<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
[Amendment No. ]
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Carpenter Technology Corporation
-----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
*Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:_______________________________________________
2) Form Schedule or Registration Statement No.:__________________________
3) Filing Party:_________________________________________________________
4) Date Filed:___________________________________________________________
<PAGE>
LOGO
CARPENTER TECHNOLOGY CORPORATION
101 WEST BERN STREET READING, PA 19601
------
Notice of Annual Meeting of Stockholders to be held October 21, 1996
------
To the Stockholders of CARPENTER TECHNOLOGY CORPORATION:
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of Stockholders of
CARPENTER TECHNOLOGY CORPORATION will be held at The Inn At Reading,
Wyomissing, Pennsylvania, on Monday, October 21, 1996, at 4 p.m., local time,
for the purpose of:
(1) Electing four directors (Proposal No. 1);
(2) Approving the appointment of independent accountants of the
Corporation for the fiscal year ending June 30, 1997 (Proposal No. 2);
(3) Approving an amendment and restatement of the Stock-Based Incentive
Compensation for Officers and Key Employees (Proposal No. 3);
(4) Transacting such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on September 2,
1996, as the record date for the determination of stockholders entitled to
notice of and to vote at the meeting. A list of stockholders will be
available at the time and place of the meeting and, during the 10 days prior
to the meeting, at the office of the Corporate Secretary, 101 West Bern
Street, Reading, Pennsylvania.
It is important that your shares be represented at the meeting regardless
of the number of shares that you own. Please complete and sign the enclosed
proxy card, which is being solicited by the Board of Directors of the
Corporation, and return it in the enclosed postage pre-paid envelope as soon
as you can.
If you plan to attend the meeting, please use the admission card attached
to your proxy card. You may, of course, attend the meeting without an
admission card upon proper identification.
A proxy statement for your additional information is attached to this
notice.
You are cordially invited to attend the meeting. A map showing the
location of The Inn At Reading appears at the end of the proxy statement.
Respectfully,
JOHN R. WELTY
Secretary
Dated: September 27, 1996
<PAGE>
LOGO
CARPENTER TECHNOLOGY CORPORATION
101 WEST BERN STREET READING, PA 19601
September 27, 1996
PROXY STATEMENT
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation of
proxies to be used at the Annual Meeting of Stockholders to be held on
October 21, 1996, and at any adjournment thereof. The Corporation's annual
report to stockholders, including financial statements, accompanies this
notice and proxy statement, but is not incorporated as part of the proxy
statement and is not to be regarded as part of the proxy solicitation
material.
Proxies are solicited by the Board of Directors of the Corporation in
order to provide every stockholder an opportunity to vote on all matters
scheduled to come before the meeting, whether or not he or she attends the
meeting in person. When the enclosed proxy card is returned properly signed,
the shares represented thereby will be voted by the proxy holders named on
the card in accordance with the stockholder's directions. You are urged to
specify your choices by marking the appropriate boxes on the enclosed proxy
card. If the proxy is signed and returned without specifying choices, the
shares will be voted as recommended by the Board of Directors. A stockholder
giving a proxy may revoke it at any time before it is voted at the meeting by
filing with the Corporate Secretary an instrument revoking it, or by a duly
executed proxy bearing a later date. If you do attend, you may, if you wish,
vote by ballot at the meeting, thereby canceling any proxy vote previously
given.
If a stockholder wishes to give a proxy to someone other than those
designated on the proxy card, he or she may do so by crossing out the names
of the designated proxies and by then inserting the name of another
person(s). The signed proxy card should be presented at the meeting by the
person(s) representing the stockholder.
On September 2, 1996, there were 16,617,647 shares of common stock issued
and outstanding, each of which is entitled to one vote. There were also
452.567 shares of the Corporation series A convertible preferred stock held
by the Trustee of the Corporation's Employee Stock Ownership Plan (ESOP).
Each share of preferred stock is convertible, per operation of the ESOP, into
at least 2,000 shares of common stock with the equivalent of 1.3 votes for
each such common share, subject to anti-dilution adjustments and to
limitations under applicable securities laws and stock exchange regulations.
The preferred stock votes together with the common stock as a single class on
all matters upon which the common stock is entitled to vote. Each ESOP
Participant is entitled to direct the Trustee how to vote both the shares of
preferred stock allocated to his or her account and his or her proportionate
share of any unvoted or unallocated shares of preferred stock. Under the
Savings Plan of Carpenter Technology Corporation, each Participant is
entitled to direct the Trustee how to vote the shares of common stock
allocated to his or her account. The Trustee shall vote any undirected shares
in the same proportion and manner as the directed shares.
The holders of a majority of the outstanding shares must be present in
person or by proxy at the annual meeting in order to constitute a quorum for
the purpose of transacting business at the meeting. Except for the election
of directors, the affirmative vote of the holders of a majority of the
outstanding shares of common stock present in person or by proxy at the
meeting and entitled to vote on the proposals is required to ratify and
approve the proposals. Directors are elected by a plurality of the votes cast
by written ballot. Abstentions are counted in tabulations of the votes cast
by stockholders on the proposals and will have the effect of a negative vote.
