Carpenter is subject to various stringent federal, state, local and foreign environmental laws and regulations relating
to pollution, protection of public health and the environment, natural resource damages and occupational safety and health. Although compliance with these laws and regulations may affect the costs of Carpenters operations, compliance costs to
date have not been material. Carpenter has environmental remediation liabilities at some of its owned operating facilities and has been designated as a potentially responsible party (PRP) with respect to certain third-party Superfund
waste disposal sites. Additionally, Carpenter has been notified that it may be a PRP with respect to other Superfund sites as to which no proceedings have been instituted against Carpenter. Neither the exact amount of remediation costs nor the final
method of their allocation among all designated PRPs at these Superfund sites has been determined. The liability for future environmental remediation costs is evaluated by management on a quarterly basis. Carpenter accrues amounts for environmental
remediation costs that represent managements best estimate of the probable and reasonably estimable costs related to environmental remediation. For fiscal 2001, the liability for environmental remediation costs was increased by $0.6 million,
which was included in cost of sales. Fiscal 2000 included $0.8 million of reversals of prior years accruals for environmental remediation, which were reported in other income. No expense was recognized in fiscal 1999. Carpenter entered into
partial settlements of litigation relating to insurance coverages for certain environmental remediation sites and recognized income before income taxes of $0.6 million for the years ended June 30, 2001 and 2000 and $1.1 million for the year ended
June 30, 1999.
This income was reported in other income. The liability recorded for environmental remediation costs for Carpenter-owned operating facilities and the Superfund sites
remaining at June 30, 2001 and 2000, was $8.0 million and $7.7 million, respectively. The estimated range at June 30, 2001 of the reasonably possible future costs of remediation at Carpenter-owned operating facilities and the Superfund sites is
between $8.0 million and $14.7 million.
Estimates of the amount and timing of future costs of environmental remediation requirements are necessarily imprecise
because of the continuing evolution of environmental laws and regulatory requirements, the availability and application of technology, the identification of currently unknown remediation sites and the allocation of costs among the PRPs. Based upon
information currently available, such future costs are not expected to have a material effect on Carpenters competitive or financial position. However, such costs could be material to results of operations in a particular future quarter or
year.
Other
Carpenter also is defending various claims and legal actions, and is subject to contingencies that are common to its
operations. Carpenter provides for costs relating to these matters when a loss is probable and the amount is reasonably estimable. The effect of the outcome of these matters on Carpenters future results of operations and liquidity cannot be
predicted because any such effect depends on future results of operations and the amount and timing (both as to recording future charges to operations and cash expenditures) of the resolution of such matters. While it is not feasible to determine
the outcome of these matters, management believes that any total ultimate liability will not have a material effect on Carpenters financial position or results of operations and cash flows.
New Accounting Pronouncements
Statement of Financial Accounting Standards (SFAS) 133, Accounting for Derivative Instruments and
Hedging Activities requires that derivative instruments be recorded on the balance sheet at their fair value and that changes in fair value be recorded each period in current earnings or comprehensive income. Carpenter adopted SFAS 133, as
amended, on July 1, 2000. In accordance with the transition provisions of SFAS 133, Carpenter recorded a cumulative positive adjustment to other comprehensive income of $.8 million, after tax, to recognize the fair value of its derivative
instruments as of the date of adoption. See note 9 to the consolidated financial statements included in Item 8 Financial Statements and Supplementary Data.
The Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board (FASB) issued EITF 00-10 regarding the
classification of freight and handling costs billed to customers. EITF 00-10 requires freight and handling costs billed separately to be included as part of sales on the statement of income. In addition, the preferred classification of freight and
handling costs expensed on the statement of income is to include them in cost of sales. Carpenter adopted this requirement effective July 1, 2000. Reclassification of fiscal 2000 and 1999 resulted in increasing sales by $13.3 million and $12.5
million, increasing cost of sales by $42.6 million and $32.4 million and decreasing selling and administrative expenses by $29.3 million and $19.9 million, respectively.
In the fourth quarter of fiscal year 2001, Carpenter changed its method of accounting for revenue recognition in
accordance with the guidance of the Securities and Exchange Commissions Staff Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial Statements. Carpenters standard terms and conditions of sale for most of
its sales included a provision that title to the goods was retained as a security interest until payment was received, even though the risks and benefits of ownership were passed to the customer at the time of shipment. Under SAB 101, except for
certain foreign units, revenue cannot be recognized until title passes to the customer, which in Carpenters case was when payment was received.
On April 1, 2001, Carpenter changed its terms and conditions of sale so that revenue can be recognized when product is
shipped, in accordance with its historical practice. The combined effect of SAB 101 and the change in terms and conditions increased fiscal year 2001 sales by $138.0 million and net income by $14.1 million, net of $9.4 million of tax. The cumulative
effect of this change in accounting principle as of July 1, 2001 was a charge of $14.1 million after taxes, or $.62 per diluted share.
The Financial Accounting Standards Board (FASB) has issued Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets (SFAS 142) which requires that goodwill and certain intangible assets no longer be amortized and requires ongoing evaluation of these assets for impairment. Carpenter anticipates adopting SFAS 142 in
fiscal 2002 and is currently evaluating its impact. Amortization of goodwill and certain intangible assets in fiscal 2001 was approximately $.28 per diluted share.
Forward-Looking Statements
This Form 10-K contains various Forward-looking Statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements, which represent Carpenters expectations or beliefs concerning various future events, include statements concerning future revenues and continued growth in various market segments. These
statements are based on current expectations regarding future events that involve a number of risks and uncertainties which could cause actual results to differ from those of such forward-looking statements. These risks and uncertainties include
those set forth in other filings made by Carpenter under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and also include the following factors: 1) the cyclical nature of the specialty materials business
and certain end-use markets, including, but not limited to, aerospace, automotive, industrial products and consumer durables, all of which are subject to changes in general economic and financial market conditions; 2) the continuing high levels of
stainless steel imports into the United States; 3) the ability of Carpenter, along with other domestic producers of stainless steel products, to obtain and retain favorable rulings in dumping and countervailing duty claims against foreign producers;
4) the ability of Carpenter to recoup increased costs of electricity, natural gas and raw materials through increased prices and surcharges; 5) worldwide excess manufacturing capacity for certain alloys which Carpenter produces and fluctuations in
currency exchange rates, resulting in increased competition and downward pricing pressure on certain Carpenter products; 6) fluctuations in financial markets that could impact the valuation of the assets in Carpenters pension trusts and the
accounting for pension assets; 7) the critical importance of certain raw materials used by Carpenter, some of which are acquired from foreign sources and may be located in countries subject to unstable political and economic conditions, which may
affect the prices or supply of these materials; 8) the susceptibility of export sales to the effects of export controls, changes in legal and regulatory requirements, policy changes affecting the markets, changes in tax laws and tariffs, exchange
rate fluctuations and political and economic instability; and 9) the effects on operations of changes in domestic and foreign governmental laws and public policy, including environmental regulations. Any of these factors could have an adverse and/or
fluctuating effect on Carpenters results of operations. The forward-looking statements in this document are intended to be subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended.
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements and Supplementary Data
|
|
Page
|
Consolidated Financial Statements: |
|
Responsibilities for Financial Reporting and Internal Control |
|
24 |
|
Report of Independent Accountants |
|
25 |
|
Consolidated Statement of Income for the Years Ended June 30, 2001, 2000 and 1999 |
|
26 |
|
Consolidated Statement of Cash Flows for the Years Ended June 30, 2001, 2000 and 1999 |
|
27 |
|
Consolidated Balance Sheet as of June 30, 2001 and 2000 |
|
28 |
|
Consolidated Statement of Changes in Stockholders Equity for the Years Ended
June 30, 2001, 2000 and 1999 |
|
29-30 |
|
Consolidated Statement of Comprehensive Income for the years ended June 30, 2001, 2000
and 1999 |
|
30 |
|
Notes to Consolidated Financial Statements |
|
31 |
|
Supplementary Data: |
|
Quarterly Financial Data (Unaudited) |
|
53 |
Responsibilities for Financial Reporting and Internal Control
Carpenters financial statements included in this Annual Report were prepared by management, which is responsible
for their integrity and objectivity. The statements were prepared in conformity with generally accepted accounting principles and, as such, include amounts based on managements best judgments and estimates. Financial information elsewhere in
this Annual Report is consistent with that in the financial statements.
Carpenter maintains a strong system of internal control, supported by a code of conduct, designed to provide reasonable
assurance that assets are safeguarded and transactions are properly executed and recorded for the preparation of financial information. There are limits in all systems of internal control, based on recognition that the cost of the system should not
exceed the benefits to be derived. We believe Carpenters internal control system provides this appropriate balance. The internal control system, and compliance therewith, is continually monitored by Carpenters internal audit
staff.
The independent accountants, PricewaterhouseCoopers LLP, recommended by the Board of Directors and elected by the
stockholders, audit our financial statements. Their audit includes a review of the internal control structure to the extent necessary and selective tests of the transactions to support their report which appears on the next page.
The Audit Committee of the Board of Directors, composed of directors who are neither current nor former employees of
Carpenter, meets regularly with management, internal auditors and our independent accountants to consider audit results and to discuss significant internal control, auditing and financial reporting matters. Both the independent accountants and
internal auditors have unrestricted access to the Audit Committee.
/s/ Dennis M. Draeger
Dennis M. Draeger
Chairman, President and Chief Executive Officer
/s/ Terrence E. Geremski
Terrence E. Geremski
Senior Vice PresidentFinance and Chief Financial Officer
Report of Independent Accountants
To the Board of Directors and
Stockholders of Carpenter Technology Corporation:
In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income,
comprehensive income, changes in stockholders equity and cash flows present fairly, in all material respects, the financial position of Carpenter Technology Corporation and its subsidiaries at June 30, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended June 30, 2001, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the
Companys 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 auditing standards generally accepted in the United States of
America, 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
our opinion.
As discussed in Notes 1 and 9 to the financial statements, Carpenter adopted the provisions of the Securities and
Exchange Commissions Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements, and Statement of Financial Accounting Standards No. 133, as amended, Accounting for Derivative Instruments and Hedging
Activities, in fiscal 2001.
|
/s/ PricewaterhouseCoopers LLP
|
|
|
|
PricewaterhouseCoopers LLP
|
|
Philadelphia, Pennsylvania
|
Consolidated Statement of Income
Carpenter Technology Corporation
For the years ended June 30, 2001, 2000 and 1999
|
|
2001
|
|
2000
|
|
1999
|
|
|
(in millions, except per share data) |
|
Net sales |
|
$1,324.1 |
|
|
$1,109.1 |
|
|
$1,049.3 |
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
Cost of sales |
|
1,039.3 |
|
|
862.7 |
|
|
808.4 |
|
Selling and administrative expenses |
|
152.4 |
|
|
146.4 |
|
|
142.1 |
|
Interest expense |
|
40.3 |
|
|
33.4 |
|
|
29.3 |
|
Special charges |
|
36.0 |
|
|
|
|
|
14.2 |
|
Other income, net |
|
(2.3 |
) |
|
(13.3 |
) |
|
(0.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
1,265.7 |
|
|
1,029.2 |
|
|
993.5 |
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and cumulative effect of accounting
change |
|
58.4 |
|
|
79.9 |
|
|
55.8 |
|
Income taxes |
|
23.2 |
|
|
26.6 |
|
|
18.7 |
|
|
|
|
|
|
|
|
|
|
|
Income before cumulative effect of accounting change, net of tax |
|
35.2 |
|
|
53.3 |
|
|
37.1 |
|
Cumulative effect of accounting change, net of $9.4 million tax
(see note 1) |
|
(14.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ 21.1 |
|
|
$ 53.3 |
|
|
$ 37.1 |
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
Basic: |
|
|
|
|
|
|
|
|
|
Income before cumulative effect of accounting change |
|
$ 1.52 |
|
|
$ 2.35 |
|
|
$ 1.61 |
|
Cumulative effect of accounting change |
|
(0.64 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ 0.88 |
|
|
$ 2.35 |
|
|
$ 1.61 |
|
|
|
|
|
|
|
|
|
|
|
Diluted: |
|
|
|
|
|
|
|
|
|
Income before cumulative effect of accounting change |
|
$ 1.50 |
|
|
$ 2.31 |
|
|
$ 1.58 |
|
Cumulative effect of accounting change |
|
(0.62 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ 0.88 |
|
|
$ 2.31 |
|
|
$ 1.58 |
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
Consolidated Statement of Cash Flows
Carpenter Technology Corporation
For the years ended June 30, 2001, 2000 and 1999
|
|
2001
|
|
2000
|
|
1999
|
|
|
(in millions) |
OPERATIONS: |
|
|
|
|
|
|
|
|
|
Net income |
|
$21.1 |
|
|
$ 53.3 |
|
|
$ 37.1 |
|
Adjustments to reconcile net income to net cash provided
from operations: |
|
|
|
|
|
|
|
|
|
Depreciation |
|
55.6 |
|
|
53.1 |
|
|
51.8 |
|
Amortization of intangible assets |
|
16.9 |
|
|
15.2 |
|
|
13.9 |
|
Deferred income taxes |
|
11.1 |
|
|
9.9 |
|
|
(6.2 |
) |
Pension and postretirement costs, net |
|
(41.8 |
) |
|
(38.1 |
) |
|
(30.1 |
) |
Net (gain) loss on asset disposals |
|
(1.5 |
) |
|
(5.2 |
) |
|
1.5 |
|
Special charges |
|
37.6 |
|
|
|
|
|
14.2 |
|
Changes in working capital and other, net of acquisitions: |
|
|
|
|
|
|
|
|
|
Receivables |
|
(7.2 |
) |
|
(34.5 |
) |
|
28.7 |
|
Inventories |
|
27.8 |
|
|
(16.7 |
) |
|
18.9 |
|
Accounts payable |
|
(15.0 |
) |
|
35.9 |
|
|
(23.2 |
) |
Accrued current liabilities |
|
2.2 |
|
|
(6.6 |
) |
|
(18.9 |
) |
Other, net |
|
11.8 |
|
|
(3.9 |
) |
|
(0.3 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided from operations |
|
118.6 |
|
|
62.4 |
|
|
87.4 |
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Purchases of plant, equipment and software |
|
(50.5 |
) |
|
(105.0 |
) |
|
(153.1 |
) |
Proceeds from disposals of plant and equipment |
|
15.3 |
|
|
13.4 |
|
|
0.5 |
|
Acquisitions of businesses, net of cash received |
|
|
|
|
(7.0 |
) |
|
(23.1 |
) |
Proceeds from net assets held for sale |
|
|
|
|
|
|
|
121.4 |
|
|
|
|
|
|
|
|
|
|
|
Net cash used for investing activities |
|
(35.2 |
) |
|
(98.6 |
) |
|
(54.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES: |
|
Net change in short-term debt |
|
(49.3 |
) |
|
78.5 |
|
|
20.2 |
|
Proceeds from issuance of long-term debt |
|
|
|
|
7.6 |
|
|
|
|
Payments on long-term debt |
|
(10.6 |
) |
|
(15.5 |
) |
|
(36.6 |
) |
Dividends paid |
|
(30.7 |
) |
|
(30.8 |
) |
|
(30.7 |
) |
Proceeds from issuance of common stock |
|
5.5 |
|
|
0.4 |
|
|
2.1 |
|
Payments to acquire treasury stock |
|
|
|
|
|
|
|
(35.0 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided from (used for) financing activities |
|
(85.1 |
) |
|
40.2 |
|
|
(80.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
(1.7 |
) |
|
4.0 |
|
|
(46.9 |
) |
Cash and cash equivalents at beginning of year |
|
9.5 |
|
|
5.5 |
|
|
52.4 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
$ 7.8 |
|
|
$ 9.5 |
|
|
$ 5.5 |
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
Consolidated Balance Sheet
Carpenter Technology Corporation
June 30, 2001 and 2000
|
|
2001 |
|
2000 |
|
|
(in millions) |
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ 7.8 |
|
|
$ 9.5 |
|
Accounts receivable, net of allowance for doubtful accounts of
|
|
|
|
|
|
|
$2.3 and $2.2 at June 30, 2001 and 2000, respectively |
|
193.8 |
|
|
187.0 |
|
Inventories |
|
241.1 |
|
|
270.2 |
|
Other current assets |
|
16.4 |
|
|
16.3 |
|
|
|
|
|
|
|
|
Total current assets |
|
459.1 |
|
|
483.0 |
|
Property, plant and equipment, net |
|
752.2 |
|
|
789.9 |
|
Prepaid pension cost |
|
225.6 |
|
|
185.2 |
|
Goodwill, net |
|
161.7 |
|
|
172.3 |
|
Other assets |
|
92.9 |
|
|
115.5 |
|
|
|
|
|
|
|
|
Total assets |
|
$1,691.5 |
|
|
$1,745.9 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Short-term debt |
|
$ 170.6 |
|
|
$ 219.9 |
|
Accounts payable |
|
82.3 |
|
|
97.3 |
|
Accrued liabilities |
|
63.9 |
|
|
61.2 |
|
Deferred income taxes |
|
2.1 |
|
|
5.6 |
|
Current portion of long-term debt |
|
25.2 |
|
|
10.4 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
344.1 |
|
|
394.4 |
|
Long-term debt, net of current portion |
|
326.9 |
|
|
352.3 |
|
Accrued postretirement benefits |
|
157.8 |
|
|
152.3 |
|
Deferred income taxes |
|
177.8 |
|
|
158.0 |
|
Other liabilities |
|
36.3 |
|
|
35.3 |
|
|
|
STOCKHOLDERS EQUITY |
|
|
|
|
|
|
Convertible preferred stockauthorized 2,000,000 shares |
|
25.4 |
|
|
26.0 |
|
Common stockauthorized 100,000,000 shares |
|
116.3 |
|
|
115.4 |
|
Capital in excess of par valuecommon stock |
|
196.7 |
|
|
192.2 |
|
Reinvested earnings |
|
378.4 |
|
|
388.0 |
|
Common stock in treasury, at cost |
|
(38.4 |
) |
|
(38.4 |
) |
Deferred compensation |
|
(13.1 |
) |
|
(14.1 |
) |
Accumulated other comprehensive income (loss) |
|
(16.7 |
) |
|
(15.5 |
) |
|
|
|
|
|
|
|
Total stockholders equity |
|
648.6 |
|
|
653.6 |
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$1,691.5 |
|
|
$1,745.9 |
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
Consolidated Statement of Changes in Stockholders Equity
Carpenter Technology Corporation
For the years ended June 30, 2001, 2000 and 1999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
Stock
Par Value
of $5 |
|
Par
Value
of $5 |
|
Capital in
Excess of
Par Value |
|
Reinvested
Earnings |
|
Treasury
Stock |
|
Deferred
Compen-
sation |
|
Accumulated
Other Comp.
Income
(Loss) |
|
Total
Stock-
holders
Equity |
|
|
(in millions, except per share data) |
Balances at June 30, 1998 |
|
$27.8 |
|
|
$115.0 |
|
|
$190.0 |
|
|
$359.1 |
|
|
$ (3.4 |
) |
|
$(17.8 |
) |
|
$(11.2 |
) |
|
$659.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
37.1 |
|
|
|
|
|
|
|
|
|
|
|
37.1 |
|
Cash dividends: |
Common @ $1.32 per
share |
|
|
|
|
|
|
|
|
|
|
(29.2 |
) |
|
|
|
|
|
|
|
|
|
|
(29.2 |
) |
Preferred @ $5,362.50 per
share |
|
|
|
|
|
|
|
|
|
|
(1.5 |
) |
|
|
|
|
|
|
|
|
|
|
(1.5 |
) |
Stock options exercised |
|
|
|
|
0.1 |
|
|
0.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.5 |
|
Treasury shares purchased |
|
|
|
|
|
|
|
|
|
|
|
|
|
(35.0 |
) |
|
|
|
|
|
|
|
(35.0 |
) |
Other |
|
(1.0 |
) |
|
0.2 |
|
|
1.5 |
|
|
|
|
|
|
|
|
1.4 |
|
|
(1.0 |
) |
|
1.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at June 30, 1999 |
|
$26.8 |
|
|
$115.3 |
|
|
$191.9 |
|
|
$365.5 |
|
|
$(38.4 |
) |
|
$(16.4 |
) |
|
$(12.2 |
) |
|
$632.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
53.3 |
|
|
|
|
|
|
|
|
|
|
|
53.3 |
|
Cash dividends: |
Common @ $1.32 per
share |
|
|
|
|
|
|
|
|
|
|
(29.0 |
) |
|
|
|
|
|
|
|
|
|
|
(29.0 |
) |
Preferred @ $5,362.50 per
share |
|
|
|
|
|
|
|
|
|
|
(1.8 |
) |
|
|
|
|
|
|
|
|
|
|
(1.8 |
) |
Stock options exercised |
|
|
|
|
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1 |
|
Other |
|
(0.8 |
) |
|
0.1 |
|
|
0.2 |
|
|
|
|
|
|
|
|
2.3 |
|
|
(3.3 |
) |
|
(1.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at June 30, 2000 |
|
$26.0 |
|
|
$115.4 |
|
|
$192.2 |
|
|
$388.0 |
|
|
$(38.4 |
) |
|
$(14.1 |
) |
|
$(15.5 |
) |
|
$653.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
21.1 |
|
|
|
|
|
|
|
|
|
|
|
21.1 |
|
Cash dividends: |
Common @ $1.32 per
share |
|
|
|
|
|
|
|
|
|
|
(29.1 |
) |
|
|
|
|
|
|
|
|
|
|
(29.1 |
) |
Preferred @ $5,362.50 per
share |
|
|
|
|
|
|
|
|
|
|
(1.6 |
) |
|
|
|
|
|
|
|
|
|
|
(1.6 |
) |
Stock options exercised |
|
|
|
|
0.8 |
|
|
3.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.9 |
|
Other |
|
(0.6 |
) |
|
0.1 |
|
|
1.4 |
|
|
|
|
|
|
|
|
1.0 |
|
|
(1.2 |
) |
|
0.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at June 30, 2001 |
|
$25.4 |
|
|
$116.3 |
|
|
$196.7 |
|
|
$378.4 |
|
|
$(38.4 |
) |
|
$(13.1 |
) |
|
$(16.7 |
) |
|
$648.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
Consolidated Statement of Changes in Stockholders Equity (continued)
Carpenter Technology Corporation
For the years ended June 30, 2001, 2000 and 1999
|
|
|
|
Common Shares
|
|
|
Preferred
Shares
Issued
|
|
Issued
|
|
Treasury
|
|
Net
Outstanding
|
Balances at June 30, 1998 |
|
441.1 |
|
|
22,995,036 |
|
(147,920 |
) |
|
22,847,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options exercised |
|
|
|
|
13,940 |
|
|
|
|
13,940 |
|
Treasury shares purchased |
|
|
|
|
|
|
(955,567 |
) |
|
(955,567 |
) |
Other |
|
(15.3 |
) |
|
42,800 |
|
(1,554 |
) |
|
41,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at June 30, 1999 |
|
425.8 |
|
|
23,051,776 |
|
(1,105,041 |
) |
|
21,946,735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options exercised, net of 3,753 shares
exchanged |
|
|
|
|
2,587 |
|
|
|
|
2,587 |
|
Other |
|
(12.7 |
) |
|
17,272 |
|
(2,159 |
) |
|
15,113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at June 30, 2000 |
|
413.1 |
|
|
23,071,635 |
|
(1,107,200 |
) |
|
21,964,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options exercised |
|
|
|
|
154,230 |
|
|
|
|
154,230 |
|
Other |
|
(9.1 |
) |
|
41,654 |
|
(1,047 |
) |
|
40,607 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at June 30, 2001 |
|
404.0 |
|
|
23,267,519 |
|
(1,108,247 |
) |
|
22,159,272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Comprehensive Income
Carpenter Technology Corporation
For the years ended June 30, 2001, 2000 and 1999
|
|
2001
|
|
2000
|
|
1999
|
|
|
(in millions) |
Net income |
|
$21.1 |
|
|
$53.3 |
|
|
$37.1 |
|
Cumulative effect of change in accounting principle for derivatives
and hedging activities (SFAS 133), net of tax |
|
.8 |
|
|
|
|
|
|
|
Net losses on derivative instruments, net of tax |
|
(2.3 |
) |
|
|
|
|
|
|
Unrealized loss on investment, net of tax |
|
(.1 |
) |
|
|
|
|
|
|
Foreign currency translation, net of tax |
|
.4 |
|
|
(3.3 |
) |
|
(1.0 |
) |
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
$19.9 |
|
|
$50.0 |
|
|
$36.1 |
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Basis of ConsolidationThe consolidated financial statements include the accounts of
Carpenter and all majority-owned subsidiaries. All significant intercompany accounts and transactions are eliminated. Investments in companies in which Carpenter has an ownership interest of 20 to 50 percent are accounted for on an equity basis and
accordingly, Carpenters share of their income is included in consolidated net income.
Revenue RecognitionRevenue, net of related discounts and allowances, is principally
recognized when product is shipped and title and risk of loss has transferred to the customer.
Cash EquivalentsCash equivalents consist of highly liquid instruments with maturities
at the time of acquisition of three months or less. Cash equivalents are stated at cost, which approximates market.
InventoriesInventories are valued at the lower of cost or market. Cost for inventories
is principally determined by the Last-In, First-Out (LIFO) method. Carpenter also uses the First-In, First-Out (FIFO) and average cost methods.
Depreciation and AmortizationDepreciation for financial reporting purposes is computed
by the straight-line method. Depreciation for income tax purposes is computed using accelerated methods. Upon disposal, assets and related depreciation are removed from the accounts and the differences between the net amounts and proceeds from
disposal are included in other income, net in the consolidated statement of income.
The costs of intangible assets other than goodwill, which are included in other assets on the consolidated balance
sheet, are comprised principally of trademarks and tradenames and computer software, and are amortized for financial reporting purposes on a straight-line basis over their respective estimated useful lives, ranging from 3 to 30 years.
GoodwillGoodwill, representing the excess of the purchase price over the estimated
fair value of the identifiable net assets of companies acquired to date, is being amortized on a straight-line basis over the estimated life of the goodwill, ranging from 20 to 40 years. Accumulated amortization of goodwill was $29.0 million and
$22.6 million at June 30, 2001 and 2000, respectively.
Long-Lived AssetsLong-lived assets, including goodwill and other intangibles, are
reviewed for impairment and written down to fair value whenever events or changes in circumstances indicate that the carrying value may not be recoverable through future undiscounted cash flows. Carpenter evaluates long-lived assets for impairment
by individual business unit.
Environmental ExpendituresEnvironmental expenditures that pertain to current
operations or to future revenues are expensed or capitalized consistent with Carpenters capitalization policy for property, plant and equipment. Expenditures that result from the remediation of an existing condition caused by past operations
and that do not contribute to current or future revenues are expensed. Liabilities are recognized for remedial activities when the cleanup is probable and the cost can be reasonably estimated. Recoveries of expenditures are recognized as receivables
when they are estimable and probable. Estimated liabilities are not discounted to present value, but estimated receivables are measured on a discounted basis.
Foreign Currency TranslationAssets and liabilities of most foreign operations are
translated at exchange rates in effect at year-end, and their income statements are translated at the average monthly exchange rates prevailing during the year. Translation gains and losses are recorded each period in other comprehensive income
until the foreign entity is sold or liquidated. For operations in highly inflationary countries and where the local currency is not the functional currency, inventories, property, plant and equipment, and other noncurrent assets are converted to
U.S. dollars at historical exchange rates, and all gains or losses from conversion are included in net income.
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
1. Summary of Significant Accounting Policies (Continued)
Freight and Handling Fees and CostsThe Emerging Issues Task Force (EITF) of the
Financial Accounting Standards Board (FASB) issued EITF 00-10 regarding the classification of freight and handling costs billed to customers. EITF 00-10 requires freight and handling costs billed separately to be included as part of sales on the
statement of income. In addition, the preferred classification of freight and handling costs expensed on the statement of income is to include them in cost of sales. Carpenter adopted this requirement effective July 1, 2000. Reclassification of
fiscal 2000 and 1999 resulted in increasing sales by $13.3 million and $12.5 million, increasing cost of sales by $42.6 million and $32.4 million and decreasing selling and administrative expenses by $29.3 million and $19.9 million,
respectively.
Overhaul CostsMajor maintenance costs incurred during scheduled plant shutdowns
are capitalized when incurred and amortized over the period until the next scheduled shutdown, which is generally within the same fiscal year.
Use of EstimatesThe preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
ReclassificationsCertain reclassifications of prior years amounts have been made
to conform with the current years presentation.
Accounting ChangeIn the fourth quarter of fiscal 2001, Carpenter changed its method of
accounting for revenue recognition in accordance with the guidance of the Securities and Exchange Commissions Staff Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial Statements. Carpenters standard terms
and conditions of sale for most of its sales included a provision that title to the goods was retained as a security interest until payment was received, even though the risks and benefits of ownership were passed to the customer at the time of
shipment. Under SAB 101, except for certain foreign units, revenue cannot be recognized until title passes to the customer, which in Carpenters case was when payment was received.
On April 1, 2001, Carpenter changed its terms and conditions of sale so that revenue can be recognized when product is
shipped, in accordance with its historical practice. The combined effect of SAB 101 and the change in terms and conditions increased fiscal 2001 sales by $138.0 million and net income by $14.1 million, net of $9.4 million of tax. The cumulative
effect at July 1, 2000 of this change in accounting principle was a charge of $14.1 million after taxes, or $.62 per diluted share.
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Pro-forma net income and earnings per share information for the years ended June 30, 2000 and 1999, assuming SAB 101
had been applied retroactively, are as follows:
|
|
2000
|
|
1999
|
|
|
(Dollars in millions, except
per share information) |
Net income: |
|
|
|
|
As reported |
|
$53.3 |
|
$37.1 |
Pro-forma under SAB 101 |
|
$48.3 |
|
$41.8 |
|
Basic earnings per share: |
As reported |
|
$2.35 |
|
$1.61 |
Pro-forma under SAB 101 |
|
$2.12 |
|
$1.82 |
|
Diluted earnings per share: |
As reported |
|
$2.31 |
|
$1.58 |
Pro-forma under SAB 101 |
|
$2.09 |
|
$1.78 |
New Accounting PronouncementsThe FASB has issued Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets (SFAS 142) which requires that goodwill and certain intangible assets no longer be amortized and requires ongoing evaluation of these assets for impairment. Carpenter anticipates
adopting SFAS 142 in fiscal 2002, and is currently evaluating its impact.
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
2. Earnings Per Common Share
The computation of basic and diluted earnings per share for the years ended June 30, 2001, 2000 and 1999
follows:
|
|
2001
|
|
2000
|
|
1999
|
|
|
(in millions, except
per share data) |
Basic EPS: |
Income before cumulative effect of accounting
change, net of tax |
|
$35.2 |
|
|
$53.3 |
|
|
$37.1 |
|
Dividends accrued on convertible preferred stock,
net of tax benefits |
|
(1.7 |
) |
|
(1.8 |
) |
|
(1.5 |
) |
|
|
|
|
|
|
|
|
|
|
Earnings available for common stockholders |
|
33.5 |
|
|
51.5 |
|
|
35.6 |
|
Cumulative effect of accounting change |
|
(14.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available for common stockholders |
|
$19.4 |
|
|
$51.5 |
|
|
$35.6 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
22.0 |
|
|
22.0 |
|
|
22.1 |
|
|
|
|
|
|
|
|
|
|
|
Earnings per share before cumulative effect of
accounting change |
|
$1.52 |
|
|
$2.35 |
|
|
$1.61 |
|
Cumulative effect of accounting change per share |
|
(0.64 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share |
|
$0.88 |
|
|
$2.35 |
|
|
$1.61 |
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS: |
Net income before cumulative effect of accounting
change, net of tax |
|
$35.2 |
|
|
$53.3 |
|
|
$37.1 |
|
Assumed shortfall between common and preferred
dividends |
|
(0.7 |
) |
|
(0.6 |
) |
|
(0.7 |
) |
|
|
|
|
|
|
|
|
|
|
Earnings available for common stockholders |
|
34.5 |
|
|
52.7 |
|
|
36.4 |
|
Cumulative effect of accounting change |
|
(14.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available for common stockholders |
|
$20.4 |
|
|
$52.7 |
|
|
$36.4 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
22.0 |
|
|
22.0 |
|
|
22.1 |
|
Assumed conversion of preferred shares |
|
0.8 |
|
|
0.8 |
|
|
0.9 |
|
Effect of shares issuable under stock option plans |
|
0.1 |
|
|
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted weighted average common shares |
|
22.9 |
|
|
22.8 |
|
|
23.1 |
|
|
|
|
|
|
|
|
|
|
|
Earnings per share before cumulative effect of accounting change |
|
$1.50 |
|
|
$2.31 |
|
|
$1.58 |
|
Cumulative effect of accounting change per share |
|
(0.62 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share |
|
$0.88 |
|
|
$2.31 |
|
|
$1.58 |
|
|
|
|
|
|
|
|
|
|
|
In fiscal 2001, 2000 and 1999, 1.4 million, 1.8 million and 0.7 million stock options, respectively, were excluded from
the computation of diluted earnings per share due to their antidilutive effect.
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
3. Special Charges
During the fourth quarter of fiscal 2001, Carpenter incurred special charges of $37.6 million before taxes that are
recognized in the consolidated statement of income as a separate $36.0 million special charge, an addition to cost of sales of $1.2 million as a result of a writedown of inventory and an addition to selling and administrative expenses of $.4 million
due to a writedown of accounts receivable. The components of this special charge are:
|
|
The divestiture of certain business units that are considered non-strategic. These small business units, with combined annual
revenues of $25 million, are within Carpenters Engineered Products Group (EPG). The charge of $19.3 million before taxes consists primarily of the writedown of certain assets, including property, plant and equipment, goodwill and inventory, to
their net realizable values.
|
|
|
The reduction in workforce of approximately 100 salaried positions as a result of the realignment of Specialty Alloys
Operations (SAO) and Corporate staff. The charge of $9.1 million before taxes consists primarily of various personnel-related costs to cover severance payments, enhanced pension benefits, medical coverage and related items. Approximately $7.6
million of the charge will be paid from the qualified pension plan and, accordingly, this portion of the special charge reduced the prepaid pension cost account on the balance sheet. All employees are expected to depart during fiscal 2002. There was
also a $1.7 million before taxes charge to writedown certain SAO assets to their net realizable value.
|
|
|
On May 18, 2001, Carpenter reached a settlement agreement with the City of Bridgeport, Connecticut and the Bridgeport Port
Authority in connection with the disposal of Carpenters former steel mill property in Bridgeport. As a result of the settlement agreement, Carpenter incurred a one-time, non-cash charge of $7.5 million before taxes. The City of Bridgeport had
proposed compensation of $2.5 million and had sought reimbursement of any additional site remediation costs. Under the settlement agreement, Carpenter received $9.25 million and retained responsibility for an existing oil deposit on the property,
except to the extent the oil deposit is disturbed by the City of Bridgeport or the Bridgeport Port Authority or a third party acting on their behalf to develop the site.
|
During the third quarter of fiscal 1999, Carpenter recorded a pre-tax charge of $14.2 million related to a salaried work
force reduction and a reconfiguration of its U.S. distribution network. The positions eliminated include various salaried positions throughout the SAO and corporate offices. The charge consisted chiefly of various personnel-related costs for about
205 employees to cover severance payments, enhanced pension benefits, medical coverage and related items. Approximately $13.0 million of the charge was paid from the qualified pension plan and, accordingly, this portion of the special charge reduced
the prepaid pension cost account on the balance sheet. As of June 30, 2000, the reduction of employees was complete.
4. Acquisitions of Businesses
During the previous two fiscal years, Carpenter acquired the businesses described below, all of which were accounted for
by the purchase method of accounting.
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
4. Acquisitions of Businesses (continued)
Fiscal 2000
On February 1, 2000, Carpenter acquired the Anval Group, a powder metal producer based in Torshälla, Sweden, at a
cost of $7 million in cash, including acquisition costs, and assumed Anvals debt with a fair market value of $1.6 million. The purchase price included $3.5 million of goodwill with a life of 20 years. The pro-forma impact of the acquisition
was not material.
Fiscal 1999
In April 1999, Carpenter finalized a joint venture with Kalyani Steels Ltd. that established two companies in India, at
an initial cost of $10.7 million, including organization costs. The companies established are Kalyani Carpenter Special Steels Ltd. (KCSSL), a specialty steel manufacturing company, and Kalyani Carpenter Metal Centres Ltd. (KCMCL), a specialty steel
distribution company. Carpenter owns 26 percent of KCSSL and 51 percent of KCMCL. The investment in KCSSL exceeded Carpenters share of the initial equity of KCSSL by $6.0 million which is included in other assets in the consolidated balance
sheet and is being amortized on a straight-line basis over 20 years.
In October 1998, Carpenter acquired the strip producing business of Telcon, Ltd., for $11.4 million of cash, including
acquisition costs. This facility produces narrow strip for electronic applications using magnetic and controlled expansion alloys. The fair value of the net assets acquired approximated the purchase price.
The pro-forma impact of these acquisitions were not material. Fiscal 1999 included other acquisitions which were
immaterial.
The purchase prices have been allocated to the assets purchased and the liabilities assumed, based upon the fair values
on the dates of acquisition, as follows:
|
|
2000 |
|
1999 |
|
|
(in millions) |
Working capital, other than cash |
|
$ 0.3 |
|
|
$ 2.3 |
Property, plant and equipment |
|
3.7 |
|
|
9.1 |
Goodwill |
|
3.5 |
|
|
1.0 |
Other assets |
|
0.4 |
|
|
10.7 |
Noncurrent liabilities |
|
(0.9 |
) |
|
|
|
|
|
|
|
|
Purchase price, net of cash received |
|
$ 7.0 |
|
|
$ 23.1 |
|
|
|
|
|
|
In fiscal 2000, deferred tax liabilities included in the allocation totaled $0.6 million and debt included in the
allocation was $1.6 million. No debt or deferred tax liabilities were included in the allocation in fiscal 1999.
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
5. Inventories
|
|
June 30
|
|
|
|
|
2001
|
|
2000
|
|
|
|
|
(in millions) |
Finished and purchased products |
|
$ 108.7 |
|
$138.1 |
Work in process |
|
185.4 |
|
211.9 |
Raw materials and supplies |
|
44.5 |
|
46.2 |
|
|
|
|
|
Total at current cost |
|
338.6 |
|
396.2 |
|
|
|
|
|
Less excess of current cost over LIFO values |
|
97.5 |
|
126.0 |
|
|
|
|
|
|
|
$ 241.1 |
|
$270.2 |
|
|
|
|
|
Current cost of LIFO-valued inventories was $272.5 million at June 30, 2001 and $331.9 million at June 30, 2000. In
fiscal 2001, the reductions of certain LIFO valued inventories decreased cost of sales by $.7 million.
6. Property, Plant and Equipment
|
|
June 30
|
|
|
|
|
2001
|
|
2000
|
|
|
|
|
(in millions) |
Land |
|
$ 7.7 |
|
$ 12.8 |
Buildings and building equipment |
|
233.8 |
|
234.6 |
Machinery and equipment |
|
1,076.0 |
|
1,056.5 |
Construction in progress |
|
28.4 |
|
37.5 |
|
|
|
|
|
Total at cost |
|
1,345.9 |
|
1,341.4 |
|
|
|
|
|
Less accumulated depreciation and amortization |
|
593.7 |
|
551.5 |
|
|
|
|
|
|
|
$ 752.2 |
|
$ 789.9 |
|
|
|
|
|
The estimated useful lives of depreciable assets are as follows: land improvements20 years; buildings and
equipment20 to 45 years; machinery and equipment5 to 30 years; autos and trucks3 to 6 years; office furniture and equipment3 to 10 years. Effective April 1, 1999, Carpenter changed its estimates of the useful lives of certain
major manufacturing equipment from 20 to 30 years. This change recognizes the current expectations of economic useful lives for this equipment and resulted in a reduction of depreciation expense of $1.8 million or $.04 per diluted share during the
fourth quarter of fiscal 1999.
7. Accrued Liabilities
|
|
June 30
|
|
|
|
|
2001
|
|
2000
|
|
|
|
|
(in millions) |
Compensation |
|
$18.6 |
|
$20.6 |
Employee benefits |
|
12.2 |
|
12.9 |
Interest |
|
7.5 |
|
7.8 |
Environmental costs |
|
2.2 |
|
1.0 |
Other |
|
23.4 |
|
18.9 |
|
|
|
|
|
|
|
$63.9 |
|
$61.2 |
|
|
|
|
|
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
8. Debt
Carpenter has $275 million of revolving credit agreements with four banks. Interest is based on short-term market rates.
