
fiscal quarter plus the immediately preceding fiscal quarter, so long as no
Event of Default shall have occurred and be continuing or be created thereby
and no Possible Default shall be existing or created thereby.

Section 6.05 LIMITATION ON INVESTMENTS. The Borrower
will not, and will not permit its Material Subsidiaries to, purchase or
otherwise acquire or make any Investment, except for (i) Investments
existing on the Closing Date but without any increase therein (no increase in
an Investment shall be deemed to have occurred solely by reason of an increase
in the fair market value of such Investment or increases in the net worth in
the Person that is the subject of the Investment resulting from earnings of
such Person), (ii) Investments in the ordinary course of business or (iii),
without duplication, Investments not in the ordinary course of business in
Subsidiaries, joint ventures and similar Persons in the titanium or related
industries (except that Investments in connection with the existing Department
of Energy contract shall also be permitted) so long as the aggregate amount of
all such Investments does not exceed Five Million Dollars ($5,000,000) measured
from June 3, 1993. For purposes of this Section 6.05, the term "ordinary
course of business" means loans or advances to employees in accordance with the
Borrower's customary practices or Investments similar to the foregoing arising
in the ongoing operation of the Borrower's and its Material Subsidiaries'
businesses.

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<PAGE> 59
Section 6.06 DISPOSITION OF ASSETS The Borrower will
not, and will not permit its Material Subsidiaries to, Dispose of any assets,
interests, facilities, or property ("Assets"), except for (i) sales of
Inventory in the ordinary course of business, (ii) assignments of uncollectible
Receivables, (iii) Dispositions of worn or obsolete equipment that is replaced
within 30 days, (iv) Assets historically associated with the Borrower's
Ashtabula, Ohio, facility (provided, however, that Inventory may only be
Disposed of by sales in the ordinary course of business), and (v) equity
interests of Persons other than Material Subsidiaries.

Section 6.07 FISCAL YEAR. Except as required by
law, the Borrower will not change its fiscal year.

Section 6.08 ERISA. (i) The Borrower shall not
permit, with respect to any Plan whose current value of benefits which are
guaranteed by the PBGC under Title IV of ERISA (determined on the basis of
assumptions prescribed by the PBGC) exceeds the then current value of such
Plan's assets allocable to such benefit(s):

(A) any Reportable Event;

(B) the filing with the PBGC of a notice of intent
to terminate a Plan or the giving of a notice of such termination to
participants in anticipation of such filing; or

(C) the adoption of an amendment to a Plan if, after
giving effect to such amendment, the Plan is a plan described in
Section 4021(b)(1) of ERISA.

(ii) The Borrower shall not (I) withdraw from one or
more multiple employer plans during a plan year for which the Borrower is a
substantial employer with respect to such Plan if the Borrower would incur
liability to the PBGC with respect to such Plan or Plans under Section 4063 of
ERISA, or (II) withdraw from one or more multi-employer plans if, pursuant to
Section 4202 of ERISA, a withdrawal liability against the Borrower would
result, or (III) engage in a transaction or transactions which could subject
the Borrower, to a tax or penalty imposed by either Section 4975 of the Code or
Section 502(i) of ERISA, or (IV) allow one or more Plans, at any time to have
an accumulated funding deficiency, or (V) fail to make any contributions when
due to a Plan that is required to satisfy the minimum funding standards under
Section 412 of the Code. As used in this Section 6.08, (y) "accumulated
funding deficiency", "multiple employer plan", and "plan year" shall have

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<PAGE> 60
the respective meanings assigned to such terms in Section 3.11 and (z)
"withdrawal liability" means the amount thereof as determined in accordance
with Section 4201 of ERISA.

(iii) Notwithstanding clauses (i), (ii)(I) or
(ii)(II) above, the Borrower shall have the right to terminate, or withdraw
from, any Plan or Plans at any time so long as the total of the continuing
funding obligation with respect to such Plans, plus the portion of any
liability incurred by reason of such terminations or withdrawals required to be
paid in any one year, does not increase the annual cost of such Plan or Plans
(including funding costs) by more than $100,000 in the aggregate.

Section 6.09 REGULATION U. The Borrower shall not,
directly or indirectly, (a) apply any part of the proceeds of the Loan to the
purchasing or carrying of any "margin stock" within the meaning of Regulations
G, T, U or X of the Federal Reserve Board, or any regulations, interpretations
or rulings thereunder, (b) extend credit to others for the purpose of
purchasing or carrying any such margin stock, or (c) retire Indebtedness which
was incurred to purchase or carry any such margin stock.

Section 6.10 ENVIRONMENTAL COMPLIANCE. The Borrower
will not and will cause its Material Subsidiaries not to:

(a) treat, store for more than 90 days (or such
longer periods as are unlawful for smaller quantity generators),
recycle or dispose of Hazardous Substances on any property owned or
leased by the Borrower, except in compliance with applicable permits
and applicable laws; or dispose of or Release reportable quantities of
Hazardous Substances on any property owned or leased by the Borrower;

(b) purchase or lease any property where, to the
best knowledge of the Borrower, after reasonable investigation,
Hazardous Substances have been disposed or released; or

(c) fail to comply in full with all clean-up or
remediation required under any Environmental law or order of any
governmental authority concerning property owned or leased by the
Borrower, except to the extent that compliance is being contested in
good faith by appropriate proceedings and reserves are established or
other appropriate provisions made therefor in

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<PAGE> 61
accordance with GAAP (to the extent such reserves or provisions are
required in accordance with GAAP).