Brokers who hold shares in street name for customers have the authority to
vote only on certain routine matters in the absence of instruction from the
beneficial owners. A broker non-vote occurs when the broker does not have the
authority to vote on a particular proposal. Under applicable Delaware law,
broker non-votes will not be counted for purposes of determining whether any
proposal has been approved.
1
<PAGE>
The Board of Directors believes that as of September 2, 1996, the
following entity owned more than 5% of the Corporation's issued and
outstanding shares of common stock:
<TABLE>
<CAPTION>
Number of Shares Percent
Name and Address of Beneficial Owner Beneficially Owned of Class
- ------------------------------------ --------------------------- ----------
<S> <C> <C>
State Street Bank and Trust Company 2,153,588 shares(1) 13%
P.O. Box 1389
Boston, Massachusetts 02104
</TABLE>
- ------
1) State Street Bank and Trust Company has advised the Corporation that,
acting as Trustee for various collective investment funds for employee
benefit plans and other index accounts, it had sole voting power with
respect to 50,300 shares of common stock; sole dispositive power with
respect to 61,300 shares of common stock; acting as Trustee for the
Corporation's Savings Plan, it had shared voting power and shared
dispositive power with respect to 1,187,153 shares of common stock; and
acting as Trustee for the Corporation's Employee Stock Ownership Plan
(ESOP), it had shared voting power and shared dispositive power with
respect to 905,135 shares of common stock, representing the amount of
common stock that would be held if the shares of series A convertible
preferred stock actually held were converted into common stock using the
ratio of one preferred share equal to 2,000 shares of common stock.
Except as discussed above, the Board of Directors and Management is not
aware of any other person or entity who holds beneficially more than 5% of
the outstanding common stock of the Corporation.
Solicitation of proxies is made on behalf of the Board of Directors of the
Corporation, and the cost of preparing, assembling, and mailing the notice of
annual meeting, proxy statement, and form of proxy will be borne by the
Corporation. In addition to the use of the mail, proxies may be solicited by
directors, officers and regular employees of the Corporation, without
additional compensation, in person or by telephone or telegraph. Solicitation
of proxies may also be made on behalf of the Corporation by D. F. King & Co.
at a cost of approximately $4,500. The Corporation will reimburse brokerage
houses and other nominees for their expenses in forwarding proxy material to
beneficial owners of the Corporation's stock.
BOARD OF DIRECTORS
The Corporation's Board of Directors held 11 meetings during fiscal year
1996. No director attended less than 88% of the total number of meetings of
the Board of Directors and Board Committees on which they served. The average
attendance for all of these meetings equalled 94%.
No director who is an employee of the Corporation is compensated as a
member of the Board or any Committee of the Board. Compensation for
non-employee directors consists of an annual retainer of $20,000 and a $1,000
fee, plus travel expenses, where appropriate, for each Board meeting attended
and a $800 fee for each Committee meeting attended. Each Committee
Chairperson receives an additional annual retainer of $3,000.
COMMITTEES OF THE BOARD
The standing Committees of the Board of Directors are the Audit, Corporate
Governance, Human Resources, and Finance Committees.
The Audit Committee reviews the adequacy of the Corporation's financial
reporting, accounting systems and controls and recommends the independent
accountants to conduct the annual audit of the books and accounts of the
Corporation. The Audit Committee also evaluates the Corporation's internal
and external auditing procedures, the security of data processing systems,
and its environmental compliance program. The Committee maintains a direct
line of communication with the Corporation's independent accountants. The
Committee held three meetings during fiscal year 1995. No member of the Audit
Committee may be an employee or former employee of the Corporation. The Audit
Committee currently consists of Messrs. Kay, Chairman; Evarts; Humphrey;
Miller; Wolfe, and Ms. Turner.
The Corporate Governance Committee reviews and recommends any action
proposed with respect to changes in the Corporate Charter or By-Laws, and any
stockholder proposals. The Committee reviews and recommends to the Board the
size, composition and committee structure of the Board, as well as nominees
to the Board of Directors and its Committees to fill vacancies. The Committee
also considers the performance and
2
<PAGE>
potential conflicts of incumbent directors in determining whether to
recommend them to the Board as nominees for reelection, and maintains
guidelines informing the directors of their duties and obligations. The
Committee met four times during fiscal year 1996. No member of the Corporate
Governance Committee may be an employee or former employee of the
Corporation. Members of the Corporate Governance Committee currently are
Messrs. Hudson, Chairman; Bennett; Dietrich; Garr; Langenberg, and Wolfe.