As of June 30, 2001, there was $170.6 million outstanding under the credit agreements.
For the years ended June 30, 2001, 2000 and 1999, interest cost totaled $41.1 million, $39.4 million and $34.8 million,
of which $0.8 million, $6.0 million and $5.5 million, respectively, were capitalized as part of the cost of plant, equipment and software.
The weighted average interest rates for short-term borrowings during fiscal 2001 and 2000 were 6.24 percent and 6.1
percent, respectively.
Long-term debt outstanding at June 30, 2001 and 2000, consists of the following:
|
|
June 30 |
|
|
|
|
2001 |
|
2000 |
|
|
|
|
(in millions) |
Medium-term notes, Series B at 6.28% to 7.10% due from
April 2003 to 2018 |
|
$198.0 |
|
$198.0 |
9% Sinking fund debentures due 2022, callable beginning in March 2002
at 104.2%; sinking fund requirements are $5.0 million annually
from 2003 to 2021 |
|
99.7 |
|
99.6 |
Medium-term notes, Series A at 6.78% to 7.80% due from
September 2000 to 2005 |
|
45.0 |
|
55.0 |
Secured note, payable in monthly installments of $0.1 million including
interest of 8% with a final payment of $6.1 million due April 2010 |
|
7.5 |
|
7.6 |
Other |
|
1.9 |
|
2.5 |
|
|
|
|
|
Total |
|
352.1 |
|
362.7 |
Less amounts due within one year |
|
25.2 |
|
10.4 |
|
|
|
|
|
Long-term debt, net of current portion |
|
$326.9 |
|
$352.3 |
|
|
|
|
|
Aggregate maturities of long-term debt for the four years subsequent to June 30, 2002, are $50.3 million in fiscal 2003,
$5.3 million in fiscal 2004, $45.4 million in fiscal 2005 and $5.4 million in fiscal 2006.
Carpenters financing agreements contain restrictions on the total amount of debt and the minimum tangible net
worth permitted.
In August, 2001, Carpenter issued $100 million of medium-term notes at 7.625%. The notes will mature in
2011.
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
9. Financial Instruments
The carrying amounts and estimated fair values of Carpenters financial instruments were as follows:
|
|
June 30
|
|
|
2001
|
|
2000
|
|
|
Carrying
Value
|
|
Fair
Value
|
|
Carrying
Value
|
|
Fair
Value
|
|
|
(in millions) |
Cash and cash equivalents |
|
$ 7.8 |
|
|
$ 7.8 |
|
|
$ 9.5 |
|
$ 9.5 |
Company-owned life insurance |
|
$ 16.3 |
|
|
$ 16.3 |
|
|
$ 18.2 |
|
$ 18.2 |
Short-term debt |
|
$170.6 |
|
|
$170.6 |
|
|
$219.9 |
|
$219.9 |
Long-term debt |
|
$352.1 |
|
|
$344.0 |
|
|
$362.7 |
|
$338.0 |
Commodity price swaps and options |
|
$ (2.0 |
) |
|
$ (2.0 |
) |
|
$ |
|
$ 0.9 |
Foreign currency forwards and options |
|
$ 1.6 |
|
|
$ 1.6 |
|
|
$ 0.6 |
|
$ 0.9 |
Interest rate swaps and locks |
|
$ |
|
|
$ |
|
|
$ |
|
$ |
The carrying amounts for cash, cash equivalents and short-term debt approximate their fair values due to the short
maturities of these instruments. The carrying amount for company-owned life insurance reflects cash surrender values based upon market values of underlying securities.
The fair value of long-term debt as of June 30, 2001 and 2000, was determined by using current interest rates and market
values of similar issues.
Carpenter is exposed to credit risk related to its financial instruments in the event of non-performance by the
counterparties. Carpenter does not generally require collateral or other security to support these financial instruments. However, the counterparties to these transactions are major financial institutions deemed credit worthy by Carpenter. Carpenter
does not anticipate non-performance by the counterparties.
Adoption of SFAS 133
Carpenter adopted SFAS 133, as amended, Accounting for Derivative Instruments and Hedging Activities, on
July 1, 2000. SFAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in earnings or other comprehensive income, depending on the type
of hedging instrument and the effectiveness of the hedges. In accordance with the transition provisions of SFAS 133, Carpenter recorded a cumulative positive adjustment to other comprehensive income of $.8 million, after tax, to recognize the fair
value of its derivative instruments as of the date of adoption.
Carpenters current risk management strategies include the use of derivative instruments to reduce certain risks.
These strategies are:
|
The use of commodity swaps and options to fix the price of a portion of anticipated future purchases of certain raw materials
and energy to offset the effects of changes in the costs of those commodities.
|
|
The use of foreign currency forwards and options to hedge a portion of anticipated future sales denominated in foreign
currencies, principally the Euro and Pound Sterling, in order to offset the effect of changes in exchange rates.
|
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
9. Financial Instruments (continued)
|
The use of foreign currency forwards and options to hedge certain foreign currency denominated intercompany receivables,
primarily in Euro and Pound Sterling, to offset the effect on earnings of changes in exchange rates until these receivables are collected.
|
|
The use of interest rate swaps to fix the interest rate on certain floating rate debt to stabilize interest
rates.
|
|
The use of treasury rate locks to fix forward the treasury rate component of a portion of the August 2001 debt offering that
was priced based on the prevailing applicable treasury rate and credit spread at the time the debt offering was finalized.
|
All of the derivatives used by Carpenter in its risk management strategies are highly effective hedges because all of
the critical terms of the derivative instruments match those of the hedged item. All of the described derivative instruments, except for hedges of receivables, have been designated as cash flow hedges at the time of adoption of SFAS 133 or if later
than July 1, 2000 at the time they were executed. The hedges of intercompany receivables do not qualify for hedge accounting. All derivatives are adjusted to their fair market values at the end of each calendar quarter. Unrealized net gains and
losses for cash flow hedges are recorded in other comprehensive income. At the time the anticipated transactions occur, any unrealized gains and losses on the related hedge are reclassified from other comprehensive income to the statement of income,
thus offsetting the income effects of the anticipated transactions to which they relate. Amounts reclassified to the statement of income are included in cost of sales (commodity hedges), interest expense (interest rate swaps) and sales (foreign
exchange hedges of anticipated sales). All unrealized gains or losses on hedges of intercompany receivables are recorded in income each quarter, as are changes in the value of the receivables. If an anticipated transaction is no longer expected to
occur, unrealized gains and losses on the related hedge are reclassified to the statement of income. Cash flow hedges at June 30, 2001 have various settlement dates, the latest of which is a September, 2005 interest rate swap.
Carpenter evaluates all derivative instruments each quarter to determine that they are highly effective. Any
ineffectiveness is recorded in the statement of income. The ineffectiveness for existing derivative instruments for the year ending June 30, 2001 was primarily related to option premiums and was immaterial. During the year ended June 30, 2001,
unrealized net losses totaling $1.7 million after taxes were recorded in other comprehensive income, including the $.8 million cumulative effect as of July 1, 2000, and $.2 million of income after taxes was reclassified from other comprehensive
income to the statement of income. There were no reclassifications from other comprehensive income to earnings during the year ended June 30, 2001 that were caused by anticipated transactions which are no longer expected to occur.
As of June 30, 2001, $1.5 million of net losses from derivative instruments was included in accumulated other
comprehensive income, $1.4 million of which is expected to be reclassified to the statement of income within one year.
10. Common Stock
Common Stock Repurchase Program:
On August 6, 1998, a stock repurchase program was approved for up to 1.2 million, or 5 percent, of the outstanding
shares of Carpenters common stock. The shares may be purchased over time and held as treasury shares. During fiscal 1999, 0.9 million shares were repurchased at a total cost of $34.5 million.
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
10. Common Stock (continued)
Common Stock Purchase Rights:
Under a common stock Rights Agreement amended as of June 12, 2000, Carpenter has issued one common stock purchase right
(Right) for every outstanding share of common stock. Except as otherwise provided in the Rights Agreement, the Rights will become exercisable and separate Rights certificates will be distributed to the stockholders: (1) 10 days following
the acquisition of 20 percent or more of Carpenters common stock, (2) 10 business days (or such later date as the Board of Directors may determine) following the commencement of a tender or exchange offer for 20 percent or more of
Carpenters common stock, or (3) 10 days after Carpenters Board of Directors determines that a holder of 15 percent or more of Carpenters shares has an interest adverse to those of Carpenter or its stockholders (an adverse
person). Upon distribution, each Right would then entitle a holder to buy from Carpenter one newly issued share of its common stock for an exercise price of $145.
After distribution, upon: (1) any person acquiring 20 percent of the outstanding stock (other than pursuant to a fair
offer as determined by the Board of Directors), (2) a 20 percent holder engaging in certain self-dealing transactions, (3) the determination of an adverse person, or (4) certain mergers or similar transactions between Carpenter and holder of 20
percent or more of Carpenters common stock, each Right (other than those held by the acquiring party) entitles the holder to purchase shares of common stock of either the acquiring company or Carpenter (depending on the circumstances) having a
market value equal to twice the exercise price of the Right. The Rights may be redeemed by Carpenter for $.025 per Right at any time before they become exercisable. The Rights Agreement expires on June 26, 2006.
11. Stock-Based Compensation
Carpenter has three stock-based compensation plans for officers and key employees: a 1993 plan, a 1982 plan and a 1977
plan.
1993 Plan:
The 1993 plan provides that the Board of Directors may grant incentive stock options, non-qualified stock options, stock
appreciation rights, restricted stock and performance share awards, and determine the terms and conditions of each grant. In fiscal 1998, the plan was amended to provide the Chief Executive Officer with limited authority to grant stock options and
restricted stock. In October, 2000, the stockholders authorized an additional 1,800,000 shares to the plan for share awards. As of June 30, 2001 and 2000, 1,376,936 and 2,116 shares, respectively, were reserved for options and share awards which may
be granted under this plan.
Stock option grants under this plan must be at no less than market value on the date of grant, are exercisable after one
year of employment following the date of grant, and will expire no more than ten years after the date of grant.
Restricted stock awards outstanding vest over periods ranging from three to five years from the date of grant. When
restricted shares are issued, deferred compensation is recorded as a reduction of stockholders equity, and charged to expense over the vesting period. During fiscal 2001, 2000 and 1999, $0.2 million, $0.4 million and $0.4 million,
respectively, were charged to expense for vested restricted shares.
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
11. Stock-Based Compensation (continued)
Performance share awards are earned only if Carpenter achieves certain performance levels over a three-year period. The
awards are payable at the discretion of the Board of Directors in either shares of common stock or cash and expensed over the three-year performance period. Pre-tax income was increased by $0.3 million in both fiscal 2001 and 2000, and decreased by
$0.5 million in fiscal 1999 relating to performance shares.
1982 and 1977 Plans:
The 1982 plan expired in June 1992; however, all outstanding unexpired options granted prior to that date remain in
effect. Under the 1982 and 1977 plans, options are granted at the market value on the date of grant, are exercisable after one year of employment following the date of grant and expire ten years after grant. At June 30, 2001 and 2000, 18,160 and
2,120 shares, respectively, were reserved for options which may be granted under the 1977 plan.
Carpenter has a stock-based compensation plan which provides for the granting of stock options and other market-based
units to non-employee Directors. Options are granted at the market value on the date of the grant and are exercisable after one year of Board service following the date of grant. Options expire ten years after the date of grant. At June 30, 2001 and
2000, 46,000 and 65,000 shares, respectively, were reserved for options which may be granted under this plan.
Option Activity:
|
|
Number of
Shares |
|
Weighted Average
Exercise Price |
|
Balance at June 30, 1998 |
|
1,151,944 |
|
|
$39.30 |
|
|
|
|
|
|
|
|
Granted |
|
597,500 |
|
|
28.80 |
|
Exercised |
|
(13,940 |
) |
|
30.67 |
|
Cancelled |
|
(13,760 |
) |
|
49.16 |
|
|
|
|
|
|
|
|
Balance at June 30, 1999 |
|
1,721,744 |
|
|
$35.65 |
|
|
|
|
|
|
|
|
Granted |
|
371,000 |
|
|
20.41 |
|
Exercised |
|
(6,340 |
) |
|
24.67 |
|
Cancelled |
|
(10,120 |
) |
|
28.37 |
|
|
|
|
|
|
|
|
Balance at June 30, 2000 |
|
2,076,284 |
|
|
$32.99 |
|
|
|
|
|
|
|
|
Granted |
|
495,400 |
|
|
29.92 |
|
Exercised |
|
(154,230 |
) |
|
24.79 |
|
Cancelled |
|
(77,377 |
) |
|
33.68 |
|
|
|
|
|
|
|
|
Balance at June 30, 2001 |
|
2,340,077 |
|
|
$32.86 |
|
|
|
|
|
|
|
|
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
11. Stock-Based Compensation (continued)
Outstanding Options
Exercise Price
Range |
|
Number
Outstanding
at 06/30/01 |
|
Weighted Average
Remaining Life |
|
Weighted Average
Exercise Price |
|
$19 $30 |
|
972,522 |
|
7.67
|
|
$25.50 |
|
$30 $40 |
|
820,955 |
|
7.52
|
|
31.61 |
|
$40 $51 |
|
546,600 |
|
6.52
|
|
47.84 |
|
|
|
|
|
|
|
|
|
|
|
2,340,077 |
|
|
|
$32.86 |
|
|
|
|
|
|
|
|
|
Of the options outstanding at June 30, 2001, 1,875,335 relate to the 1993 plan, 33,260 relate to the 1982 plan, 272,980
relate to the 1977 plan and 158,502 relate to the plan for non-employee Directors.
Exercisable Options
Exercise Price
Range |
|
Number
Exercisable
at 06/30/01 |
|
Weighted Average
Exercise Price |
|
$19 $30 |
|
920,722 |
|
$25.37 |
|
$30 $40 |
|
377,355 |
|
33.30 |
|
$40 $51 |
|
546,600 |
|
47.84 |
|
|
|
|
|
|
|
|
|
1,844,677 |
|
$33.65 |
|
|
|
|
|
|
|
Carpenter accounts for its stock option plans in accordance with APB Opinion 25, Accounting for Stock Issued to
Employees, and related interpretations. Under APB Opinion 25, no compensation cost is recognized because the exercise price of Carpenters employee stock options equals the market price of the underlying stock at the date of the grant.
Had compensation cost for Carpenters stock option plans been determined based on the fair value at the grant date for awards in accordance with Statement of Financial Accounting Standards (SFAS) 123, Accounting for Stock-based
Compensation, net income would have been reduced by $0.8 million, $1.8 million and $1.6 million, and diluted earnings per share would have been reduced by $.04, $.08 and $.07 in fiscal 2001, 2000 and 1999, respectively.
These pro-forma adjustments were calculated using the Black-Scholes option pricing model to value all stock options
granted since July 1, 1996.
A summary of the assumptions and data used in these calculations follows:
|
|
2001 |
|
2000 |
|
1999 |
Weighted average exercise price
of options exercisable |
|
$ 33.65 |
|
|
$ 35.73 |
|
|
$ 39.28 |
|
Weighted average fair value
per share of options |
|
$ 7.09 |
|
|
$ 3.74 |
|
|
$ 5.63 |
|
Fair value assumptions: |
Risk-free interest rate |
|
4.9 |
% |
|
6.5 |
% |
|
5.7 |
% |
Expected volatility |
|
32.7 |
% |
|
28.6 |
% |
|
25.4 |
% |
Expected life of options |
|
5 years
|
|
5 years
|
|
5 years
|
Expected dividends |
|
4.4 |
% |
|
6.5 |
% |
|
4.6 |
% |
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
12. Pension and Other Postretirement Benefits
Carpenter provides several noncontributory defined benefit pension plans and postretirement benefit plans to certain of
its employees. The following provides a reconciliation of benefit obligations, plan assets, and funded status of the plans.
|
|
Pension Plans
|
|
Other
Postretirement Plans
|
|
|
2001
|
|
2000
|
|
2001
|
|
2000
|
|
|
( dollars in millions) |
Change in projected benefit obligation: |
|
|
|
Projected benefit obligation at beginning of year |
|
$ 576.3 |
|
|
$ 592.2 |
|
|
$ 179.0 |
|
|
$ 182.8 |
|
Service cost |
|
16.0 |
|
|
17.3 |
|
|
2.6 |
|
|
2.8 |
|
Interest cost |
|
43.4 |
|
|
40.2 |
|
|
13.5 |
|
|
12.5 |
|
Benefits paid |
|
(38.4 |
) |
|
(52.5 |
) |
|
(9.6 |
) |
|
(11.7 |
) |
Special termination benefits
(a)
|
|
8.1 |
|
|
|
|
|
|
|
|
|
|
Actuarial (gain) loss |
|
(2.9 |
) |
|
(21.8 |
) |
|
4.1 |
|
|
(7.4 |
) |
Plan amendments |
|
|
|
|
0.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at end of year |
|
$ 602.5 |
|
|
$ 576.3 |
|
|
$ 189.6 |
|
|
$ 179.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets: |
|
|
|
Fair value of plan assets at beginning of year |
|
$1,022.8 |
|
|
$ 981.7 |
|
|
$ 89.4 |
|
|
$ 80.3 |
|
Actual return (loss) on plan assets |
|
(99.7 |
) |
|
91.8 |
|
|
(25.3 |
) |
|
21.5 |
|
Benefits paid from plan assets |
|
(38.4 |
) |
|
(51.0 |
) |
|
(9.6 |
) |
|
(11.7 |
) |
Contributions |
|
1.8 |
|
|
0.3 |
|
|
0.5 |
|
|
(0.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year |
|
$ 886.5 |
|
|
$1,022.8 |
|
|
$ 55.0 |
|
|
$ 89.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status of the plans |
|
$ 284.0 |
|
|
$ 446.5 |
|
|
$ (134.6 |
) |
|
$ (89.6 |
) |
Unrecognized net gain |
|
(105.6 |
) |
|
(306.7 |
) |
|
(15.7 |
) |
|
(55.2 |
) |
Unrecognized prior service cost (benefit) |
|
26.0 |
|
|
28.6 |
|
|
(7.7 |
) |
|
(8.4 |
) |
Unrecognized transition (asset) obligation |
|
0.1 |
|
|
(2.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid (accrued) benefit cost |
|
$ 204.5 |
|
|
$ 165.7 |
|
|
$ (158.0 |
) |
|
$ (153.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal actuarial assumptions at June 30: |
|
|
|
|
|
|
Discount rate |
|
7.5 |
% |
|
7.75 |
% |
|
7.5 |
% |
|
7.75 |
% |
Long-term rate of compensation increase |
|
4.0 |
% |
|
4.5 |
% |
|
|
|
|
|
|
Long-term rate of return on plan assets |
|
10.0 |
% |
|
9.0 |
% |
|
10.0 |
% |
|
9.0 |
% |
(a)
|
Benefits provided to employees terminated as a result of a reduction in salaried work force. See note 3 to the consolidated financial statements.
|
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
12. Pension and Other Postretirement Benefits (continued)
Pension and other postretirement plans included the following net credits and costs components:
|
|
Pension Plans
|
|
Other
Postretirement Plans
|
|
|
2001
|
|
2000
|
|
1999
|
|
2001
|
|
2000
|
|
1999
|
|
|
(in millions) |
Service cost |
|
$ 16.0 |
|
|
$ 17.3 |
|
|
$ 17.6 |
|
|
$ 2.6 |
|
|
$ 2.8 |
|
|
$ 2.9 |
|
Interest cost |
|
43.4 |
|
|
40.2 |
|
|
39.6 |
|
|
13.5 |
|
|
12.5 |
|
|
11.4 |
|
Expected return on plan assets |
|
(90.5 |
) |
|
(86.7 |
) |
|
(80.9 |
) |
|
(7.6 |
) |
|
(7.2 |
) |
|
(5.5 |
) |
Amortization of net gain |
|
(13.8 |
) |
|
(13.1 |
) |
|
(9.7 |
) |
|
(2.5 |
) |
|
(1.2 |
) |
|
(1.3 |
) |
Amortization of prior service cost (benefit) |
|
2.6 |
|
|
2.6 |
|
|
2.4 |
|
|
(0.7 |
) |
|
(0.7 |
) |
|
(0.7 |
) |
Amortization of transition asset |
|
(2.9 |
) |
|
(2.9 |
) |
|
(2.9 |
) |
|
|
|
|
|
|
|
|
|
Change in purchase price allocation |
|
|
|
|
|
|
|
4.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (credit) cost |
|
$ (45.2 |
) |
|
$ (42.6 |
) |
|
$ (29.1 |
) |
|
$ 5.3 |
|
|
$ 6.2 |
|
|
$ 6.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For segment reporting (see note 19 to the consolidated financial statements), Carpenter reports separately the credit
for the overfunded defined benefit pension plans. The expense for the underfunded defined benefit pension and postretirement benefit plans is charged to the operating segments. The $4.8 million effect of changes to purchase accounting allocations in
fiscal 1999 was included in corporate costs for segment reporting.
Amounts shown in the consolidated statement of cash flows for pensions and postretirement benefits are net of cash
payments made to the plans and amounts received from the pension plans as reimbursement of postretirement benefits paid by Carpenter.
Pension Plans
Carpenter has several underfunded plans which are included in the data presented above. As of June 30, 2001 and 2000,
the projected benefit obligation of the underfunded plans was $26.0 million and $23.9 million, the total fair value of assets was $1.6 million and $1.3 million, and the accumulated benefit obligation was $22.9 million and $20.3 million,
respectively.
During fiscal 1999, adjustments for final purchase price allocations for pensions resulted in an increase in goodwill of
$10.3 million. Additional purchase price adjustments for pensions resulted in a charge to pre-tax income of $4.8 million which was included in other income, net on the consolidated statement of income.
Carpenter also maintains defined contribution pension and savings plans for substantially all domestic employees.
Company contributions were $7.4 million in fiscal 2001 and fiscal 2000 and $7.1 million in fiscal 1999. There were 1,437,110 common shares reserved for issuance under the savings plans at June 30, 2001.
Other Postretirement Plans
The postretirement benefit plans consist of health care and life insurance plans. Prior to June 1999, Carpenter paid
claims incurred for most retired employees. Beginning in June 1999, retired employees benefit payments are being paid by a Voluntary Employee Benefit Association (VEBA). Carpenter has contributed discretionary amounts, which have not exceeded the
amount deductible for tax purposes,
12. Pension and Other Postretirement Benefits (continued)
into the VEBA. Plan assets are invested in trust-owned life insurance, which is invested in equity, fixed income and money market securities.
The assumed health care cost trend rate for fiscal 2002 is 7 percent, declining .5% per year to an ultimate rate of 5%,
and is 6 percent for both fiscal 2001 and 2000. The health care cost trend rate has a significant effect on the amounts reported. If the assumed health care cost trend rate was increased by 1 percent, the accumulated projected benefit obligation at
June 30, 2001 would have increased by $17.8 million and the postretirement benefit expense for fiscal 2001 would have increased by $1.8 million. If the assumed health care cost trend rate was decreased by 1 percent, the accumulated projected benefit
obligation at June 30, 2001 would have decreased by $15.6 million and the postretirement benefit expense for fiscal 2001 would have decreased by $1.5 million.
13. Employee Stock Ownership Plan
Carpenter has a leveraged employee stock ownership plan (ESOP) to assist certain employees with their future
retiree medical obligations. Carpenter issued 461.5 shares of convertible preferred stock in fiscal 1992 at $65,000 per share to the ESOP in exchange for a $30.0 million 15-year 9.345% note which is included in the stockholders equity section
of the consolidated balance sheet as deferred compensation. The preferred stock is recorded net of related issuance costs.
Principal and interest obligations on the note are satisfied by the ESOP as Carpenter makes contributions to the ESOP
and dividends are paid on the preferred stock. As payments are made on the note, shares of preferred stock are allocated to participating employees accounts within the ESOP. Carpenter contributed $1.7 million in fiscal 2001, $1.6 million in
fiscal 2000 and $1.5 million in fiscal 1999 to the ESOP. Compensation expense related to the plan was $1.5 million in fiscal 2001, $1.6 million in fiscal 2000 and $1.7 million in fiscal 1999.
As of June 30, 2001, the ESOP held 404.0 shares of the convertible preferred stock, consisting of 219.0 allocated shares
and 185.0 unallocated shares. Each preferred share is convertible into at least 2,000 shares of common stock. There are 808,010 common shares reserved for issuance under the ESOP at June 30, 2001. The shares of preferred stock pay a cumulative
annual dividend of $5,362.50 per share, are entitled to vote together with the common stock as a single class and have 2,600 votes per share. To the extent permitted by the ESOP and its trustee, the stock is redeemable at Carpenters option at
$65,520 per share, declining to $65,000 per share by September, 2001 and thereafter.
14. Supplemental Data
|
|
2001
|
|
2000
|
|
1999
|
|
|
(in millions) |
Cost Data: |
|
Research and development costs |
|
$ 14.7 |
|
|
$ 14.4 |
|
$ 15.4 |
Repairs and maintenance costs |
|
$ 62.4 |
|
|
$ 62.3 |
|
$ 61.4 |
Cash Flow Data: |
Cash paid during the year for: |
Interest payments, net of amounts capitalized |
|
$ 39.8 |
|
|
$ 33.4 |
|
$ 28.3 |
Income tax payments (refunds), net |
|
$ (2.8 |
) |
|
$ 12.0 |
|
$ 19.1 |
Non-cash investing and financing activities: |
Debt assumed in business acquisitions |
|
$ |
|
|
$ 1.6 |
|
$ |
|
Property, plant and equipment exchanges |
|
$ |
|
|
$ 3.4 |
|
$ |
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
15. Income Taxes
Provisions for income taxes consisted of the following:
|
|
2001
|
|
2000
|
|
1999
|
|
|
(in millions) |
Current: |
Federal |
|
$ 6.0 |
|
|
$12.4 |
|
$18.2 |
|
State |
|
2.4 |
|
|
1.6 |
|
3.6 |
|
Foreign |
|
3.7 |
|
|
2.7 |
|
3.1 |
|
Deferred: |
Federal |
|
11.2 |
|
|
9.7 |
|
(5.0 |
) |
State |
|
(0.1 |
) |
|
0.2 |
|
(1.2 |
) |
Foreign |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ 23.2 |
|
|
$26.6 |
|
$18.7 |
|
|
|
|
|
|
|
|
|
|
The income tax benefit resulting from recording the cumulative effect on prior years due to the accounting change was
$9.4 million.
The following is a reconciliation of the statutory federal income tax rate to the actual effective income tax
rate:
|
|
2001
|
|
2000
|
|
1999
|
|
|
(% of pre-tax income) |
Federal tax rate |
|
35.0 |
% |
|
35.0 |
% |
|
35.0 |
% |
Increase (decrease) in taxes resulting from: |
State income taxes, net of federal tax benefit |
|
3.3 |
|
|
1.7 |
|
|
3.8 |
|
Goodwill amortization |
|
9.2 |
|
|
2.4 |
|
|
3.9 |
|
Settlement of prior years tax issues |
|
(4.8 |
) |
|
(4.4 |
) |
|
(5.6 |
) |
Nontaxable income |
|
(2.8 |
) |
|
(0.5 |
) |
|
(2.7 |
) |
Federal and state tax law changes |
|
|
|
|
|
|
|
(0.8 |
) |
Other, net |
|
(0.2 |
) |
|
(0.9 |
) |
|
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
39.7 |
% |
|
33.3 |
% |
|
33.5 |
% |
|
|
|
|
|
|
|
|
|
|
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
15. Income Taxes (continued)
Deferred taxes are recorded based upon temporary differences between financial statement and tax bases of assets and
liabilities. The following deferred tax liabilities and assets were recorded as of June 30, 2001 and 2000:
|
|
2001
|
|
2000
|
|
|
(in millions) |
Deferred tax liabilities: |
Depreciation |
|
$166.6 |
|
|
$159.6 |
|
Prepaid pension cost |
|
89.7 |
|
|
74.0 |
|
Intangible assets |
|
11.5 |
|
|
12.1 |
|
Inventories |
|
11.8 |
|
|
12.5 |
|
Other |
|
6.4 |
|
|
6.8 |
|
|
|
|
|
|
|
|
Total deferred tax liabilities |
|
286.0 |
|
|
265.0 |
|
|
|
|
|
|
|
|
Deferred tax assets: |
Postretirement provisions |
|
62.5 |
|
|
58.1 |
|
Alternative Minimum Tax credit |
|
6.8 |
|
|
10.0 |
|
Net operating loss benefit |
|
6.6 |
|
|
7.1 |
|
Other reserve provisions |
|
34.1 |
|
|
30.4 |
|
Valuation allowance
(a)
|
|
(3.9 |
) |
|
(4.2 |
) |
|
|
|
|
|
|
|
Total deferred tax assets |
|
106.1 |
|
|
101.4 |
|
|
|
|
|
|
|
|
Net deferred tax liability |
|
$179.9 |
|
|
$163.6 |
|
|
|
|
|
|
|
|
(a)
|
A valuation allowance is recorded when it is more likely than not that the net deferred tax asset will not be
realized.
|
16. Net Assets Held for Sale
In 1998, Carpenter acquired Talley Industries, Inc. (Talley), which was composed of a stainless steel products segment,
a governmental products and services segment and an industrial products segment. Carpenter has retained the companies in the stainless steel products segment and divested all of the other operating companies. Accordingly, the divested segments were
accounted for as net assets held for sale. Eight businesses of the government products and services and industrial products segments of Talley were sold as of June 30, 1999. The net income of all of the businesses in these segments was excluded from
Carpenters consolidated statement of income from the date of acquisition through December 31, 1998 and amounted to $1.5 million for fiscal 1999. The operating results for the remaining businesses were included in Carpenters consolidated
statement of income from January, 1999 until the dates of their sales.
Through December 31, 1998, changes in estimates for net cash proceeds on the sales of all of the businesses, interest
costs and operating cash flows until the time of their sale were recorded as adjustments of goodwill.
Proceeds from net assets held for sale on the statement of cash flows for the year ended June 30, 1999 were calculated
as follows:
|
|
(in millions) |
Proceeds from sales of businesses |
|
$134.0 |
|
Net cash funded by Carpenter |
|
(10.3 |
) |
Interest allocated |
|
(2.3 |
) |
|
|
|
|
Proceeds from net assets held for sale |
|
$121.4 |
|
|
|
|
|
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
17. Operating Leases
Carpenter leases certain facilities and equipment under operating leases. Total rent expense was $12.6 million, $10.5
million and $9.5 million for the fiscal years ended June 30, 2001, 2000 and 1999, respectively.
Future minimum payments for noncancelable operating leases in effect at June 30, 2001 were (in millions):
June 30, |
2002 |
|
$ 7.7 |
|
2003 |
|
7.0 |
|
2004 |
|
6.7 |
|
2005 |
|
5.5 |
|
2006 |
|
4.1 |
Thereafter |
|
11.9 |
|
|
|
|
|
$ 42.9 |
|
|
|
18. Contingencies
Environmental
Carpenter is subject to various stringent federal, state, local and foreign environmental laws and regulations relating
to pollution, protection of public health and the environment, natural resource damages and occupational safety and health. Although compliance with these laws and regulations may affect the costs of Carpenters operations, compliance costs to
date have not been material. Carpenter has environmental remediation liabilities at some of its owned operating facilities and has been designated as a potentially responsible party (PRP) with respect to certain third-party Superfund
waste disposal sites. Additionally, Carpenter has been notified that it may be a PRP with respect to other Superfund sites as to which no proceedings have been instituted against Carpenter. Neither the exact amount of remediation costs nor the final
method of their allocation among all designated PRPs at these Superfund sites have been determined. The liability for future environmental remediation costs is evaluated by management on a quarterly basis. Carpenter accrues amounts for environmental
remediation costs that represent managements best estimate of the probable and reasonably estimable costs related to environmental remediation. For fiscal 2001, the liability for environmental remediation costs was increased by $0.6 million,
which was included in cost of sales. Fiscal 2000 included $0.8 million of reversals of prior years accruals for environmental remediation, which were reported in other income. No expense was recognized in fiscal 1999. Carpenter entered into
partial settlements of litigation relating to insurance coverages for certain environmental remediation sites and recognized income before income taxes of $0.6 million for the years ended June 30, 2001 and 2000 and $1.1 million for the year ended
June 30, 1999. This income was reported in other income. The liability recorded for environmental remediation costs for Carpenter-owned operating facilities and the Superfund sites remaining at June 30, 2001 and 2000, was $8.0 million and $7.7
million, respectively. The estimated range at June 30, 2001 of the reasonably possible future costs of remediation at Carpenter-owned operating facilities and the Superfund sites is between $8.0 million and $14.7 million.
Estimates of the amount and timing of future costs of environmental remediation requirements are necessarily imprecise
because of the continuing evolution of environmental laws and regulatory requirements, the availability and application of technology, the identification of currently unknown remediation
sites and the allocation of costs among the PRPs. Based upon information currently available, such future costs are not expected to have a material effect on Carpenters competitive or financial position. However, such costs could be material
to results of operations in a particular future quarter or year.
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Other
Carpenter also is defending various claims and legal actions, and is subject to contingencies that are common to its
operations. Carpenter provides for costs relating to these matters when a loss is probable and the amount is reasonably estimable. The effect of the outcome of these matters on Carpenters future results of operations and liquidity cannot be
predicted because any such effect depends on future results of operations and the amount and timing (both as to recording future charges to operations and cash expenditures) of the resolution of such matters. While it is not feasible to determine
the outcome of these matters, management believes that any total ultimate liability will not have a material effect on Carpenters financial position or results of operations and cash flows.
19. Business Segments and Geographic Data
Carpenter is organized on a product basis and managed in three segments: Specialty Alloys, Titanium Alloys and
Engineered Products. For the following segment reporting, the Specialty Alloys and Titanium Alloys segments have been aggregated into one reportable segment (Specialty Metals) because of the similarities in products, processes, customers,
distribution methods, and economic characteristics.
Specialty Metals includes the manufacture and distribution of stainless steels, titanium, high temperature
alloys, electronic alloys, tool steels and other alloys in billet, bar, wire, rod, and strip forms. Sales are distributed both directly from production plants and from Carpenters distribution network.
Engineered Products includes structural ceramic products, ceramic cores for the casting industry, metal-injection
molded products, tubular metal products for nuclear and aerospace applications, custom shaped bar and ultra hard wear materials.
Effective July 1, 1999, management changed the basis for measuring the business segments profits to exclude the
costs of all corporate functions and the pension credit from the Specialty Metals segment, to transfer the Mexican operations from the Engineered Products segment to the Specialty Metals segment, to allocate certain corporate costs to the business
segments, and to show separately both the unallocated corporate costs and the pension credit. All segment data for fiscal 1999 have been restated to reflect the current segment reporting structure.
The accounting policies of both reportable segments are the same as those described in the Summary of Significant
Accounting Policies. Carpenter evaluates segment performance based upon income before interest and income taxes (EBIT) and return on assets after the allocation of certain corporate costs. Sales between the segments are generally made at
market-related prices.
The pension credit represents the income relating to Carpenters overfunded defined benefit pension plan. None of
the pension credit is allocated to the business segments. The corporate costs primarily represent the unallocated portion of the operating costs of the finance, information services, law and human resource departments and corporate management staff.
Corporate assets are primarily cash and cash equivalents, prepaid pension cost, certain assets held for sale, corporate-owned life insurance, other investments and corporate operating assets.
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
19. Business Segments and Geographic Data (continued)
Carpenters sales are not materially dependent on a single customer or a small group of customers.
Geographic Data
|
|
2001
|
|
2000
|
|
1999
|
|
|
(in millions) |
Net sales:
(a)
|
|
United States |
|
$1,080.3 |
|
$ 899.4 |
|
$ 861.7 |
Europe |
|
126.8 |
|
104.4 |
|
104.2 |
Mexico |
|
52.6 |
|
49.8 |
|
43.8 |
Canada |
|
25.1 |
|
22.3 |
|
16.3 |
Asia Pacific |
|
10.9 |
|
19.8 |
|
12.2 |
Other |
|
28.4 |
|
13.4 |
|
11.1 |
|
|
|
|
|
|
|
Consolidated net sales |
|
$1,324.1 |
|
$1,109.1 |
|
$1,049.3 |
|
|
|
|
|
|
|
Long-lived assets: |
|
United States |
|
$1,186.1 |
|
$1,214.7 |
|
$1,139.5 |
Europe |
|
20.5 |
|
22.0 |
|
12.8 |
Mexico |
|
14.1 |
|
13.2 |
|
14.2 |
Canada |
|
0.7 |
|
0.8 |
|
0.9 |
Asia Pacific |
|
0.2 |
|
0.2 |
|
0.2 |
Other |
|
10.8 |
|
12.0 |
|
17.5 |
|
|
|
|
|
|
|
Consolidated long-lived assets |
|
$1,232.4 |
|
$1,262.9 |
|
$1,185.1 |
|
|
|
|
|
|
|
(a)
Net sales are attributed to countries based on the location of the customer.
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
19. Business Segments and Geographic Data (continued)
Segment Data
|
|
2001
|
|
2000
|
|
1999
|
|
|
(in millions) |
Net Sales: |
|
Specialty Metals |
|
$1,168.7 |
|
|
$ 980.5 |
|
|
$ 935.7 |
|
Engineered Products |
|
157.0 |
|
|
131.6 |
|
|
115.6 |
|
Intersegment |
|
(1.6 |
) |
|
(3.0 |
) |
|
(2.0 |
) |
|
|
|
|
|
|
|
|
|
|
Consolidated net sales |
|
$1,324.1 |
|
|
$1,109.1 |
|
|
$1,049.3 |
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) Before Income Taxes: |
Specialty Metals |
|
$ 91.8
|
(a)
|
|
$ 84.3 |
|
|
$ 70.5
|
(b)
|
Engineered Products |
|
(3.8 |
)
(a)
|
|
7.1 |
|
|
2.0 |
|
Pension credit |
|
47.9 |
|
|
45.7 |
|
|
36.1 |
|
Corporate costs |
|
(39.8 |
)
(a)
|
|
(26.3 |
) |
|
(26.1 |
) |
|
|
|
|
|
|
|
|
|
|
Consolidated EBIT |
|
96.1 |
|
|
110.8 |
|
|
82.5 |
|
Interest expense |
|
(40.3 |
) |
|
(33.4 |
) |
|
(29.3 |
) |
Interest income |
|
2.6 |
|
|
2.5 |
|
|
2.6 |
|
|
|
|
|
|
|
|
|
|
|
Consolidated income before income taxes and cumulative
effect of
accounting change |
|
$ 58.4 |
|
|
$ 79.9 |
|
|
$ 55.8 |
|
|
|
|
|
|
|
|
|
|
|
Total Assets: |
|
Specialty Metals |
|
$1,274.4 |
|
|
$1,357.4 |
|
|
$1,272.5 |
|
Engineered Products |
|
102.1 |
|
|
124.4 |
|
|
115.7 |
|
Corporate |
|
315.0 |
|
|
264.1 |
|
|
219.6 |
|
|
|
|
|
|
|
|
|
|
|
Consolidated total assets |
|
$1,691.5 |
|
|
$1,745.9 |
|
|
$1,607.8 |
|
|
|
|
|
|
|
|
|
|
|
Depreciation: |
|
Specialty Metals |
|
$ 45.1 |
|
|
$ 42.8 |
|
|
$ 43.8 |
|
Engineered Products |
|
6.4 |
|
|
6.1 |
|
|
5.2 |
|
Corporate |
|
4.1 |
|
|
4.2 |
|
|
2.8 |
|
|
|
|
|
|
|
|
|
|
|
Consolidated depreciation |
|
$ 55.6 |
|
|
$ 53.1 |
|
|
$ 51.8 |
|
|
|
|
|
|
|
|
|
|
|
Amortization of Intangible Assets: |
|
|
|
Specialty Metals |
|
$ 13.5 |
|
|
$ 11.7 |
|
|
$ 10.9 |
|
Engineered Products |
|
2.3 |
|
|
2.4 |
|
|
1.8 |
|
Corporate |
|
1.1 |
|
|
1.1 |
|
|
1.2 |
|
|
|
|
|
|
|
|
|
|
|
Consolidated amortization |
|
$ 16.9 |
|
|
$ 15.2 |
|
|
$ 13.9 |
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures, Including Software: |
|
|
|
Specialty Metals |
|
$ 40.6 |
|
|
$ 84.7 |
|
|
$ 137.0 |
|
Engineered Products |
|
8.2 |
|
|
7.8 |
|
|
10.0 |
|
Corporate |
|
1.7 |
|
|
12.5 |
|
|
6.1 |
|
|
|
|
|
|
|
|
|
|
|
Consolidated capital expenditures, including
software |
|
$ 50.5 |
|
|
$ 105.0 |
|
|
$ 153.1 |
|
|
|
|
|
|
|
|
|
|
|
(a)
Specialty Metals, Engineered Products and Corporate costs include special charges of $9.6 million, $19.3 million and $8.7 million, respectively.