Section 6.11 LIMITATION ON INDEBTEDNESS FOR BORROWED
MONEY. The Borrower will not, and will not permit its Material Subsidiaries
to, incur, assume, or pay any Indebtedness for Borrowed Money; provided,
however, that the foregoing restriction shall not prohibit (a) Indebtedness for
Borrowed Money owing to the Banks, (b) industrial revenue bond(s) outstanding
on the date of this Credit Agreement not in excess of $1,180,000, (c)
Capitalized Lease Obligations and amounts secured by purchase money security
interests up to the maximum amount otherwise permitted by Section 6.01(vi) and
(d) Guarantees of Indebtedness for Borrowed Money up to the maximum amount
otherwise permitted by Section 6.05 of this Credit Agreement.

ARTICLE VII
-----------

WAIVERS AND AMENDMENTS
----------------------

(i) Any of the acts which the Borrower is required
to do or prohibited from doing by any of the provisions of this Credit
Agreement may, notwithstanding such provisions, be omitted or done, as the case
may be, (ii) any provision of the Loan Documents may be amended or modified and
(iii) any provision requiring the consent, approval or satisfaction of the
Banks shall be met, in each case, if the Required Banks have agreed or
consented thereto in writing except no waiver, amendment, modification or other
alteration with regard to the amount of or time for payment of any amount
payable by the Borrower under the Loan Documents, the amount of the
Commitments, the interest rate(s) on the Loan, the provisions of Section 2.07,
the provisions of Section 11.05, the definition of "Borrowing Base" or any of
the advance rates referenced therein, the provisions of this Article VII or the
conditions precedent to the making of any Advance shall be effective without
the written agreement or consent of all of the Banks and the Agent thereto.

ARTICLE VIII
------------

DEFAULTS
--------

Each of the following events shall be termed "Events
of Default":

Section 8.01 PRINCIPAL DEFAULT. Default shall be
made the payment of any principal of the Notes or the Loan

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<PAGE> 62
when and as the same shall become due and payable, whether at maturity or
otherwise, and such default shall continue for five consecutive calendar
days; or

Section 8.02 INTEREST DEFAULT. Default shall be made
in the payment of any interest on or with respect to the Notes or the Loan when
the same shall become due and payable and such default shall continue for ten
consecutive calendar days; or

Section 8.03 OTHER PAYMENT DEFAULTS. Default shall
be made in the payment of any other amount when and as the same shall become
due and payable under the terms of this Credit Agreement or any of the Loan
Documents and such default shall continue for thirty consecutive calendar days
after demand or delivery of invoice therefor; or

Section 8.04 ARTICLE VI DEFAULTS AND CERTAIN Article
V Defaults. Default shall be made in the due observance or performance of any
covenant, agreement, or provision contained in Section 5.02 (as to maintenance
of existence only) or in Section 5.16, or in any provision of Article VI; or

Section 8.05 OTHER PROVISION DEFAULT. Default shall
be made in the due observance or performance of any other covenant, agreement,
or provision of any Loan Document to be performed or observed by the Borrower
or any other party thereto (other than the Agent or the Banks) and such default
shall not be corrected or cured within thirty consecutive calendar days; or

Section 8.06 REPRESENTATION AND WARRANTY. Any
representation or warranty made by the Borrower or any other party (other than
the Agent or the Banks) under any Loan Document or in any certificate, report,
instrument, financial statement or other document furnished pursuant to any
Loan Document (including the information provided in the Collateral Disclosure
List) shall prove to have been false or incorrect in any material respect as of
the date on which made and such representation or warranty shall continue to be
material; or

Section 8.07 FINANCIAL DIFFICULTIES. Any of the
following events evidencing the financial difficulties of the Borrower or any
Material Subsidiary shall occur:

(i) any admission in writing of inability to pay
debts as they become due or the failure to pay debts generally as such
debts become due; or

(ii) the entry of an order for relief in the name
of the Borrower or any such Subsidiary under

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<PAGE> 63
Title 11 of the United States Code or similar provisions of foreign
law; or

(iii) the Borrower or any such Subsidiary shall make
an assignment for the benefit of creditors; or

(iv) the Borrower or any such Subsidiary shall
consent to the appointment of a trustee or receiver for all or a major
part of its property; or

(v) the commencement of a case by the Borrower or
any such Subsidiary under Title 11 of the United States Code or
similar provisions of foreign law; or

(vi) the commencement of a case under Title 11 of
the United States Code or similar provisions of foreign law against
the Borrower or any such Subsidiary, which case shall not be
dismissed, vacated, denied, set aside, or stayed within 60 days from
the date of commencement; or

(vii) the entry of a court order appointing a
receiver or a trustee for all or a major part of the Borrower's or any
such Subsidiary's property without consent, which order shall not be
dismissed, vacated, denied, set aside, or stayed within 60 calendar
days from the date of entry; or

(viii) the entry of a judgment or judgments for the
payment of money aggregating in excess of $5,000,000 against the
Borrower or any such Subsidiary, and the same shall not be satisfied
and discharged within 90 calendar days from the date of entry thereof
or an appeal or other proceeding for the review thereof shall not be
taken within the period allowed to take such appeal and a stay of
execution pending such appeal shall not be obtained.