(b)
Includes special charge of $14.2 million. See note 3 to the consolidated financial statements.
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
SUPPLEMENTARY DATA
Quarterly Financial Data (Unaudited)
Quarterly sales and earnings results are usually influenced by seasonal factors. The first fiscal quarter (three months
ending September 30) is typically the lowest because of annual plant vacation and maintenance shutdowns in this period by Carpenter and by many of its customers. This seasonal pattern can be disrupted by economic cycles or special accounting
adjustments.
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
(b)
|
|
|
(dollars and shares in millions, except
per share amounts) |
Results of Operations |
|
|
|
Fiscal 2001
(a)
|
Net sales |
|
$293.1 |
|
|
$292.2 |
|
$297.3 |
|
$441.5 |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales as previously reported |
|
$277.7 |
|
|
$288.7 |
|
$311.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profits |
|
$ 71.5 |
|
|
$ 66.4 |
|
$ 65.7 |
|
$ 81.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before cumulative effect of accounting change, net
of tax |
|
$ 15.3 |
|
|
$ 13.4 |
|
$ 10.5 |
|
$ (4.0 |
) |
Cumulative effect of accounting change, net of $9.4 million tax |
|
(14.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ 1.2 |
|
|
$ 13.4 |
|
$ 10.5 |
|
$ (4.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net income as previously reported |
|
$ 11.1 |
|
|
$ 13.3 |
|
$ 11.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2000
(c)
|
Net sales |
|
$241.7 |
|
|
$254.0 |
|
$301.5 |
|
$311.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profits |
|
$ 57.2 |
|
|
$ 54.5 |
|
$ 64.6 |
|
$ 70.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ 10.2 |
|
|
$ 12.7 |
|
$ 11.9 |
|
$ 18.5 |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share |
|
|
|
Fiscal 2001
(a)
|
Basic earnings |
Income (loss) before cumulative effect of accounting change |
|
$ .68 |
|
|
$ .59 |
|
$ .46 |
|
$ (.20 |
) |
Cumulative effect of accounting change |
|
$ (.64 |
) |
|
$ |
|
$ |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ .04 |
|
|
$ .59 |
|
$ .46 |
|
$ (.20 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net income as previously reported |
|
$ .49 |
|
|
$ .58 |
|
$ .51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings |
|
|
|
Income (loss) before cumulative effect of accounting change |
|
$ .66 |
|
|
$ .58 |
|
$ .45 |
|
$ (.20 |
) |
Cumulative effect of accounting change |
|
$ (.62 |
) |
|
$ |
|
$ |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ .04 |
|
|
$ .58 |
|
$ .45 |
|
$ (.20 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net income as previously reported |
|
$ .48 |
|
|
$ .57 |
|
$ .50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2000 |
Basic earnings |
|
$ .45 |
|
|
$ .56 |
|
$ .53 |
|
$ .81 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings |
|
$ .44 |
|
|
$ .55 |
|
$ .52 |
|
$ .80 |
|
|
|
|
|
|
|
|
|
|
|
|
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Weighted average common shares outstanding (in millions) |
|
|
Fiscal 2001 |
Basic |
|
22.0 |
|
22.0 |
|
22.1 |
|
22.1 |
Diluted |
|
22.9 |
|
23.0 |
|
23.0 |
|
22.1 |
Fiscal 2000 |
Basic |
|
22.0 |
|
21.9 |
|
22.0 |
|
22.0 |
Diluted |
|
22.8 |
|
22.8 |
|
22.8 |
|
22.8 |
(a)
|
Fiscal 2001 reflects the adoption of SAB 101 (Revenue Recognition in Financial Statements) during the fourth quarter,
effective July 1, 2000, and the restatement of the first, second and third quarters of fiscal 2001.
|
(b)
|
The fourth quarter of fiscal 2001 includes a special charge of $37.6 million ($24.4 million after-tax or $1.09 per diluted
share) related principally to the realignment of Special Alloys Operations, planned divestitures of certain Engineered Products Group businesses and a loss on the disposal of the Bridgeport, Connecticut site.
|
(c)
|
Net sales and gross profits have been restated in fiscal 2000 due to the adoption of EITF 00-10 (accounting for freight and
handling revenues and costs), effective July 1, 2000.
|
Item 9. Disagreements on Accounting and Financial Disclosure
Not Applicable
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required as to directors is incorporated herein by reference to the 2001 definitive Proxy Statement
under the caption Election of Directors.
Information concerning Carpenters executive officers appears in Part I of this Annual Report on Form
10-K.
Item 11. Executive Compensation
The information required by this item is incorporated herein by reference to the 2001 definitive Proxy Statement under
the caption Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated herein by reference to the 2001 definitive Proxy Statement under
the captions Ownership of Carpenter Stock by Certain Beneficial Owners and Ownership of Carpenter Stock by Directors and Officers.
Item 13. Certain Relationships and Related Transactions
Not applicable
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents Filed as Part of this Report:
(1) The following consolidated financial statement schedule should be read in conjunction with the consolidated financial statements (see Item 8 Financial
Statements and Supplementary Data):
|
Report of Independent Accountants on Financial Statement Schedule
|
|
Schedule IIValuation and Qualifying Accounts
|
All other schedules are omitted because they are not applicable or the required information is contained in the
consolidated financial statements or notes thereto.
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Report of Independent Accountants on
Financial Statement Schedule
To the Board of Directors of
Carpenter Technology Corporation:
Our audits of the consolidated financial statements referred to in our report dated August 13, 2001, appearing herein
also included an audit of the financial statement schedule listed in Item 14(a)(1) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
|
/s/ PricewaterhouseCoopers LLP
|
|
PricewaterhouseCoopers LLP
|
|
Philadelphia, Pennsylvania
|
(2) The following documents are filed as exhibits:
|
3. Articles of Incorporation and By-Laws
|
|
4. Instruments Defining the Rights of Security Holders, Including Indentures
|
|
12. Computation of Ratios of Earnings to Fixed Charges (unaudited)
|
|
23. Consent of Experts and Counsel
|
(b) Reports on Form 8-K:
Current Reports on Form 8-K were filed on behalf of Carpenter on May 22, 2001, July 10, 2001, July 27, 2001 and August
20, 2001. The Reports were dated respectively May 18, 2001, June 26, 2001, July 26, 2001 and August 13, 2001 and covered Item 5, Other Events. No financial statements were filed with these Reports.
CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
(in millions)
Column A |
|
Column B |
|
Column C |
|
Column D |
|
Column E |
|
|
|
|
Additions |
Description
|
|
Balance at
Beginning of
Period
|
|
Charged to
Costs &
Expenses
|
|
Charged to
Other
Accounts
(1)
|
|
Deductions
(2)
|
|
Balance at End
of Period
|
Year ended June 30, 2001 |
|
|
Allowance for doubtful
accounts receivable |
|
$2.2 |
|
$0.4 |
|
$ |
|
$(0.3 |
) |
|
$2.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30, 2000 |
|
|
Allowance for dountful
accounts receivable |
|
$1.9 |
|
$1.0 |
|
$0.1 |
|
$(0.8 |
) |
|
$2.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30, 1999 |
|
|
Allowance for doubtful
accounts receivable |
|
$1.9 |
|
$0.8 |
|
$0.1 |
|
$(0.9 |
) |
|
$1.9 |
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes beginning balances of acquired businesses and recoveries of accounts previously written off, net of collection
expenses.
|
(2)
|
Doubtful accounts written off.
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
CARPENTER TECHNOLOGY CORPORATION
|
|
By /s/ Terrence E. Geremski
|
|
Sr. Vice PresidentFinance &
Chief Financial Officer
|
Date: September 21, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following
persons on behalf of the registrant in the capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
/s/ Dennis M. Draeger
Dennis M. Draeger |
|
Chairman, President and
Chief Executive Officer and
Director (Principal Executive
Officer) |
|
September 21, 2001 |
|
|
|
/s/ Terrence E. Geremski
Terrence E. Geremski |
|
Sr. Vice PresidentFinance &
Chief Financial Officer |
|
September 21, 2001 |
|
|
|
/s/ Richard D. Chamberlain
Richard D. Chamberlain |
|
Vice President and Corporate
Controller (Principal
Accounting Officer) |
|
September 21, 2001 |
|
|
|
*
Marcus C. Bennett |
|
Director |
|
September 21, 2001 |
|
|
|
*
William S. Dietrich II |
|
Director |
|
September 21, 2001 |
|
|
|
*
C. McCollister Evarts, M.D. |
|
Director |
|
September 21, 2001 |
|
*
J. Michael Fitzpatrick |
|
Director |
|
September 21, 2001 |
|
|
|
*
William J. Hudson, Jr. |
|
Director |
|
September 21, 2001 |
|
|
|
*
Robert J. Lawless |
|
Director |
|
September 21, 2001 |
|
|
|
*
Martin Miller, Jr. |
|
Director |
|
September 21, 2001 |
|
|
|
|
*
Robert N. Pokelwaldt |
|
Director |
|
September 21, 2001 |
|
|
|
|
*
Peter C. Rossin |
|
Director |
|
September 21, 2001 |
|
|
|
|
*
Kathryn C. Turner |
|
Director |
|
September 21, 2001 |
|
|
|
|
Stephen M. Ward, Jr. |
|
Director |
|
|
|
|
|
|
*
Kenneth L. Wolfe |
|
Director |
|
September 21, 2001 |
|
Original Powers of Attorney authorizing John R. Welty to sign this Report on behalf of: Marcus C. Bennett, William S. Dietrich II, C. McCollister Evarts, M.D., J.
Michael Fitzpatrick, William J. Hudson, Jr., Robert J. Lawless, Marlin Miller, Jr., Robert N. Pokelwaldt, Peter C. Rossin, Kathryn C. Turner and Kenneth L. Wolfe are being filed with the Securities and Exchange Commission.
EXHIBIT INDEX
Exhibit
No.
|
|
|
|
Title
|
|
Page
|
3. |
|
|
|
Articles of Incorporation and By-Laws |
|
|
|
|
|
|
A. |
|
Restated Certificate of Incorporation is incorporated herein by
reference to Exhibit 3 of Carpenters Form 10-Q Quarterly Report
for the quarter ended September 30, 1998. |
|
|
|
|
|
|
B. |
|
By-Laws, amended as of December 5, 1996, are incorporated herein
by reference to Exhibit 3B of Carpenters 1996 Annual Report on
Form 10-K and to Exhibit 3 of Carpenters Form 10-Q Quarterly
Report for the quarter ended December 31, 1996. |
|
|
|
|
4. |
|
|
|
Instruments Defining Rights of Security Holders, Including
Indentures |
|
|
|
|
|
|
A. |
|
Restated Certificate of Incorporation and By-Laws set forth in
Exhibit Nos. 3A and 3B, above. |
|
|
|
|
|
|
B. |
|
Rights Agreement relating to Rights distributed to holders of
Carpenters Stock, amended as of June 12, 2000, is attached as
an Exhibit to this Annual Report on Form 10-K. |
|
|
|
|
|
|
C. |
|
Carpenters Registration Statement No. 333-44757, as filed on
Form S-3 on January 22, 1998, and amended on February 13,
1998, with respect to issuance of Common Stock and unsecured
debt is incorporated herein by reference. |
|
|
|
|
|
|
D. |
|
Prospectus, dated February 13, 1998 and Prospectus Supplement,
dated March 31, 1998, File No. 333-44757, with respect to issuance
of $198,000,000 of Medium Term Notes are incorporated by reference. |
|
|
|
|
|
|
E. |
|
Indenture dated as of January 12, 1994, between Carpenter and
U.S. Bank Trust National Association, formerly known as First
Trust of New York, National Association, as successor Trustee to
Morgan Guaranty Trust Company of New York, related to Carpenters
i) $100,000,000 of unsecured medium term notes registered on
Registration Statement No. 33-51613 and ii) $198,000,000 of unsecured
medium term notes registered on Registration Statement No. 333-44757
is incorporated by reference to Exhibit 4(c) to Carpenters Form S-3
filed January 6, 1994. |
|
|
|
|
|
|
F. |
|
Forms of Fixed Rate and Floating Rate Medium-Term Note, Series B
are incorporated by reference to Exhibit 20 to Carpenters Current
Report on Form 8-K filed on April 15, 1998. |
|
|
|
|
|
|
G. |
|
Pricing Supplements No. 1 through 25 dated and filed from April 2, 1998
to June 11, 1998, supplements to Prospectus dated February 13, 1998 and
Prospectus Supplement dated March 31, 1998, File No. 333-44757 with
respect to issuance of $198,000,000 of Medium Term Notes are incorporated herein
by reference. |
|
|
Exhibit
No.
|
|
|
|
Title
|
|
Page
|
10. |
|
|
|
Material Contracts |
|
|
|
|
|
|
A. |
|
Agreement and Plan of Merger dated January 6, 1997, by and among
Dynamet Incorporated, Stockholders of Dynamet Incorporated and
Carpenter is incorporated herein by reference to Exhibit 1 to
Carpenters Current Report on Form 8-K filed on March 27, 1997. |
|
|
|
|
|
|
B. |
|
Supplemental Retirement Plan for Executive Officers, amended as of
January 1, 2001, is attached as an Exhibit to this Annual Report on
Form 10-K. |
|
|
|
|
|
|
C. |
|
Management and Officers Capital Appreciation Plan, an Incentive Stock
Option Plan, amended as of April 26, 2001, is attached as an Exhibit to
this Annual Report on Form 10-K. |
|
|
|
|
|
|
D. |
|
Incentive Stock Option Plan for Officers and Key Employees, amended
as of August 9, 1990, is incorporated herein by reference to Exhibit 10D
to Carpenters 2000 Annual Report on Form 10-K. |
|
|
|
|
|
|
E. |
|
Deferred Compensation Plan for Non-management Directors of Carpenter
Technology Corporation, amended as of December 7, 1995, is attached
as an Exhibit to this Annual Report on Form 10-K. |
|
|
|
|
|
|
F. |
|
Deferred Compensation Plan for Corporate and Division Officers of
Carpenter Technology Corporation, amended as of April 1, 1997, is
incorporated by reference to Exhibit E-9 to Carpenters 1997 Annual
Report on Form 10-K. |
|
|
|
|
|
|
G. |
|
Executive Annual Compensation Plan, amended as of July 1, 1997 is
incorporated by reference to Exhibit E-20 to Carpenters 1997 Annual
Report on Form 10-K. |
|
|
|
|
|
|
H. |
|
Stock-Based Incentive Compensation Plan For Non-Employee Directors,
amended as of April 26, 2001, is attached as an Exhibit to this Annual
Report on Form 10-K. |
|
|
|
|
|
|
I. |
|
Officers Supplemental Retirement Plan of Carpenter Technology
Corporation is incorporated herein by reference to Exhibit 10-I to
Carpenters 2000 Annual Report on Form 10-K. |
|
|
|
|
|
|
J. |
|
Trust Agreement between Carpenter and the Chase Manhattan Bank,
N.A., dated September 11, 1990 as amended and restated on May 1,
1997, relating in part to the Supplemental Retirement Plan for
Executive Officers, Deferred Compensation Plan for Corporate and
Division Officers and the Officers Supplemental Retirement Plan of
Carpenter Technology Corporation is incorporated by reference to
Exhibit E 28 to Carpenters 1997 Annual Report on Form 10-K. |
|
|
|
|
|
|
K. |
|
Form of Indemnification Agreement, entered into between Carpenter
and each of the directors and the following executive officers:
Dennis M. Draeger, Terrence E. Geremski, Robert W. Lodge,
Michael L. Shor, Robert J. Torcolini and John R. Welty is
incorporated herein by reference to Exhibit 10K to Carpenters 2000
Annual Report on Form 10-K. |
|
|
|
Exhibit
No.
|
|
|
|
Title
|
|
Page
|
|
|
L. |
|
Stock-Based Incentive Compensation Plan for Officers and Key
Employees, amended as of April 26, 2001, is attached as an Exhibit
to this Annual Report on Form 10-K. |
|
|
|
|
|
|
M. |
|
Carpenter Technology Corporation Change of Control Severance Plan,
adopted April 26, 2001, is attached as an Exhibit to this Annual Report
on Form 10-K. |
|
|
|
|
|
|
N. |
|
Form of amended and restated Special Severance Agreement entered into
between Carpenter and each of the following executive officers: Terrence E.
Geremski, Michael L. Shor and Robert J. Torcolini is attached as an Exhibit
to this Annual Report on Form 10-K. |
|
|
|
|
|
|
O. |
|
Form of amended and restated Special Severance Agreement entered into
between Carpenter and each of the following executive officers: Dennis M.
Draeger, Robert W. Lodge and John R. Welty is attached as an Exhibit to
this Annual Report on Form 10-K. |
|
|
|
|
|
|
P. |
|
Trust Agreement between Carpenter and the Chase Manhattan Bank, N.A.,
dated December 7, 1990 as amended and restated on May 1, 1997, relating
in part to the Directors Retirement Plan and the Deferred Compensation
Plan for Non-management Directors, is incorporated by reference to
Exhibit E-83 to Carpenters 1997 Annual Report on Form 10-K. |
|
|
|
|
12. |
|
|
|
Computations of Ratios of Earnings to Fixed Charges (unaudited) |
|
|
|
|
23. |
|
|
|
Consent of Experts and Counsel
Consent of Independent Accountants |
|
|
|
|
24. |
|
|
|
Powers of Attorney
Powers of Attorney in favor of Terrence E. Geremski or John R. Welty |
|
|
|
|
99. |
|
|
|
Additional Exhibits
Agreement to Furnish Debt Instruments |
|
|
EX-4.B
3
dex4b.txt
RIGHTS AGREEMENT
[Composite Restatement - as Amended through 6/12/00]
Exhibit 4B
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RIGHTS AGREEMENT
between
CARPENTER TECHNOLOGY CORPORATION
and
AMERICAN STOCK TRANSFER & TRUST COMPANY, successor to
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
Rights Agent
__________________________________
Dated June 26, 1986, as Amended
as of May 11, 1989, April 23, 1996 and as of June 12, 2000
__________________________________
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TABLE OF CONTENTS
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PAGE
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SECTION 1 CERTAIN DEFINITIONS...................................................................... 1
SECTION 2 APPOINTMENT OF RIGHTS AGENT.............................................................. 3
SECTION 3 ISSUE OF RIGHT CERTIFICATES.............................................................. 3
SECTION 4 FORM OF RIGHT CERTIFICATES............................................................... 5
SECTION 5 COUNTERSIGNATURE AND REGISTRATION........................................................ 6
SECTION 6 TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES; MUTILATED, DESTROYED,
LOST OR STOLEN RIGHT CERTIFICATES........................................................ 6
SECTION 7 EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS............................ 7
SECTION 8 CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES....................................... 8
SECTION 9 RESERVATION AND AVAILABILITY OF COMMON SHARES............................................ 9
SECTION 10 COMMON SHARES RECORD DATE................................................................ 9
SECTION 11 ADJUSTMENT OF PURCHASE PRICE NUMBER OF SHARES OR NUMBER OF RIGHTS........................ 10
SECTION 12 CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES............................... 17
SECTION 13 CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING POWER..................... 18
SECTION 14 FRACTIONAL RIGHTS AND FRACTIONAL SHARES.................................................. 20
SECTION 15 RIGHTS OF ACTION......................................................................... 21
SECTION 16 AGREEMENT OF RIGHT HOLDERS............................................................... 21
SECTION 17 CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER.............................................. 21
SECTION 18 CONCERNING THE RIGHTS AGENT.............................................................. 22
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SECTION 19 MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT................................ 22
SECTION 20 DUTIES OF RIGHTS AGENT................................................................... 23
SECTION 21 CHANGE OF RIGHTS AGENT................................................................... 24
SECTION 22 ISSUANCE OF NEW RIGHTS CERTIFICATES...................................................... 25
SECTION 23 REDEMPTION............................................................................... 25
SECTION 24 NOTICE OF CERTAIN EVENTS................................................................. 26
SECTION 25 NOTICES.................................................................................. 27
SECTION 26 SUPPLEMENTS AND AMENDMENTS............................................................... 27
SECTION 27 SUCCESSORS............................................................................... 27
SECTION 28 BENEFITS OF THIS AGREEMENT............................................................... 28
SECTION 29 SEVERABILITY............................................................................. 28
SECTION 30 GOVERNING LAW............................................................................ 28
SECTION 31 COUNTERPARTS............................................................................. 28
SECTION 32 DESCRIPTIVE HEADINGS..................................................................... 28
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RIGHTS AGREEMENT
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AGREEMENT, dated as of June 26, 1986, as amended by Amendment No. 1
thereto dated as of May 11, 1989, Amendment No. 2 thereto dated April 23, 1996
and Amendment No. 3 thereto dated as of June 12, 2000 between CARPENTER
TECHNOLOGY CORPORATION, a Delaware corporation (the "Company"), and AMERICAN
STOCK TRANSFER & TRUST COMPANY, as successor Rights Agent (the "Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one Right for each share of Common Stock of the par value of $5 each
of the Company ("Common Share") outstanding on June 26, 1986 and has authorized
the issuance of one Right with respect to each Common Share that shall become
outstanding between June 26, 1986 and the earlier of the Distribution Date, the
Expiration Date and the Final Expiration Date (as such terms are defined in
Sections 3 and 7), each right representing the right to purchase one Common
Share.
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
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following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined) of 20% or more of the Common Shares
then outstanding, but shall not include the Company or any of its subsidiaries
(as defined in Section 11) or any employee benefit plan of the Company or any of
its subsidiaries or an entity holding Common Shares for or pursuant to the terms
of any such plan.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on June 26, 1986.
(c) A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding, or upon the exercise of conversion rights,
exchange rights, rights (other than these Rights), warrants or options, or
otherwise; provided, however, that a Person
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shall not be deemed the Beneficial Owner of, or to beneficially own, securities
tendered pursuant to a tender or exchange offer made by or on behalf of such
Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase; or (B) the right to vote pursuant to any
agreement, arrangement or understanding; provided, however, that a Person shall
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not be deemed the Beneficial owner of, or to beneficially own, any security if
the agreement, arrangement or understanding to vote such security (1) arises
solely from a revocable proxy or consent given to such Person in response to a
public proxy or consent solicitation made pursuant to, and in accordance with,
the applicable rules and regulations of the Exchange Act and (2) is not also
then reportable on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any securities of the Company;
provided, however, that nothing in this paragraph (c) shall cause a person
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engaged in business as an underwriter of securities to be the "Beneficial Owner"
of, or to "beneficially own," any securities acquired through such person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition; and provided,
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further, that nothing herein shall cause a person who is an institutional
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investor of the type eligible to report securities ownership on Schedule 13G
pursuant to Rule 13d-1(b) under the Exchange Act to be the "Beneficial Owner"
of, or to "beneficially own", any securities the ownership of which is required
to be reported on Schedule 13G (or on Schedule 13D if such person does not state
any intention, or reserve the right, to change or influence control of the
Company), and if upon the Company's request such person certifies that it became
an Acquiring Person inadvertently or without knowledge of the terms of the
Rights or the Rights Agreement and such person further undertakes and agrees not
to acquire any additional Common Shares.
(d) "Business Day" shall mean any day other than a Saturday, Sunday,
or a day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
(e) "Close of business" on any given date shall mean 5:00 P.M., New
York City time, on such date; provided, however, that if such date is not a
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Business Day it shall mean 5:00 P.M., New York City time, on the next succeeding
Business Day.
(f) "Common Shares" when used with reference to the Company shall
mean the shares of Common Stock of the par value of $5 each of the Company.
"Common Shares" when used with reference to any Person other than the Company
shall mean the capital stock or other equity security with the greatest voting
power of such Person.
(g) "Continuing Director" shall mean any member of the Board of
Directors of the Company, while such person is a member of the Board, who is not
an
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Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or a
representative or nominee of an Acquiring Person or of any such Affiliate or
Associate, and was a member of the Board prior to the Shares Acquisition Date,
and any successor of a Continuing Director, while such successor is a member of
the Board, who is not an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, or a representative or nominee of an Acquiring Person or of
any such Affiliate or Associate, and is recommended or elected to succeed the
Continuing Director by a majority of the Continuing Directors.
(h) "Person" shall mean any individual, firm, corporation or other
entity.
(i) "Shares Acquisition Date" shall mean the first date of public
announcement by the Company or an Acquiring Person which establishes that an
Acquiring Person has become such.
(j) "Triggering Event" shall mean any event described in Section
11(a)(ii)(A), (B), (C), (D) or (E) or Section 13(a).
(k) "Adverse Person" shall mean any Person declared to be an Adverse
Person by the Board of Directors upon determination that the criteria set forth
in Section 11(a)(ii)(E) hereof apply to such Person.
(l) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii)(A), (B), (C), (D) or (E) hereof.
Section 2. Appointment of Rights Agent. The Company hereby appoints
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the Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accordance with Section 3 hereof, shall prior to the Distribution Date
also be the holders of the Common Shares) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issue of Right Certificates.
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(a) Until the earliest of (i) the close of business on the tenth day
after the Shares Acquisition Date, (ii) the close of business on the tenth
business day (or such later date as may be determined by the Board of Directors
of the Company) after the date that a tender offer or exchange offer by any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan) for 20% or more of the Common Shares then
outstanding is first published or sent or given within the meaning of Rule 14d-
2(a) of the General Rules and Regulations under the Exchange Act, or (iii) the
close of business on the tenth day after the Board of Directors of the Company
determines, pursuant to the criteria set forth in Section 11(a)(ii)(E) hereof,
that a Person is an Adverse Person (the earliest of (i), (ii) and (iii) being
herein referred to as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of
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paragraph (b) and (c) of this Section 3) by the certificates for the Common
Shares registered in the names of the holders of the Common Shares (which
certificates for Common Shares shall be deemed also to be certificates for
Rights) and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying Common
Shares (including a transfer to the Company). Upon the occurrence of an event
described in clauses (i), (ii) or (iii) above, the Company shall give prompt
notice thereof to the Rights Agent. As of the Distribution Date, the Rights will
be evidenced solely by such Right Certificates.
(b) On June 26, 1986 or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Purchase Common Shares, in
substantially the form attached hereto as Exhibit B (the "Summary of Rights"),
by first-class, postage prepaid mail, to each record holder of Common Shares as
of the close of business on June 26, 1986 at the address of such holder shown on
the records of the Company. With respect to certificates for Common Shares
outstanding as of June 26, 1986, until the Distribution Date, the Rights will be
evidenced by such certificates for Common Shares registered in the names of the
holders thereof (together with a copy of the Summary of Rights). Until the
Distribution Date (or the earlier Expiration Date or Final Expiration Date), the
surrender for transfer of any certificate for Common Shares outstanding on June
26, 1986, with or without a copy of the Summary of Rights attached hereto, shall
also constitute the transfer of the Rights associated with the Common Shares
represented thereby.
(c) Certificates for Common Shares issued after June 26, 1986 but
prior to the earlier of the Distribution Date or the Expiration Date or the
Final Expiration Date shall have impressed on, printed on, written on or
otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between Carpenter
Technology Corporation and American Stock Transfer & Trust Company,
successor to Morgan Guaranty Trust Company of New York, dated as of
June 26, 1986, as amended as of May 11, 1989, as of April 23, 1996 and
as of June 12, 2000 (the "Rights Agreement"), the terms of which are
hereby incorporated herein by reference and a copy of which is on file
at the principal executive offices of Carpenter Technology
Corporation. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. Carpenter Technology
Corporation will mail to the holder of this certificate a copy of the
Rights Agreement without charge after receipt of a written request
therefor. Under certain circumstances, Rights issued to or held by
Acquiring Persons, an Adverse Person or their Affiliates or Associates
(as defined in the Rights Agreement) and any subsequent holder of such
Rights may become null and void.
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With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificates shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby.
Section 4. Form of Right Certificates.
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(a) The Right Certificates (and the forms of election to purchase
shares and of assignment to be printed on the reverse thereof) shall be
substantially the same as Exhibit A hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Sections
11 and 22 hereof, the Right Certificates, whenever issued, shall be dated as of
June 26, 1986, and on their face shall entitle the holders thereof to purchase
such number of Common Shares as shall be set forth therein at the price per
share set forth therein (the "Purchase Price"), but the number of such shares
and the Purchase Price shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section
22 hereof that represents Rights beneficially owned by: (i) an Acquiring Person
or an Adverse Person or any Associate or Affiliate of an Acquiring Person or an
Adverse Person, (ii) a transferee of an Acquiring Person or an Adverse Person
(or of any such Associate or Affiliate) who becomes a transferee after the
Acquiring Person or Adverse Person becomes such, or (iii) a transferee of an
Acquiring Person or an Adverse Person (or of any such Associate or Affiliate)
who becomes a transferee prior to or concurrently with the Acquiring Person or
Adverse Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person or Adverse
Person to holders of equity interests in such Acquiring Person or Adverse Person
or to any Person with whom such Acquiring Person or Adverse Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect avoidance of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer,
exchange, replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall contain (to the extent feasible) the following legend:
The Rights represented by this Certificate are or were beneficially
owned by a Person who was or became an [Acquiring] [Adverse] Person or
an Affiliate or Associate of an [Acquiring] [Adverse] Person (as such
terms are defined in The Rights Agreement). This Right Certificate and
the Rights represented hereby may become null and void in the
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circumstances specified in Section 7(e) of the Rights Agreement.
Section 5. Countersignature and Registration. The Right Certificates
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shall be executed on behalf of the Company by its Chief Executive Officer,
President or any Vice President, either manually or by facsimile signature, and
have affixed thereto the Company's seal or a facsimile thereof which shall be
attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Right Certificates shall be manually
countersigned by the Rights Agent and shall not be valid for any purpose unless
so countersigned. In case any officer of the Company who shall have signed any
of the Right Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent,
and issued and delivered by the Company with the same force and effect as though
the person who signed such Right Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by any person who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause
to be kept, at one of its offices in New York, New York, books for registration
and transfer of the Right Certificates issued hereunder. Such books shall show
the names and addresses of the respective holders of the Right Certificates, the
number of Rights evidenced on its face by each of the Right Certificates, the
Right Certificate numbers, and the date of each of the Right Certificates.
Section 6. Transfer, Split up, Combination and Exchange of Right
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Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject
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to the provisions of Section 14 hereof, at any time after the close of business
on the Distribution Date, and at or prior to the close of business on the
earlier of the Expiration Date or the Final Expiration Date, any Right
Certificate or Certificates may be transferred, split up, combined or exchanged
for another Right Certificate or Right Certificates entitling the registered
holder to purchase a like number of Common Shares as the Right Certificate or
Right Certificates surrendered then entitled such holder to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any Right
Certificate shall make such request in writing delivered to the Rights Agent,
and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the principal office of the
Rights Agent. Thereupon the Rights Agent shall countersign and deliver to the
person entitled thereto a Right Certificate or Right Certificates, as the case
may be, as so requested. The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Right Certificates.
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Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for delivery to the
registered owner in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
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Rights.
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(a) The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal office of the Rights Agent
in New York, New York, together with payment of the Purchase Price for each
Common Share as to which the Rights are exercised, at or prior to the earlier of
(i) the close of business on June 26, 2006 (the "Final Expiration Date"), or
(ii) the time at which the Rights are redeemed as provided in Section 23 hereof
(such earlier time being herein referred to as the "Expiration Date").
(b) The Purchase Price for each Common Share pursuant to the exercise
of a Right shall initially be $145, shall be subject to adjustment from time to
time as provided in Sections 11 and 13 hereof and shall be payable in lawful
money of the United States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the shares to be purchased and an amount equal
to any applicable transfer tax in cash, or by certified check or money order
payable to the order of the Company, the Rights Agent shall thereupon promptly
(i) requisition from any transfer agent of the Common Shares (or make available,
if the Rights Agent is the transfer agent) certificates for the number of Common
Shares to be purchased and the Company hereby irrevocably authorizes its
transfer agent to comply with all such requests, (ii) when appropriate,
requisition from the Company the amount of cash to be paid in lieu of issuance
of fractional shares in accordance with Section 14 or in lieu of issuance of
Common Shares in accordance with Section 11(a)(iii) (or Section 13 to the extent
that Section 11(a)(iii) is made applicable thereunder), (iii) promptly after
receipt of such certificates, cause the same to be delivered to or upon the
order of the registered holder of such Right Certificate, registered in such
name or names as may be designated by such holder and (iv) when appropriate,
after receipt promptly deliver such cash to or upon the order of the registered
holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and
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delivered to the registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person, an Adverse Person or an Associate
or Affiliate of an Acquiring Person or an Adverse Person, (ii) a transferee of
an Acquiring Person or an Adverse Person (or of any such Associate or Affiliate)
who becomes a transferee after the Acquiring Person or Adverse Person becomes
such, or (iii) a transferee of an Acquiring Person or an Adverse Person (or of
any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person or Adverse Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person or Adverse Person to holders of equity
interests in such Acquiring Person or Adverse Person or to any Person with whom
the Acquiring Person or Adverse Person has any continuing agreement, arrangement
or understanding regarding the transferred Rights or (B) a transfer which the
Board of Directors of the Company has determined is a part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void without any further
action and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Rights Certificates or other Person as
a result of its failure to make any determinations with respect to an Acquiring
Person or an Adverse Person or any of their respect Affiliates, Associates or
transferees hereunder.
Section 8. Cancellation and Destruction of Right Certificates. All
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Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all cancelled Right Certificates to the Company, or shall, at the written
request of the Company, destroy such cancelled Right Certificates, and in such
case shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Common Shares. The
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Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued Common Shares or any authorized and
issued Common Shares held in its treasury, the number of Common Shares that will
be sufficient to permit the exercise in full of all outstanding Rights.
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So long as the Common Shares issuable upon the exercise of Rights may
be listed on any national securities exchange, the Company shall use its best
efforts to cause, from and after such time as the Rights become exercisable, all
shares reserved for such issuance to be listed on such exchange upon official
notice of issuance upon such exercise.
The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all Common Shares delivered upon exercise of
Rights shall, at the time of delivery of the certificates for such shares
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable shares.
The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Common Shares upon the exercise of Rights. The Company shall not, however,
be required to pay any transfer tax which may be payable in respect of any
transfer or delivery of Right Certificates to a person other than, or the
issuance or delivery of certificates for the Common Shares in a name other than
that of, the registered holder of the Right Certificate evidencing Rights
surrendered for exercise or to issue or deliver any certificates for Common
Shares upon the exercise of any Rights until any such tax shall have been paid
(any such tax being payable by the holder of such Right Certificate at the time
of surrender) or until it has been established to the Company's satisfaction
that no such tax is due.
Section 10. Common Shares Record Date. Each person in whose name any
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certificate for Common Shares is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Common Shares
represented thereby on, and such certificate shall be dated, the date upon which
the Right Certificate evidencing such Rights was duly surrendered and payment of
the Purchase Price (and any applicable transfer taxes) was made; provided,
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however, that if the date of such surrender and payment is a date upon which the
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Common Shares transfer books of the Company are closed, such person shall be
deemed to have become the record holder of such shares on, and such certificate
shall be dated, the next succeeding Business Day on which the Common Shares
transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Right Certificate shall not be entitled to
any rights of a stockholder of the Company with respect to shares for which the
Rights shall be exercisable, including, without limitation, the right to vote,
to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.
Section 11. Adjustment of Purchase Price Number of Shares or Number
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of Rights. The Purchase Price, the number of shares covered by each Right and
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the number of Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.
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(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Common Shares payable in Common
Shares, (B) subdivide the outstanding Common Shares, (C) combine the outstanding
Common Shares into a smaller number of shares or (D) issue any shares of its
capital stock in a reclassification of the Common Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a), the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of capital
stock issuable on such date, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to receive the
aggregate number and kind of shares of capital stock which, if such Right had
been exercised immediately prior to such date and at a time when the Common
Shares transfer books of the Company were open, he would have owned upon such
exercise and been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification. If an event occurs which would require an
adjustment under both Section 11(a)(i) and Section 11(a)(ii), the adjustment
provided for in this Section 11(a)(i) shall be in addition to, and shall be made
prior to, any adjustment required pursuant to Section 11(a)(ii).
(ii) In the event
(A) any Acquiring Person or any Associate or Affiliate of
any Acquiring Person, at any time after the date of this Agreement,
directly or indirectly, (1) shall merge into the Company or otherwise
combine with the Company and the Company shall be the continuing or
surviving corporation of such merger or combination and the Common Shares
of the Company shall remain outstanding and unchanged, (2) shall, in one or
more transactions, transfer any assets to the Company in exchange (in whole
or in part) for Common Shares or for securities exercisable for or
convertible into Common Shares or otherwise obtain from the Company, with
or without consideration, any additional Common Shares or securities
exercisable for or convertible into Common Shares (other than as part of a
pro rata distribution to all holders of Common Shares), (3) shall sell,
purchase, lease, exchange, mortgage, pledge, transfer or otherwise dispose
(in one or more transactions), to, from or with, as the case may be, the
Company or any of its subsidiaries, assets on terms and conditions less
favorable to the Company than the Company would be able to obtain in arm's-
length negotiation with an unaffiliated third party, (4) shall sell,
purchase, lease, exchange, mortgage, pledge, transfer or otherwise dispose
(in one or more transactions) to, from or with, as the case may be, the
Company or any of its subsidiaries, assets having an aggregate fair market
value of more than $10,000,000 (5) shall receive any compensation from the
Company or any of the Company's subsidiaries other than compensation for
full-time employment as a regular employee at rates in accordance with the
Company's (or its subsidiaries') past practices, or (6) shall receive the
benefit, directly or indirectly (except proportionately as a stockholder),
of any loans, advances, guarantees,
-10-
pledges or other financial assistance or any tax credits or other tax
advantage provided by the Company or any of its subsidiaries, or
(B) any Person (other than the Company, any subsidiary of the
Company, any employee benefit plan of the Company or of any subsidiary of
the Company, or any Person or entity organized, appointed or established by
the Company for or pursuant to the terms of any such plan), alone or
together with its Affiliates and Associates, shall become the Beneficial
Owner of 20% or more of the Common Shares then outstanding, unless the
event causing the 20% threshold to be crossed is (1) a transaction set
forth in Section 13(a) hereof or (2) an acquisition of Common Shares
pursuant to a tender offer or an exchange offer for all outstanding Common
Shares at a price and on terms determined by a majority of the Continuing
Directors to be in the best interests of the Company and its shareholders.