Section 8.08 ERISA TERMINATION. Any employee pension
benefit plan of the Borrower whose current value of benefits which are
guaranteed by PBGC under Title IV of ERISA (determined on the basis of
assumptions prescribed by the PBGC) exceeds the then current value of such
plan's assets: (i) shall be terminated under Section 4041 of ERISA (unless the
plan is restored under Section 4047 of ERISA within ten (10) days of its
termination), (ii) shall be terminated under Section 4042 of

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<PAGE> 64
ERISA, or (iii) shall have a trustee appointed under Section 4042 of ERISA to
administer the Plan; or

Section 8.09 ACCUMULATED FUNDING DEFICIENCY. Any
employee pension benefit plan of the Borrower which is a single employer plan
shall have an accumulated funding deficiency, except as permitted by or
disclosed pursuant to Section 3.11 (as defined in Section 302 of ERISA and
Section 412 of the Code), as of the last day of any plan year (determined after
the period during which employer contributions may be deemed to have been made
on such last day under Section 302(c)(10) of ERISA and Section 412(c)(10) of
the Code); or

Section 8.10 JUDGMENTS. Entry of a final judgment (a
final judgment being one from which all available appeals have been exhausted
or the time for taking such appeal has lapsed) against the Borrower in the
amount of $5,000,000 or more and the same is not discharged or satisfied within
thirty (30) consecutive calendar days from the date of entry; or

Section 8.11 CROSS-DEFAULT. (i) Default in any
payment of principal of or interest on any Indebtedness for Borrowed Money of
the Borrower including, without limitation, Capitalized Lease Obligations, of
which the principal amount (or equivalent thereof) in the aggregate is in
excess of $3,000,000 ("Major Indebtedness") and such default shall continue for
more than the period of grace, if any, therein specified; (ii) default in any
other covenant or provision under which Major Indebtedness is created or
governed and the result of such default is to cause such Major Indebtedness to
become due prior to its stated maturity; or (iii) the occurrence of any "Event
of Default" (or term of similar meaning) as defined in the documents governing
the EXIM Bank Facility; or

Section 8.12 MATERIAL ADVERSE CHANGE. A material
adverse change in the business, operations, management, or financial condition
of the Borrower that would impair the Borrower's ability to comply with and
perform its obligations under any of the Loan Documents, as determined by the
Required Banks in good faith, shall have occurred; or

Section 8.13 RESTRAINT ON BUSINESS. Any court or
administrative or regulatory agency shall have issued an injunction or order
that materially restricts or enjoins the Borrower from conducting any material
part of its business as now conducted; or

Section 8.14 STOCK TRANSFERS BY USX CORPORATION.
USX Corporation shall cease to own beneficially at least 48% of

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<PAGE> 65
the voting equity securities of the Borrower and within 60 consecutive calendar
days of such occurrence the Banks and the Borrower shall have been unable to
reach a written agreement on amendments to the Credit Agreement (including,
without limitation, with regard to interest rates, matters in respect of the
Borrowing Base including the Overadvance, the covenant structure, cash
concentration, and funds dominion) as requested by the Banks as a result of
such occurrence; or

Section 8.15 NEW EQUITY. The Borrower fails to
obtain gross proceeds in connection with the rights offering contemplated in
the Registration Statement of at least $15,000,000 by July 29, 1994, of which
at least $14,725,000 constitutes New Equity; or

Section 8.16 DEFICIENCY. A Deficiency occurs and
such default shall continue for one Business Day, except in the case of a
Deficiency resulting from errors in the calculation of the Borrowing Base, in
which case, such Deficiency shall continue for three consecutive business days
after the discovery of the errors.

ARTICLE IX
----------

REMEDIES
--------

Section 9.01 ACCELERATION. (i) Upon the occurrence
and during the continuance of any Event of Default described in Article VIII
(except under Section 8.08) the Agent may, and at the direction of the Required
Banks shall, at any time (unless all Events of Default shall theretofore have
been remedied or waived in accordance with the terms of this Credit Agreement),
terminate the right of the Borrower to obtain Advances and Letters of Credit
and/or declare the unpaid principal amount of the Loan, all interest accrued
thereon and all other amounts owing by the Borrower to the Agent and the Banks
to be immediately due and payable and (ii) upon the occurrence of any Event of
Default under Section 8.08, without any further action by the Agent or the
Banks, the right of the Borrower to obtain Advances shall be immediately
terminated and the unpaid principal of the Loan and interest accrued thereon
and all other amounts owing by the Borrower to the Banks shall be immediately
due and payable and, in either case, such principal, interest and other amounts
shall thereupon be immediately due and payable, without presentment, demand,
protest, notice of protest, or other notice of any kind, all of which are
hereby expressly waived by the Borrower. In addition to taking any of the
actions described above, if any Letters of Credit shall have been issued,

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<PAGE> 66
the Agent may, and at the direction of the Required Banks shall, make demand
upon the Borrower to, and forthwith upon such demand the Borrower will, pay to
Agent in same day funds for deposit in the Cash Collateral Account, an amount
equal to the aggregate outstanding Letter of Credit Face Amount.