(C) during such time as there is an Acquiring Person, there
shall be any reclassification of securities (including any reverse stock
split), or recapitalization of the Company, or any merger or consolidation
of the Company with any of its subsidiaries or any other similar
transaction or series of transactions involving the Company or any of its
subsidiaries (whether or not with or into or otherwise involving an
Acquiring Person) which has the effect, directly or indirectly, of
increasing by more than 1% the proportionate share of the outstanding
shares of any class of equity securities or of securities exercisable for
or convertible into equity securities of the Company or any of its
subsidiaries which is directly or indirectly beneficially owned by an
Acquiring Person or any Associate or Affiliate of any Acquiring Person, or
(D) during such time as there is an Acquiring Person, any of the
following shall occur without the approval of a majority of the Continuing
Directors: (1) there shall be any reduction in the annual rate of dividends
paid on shares of the capital stock of the Company (except as necessary to
reflect any subdivision of such shares or as required under applicable
law), or (2) there shall be a failure to increase the annual rate of
dividends on shares of capital stock of the Company as necessary to reflect
any reclassification,(including any reverse stock split), recapitalization,
reorganization or any similar transaction which has the effect of reducing
the number of outstanding shares of such capital stock (except to the
extent such increase in the rate of dividends would be prohibited under
applicable law) or
(E) the Board of Directors of the Company shall declare any
Person to be an Adverse Person, upon a determination that such Person,
alone or together with its Affiliates and Associates has become the
Beneficial Owner of an amount of Common Shares which the Board of Directors
determines to be substantial (which amount shall in no event be less than
15% of the Common Shares then outstanding) and a determination by at least
a majority of the Board of Directors who are not officers of the Company,
after reasonable inquiry and investigation, including consultation with
such persons as
-11-
such Directors shall deem appropriate, that (1) such Beneficial Ownership
by such Person is intended to cause the Company to repurchase the Common
Shares beneficially owned by such Person or to cause pressure on the
Company to take action or enter into a transaction or series of
transactions intended to provide such Person with short-term financial gain
under circumstances where the Board of Directors determines that the best
long-term interests of the Company and its shareholders would not be served
by taking such action or entering into such transactions or series of
transactions at that time or (2) such Beneficial ownership is causing or
reasonably likely to cause a material adverse impact (including, but not
limited to, impairment of relationships with customers, impairment of the
Company's business reputation or impairment of the Company's ability to
maintain its competitive position) on the business or prospects of the
Company, then, and in each such case, proper provision shall be made so
that each holder of a Right, except as provided below and in Section 7(e),
shall have a right to receive, upon exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement, such number
of Common Shares as shall equal the result obtained by (x) multiplying the
then current Purchase Price by the then number of Common Shares for which a
Right is then exercisable and dividing that product by (y) 50% of the
current per share market price of the Common Shares (determined pursuant to
Section 11(d)) on the date of the occurrence of any one of the events
listed above in this subparagraph (ii).
For the purposes of this Section 11, "subsidiaries" shall mean any
corporations or other entities of which a majority of the voting power of the
voting equity securities or equity interests is owned, directly or indirectly,
by the Company.
(iii) In the event that there shall not be sufficient
Treasury shares or authorized but unissued Common Shares to permit the exercise
in full of the Rights in accordance with the foregoing subparagraph (ii), the
Company shall take all such action as may be necessary to authorize additional
Common Shares for issuance upon exercise of the Rights; provided, however, if
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the Company is unable to cause the authorization of additional Common Shares
then, notwithstanding any other provision of this Agreement, the Company, to the
extent necessary, shall pay cash, at a rate per share equal to the Purchase
Price in effect at the time of exercise, in lieu of issuing such additional
Common Shares and requiring payment therefor, upon exercise of the Rights. To
the extent that any legal or contractual restrictions prevent the Company from
paying the full amount of cash payable in accordance with the foregoing
sentence, the Company shall pay to holders of the Rights as to which such
payments are being made all amounts which are not then restricted, on a pro rata
basis. The Company shall continue to make payments on a pro rata basis as funds
become available until such payments have been paid in full.
(b) In case the Company shall fix a record date for the issuance of
rights or warrants to all holders of Common Shares entitling them (for a period
expiring within 45 calendar days after such record date) to subscribe for or
purchase Common Shares
-12-
(or securities convertible into Common Shares) at a price per Common Share (or
having a conversion price per Common Share, if a security convertible into
Common Shares) less than the current per share market price of the Common Shares
(as defined in Section 11(d)) on such record date, the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of Common Shares outstanding on such
record date plus the number of Common Shares which the aggregate offering price
of the total number of Common Shares so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such current market price and the denominator of which shall be the
number of Common Shares outstanding on such record date plus the number of
additional Common Shares to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible). In
case such subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent.
Common Shares owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed; and in the
event that such rights or warrants are not so issued, the Purchase Price shall
be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Common Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular periodic cash dividend at a rate not in excess
of 125% of the rate of the last regular periodic cash dividend theretofore paid
or a dividend payable in Common Shares) or subscription rights or warrants
(excluding those referred to in Section 11(b)), the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the current per share market price of the Common
Shares (as defined in Section 11(d)) on such record date, less the fair market
value (as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent) of the portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to one Common
Share and the denominator of which shall be such current per share market price
of the Common Shares. Such adjustments shall be made successively whenever such
a record date is fixed; and in the event that such distribution is not so made,
the Purchase Price shall again be adjusted to be the Purchase Price which would
then be in effect if such record date had not been fixed.
(d) For the purpose of any computation hereunder, the "current per
share market price" of the Common Shares on any date shall be deemed to be the
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average of the daily closing prices per share of such Common Shares for the 20
consecutive Trading Days (as such term is hereinafter defined) immediately prior
to such date; provided, however, that in the event that the current per share
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market price of the Common Shares is determined during a period following the
announcement by the issuer of such Common Shares of (i) a dividend or
distribution on such Common Shares payable in such Common Shares or securities
convertible into such Common Shares or (ii) any subdivision, combination or
reclassification of such Common Shares, and prior to the expiration of 20
Trading Days after the ex-dividend date for such dividend or distribution, or
the record date for such subdivision, combination or reclassification, then, and
in each such case, the "current market price" shall be appropriately adjusted to
reflect the effects of such dividend or distribution. The closing price for each
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Common Shares are not listed or admitted to trading on
the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Common Shares are listed or admitted
to trading or, if the Common Shares are not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") or such other system then in use, or, if on any such
date the Common Shares are not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in the Common Shares selected by the Board of Directors of the
Company. If on any such date no market maker is making a market in the Common
Shares, the fair value of such shares on such date as determined in good faith
by the Board of Directors of the Company shall be used. The term "Trading Day"
shall mean a day on which the principal national securities exchange on which
the Common Shares are listed or admitted to trading is open for the transaction
of business or, if the Common Shares are not listed or admitted to trading on
any national securities exchange, a Monday, Tuesday, Wednesday, Thursday or
Friday on which banking institutions in the State of New York are not authorized
or obligated by law or executive order to close. If the Common Shares are not
publicly held or not so listed or traded, "current per share market price" shall
mean the fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in such price;
provided, however, that any adjustments which by reason of this Section 11(e)
-------- -------
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest thousandth of a share as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be
-14-
made no later than the earlier of (i) three years from the date of the
transaction which requires such adjustment or (ii) the date of the expiration of
the right to exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a),
the holder of any Right thereafter exercised shall become entitled to receive
any shares of capital stock of the Company other than Common Shares, thereafter
the number of such other shares so receivable upon exercise of any Right shall
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the shares contained
in Section 11(a) through (c), inclusive, and the provisions of Sections 7, 9, 10
and 13 hereof with respect to the Common Shares shall apply on like terms to any
such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of Common Shares
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of the,
calculations made in Section 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of shares (calculated to
the nearest thousandth) obtained by (i) multiplying (x) the number of shares
covered by a Right immediately prior to this adjustment by (y) the Purchase
Price in effect immediately prior to such adjustment of the Purchase Price and
(ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of Common Shares issuable upon the exercise of a Right.
Each of the Rights outstanding after such adjustment of the number of Rights
shall be exercisable for the number of Common Shares for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least 10 days later than the date of
the public announcement. If Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Right Certificates on such record date Right Certificates evidencing, subject
to Section 14 hereof, the additional
-15-
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Right Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Right Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Right Certificates
so to be distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the adjusted
Purchase Price) and shall be registered in the names of the holders of record of
Right Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of Common Shares issuable upon the exercise of the Rights, the Right
Certificates theretofore and thereafter issued may continue to express the
Purchase Price per share and the number of shares which were expressed in the
initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of the Common Shares
issuable upon exercise of the Rights, the Company shall take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable Common Shares
at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date
the Common Shares and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the Common Shares and other capital
stock or securities of the Company, if any, issuable upon such exercise on the
basis of the Purchase Price in effect prior to such adjustment; provided,
--------
however, that the Company shall deliver to such holder a due bill or other
-------
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the Common Shares, issuance
wholly for cash of any of the Common Shares at less than the current market
price, issuance wholly for cash of Common Shares or securities which by their
terms are convertible into or exchangeable for Common Shares, stock dividends or
issuance of rights, options or warrants referred to hereinabove in this Section
11, hereafter made by the Company to holders of its Common Shares shall not be
taxable to such stockholders.
-16-
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with, (ii) merge with or into, or
(iii) sell or transfer (or permit any of its subsidiaries to sell or transfer),
in one or more transactions, assets or earning power or cash flow potential
aggregating more than 50% of the assets or earning power or cash flow potential
of the Company and its subsidiaries (taken as a whole) to, any other Person if
at the time of or immediately after such consolidation, merger or sale there are
any rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 hereof, take (or permit any
of its subsidiaries to take) any action if at the time such action is taken it
is reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.
(p) The failure by the Board of Directors to declare a Person to be an
Adverse Person following such Person becoming the Beneficial Owner of 15% or
more of the outstanding Common Shares shall not imply that such Person is not an
Adverse Person or limit the Board of Directors' right at any time in the future
to declare such Person to be an Adverse Person.
Section 12. Certificate of Adjusted Purchase Price or Number of
---------------------------------------------------
Shares. Whenever an adjustment is made as provided in Sections 11 and 13 hereof,
------
the Company shall (a) promptly prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the
Common Shares a copy of such certificate and (c) mail a brief summary thereof to
each holder of a Right Certificate in accordance with Section 25 hereof.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
------------------------------------------------------
Earning Power.
-------------
(a) In the event, directly or indirectly,(x) the Company shall
consolidate with, or merge with and into, any Acquiring Person or any Associate
or Affiliate of any Acquiring Person, and the Company shall not be the
continuing or surviving corporation of such consolidation or merger, (y) any
Acquiring Person or any Associate or Affiliate of any Acquiring Person shall
consolidate with the Company, or merge with and into the Company and the Company
shall be the continuing or surviving corporation of such merger and, in
connection with such merger, all or part of the Common Shares shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (z) the Company shall sell or otherwise transfer (or one
or more of its subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power or cash flow potential aggregating more
than 50% of the assets or earning power or cash flow potential of the Company
and its subsidiaries (as defined in Section 11) (taken as a whole) to any
Acquiring Person or an Associate or Affiliate of any Acquiring Person, then, and
in each such case (except as may be contemplated by
-17-
Section 13(d) hereof), proper provision shall be made so that (i) each holder of
a Right, except as provided in Section 7(e), shall thereafter have the right to
receive, upon the exercise thereof at the then-current Purchase Price in
accordance with the terms of this Agreement, such number of shares of validly
issued, fully paid, nonassessable and freely tradeable Common Shares of the
Principal Party, not subject to any rights of first refusal, as shall be equal
to the result obtained by (1) multiplying the then-current Purchase Price by the
number of Common Shares for which a Right is then exercisable and dividing that
product by (2) 50% of the current per share market price of Common Shares of
such Principal Party (determined pursuant to Section 11(d) hereof) on the date
of consummation of such consolidation, merger, sale or transfer; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such consolidation, merger, sale or transfer, all the obligations and duties of
the Company pursuant to this Agreement (including Section 11(a)(iii)); (iii) the
term "Company" shall thereafter be deemed to refer to such Principal Party, it
being specifically intended that the provisions of Section 11 hereof shall apply
to such Principal Party; and (iv) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of shares
of its Common Shares in accordance with Section 9 hereof) in connection with
such consummation as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonable may be, in relation to its
shares of Common Shares thereafter deliverable upon the exercise of the Rights.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in (x) or (y) of
the first sentence of Section 130(a), the Person that is the issuer of any
securities into which Common Shares of the Company are converted or exchanged in
such merger or consolidation, and if no securities are so issued, the Person
that is the other party to the merger or consolidation; and
(ii) in the case of any transaction described in (z) of the
first sentence in Section 13(a), the Person that is the other party to such
transaction; provided, however, that in any such case, (x) if the Common Shares
-------- -------
of such Person are not at such time and have not been continuously over the
preceding 12-month period registered under Section 12 of the Securities Exchange
Act of 1934, and such Person is a direct or indirect subsidiary (which for
purposes of this Section shall mean any corporation or other entity of which a
majority of the voting power of the voting equity securities or equity interests
is owned, directly or indirectly by another corporation) of another corporation
the Common Shares of which are and have been so registered, "Principal Party"
shall refer to such other corporation; and (y) in case such Person is a
subsidiary, directly or indirectly, of more than one corporation, the Common
Shares of all of which are and have been so registered, "Principal Party" shall
refer to whichever of such corporations is the issuer of the Common Shares
having the greatest market value of shares held by the public.
(c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the
-18-
terms set forth in paragraphs (a) and (b) of this Section 13 and further
providing that, as soon as practicable after the date of any consolidation,
merger or sale of assets mentioned in paragraph (a) of this Section 13, the
Principal Party will
(i) prepare and file a registration statement under the
Securities Act of 1933, as amended (the "Act"), with respect to the Rights and
the securities purchasable upon exercise of the Rights on an appropriate form,
will use its best efforts to cause such registration statement to become
effective as soon as practicable after such filing and will use its best efforts
to cause such registration statement to remain effective (with a prospectus at
all times meeting the requirements of the Act) until the date of expiration of
the Rights; and
(ii) will deliver to holders of the Rights historical financial
statements for the Principal Party which comply in all respects with the
requirements for registration on Form 10 under the Exchange Act. The provisions
of this Section 13 shall similarly apply to successive mergers or consolidations
or sales or other transfers. In the event that one of the transactions
described in Section 13(a) hereof shall occur at any time after the occurrence
of a transaction described in Section 11(a)(ii) hereof, the Rights which have
not theretofore been exercised shall thereafter become exercisable in the manner
described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in subparagraphs
(x) and (y) of Section 13(a) if (i) such transaction is consummated with a
Person or Persons who acquired Common Shares pursuant to a tender offer or
exchange offer for all outstanding Common Shares which was carried out pursuant
to the exception contained in clause (2) of Section 11(a)(ii)(B) hereof (or a
wholly owned subsidiary of any such Person or Persons), (ii) the price per
Common Share offered in such transaction is not less than the price per Common
Share paid to all holders of Common Shares whose shares were purchased pursuant
to such tender offer or exchange offer, and (iii) the form of consideration
being offered to the remaining holders of Common Shares pursuant to such
transaction is the same as the form of consideration paid pursuant to such
tender offer or exchange offer. Upon consummation of any such transaction
contemplated by this Section 13(d), all Rights hereunder shall expire.
-19-
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of Rights or
to distribute Right Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Right Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of shares
upon exercise of the Rights or to distribute certificates which evidence
fractional shares. In lieu of fractional shares, the Company may pay to the
registered holders of Right Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of one Common Share. For purposes of this Section 14(b), the
current market value of a Common Share shall be the closing price of a Common
Share (as determined pursuant to the second sentence of Section 11(d) hereof)
for the Trading Day immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right.
Section 15. Rights of Action. All rights of action in respect of
----------------
this Agreement are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his
-20-
own behalf and for his own benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Company to enforce, or otherwise act in
respect of, his right to exercise the Rights evidenced by such Right Certificate
in the manner provided in such Right Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of, the obligations of any Person subject to this
Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right by
--------------------------
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the person in
whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated Common Shares
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
Section 17. Certificate Holder Not Deemed a Stockholder. No holder,
-------------------------------------------
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the Common Shares or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 24 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent. The Company agrees to pay
---------------------------
to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The
-21-
Company also agrees to indemnify the Rights Agent for, and to hold it harmless
against, any loss, liability or expense, incurred without gross negligence, bad
faith or willful misconduct on the part of the Rights Agent, for anything done
or omitted by the Rights Agent in connection with the acceptance and
administration of this Agreement, including the costs and expenses of defending
against any claim of liability in the premises.
The Rights Agent shall be protected and shall incur no liability for
or in respect of any action taken, suffered or omitted by it in connection with
its administration of this Agreement in reliance upon any Right Certificate or
certificate for the Common Shares or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, direction, consent, certificate, statement, or other paper or
document believed by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper person or persons.
Section 19. Merger or Consolidation or Change of Name of Rights
---------------------------------------------------
Agent. Any corporation into which the Rights Agent or any successor Rights
-----
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
stock transfer or corporate trust business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, provided that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Right Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in is prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
----------------------
duties and obligations imposed by this Agreement upon the following terms and
-22-
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chief Executive Officer,
the President, a Vice President, the Treasurer or the Secretary of the Company
and delivered to the Rights Agent; and such certificate shall be full
authorization to the Rights Agent for any action taken or suffered in good faith
by it under the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own gross
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Right
Certificates (except as to its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any adjustment required under the provisions of Section 11 or
13 hereof or responsible for the manner, method or amount of any such adjustment
or the ascertaining of the existence of facts that would require any such
adjustment (except with respect to the exercise of Rights evidenced by Right
Certificates after actual notice of any such adjustment); nor shall it by any
act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Common Shares to be issued pursuant to this
Agreement or any Right Certificate or as to whether any Common Shares will, when
so issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
-23-
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chief Executive Officer, the President, a Vice President, the
Secretary or the Treasurer of the Company, and to apply such officers for advice
or instructions in connection with its duties, and it shall not be liable for
any action taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
Section 21. Change of Rights Agent. The Rights Agent or any
----------------------
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the Common Shares by registered or certified mail, and to the
holders of the Right Certificates by first-class mail. The Company may remove
the Rights Agent or any successor Rights Agent upon 30 days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and to
each transfer agent of the Common Shares by registered or certified mail, and to
the holders of the Right Certificates by first-class mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of 30 days after giving notice of
such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Company), then the registered holder of any Right Certificate
may apply to any court of competent jurisdiction for the appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed by the Company or
by such a court, shall be (a) a corporation organized and doing business under
the laws of the United States or of the State of New York (or of any other state
of the United States so long as such corporation is authorized to do business as
a banking institution in the State of New York), in good standing, having a
principal office in the State of New York, which is authorized under such laws
to exercise stock transfer or corporate trust powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $10
-24-
million, or (b) an affiliate of a corporation described in clause (a) of this
sentence. After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Shares,
and mail a notice thereof in writing to the registered holders of the Right
Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any
-----------------------------------
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change in the Purchase Price per share and the number or kind or class of
shares or other securities or property purchasable under the Right Certificates
made in accordance with the provisions of this Agreement.
Section 23. Redemption.
----------
(a) The Board of Directors of the Company may, at its option, at any
time prior to the earlier of (i) the close of business on the tenth business day
following the Shares Acquisition Date (or such later date as may be determined
by a majority of the Continuing Directors who are not officers of the Company;
provided, that this date shall not be extended at such time as the Rights are
--------
not then redeemable) or (ii) the Final Expiration Date, redeem all but not less
than all the then outstanding Rights at a redemption price of $.05 per Right, as
such amount may be appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such redemption
price being hereinafter referred to as the "Redemption Price"). Notwithstanding
the foregoing, the Board of Directors may not redeem any Rights following a
determination that any Person is an Adverse Person. Notwithstanding anything
contained in this Agreement to the contrary, the Rights shall not be exercisable
after the first occurrence of a Section 11(a)(ii) Event until such time as the
Company's right of redemption hereunder has expired. The Company may, at its
option, pay the Redemption Price in cash, Common Shares (based on the "current
market price", as defined in Section 11(d) hereof, of the Common Shares at the
time of redemption) or any other form of consideration deemed appropriate by the
Board of Directors.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, and without any further action
and without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price. Within 10
-25-
days after the action of the Board of Directors ordering the redemption of the
Rights, the Company shall give notice of such redemption to the holders of the
then outstanding Rights by mailing such notice to all such holders at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the Transfer Agent for the
Common Shares. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made.
Section 24. Notice of Certain Events. In case the Company shall
------------------------
propose (a) to pay any dividend payable in stock of any class to the holders of
Common Shares or to make any other distribution to the holders of Common Shares
(other than a regular periodic cash dividend at a rate not in excess of 125% of
the rate of the last regular periodic cash dividend theretofore paid) or (b) to
offer to the holders of Common Shares rights or warrants to subscribe for or to
purchase any additional Common Shares or shares of stock of any class or any
other securities, rights or options, or (c) to effect any reclassification of
its Common Shares (other than a reclassification involving only the subdivision
of outstanding Common Shares), or (d) to effect any consolidation or merger into
or with, or to effect any sale or other transfer (or to permit one or more of
its subsidiaries to effect any sale or other transfer), in one or more
transactions, of more than 50% of the assets or earning power of the Company and
its subsidiaries (taken as a whole) to, any other Person, or (e) to effect the
liquidation, dissolution or winding up of the Company, then, in each such case,
the Company shall given to each holder of a Right Certificate, in accordance
with Section 25 hereof, a, notice of such proposed action, which shall specify
the record date for the purposes of such stock dividend, distribution of rights
or warrants, or the date on which such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution or winding up is to take place and the
date of participation therein by the holders of the Common Shares, if any such
date is to be fixed, and such notice shall be so given in the case of any action
covered by clause (a) or (b) above at least 20 days prior to the record date for
determining holders of the Common Shares for purposes of such action, and in the
case of any such other action, at least 20 days prior to the date of the taking
of such proposed action or the date of participation therein by the holders of
the Common Shares, whichever shall be the earlier.
In case any of the events set forth in Section 11(a)(ii) of this
Agreement shall occur, then, in any such case, the Company shall as soon as
practicable thereafter give to each holder of a Right Certificate, in accordance
with Section 25 hereof, a notice of the occurrence of such event, which shall
specify the event and the consequences of the event to holders of Rights under
Section 11(a)(ii) hereof.
Section 25. Notices. Notices or demands authorized by this Agreement
-------
to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
-26-
Carpenter Technology Corporation
1047 North Park Road
Wyomissing, PA 19610-1339
Attention: Corporate Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
American Stock Transfer & Trust Company
59 Maiden Lane
New York, New York 10007
Attention: Tenders and Exchanges Administration
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 26. Supplements and Amendments. The Company and the Rights
--------------------------
Agent may from time to time supplement or amend this Agreement without the
approval of any holders of Right Certificates in order to cure any ambiguity, to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, or to make any other provisions
in regard to matters or questions arising hereunder which the Company and the
Rights Agent may deem necessary or desirable and which shall not adversely
affect the interests of the holders of Right Certificates.
Section 27. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 28. Benefits of this Agreement. Nothing in this Agreement
--------------------------
shall be construed to give to any person or corporation other than the Company,
the Rights Agent and the registered holders of the Right Certificates (and,
prior to the Distribution Date, the Common Shares) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates.
Section 29. Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the terms
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
--------
contrary, if any such term, provision, covenant or restriction is
-27-
held by such court or authority to be invalid, void or unenforceable and the
Board of Directors of the Company determines in its good faith judgment that
severing the invalid language from this Agreement would adversely affect the
purpose or effect of this Agreement, the right of redemption set forth in
Section 23 hereof shall be reinstated and shall not expire until the close of
business on the tenth day following the date of such determination by the Board
of Directors. Without limiting the foregoing, if any provision requiring a
majority of the Board of Directors of the Company to be Continuing Directors to
act is held by any court of competent jurisdiction or other authority to be
invalid, void or unenforceable, such determination shall then be made by the
Board of Directors of the Company in accordance with applicable law and the
Company's Certificate of Incorporation and By-Laws.
Section 30. Governing Law. This Agreement and each Right Certificate
-------------
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.
Section 31. Counterparts. This Agreement may be executed in any
------------
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 32. Descriptive Headings. Descriptive headings of the
--------------------
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
CARPENTER TECHNOLOGY CORPORATION
Attest:
By _________________________ By ______________________
Title Title
AMERICAN STOCK TRANFER & TRUST COMPANY,
successor to Morgan Guaranty Trust Company
of New York
Attest:
-28-
By _________________________ By ______________________
Title Title
-29-
EXHIBIT A
---------
[Form of Right Certificate]
Certificate No. R- ______ Rights
NOT EXERCISABLE AFTER JUNE 26, 2006 OR EARLIER IF NOTICE OF REDEMPTION IS
GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY,
AT $.05 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER
CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR
AN ADVERSE PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND
ANY SUBSEQUENT HOLDER MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY
THIS CERTIFICATE WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN
[ACQUIRING] [ADVERSE] PERSON OR AN ASSOCIATE OR AFFILIATE OF AN (ACQUIRING]
[ADVERSE] PERSON. THIS RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY
MAY BECOME VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE
RIGHTS AGREEMENT.]*
_____________________________
* The portion of the legend in brackets shall be inserted only if applicable.
A-1
Right Certificate
CARPENTER TECHNOLOGY CORPORATION
This certifies that _______________________, or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement dated as of June 26, 1986, as amended (the "Rights
Agreement") between Carpenter Technology Corporation, a Delaware corporation
(the "Company"), and American Stock Transfer & Trust Company, successor to
Morgan Guaranty Trust Company of New York (the "Rights Agent"), to purchase from
the Company at any time after the Distribution Date (as such term is defined in
the Rights Agreement) and prior to the close of business on June 26, 2006, at
the principal office of the Rights Agent, or its successors as Rights Agent, in
New York, New York, one fully paid, nonassessable share of the Common Stock (the
"Common Shares") of the Company, at a purchase price of $145 per share (the
"Purchase Price"), upon presentation and surrender of this Right Certificate
with the Form of Election to Purchase and related certificate duly executed. The
number of Rights evidenced by this Right Certificate (and the number of shares
which may be purchased upon exercise thereof) set forth above, and the Purchase
Price per share set forth above, are the number and Purchase Price as of April
23, 1996, based on the Common Shares as constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person, an Adverse Person
or an Affiliate or Associate of any such Person (as such terms are defined in
the Rights Agreement), (ii) a transferee of any such Acquiring Person, Adverse
Person, Associate or Affiliate, or (iii) under certain circumstances specified
in the Rights Agreement, a transferee of a person who, after such transfer,
became an Acquiring Person, an Adverse Person or an Affiliate or Associate of
any such Person, such Rights shall become null and void and no holder hereof
shall have any right with respect to such Rights from and after the occurrence
of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number
of Common Shares or cash which may be purchased upon the exercise of the Rights
evidenced by this Right Certificate are subject to modification and adjustment
upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the above-mentioned office of the Rights
Agent.
A-2
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Common Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may (unless the Board of Directors shall have made
a determination that a Person is an Adverse Person) be redeemed by the Company
at its option at a redemption price of $.05 per Right, at any time prior to the
earlier of the close of business on (i) the 10th day following the Stock
Acquisition Date (as such time period may be extended pursuant to the Rights
Agreement) and (ii) the Final Expiration Date which price is subject to
adjustment in certain circumstances as set forth in the Rights Agreement.
No fractional Common Shares will be issued upon the exercise of any
Right or Rights evidenced hereby, but in lieu thereof a cash payment will be
made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Common Shares
or of any other securities of the Company which may at any time be issuable on
the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or, to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Right Certificate shall have been
Exercised as provided in the Rights Agreement.
A-3
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of ________ __, 19__
ATTEST: CARPENTER TECHNOLOGY
CORPORATION
_____________________________ By ___________________________
Secretary Title:
Countersigned:
Rights Agent
By ________________________
A-4
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Right Certificates.)
FOR VALUE RECEIVED ____________________________ hereby sells, assigns
and transfers unto __________________
________________________________________________________________________________
(Please Print name and address of transferee)
________________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint _______________ Attorney, to
transfer the within Right Certificate on the books of the within named Company,
with full power of substitution.
Dated: ________________, 19__
________________________
Signature
Signature Guaranteed:
A-5
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Right Certificate [_] is [_] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person, an
Adverse Person or an Affiliate or Associate of any such Person (as such terms
are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [_] did [_] did not acquire the Rights evidenced by this Right Certificate
from any Person who is, was or subsequently became an Acquiring Person, Adverse
Person or an Affiliate or Associate of any such Person.
Dated: ________________, 19__
________________________
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Assignment must correspond to the name as
written upon the face of this Right Certificate in every particular, without
alteration or enlargement or any change whatsoever.
A-6
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise the Right Certificate.)
To CARPENTER TECHNOLOGY CORPORATION:
The undersigned hereby irrevocably elected to exercise __________
Rights represented by this Right Certificate to purchase the Common Shares
issuable upon the exercise of such Rights (or such other securities or cash of
the Company or of any other person which may be issuable upon the exercise of
the Rights) and requests that certificates for such shares be issued in the name
of:
Please insert social security
or other identifying number
___________________________________________________________
(Please print name and address)
___________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate, a new Right Certificate for the balance remaining of
such Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
___________________________________________________________
(Please print name and address)
___________________________________________________________
Dated: ______________, 19-
________________________
Signature
(Signature must conform in all respects to
name of holder as specified on the fact of
this Right Certificate)
Signature Guaranteed:
A-7
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person, an Adverse Person or an Affiliate or Associate of any such Person (as
such terms are defined pursuant to the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Right Certificate
from any Person who is, was or subsequently became an Acquiring Person, an
Adverse Person or an Affiliate or Associate of any such Person.
Dated: __________, 19___
_________________________
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Right Certificate
in every particular, without alteration or enlargement or any change whatsoever.
A-8
EXHIBIT B
---------
SUMMARY OF RIGHTS TO PURCHASE COMMON SHARES
On May 11, 1989, the Board of Directors of Carpenter
Technology Corporation (the "Company") amended the Rights Agreement dated as of
June 26, 1986 between the Company and Morgan Guaranty Trust Company of New York
as Rights Agent (the "Rights Agreement"). Each Right entitles the registered
holder to purchase from the Company one Common Share at a Purchase Price of
$90.00 per share, subject to adjustment. The description and terms of the Rights
are set forth in the Rights Agreement.
Initially, the Rights will be attached to all certificates
representing Common Shares then outstanding, and no separate Rights Certificates
will be distributed. The Rights will separate from the Common Shares and a
Distribution Date will occur upon the earliest of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of 20% or more of the outstanding Common Shares, (the date of such
announcement being the "Shares Acquisition Date"), (ii) 10 Business Days
following the commencement of a tender offer or exchange offer for 20% or more
of such outstanding Common Shares or (iii) 10 days after the Board of Directors
of the Company determines any person, alone or together with its affiliates and
associates, has become the Beneficial Owner of an amount of Common Shares which
the Board of Directors determines to be substantial (which amount shall in no
event be less than 15% of the Common Shares outstanding) and at least a majority
of the Board of Directors who are not officers of the Company, after reasonable
inquiry and investigation, including consultation with such persons as such
directors shall deem appropriate, shall determine that (a) such beneficial
ownership by such person is intended to cause the Company to repurchase the
Common Shares beneficially owned by such person or to cause pressure on the
Company to take action or enter into a transaction or series of transactions
intended to provide such person with short-term financial gain under
circumstances where the Board of Directors determines that the best long-term
interests of the Company and its stockholders would not be served by taking such
action or entering into such transactions or series of transactions at that time
or (b) such beneficial ownership is causing or reasonably likely to cause a
material adverse impact (including, but not limited to, impairment of
relationships with customers or impairment of the Company's ability to maintain
its competitive position) on the business or prospects of the Company (any such
person being referred to herein and in the Rights Agreement as an "Adverse
Person").
Until the Distribution Date, (i) the Rights will be evidenced by the
Common Share certificates and will be transferred with and only with such Common
Share certificates, (ii) new Common Share certificates issued after May 11, 1989
will contain a notation incorporating the amended Rights Agreement by reference
and (iii) the surrender for transfer of any certificate for Common Shares
outstanding will also
B-1
constitute the transfer of the Rights associated with the Common Shares
represented by such certificate.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on June 26, 1996, unless earlier redeemed by the
Company as described below.
As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of Common Shares as of the
close of business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights.
In the event that (i) a Person becomes the beneficial owner of more
than 20% of the then outstanding Common Shares (except pursuant to an offer for
all outstanding Common Shares which the Continuing Directors determine to be
fair to and otherwise in the best interests of the Company and its
stockholders), (ii) any Acquiring Person, or any Associate or Affiliate of any
Acquiring Person engages in a merger or other business combination with the
Company, and its Common Shares are not changed or exchanged, (iii) an Acquiring
Person engages in one or more "self-dealing' transactions as set forth in the
Rights Agreement, or (iv) the Board of Directors determines that a person is an
Adverse Person, each holder of a Right will thereafter have the right to
receive, upon exercise, Common Shares (or, in certain circumstances, a
combination of Common Shares and cash), having a value equal to two times the
exercise price of the Right. Notwithstanding any of the foregoing, following the
occurrence of any of the events set forth in this paragraph, all Rights that
are, or (under certain circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person or an Adverse Person will be null and
void. However, Rights are not exercisable following the occurrence of any of the
events set forth above until such time as the Rights are no longer redeemable by
the Company as set forth below.
For example, at an exercise price of $90 per Right, each Right not
owned by an Acquiring Person (or by certain related parties) following an event
set forth in the preceding paragraph would entitle its holder to purchase $180
worth of Common Shares (or other consideration, as noted above) for $90.
Assuming that the Common Shares had a per share value of $45 at such time, the
holder of each valid Right would be entitled to purchase four Common Shares for
$90.
In the event that, at any time following the Shares Acquisition Date,
(i) the Company is acquired in a merger or other business combination
transaction with any Acquiring Person (other than a merger described in the
second preceding paragraph or a merger which follows an offer described in the
second preceding paragraph), or (ii) 50% or more of the Company's assets or
earning power is sold or transferred to an Acquiring Person, each holder of a
Right (except Rights which previously have been voided as set forth above) shall
thereafter have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the exercise price of the
Right. The events set forth in this paragraph and in the second preceding
paragraph are referred to as the "Triggering Events."
B-2
The Purchase Price payable, and the number of Common Shares issuable,
upon exercise of the Rights are subject to adjustment from time to time to
prevent dilution (i) in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the Common Shares, (ii) if holders of the
Common Shares are granted certain rights or warrants to subscribe for Common
Shares or convertible securities at less than the current market price of the
Common Shares, or (iii) upon the distribution to holders of the Common Shares of
evidences of indebtedness or assets (excluding regular quarterly cash dividends
at a rate not in excess of 125% of the rate of the last cash dividend
theretofore paid or dividends payable in Common Shares) or of subscription
rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Common Shares will be issued and, in lieu thereof, an
adjustment in cash will be made based on the market price of the Common Shares
on the last trading date prior to the date of exercise.
In general, the Company may redeem the Rights in whole, but not in
part, at a price of $.05 per Right, at any time until ten Business Days
following the Shares Acquisition Date. At any time prior to the date the Rights
would otherwise become nonredeemable, the Board may extend the period for
redemption. Immediately upon the action of the Board of Directors ordering
redemption of the Rights, the Rights will terminate and the only right of the
holders of Rights will be to receive the $.05 redemption price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Shares (or other consideration) of the Company or for
common stock of the acquiring company as set forth above.
The Rights Agreement may be amended by the Board of Directors of the
Company with the approval of the Rights Agent at any time in order to cure any
ambiguity or to make changes which do not adversely affect the interests of
holders of Rights.
A copy of amendments to the Rights Agreement will be filed with the
Securities and Exchange Commission as an Exhibit to an Amendment to Application
or Report on Form 8. A copy of the Rights Agreement is available free of charge
from the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is incorporated herein by reference.
B-3
EX-10.B
4
dex10b.txt
SUPPLEMENTAL RETIREMENT PLAN
Exhibit 10 B
SUPPLEMENTAL RETIREMENT PLAN
FOR EXECUTIVES OF
CARPENTER TECHNOLOGY CORPORATION
Effective December 13, 1979
As Amended January 1, 2001
1. Purpose
-------
The purpose of this Plan is to attract, retain and motivate designated
employees of Carpenter Technology Corporation (the "Corporation") who are
Participants in the Plan by providing supplemental pension and death
benefits to enhance their economic security during their active careers
with the Corporation and in Retirement.
2. Definitions
-----------
(A) "Annual Base Formula Retirement Benefit" shall mean the annual benefit
computed to measure total annual retirement income after normal
Retirement age, as provided in Section 6.
(B) "Annual Supplemental Retirement Benefit" shall mean the annual benefit
to be paid from the Plan, as provided in Section 7, and shall be paid
in accordance with the provisions of Section 5.
(C) "Board" shall mean the Board of Directors of Carpenter Technology
Corporation.
(D) "Disabled" shall mean totally disabled as described in, and which
results in, the Participant's eligibility to receive benefits under
the Corporation's Long Term Disability Plan.
(E) "Five-Year Calculation Period" shall mean the five calculation periods
created under the definition of "average monthly earnings" found in
the General Retirement Plan used to determine such average.
(F) "Former Participant" shall mean any person who has previously been a
Participant in this Plan and was either (i) a Participant for at least
three years or (ii) an employee of the Company for at least ten years.
- 1 -
(G) "General Retirement Plan" shall mean the Corporation's "General
Retirement Plan for Employees of Carpenter Technology Corporation" as
in effect on the last date of a Participant's employment with the
Corporation as a participant under the General Retirement Plan.
(H) "Participant" shall mean any person included in the Plan, as provided
in Section 3 and shall also mean a Former Participant except as
otherwise provided in Section 6.
(I) "Plan" shall mean the Supplemental Retirement Plan for Executives of
Carpenter Technology Corporation.
(J) "Retirement" shall mean the date of retirement as defined in the
General Retirement Plan.
(K) "Spouse" shall mean the Participant's spouse as defined in section
4.5(a)(1) of the General Retirement Plan.
3. Participants
------------
Participants in the Plan will consist of such employees of the Corporation
as the Board in its sole discretion may from time to time designate.
Participation in the Plan will terminate only
(A) upon termination of employment of a Participant for any reason other
than Retirement under conditions where benefits are payable under
Section 7 (except that a Former Participant shall be eligible to
receive any previously accrued benefit under this Plan), or
(B) when further participation is canceled by the Board (except that a
Former Participant shall be eligible to receive any previously accrued
benefit under this Plan), or
(C) when a Participant performs services for the Corporation solely as an
independent contractor or consultant (except that such Participant
shall continue to receive any previously accrued benefit under this
Plan), or
(D) notwithstanding anything to the contrary contained in (A), (B) or (C)
above, when a Participant competes with the Corporation as provided in
the Supplemental Retirement Agreement referenced in Section 4 hereof,
(in which case no further payments will be made under the Plan).
- 2 -
4. Supplemental Retirement Agreement
---------------------------------
Each Participant, as a condition precedent to becoming a Participant, will
enter into an agreement with the Corporation, in a form supplied by and
satisfactory to the Corporation, which will, inter alia,
(A) set forth the provisions of the benefits of this Plan,
(B) permit the Corporation, in its sole discretion, to insure the
Participant's life under an individual life insurance policy in which
the Corporation is the owner and beneficiary at no cost to the
Participant, and
(C) contain a noncompetition provision.
5. Benefits
--------
(A) Each Participant who shall retire under the conditions set forth in
Section 7 will receive an Annual Supplemental Retirement Benefit paid
from the general assets of the Corporation for a period of fifteen
years commencing as provided herein. Such benefit will be paid in
consecutive quarter yearly payments on the first business day of
January, April, July and October (hereinafter individually referred to
as the "Quarterly Payment Date") for the immediately preceding
calendar quarters ended, December 31, March 31, June 30 and September
30, respectively.
The initial payment shall be made on the first Quarterly Payment Date
following the Participant's Retirement, or, at the election of a
Disabled Participant, commencing upon any subsequent Quarterly Payment
Date which occurs while the Participant remains Disabled, but in no
event later than the Quarterly Payment Date following the earlier of
the Participant's cessation of disability or the attainment of age 65.
Proration shall be made for a short calendar quarter and calculated on
a 90 day per quarter basis.
(B) In the event of the death of a Participant after Retirement and before
the entire number of said quarterly payments have been paid, such
remaining unpaid quarterly payments will be paid to the last
beneficiary designated in writing by the Participant to, and received
by, the Pension Board or, in the absence or failure of any such
designation or the designated beneficiary fails to survive for the
said fifteen year period, to the surviving Spouse of the Participant,
or in the absence of such Spouse, to the Participant's estate.
- 3 -
In the event the designated beneficiary fails to survive and the
Participant's Spouse does not survive for the said fifteen years, the
Pension Board may elect to make a lump sum payment of the unpaid
amount to the Participant's estate, or the Spouse's estate, or the
beneficiary's estate, as the Pension Board may determine in its sole
discretion to be fair and equitable, said lump sum payment being the
present value of the remaining payments, determined in accordance with
the average rate of interest published by the Pension Benefit Guaranty
Corporation for immediate annuities for the 36 months immediately
preceding the date of such payment.
(C) In the event of the death of a Participant before Retirement when the
Participant would have been eligible to receive retirement benefits
under either Section 7(A) or 7(B), the Normal or Early Supplemental
Retirement Benefit to which the Participant would have been entitled
had he retired on the date of his death will be paid to the last
beneficiary designated in writing by the Participant to, and received
by, the Pension Board or, in the absence or failure of any such
designation or the designated beneficiary fails to survive for the
said fifteen year period, to the surviving Spouse of the Participant,
or, in the absence of such Spouse, to the Participant's estate.