Section 9.02 RECOVERY OF AMOUNTS. In case any one
or more Events of Default shall happen and be continuing, the Banks shall be
entitled to recover judgment against the Borrower for the amount due either
before, or after, or during the pendency of any proceedings for the enforcement
of any security therefor, and, in the event of realization of any funds from
any security and application thereof to the partial payment of the amounts due,
the Agent and the Banks shall be entitled to enforce payment of and recover
judgment for all amounts then remaining due and unpaid. In case any one or
more Events of Default shall happen and be continuing the Banks may proceed to
protect and enforce their rights by suit in equity, action at law, and/or by
any other appropriate proceeding, including, without limitation, for the
specific performance of any covenant or agreement or in aid of the exercise of
any power granted to the Agent or the Banks, or may proceed to enforce payment
of the Notes or to enforce any other legal or equitable right.

Section 9.03 REMEDIES CUMULATIVE. The Banks may
pursue the rights or remedies of the holders of the Notes under this Credit
Agreement, independently or concurrently. All rights, remedies, or powers
herein conferred upon the Agent or the Banks shall, to the extent not
prohibited by law, be deemed cumulative and not exclusive of any other rights,
remedies, or powers available to the Agent and the Banks. Without limiting the
foregoing, the rights and remedies of the Agent and the Banks under this Credit
Agreement, the Notes and the other Loan Documents are cumulative, may be
exercised simultaneously or in such order and at such times as the Agent and
the Banks may elect and are in addition to its rights and remedies at law or
equity. No delay or omission of the Agent or the Banks to exercise any right,
remedy, or power shall impair the same or be construed to be a waiver of any
Event of Default or an acquiescence therein. No waiver of any Event of Default
shall extend to or affect any subsequent Event of Default or shall impair any
rights, remedies, or powers available to the Agent or the Banks. No single or
partial exercise of any right, remedy, or power shall preclude other or further
exercise thereof by the Agent or the Banks.

Section 9.04 COST OF COLLECTION. The Borrower agrees
that if default shall be made in the payment of the principal of or interest on
any Note, when the same shall become due and payable, it will pay to the Agent
for the benefit of the

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<PAGE> 67
Banks such additional amount as shall be sufficient to cover the cost and
expenses of collection, including reasonable attorneys' fees, and any expenses
or liabilities incurred by the Agent or the Banks in the collection thereof.

Section 9.05 NO ADVANCES, ETC. The Banks shall not
be required to make any Advances under this Credit Agreement if a Possible
Default or an Event of Default has occurred and is continuing.

ARTICLE X
---------

THE AGENT
---------

Section 10.01 AUTHORIZATION. The Banks hereby agree
that the Agent shall act as Agent and the Agent agrees to act as such as set
forth in this Credit Agreement. The Agent assumes no obligation to the Banks
as to the collectibility of any of the Notes (nor as to the collectibility of
any other amounts of any kind or nature now or hereafter owing by the Borrower
to the Banks), and neither it nor any of its directors, employees, agents or
attorneys shall be liable to the Banks for any action taken or omitted to be
taken by the Agent or its directors, employees, agents, or attorneys under or
in any way related to the Loan Documents, except for its own or their own gross
negligence or willful misconduct. The Banks acknowledge that each has taken
and will take such action and make such investigation as it deems necessary to
inform itself as to the affairs of the Borrower and as to the value of any
collateral assigned, pledged, or granted in connection with the Loan Documents.
The Banks acknowledge that each has independently, and without reliance on the
Agent or any other Bank and based on such documents and information as it has
deemed appropriate, made its own credit analysis of the Borrower and made its
independent decision to enter into the Loan Documents. The Agent shall have no
responsibility to the Banks for any errors or omissions in any information
furnished by it to the Banks and the Banks expressly acknowledge that the Agent
has made no representations or warranties to either of them and that no act
hereafter taken or failed to be taken shall be deemed to constitute any
representation or warranty by the Agent to the Banks. All of the Banks agree
to continue to make their own analysis and decisions without reliance on the
Agent or any other Bank. The Agent shall not be required to keep itself
informed as to the performance or observance by the Borrower of the Loan
Documents.

Section 10.02 POWERS AND DUTIES. The Agent shall
have such powers as are granted to it by this Credit Agreement,

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together with all such other powers as are reasonably incidental thereto.
However, the Agent shall have no implied duties or obligations to take any
action under this Credit Agreement. Except for action expressly required under
this Credit Agreement, the Agent shall be fully justified in failing or
refusing to act under this Credit Agreement unless it shall be indemnified to
its satisfaction by the Banks proportionate to their respective commitments
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action, except no such indemnification
shall be required for the Agent's gross negligence or willful misconduct;
provided, however, notwithstanding indemnification by the Banks, the Agent need
not take any action which it believes is prohibited by this Credit Agreement or
law.

Section 10.03 CONSULTATION WITH COUNSEL. The Banks
agree that the Agent may consult with legal counsel reasonably selected by it
and shall not be liable for any action taken or suffered in good faith by it in
accordance with the opinion of such counsel.

Section 10.04 DOCUMENTS. The Agent shall not be
under any duty to examine into or pass upon the validity, effectiveness,
genuineness or value of the Loan Documents or any other agreement, assignment,
certificate, statement, instrument or document furnished pursuant to this
Credit Agreement or in connection with the Loan Documents, and the Agent shall
be entitled to assume that the same are valid, effective and genuine and what
they purport to be. The Agent makes no representation as to nor assumes any
responsibility with respect to the authorization, execution, collectibility or
enforceability of the Loan Documents and assumes no responsibility for the
accuracy, completeness or truthfulness of any certificates, statements, reports
or other writings containing information with respect to the Borrower. Without
limiting the generality of the foregoing, the Agent makes no representation as
to nor assumes any responsibility with respect to the value of any collateral
assigned or granted in connection with the Loan Documents or as to the
perfection of any security interest or other lien. The Agent has no obligation
to the Banks to periodically review the value or condition of the collateral
assigned or granted in connection with the Loan Documents, and all of the Banks
acknowledge that they have taken and will take such action and make such
investigation as they deem necessary to inform themselves as to the value and
condition of the collateral assigned, pledged or granted in connection with the
Loan Documents.

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<PAGE> 69
Section 10.05 THE AGENT AND AFFILIATES. The Agent
shall have the same rights and powers hereunder and under the other Loan
Documents as the Banks and may exercise the same as though it were not the
Agent, and the Agent and its affiliates may accept deposits from, lend money to
and generally engage in any kind of business with the Borrower or its
Affiliates.

Section 10.06 KNOWLEDGE OF DEFAULT. It is expressly
understood and agreed that the Agent shall be entitled to assume that no
Possible Default or Event of Default has occurred and is continuing, unless the
Agent has been notified in writing by a Bank that such Bank considers that a
Possible Default or an Event of Default has occurred and is continuing and
specifying the nature thereof; or unless the Agent otherwise has actual
knowledge that a Possible Default or an Event of Default has occurred and is
continuing.

Section 10.07 ACTION BY THE AGENT. Subject to
Section 10.08 hereof, so long as the Agent shall be entitled to assume that no
Event of Default or Possible Default shall have occurred and be continuing, the
Agent shall be entitled to use its discretion with respect to exercising or
refraining from exercising any rights which may be vested in it by this Credit
Agreement, or with respect to anything which it may do or refrain from doing
which may seem to it to be necessary or desirable.

Section 10.08 NOTICES OF EVENT OF DEFAULT, WAIVERS,
COVENANTS, APPROVALS, ETC. In the event that the Agent shall have been
notified of any Possible Default or Event of Default or in the event that the
Agent shall have been requested to grant any waiver, consent, approval or take
other similar action under the Loan Documents, the Agent:

(i) shall promptly notify the Banks;

(ii) shall take such action and assert such rights
under the Loan Documents as it is expressly required to do pursuant to
the terms of this Credit Agreement;

(iii) may, subject to the provisions of ARTICLE VII,
take such action, or refrain from taking such action, as it shall deem
advisable in the best interests of the Banks;

(iv) shall inform the Banks of the taking of action
or assertion of rights pursuant to this Section 10.08; and

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<PAGE> 70
(v) upon the direction of the Required Banks, shall
exercise the rights and remedies described in Sections 9.01, 9.02,
9.03, 9.04 and 9.05 and such other rights and remedies as the Agent
may have at law, in equity or otherwise.

Notwithstanding the provisions of this Section 10.08,
the Agent shall in all cases be justified in failing or refusing to act
hereunder unless it shall be indemnified to its satisfaction by the Banks to
the proportionate extent of each Bank's Commitment against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take such action. Each Bank agrees with the Agent and the other
Banks that until the scheduled or accelerated maturity of the Loan, the
decisions and determinations of the Required Banks in enforcing the Notes and
the other Loan Documents and realizing (or attempting to realize) upon the
collateral for the Notes and in guiding the Agent in those matters shall be
binding upon all the Banks, including, without limitation, authorizing the
Agent at the Pro rata expense of all the Banks (to the extent not reimbursed by
the Borrower) to retain attorneys to seek judgment on the Notes. Each Bank
similarly agrees with the other Banks that until the scheduled or accelerated
maturity of the Loan, it will not, without the consent of the Required Banks,
seek to separately institute any legal action on its Notes or the other Loan
Documents or to institute proceedings to foreclose upon the collateral for the
Notes.