Such benefit will be determined as of the date of death of the
Participant and will be paid in accordance with the payment procedures
in Section 5(A).
In the event the designated beneficiary fails to survive and the
Participant's Spouse does not survive for the said fifteen years, the
Pension Board may elect to make a lump sum payment of the unpaid
amount to the Participant's estate, or the Spouse's estate, or the
beneficiary's estate, as the Pension Board may determine in its sole
discretion to be fair and equitable, said lump sum payment being the
present value of the remaining payments, determined in accordance with
the average rate of interest published by the Pension Benefit Guaranty
Corporation for immediate annuities for the 36 months immediately
preceding the date of such payment.
(D) No benefit payable under this Plan shall be subject in any way to
alienation, sale, transfer, assignment, pledge, attachment,
garnishment, execution, or encumbrance of any kind, and any attempt to
accomplish the same shall be void and of no effect.
6. Annual Base Formula Retirement Benefit
--------------------------------------
The Annual Base Formula Retirement Benefit shall be calculated at the date
of Retirement or in the case of a Former Participant at the termination of
participation and will be equal to
- 4 -
(A) the Participant's or Former Participant's average annual earnings
calculated by multiplying the "average monthly earnings" (as
determined for pension purposes under the General Retirement Plan) by
12 (or in the event the Participant or Former Participant has
insufficient service to create a Five-Year Calculation Period, the
average annual earnings calculated from such years of service and
fractions thereof, rounded to the nearest month) [in either event, if
the Participant had eligible compensation reduced under the General
Retirement Plan to comply with section 401(a)(17) of the Internal
Revenue Code of 1986, and the regulations thereunder, as amended, or
has deferred compensation under any deferred compensation plan of the
Corporation, other than any deferred compensation previously included
in the definition of "earnings" contained in the General Retirement
Plan, such deferred and/or reduced compensation shall be added, for
the sole purpose of determining the benefit under this Section, to the
Participant's earnings in the year the Participant would have been
credited with such earnings under the General Retirement Plan but for
such deferral and/or reduction],
(B) multiplied by a percentage which is
(l) five percent for each year of service, or fraction thereof, with
the Corporation up to a maximum of ten years, that an individual
has been designated a Participant in this Plan subsequent to
December 13, 1979, plus
(2) (with respect to Participants and Former Participants who became
Participants before October 1, 1988) two percent for each other
year of service or fraction thereof with the Corporation, or its
subsidiaries; or
(3) (with respect to Participants and Former Participants who became
Participants on or after October 1, 1988 and retire prior to
January 1, 1997) 1.26 percent for each other year of service or
fraction thereof with the Corporation, or its subsidiaries; or
(4) (with respect to Participants and Former Participants who became
Participants on or after October 1, 1988 and retire after
December 31, 1996) 1.3 percent for each year of service up to 20
years and 1.4 percent for each additional year of service or
fraction thereof with the Corporation, or its subsidiaries;
provided, however, that the aggregate of the percentages of this
Subparagraph 6(B) shall not exceed the sum of 60% plus one-quarter
percent per year for each year or fraction thereof for such service
exceeding 30 years,
- 5 -
(C) reduced by the sum of the following (such reduction to commence and be
fixed as of the respective calculation dates hereinafter stated):
(l) the Participant's accrued pension benefits calculated to be
payable from any other defined benefit pension plans (including
but not limited to the General Retirement Plan, the Benefit
Equalization Plan, the Earnings Adjustment Plan, the Officers'
Supplemental Retirement Plan, and any pension plans from other
prior employment) as of the respective date or dates of earliest
entitlement or, if later, the date of retirement under such
pension plans, before any actuarial reduction for option
election; provided, however, that any such reduction shall not
include the portion of any other pension benefit resulting from
the Participant's express contribution or any Increased Benefit
calculated under paragraph 3.7 of the General Retirement Plan,
nor any benefits attributable to a defined contribution
entitlement and
(2) the amount of the Primary Social Security Retirement Benefit
calculated to be payable as of the date of earliest entitlement
or, if later, the date of Retirement hereunder.
7. Annual Supplemental Retirement Benefits
---------------------------------------
(A) Normal Retirement.
(1) A Participant shall receive upon Retirement a Normal Supplemental
Retirement Benefit if he has attained (a) age 62 or older with
five or more years of service with the Corporation or its
subsidiaries, or (b) thirty years of service with the Corporation
or its subsidiaries.
(2) The amount of such benefit will be the Annual Base Formula
Retirement Benefit, as set forth in Section 6.
(B) Early Retirement.
(1) In the event of Retirement before attainment of eligibility for
Normal Retirement, a Participant shall receive an Early
Supplemental Retirement benefit if he is then vested under the
General Retirement Plan.
- 6 -
(2) The amount of such benefit will be equal to the Annual Base
Formula Retirement Benefit, as set forth in Section 6(A) and
6(B), reduced to its equivalent actuarial value from age 62 to
the date of initial payment to the Participant based on the
average rate of interest published by the Pension Benefit
Guaranty Corporation for immediate annuities for the immediately
preceding 36 months, and subsequently adjusted for any further
reduction required under Section 6(C).
(C) Mutual Consent Retirement.
(1) A Participant shall receive upon Retirement hereunder with ten or
more years' service with the Corporation or its subsidiaries, a
Mutual Consent Retirement if: (a) he is entitled to retire with
monthly payments under the General Retirement Plan that are
concurrent with benefits under this Plan, and (b) both the
Participant and the Corporation agree that his Retirement under
this Plan would be mutually beneficial.
(2) The amount of such benefit will be the Annual Base Formula
Retirement Benefit, as set forth in Section 6.
(D) Notwithstanding anything to the contrary contained in this Plan, no
Participant, Spouse or other beneficiary may become entitled to
benefits under this Plan without the Participant or Former Participant
first completing five consecutive years of service with the
Corporation or its subsidiaries, unless otherwise provided in writing
and expressly authorized by Board approval.
8. General Provisions
------------------
(A) The administration of this Plan shall be by the Pension Board
appointed by the Board under the provisions of the General Retirement
Plan. Any interpretation of this Plan shall be by the Human Resources
Committee of the Board.
(B) The benefits provided by this Plan will be paid from the general
assets of the Corporation or otherwise as the Board may from time to
time determine.
(C) The Board or, when so designated by the Board, the Human Resources
Committee reserves the right at any time to modify or amend in whole
or in part any or all of the provisions of the Plan, subject to the
provisions of the Supplemental Retirement Agreement between the
Corporation and each Participant.
- 7 -
EX-10.C
5
dex10c.txt
MANAGEMENT OFFICERS AND CAPITAL APPRECIATION PLAN
Exhibit 10 C
MANAGEMENT AND OFFICERS CAPITAL APPRECIATION PLAN,
AN INCENTIVE STOCK OPTION PLAN
Adopted May 12, 1977
(As last amended April 26, 2001)
1. Purpose.
The purposes of this Plan are to attract, retain and motivate key employees
of Carpenter Technology Corporation and its wholly owned subsidiaries ("the
Corporation"), to encourage stock ownership by such employees by providing them
with a means to acquire a proprietary interest or to increase their proprietary
interest in the Corporation's success and to provide a greater community of
interest between such employees and the Corporation's stockholders.
2. Administration.
The Board of Directors of Carpenter Technology Corporation ("the Board")
shall be responsible for the operation of the Plan. It shall be authorized,
subject to the provisions of the Plan, from time to time to establish such rules
and regulations and to appoint such agents as it deems appropriate for the
proper administration of the Plan, and to make such determinations under, and
such interpretations of, and to take such steps in connection with, the Plan or
the options or stock appreciation rights granted hereunder as it deems necessary
or advisable. Any questions of interpretation as determined by the Board shall
be final and binding upon all persons. The Board may delegate these powers to
the Compensation and Stock Option Committee of the Board, consisting of at least
three Directors not participating in the Plan.
3. Participants.
Participants in the Plan will consist of such officers or key employees of
the Corporation as the Board in its sole discretion may, from time to time,
designate. The Board's designation of a participant at any time to receive
benefits under the Plan shall not obligate it to designate such person to
receive benefits at any other time. The Board shall consider such factors as it
deems pertinent in selecting participants and in determining the type and amount
of options and rights granted hereunder.
1
4. Types of Benefits.
Benefits under the Plan may be granted in (a) non-qualified stock options
("options" or individually an "option") which are intended to be nonstatutory
options not qualifying under Section 422 or any other section of the Internal
Revenue Code, and (b) stock appreciation rights, each as described below.
5. Shares Reserved Under the Plan.
(a) Subject to the provisions of Section 11, the maximum aggregate number
of shares which may be made available for options hereunder is 400,000 shares of
common stock of Carpenter Technology Corporation and no more than 40,000 shares
of said 400,000 shares shall be optioned to any one individual. The shares
involved in the unexercised portion of any terminated or expired option or stock
appreciation right under the Plan may again be subject to options under the
Plan. Such shares may be either authorized and unissued shares, or issued shares
reacquired by the Corporation.
6. Options.
Options may be granted by the Board from time to time, subject to the
following provisions:
(a) Each option granted under this Plan shall become exercisable by the
optionee only after the optionee has completed one year of employment
immediately following the date the option is granted, as determined by the Board
(the "date of grant"), and shall expire ten years from the date of grant.
Exercise of any or all prior existing options shall not be required.
(b) The option price per share of an option shall be determined by the
Board but shall not be less than the fair market value of Carpenter Technology
Corporation's stock on the date of grant. For the purpose of this Plan, the term
"fair market value" shall mean the closing price of Carpenter Technology
Corporation common stock on the New York Stock Exchange on the date in question,
or, in the absence of a closing price on such date, then the closing price on
the last trading day preceding the date of grant, as reflected on the
consolidated tape of New York Stock Exchange issues.
2
(c) No option under this Plan may be transferable by the optionee except
by will or the laws of descent and distribution. In the event of the death of
the optionee more than one year after the date of grant and not more than three
months after the termination of the optionee's employment by the Corporation,
the option may be transferred to the optionee's personal representative, heirs
or legatees ("transferee") and may be exercised by the transferee before the
earlier of (i) the expiration of one year from the date of the death of the
optionee or (ii) the expiration of 10 years from the date of grant. In the event
of the retirement of an optionee, an option may be exercised prior to its
expiration during the five year period beginning with the date of retirement;
provided, however, that in the event of a retiree's death during such five year
period, unexercised options may be exercised by the transferee before the
earlier of either items (i) or (ii) of this Section 6(c). In all other cases of
termination of employment of an optionee, the option, if otherwise exercisable
by the optionee at the time of such termination, may be exercised within three
months after such termination.
Notwithstanding anything in the Plan to the contrary, in the event an
optionee's employment with the Corporation is terminated for "cause", the Board
(or if the Board has delegated its authority, the Compensation and Stock Option
Committee) may, in its sole discretion, cancel each unexercised option awarded
to such terminated optionee effective upon the termination. For purposes of this
Section, a termination for "cause" shall mean termination of an optionee's
employment with the Corporation which results from either (a) the optionee
committing an Intolerable Offense (as defined in the Corporation's Personnel
Practices and Policies as in effect on the date of termination) or (b) the
operation of the Corporation's Corrective Performance System (as set forth in
the Corporation's Personnel Procedures and Policies as in effect on the date of
termination).
(d) Each option shall be exercisable for the full amount or any part
thereof, including a partial exercise from time to time. All shares purchased
under options shall be paid for in full at the time of purchase. Exercised
options may be paid for with cash or stock of Carpenter Technology Corporation
which has been held by the optionee for a period of at least six months, the
value of which shall be the fair market value on the date of exercise of the
options, as determined in Section 6(b) of the Plan.
7. Stock Appreciation Rights.
(a) Stock appreciation rights may be granted from time to time by the
Board upon such terms and conditions as it may prescribe. The Board shall grant
one stock appreciation right for every option share granted hereunder prior to
August 9, 1990. The Board may in its discretion grant no more than one stock
appreciation right for every option share granted hereunder on or subsequent to
August 9, 1990. A stock appreciation right shall be exercisable only with
exercise and surrender of the related option or portion thereof and shall
entitle the optionee to receive the excess of the fair market value of the
shares of
3
the common stock for which the right is exercised on the date of such exercise
over the option price under the related option. Such excess is hereafter called
"the spread".
(b) A stock appreciation right shall be exercisable only to the extent and
at the same time that the related option is exercised.
(c) Upon the exercise of a stock appreciation right, the Corporation shall
give to the optionee an amount equivalent to the spread (less any applicable
withholding taxes) in cash, or in shares of Carpenter Technology Corporation's
common stock, or a combination of both, as the Board shall determine. Such
determination may be made at the time of the granting of the stock appreciation
right. The shares may consist either in whole or in part of authorized and
unissued shares or issued shares reacquired by the Corporation. The payment of
the stock appreciation right spread in shares of common stock will
correspondingly reduce the number of shares reserved under Section 5. No
fractional shares of common stock shall be issued and the Board shall determine
whether cash shall be given in lieu of such fractional share or whether such
fractional share shall be eliminated.
(d) A stock appreciation right shall terminate and may no longer be
exercised upon the termination or expiration of the related option.
(e) Income attributable to the exercise of a stock appreciation right shall
not be included in the calculation of pension or other benefits payable at any
time by reason of the optionee's employment by the Corporation.
(f) No stock appreciation right shall be transferable by the optionee
except as provided in Section 6(c) of this Plan.
8. Valuation Date.
The options granted hereunder shall be valued for Federal income tax
purposes on the date said options are exercised and the optionee, by accepting
the option, agrees not to elect to value said options for tax purposes at any
other date, including, without limitation, the date of grant.
4
9. Adjustment Provisions.
If Carpenter Technology Corporation shall at any time change the number of
issued shares of common stock without new consideration to the Corporation (such
as by stock dividends, stock splits or stock combinations), the total number of
shares reserved for issuance under this Plan and the number of shares covered by
each outstanding benefit shall be adjusted so that the aggregate consideration
payable to the Corporation and the value of each benefit shall not be changed.
In the event of a merger or consolidation of Carpenter Technology Corporation,
the Board shall make such adjustments with respect to options or take such other
action as it deems necessary or appropriate to equitably reflect such merger or
consolidation including, without limitation, the substitution of new options,
the termination of existing options or the acceleration of the right to
exercise. Appropriate adjustments shall be made by the Board in the terms of
stock appreciation rights to reflect the foregoing changes.
10. Change in Control.
(a) Notwithstanding anything in this Plan to the contrary, in the event of
a Change in Control of the Corporation (i) each Option shall become immediately
exercisable and (ii) each stock appreciation right shall be fully exercisable
for the sixty-day period immediately following the Change in Control of the
Corporation using the Change in Control Price instead of the fair market value
to determine the amount payable upon the exercise of such stock appreciation
right. In addition, notwithstanding anything in this Plan to the contrary, if
the employment of an optionee or holder of a stock appreciation right is
terminated by the Corporation without "cause" as defined in Section 6(c), or, in
the case of an employee who is covered by an employment arrangement or agreement
that enables such employee to terminate for Good Reason (as defined in such
arrangement or agreement), for Good Reason, during the two-year period
commencing on the date of the occurrence of a Change in Control of the
Corporation, then such employee shall be able to exercise his or her options and
stock appreciation rights until the earlier of (x) the second anniversary of
such employment termination or (y) the expiration of their original term.
(b) For purposes of this Plan, a "Change in Control of the Corporation"
means:
(1) The acquisition by any individual, entity or group [within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")] (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (A) the then-outstanding shares of common stock of Carpenter Technology
Corporation (the "Outstanding Company Common Stock") or (B) the combined voting
power of the then-outstanding voting securities of Carpenter Technology
Corporation entitled to vote
5
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that, for purposes of this Section 10(b), the
following acquisitions shall not constitute a Change in Control of the
Corporation: (i) any acquisition directly from Carpenter Technology Corporation,
(ii) any acquisition by Carpenter Technology Corporation, (iii) any acquisition
by any employee benefit plan (or related trust) sponsored or maintained by
Carpenter Technology Corporation or any affiliated company or (iv) any
acquisition by any corporation pursuant to a transaction that complies with
Sections 10(b)(3)(A), 10(b)(3)(B) and 10(b)(3)(C);
(2) individuals who, as of the date hereof, constitute the Board
(the"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director subsequent
to the date hereof whose election, or nomination for election by Carpenter
Technology Corporation's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board;
(3) consummation of a reorganization, merger, consolidation or sale
or other disposition of all or substantially all of the assets of Carpenter
Technology Corporation or the acquisition of the assets or stock of another
entity (a "Business Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and entities that
were the beneficial owners of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of the then-
outstanding shares of common stock and the combined voting power of the then-
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation that, as a result of
such transaction, owns Carpenter Technology Corporation or all or substantially
all of Carpenter Technology Corporation's assets either directly or through one
or more subsidiaries) in substantially the same proportions as their ownership
immediately prior to such Business Combination of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of Carpenter Technology Corporation
or such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then-outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then-outstanding voting
securities of such corporation, except to the extent that such ownership existed
prior to the Business Combination, and (C) at least a majority
6
of the members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement or of the action of the Board providing for
such Business Combination; or
(4) approval by the stockholders of Carpenter Technology Corporation
of a complete liquidation or dissolution of Carpenter Technology Corporation.
(c) For purposes of this Plan, Change in Control Price shall mean the
higher of (i) the highest price paid per share of Corporation common stock in
any transaction constituting a Change in Control of the Corporation or (ii) the
highest fair market value per share of Carpenter Technology Corporation common
stock as reported in the Wall Street Journal at any time during the sixty-day
period preceding the Change in Control of the Corporation.
11. Amendment, Modification and Termination of the Plan.
The Board, at any time, may terminate, and at any time and from time to
time, and in any respect, may amend or modify, the Plan; provided, however, that
no such action by the Board, without approval of the stockholders, may (a)
increase the total amount of common stock which may be purchased under options
granted under the Plan or the maximum number of shares of common stock for which
options may be granted under the Plan to any one individual, except as
contemplated in Section 9, (b) permit options to be granted at less than fair
market value, (c) permit any person while a member of the committee contemplated
in Section 2 to be eligible to receive or hold an option or stock appreciation
right under the Plan or (d) change the manner of computing the spread upon the
exercise of a stock appreciation right.
12. Effective Date of the Plan.
The Plan shall become effective upon approval by the Board; provided,
however, that the Plan shall be submitted for ratification by the stockholders
at the Annual Meeting to be held on November 7, 1977, and if not ratified shall
be of no force and effect. All options and stock appreciation rights granted
prior to such Annual Meeting shall be granted subject to ratification of the
Plan by the stockholders of Carpenter Technology Corporation at such Meeting and
no option shall be exercisable before such ratification.
7
EX-10.E
6
dex10e.txt
DEFFERED COMPENSATION PLAN FOR NON-MANAGEMENT DIR.
Exhibit 10 E
CARPENTER TECHNOLOGY CORPORATION
DEFERRED COMPENSATION PLAN FOR NON-MANAGEMENT DIRECTORS
-------------------------------------------------------
This is the Carpenter Technology Corporation Deferred Compensation
Plan for Non-Management Directors, effective January 1, 1995, established by
Carpenter Technology Corporation and its subsidiaries expressly included herein
to provide its non-employee directors with an additional method of planning for
their retirement. The Plan is intended to be an unfunded plan maintained for the
purpose of providing deferred compensation to the non-employee directors of
Carpenter Technology Corporation.
ARTICLE I - DEFINITIONS
-----------------------
The following words and phrases as used herein have the following
meanings unless the context plainly requires a different meaning:
1.1 Account means the total amount credited to the bookkeeping
-------
accounts in which a Participant's Contributions are maintained, including
earnings thereon.
1.2 Beneficiary means the person that the Participant designates to
-----------
receive any unpaid portion of the Participant's Account should the Participant's
death occur before the Participant receives the entire balance to the credit of
such Participant's Account. If the Participant does not designate a beneficiary,
his Beneficiary shall be his spouse if he is married at the time of his death,
or his estate if he is unmarried at the time of his death.
1.3 Board of Directors means the board of directors of Carpenter
------------------
Technology Corporation.
1.4 Code means the Internal Revenue Code of 1986, as amended.
----
1.5 Compensation means all amounts that a Director receives in
------------
payment for serving on the Board of Directors. Notwithstanding the preceding
sentence, Compensation shall not include amounts identified by the Corporation
as expense allowances or reimbursements.
-1-
1.6 Contribution means an amount deferred under the Plan pursuant to
------------
a Participant's election under Article IV and credited to a Participant's
Account. No money or other assets will actually be contributed to such Accounts.
1.7 Corporation means the Carpenter Technology Corporation.
-----------
1.8 Director means an individual who serves on the Board of Directors
--------
or on the board of directors of any subsidiary that the Board of Directors of
Carpenter Technology Corporation designates to participate in the Plan. A list
of the subsidiaries currently designated to participate in the Plan is attached
hereto as Appendix A.
1.9 Effective Date means January 1, 1995.
--------------
1.10 Five-Year Medium Term Note Borrowing Rate means the Corporation's
-----------------------------------------
Five-Year Medium Term Note Borrowing Rate, as provided by one of the
Corporation's investment bankers for any such medium term note that would have
been issued on November 15 (or the next business day thereafter if November 15
is not a business day) of each Plan Year.
1.11 Participant means a Director who elects to participate in the
-----------
Plan pursuant to Section 2.2.
1.12 Pension Board means the Pension Board appointed pursuant to the
-------------
General Retirement Plan for Employees of Carpenter Technology Corporation, as
constituted from time to time.
1.13 Plan means the Carpenter Technology Corporation Deferred
----
Compensation Plan for Non-Management Directors, as may be amended from time to
time.
1.14 Plan Administrator means the Pension Board.
------------------
1.15 Plan Year means the 12-month period beginning January 1 and
---------
ending December 31.
ARTICLE II - PARTICIPATION
--------------------------
2.1 Eligibility to Participate. All Directors who are neither
--------------------------
current nor past employees of the Corporation or any of its subsidiaries are
eligible to participate in the Plan.
2.2 Participation. Any Director who elects to participate in the
-------------
Plan shall become a Participant in the Plan immediately upon enrolling as a
Participant by the method required by the Plan Administrator. An individual
shall remain a Participant under the Plan until all amounts credited to the
Participant's Account have been distributed to the Participant or the
Participant's Beneficiary.
-2-
ARTICLE III - VESTING
---------------------
Participants are always fully vested in all amounts credited to their
Accounts.
ARTICLE IV - CONTRIBUTIONS
--------------------------
4.1 Eligibility to Receive Contributions. Subject to Section 5.4.2,
------------------------------------
a Participant may receive Contributions in each Plan Year that the Participant
is a Director and is not an employee of the Corporation.
4.2 Contributions. A Participant may elect to defer up to 100% of
-------------
the Participant's Compensation and to have the Corporation make a Contribution
of that amount to the Participant's Account under the Plan.
4.3 Elections.
---------
4.3.1 Frequency and Timing of Elections. Elections may be
---------------------------------
made once each Plan Year and they may not be modified during the Plan Year. The
Participant must make an election by December 15 of a Plan Year for it to take
effect for the next Plan Year. However, for the initial Plan Year beginning
January 1, 1995, elections must be made by January 31, 1995, and they will be
effective as of February 1, 1995.
4.3.2 Duration of Elections. Elections to receive
---------------------
Contributions under this Article IV expire at the end of each Plan Year for
which the election was made.
-3-
4.3.3 Restriction on Elections. Elections to receive
------------------------
Contributions may be in the form of a whole percentage or in $1 increments.
4.4 Earnings. All amounts credited to a Participant's Account shall
--------
be credited with earnings at a rate equal to the Five-Year Medium Term Note
Borrowing Rate, established as of November 15 (or the next business day
thereafter if November 15 is not a business day) of the prior Plan Year. For the
first Plan Year, the rate is 8.25%. The Pension Board shall communicate to all
Directors the Five-Year Medium Term Note Borrowing Rate for the next Plan Year
no later than November 30 of the current Plan Year. Earnings on Contributions
shall begin to accrue on the date that such Contributions would have been paid
to the Participant but for an election to defer under this Article IV. Earnings
shall be compounded semi-annually on each January 1 and July 1. In addition, any
distribution not made on either January 1 or July 1 shall have earnings
compounded as of the date of distribution.
-4-
ARTICLE V - DISTRIBUTIONS
-------------------------
5.1 Payment of Distributions. All distributions shall, at the
------------------------
Company's discretion, be made directly out of the Corporation's general assets
or from the Carpenter Technology Corporation Non-Qualified Benefits Trust for
Directors.
5.2 Form of Distributions. A Participant may receive distributions
---------------------
in one of the following manners, which the Participant shall elect on the
initial enrollment form.
5.2.1 A lump sum distribution of the Participant's entire
Account;
5.2.2 Ten annual installments, with the distribution each year
equal to the product resulting from multiplying the then current Account balance
by a fraction. The numerator of the fraction is always one, and the denominator
of the fraction is ten for the first distribution and is reduced by one for each
subsequent distribution;
5.2.3 Fifteen annual installments, with the distribution each
year equal to the product resulting from multiplying the then current Account
balance by a fraction. The numerator of the fraction is always one, and the
denominator of the fraction is fifteen for the first distribution and is reduced
by one for each subsequent distribution; or
5.2.4 On a schedule that is the same as that used for payments
made to the Participant under the Carpenter Technology Corporation Director
Retirement Plan.
5.3 Timing of Distributions. Participants shall elect on their
-----------------------
initial enrollment forms when distributions of their Accounts will begin, which
shall either be a specific date or event. At any point prior to a year in which
a distribution of any or all of a Participant's Account is scheduled for
distribution pursuant to this Article V, the Participant shall have the option
to further defer all or part of the scheduled distribution to a later year. A
scheduled distribution or portion thereof may, however, be further deferred only
once.
5.4 Accelerated Distributions. Subject to the following forfeiture
-------------------------
and suspension provisions, a Participant may elect to receive a distribution of
all or a portion of his Account prior to the date or dates originally elected
under Section 5.3 as long as such distribution is at least $5,000.
5.4.1 Forfeiture of Earnings. A Participant shall forfeit any
----------------------
earnings attributable to the amount distributed pursuant to Section 5.4 that
accrued
-5-
during the six-month period ending on the date of the distribution. The amount
of forfeited earnings shall be calculated using the highest interest rate that
was in effect during the six-month period. If, however, the actual earnings
credited to a Participant's Account are less than the amount determined in the
immediately preceding sentence, no amount beyond the actual earnings shall be
forfeited. Any amounts forfeited under this Section shall not be distributed or
allocated to any other Account in the Plan and shall be forfeited to the
Corporation.
5.4.2 Suspension of Participation. If a Participant elects to
---------------------------
accelerate a distribution under Section 5.4, he will not be entitled to receive
any Contributions under the Plan for the Plan Year immediately following the
Plan Year in which the Participant elected to accelerate a distribution. Any
election made to receive Contributions for a Plan Year in which participation is
suspended shall be disregarded.
5.5 Termination of Service. Upon termination of service as a
----------------------
Director, a Participant, or the Beneficiary if the termination of service is
caused by the Participant's death, shall have the following options with respect
to the distribution of the Participant's Account:
5.5.1 Reaffirm Current Election. The Participant or
-------------------------
Beneficiary may elect to reaffirm the Participant's election under Section 5.3
that was in effect at the time of the Participant's termination; or
5.5.2 Request a New Election. The Participant or Beneficiary
----------------------
may elect a new distribution option available under Section 5.2, subject to the
Corporation's consent.
ARTICLE VI - PLAN ADMINISTRATION
--------------------------------
6.1 General. The Plan shall be administered by the Pension Board,
-------
which is the Plan Administrator.
6.2 Responsibilities and Reports. The Plan Administrator may
----------------------------
pursuant to a written resolution allocate among one or more of its members
specific responsibilities under the Plan and the Plan Administrator may name
other persons to carry out such responsibilities. The Plan Administrator shall
be entitled to rely conclusively upon all tables, valuations, certificates,
opinions and reports that are furnished by any actuary, accountant, controller,
counsel, investment banker or other person who is employed or engaged for such
purposes.
-6-
6.3 Governing Law. This Plan shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Pennsylvania, to the extent not
preempted by federal law.
ARTICLE VII - CLAIMS PROCEDURE
------------------------------
7.1 Plan Interpretation. The Human Resources Committee of the Board
-------------------
of Directors shall have the authority and responsibility to interpret and
construe the Plan and to decide all questions arising thereunder, including
without limitation, questions of eligibility for participation, eligibility for
Contributions, the amount of Account balances, and the timing of the
distribution thereof, and shall have the authority to deviate from the literal
terms of the Plan to the extent it shall determine to be necessary or
appropriate to operate the Plan in compliance with the provisions of applicable
law. Notwithstanding the above, a member of the Human Resources Committee shall
not take any part in decisions regarding his participation in the Plan.
7.2 Denial of Claim for Benefits. Any denial by the Human Resources
----------------------------
Committee of any claim for benefits under the Plan by a Participant or
Beneficiary shall be stated in writing by the Human Resources Committee and
delivered or mailed to the Participant or Beneficiary. The Human Resources
Committee shall furnish the claimant with notice of the decision not later than
90 days after receipt of the claim, unless special circumstances require an
extension of time for processing the claim. If such an extension of time for
processing is required, written notice of the extension shall be furnished to
the claimant prior to the termination of the initial 90 day period. In no event
shall such extension exceed a period of 90 days from the end of such initial
period. The extension notice shall indicate the special circumstances requiring
an extension of time and the date by which the Human Resources Committee expects
to render the final decision. The notice of the Human Resources Committee's
decision shall be written in a manner calculated to be understood by the
claimant and shall include (i) the specific reasons for the denial, including,
where appropriate, references to the Plan, (ii) any additional information
necessary to perfect the claim with an explanation of why the information is
necessary, and (iii) an explanation of the procedure for perfecting the claim.
-7-
7.3 Appeal of Denial. The claimant shall have 60 days after receipt
----------------
of written notification of denial of his or her claim in which to file a written
appeal with the Human Resources Committee. As a part of any such appeal, the
claimant may submit issues and comments in writing and shall, on request, be
afforded an opportunity to review any documents pertinent to the perfection of
his or her claim. The Human Resources Committee shall render a written decision
on the claimant's appeal ordinarily within 60 days of receipt of notice thereof
but, in no case, later than 120 days.
ARTICLE VIII - FUNDING
----------------------
8.1 Funding. The Corporation shall not segregate or hold separately
-------
from its general assets any amounts credited to the Accounts, and shall be under
no obligation whatsoever to fund in advance any amounts under the Plan,
including Contributions and earnings thereon.
8.2 Insolvency. In the event that the Corporation becomes insolvent,
----------
all Participants and Beneficiaries shall be treated as general, unsecured
creditors of the Corporation with respect to any amounts credited to the
Accounts under the Plan.
ARTICLE IX - AMENDMENT AND TERMINATION
--------------------------------------
9.1 Reservation of Rights. The Corporation reserves the right to
---------------------
amend or terminate the Plan at any time by action of the Board of Directors.
Notwithstanding the foregoing, no such amendment or termination shall reduce the
balance of any Participant's Account as of the date of such amendment or
termination.
9.2 Funding upon Termination. Upon a complete termination of the
------------------------
Plan, the Corporation shall contribute to the Carpenter Technology Corporation
Non-Qualified Benefits Trust for Directors an amount equal to the aggregate of
all amounts credited to Participants' Accounts as of the date of such
termination. If the Carpenter Technology Corporation Non-Qualified Benefits
Trust for Directors does not exist at the time the Plan is terminated, the
Corporation shall create an irrevocable grantor trust to which it will
contribute such amounts. This newly created trust shall be designed to ensure
that Participants will not be subject to taxation on amounts contributed to and
held under the trust on their behalf before the amounts are distributed.
-8-
9.3 Survival of Accounts and Elections. Notwithstanding any
----------------------------------
termination of the Plan, the trustee of the trust to which amounts are
contributed under Section 9.2 shall maintain the Accounts for Participants in
the same manner as under this Plan and all elections for distributions under
Article V of the Plan shall survive the termination and remain in effect.
ARTICLE X - MISCELLANEOUS
-------------------------
10.1 Limited Purpose of Plan. The establishment or existence of the
-----------------------
Plan shall not confer upon any individual the right to be continued as a
Director.
10.2 Non-alienation. No amounts payable under the Plan shall be
--------------
subject in any manner to anticipation, assignment, or voluntary or involuntary
alienation.
10.3 Facility of Payment. If the Plan Administrator, in its sole
-------------------
discretion, deems a Participant or Beneficiary who is eligible to receive any
payment hereunder to be incompetent to receive the same by reason of age,
illness or any infirmity or incapacity of any kind, the Plan Administrator may
direct the Corporation to apply such payment directly for the benefit of such
person, or to make payment to any person selected by the Plan Administrator to
disburse the same for the benefit of the Participant or Beneficiary. Payments
made pursuant to this Section 10.3 shall operate as a discharge, to the extent
thereof, of all liabilities of the Corporation and the Plan Administrator to the
person for whose benefit the payments are made.
-9-
To record the adoption of the Plan, the Carpenter Technology
Corporation has caused its authorized officers to affix its corporate name and
seal this ____ day of ___________, 1995.
[CORPORATE SEAL] CARPENTER TECHNOLOGY CORPORATION
Attest: ____________________ By:____________________________________________
Secretary Robert W. Lodge
Title: Vice President - Human & Administrative
------------------------------------------
Services
--------
-10-
CARPENTER TECHNOLOGY CORPORATION
DEFERRED COMPENSATION PLAN FOR NON-MANAGEMENT DIRECTORS
-------------------------------------------------------
APPENDIX A
PARTICIPATING SUBSIDIARIES
--------------------------
None
As of January 1, 1995
EX-10.H
7
dex10h.txt
STOCK-BASE INCENTIVE COMP PLAN FOR NON-EMPLOYEE
Exhibit 10 H
CARPENTER TECHNOLOGY CORPORATION
STOCK-BASED COMPENSATION PLAN FOR
NON-EMPLOYEE DIRECTORS
Effective October 20, 1997
As last amended April 26, 2001
1. Purpose:
The purposes of the Plan are to attract and retain the services of
experienced and knowledgeable non-employee Directors, to encourage Eligible
Directors of Carpenter Technology Corporation (the "Company") to acquire a
proprietary and vested interest in the growth and performance of the Company,
and to generate an increased incentive for Directors to contribute to the
Company's future success and prosperity, thus enhancing the value of the Company
for the benefit of its stockholders.
This Plan is an amendment and restatement of the Carpenter Technology
Corporation Non-Qualified Stock Option Plan for Non-Employee Directors as
adopted effective August 1, 1990 and amended October 23, 1995 and October 20,
1997. The rights of any Director whose service as a Director ended on or before
April 25, 2001 shall be governed by the terms of the Plan as in effect when that
Director's service ended.
2. Definitions:
As used in the Plan, the following terms shall have the meanings set forth
below:
a) "Annual Retainer" shall mean base compensation for services as a
Director. Annual Retainer shall not include meeting fees, committee service
fees, if any, expense allowances or reimbursements or any other additional
compensation for services as a Director.
b) "Beneficiary" means the person that the Eligible Director designates
to receive any unpaid portion of the Eligible Director's Account should the
Eligible Director's death occur before the Eligible Director receives the entire
balance to the credit of such Eligible Director's Account. If the Eligible
Director does not designate a Beneficiary, the Beneficiary shall be the person's
spouse if the person is married at the time of death, or the Eligible Director's
estate if unmarried at the time of the person's death.
c) "Board" shall mean the Board of Directors of the Company.
d) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
e) "Common Stock" shall mean the Common Stock, $5.00 par value, of the
Company.
f) "Company" shall mean Carpenter Technology Corporation.
g) "Election Date" shall mean with respect to an Option hereunder the
date of the appointment, election, or re-election of the Eligible Director that
prompted the grant of such Option.
h) "Eligible Director" shall mean each Director of the Company who is not
an employee of the Company or any of the Company's subsidiaries (as defined in
Section 425 (f) of the Code), or who is not otherwise excluded from
participation by agreement.
i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
j) "Fair Market Value" shall mean with respect to the Common Stock (I)
the last sale price of the Common Stock on the date on which such value is
determined, as reported on the consolidated tape of New York Stock Exchange
issues or, if there shall be no trades on such date, on the date nearest
preceding such date; (ii) if the Common Stock is not then listed for trading on
the New York Stock
1
Exchange, the last sale price of the Common Stock on the date of which such
value is determined, as reported on another recognized securities exchange or on
the NASDAQ National Market System if the Common Stock shall then be listed and
traded upon such exchange or system or, if there shall be no trades on such
date, on the date nearest preceding such date; or (iii) the mean between the bid
and asked quotations for such stock on such date (as reported by a recognized
stock quotation services) or, in the event that there shall be no bid or asked
quotations on such date, then upon the basis of the mean between the bid and
asked quotations on the date nearest preceding such date.
k) "Grant Date" shall mean with respect to an Option hereunder the date
upon which such Option is granted.
l) "Option" shall mean any right granted to an Eligible Director allowing
such Eligible Director to purchase Shares at such price or prices and during
such period or periods as set forth under the Plan. All Options shall be non-
qualified options not entitled to special tax treatment under Section 422A of
the Code.
m) "Option Letter" shall mean a written instrument evidencing an Option
granted hereunder and signed by an authorized representative of the Company.
n) "Performance Unit" shall mean the right to receive, following
termination of service as an Eligible Director, one share of Common Stock.
Performance Units will be awarded, if at all, based upon the attainment of a
specified goal ("Performance Goal") by the end of a period specified by the
Board based upon one or more of the following criteria: (I) price of the Common
Stock, (ii) market share of the Company, (iii) sales by the Company, (iv)
earnings per share of the Common Stock, (v) return on shareholder equity of the
Company, or (vi) costs of the Company. Such goal shall be pre-determined by the
Board at a time when it is substantially uncertain that the Performance Goals
will be met and subject to verification by the Company's independent auditors
using generally accepted accounting principles, consistently applied. For
purposes of this Plan, fractional Performance Units, measured to the nearest
four decimal places, may be credited.
o) "Release Date" shall mean the fifth business day occurring after the
Company's earnings release for the preceding fiscal period. In calculating the
Release Date, the day of an earnings release shall be counted, if the earnings
release is made before the opening of trading on the New York Stock Exchange and
shall not be counted if such release is made after the opening of trading.
p) "Retirement" shall mean Retirement from the Board with a minimum of
three years service as an Eligible Director.
q) "SAR" or "Stock Appreciation Right" shall mean the right granted to an
Eligible Director to receive the increase in the Fair Market Value of a
specified number of Shares.
r) "Shares" shall mean Shares of Common Stock.
s) "Stock Unit" shall mean the right to receive, following both service
as an Eligible Director for one year following the grant of the Stock Unit and
termination of service as an Eligible Director, one share of Common Stock. For
purposes of this Plan, fractional Stock Units, measured to the nearest four
decimal places, may be credited.
t) "Unit" shall mean a Performance Unit, a Stock Unit, or both, as
required by context.
u) "Window" shall mean a 30 calendar-day period of time beginning on a
Release Date.
3. Administration:
The Plan shall be administered by the Company. Subject to the terms of the
Plan, the Board shall have the power to interpret the provisions and supervise
the administration of the Plan.
2
4. Shares Subject to the Plan:
a) Total Number. Subject to adjustment as provided in this Section, the
------------
total number of Shares as to which Options may be granted, or Performance Units,
Stock Units and SARs awarded shall be 329,000. Any Shares issued hereunder may
consist, in whole or in part, of authorized and unissued Shares or treasury
Shares.
b) Reduction of Shares Available.
-----------------------------
(i) The grant of an Option will reduce the Shares as to which
Options may be granted by the number of Shares subject to such Option.
(ii) Any shares issued by the Company through the assumption or
substitution of outstanding grants from an acquired company shall not reduce the
Shares available for grants under the Plan.
(iii) The grant of Performance Units or Stock Units will reduce the
number of Shares available for further grants by the number of Units granted.