Section 10.09 INDEMNIFICATION. The Borrower agrees
to the activities of the Agent as required or permitted pursuant to this Credit
Agreement. The Borrower agrees to indemnify the Agent against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever
(including, without limitation, reasonable attorneys' fees [to the extent
attorneys' fees may be incurred by the Agent on account of the failure of the
Borrower to adequately defend the interest of the Agent against claims by third
parties]) which may be imposed on, incurred by or asserted against the Agent in
any way relating to or arising out of this Credit Agreement or any other Loan
Document ("Indemnified Liabilities"), except (i) such Indemnified Liabilities
resulting from the gross negligence or willful misconduct of the Agent, (ii)
for Indemnified Liabilities which arise from a claim, action or proceeding by
any of the Banks from or against the Agent or (iii) violations of laws and
regulations applicable to the Agent not occasioned by any action or inaction of
the Borrower which violates covenants or is inconsistent with the
representations of the Borrower in this Credit Agreement. Each Bank agrees to
indemnify the Agent (to

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<PAGE> 71
the extent that the Agent has not been reimbursed by the Borrower) ratably
according to the aggregate unpaid principal amount of the Notes it holds (at
the time the action or event in question was taken or omitted to be taken or
occurred) from and against any and all Indemnified Liabilities, except such
Indemnified Liabilities resulting from the gross negligence or willful
misconduct of the Agent, and except for routine administrative costs incurred
by the Agent in the ordinary course of business in administering the loans
hereunder.

Section 10.10 RESIGNATION OR REMOVAL OF AGENT.
Subject to the appointment and acceptance of a successor Agent as provided
below, the Agent may resign at any time by giving notice thereof to the Banks
and the Borrower. Upon any such resignation or removal, the Required Banks
shall have the right to appoint a successor Agent. Upon the earlier of (i) 20
days after the retiring Agent's giving of notice of resignation, or (ii) the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent (if one shall have accepted) shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the
retiring Agent, and, in any event, the retiring Agent shall be discharged from
its duties and obligations hereunder. After any retiring Agent's resignation
or removal hereunder as 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 Agent.

Section 10.11 BENEFITS. None of the provisions
contained in this Article X are intended to benefit the Borrower (other than
the exceptions described in Section 10.09 and the notice provision in Section
10.10) or any Person other than the Banks and the Agent; however, such
provisions are binding upon the Borrower. Accordingly, neither the Borrower
nor any Person other than one of the Banks and the Agent shall be entitled to
rely upon or to raise as a defense the failure of the Agent or any of the Banks
to comply with the provisions of this Article X.

ARTICLE XI
----------

MISCELLANEOUS
-------------

Section 11.01 PAYMENT OF EXPENSES. If any taxes
shall be payable, or ruled to be payable, to any state, province or Federal
authority, with respect to the execution and delivery of this Credit Agreement
or, the Notes or other Loan Document by reason of any existing or hereafter
enacted Federal or state statutes, the Borrower will pay all such taxes,
including

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<PAGE> 72
interest and penalties thereon, excluding taxes on income if any, and will
indemnify and hold the Agent and the Banks harmless against any liability in
connection therewith. The Borrower will also reimburse the Agent and the Banks
the reasonable fees and disbursements incurred by Messrs. Thompson, Hine and
Flory for their services to the Agent and the Banks in preparing, reviewing,
closing, administering, interpreting or enforcing this Credit Agreement and the
other documents executed in connection herewith, and will reimburse the Agent
and the Banks for any out-of-pocket expenses incurred in connection therewith,
including, the fees and expenses of the Agent's and each of the Bank's counsel
in connection with the enforcement of this Credit Agreement and the collection
of the Notes and all audit and appraisal fees (including, without limitation,
for the asset based audits conducted prior to the execution hereof and the
quarterly audits to be conducted hereafter), all title, survey, mortgage
filing, UCC, and similar fees, and all due diligence costs and expenses in
connection with environmental assessments. The Borrower shall at all times
protect, indemnify, defend and save harmless the Agent and the Banks, their
officers, directors, employees and agents from and against any and all claims,
actions, suits and other legal proceedings and liabilities, damages, costs,
interest, charges, counsel fees and other expenses and penalties which the
Agent or any of the Banks may, at any time, sustain or incur by reason of or in
consequence of or arising out of the execution and delivery of this Credit
Agreement, the consummation of the transactions contemplated hereby or any use
of any Advance, except by reason of the gross negligence or willful misconduct
of the Agent or any of the Banks. The obligations imposed upon the Borrower by
this Section 11.01 shall survive the payment of the Loan and the Notes for a
period of three years.

Section 11.02 NOTICES. Any notice to or demand upon
the Borrower shall be deemed to have been sufficiently given or served for all
purposes hereof one day after being sent by overnight express courier or three
days after being mailed, certified mail, return receipt requested, addressed to
the Borrower at 1000 Warren Avenue, Niles, Ohio 44446, Attention: Chief
Financial Officer, or to such other address as may be furnished in writing to
the Agent and the Banks for such purpose by the Borrower. Any notice to or
demand upon the Agent or the Banks shall be deemed to have been sufficiently
given or served for all purposes hereof one day after being sent by overnight
express courier or three days after being mailed, certified mail, return
receipt requested, addressed to the Agent and SNB at 127 Public Square,
Cleveland, Ohio 44114, Attention: Nancy D. Terrill; to PNC at 5th Avenue and
Wood Street, Pittsburgh, Pennsylvania 15265, Attention: US/Pittsburgh Group;
and to NBD

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<PAGE> 73
at 611 Woodward Avenue, Detroit, Michigan 48226, Attention: Andrew Arton; or to
such other addresses as may be furnished in writing to the Borrower for such
purpose by the Agent or the Banks, as the case may be. The Borrower agrees
that the Agent and the Banks may rely and act upon, without any investigation
or inquiry as to the authority or power to give, or accuracy or reasonableness
of, and the Borrower will be unconditionally and irrevocably bound and
obligated by, any instructions, notice, request, report or other communications
given by the Borrower to the Agent.

Section 11.03 SURVIVAL OF REPRESENTATIONS AND
WARRANTIES. All representations and warranties contained herein shall survive
the execution and delivery of this Credit Agreement, any investigation at any
time made by the Agent or the Banks, and the execution and delivery of the
Notes and shall continue in full force and effect so long as any Obligations
are outstanding and unpaid.

Section 11.04 ENTIRE AGREEMENT; AMENDMENT. This
Credit Agreement, including all Schedule and Exhibits hereto, embodies the
entire agreement and understanding between the Borrower and the Banks and
supersedes all other prior agreements and understandings relating to the
subject matter hereof. The Borrower and the Banks may enter into further and
additional written agreements to amend or supplement this Credit Agreement and
the terms and provisions of such further and additional written agreements
shall be deemed a part of this Credit Agreement as though incorporated herein.
Except as provided herein, the Banks have no obligation to make loans or
advances to the Borrower. The Borrower hereby agree that they shall have no
rights of any kind in respect of any agreements, documents, or instrument
governing matters between or among the Banks and the Agent.

Section 11.05 PARTIES IN INTEREST. All the terms
and provisions of this Credit Agreement shall inure to the benefit of and be
binding upon and be enforceable by the respective successors and assigns of the
parties hereto, whether so expressed or not and, in particular, shall inure to
the benefit of and be enforceable by any holder of the Notes. The Borrower
shall not assign its rights under this Credit Agreement without the prior
written consent of the Agent and the Banks. The Agent and the Banks, without
the prior written consent of the Borrower, may assign, or sell participations
in, all or part of the Loans and its rights under the Credit Agreement and the
other Loan Documents. The Agent agrees that it will give the Borrower prompt
written notice of any assignment of all or part of the Loans. If any such
assignment or sale is for less than a Bank's

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<PAGE> 74
entire Commitment, then the Borrower shall only be required to provide the
information and notices specified in this Credit Agreement to such Bank and not
to the transferees or purchasers, as the case may be; however, if such
assignment or sale is for a Bank's entire Commitment, then the Borrower shall
be required to provide the transferee or purchaser, as the case may be, with
all information and notices specified in this Credit Agreement.

Section 11.06 WAIVER OF COUNTERCLAIMS; WAIVER OF
JURY TRIAL. Each and every right granted to the Agent and the Banks hereunder
or under any other document delivered hereunder or in connection herewith, or
allowed it by law or equity, shall be cumulative and may be exercised from time
to time. No failure on the part of the Agent or the Banks or any holder of the
Notes to exercise, and no delay in exercising, any right shall operate as a
waiver thereof, nor shall any single or partial exercise of any right preclude
any other or future exercise thereof or the exercise of any other right. The
due payment and performance of the Borrower's indebtedness, liabilities and
obligations under the Notes and this Credit Agreement shall be without regard
to any counterclaim or right of offset which the Borrower may have against the
Agent or any of the Banks and without regard to any other obligation of any
nature whatsoever which the Agent or any of the Banks may have to the Borrower,
and no such counterclaim or offset shall be asserted by the Borrower in any
action, suit or proceeding instituted by the Agent or the Banks for payment or
performance of the Borrower's indebtedness, liabilities or obligations under
the Notes or this Credit Agreement.

THE BORROWER AND THE BANKS HEREBY WAIVE THEIR
RESPECTIVE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING IN CONNECTION
WITH THIS CREDIT AGREEMENT, THE NOTES OR ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS RELATED THERETO.

Section 11.07 SET-OFF PROVISION. As security for
the due payment and performance of all the Obligations, the Borrower hereby
grants to the Agent and the Banks a lien on and security interest in any and
all deposits or other sums at any time credited by or due from any of the Banks
to the Borrower, whether in regular or special depository accounts or otherwise
(other than the accounts specified on Part B of Schedule 5.15), and any and all
monies, securities and other property of the Borrower, and the proceeds
thereof, now or hereinafter held or received by or in transit to any of the
Banks from or for the Borrower, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, and any such deposits, sums, monies,
securities and other property, may at any time after the occurrence and during
the continuance of any Event of Default be set-off, appropriated and applied by
the Agent and the Banks

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<PAGE> 75
against any of the Obligations, whether or not any of such Obligations is then
due or is secured by any collateral, or, if it is so secured, whether or not
the collateral held by the Agent and the Banks is considered to be adequate.

Section 11.08 SEVERABILITY OF PROVISIONS. Any
provision of this Credit Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions of this Credit Agreement or affecting the validity or enforceability
of such provision in any other jurisdiction.