(iv) The exercise of an SAR payable in Shares will reduce the number
of Shares that may be issued upon subsequent exercise of SARs.
c) Increase of Shares Available. The lapse, cancellation or other
----------------------------
termination of an Option, Unit or SAR that has not been fully exercised or paid
shall increase the available Shares for such Options, Units or SARs by the
number of Shares that have not been issued upon exercise of such Option or SAR
or payment of such Unit.
d) Other Adjustments. The total number and kind of Shares available for
-----------------
Options, Units or SARs under the Plan or which may be allocated to any one
Eligible Director, the number and kind of Shares subject to outstanding Options,
Units or SARs, and the exercise price for such Options or SARs or the value of
Units shall be appropriately adjusted by the Board for any increase or decrease
in the number of outstanding Shares resulting from a stock dividend,
subdivision, combination of Shares, reclassification, or other change in
corporate structure affecting the Shares or for any conversion of the Shares
into or exchange of the Shares for other Shares as a result of any merger or
consolidation (including a sale of assets) or other recapitalization as may be
necessary to maintain the proportionate interest of the Option, SAR or Unit
holder.
5. Initial Options:
Initial Options shall be granted to Eligible Directors as follows:
a) Initial Grant. Each Eligible Director who has not previously received
-------------
a grant under this Plan shall be granted an Option to acquire 2,000 Shares as
follows: (1) on the Election Date in the event that the Election Date occurs
during a Window, or (2) on the next Release Date in the event that the Election
Date does not occur during the Window.
b) Terms and Conditions. Any Option granted under this Section 5 shall
--------------------
be subject to the following terms and conditions:
(i) Option Price. The purchase price per Share purchasable under
------------
an Option granted under Section 5 shall be 100% of the Fair Market Value of a
Share on the Grant Date.
(ii) Exercisability. Unless otherwise provided by this Plan, an
--------------
Option granted under Section 5 shall become exercisable in whole or in part one
year from the Grant Date.
3
6. Annual Options:
Annual Options shall be granted to Eligible Directors as follows:
a) Eligible Directors. Each Eligible Director on or after the Effective
------------------
Date of the Plan shall be granted an Option to acquire 2,000 Shares immediately
after the annual meeting of the Company's stockholders.
b) Terms and Conditions. Any Option granted under this Section 6 shall
--------------------
be subject to the following terms and conditions:
(i) Option Price. The purchase price per Share purchasable under an
------------
Option shall be 100% of the Fair Market Value of a Share on the Grant Date.
(ii) Exercisability. Unless otherwise provided by this Plan, an
--------------
Option granted under this Section 6 shall become exercisable in whole or in part
one year from the Grant Date.
7. General Terms:
The following provisions shall apply to any Option:
a) Option Period. Each Option shall expire ten years from its Grant
-------------
Date, subject to earlier termination as hereinafter provided.
b) Each Option granted under this Plan shall become exercisable by the
Eligible Director only after the completion of one year of Board service
immediately following the Grant Date; provided, however, that for Annual Options
under Section 6, uninterrupted Board service by the Eligible Director until the
annual meeting of the Company's stockholders next following the Grant Date shall
be deemed completion of one year of Board service. Exercise of any or all prior
existing Options shall not be required.
c) No Option under this Plan may be transferable by the Eligible Director
except by will or the laws of descent and distribution. In the event of the
death of the Eligible Director more than one year after the Grant Date and not
more than three months after the termination of the Eligible Director's Board
service, the Option may be transferred to the Eligible Director's personal
representative, heirs or legatees ("Transferee") and may be exercised by the
Transferee before the earlier of (i) the expiration of one year from the date of
the death of the Eligible Director or (ii) the expiration of ten years from the
Grant Date. In the event of the Retirement from Board service of an Eligible
Director, an Option may be exercised prior to its expiration during the five
year period beginning with the date of Retirement; provided, however, that in
the event of a retiree's death during such five year period, unexercised Options
may be exercised by the Transferee before the earlier of either items (i) or
(ii) of this Section 7(c). In all other cases of termination of Board service of
an Eligible Director except for removal for cause, the Option, if otherwise
exercisable by the Eligible Director at the time of such termination, may be
exercised within three months after such termination. In the event of removal
for cause, all existing Options shall be of no force and effect.
d) Method of Exercise. Any Option may be exercised by the Eligible
------------------
Director in whole or in part at such time or times and by such methods as the
Board may specify. The applicable Option Letter may provide that the Eligible
Director may make payment of the Option price in cash, Shares, held for at least
six months, or such other consideration as the Board may specify, or any
combination thereof, having a Fair Market Value on the exercise date equal to
the total Option price.
4
8. Stock Units:
a) Grant of Stock Units. On the date of the annual meeting of
--------------------
stockholders, each Eligible Director shall be awarded each year a number of
Stock Units determined by dividing 50% of the Director's Annual Retainer by
the Fair Market Value on that date.
b) Election of Stock Units. By written election filed with the Board
-----------------------
before the end of any calendar year, an Eligible Director may elect to increase
the percentage in a) above to 100%, and thereby have the entire Director's
Annual Retainer payable in each calendar year beginning after the date of the
election awarded in Stock Units. An election under this Section 8 b) shall
remain in effect until changed, in writing, by the Director. Any such change
shall be effective in the first calendar year beginning after the date of the
written notice of change.
c) Forfeiture of Stock Units. Stock Units awarded at an annual meeting
-------------------------
of stockholders will be forfeited if the Director terminates service as a
Director for any reason other than Board approved Retirement, Board determined
disability, or death, before the immediately following annual meeting of
stockholders.
d) Stock Units in Lieu of Pension. Effective October 20, 1997, the
------------------------------
present value on that date of any Eligible Director's accrued pension benefit
under the Carpenter Technology Corporation Director Retirement Plan, excluding
any Eligible Director who is required to retire on or before the 1998 Annual
Meeting of Stockholders, shall be converted to Stock Units. The number of Stock
Units to be awarded under this Section 8 d) shall be determined by dividing
average of the Fair Market Value on the last ten business days of October 1997
into the present value of each Eligible Director's accrued pension. The present
value will be determined using the UP-84 mortality table and a 7.5% interest
rate. Stock Units awarded under this Section 8 d) shall not be subject to the
vesting schedule of Section 8 c). Instead, such Stock Units will be payable upon
the earlier of the Director's Retirement, Board determined disability, or death.
9. Performance Units:
a) Grant of Performance Units. Performance Units may be granted annually
--------------------------
to Eligible Directors in such amounts and subject to such Performance Goals as
shall be determined by the Board. Each Performance Unit shall have an initial
value equal to the Fair Market Value of a Share (or similar fractional Share) on
the Grant Date. The Board shall set one or more Performance Goals as described
in Section 2(n) of this Plan. The extent to which those Performance Goals are
met will determine the number and value of Performance Units that will be paid
out to the Eligible Director.
b) Form and Timing of Payment of Performance Units. Payment of earned
-----------------------------------------------
Performance Units shall be made as soon as practicable following the close of
the applicable period in a manner designated by the Board, in its sole
discretion. The Board, in its sole discretion, may pay earned Performance Units
in the form of cash or in Shares (or in a combination thereof) that have an
aggregate Fair Market Value equal to the value of the earned Performance Units
at the close of the applicable period. Such Shares may be granted subject to any
restrictions deemed appropriate by the Board.
c) Dividends on Earned but Undistributed Shares. Eligible Directors
--------------------------------------------
shall be entitled to receive any dividends declared with respect to Shares that
have been earned in connection with grants of Performance Units, but not yet
distributed to Eligible Directors.
10. Nontransferability of Units:
Neither Performance Units nor Stock Units may be sold, transferred,
pledged, assigned or otherwise alienated, other than by will or by the laws of
descent and distribution.
5
11. Dividend Equivalents:
An Eligible Director who has been awarded Stock Units will also be awarded
additional Units, determined on a quarterly basis. The number of additional
Units to be awarded will be determined by multiplying the quarterly dividend per
Share for the immediately preceding quarter by the number of Units credited to
the Director on the first day of that calendar quarter and dividing the result
by the Fair Market Value on the last business day of that quarter.
12. Payment of Units:
a) Following an Eligible Director's Retirement, or termination of service
on account of disability, the Director shall be paid a number of Shares equal to
the number of whole Units credited to the Director, with cash paid in lieu of
any fractional Units. The amount of cash to be paid will be based on the Fair
Market Value on the date of the Director's termination of service as a Director.
In the case of the Director's death, the payment will be made to the Director's
Beneficiary.
b) Manner of Payment.
-----------------
(1) An Eligible Director may elect to receive Shares in payment of
Units credited to the Director's account in a lump sum or in annual installments
payable over either ten or fifteen years.
(2) The election shall be made by the Director, in writing, filed
with the Board no later than the end of the calendar year immediately preceding
the Director's termination of service. If no election is made, the Director's
Units will be paid in a lump sum as soon as is practicable following the
Director's termination of service.
(3) If a Director elects installment payments, the amount of each
annual installment will be the number of Units to the Director's credit at the
end of the immediately preceding calendar year multiplied by a fraction the
numerator of which is one and the denominator of which is the number of years
remaining in the original installment period. Dividend equivalents will continue
to be credited to the Director's account through the end of the calendar quarter
immediately preceding the final installment.
(4) An Eligible Director who has elected installment payment of Units
may, with the consent of the Board, which may be given or denied in the Board's
sole discretion, change that election and receive a lump sum distribution of all
remaining Units credited to the Director's account.
13. Stock Appreciation Rights or SARs:
SARs may be granted by the Board from time to time, subject to the
following provisions:
a) The Board may grant a SAR either in connection with the grant of an
Option ("Tandem SAR") or independent of the grant of an Option ("Freestanding
SAR"). The grant of any Freestanding SAR must be related to the attainment of
Performance Goals under Section 9. Each Tandem SAR shall be exercisable only
with the exercise and surrender of the related Option or portion thereof and
shall entitle the Eligible Director to receive the excess of the Fair Market
Value of the Shares on the date the Tandem SAR is exercised over the option
price under the related Option. The excess is hereafter called the "Spread" for
both Tandem SARs and Freestanding SARs. If the Eligible Director elects instead
to exercise the related Option, the Tandem SAR shall be canceled automatically.
b) A Tandem SAR shall be exercisable only to the extent and at the same
time that the related Option is exercisable.
c) A Freestanding SAR shall be exercisable pursuant to the terms and
conditions that are specified in the agreement in which the Freestanding SAR is
granted.
6
d) Upon the exercise of a SAR, the Company shall pay to the Eligible
Director an amount equivalent to the spread (less any applicable withholding
taxes) in cash, or in Shares, or a combination of both, as the Board shall
determine. Such determination may be made at the time of the granting of the
SAR. No fractional Shares of Stock shall be issued and the Board shall determine
whether cash shall be given in lieu of such fractional Share or whether such
fractional Share shall be eliminated.
e) A Tandem SAR shall terminate and may no longer be exercised upon the
termination or expiration of the related Option.
f) Income attributable to the exercise of a SAR shall not be included in
the calculation of any other benefits payable at any time by reason of
the Eligible Director's service to the Company.
g) No SAR shall be transferable by the Eligible Director.
h) The agreement under which a SAR is granted shall set forth the extent
to which the Eligible Director shall have the right to exercise the SAR
following termination of the Eligible Director's service as a Director. Such
provisions shall be determined at the sole discretion of the Board and need not
be uniform among all SARs issued pursuant to this Section 13, and may reflect
distinctions based on the reasons for termination of service.
i) The Board may only grant Freestanding SARs pursuant to the achievement
of Performance Goals and it may impose additional restrictions upon the vesting
and exercise of such SARs on the attainment of Performance Goals. For all
purposes under this Plan, "Performance Goals" means goals that must be met by
the end of a period specified by the Board based upon one or more of the
following criteria: (i) price of the Common Stock, (ii) market share of the
Company, (iii) sales by the Company, (iv) earnings per share of the Common
Stock, (v) return on shareholder equity of the Company, or (vi) costs of the
Company.
14. Change in Control:
a) Notwithstanding anything in this Plan to the contrary, in the event of
a Change in Control of the Company, the Options granted under Sections 5 and 6
and any SARs granted under Section 13 shall vest and become immediately
exercisable and any unvested Stock Units granted under Section 8 shall vest.
b) For purposes of this Plan, "Change in Control of the Company" means:
(1) The acquisition by any individual, entity or group [within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act] (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (A) the then-outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock") or (B) the
combined voting power of the then-outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that, for purposes of this
Section 14(b), the following acquisitions shall not constitute a Change in
Control: (i) any acquisition directly from the Company, (ii) any acquisition by
the Company, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any affiliated company or (iv)
any acquisition by any corporation pursuant to a transaction that complies with
Sections 14(b)(3)(A), 14(b)(3)(B) and 14(b)(3)(C);
7
(2) individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board;
(3) consummation of a reorganization, merger, consolidation or sale
or other disposition of all or substantially all of the assets of the Company or
the acquisition of the assets or stock of another entity (a "Business
Combination"), in each case, unless, following such Business Combination, (A)
all or substantially all of the individuals and entities that were the
beneficial owners of the Outstanding Company Common Stock and the Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the then-outstanding
shares of common stock and the combined voting power of the then-outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation that, as a result of such
transaction, owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then-outstanding voting securities of such corporation, except to the extent
that such ownership existed prior to the Business Combination, and (C) at least
a majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement or of the action of the Board
providing for such Business Combination; or
(4) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
c) Payment for Performance Units. Within 30 days following a Change in
-----------------------------
Control of the Company, as defined in Section 14(b) of this Plan, there shall be
paid in cash to Eligible Directors holding Performance Units a pro rata amount
based upon the assumed achievement of all relevant Performance Goals at target
levels, and upon the length of time with the performance period that has elapsed
before the Change in Control of the Company; provided, however, that if the
Board determines that actual performance to the date of the Change in Control of
the Company exceeds targeted levels, the prorated payouts shall be made using
the actual performance data; and provided further, that there shall not be an
accelerated payout with respect to Performance Units that qualify as "Derivative
Securities" under Section 16 of the Exchange Act that were granted less than six
months before the Change in Control of the Company.
8
15. Amendments and Termination:
a) Board Authority. The Board may amend or terminate the Plan at any
---------------
time; provided that no amendment may be made (i) without the appropriate
approval of the Company's stockholders if such approval is necessary to comply
with any tax or other regulatory requirement, including any stockholder approval
required as a condition to exemptive relief under Section 16(b) of the Exchange
Act; (ii) which would adversely impair or affect, without the consent of the
Eligible Director, any rights or obligations under any Option, Unit or SAR
theretofore granted to such Eligible Director; or (iii) more than once every six
months with respect to the timing, amount and price of Options or SARs to be
awarded to Eligible Directors, other than to comport with changes to the Code,
the Employee Retirement Income Security Act, or the rules thereunder.
b) Prior Stockholder and Eligible Director Approval. Anything herein to
------------------------------------------------
the contrary notwithstanding, in the event that amendments to the Plan are
required in order that the Plan or any other stock-based compensation plan of
the Company comply with the requirements of Rule 16b-3 issued under the Exchange
Act, as amended from time to time, or any successor rules promulgated by the
Securities and Exchange Commission related to the treatment of benefit and
compensation plans under Section 16 of the Exchange Act, the Board is authorized
to make such amendments without the consent of Eligible Directors or the
stockholders of the Company.
16. General Provisions:
a) Compliance Regulations. All certificates for Shares delivered under
----------------------
this Plan pursuant to any Option, Unit or SAR shall be subject to such stock-
transfer orders and other restrictions as the Board may deem advisable under the
rules, regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Shares are then listed, and any
applicable federal or state securities law, and the Board may cause a legend or
legends to be put on any such certificates to make appropriate reference to such
restrictions. The Company shall not be required to issue or deliver any Shares
under the Plan prior to the completion of any registration or qualification of
such Shares under any federal or state law, or under any ruling or regulations
of any governmental body or national securities exchange that the Board in its
sole discretion shall deem to be necessary or appropriate.
b) Other Plans. Nothing contained in this Plan shall prevent the Board
-----------
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required by applicable law or the rules
of any stock exchange on which the Common Stock is then listed; and such
arrangements may be either generally applicable or applicable only in specific
cases.
c) Governing Law. The validity, construction, and effect of the Plan and
-------------
any rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of Delaware and applicable federal law.
d) Conformity With Law. If any provision of this Plan is or becomes or
-------------------
is deemed invalid, illegal, or unenforceable in any jurisdiction, or would
disqualify the Plan or any Option under any law deemed applicable by the Board,
such provision shall be construed or deemed amended in such jurisdiction to
conform to applicable laws or if it cannot be construed or deemed amended
without, in the determination of the Board, materially altering the intent of
the Plan, it shall be stricken and the remainder of the Plan shall remain in
full force and effect.
e) Insufficient Shares. In the event there are insufficient Shares
-------------------
remaining to satisfy all of the grants of Options, Units or SARs made on the
same day, such Options, Units or SARs shall be reduced pro-rata.
9
17. Effective Date and Termination:
The Plan's original effective date, as approved by the Board, was August 9,
1990, and amended by the Board on August 10, 1995; and ratified by the
stockholders at the Annual Meeting held October 23, 1995. The effective date of
this amendment is April 26, 2001, while the effective date of the previous
restatement was October 20, 1997, as ratified by the Company's stockholders at
the Annual Meeting held on October 20, 1997. The Plan will terminate upon the
date on which all outstanding Options have expired or terminated, and all
outstanding Units and SARs have been paid or otherwise provided for.
10
EX-10.L
8
dex10l.txt
STOCK BASED INCENTIVE COMP. PLAN FOR OFFICERS
Exhibit 10 L
CARPENTER TECHNOLOGY CORPORATION
STOCK-BASED INCENTIVE COMPENSATION PLAN FOR
OFFICERS AND KEY EMPLOYEES
Adopted June 22, 1993, Restated June 27, 1996,
And as last Amended April 26, 2001
1. Background and Purpose.
The Plan was previously adopted on June 22, 1993 and its purposes were
to attract, retain and motivate key employees of Carpenter Technology
Corporation and its wholly owned subsidiaries, to encourage stock ownership by
such employees by providing them with a means to acquire a proprietary interest
or to increase their proprietary interest in the success of Carpenter Technology
Corporation and its subsidiaries and to provide a greater community of interest
between such employees and the stockholders of Carpenter Technology Corporation.
For purposes of this Plan, Carpenter Technology Corporation and each subsidiary
described in Section 424(f) of the Internal Revenue Code of 1986, as amended
(the "Code") shall be referred to collectively as the "Corporation". The Plan
has been amended and restated [in 1996] to create a new category of awards,
which are referred to as Performance Units and Performance Shares, with the
intention that these awards will be directly related to the Corporation's
performance.
2. Administration.
The Board of Directors of Carpenter Technology Corporation (the
"Board") shall be responsible for the operation of the Plan. The Board is
authorized, subject to the provisions of the Plan, from time to time to (i)
select employees to receive awards under the Plan, (ii) determine the type and
amount of awards to be granted to participants, (iii) determine the terms and
conditions of such awards and the terms of agreements entered into with
participants, (iv) establish such rules and regulations and to appoint such
agents as it deems appropriate for the proper administration of the Plan, and
(v) make such determinations under, and such interpretations of, and to take
such steps in connection with, the Plan or the awards granted hereunder as it
deems necessary or advisable. Any questions of interpretation determined by the
Board shall be final and binding upon all persons. The Board may delegate any
or all of these powers to the Human Resources Committee ("Committee") of the
Board, consisting of at least two directors, each of whom shall be "non-employee
directors" as defined in Rule 16b-3 promulgated by the U.S. Securities and
Exchange Commission ("SEC") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and each of whom shall also be "outside directors"
as defined in Treas. Reg. 1.162-27(e)(3). In particular, the Board shall
delegate to the Committee all powers with respect to the granting of awards that
are intended to comply with the requirements of Rule 16b-3 of the Exchange Act
and section 162(m) of the Code that would exempt such awards from being subject
to short-swing liability and being subject to the annual limit on the deduction
of compensation.
- 1 -
3. Participants.
The class of employees eligible to receive awards under the Plan shall
be limited to officers and key employees of the Corporation. Participants in
the Plan will consist of such officers or key employees as the Board in its sole
discretion may from time to time designate. The Board's designation of a
Participant at any time to receive benefits under the Plan shall not obligate it
to designate such person to receive benefits at any other time. The Board shall
consider such factors as it deems pertinent in selecting Participants and in
determining the type and amount of awards granted hereunder. As used herein,
"Participant" shall refer to an employee designated by the Board who has
received an award under the Plan. Only the Committee may designate which
Participants shall receive awards of Performance Units and Performance Shares
under Section 10 of the Plan.
4. Types of Awards.
Awards under the Plan will consist of (i) incentive stock options
("ISOs" or individually an "ISO") intended to be options qualifying under
Section 422 of the Code; (ii) non-qualified stock options ("NQSOs" or
individually a "NQSO") intended to be non-statutory options not qualifying under
Section 422 or any other section of the Code; (iii) stock appreciation rights
("SARs" or individually a "SAR") intended to provide a participant with the
right to receive the increase in the fair market value of a specified number of
Shares, as defined in Section 5; (iv) shares of restricted stock ("Restricted
Stock") intended to give a participant the right to receive a specified number
of Shares without payment upon the occurrence of certain events; and (v)
Performance Shares or Performance Units intended to give a participant the right
to receive a specified number of Shares or unit equivalencies of Shares without
payment when the Corporation attains certain pre-established Performance Goals.
The Board may permit or require a participant to defer such participant's
receipt of the payment of cash or the delivery of Shares that would otherwise be
due such participant resulting from awards granted under the Plan. If any such
deferral is required or permitted, the Board shall, in its sole discretion,
establish rules and procedures for such deferrals.
5. Shares Reserved Under the Plan.
Subject to the provisions of Section12, the number of shares of Common
Stock of Carpenter Technology Corporation ("Stock") available for awards under
this Plan, which may consist of authorized but unissued shares or issued shares
reacquired by Carpenter Technology Corporation or a combination thereof, is
1,800,000 (such shares being referred to herein as "Shares") plus previously
ungranted shares and lapsed grants that remain from previous shareholder
authorizations; provided, however, that in no event shall the cumulative number
--------
of Shares to be issued as ISOs granted under Section 6 exceed 500,000, nor shall
the cumulative number of Shares to be issued as Restricted Stock and Performance
Units/Shares granted under Sections 7 and 9 respectively exceed 750,000. If any
award granted under this Plan is canceled, terminates, expires, or lapses for
any reason (with the exception of the termination of a Tandem SAR upon exercise
of the related Option, or the termination of a
- 2 -
related Option upon exercise of the corresponding Tandem SAR), any Shares
subject to such award shall be available for award under the Plan.
6. Options.
ISOs and NQSOs (collectively "Options") may be granted by the Board
from time to time, subject to the following provisions:
(a) Except as otherwise determined by the Board, each Option granted
under this Plan shall become exercisable by a participant only after completion
of one year of employment immediately following the date the Option is granted
(the "Date of Grant"). Exercise of any or all prior existing Options shall not
be required. Each agreement entered into between the participant and the
Corporation shall specify (i) when an Option may be exercised, (ii) the terms
and conditions applicable thereto, and (iii) whether the Option is an ISO or an
NQSO. In no event, however, shall an Option granted under this Plan expire more
than ten years from the Date of Grant.
(b) Each Option shall specify the amount per share a participant must
pay to the Corporation to exercise the Option (the "option price"). The option
price of an Option shall be determined by the Board but shall not be less than
the fair market value of a share of Stock on the Date of Grant. For purposes of
this Plan, the term "fair market value" shall mean the closing price of the
Stock on the New York Stock Exchange on the date in question, or, in the absence
of a closing price on such date, the closing price on the last trading day
preceding the Date of Grant, as reflected on the consolidated tape of New York
Stock Exchange-Composite Transactions.
(c) Except as permitted in the immediately following sentence, no
Option granted under this Plan may be transferable by the participant except by
will or the laws of descent and distribution and no Option may be exercised
during the lifetime of a participant except by that participant. Notwithstanding
the aforementioned, a NQSO Optionee may transfer a NQSO to his or her spouse,
parents, siblings, children or grandchildren (in each case, natural or adopted),
any trust for his or her benefit or the benefit of his or her spouse, parents,
siblings, children or grandchildren (in each case, natural or adopted)
(collectively, a "Permitted Transferee"), or any corporation or partnership in
which the direct and beneficial owner of all of the equity interest in such
corporation or partnership is such NQSO Optionee or any Permitted Transferee (or
any trust for the benefit of such persons).
Unless otherwise provided in the participant's agreement, the following exercise
periods will apply in the case of a separation from employment. In the event of
the death of the participant more than one year after the Date of Grant and not
more than three months after the termination of the participant's employment by
the Corporation, an Option may be transferred to the participant's personal
representative, heirs or legatees ("transferee") and may be exercised by the
transferee before the earlier to occur of the expiration of (i) one year from
the date of the death of the participant or (ii) the term of the Option as
specified in the agreement with the participant. In the event of a
participant's separation from service with the Corporation as a result of
Retirement [as defined in Section 9(f) of this Plan] or due to "disability"
[within the
- 3 -
meaning of Section 422(c)(6) of the Code], any outstanding Option will continue
to be exercisable during the original term of the grant. If the participant
dies within such period (following Retirement or "disability"), a transferee may
exercise any unexpired Option before the expiration of the earlier to occur of
(i) or (ii) of this Section 6(c). In the event of a participant's separation
from service with the Corporation other than by death, disability or Retirement,
an Option must be exercised prior to its expiration during the three month
period beginning on the last day of employment.
The agreement under which an Option is granted shall set forth the extent to
which the participant shall have the right to exercise the Option following
termination of the participant's employment. Such provisions shall be determined
at the sole discretion of the Board and need not be uniform among all Options
issued pursuant to this Section 6, and may reflect distinctions based on the
reasons for termination of employment. In any case where the terms governing an
Option that is an ISO grant a longer exercise period than that permitted under
Section 422 of the Code, the Option will continue to be exercisable during the
remainder of the period as a NQSO.
(d) Each Option shall be exercisable for the full amount or any part
thereof, including a partial exercise from time to time; provided, however, that
--------
in no event shall ISOs granted to a participant be first exercisable in any one
calendar year with respect to Shares having an aggregate fair market value,
determined as of the Date of Grant, of more than $100,000. The option price for
each exercised Option shall be paid in full at the time of such exercise. The
option price may be paid in cash or shares of Stock, the value of which shall be
the fair market value on the date of the exercise of the Option, as determined
in Section 6(b) of this Plan; provided, however, that any such shares must have
--------
been held by a participant for a period of at least six months. An Option may
also be exercised by delivery of the Option to a registered broker/dealer with
instructions to exercise the Option and sell a sufficient number of the shares
of Stock acquired on exercise to pay the option price and, if not previously
paid, any required tax withholdings. In any event, the participant may elect to
deliver shares of Stock to the Company to allow any minimum tax withholding
requirements to be paid on behalf of the participant.
(e) The Committee may grant Options pursuant to the achievement of
Performance Goals, as described in Section 11 of this Plan, and it may impose
restrictions upon the vesting and exercise of Options based on the attainment of
Performance Goals.
7. Restricted Stock.
Restricted Stock may be granted by the Board from time to time,
subject to the following provisions:
(a) The Board shall determine the number of shares of Restricted
Stock to be granted to a participant and direct the transfer agent for the Stock
that a certificate or certificates representing such number of shares be issued
and registered in the participant's name. The certificate(s) representing such
shares shall be legended as to sale, transfer, assignment, pledge or other
encumbrance during the period the Restricted Stock is subject to
- 4 -
forfeiture (such period being referred to herein as the "restriction period")
and deposited, together with a stock power with respect to the transfer thereof
executed by the participant and endorsed in blank, with the Treasurer of
Carpenter Technology Corporation, to be held in escrow during the restriction
period.
(b) At the Board's discretion, during the restriction period the
Board may give participants the right to receive cash payments in amounts
equivalent to the dividends from time to time declared and paid in respect of
the shares of Restricted Stock. All shares of Restricted Stock will include
voting rights during the restriction period.
(c) The Restricted Stock agreement shall specify the duration of the
restriction period and the performance, employment or other conditions under
which the Restricted Stock may be forfeited by the participant. At the end of
the restriction period, the restrictions imposed hereunder shall lapse with
respect to the number of shares of Restricted Stock as determined by the Board,
and the legend shall be removed and the certificates for such number of shares
delivered from escrow to the participant. The Board may, in its sole
discretion, modify or accelerate the vesting of shares of Restricted Stock. The
participant's required tax withholding on newly vested shares of Restricted
Stock may be paid in cash or the participant may elect to have the Company
withhold a sufficient number of the vesting shares of Stock to pay any required
tax withholdings on behalf of the participant.
(d) The Restricted Stock agreement shall set forth the extent to
which the participant shall have the right to vest in shares of Restricted Stock
following termination of the participant's employment. Such provisions shall be
determined at the sole discretion of the Board and need not be uniform among all
Restricted Stock issued pursuant to this Section 7, and may reflect distinctions
based on the reasons for termination of employment.
(e) The Committee may grant Restricted Stock pursuant to the
achievement of Performance Goals, as described in Section 11 of this Plan, and
it may impose restrictions upon the vesting of Restricted Stock based on the
attainment of Performance Goals.
8. Limited Authority to Grant Certain Awards.
The Human Resources Committee may delegate, to Carpenter Technology
Corporation's Chief Executive Officer ("C.E.O."), authority to grant awards
covering a pre-determined number of shares. Such delegation is limited to the
authority to grant NQSOs and Restricted Stock to participants who are not
subject to the requirements of Rule 16b-3 of the Exchange Act. The option price
of any NQSO shall not be less than the fair market value of a share of Stock on
the date such grant is awarded by the C.E.O. The C.E.O. shall report at least
annually on the disposition of these shares to the Committee in a form and
manner determined by the Committee.
- 5 -
9. Stock Appreciation Rights.
SARs may be granted by the Board from time to time, subject to the
following provisions:
(a) The Board may grant a SAR either in connection with the grant of
an Option ("Tandem SAR") or independent of the grant of an Option ("Freestanding
SAR"). Each Tandem SAR shall be exercisable only with the exercise and
surrender of the related Option or portion thereof and shall entitle the
participant to receive the excess of the fair market value of the shares of
Stock on the date the Tandem SAR is exercised over the option price under the
related Option. The excess is hereafter called the "spread" for both Tandem
SARs and Freestanding SARs. If the participant elects instead to exercise the
related Option, the Tandem SAR shall be cancelled automatically.
(b) A Tandem SAR shall be exercisable only to the extent and at the
same time that the related Option is exercisable.
(c) A Freestanding SAR shall be exercisable pursuant to the terms and
conditions that are specified in the agreement in which the Freestanding SAR is
granted.
(d) Upon the exercise of a SAR, the Corporation shall pay to the
participant an amount equivalent to the spread (less any applicable withholding
taxes) in cash, or in Shares, or a combination of both, as the Board shall
determine. Such determination may be made at the time of the granting of the
SAR. No fractional shares of Stock shall be issued and the Board shall
determine whether cash shall be given in lieu of such fractional share or
whether such fractional share shall be eliminated.
(e) A Tandem SAR shall terminate and may no longer be exercised upon
the termination or expiration of the related Option.
(f) Income attributable to the exercise of a SAR shall not be
included in the calculation of pension or other benefits payable at any time by
reason of the participant's employment by the Corporation.
(g) No SAR shall be transferable by the participant except as
provided in Section 6(c) of the Plan.
(h) The agreement under which a SAR is granted shall set forth the
extent to which the participant shall have the right to exercise the SAR
following termination of the participant's employment. Such provisions shall be
determined at the sole discretion of the Board and need not be uniform among all
SARs issued pursuant to this Section 9, and may reflect distinctions based on
the reasons for termination of employment.
(i) The Committee may grant SARs pursuant to the achievement of
Performance Goals, as described in Section 11 of this Plan, and it may impose
restrictions upon the vesting and exercise of SARs based on the attainment of
Performance Goals.
- 6 -
10. Performance Units and Performance Shares.
Performance Units or Performance Shares may be granted to participants in
such amounts or combinations and upon such terms, and at any time and from time
to time, as shall be determined by the Committee. Each Performance Unit shall
be that fraction of a Performance Share that is determined by the Committee at
the time of grant and shall have an initial value equal to that same fraction of
the value of a Share on the date of grant. Each Performance Share shall have an
initial value equal to the fair market value of a Share on the Date of Grant.
The Committee shall set one or more Performance Goals as described in Section 11
of this Plan. The extent to which those Performance Goals are met will
determine the number and value of Performance Units or Performance Shares that
will be paid out to the participant.
(a) Amount of Performance Units or Performance Shares. A participant
-------------------------------------------------
may not receive grants totaling more than 500,000 Performance Shares during any
calendar year.
(b) Earning of Performance Units or Performance Shares. After the
--------------------------------------------------
applicable Performance Period, as defined in Section 11, has ended, the holder
of Performance Units or Performance Shares shall be entitled to receive payout
on the number and value of Performance Units or Performance Shares earned by the
participant over the Performance Period, to be determined as a function of the
extent to which the corresponding Performance Goals have been achieved.
(c) Form and Timing of Payment of Performance Units or Performance
--------------------------------------------------------------
Shares. Payment of earned Performance Units or Performance Shares shall be made
------
as soon as practicable following the close of the applicable Performance Period
in a manner designated by the Committee, in its sole discretion. The Committee,
in its sole discretion, may pay earned Performance Units or Performance Shares
in the form of cash or in Shares (or in a combination thereof) which have an
aggregate fair market value equal to the value of the earned Performance Units
or Performance Shares at the close of the applicable Performance Period. Such
Shares may be granted subject to any restrictions deemed appropriate by the
Committee. The participant's required tax withholding on newly awarded
Performance Shares may be paid in cash or the participant may elect to have the
Company withhold a sufficient number of the awarded Performance Shares to pay
any required tax withholdings on behalf of the participant.
(d) Dividend and Voting Rights. At the discretion of the Committee,
---------------------------
participants may be entitled to receive any dividends declared with respect to
Shares which have been earned in connection with grants of Performance Units or
Performance Shares, but not yet distributed to participants. Participants may
exercise voting rights with respect to such Shares. Participants will not have
any voting rights with respect to Performance Units.
(e) Dividend Equivalents. The Committee may grant dividend
--------------------
equivalents in connection with Performance Units or Performance Shares granted
under this Plan. Such dividend equivalents may be payable in cash or in Shares,
upon such terms as the Committee, in its sole discretion, deems appropriate.
- 7 -
(f) Termination of Employment due to Death, Disability or Retirement.
----------------------------------------------------------------
Unless determined otherwise by the Committee and set forth in the participant's
award agreement, in the event the employment of a participant is terminated by
reason of death, Disability or Retirement during a Performance Period, the
participant shall receive a payout of the Performance Units or Performance
Shares which is prorated, as specified by the Committee in its discretion.
Payment of earned Performance Units or Performance Shares shall be made at a
time specified by the Committee in its sole discretion and set forth in the
participant's award agreement. Notwithstanding the foregoing, with respect to
participants who retire during a Performance Period, payments shall be made at
the same time as payments are made to participants who did not terminate
employment during the applicable Performance Period. For this purpose,
"Disability" shall be defined in a manner consistent with the definition of that
term in the Corporation's long-term disability plan under which the participant
participates, or at the discretion of the Committee using standards comparable
to those under the Corporation's long-term disability plans, if the participant
does not participate in any such plan. In addition, for this purpose,
"Retirement" shall be defined as the termination of employment with the
Corporation after the participant has attained age 55 while being credited with
at least ten Years of Service, or has attained age 60 while being credited with
at least five Years of Service, or at least thirty Years of Service regardless
of age. For purposes of this Plan, a participant shall be credited with one
Year of Service for each 12-month period following the participant's
commencement of service with the Corporation that the participant has worked at
least one hour for the Corporation.
(g) Termination of Employment for Other Reasons. If a participant's
-------------------------------------------
employment terminates for any reason other than those reasons set forth in
Section 10(f), all Performance Units or Performance Shares shall be forfeited by
the participant to Carpenter Technology Corporation unless determined otherwise
by the Committee, as set forth in the participant's award agreement.
(h) Nontransferability. Except as otherwise provided in a
------------------
participant's award agreement, Performance Units or Performance Shares may not
be sold, transferred, pledged, assigned or otherwise alienated, other than by
will or by the laws of descent and distribution. Further, except as otherwise
provided in a participant's award agreement, a participant's rights under the
Plan shall be exercisable during the participant's lifetime only by the
participant or the participant's legal representative.
(i) Payment for Performance Units and Shares upon a Change in
---------------------------------------------------------
Control. Within 30 days following a Change in Control Event, as defined in
-------
Section 13(b) of the Plan, there shall be paid in cash to participants holding
Performance Units and Performance Shares a pro rata amount based upon the
assumed achievement of all relevant Performance Goals at target levels, and upon
the length of time within the Performance Period that has elapsed before the
Change in Control Event; provided, however, that if the Committee determines
--------
that actual performance to the date of the Change in Control Event exceeds
targeted levels, the prorated payouts shall be made using the actual performance
data; and provided further, that there shall not be an accelerated payout with
----------------
respect to Performance Shares or Performance Units that qualify
as "derivative securities" under Section 16 of the Exchange Act that were
granted less than six months before the Change in Control Event.
- 8 -
11. Performance Goals.
For all purposes under this Plan, "Performance Goals" means goals that
must be met by the end of a period specified by the Committee based upon one or
more of the following criteria: (i) price of the Stock, (ii) market share of the
Corporation, (iii) sales by the Corporation, (iv) earnings per share of the
Stock, (v) return on shareholder equity of the Corporation, or (vi) costs of the
Corporation. The time period during which the Performance Goals must be met
shall be called a "Performance Period." The Performance Goals shall be
interpreted in a manner that complies with the exceptions for performance-based
compensation set forth in Code [_] 162(m) and Treas. Reg. [_] 1.162-27, as in
effect during any relevant period, and must be set (a) before 25% of the
Performance Period has elapsed and (b) at a time when it is substantially
uncertain that the Performance Goals will be met.
12. Adjustment Provisions.
If Carpenter Technology Corporation shall at any time change the
number of issued shares of Stock without new consideration to Carpenter
Technology Corporation (such as by stock dividends, stock splits, stock
combinations, stock exchanges or recapitalization), the total number of Shares
reserved for issuance under this Plan, limits on types of awards that may be
issued, the number of Shares covered by, the option price for, and any other
relevant terms of, each outstanding award shall be adjusted so that the
aggregate consideration payable to Carpenter Technology Corporation and the
value of each award under this Plan shall not be changed. In the event of a
merger, reorganization, acquisition, consolidation, divestiture, sale or
exchange of assets of Carpenter Technology Corporation, or similar event, the
Board shall make such adjustments with respect to awards under this Plan or take
such other action as it determines to be appropriate and such determination
shall be conclusive.
13. Change in Control.
(a) Notwithstanding any provision in this Plan to the contrary, upon
the occurrence of a Change in Control Event, (i) each Option then outstanding
shall become immediately exercisable to the full extent of the Shares subject
thereto, (ii) any remaining restrictions on shares of Restricted Stock shall
immediately lapse, (iii) each SAR then outstanding shall be fully exercisable
immediately following the occurrence of the Change in Control Event using the
Change in Control Price [as defined in subsection (c)] to determine the spread,
and (iv) any Performance Units or Performance Shares shall become fully vested
and payment shall be made pursuant to the terms of Section 10(i). In addition,
notwithstanding anything in this Plan to the contrary, if the employment of an
optionee or holder of a SAR is terminated by the Corporation without "cause" [as
defined in Section 15(a)], or, in the case of an employee who is covered by an
employment arrangement or agreement that enables such employee to terminate for
Good Reason (as defined in such arrangement or agreement), for Good Reason, in
either case during the two-year period commencing on the date of the occurrence
of a Change in Control Event, then such employee shall be able to exercise his
or her Options and SARs until the earlier of (x) the second anniversary of such
employment termination or (y) the expiration of their original term.