Section 11.09 HEADINGS. Article and Section
headings used in this Credit Agreement are for convenience of reference only
and are not a part of this Credit Agreement for any other purpose.

Section 11.10 CONSENT TO JURISDICTION. The Borrower
agrees that any action or proceeding to enforce or arising out of this Credit
Agreement or any of the other Loan Documents may be commenced either in the
Court of Common Pleas for Cuyahoga County, Ohio or in the District Court of the
United States for the Northern District of Ohio, and the Borrower waives
personal service of process and agrees that a summons and complaint commencing
an action or proceeding in any such court shall be properly served and shall
confer personal jurisdiction over the Borrower if served to the Borrower at the
address listed in Section 11.02 in accordance with the provisions of Section
11.02, or as otherwise provided by the laws of the State of Ohio or the United
States.

Section 11.11 GOVERNING LAW. This Credit Agreement,
the Notes and each other Loan Document are and will be contracts made under the
laws of the State of Ohio and together with the rights and obligations of the
parties hereunder shall be construed and enforced in accordance with and
governed by the laws of such State.

Section 11.12 RATABLE SHARING. Each Bank and each
subsequent holder by acceptance of a Note agrees among themselves that (i) with
respect to all amounts received by them which are applicable to the payment of
the Obligations (the "Senior Obligations"), equitable adjustment will be made
so that, in effect, all such amounts will be shared among them Pro rata,
whether received by voluntary payment, by the exercise of the right of set-off
or banker's lien, by counterclaim or cross claim or by the enforcement of any
or all of the Senior Obligations or the Collateral, (ii) if any of them shall
exercise any right of

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<PAGE> 76
counterclaim, set-off, banker's lien or similar right with respect to any
amounts in respect of Indebtedness for Borrowed Money (but excluding for fees,
expenses or other obligations arising out of the performance of other banking
services for the Borrower) owed by the Borrower to that Bank or holder, such
Person shall apply the amount recovered as a result of the exercise of such
right first to the payment of the Loan and other amounts due hereunder to the
extent lawful, and thereafter to all amounts otherwise owed by the Borrower to
it, and (iii) if any of them shall thereby through the exercise of any right of
counterclaim, set-off, banker's lien or otherwise, receive payment of a
proportion of the aggregate amount of the Senior Obligations held by it, which
is greater than the proportion received by any other of them, the one receiving
such proportionately greater payment shall purchase, without recourse or
warranty, an undivided interest and participation (which it shall be deemed to
have done simultaneously upon the receipt of such payment) in the Senior
Obligations owed to the others so that all such recoveries with respect to the
Senior Obligations shall be applied ratably; PROVIDED that if all or part of
such proportionately greater payment received by the purchasing party is
thereafter recovered from it, those purchases shall be rescinded and the
purchase prices paid for such participations shall be returned to that party to
the extent necessary to adjust for such recovery, but without interest except
to the extent the purchasing party is required to pay interest in connection
with such recovery.

Section 11.13 COUNTERPARTS. This Credit Agreement
may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which, when so executed and delivered, shall
be deemed to be an original and all of which, taken together, shall constitute
but one and the same instrument.

IN WITNESS WHEREOF, the parties have caused this
Credit Agreement to be executed as of the date first above written by their
respective representatives thereunto duly authorized.

RMI TITANIUM COMPANY

By: T. G. Rupert
------------------------
Title: Senior Vice President &
Chief Financial Officer
<PAGE> 77
SOCIETY NATIONAL BANK

Wire Transfer Instructions By: Nancy Terrill
-----------------
Vice President
ABA #041001039
Attn.: Commercial Loan
Operations
Reference: RMI Titanium
Company

PNC BANK, NATIONAL ASSOCIATION

Wire Transfer Instructions By: Robert H. Friend
---------------------
Title: AZP
ABA #043000096
Attn.: Loan and Commercial
Accounting Department
Reference: RMI Titanium
Company

NBD BANK, N.A.

Wire Transfer Instructions By: Andrew P. Arton
--------------------
Title: 2nd Vice President
ABA #072000326
Attn.: Commercial Loan
Department
Reference: RMI Titanium
Company

SOCIETY NATIONAL BANK, as
Agent

By: Nancy Terrill
------------------
Vice President
<PAGE> 78
LIST OF
SCHEDULES AND EXHIBITS

<TABLE>
<CAPTION>
Schedules Description
- --------- -----------
<S> <C>
1.01 Natural Gas Reserves

3.01 Subsidiaries; Capital Structure

3.19 Insurance

5.06(iii) Monthly Financial statements

5.07 Borrowing Base Certificate

5.15 Other Accounts

5.17 Post-Closing Items
</TABLE>
<PAGE> 79
Schedule 5.17
Post-Closing Items

1. Post-closing lien searches.

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
January 31, 1994 appearing on page 17 of RMI Titanium Company's Annual Report on
Form 10-K for the year ended December 31, 1993. We also consent to the use in
the Prospectus of our report dated January 31, 1994 relating to the financial
statements of RMI Titanium Company, which appears in such Prospectus. We also
consent to the reference to us under the heading "Experts" in such Prospectus.

PRICE WATERHOUSE
Pittsburgh, Pennsylvania

June 15, 1994
<R/>