- 9 -
(b) For purposes of this Plan, a "Change in Control Event" means:
(1) The acquisition by any individual, entity or group [within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act] (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (A) the then-outstanding shares of common
stock of Carpenter Technology Corporation (the "Outstanding Company Common
Stock") or (B) the combined voting power of the then-outstanding voting
securities of Carpenter Technology Corporation entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities"); provided,
however, that, for purposes of this Section 13(b), the following acquisitions
shall not constitute a Change in Control Event: (i) any acquisition directly
from Carpenter Technology Corporation, (ii) any acquisition by Carpenter
Technology Corporation, (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Carpenter Technology Corporation
or any affiliated company or (iv) any acquisition by any corporation pursuant to
a transaction that complies with Sections 13(b)(3)(A), 13(b)(3)(B) and
13(b)(3)(C);
(2) individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
Carpenter Technology Corporation's stockholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board;
(3) consummation of a reorganization, merger, consolidation or
sale or other disposition of all or substantially all of the assets of Carpenter
Technology Corporation or the acquisition of the assets or stock of another
entity (a "Business Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and entities that
were the beneficial owners of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of the then-
outstanding shares of common stock and the combined voting power of the then-
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation that, as a result of
such transaction, owns Carpenter Technology Corporation or all or substantially
all of Carpenter Technology Corporation's assets either directly or through one
or more subsidiaries) in substantially the same proportions as their ownership
immediately prior to such Business Combination of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of Carpenter Technology Corporation
or such corporation resulting from such Business Combination)
- 10 -
beneficially owns, directly or indirectly, 20% or more of, respectively, the
then-outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then-outstanding voting
securities of such corporation, except to the extent that such ownership existed
prior to the Business Combination, and (C) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement or of the action of the Board providing for such Business
Combination; or
(4) approval by the stockholders of Carpenter Technology
Corporation of a complete liquidation or dissolution of Carpenter Technology
Corporation.
(c) For purposes of SARs granted under this Plan, "Change in Control
Price" shall mean the higher of (i) the highest price paid per share of Stock in
any transaction constituting a Change in Control Event, or (ii) the highest fair
market value of the Stock at any time during the sixty-day period preceding the
occurrence of the Change in Control Event.
14. Amendment, Modification and Termination of the Plan.
The Board at any time may terminate, and at any time and from time to
time and in any respect, may amend or modify, the Plan; provided, however, that
--------
no such action by the Board, without approval of the stockholders, may: (i)
increase the Shares available for award pursuant to the Plan or the maximum
number of Shares for which Options may be granted under the Plan to any one
individual, except as contemplated in Section 12, (ii) permit Options to be
granted at less than fair market value, (iii) permit any person who is not both
a "non-employee director" and an "outside director" from serving as a member of
the Committee contemplated in Section 2, (iv) change the provisions of this
Section 14, or (v) effect other changes for which stockholder approval would be
required under Rule 16b-3 of the Exchange Act or any successor rule promulgated
by the SEC. No amendment or modification of the Plan shall be made that would
adversely affect any award previously granted under the Plan without the prior
written consent of such holder, except such an amendment necessary to comply
with applicable law, stock exchange rules or accounting rules. The ability to
award ISOs under the Plan shall automatically terminate ten years after the
earlier of (a) the date the Plan is adopted, or (b) the date the Plan is
approved by stockholders. Termination of the Plan pursuant to this Section 14
shall not affect awards outstanding under the Plan at the time of termination.
15. General Provisions.
(a) Notwithstanding anything in the Plan to the contrary, in the
event a participant's employment with the Corporation is terminated for "cause,"
the Board may, in its sole discretion, cancel each unexercised or unvested award
granted to such participant effective upon the termination. For purposes of this
subsection, a termination for "cause" shall mean termination of a participant's
employment with the Corporation which results from either (i) the participant's
commitment of an Intolerable Offense (as defined in the Corporation's
- 11 -
Personnel Practices and Policies as in effect on the date of termination) or
(ii) the operation of the Corporation's Corrective Performance System (as set
forth in the Corporation's Personnel Practices and Policies as in effect on the
date of termination).
(b) Nothing contained in the Plan, or an award granted under the Plan,
shall confer upon a participant any right with respect to continuance of
employment with the Corporation, nor interfere in any way with the right of the
Corporation to terminate such employment at any time.
(c) For purposes of this Plan, transfer of employment between any
members of the Corporation shall not be deemed termination of employment.
(d) Participants shall be responsible to make appropriate provisions
for all taxes in connection with any award, the exercise thereof and the
transfer of Shares pursuant to this Plan. However, in the absence of an
alternative provision the Corporation shall withhold the number of Shares whose
aggregate fair market value on the date of such withholding equals the amount to
be withheld in satisfaction of the Corporation's obligation under all applicable
withholding taxes. A participant may acquire such Shares by paying to the
Corporation an amount equal to the Corporation's withholding obligation.
Agreements evidencing such awards shall contain appropriate provisions to effect
withholding in this manner.
(e) Without amending the Plan, awards may be granted to employees who
are foreign nationals or employed outside the United States or both, on such
terms and conditions different from those specified in the Plan as may, in the
judgment of the Board, be necessary or desirable to further the purpose of the
Plan.
(f) To the extent that Federal laws (such as the Exchange Act or the
Code) do not otherwise control, the Plan and all determinations made and actions
taken pursuant hereto shall be governed by the law of the State of Delaware and
construed accordingly.
(g) The Committee shall have the authority to improve the terms of any
granted Option, Restricted Stock agreement, SAR agreement or established
Performance Goals, subject to the limitation that the price of an Option may not
be reduced to less than fair market value.
16. Effective Date of the Last Restated Plan Document.
An amendment and restatement of the Plan became effective upon approval by
the Board on June 27, 1996 and was ratified by the stockholders at the Annual
Meeting held on October 21, 1996. The Plan was further amended and restated by
the Board on August 17, 2000 to increase the number of shares available for
awards by 1,800,000 shares. This amendment was approved by the stockholders at
the Annual Meeting held on October 23, 2000.
- 12 -
EX-10.M
9
dex10m.txt
CARPENTER TECH CORP CHANGE OF CONTROL SEVERANCE
Exhibit 10 M
CARPENTER TECHNOLOGY CORPORATION CHANGE OF CONTROL
SEVERANCE PLAN
INTRODUCTION
------------
As is the case with many publicly held corporations, there exists the
possibility of a Change of Control of the Company. This possibility and the
uncertainty it creates may result in the loss or distraction of employees of the
Company and its Subsidiaries to the detriment of the Company and its
stockholders. The avoidance of such loss and distraction is essential to
protecting and enhancing the best interests of the Company and its stockholders.
When a Change of Control is perceived as imminent, or is occurring,
the Company should be able to receive and rely on disinterested service from
employees regarding the best interests of the Company and its stockholders
without concern that employees might be distracted or concerned by the personal
uncertainties and risks created by the perception of an imminent or occurring
Change of Control.
It is consistent with the employment practices and policies of the
Company and its Subsidiaries and in the best interests of the Company and its
stockholders to treat fairly its employees whose employment terminates in
connection with or following a Change of Control. Accordingly, it has been
determined that appropriate steps should be taken to assure the Company and its
Subsidiaries of the continued employment and attention and dedication to duty of
their employees and to seek to ensure the availability of their continued
service, notwithstanding the possibility, threat or occurrence of a Change of
Control.
Therefore, in order to fulfill the above purposes, the following plan
has been developed and is hereby adopted.
ARTICLE I
ESTABLISHMENT OF PLAN
---------------------
As of the Effective Date, the Company hereby establishes a separation
compensation plan known as the Carpenter Technology Corporation Change of
Control Severance Plan, as set forth in this document.
ARTICLE II
DEFINITIONS
-----------
As used herein the following words and phrases shall have the
following meanings unless the context clearly indicates otherwise:
(a) Affiliated Company. Any company controlled by, controlling or
------------------
under common control with the Company.
(b) Annual Salary. The Participant's regular annual base salary
-------------
immediately prior to his or her termination of employment, including
compensation converted to other benefits under a flexible pay arrangement
maintained by the Company or any Subsidiary or deferred pursuant to a written
plan or agreement with the Company or any Subsidiary, but excluding overtime
pay, allowances, premium pay, compensation paid or payable under any Company
bonus or incentive plan of the Company or any Subsidiary or any similar payment.
(c) Board. The Board of Directors of Carpenter Technology
-----
Corporation.
(d) Cause. With respect to any Participant: (i) the willful and
-----
continued failure of the Participant to perform substantially the Participant's
duties with the Company or any Subsidiary (other than any such failure resulting
from incapacity due to physical or mental illness), after a written demand for
substantial performance is delivered to the Participant by an executive officer
of the Company which specifically identifies the manner in which the executive
officer believes that the Participant has not substantially performed the
Participant's duties, or (ii) the willful engaging by the Participant in illegal
conduct or gross misconduct which is materially and demonstrably injurious to
the Company or any Subsidiary. For purposes of this definition, no act or
failure to act on the part of the Participant shall be considered "willful"
unless it is done, or omitted to be done, by the Participant in bad faith or
without reasonable belief that the Participant's action or omission was in the
best interests of the Company or any Subsidiary. Any act or failure to act
based upon authority given pursuant to a resolution duly adopted by the Board or
upon the instructions of the Chief Executive Officer or another executive
officer of the Company or any Subsidiary or based upon the advice of counsel for
the Company shall be conclusively presumed to be done, or omitted to be done, by
the Participant in good faith and in the best interests of the Company.
(e) Change of Control. The occurrence of any of the following events:
-----------------
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
------------
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (x) the then-outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (y) the combined voting power of the
--------------------------------
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
-------------------------------------
provided, however, that, for purposes of this subsection (i), the following
-------- -------
acquisitions shall not constitute a Change of Control: (A) any acquisition
directly from the Company, (B) any acquisition by the Company, (C) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Affiliated Company, or (D) any acquisition by
any corporation pursuant to a transaction that complies with clauses (A), (B),
and (C) of paragraph (iii) of this definition of Change of Control;
(ii) Individuals who, as of the Effective Date, constitute the
Board
-2-
(the "Incumbent Board") cease for any reason to constitute at least a majority
---------------
of the Board; provided, however, that any individual becoming a director
-----------------
subsequent to the Effective Date whose election, or nomination for election by
the Company's stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board;
(iii) Consummation of a reorganization, merger, consolidation or sale
or other disposition of all or substantially all of the assets of the Company or
the acquisition of the assets or stock of another entity (a "Business
--------
Combination"), in each case, unless, following such Business Combination, (A)
-----------
all or substantially all of the individuals and entities that were the
beneficial owners of the Outstanding Company Common Stock and the Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the then-outstanding
shares of common stock and the combined voting power of the then-outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation that, as a result of such
transaction, owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then-outstanding voting securities of such corporation, except to the extent
that such ownership existed prior to the Business Combination, and (C) at least
a majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement or of the action of the Board
providing for such Business Combination; or
(iv) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
(f) Code. The Internal Revenue Code of 1986, as amended from time to
----
time.
(g) Committee. The Human Resources Committee of the Board.
---------
-3-
(h) Company. Carpenter Technology Corporation and any successor or
-------
assignee to the business or assets which becomes bound by this Plan by reason of
Article V.
(i) Date of Termination. The date on which a Participant ceases to be
-------------------
an Employee of an Employer.
(j) Disability. A condition such that the Participant has terminated
----------
employment with the Participant's Employer with a qualifying disability and has
immediately begun receiving benefits from a long-term disability plan of the
Company or any Employer.
(k) Effective Date. April 26, 2001.
--------------
(l) Employee. A full-time employee of an Employer.
--------
(m) Employer. The Company or any Subsidiary (or any parent
--------
corporation of the Company or any of such parent corporation's subsidiaries) by
which a Participant is employed.
(n) ERISA. The Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
(o) Good Reason. With respect to any Participant, without such
-----------
Participant's written consent: (i) any reduction in the Participant's Annual
Salary or Target Annual Bonus opportunity, as in effect during the 120-day
period immediately preceding the Change of Control (or as such amounts may be
increased from time to time), other than as a result of an isolated and
inadvertent action not taken in bad faith and which is remedied by the Employer
promptly after receipt of notice thereof given by the Participant; (ii) the
Employer requiring the Participant to relocate his or her principal place of
business to a location which is more than 35 miles from his or her previous
principal place of business; (iii) the assignment to the Participant of any
duties inconsistent in any material and adverse respect with the duties assigned
to the Participant during the 120-day period immediately prior to a Change of
Control, other than an isolated, insubstantial and inadvertent action that is
not taken in bad faith and is remedied by the Employer promptly after receipt of
notice thereof from the Participant; (iv) any material reduction in benefits of
the Participant, as in effect during the 120-day period immediately preceding
the Change of Control, other than as a result of an isolated and inadvertent
action not taken in bad faith and which is remedied by the Employer promptly
after receipt of notice thereof given by the Participant; provided, however,
-------- -------
that no material reduction shall be deemed to have occurred following a Change
of Control if the benefits provided to the Participant are (A) reasonably
equivalent to the benefits provided to similarly situated employees of the
company resulting from a Business Combination and its subsidiaries, and (B)
comparable to the
-4-
benefits provided to the Participant immediately prior to the Change of Control;
(v) any purported termination of the Plan otherwise than as expressly permitted
by the Plan; or (vi) any failure by the Employer to comply with and satisfy
Article VI of the Plan.
(p) Participant. Any individual whose employment is classified as job
-----------
class 19 or above and any other individual employed by the Company or any of its
Affiliated Companies in an equivalent position who is designated as a
Participant by the Chief Executive Officer of the Company; provided, however,
-------- -------
that no individual who is a party to a separately executed change of control or
similar agreement with the Company or any of its Affiliated Companies entered
into prior to a Change of Control shall be a Participant so long as such
agreement remains in force. Each individual who is a Participant immediately
prior to a Change of Control shall remain a Participant at least until the
second anniversary of the Change of Control. Notwithstanding the foregoing,
individuals employed primarily outside of the United States are not eligible to
be Participants.
(q) Plan. Carpenter Technology Corporation Change of Control
----
Severance Plan.
(r) Separation Benefits. The benefits described in Section 4.2 that
-------------------
are provided to qualifying Participants under the Plan.
(s) Subsidiary. Any corporation in which the Company, directly or
----------
indirectly, holds a majority of the voting power of such corporation's
outstanding shares of capital stock.
(t) Target Annual Bonus. The Participant's target bonus under the
-------------------
Company's annual incentive plans for the fiscal year in which such Participant's
Date of Termination occurs (or, if no target bonus has been set for such fiscal
year, the Participant's target bonus for the immediately preceding fiscal year).
ARTICLE III
ELIGIBILITY
-----------
A Participant shall cease to be a Participant in the Plan only as a
result of an amendment or termination of the Plan complying with Article VI of
the Plan, or when the Participant ceases to be an Employee of any Employer,
unless, at the time the Participant ceases to be an Employee, such Participant
is entitled to payment of a Separation Benefit as provided in the Plan. A
Participant entitled to payment of a Separation Benefit or any other amounts
under the Plan shall remain a Participant in the Plan until the full amount of
the Separation Benefit and any other amounts payable under the Plan have been
paid to the Participant.
-5-
ARTICLE IV
SEPARATION BENEFITS
-------------------
4.1 Terminations of Employment Which Give Rise to Separation Benefits
-----------------------------------------------------------------
Under This Plan. A Participant shall be entitled to Separation Benefits as set
---------------
forth in Section 4.2 below if, at any time during the two-year period
immediately following a Change of Control, the Participant's employment is
terminated (i) by the Employer for any reason other than Cause, death, or
Disability or (ii) by the Participant, within 120 days after the Participant has
knowledge of the occurrence of Good Reason.
4.2 Separation Benefits.
-------------------
(a) If a Participant's employment is terminated in circumstances
entitling such participant to Separation Benefits pursuant to Section 4.1, the
Company shall provide to such Participant, within ten days following the Date of
Termination, a lump sum cash payment as set forth in subsection (b) below, and
shall provide to the Participant the continued benefits and outplacement as set
forth in subsections (b), (c) and (d) below. For purposes of determining the
benefits set forth in subsection (b), if the termination of the Participant's
employment is for Good Reason based upon a reduction of the Participant's Annual
Salary, opportunity to earn Target Annual Bonuses, or other compensation or
employee benefits, such reduction shall be ignored.
(b) The cash lump sum referred to in Section 4.2(a) shall be the
aggregate of the amounts set forth in clauses (i), (ii) and (iii):
(i) the sum of (A) any portion of the Participant's Annual
Salary earned through the Date of Termination that was not previously paid
and (B) any compensation previously deferred by the Participant (together
with any accrued interest or earnings thereon) and any accrued vacation
pay, in each case to the extent not theretofore paid and in full
satisfaction of the rights of the Participant thereto;
(ii) an amount equal to one times the Participant's Annual
Salary;
and
(iii) an amount equal to one times the Participant's Target
Annual Bonus.
(c) The Company shall at its sole expense provide the Participant
with reasonable outplacement services, at a cost not to exceed $20,000, during
the one-year period following the Participant's Date of Termination. The
Participant shall not, however, be entitled to any payment in lieu of accepting
outplacement assistance services.
-6-
(d) The Participant (and eligible family members) shall be eligible
for participation in and shall receive all benefits under any medical and dental
plan, plan, program, policy, practice, contract or agreement of the Company and
its Affiliated Companies for which the Participant was eligible prior to the
Change of Control, on terms no less favorable than those applicable to the
Participant prior to the Participant's Date of Termination, for the six months
immediately following the Participant's Date of Termination; provided, however,
-------- -------
that during any period when the Participant becomes reemployed with another
employer and is eligible to receive any such benefits under another employer-
provided plan, the medical and dental benefits provided by the Company and the
Affiliated Companies described herein shall be secondary to those provided under
such other plan during such period of eligibility.
4.3 Other Benefits Payable. To the extent not theretofore paid or
----------------------
provided, the Company shall timely pay or provide (or cause to be paid or
provided) to a Participant entitled to the Separation Benefits, any amounts or
benefits required to be paid or provided to the Participant, or which the
Participant is eligible to receive, under the General Retirement Plan for
Employees of Carpenter Technology Corporation (the "GRP"), and the Separation
---
Benefits shall be reduced, dollar for dollar (but not below zero), by any
amounts received by the Participant pursuant to the GRP. Any other severance
pay or pay in lieu of notice required to be paid to such Participant under
applicable law or under any other severance pay plan or policy of the Company or
any Employer, including, without limitation, under the Severance Pay Plan for
Salaried Employees of Carpenter Technology Corporation (but excluding the GRP)
shall be reduced, dollar for dollar (but not below zero), by the Separation
Benefits. The Separation Benefits shall in no event affect a Participant's
eligibility for or entitlement to benefits under the GRP or any other qualified
or nonqualifed retirement or pension benefit or welfare or fringe benefit plan,
program, policy, practice, contract or agreement of the Company and its
Affiliated Companies.
4.4 Certain Reduction of Payments by the Company.
--------------------------------------------
(a) Reduction of Certain Payments. For purposes of this Section 4.4:
-----------------------------
(i) a "Payment" shall mean any payment or distribution in the nature of
-------
compensation to or for the benefit of the Participant, whether paid or payable
pursuant to this Plan or otherwise; (ii) "Plan Payment" shall mean a Payment
------------
paid or payable pursuant to this Plan (disregarding this Section 4.4); (iii)
"Present Value" shall mean such value determined in accordance with Sections
--------------
280G(b)(2)(A)(ii) and 280G(d)(4) of the Code; and (iv) "Reduced Amount" shall
--------------
mean an amount expressed in Present Value that maximizes the aggregate Present
Value of Plan Payments without causing any Payment to be nondeductible by the
Company or Employer because of Section 280G of the Code.
(b) Anything in this Plan to the contrary notwithstanding, in the
event PricewaterhouseCoopers LLP or such other accounting firm retained by the
Company
-7-
to perform its annual audit (the "Accounting Firm") shall determine that
---------------
receipt of all Payments would subject the Participant to tax under Section 4999
of the Code, the aggregate Plan Payments shall be reduced (but not below zero)
to meet the definition of Reduced Amount.
(c) If the Accounting Firm determines that aggregate Plan Payments
should be reduced to the Reduced Amount, the Company shall promptly give the
Participant notice to that effect and a copy of the detailed calculation
thereof, and the Participant may then elect, in his or her sole discretion,
which and how much of the Plan Payments shall be eliminated or reduced (as long
as after such election the Present Value of the aggregate Plan Payments equals
the Reduced Amount), and shall advise the Company in writing of his or her
election within 30 days of his or her receipt of notice. If no such election is
made by the Participant within such 30-day period, the Company may elect which
of such Plan Payments shall be eliminated or reduced (as long as after such
election the Present Value of the aggregate Plan Payments equals the Reduced
Amount) and shall notify the Participant promptly of such election. All
determinations made by the Accounting Firm under this Section shall be binding
upon the Company and the Participant and shall be made within 60 days of a
termination of employment of the Participant. As promptly as practicable
following such determination, the Company shall pay to or distribute for the
benefit of the Participant such Plan Payments as are then due to the Participant
under this Plan and shall promptly pay to or distribute for the benefit of the
Participant in the future such Plan Payments as become due to the Participant
under this Plan.
(d) As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that amounts will have been paid or distributed by the
Company to or for the benefit of the Participant pursuant to this Plan which
should not have been so paid or distributed ("Overpayment") or that additional
-----------
amounts which will have not been paid or distributed by the Company to or for
the benefit of the Participant pursuant to this Plan could have been so paid or
distributed ("Underpayment"), in each case, consistent with the calculation of
------------
the Reduced Amount hereunder. In the event that the Accounting Firm, based upon
the assertion of a deficiency by the Internal Revenue Service against either the
Company or the Participant which the Accounting Firm believes has a high
probability of success determines that an Overpayment has been made, any such
Overpayment paid or distributed by the Company to or for the benefit of the
Participant shall be treated for all purposes as a loan to the Participant which
the Participant shall repay to the Company together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code;
provided, however, that no such loan shall be deemed to have been made and no
-------- -------
amount shall be payable by the Participant to the Company if and to the extent
such deemed loan and payment would not either reduce the amount on which the
Participant is subject to tax under Section 1 and Section 4999 of the Code or
generate a refund of such taxes. In the event that the Accounting Firm, based
upon
-8-
controlling precedent or substantial authority, determines that an Underpayment
has occurred, any such Underpayment shall be promptly paid by the Company to or
for the benefit of the Participant together with interest at the applicable
federal rate provided for in Section 7872(f)(2) of the Code.
(e) All fees and expenses of the Accounting Firm in implementing the
provisions of this Section 4.4 shall be borne by the Company.
ARTICLE V
SUCCESSOR TO COMPANY
--------------------
5.1 This Plan shall bind any successor of the Company, its assets or
its businesses (whether direct or indirect, by purchase, merger, consolidation
or otherwise), in the same manner and to the same extent that the Company would
be obligated under this Plan if no succession had taken place.
5.2 In the case of any transaction in which a successor would not by
the foregoing provision or by operation of law be bound by this Plan, the
Company shall require such successor expressly and unconditionally to assume and
agree to perform the Company's obligations under this Plan, in the same manner
and to the same extent that the Company would be required to perform if no such
succession had taken place.
ARTICLE VI
DURATION, AMENDMENT AND TERMINATION
-----------------------------------
6.1 Duration of Plan. If a Change of Control has not occurred and
----------------
the Board does not have knowledge of an event that could reasonably be expected
to constitute a Change of Control, this Plan may be terminated by resolution
adopted by the Board; provided that the Participants are given written notice of
--------
such termination three years in advance of such termination. If a Change of
Control occurs while this Plan is in effect, this Plan shall continue in full
force and effect for at least two years following such Change of Control, and
shall not terminate or expire until after all Participants who become entitled
to any payments hereunder shall have received such payments in full.
6.2 Amendment or Termination. The Board may amend or terminate this
------------------------
Plan; provided, that this Plan may not be terminated or amended in a manner
--------
adverse to Participants prior to the third anniversary of the date on which
notice of such amendment or termination is provided to the Participants or
during the two-year period following a Change of Control.
6.3 Procedure for Extension, Amendment or Termination. Any
-------------------------------------------------
extension, amendment or termination of this Plan by the Board in accordance with
-9-
the foregoing shall be made by action of the Board in accordance with the
Company's charter and by-laws and applicable law.
ARTICLE VII
MISCELLANEOUS
-------------
7.1 Full Settlement. The Company's obligation to make the payments
---------------
provided for under this Plan and otherwise to perform its obligations hereunder
shall not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against a Participant or
others. In no event shall a Participant be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the
Participant under any of the provisions of this Plan and such amounts shall not
be reduced whether or not the Participant obtains other employment. The Company
agrees to pay, to the full extent permitted by law, all legal fees and expenses
which a Participant may reasonably incur as a result of any contest by the
Company, the Participant or others of the validity or enforceability of, or
liability under, any provision of this Plan or any guarantee of performance
thereof (including as a result of any contest by the Participant about the
amount of any payment pursuant to this Plan), provided, that such reimbursement
--------
shall be made only if the Participant prevails on substantially all of the
issues in connection with such dispute. Such reimbursement shall be made as
soon as practicable following the resolution of such contest or dispute (whether
or not appealed).
7.2 Employment Status. This Plan does not constitute a contract of
-----------------
employment or impose on the Participant or the Participant's Employer any
obligation for the Participant to remain an Employee or change the status of the
Participant's employment or the policies of the Company and its Subsidiaries
regarding termination of employment. For purposes of this Plan, employment with
any of the Company's Subsidiaries or any parent corporation of the Company or
any of its subsidiaries shall be treated as continued employment with the
Company.
7.3 Confidential Information. Each Participant shall hold in a
------------------------
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its Affiliated
Companies, and their respective businesses, which shall have been obtained by
the Participant during the Participant's employment by the Company or any of its
Affiliated Companies and which shall not be or become public knowledge (other
than by acts by the Participant or representatives of the Participant in
violation of this Plan). After termination of a Participant's employment with
the Company, the Participant shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted violation of the
provisions of this Section 7.3 constitute a basis for deferring or withholding
any amounts otherwise payable under this Plan.
-10-
7.4 Named Fiduciary; Administration. The Company is the named
-------------------------------
fiduciary of the Plan, and shall administer the Plan, acting through the Pension
Board of the GRP (the "Administrative Committee").
------------------------
7.5 Claim Procedure. If an Employee or former Employee makes a
---------------
written request alleging a right to receive benefits under this Plan or alleging
a right to receive an adjustment in benefits being paid under the Plan, the
Company shall treat it as a claim for benefit. All claims for benefit under the
Plan shall be sent to the Administrative Committee and must be received within
30 days after termination of employment. If the Company determines that any
individual who has claimed a right to receive benefits, or different benefits,
under the Plan is not entitled to receive all or any part of the benefits
claimed, it will inform the claimant in writing of its determination and the
reasons therefor in a manner calculated to be understood by the claimant. The
notice will be sent within 60 days of the claim. The notice shall make specific
reference to the reasons for denial and pertinent Plan provisions on which the
denial is based, and describe any additional material or information necessary
for the claim to succeed and a description of why it is necessary. Such notice
shall, in addition, inform the claimant what procedure the claimant should
follow to take advantage of the review procedures set forth below in the event
the claimant desires to contest the denial of the claim. The claimant may
within 90 days thereafter submit in writing to the Company a notice that the
claimant contests the denial of his or her claim by the Company and desires a
further review. The Administrative Committee shall within 60 days thereafter
review the claim and authorize the claimant to appear personally and review
pertinent documents and submit issues and comments relating to the claim to the
persons responsible for making the determination on behalf of the Company. The
Company will render its final decision with specific reasons therefor and in a
manner calculated to be understood by the claimant, and will transmit it to the
claimant within 60 days of the written request for review. If the Company fails
to respond to a claim filed in accordance with the foregoing within 60 days, the
Company shall be deemed to have denied the claim. This Section 7.5 shall not
serve to prohibit any Participant from bringing an action in a court of
competent jurisdiction to enforce his or her rights under the Plan after
satisfaction of the foregoing procedures.
7.6 Unfunded Plan Status. All payments pursuant to the Plan shall be
--------------------
made from the general funds of the Company and no special or separate fund shall
be established or other segregation of assets made to assure payment. No
Participant or other person shall have under any circumstances any interest in
any particular property or assets of the Company as a result of participating in
the Plan. Notwithstanding the foregoing, the Company may (but shall not be
obligated to) create one or more grantor trusts, the assets of which are subject
to the claims of the Company's creditors, to assist it in accumulating funds to
pay its obligations under the Plan.
7.7 Validity and Severability. The invalidity or unenforceability of
-------------------------
any provision of the Plan shall not affect the validity or enforceability of any
other provision
-11-
of the Plan, which shall remain in full force and effect, and any prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
7.8 Governing Law. The validity, interpretation, construction and
-------------
performance of the Plan shall in all respects be governed by the laws of the
State of Delaware without reference to principles of conflict of law, except to
the extent pre-empted by Federal law.
7.9 Top-Hat Plan. For purposes of ERISA, the Plan is intended to
------------
constitute a "top-hat" plan, as described in Sections 201(2), 301(a)(3), and
401(a)(1) of ERISA and the regulations promulgated thereunder.
-12-
EX-10.N
10
dex10n.txt
FORM OF AMENDED AND RESTATED SPECIAL SEVERANCE
EXHIBIT 10N
SPECIAL SEVERANCE AGREEMENT [3x]
AGREEMENT, dated as of the [____] day of [___________],
[_____________] (this "Agreement"), by and between Carpenter Technology
Corporation, a Delaware corporation (the "Company"), and [_________] (the
"Executive").
WHEREAS, the Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its stockholders
to assure that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined herein). The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the current Company and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
that ensure that the compensation and benefits expectations of the Executive
will be satisfied and that are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
Section 1. Certain Definitions. (a) "Effective Date" means the first
-------------------
date during the Change of Control Period (as defined herein) on which a Change
of Control occurs. Notwithstanding anything in this Agreement to the contrary,
if a Change of Control occurs and if the Executive's employment with the Company
is terminated prior to the date on which the Change of Control occurs, and if it
is reasonably demonstrated by the Executive that such termination of employment
(1) was at the request of a third party that has taken steps reasonably
calculated to effect a Change of Control or (2) otherwise arose in connection
with or anticipation of a Change of Control, then "Effective Date" means the
date immediately prior to the date of such termination of employment.
(b) "Change of Control Period" means the period commencing on the date
hereof and ending on the third anniversary of the date hereof; provided,
however, that, commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual anniversary
thereof, the "Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate three years
from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the
Company shall give notice to the Executive that the Change of Control Period
shall not be so extended.
(c) "Affiliated Company" means any company controlled by, controlling
or under common control with the Company.
(d) "Change of Control" means:
(1) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (A) the then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting Securities");
provided, however, that, for purposes of this Section 1(d), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Affiliated Company or (iv) any acquisition by
any corporation pursuant to a transaction that complies with Sections
1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C).
(2) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.
(3) Consummation of a reorganization, merger, consolidation or sale or
other disposition of all or substantially all of the assets of the Company or
the acquisition of the assets or stock of another entity (a "Business
Combination"), in each case, unless, following such Business Combination, (A)
all or substantially all of the individuals and entities that were the
beneficial owners of the Outstanding Company Common Stock and the Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the then-outstanding
shares of common stock and the combined voting power of the then-outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation that, as a result of such
transaction, owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then-outstanding voting
2
securities of such corporation, except to the extent that such ownership existed
prior to the Business Combination, and (C) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement or of the action of the Board providing for such Business
Combination; or
(4) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
Section 2. Employment Period. The Company hereby agrees to continue
-----------------
the Executive in its employ, subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the
third anniversary of the Effective Date (the "Employment Period"). The
Employment Period shall terminate upon the Executive's termination of employment
for any reason.
Section 3. Terms of Employment. (a) Position and Duties. (1)
------------------- -------------------
During the Employment Period, (A) the Executive's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at any time during
the 120-day period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the office where the Executive was
employed immediately preceding the Effective Date or at any other location less
than 35 miles from such office.
(2) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period, it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that, to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation. (1) Base Salary. During the Employment Period, the
------------ -----------
Executive shall receive an annual base salary (the "Annual Base Salary") at
an annual rate at least equal to 12 times the highest monthly base salary paid
or payable, including any base salary that has been earned but deferred, to the
Executive by the Company and the Affiliated Companies in respect of the 12-month
period immediately preceding the month in which the Effective Date occurs. The
Annual Base Salary shall
3
be paid at such intervals as the Company pays executive salaries generally.
During the Employment Period, the Annual Base Salary shall be reviewed at least
annually, beginning no more than 12 months after the last salary increase
awarded to the Executive prior to the Effective Date. Any increase in the Annual
Base Salary shall not serve to limit or reduce any other obligation to the
Executive under this Agreement. The Annual Base Salary shall not be reduced
after any such increase and the term "Annual Base Salary" shall refer to the
Annual Base Salary as so increased.
(2) Annual Bonus. In addition to the Annual Base Salary, the Executive
------------
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash at least equal to the Annual Target
Bonus, where the "Annual Target Bonus" is an amount equal to the Annual Base
Salary times the Executive Annual Compensation Plan Total Target Percentage (as
most recently approved by the Company's Board of Directors or Human Resources
Committee for the year in which the Effective Date occurs), or any comparable
bonus under any predecessor or successor plan. Each such Annual Bonus shall be
paid no later than the end of the third month of the fiscal year next following
the fiscal year for which the Annual Bonus is awarded, unless the Executive
shall elect to defer the receipt of such Annual Bonus.
(3) Incentive, Savings and Retirement Plans. During the Employment
---------------------------------------
Period, the Executive shall be entitled to participate in all cash incentive,
equity incentive, savings and retirement plans, practices, policies, and
programs applicable generally to other peer executives of the Company and the
Affiliated Companies, but in no event shall such plans, practices, policies and
programs provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to the extent, if
any, that such distinction is applicable), savings opportunities and retirement
benefit opportunities, in each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and the Affiliated Companies for
the Executive under such plans, practices, policies and programs as in effect at
any time during the 120-day period immediately preceding the Effective Date or,
if more favorable to the Executive, those provided generally at any time after
the Effective Date to other peer executives of the Company and the Affiliated
Companies.
(4) Welfare Benefit Plans. During the Employment Period, the
---------------------
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and the Affiliated
Companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and the Affiliated Companies, but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
that are less favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
4
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and the Affiliated
Companies.
(5) Expenses. During the Employment Period, the Executive shall be
--------
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the most favorable policies, practices and
procedures of the Company and the Affiliated Companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and the
Affiliated Companies.
(6) Fringe Benefits. During the Employment Period, the Executive
---------------
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and, if applicable, use of an
automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company and the
Affiliated Companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and the Affiliated Companies.
(7) Office and Support Staff. During the Employment Period, the
------------------------
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and the Affiliated Companies at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and the Affiliated Companies.
(8) Vacation. During the Employment Period, the Executive shall be
--------
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and the Affiliated Companies as in effect
for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of the
Company and the Affiliated Companies.
Section 4. Termination of Employment. (a) Death or Disability. The
------------------------- -------------------
Executive's employment shall terminate automatically if the Executive dies
during the Employment Period. If the Company determines in good faith that the
Disability (as defined herein) of the Executive has occurred during the
Employment Period (pursuant to the definition of "Disability"), it may give to
the Executive written notice in accordance with Section 11(b) of its intention
to terminate the Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Executive shall not
have returned to full-time performance of the Executive's duties. "Disability"
means the absence of the Executive from the Executive's duties with the Company
on a full-time
5
basis for 180 consecutive business days as a result of incapacity due to mental
or physical illness that is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative.
(b) Cause. The Company may terminate the Executive's employment during
-----
the Employment Period for Cause. "Cause" means:
(1) the willful and continued failure of the Executive to perform
substantially the Executive's duties (as contemplated by Section
3(a)(1)(A)) with the Company or any Affiliated Company (other than any such
failure resulting from incapacity due to physical or mental illness or
following the Executive's delivery of a Notice of Termination for Good
Reason), after a written demand for substantial performance is delivered to
the Executive by the Board or the Chief Executive Officer of the Company
that specifically identifies the manner in which the Board or the Chief
Executive Officer of the Company believes that the Executive has not
substantially performed the Executive's duties, or
(2) the willful engaging by the Executive in illegal conduct or gross
misconduct that is materially and demonstrably injurious to the Company.
For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board (excluding the Executive,
if the Executive is a member of the Board) at a meeting of the Board called and
held for such purpose (after reasonable notice is provided to the Executive and
the Executive is given an opportunity, together with counsel for the Executive,
to be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in Section 4(b)(1) or
4(b)(2), and specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the
-----------
Executive for Good Reason or by the Executive voluntarily without Good Reason.
"Good Reason" means:
(1) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 3(a), or any other diminution in such position,
authority, duties or responsibilities
6
(whether or not occurring solely as a result of the Company's ceasing to be
a publicly traded entity), excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and that is
remedied by the Company promptly after receipt of notice thereof given by
the Executive;
(2) any failure by the Company to comply with any of the provisions of
Section 3(b), other than an isolated, insubstantial and inadvertent failure
not occurring in bad faith and that is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(3) the Company's requiring the Executive (i) to be based at any
office or location other than as provided in Section 3(a)(1)(B), (ii) to be
based at a location other than the principal executive offices of the
Company if the Executive was employed at such location immediately
preceding the Effective Date, or (iii) to travel on Company business to a
substantially greater extent than required immediately prior to the
Effective Date;
(4) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(5) any failure by the Company to comply with and satisfy Section
10(c).
For purposes of this Section 4(c), any good faith determination of Good Reason
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive for any reason pursuant
to a Notice of Termination given during the 30-day period immediately following
the first anniversary of the Effective Date shall be deemed to be a termination
for Good Reason for all purposes of this Agreement. The Executive's mental or
physical incapacity following the occurrence of an event described above in
clauses (1) through (5) shall not affect the Executive's ability to terminate
employment for Good Reason.
(d) Notice of Termination. Any termination by the Company for Cause,
---------------------
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11(b).
"Notice of Termination" means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (3) if the Date of Termination (as defined herein)
is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 days after the
giving of such notice). The failure by the Executive or the Company to set
forth in the Notice of Termination any fact or circumstance that contributes to
a showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's respective rights hereunder.
7
(e) Date of Termination. "Date of Termination" means (1) if the
-------------------
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the Notice of Termination, (which date shall not be
more than 30 days after the giving of such notice), as the case may be, (2) if
the Executive's employment is terminated by the Company other than for Cause or
Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (3) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
Section 5. Obligations of the Company upon Termination. (a) Good
------------------------------------------- ----
Reason; Other Than for Cause, Death or Disability. If, during the Employment
-------------------------------------------------
Period, the Company terminates the Executive's employment other than for Cause
or Disability or the Executive terminates employment for Good Reason:
(1) The Company shall pay to the Executive, in a lump sum in cash
within 10 days after the Date of Termination, the aggregate of the
following amounts:
(A) the sum of (i) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid, (ii) the
Annual Target Bonus times a fraction, the numerator of which is the
number of days in the current fiscal year through the Date of
Termination and the denominator of which is 365, and (iii) any
compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in
each case, to the extent not theretofore paid (the sum of the amounts
described in subclauses (i), (ii) and (iii), the "Accrued
Obligations");
(B) the amount equal to three times the sum of (x) the
Executive's Annual Base Salary and (y) the Annual Target Bonus,
reduced by any lump sum severance amount payable to the Executive
pursuant to the General Retirement Plan for Employees of Carpenter
Technology Corporation or any successor thereto (the "GRP"); and
(C) an amount equal to the excess of (i) the actuarial equivalent
of the benefit under the Company's qualified defined benefit
retirement plan (the "Retirement Plan") (utilizing actuarial
assumptions no less favorable to the Executive than those in effect
under the Retirement Plan immediately prior to the Effective Date),
any excess plan, and any supplemental retirement plan in which the
Executive participates (collectively, the "SERP") that the Executive
would receive if the Executive's employment continued for three years
after the Date of Termination, assuming for this purpose that all
accrued benefits are fully vested and assuming that the Executive's
compensation in each of the three years is that required by Sections
3(b)(1) and 3(b)(2), over (ii) the actuarial equivalent of the
Ex-
8
ecutive's actual benefit (paid or payable), if any, under the
Retirement Plan and the SERP as of the Date of Termination.
(2) For three years after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to those that would
have been provided to them in accordance with the plans, programs,
practices and policies described in Section 3(b)(4) or 3(b)(6) (including,
without limitation, tax and financial planning services to the extent the
Executive was entitled to such services under Section 3(b)(6)) if the
Executive's employment had not been terminated or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and the Affiliated Companies and their
families, provided, however, that, if the Executive becomes reemployed with
another employer and is eligible to receive medical or other welfare
benefits under another employer provided plan, the medical and other
welfare benefits described herein shall be secondary to those provided
under such other plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree medical and life insurance benefits,
the Executive shall be considered to have remained employed until three
years after the Date of Termination and to have retired on the last day of
such period.
(3) To the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or that the Executive is eligible to
receive under any plan, program, policy or practice or contract or
agreement of the Company and the Affiliated Companies (such other amounts
and benefits, the "Other Benefits").
(4) The Company shall at its sole expense provide the Executive with
reasonable outplacement services, at a cost not to exceed $20,000, during
the one-year period following the Executive's Date of Termination. The
Executive shall not, however, be entitled to any payment in lieu of
accepting outplacement assistance services.
(b) Death. If the Executive's employment is terminated by reason of
-----
the Executive's death during the Employment Period, the Company shall provide
the Executive's estate or beneficiaries with the Accrued Obligations and the
timely payment or delivery of the Other Benefits, and shall have no other
severance obligations under this Agreement. The Accrued Obligations shall be
paid to the Executive's estate or beneficiary, as applicable, in a lump sum in
cash within 10 days of the Date of Termination. With respect to the provision
of the Other Benefits, the term "Other Benefits" as utilized in this Section
5(b) shall include, without limitation, and the Executive's estate and/or
beneficiaries shall be entitled to receive, benefits at least equal to the most
favorable benefits provided by the Company and the Affiliated Companies to the
estates and beneficiaries of peer executives of the Company and the Affiliated
Companies under such plans, programs, practices and policies relating to
9
death benefits, if any, as in effect with respect to other peer executives and
their beneficiaries at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of the Executive's death
with respect to other peer executives of the Company and the Affiliated
Companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by reason
----------
of the Executive's Disability during the Employment Period, the Company shall
provide the Executive with the Accrued Obligations and the timely payment or
delivery of the Other Benefits, and shall have no other severance obligations
under this Agreement. The Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 10 days of the Date of Termination. With respect to
the provision of the Other Benefits, the term "Other Benefits" as utilized in
this Section 6(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and the
Affiliated Companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and the Affiliated Companies and their families.
(d) Cause; Other Than for Good Reason. If the Executive's employment
---------------------------------
is terminated for Cause during the Employment Period, the Company shall provide
to the Executive (1) the Executive's Annual Base Salary through the Date of
Termination, (2) the amount of any compensation previously deferred by the
Executive, and (3) the Other Benefits, in each case, to the extent theretofore
unpaid, and shall have no other severance obligations under this Agreement. If
the Executive voluntarily terminates employment during the Employment Period,
excluding a termination for Good Reason, the Company shall provide to the
Executive the Accrued Obligations and the timely payment or delivery of the
Other Benefits, and shall have no other severance obligations under this
Agreement. In such case, all the Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 10 days of the Date of Termination.
Section 6. Non-exclusivity of Rights. Nothing in this Agreement shall
-------------------------
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or the Affiliated Companies
and for which the Executive may qualify, nor, subject to Section 11(f), shall
anything herein limit or otherwise affect such rights as the Executive may have
under any other contract or agreement with the Company or the Affiliated
Companies. Amounts that are vested benefits or that the Executive is otherwise
entitled to receive under any plan, policy, practice or program of or any
contract or agreement with the Company or the Affiliated Companies at or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy, practice or program or contract or agreement, except as explicitly
modified by this Agreement. Notwithstanding the foregoing, if the Executive
receives
10
payments and benefits pursuant to Section 5(a) of this Agreement, the Executive
shall not be entitled to other severance pay or benefits under any severance
plan, program or policy of the Company and the Affiliated Companies, unless
otherwise specifically provided therein by an explicit reference to this
Agreement, or provided under the GRP.
Section 7. Full Settlement. The Company's obligation to make the
---------------
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense, or other claim, right or action that the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, and such amounts
shall not be reduced whether or not the Executive obtains other employment
except as set forth in Section 5(a)(2). The Company agrees to pay as incurred
(within 10 days following the Company's receipt of an invoice from the
Executive), to the full extent permitted by law, all legal fees and expenses
that the Executive may reasonably incur as a result of any contest (regardless
of the outcome thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus, in
each case, interest on any delayed payment at the applicable federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
Section 8. Certain Additional Payments by the Company.
------------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any Payment
would be subject to the Excise Tax, then the Executive shall be entitled to
receive an additional payment (the "Gross-Up Payment") in an amount such that,
after payment by the Executive of all taxes (and any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments. The
Company's obligation to make Gross-Up Payments under this Section 8 shall not be
conditioned upon the Executive's termination of employment.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required, the amount of such Gross-Up Payment and the assumptions to
be utilized in arriving at such determination, shall be made by
PricewaterhouseCoopers LLP, or such other nationally recognized certified public
accounting firm as may be designated by the Executive (the "Accounting Firm").
The Accounting Firm shall provide detailed supporting calculations both to the
Company and the Executive within 15 business days of the receipt of notice from
the Executive that there has been a Payment or such earlier time as is requested
by the Company. In the event that the Accounting Firm is serving as accountant
or auditor for the individual, entity or group effecting the Change of Control,
the Executive may appoint another nationally recognized accounting firm to
11
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 8, shall be paid by the Company to the
Executive within 5 days of the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding upon the Company and
the Executive. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments that will not have been made by
the Company should have been made (the "Underpayment"), consistent with the
calculations required to be made hereunder. In the event the Company exhausts
its remedies pursuant to Section 8(c) and the Executive thereafter is required
to make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable, but no later than 30 business days after the Executive is
informed in writing of such claim. The Executive shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of the 30-
day period following the date on which the Executive gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that the Company desires to
contest such claim, the Executive shall:
(1) give the Company any information reasonably requested by the
Company relating to such claim,
(2) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(3) cooperate with the Company in good faith in order effectively to
contest such claim, and
(4) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest, and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties) imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing
12
provisions of this Section 8(c), the Company shall control all proceedings taken
in connection with such contest, and, at its sole discretion, may pursue or
forgo any and all administrative appeals, proceedings, hearings and conferences
with the applicable taxing authority in respect of such claim and may, at its
sole discretion, either direct the Executive to pay the tax claimed and sue for
a refund or contest the claim in any permissible manner, and the Executive
agrees to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that, if the Company
directs the Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Executive, on an interest-free basis,
and shall indemnify and hold the Executive harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or penalties) imposed with
respect to such advance or with respect to any imputed income in connection with
such advance; and provided, further, that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which the Gross-Up Payment
would be payable hereunder, and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 8(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 8(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
(e) Notwithstanding any other provision of this Section 8, the Company
may, in its sole discretion, withhold and pay over to the Internal Revenue
Service or any other applicable taxing authority, for the benefit of the
Executive, all or any portion of the Gross-Up Payment, and the Executive hereby
consents to such withholding.
(f) Definitions. The following terms shall have the following meanings
-----------
for purposes of this Section 8.
(i) "Excise Tax" shall mean the excise tax imposed by Section 4999 of
the Code, together with any interest or penalties imposed with respect to such
excise tax.
13
(ii) A "Payment" shall mean any payment or distribution in the nature
of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for
the benefit of the Executive, whether paid or payable pursuant to this Agreement
or otherwise.
Section 9. Confidential Information. The Executive shall hold in a
------------------------
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or the Affiliated
Companies, and their respective businesses, which information, knowledge or data
shall have been obtained by the Executive during the Executive's employment by
the Company or the Affiliated Companies and which information, knowledge or data
shall not be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those persons designated
by the Company. In no event shall an asserted violation of the provisions of
this Section 9 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
Section 10. Successors. (a) This Agreement is personal to the
----------
Executive, and, without the prior written consent of the Company, shall not be
assignable by the Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns. Except as provided in Section
10(c), without the prior written consent of the Executive this Agreement shall
not be assignable by the Company.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. "Company" means the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that assumes and agrees to
perform this Agreement by operation of law or otherwise.
Section 11. Miscellaneous. (a) This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware without reference
to principles of conflict of laws. The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified other than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
14
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
if to the Executive:
to the last address listed for the Executive in the Company's
books and records.
if to the Company:
Carpenter Technology Corporation
1047 North Park Road
Wyomissing, PA 19610-1339
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such United States federal, state or local or foreign taxes as shall
be required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a), prior to the Effective Date, the Executive's
employment may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall have no further
rights under this Agreement. From and after the Effective Date, except as
specifically provided herein, this Agreement shall supersede any other agreement
between the parties with respect to the subject matter hereof.
(g) IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from the Board, the Company
15
has caused these presents to be executed in its name on its behalf, all as of
the day and year first above written.
EXECUTIVE
________________________________
[Name of Executive]
CARPENTER TECHNOLOGY CORPORATION
By______________________________
Name:
Title:
16
EX-10.O
11
dex10o.txt
FORM OF AMENDED AND RESTATED SPECIAL SEVERANCE
EXHIBIT 10 O
SPECIAL SEVERANCE AGREEMENT [3x Enhanced]
AGREEMENT, dated as of the [____] day of [___________],
[_____________] (this "Agreement"), by and between Carpenter Technology
Corporation, a Delaware corporation (the "Company"), and [_________] (the
"Executive").
WHEREAS, the Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its stockholders
to assure that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined herein). The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the current Company and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
that ensure that the compensation and benefits expectations of the Executive
will be satisfied and that are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
Section 1. Certain Definitions. (a) "Effective Date" means the first
-------------------
date during the Change of Control Period (as defined herein) on which a Change
of Control occurs. Notwithstanding anything in this Agreement to the contrary,
if a Change of Control occurs and if the Executive's employment with the Company
is terminated prior to the date on which the Change of Control occurs, and if it
is reasonably demonstrated by the Executive that such termination of employment
(1) was at the request of a third party that has taken steps reasonably
calculated to effect a Change of Control or (2) otherwise arose in connection
with or anticipation of a Change of Control, then "Effective Date" means the
date immediately prior to the date of such termination of employment.
(b) "Change of Control Period" means the period commencing on the date
hereof and ending on the third anniversary of the date hereof; provided,
however, that, commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual anniversary
thereof, the "Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate three years
from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the
Company shall give notice to the Executive that the Change of Control Period
shall not be so extended.
(c) "Affiliated Company" means any company controlled by, controlling
or under common control with the Company.
(d) "Change of Control" means:
(1) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (A) the then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that, for purposes of this Section 1(d), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Affiliated Company or (iv) any acquisition by
any corporation pursuant to a transaction that complies with Sections
1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C).
(2) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.
(3) Consummation of a reorganization, merger, consolidation or sale
or other disposition of all or substantially all of the assets of the Company or
the acquisition of the assets or stock of another entity (a "Business
Combination"), in each case, unless, following such Business Combination, (A)
all or substantially all of the individuals and entities that were the
beneficial owners of the Outstanding Company Common Stock and the Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the then-outstanding
shares of common stock and the combined voting power of the then-outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation that, as a result of such
transaction, owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then-outstanding voting securities of such corporation, except to the extent
that such ownership existed prior to
2
the Business Combination, and (C) at least a majority of the members of the
board of directors of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the execution of the initial
agreement or of the action of the Board providing for such Business Combination;
or
(4) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
Section 2. Employment Period. The Company hereby agrees to continue
-----------------
the Executive in its employ, subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the
third anniversary of the Effective Date (the "Employment Period"). The
Employment Period shall terminate upon the Executive's termination of employment
for any reason.
Section 3. Terms of Employment. (a) Position and Duties. (1)
------------------- -------------------
During the Employment Period, (A) the Executive's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at any time during
the 120-day period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the office where the Executive was
employed immediately preceding the Effective Date or at any other location less
than 35 miles from such office.
(2) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period, it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that, to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation. (1) Base Salary. During the Employment Period,
----------- -----------
the Executive shall receive an annual base salary (the "Annual Base Salary") at
an annual rate at least equal to 12 times the highest monthly base salary paid
or payable, including any base salary that has been earned but deferred, to the
Executive by the Company and the Affiliated Companies in respect of the 12-month
period immediately preceding the month in which the Effective Date occurs. The
Annual Base Salary shall be paid at such intervals as the Company pays executive
salaries generally. During the
3
Employment Period, the Annual Base Salary shall be reviewed at least annually,
beginning no more than 12 months after the last salary increase awarded to the
Executive prior to the Effective Date. Any increase in the Annual Base Salary
shall not serve to limit or reduce any other obligation to the Executive under
this Agreement. The Annual Base Salary shall not be reduced after any such
increase and the term "Annual Base Salary" shall refer to the Annual Base Salary
as so increased.
(2) Annual Bonus. In addition to the Annual Base Salary, the
------------
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to the
Annual Target Bonus, where the "Annual Target Bonus" is an amount equal to the
Annual Base Salary times the Executive Annual Compensation Plan Total Target
Percentage (as most recently approved by the Company's Board of Directors or
Human Resources Committee for the year in which the Effective Date occurs), or
any comparable bonus under any predecessor or successor plan. Each such Annual
Bonus shall be paid no later than the end of the third month of the fiscal year
next following the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(3) Incentive, Savings and Retirement Plans. During the Employment
---------------------------------------
Period, the Executive shall be entitled to participate in all cash incentive,
equity incentive, savings and retirement plans, practices, policies, and
programs applicable generally to other peer executives of the Company and the
Affiliated Companies, but in no event shall such plans, practices, policies and
programs provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to the extent, if
any, that such distinction is applicable), savings opportunities and retirement
benefit opportunities, in each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and the Affiliated Companies for
the Executive under such plans, practices, policies and programs as in effect at
any time during the 120-day period immediately preceding the Effective Date or,
if more favorable to the Executive, those provided generally at any time after
the Effective Date to other peer executives of the Company and the Affiliated
Companies.
(4) Welfare Benefit Plans. During the Employment Period, the
---------------------
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and the Affiliated
Companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and the Affiliated Companies, but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
that are less favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and the Affiliated
Companies.
4
(5) Expenses. During the Employment Period, the Executive shall be
--------
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the most favorable policies, practices and
procedures of the Company and the Affiliated Companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and the
Affiliated Companies.
(6) Fringe Benefits. During the Employment Period, the Executive
---------------
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and, if applicable, use of an
automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company and the
Affiliated Companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and the Affiliated Companies.
(7) Office and Support Staff. During the Employment Period, the
------------------------
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and the Affiliated Companies at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and the Affiliated Companies.
(8) Vacation. During the Employment Period, the Executive shall be
--------
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and the Affiliated Companies as in effect
for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of the
Company and the Affiliated Companies.
Section 4. Termination of Employment. (a) Death or Disability. The
------------------------- -------------------
Executive's employment shall terminate automatically if the Executive dies
during the Employment Period. If the Company determines in good faith that the
Disability (as defined herein) of the Executive has occurred during the
Employment Period (pursuant to the definition of "Disability"), it may give to
the Executive written notice in accordance with Section 11(b) of its intention
to terminate the Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Executive shall not
have returned to full-time performance of the Executive's duties. "Disability"
means the absence of the Executive from the Executive's duties with the Company
on a full-time basis for 180 consecutive business days as a result of incapacity
due to mental or physical illness that is determined to be total and permanent
by a physician selected by
5
the Company or its insurers and acceptable to the Executive or the Executive's
legal representative.
(b) Cause. The Company may terminate the Executive's employment
-----
during the Employment Period for Cause. "Cause" means:
(1) the willful and continued failure of the Executive to perform
substantially the Executive's duties (as contemplated by Section
3(a)(1)(A)) with the Company or any Affiliated Company (other than any such
failure resulting from incapacity due to physical or mental illness or
following the Executive's delivery of a Notice of Termination for Good
Reason), after a written demand for substantial performance is delivered to
the Executive by the Board or the Chief Executive Officer of the Company
that specifically identifies the manner in which the Board or the Chief
Executive Officer of the Company believes that the Executive has not
substantially performed the Executive's duties, or
(2) the willful engaging by the Executive in illegal conduct or gross
misconduct that is materially and demonstrably injurious to the Company.
For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board (excluding the Executive,
if the Executive is a member of the Board) at a meeting of the Board called and
held for such purpose (after reasonable notice is provided to the Executive and
the Executive is given an opportunity, together with counsel for the Executive,
to be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in Section 4(b)(1) or
4(b)(2), and specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the
-----------
Executive for Good Reason or by the Executive voluntarily without Good Reason.
"Good Reason" means:
(1) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 3(a), or any other diminution in such position,
authority, duties or responsibilities (whether or not occurring solely as a
result of the Company's ceasing to be a publicly traded entity), excluding
for this purpose an isolated, insubstantial and
6
inadvertent action not taken in bad faith and that is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(2) any failure by the Company to comply with any of the provisions
of Section 3(b), other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and that is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(3) the Company's requiring the Executive (i) to be based at any
office or location other than as provided in Section 3(a)(1)(B), (ii) to be
based at a location other than the principal executive offices of the
Company if the Executive was employed at such location immediately
preceding the Effective Date, or (iii) to travel on Company business to a
substantially greater extent than required immediately prior to the
Effective Date;
(4) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(5) any failure by the Company to comply with and satisfy Section
10(c).
For purposes of this Section 4(c), any good faith determination of Good Reason
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive for any reason pursuant
to a Notice of Termination given during the 30-day period immediately following
the first anniversary of the Effective Date shall be deemed to be a termination
for Good Reason for all purposes of this Agreement. The Executive's mental or
physical incapacity following the occurrence of an event described above in
clauses (1) through (5) shall not affect the Executive's ability to terminate
employment for Good Reason.
(d) Notice of Termination. Any termination by the Company for Cause,
---------------------
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11(b).
"Notice of Termination" means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (3) if the Date of Termination (as defined herein)
is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 days after the
giving of such notice). The failure by the Executive or the Company to set
forth in the Notice of Termination any fact or circumstance that contributes to
a showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's respective rights hereunder.
7
(e) Date of Termination. "Date of Termination" means (1) if the
-------------------
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the Notice of Termination, (which date shall not be
more than 30 days after the giving of such notice), as the case may be, (2) if
the Executive's employment is terminated by the Company other than for Cause or
Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (3) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
Section 5. Obligations of the Company upon Termination. (a) Good
------------------------------------------- ----
Reason; Other Than for Cause, Death or Disability. If, during the Employment
-------------------------------------------------
Period, the Company terminates the Executive's employment other than for Cause
or Disability or the Executive terminates employment for Good Reason:
(1) The Company shall pay to the Executive, in a lump sum in cash
within 10 days after the Date of Termination, the aggregate of the
following amounts:
(A) the sum of (i) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid, (ii) the
Annual Target Bonus times a fraction, the numerator of which is the
number of days in the current fiscal year through the Date of
Termination and the denominator of which is 365, and (iii) any
compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in
each case, to the extent not theretofore paid (the sum of the amounts
described in subclauses (i), (ii) and (iii), the "Accrued
Obligations"); and
(B) the amount equal to three times the sum of (x) the
Executive's Annual Base Salary and (y) the Annual Target Bonus,
reduced by any lump sum severance amount payable to the Executive
pursuant to the General Retirement Plan for Employees of Carpenter
Technology Corporation or any successor thereto (the "GRP").
(2) For three years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to those that would
have been provided to them in accordance with the plans, programs,
practices and policies described in Section 3(b)(4) or 3(b)(6) (including,
without limitation, tax and financial planning services to the extent the
Executive was entitled to such services under Section 3(b)(6)) if the
Executive's employment had not been terminated or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and the Affiliated Companies and their
families, provided, however, that, if the Executive becomes reemployed
8
with another employer and is eligible to receive medical or other welfare
benefits under another employer provided plan, the medical and other
welfare benefits described herein shall be secondary to those provided
under such other plan during such applicable period of eligibility.
(3) To the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or that the Executive is eligible to
receive under any plan, program, policy or practice or contract or
agreement of the Company and the Affiliated Companies (such other amounts
and benefits, the "Other Benefits").
(4) The Company shall at its sole expense provide the Executive with
reasonable outplacement services, at a cost not to exceed $20,000, during
the one-year period following the Executive's Date of Termination. The
Executive shall not, however, be entitled to any payment in lieu of
accepting outplacement assistance services.
(5) Notwithstanding any contrary provision of this Agreement or any
other agreement between the Executive and the Company, or of the
Supplemental Retirement Plan for Executives of Carpenter Technology
Corporation (the "CSRP"), upon the Executive's Date of Termination, the
Executive will be considered to have attained the greater of age 62 or the
Executive's actual age, and to have completed the greater of five years of
service, or the Executive's actual number of years of service, and
therefore will be entitled to retire with an immediate pension under
Section 7(A) of the CSRP, and to:
(A) receive the normal supplemental executive retirement benefit
payable to the Executive under Section 5 of the CSRP, based on the sum
of the Executive's actual years of service, plus an additional 3
years, and the greater of the Executive's attained age or age 62,
reduced in accordance with Section 6(C) of the CSRP. Notwithstanding
the provisions of Section 6(C) of the CSRP, the reduction provided
therein shall be based on the benefits actually payable to the
Executive under the GRP, the Benefit Equalization Plan of Carpenter
Technology Corporation, the Earnings Adjustment Plan of Carpenter
Technology Corporation, the Officers' Supplemental Retirement Plan of
Carpenter Technology Corporation, and the Executive's primary Social
Security retirement benefit, beginning when the Executive actually
commences receipt of those benefits;
(B) receive a special supplemental benefit payable for life to
the Executive under the CSRP in an amount equal to the benefits that
would have been payable to the Executive under the Retirement Plan had
the Executive attained age 62 and completed the greater of ten years
of service or the Executive's actual number of completed years of
service, plus an additional 3 years of service. This benefit shall be
reduced, beginning when the Executive actually commences receipt of
the benefits to which the Executive is entitled under the Retirement
Plan, by the benefit actually
9
payable to the Executive under the Retirement Plan at that time. The
benefit payable under this Section 5(a)(4)(B) will be paid in the same
form, and the necessary adjustments computed using the same actuarial
methods and assumptions, as the Executive has elected with respect to
the Executive's benefit under the Retirement Plan, or if no such
election has been made, in the form of an annuity for the Executive's
life and, if the Executive is married as of the Executive's Date of
Termination, 50% of that amount payable to the Executive's surviving
spouse for the spouse's life; and
(C) participate in, and receive coverage under, any post-
retirement medical and life insurance benefits sponsored by the
Company for executive-level employees who retire from active service,
in accordance with the terms of any such plan as in effect during the
90 days preceding the Change of Control, or as such plans may be
subsequently improved. If the Company determines to amend any such
plan in any way that could reasonably be expected to be adverse to the
Executive, or to discontinue any such plan, the Company will pay the
Executive an amount in cash, payable annually in advance, sufficient
to enable the Executive, after the payment of any income or payroll
taxes imposed on such amount, to pay the premiums necessary to
maintain in effect, on an individual basis, insurance at least equal
to that provided to the Executive by the Company immediately before
any such amendment or termination. Any such insurance shall be
provided by the insurer(s) selected by the Executive, provided, that
if the Company is able to procure such coverage at a lower cost from
another insurer rated by Moody's rating service at least equal to the
rating of the insurer selected by the Executive, and requiring no more
proof of insurability than the insurer selected by the Executive, the
Executive shall accept coverage from such insurer.
(b) Death. If the Executive's employment is terminated by reason of
-----
the Executive's death during the Employment Period, the Company shall provide
the Executive's estate or beneficiaries with the Accrued Obligations and the
timely payment or delivery of the Other Benefits, and shall have no other
severance obligations under this Agreement. The Accrued Obligations shall be
paid to the Executive's estate or beneficiary, as applicable, in a lump sum in
cash within 10 days of the Date of Termination. With respect to the provision
of the Other Benefits, the term "Other Benefits" as utilized in this Section
5(b) shall include, without limitation, and the Executive's estate and/or
beneficiaries shall be entitled to receive, benefits at least equal to the most
favorable benefits provided by the Company and the Affiliated Companies to the
estates and beneficiaries of peer executives of the Company and the Affiliated
Companies under such plans, programs, practices and policies relating to death
benefits, if any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of the Executive's death
with respect to other peer executives of the Company and the Affiliated
Companies and their beneficiaries.
10
(c) Disability. If the Executive's employment is terminated by reason
----------
of the Executive's Disability during the Employment Period, the Company shall
provide the Executive with the Accrued Obligations and the timely payment or
delivery of the Other Benefits, and shall have no other severance obligations
under this Agreement. The Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 10 days of the Date of Termination. With respect to
the provision of the Other Benefits, the term "Other Benefits" as utilized in
this Section 6(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and the
Affiliated Companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and the Affiliated Companies and their families.
(d) Cause; Other Than for Good Reason. If the Executive's employment
---------------------------------
is terminated for Cause during the Employment Period, the Company shall provide
to the Executive (1) the Executive's Annual Base Salary through the Date of
Termination, (2) the amount of any compensation previously deferred by the
Executive, and (3) the Other Benefits, in each case, to the extent theretofore
unpaid, and shall have no other severance obligations under this Agreement. If
the Executive voluntarily terminates employment during the Employment Period,
excluding a termination for Good Reason, the Company shall provide to the
Executive the Accrued Obligations and the timely payment or delivery of the
Other Benefits, and shall have no other severance obligations under this
Agreement. In such case, all the Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 10 days of the Date of Termination.
Section 6. Non-exclusivity of Rights. Nothing in this Agreement
-------------------------
shall prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or the Affiliated
Companies and for which the Executive may qualify, nor, subject to Section
11(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any other contract or agreement with the Company or the
Affiliated Companies. Amounts that are vested benefits or that the Executive is
otherwise entitled to receive under any plan, policy, practice or program of or
any contract or agreement with the Company or the Affiliated Companies at or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy, practice or program or contract or agreement, except as explicitly
modified by this Agreement. Notwithstanding the foregoing, if the Executive
receives payments and benefits pursuant to Section 5(a) of this Agreement, the
Executive shall not be entitled to other severance pay or benefits under any
severance plan, program or policy of the Company and the Affiliated Companies,
unless otherwise specifically provided therein by an explicit reference to this
Agreement, or provided under the GRP.
SECTION 7. Full Settlement. The Company's obligation to make the
---------------
payments provided for in this Agreement and otherwise to perform its obligations
11
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense, or other claim, right or action that the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, and such amounts
shall not be reduced whether or not the Executive obtains other employment
except as set forth in Section 5(a)(2). The Company agrees to pay as incurred
(within 10 days following the Company's receipt of an invoice from the
Executive), to the full extent permitted by law, all legal fees and expenses
that the Executive may reasonably incur as a result of any contest (regardless
of the outcome thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus, in
each case, interest on any delayed payment at the applicable federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
Section 8. Certain Additional Payments by the Company.
------------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any Payment
would be subject to the Excise Tax, then the Executive shall be entitled to
receive an additional payment (the "Gross-Up Payment") in an amount such that,
after payment by the Executive of all taxes (and any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments. The
Company's obligation to make Gross-Up Payments under this Section 8 shall not be
conditioned upon the Executive's termination of employment.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required, the amount of such Gross-Up Payment and the assumptions to
be utilized in arriving at such determination, shall be made by
PricewaterhouseCoopers LLP, or such other nationally recognized certified public
accounting firm as may be designated by the Executive (the "Accounting Firm").
The Accounting Firm shall provide detailed supporting calculations both to the
Company and the Executive within 15 business days of the receipt of notice from
the Executive that there has been a Payment or such earlier time as is requested
by the Company. In the event that the Accounting Firm is serving as accountant
or auditor for the individual, entity or group effecting the Change of Control,
the Executive may appoint another nationally recognized accounting firm to make
the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 8, shall be paid by the Company to the
Executive within 5 days of the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding upon the Company and
the Executive. As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial
12
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments that will not have been made by the Company should have been made (the
"Underpayment"), consistent with the calculations required to be made hereunder.
In the event the Company exhausts its remedies pursuant to Section 8(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable, but no later than 30 business days after the Executive is
informed in writing of such claim. The Executive shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of the 30-
day period following the date on which the Executive gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that the Company desires to
contest such claim, the Executive shall:
(1) give the Company any information reasonably requested by the
Company relating to such claim,
(2) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(3) cooperate with the Company in good faith in order effectively to
contest such claim, and
(4) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest, and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties) imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section 8(c),
the Company shall control all proceedings taken in connection with such contest,
and, at its sole discretion, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the applicable taxing
authority in respect of such claim and may, at its sole discretion, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in
13
one or more appellate courts, as the Company shall determine; provided, however,
that, if the Company directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to the Executive,
on an interest-free basis, and shall indemnify and hold the Executive harmless,
on an after-tax basis, from any Excise Tax or income tax (including interest or
penalties) imposed with respect to such advance or with respect to any imputed
income in connection with such advance; and provided, further, that any
extension of the statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with respect to
which the Gross-Up Payment would be payable hereunder, and the Executive shall
be entitled to settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 8(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 8(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
(e) Notwithstanding any other provision of this Section 8, the
Company may, in its sole discretion, withhold and pay over to the Internal
Revenue Service or any other applicable taxing authority, for the benefit of the
Executive, all or any portion of the Gross-Up Payment, and the Executive hereby
consents to such withholding.
(f) Definitions. The following terms shall have the following
-----------
meanings for purposes of this Section 8.
(i) "Excise Tax" shall mean the excise tax imposed by Section 4999 of
the Code, together with any interest or penalties imposed with respect to such
excise tax.
(ii) A "Payment" shall mean any payment or distribution in the nature
of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for
the benefit of the Executive, whether paid or payable pursuant to this Agreement
or otherwise.
Section 9. Confidential Information. The Executive shall hold in a
------------------------
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or the Affiliated
Companies, and their
14
respective businesses, which information, knowledge or data shall have been
obtained by the Executive during the Executive's employment by the Company or
the Affiliated Companies and which information, knowledge or data shall not be
or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those persons designated
by the Company. In no event shall an asserted violation of the provisions of
this Section 9 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
Section 10. Successors. (a) This Agreement is personal to the
----------
Executive, and, without the prior written consent of the Company, shall not be
assignable by the Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns. Except as provided in Section
10(c), without the prior written consent of the Executive this Agreement shall
not be assignable by the Company.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. "Company" means the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that assumes and agrees to
perform this Agreement by operation of law or otherwise.
Section 11. Miscellaneous. (a) This Agreement shall be governed
-------------
by and construed in accordance with the laws of the State of Delaware without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified other than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
15
if to the Executive:
--------------------
to the last address listed for the Executive in the Company's
books and records.
if to the Company:
Carpenter Technology Corporation
1047 North Park Road
Wyomissing, PA 19610-1339
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such United States federal, state or local or foreign taxes as shall
be required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a), prior to the Effective Date, the Executive's
employment may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall have no further
rights under this Agreement. From and after the Effective Date, except as
specifically provided herein, this Agreement shall supersede any other agreement
between the parties with respect to the subject matter hereof.
16
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from the Board, the Company has caused
these presents to be executed in its name on its behalf, all as of the day and
year first above written.
EXECUTIVE
----------------------------------
[Name of Executive]
CARPENTER TECHNOLOGY CORPORATION
By________________________________
Name:
Title:
17
EX-12
12
dex12.txt
COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGE
Exhibit 12
Carpenter Technology Corporation
Computations of Ratios of Earnings to Fixed Charges -- Unaudited
Five years ended June 30, 2001
(dollars in millions)
2001 2000 1999 1998/(b)/ 1997
------------------------------------------------------------
Fixed charges:
Interest costs/(a)/ $ 41.1 $ 39.4 $ 34.8 $ 31.2 $ 22.3
Interest component of
non-capitalized lease rental
expense/(c)/ 4.2 3.5 3.2 2.9 2.4
------------------------------------------------------------
Total fixed charges $ 45.3 $ 42.9 $ 38.0 $ 34.1 $ 24.7
============================================================
Earnings as defined:
Income before income taxes and
cumulative effect of accounting
change $ 58.4 $ 79.9 $ 55.8 $136.9 $ 97.9
Less Income from less-than-fifty-
percent-owned entities, and add
loss on sale of partial interest in
less-than-fifty-percent owned
entities (.3) (1.1) - 3.4 1.2
Fixed charges less interest
capitalized 44.5 36.9 32.5 32.0 22.3
Amortization of capitalized interest 2.5 2.8 2.0 1.9 1.9
------------------------------------------------------------
Earnings as defined $105.1 $118.5 $ 90.3 $174.2 $123.3
------------------------------------------------------------
Ratio of earnings to fixed charges 2.3x 2.8x 2.4x 5.1x 5.0x
============================================================
/(a)/ Includes amortization of debt discount and debt issue costs, and is before
reduction for interest capitalized related to significant plant, equipment
and software projects.
/(b)/ Excludes interest and earnings related to net assets held for sale.
/(c)/ One-third of rental expense which approximates the interest component of
non-capitalized leases.
EX-23
13
dex23.txt
CONSENTS OF EXPERTS AND COUNSEL
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Forms S-8 and S-3 (File Nos. 2-83780, 2-81019, 2-60469, 33-42536,
33-65077, 33-54045, 333-40991, 333-43017, 333-55667, 333-55669 and 333-5774) of
Carpenter Technology Corporation and its subsidiaries of our reports dated
August 13, 2001, relating to the consolidated financial statements and financial
statement schedule, which appear in this Form 10-K.
s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
September 21, 2001
EX-24
14
dex24.txt
POWERS OF ATTORNEY
Exhibit 24
POWERS OF ATTORNEY
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity as a
Director of Carpenter Technology Corporation does hereby appoint Terrence E.
Geremski and John R. Welty or either of them his true and lawful attorneys to
execute in his name, place and stead, in his capacity as Director of said
Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 on Form 10-K, for the year ended June 30, 2001, of said
Company, and any and all amendments to said Annual Report and all instruments
necessary or incidental in connection therewith and to file the same with the
Securities and Exchange Commission. Said attorneys shall individually have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
desirable to be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this
15th day of August, 2001.
/s/ Marcus C. Bennett
---------------------------------------
Marcus C. Bennett
Director
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity as a
Director of Carpenter Technology Corporation does hereby appoint Terrence E.
Geremski and John R. Welty or either of them his true and lawful attorneys to
execute in his name, place and stead, in his capacity as Director of said
Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 on Form 10-K, for the year ended June 30, 2001, of said
Company, and any and all amendments to said Annual Report and all instruments
necessary or incidental in connection therewith and to file the same with the
Securities and Exchange Commission. Said attorneys shall individually have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
desirable to be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 7th
day of August, 2001.
/s/ William S. Dietrich II
----------------------------------------
William S. Dietrich II
Director
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity as a
Director of Carpenter Technology Corporation does hereby appoint Terrence E.
Geremski and John R. Welty or either of them his true and lawful attorneys to
execute in his name, place and stead, in his capacity as Director of said
Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 on Form 10-K, for the year ended June 30, 2001, of said
Company, and any and all amendments to said Annual Report and all instruments
necessary or incidental in connection therewith and to file the same with the
Securities and Exchange Commission. Said attorneys shall individually have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
desirable to be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this
15th day of August, 2001.
/s/ C. McCollister Evarts, M.D.
----------------------------------------
C. McCollister Evarts, M.D.
Director
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity as a
Director of Carpenter Technology Corporation does hereby appoint Terrence E.
Geremski and John R. Welty or either of them his true and lawful attorneys to
execute in his name, place and stead, in his capacity as Director of said
Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 on Form l0-K, for the year ended June 30, 2001, of said
Company, and any and all amendments to said Annual Report and all instruments
necessary or incidental in connection therewith and to file the same with the
Securities and Exchange Commission. Said attorneys shall individually have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
desirable to be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this
15th day of August, 2001.
/s/ J. Michael Fitzpatrick
----------------------------------------
J. Michael Fitzpatrick
Director
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity as a
Director of Carpenter Technology Corporation does hereby appoint Terrence E.
Geremski and John R. Welty or either of them his true and lawful attorneys to
execute in his name, place and stead, in his capacity as Director of said
Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 on Form 10-K, for the year ended June 30, 2001, of said
Company, and any and all amendments to said Annual Report and all instruments
necessary or incidental in connection therewith and to file the same with the
Securities and Exchange Commission. Said attorneys shall individually have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
desirable to be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 7th
day of August, 2001.
/s/ William J. Hudson, Jr.
----------------------------------------
William J. Hudson, Jr.
Director
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity as a
Director of Carpenter Technology Corporation does hereby appoint Terrence E.
Geremski and John R. Welty or either of them his true and lawful attorneys to
execute in his name, place and stead, in his capacity as Director of said
Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 on Form 10-K, for the year ended June 30, 2001, of said
Company, and any and all amendments to said Annual Report and all instruments
necessary or incidental in connection therewith and to file the same with the
Securities and Exchange Commission. Said attorneys shall individually have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
desirable to be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this
15th day of August, 2001.
/s/ Robert J. Lawless
----------------------------------------
Robert J. Lawless
Director
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity as a
Director of Carpenter Technology Corporation does hereby appoint Terrence E.
Geremski and John R. Welty or either of them his true and lawful attorneys to
execute in his name, place and stead, in his capacity as Director of said
Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 on Form 10-K, for the year ended June 30, 2001, of said
Company, and any and all amendments to said Annual Report and all instruments
necessary or incidental in connection therewith and to file the same with the
Securities and Exchange Commission. Said attorneys shall individually have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
desirable to be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this
29th day of August, 2001.
/s/ Marlin Miller, Jr.
----------------------------------------
Marlin Miller, Jr.
Director
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity as a
Director of Carpenter Technology Corporation does hereby appoint Terrence E.
Geremski and John R. Welty or either of them his true and lawful attorneys to
execute in his name, place and stead, in his capacity as Director of said
Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 on Form 10-K, for the year ended June 30, 2001, of said
Company, and any and all amendments to said Annual Report and all instruments
necessary or incidental in connection therewith and to file the same with the
Securities and Exchange Commission. Said attorneys shall individually have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
desirable to be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this
15th day of August, 2001.
/s/ Robert N. Pokelwaldt
----------------------------------------
Robert N. Pokelwaldt
Director
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity as a
Director of Carpenter Technology Corporation does hereby appoint Terrence E.
Geremski and John R. Welty or either of them his true and lawful attorneys to
execute in his name, place and stead, in his capacity as Director of said
Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 on Form 10-K, for the year ended June 30, 2001, of said
Company, and any and all amendments to said Annual Report and all instruments
necessary or incidental in connection therewith and to file the same with the
Securities and Exchange Commission. Said attorneys shall individually have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
desirable to be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this
31st day of August, 2001.
/s/ Peter C. Rossin
----------------------------------------
Peter C. Rossin
Director
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in her capacity as a
Director of Carpenter Technology Corporation does hereby appoint Terrence E.
Geremski and John R. Welty or either of them her true and lawful attorneys to
execute in her name, place and stead, in her capacity as Director of said
Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 on Form 10-K, for the year ended June 30, 2001, of said
Company, and any and all amendments to said Annual Report and all instruments
necessary or incidental in connection therewith and to file the same with the
Securities and Exchange Commission. Said attorneys shall individually have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
desirable to be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 6th
day of August, 2001.
/s/ Kathryn C. Turner
----------------------------------------
Kathryn C. Turner
Director
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that the undersigned in his capacity as a
Director of Carpenter Technology Corporation does hereby appoint Terrence E.
Geremski and John R. Welty or either of them his true and lawful attorneys to
execute in his name, place and stead, in his capacity as Director of said
Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 on Form 10-K, for the year ended June 30, 2001, of said
Company, and any and all amendments to said Annual Report and all instruments
necessary or incidental in connection therewith and to file the same with the
Securities and Exchange Commission. Said attorneys shall individually have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever requisite or
desirable to be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 6th
day of August, 2001.
/s/ Kenneth L. Wolfe
----------------------------------------
Kenneth L. Wolfe
Director
EX-99
15
dex99.txt
AGREEMENT TO FURNISH DEBT INSTRUMENTS
Exhibit 99
AGREEMENT TO FURNISH DEBT INSTRUMENTS
Pursuant to Instruction 3(b)(4)(iii) to Item 601 of Regulation S-K, Carpenter
has not included as an Exhibit any instrument with respect to long-term debt if
the total amount of debt authorized by such instrument does not exceed 10% of
the total assets of Carpenter. Carpenter agrees, pursuant to this Instruction,
to furnish a copy of any such instrument to the Securities and Exchange
Commission upon request of the Commission.
CARPENTER TECHNOLOGY CORPORATION
By /s/ John R. Welty
-------------------------------
John R. Welty
Vice President, General Counsel
and Secretary
10-K405
16
d3383210k4051.pdf
ANNUAL REPORT - PDF
begin 644 d3383210k4051.pdf
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