The Corporate Governance Committee will consider sound and meritorious
nomination suggestions from stockholders. All letters of recommendation for
nomination at the 1997 Annual Meeting of Stockholders should be received by
the Corporate Secretary at the Corporation's headquarters on or before August
24, 1997, but not sooner than July 25, 1997. Such stockholder's notice to the
Secretary shall set forth (a) as to each person whom the stockholder proposes
to nominate for election or reelection as a director, (i) the name, age,
business address and residence address of the person, (ii) the principal
occupation or employment of the person, (iii) the class and number of shares
of capital stock of the Corporation which are beneficially owned by the
person and (iv) any other information relating to the person that is required
to be disclosed in solicitations for proxies for election of directors
pursuant to Schedule 14A under the Securities Exchange Act of 1934, as
amended; and (b) as to the stockholder giving the notice, (i) the name and
record address of the stockholder, and (ii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by the
stockholder. The Corporation may require any proposed nominee to furnish
other information as may reasonably be required by the Corporation to
determine the eligibility of such proposed nominee to serve as director of
the Corporation. No person shall be eligible for election as a director of
the Corporation unless nominated in accordance with the procedures set forth
in the Corporation's By-Laws and applicable law. A signed statement from the
person recommended for nomination should accompany the letter of
recommendation indicating that he or she consents to be considered as a
nominee.
The Human Resources Committee reviews and recommends actions to the Board
of Directors on such matters as the salary of the Chief Executive Officer and
the salary and other compensation of officers. The Human Resources Committee
also (1) oversees the administration of the Corporation's pension plans
(other than pension fund asset management); (2) reviews the Corporation's
succession plan for officers; (3) has the authority to administer, grant and
award stock and stock options under the Corporation's incentive equity plans;
and (4) reviews and reports on the Corporation's progress on affirmative
action and equal opportunity matters, employee health and safety issues and
workers' compensation costs. The Committee held three meetings during fiscal
year 1996. No member of the Human Resources Committee may be an employee or
former employee of the Corporation. Current members of the Committee are
Messrs. Bennett, Chairman; Dietrich; Evarts; Hudson; Langenberg, and Ms.
Turner.
The Finance Committee reviews and recommends certain actions to the Board
of Directors relating primar- ily to the Corporation's capital structure,
cash management strategies, pension fund asset management and dividend
policy. The Committee met three times during fiscal year 1996. Current
members of the Committee are Messrs. Miller, Chairman; Cardy; Garr; Humphrey;
Kay, and Roedel.
3
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Corporation's Board of Directors consist of 13 directors serving in
three classes, the respective terms of which expire alternately over a
three-year period.
Unless otherwise specified by the stockholders, the shares represented by
the proxies will be voted for the four nominees for directors listed below.
Messrs. Marcus C. Bennett, William S. Dietrich II, Carl R. Garr, and Marlin
Miller, Jr. are nominated for terms which will expire at the 1999 Annual
Meeting of Stockholders. Each nominee for director has consented to their
nomination as a director and, so far as the Board and management are aware,
will serve as a director if elected. The names and biographical summaries of
the four persons who have been nominated to stand for election at the 1996
Annual Meeting of Stockholders and the remaining nine directors whose terms
are continuing appear below.
The Board of Directors recommends that you vote FOR the election of
Messrs. Bennett, Dietrich II, Garr, and Miller, Jr.
Nominees -- Term to Expire 1999
PICTURE MARCUS C. BENNETT, age 60, is Executive Vice President, Chief
Financial Officer and Director of Lockheed Martin. Mr. Bennett
served as Director of Martin Marietta from 1983 to 1995, Vice
President and Chief Financial Officer from 1988 to 1995, and Vice
President of Finance from 1984 to 1988. He is Chairman of Martin
Marietta Materials, Inc., a majority owned subsidiary of Lockheed
Martin, is a Director for LMC Properties, Inc., and Orlando
Central Park, Inc., wholly owned subsidiaries of Lockheed Martin.
He also is a member of the Financial Executive's Institute, MAPI
Finance Council, The Economic Club of Washington; and Director of
the Private Sector Council and a member of its CFO Task Force. Mr.
Bennett has been a Director of the Corporation since 1993, chairs
the Human Resources Committee and serves on the Corporate
Governance Committee.
PICTURE WILLIAM S. DIETRICH II, age 58, President of Dietrich Industries,
Inc. Mr. Dietrich has served as President of Dietrich Industries,
Inc., since 1968. Dietrich Industries is a manufacturer of metal
framing for commercial and residential construction markets, and
is a subsidiary of Worthington Industries, Inc. Mr. Dietrich
serves on the Board of Directors of Worthington Industries, Inc.
He is an active community leader, serving on 11 boards in Western
Pennsylvania, that include the Greater Pittsburgh Chamber of
Commerce, the Allegheny Conference on Community Development, the
University of Pittsburgh, and the Pittsburgh Ballet Theater. Mr.
Dietrich has been a Director of the Corporation since June of 1996
and is a member of the Corporate Governance Committee and Human
Resources Committee.
4
<PAGE>
PICTURE CARL R. GARR, age 69, is Director and retired Chairman of the
Board and Chief Executive Officer, Bank of Pennsylvania. Dr. Garr
served as Chairman of the Board and Chief Executive Officer of the
Bank of Pennsylvania and Vice Chairman of Dauphin Deposit
Corporation from 1988 until his retirement in 1992. From 1984 to
1987, Dr. Garr was President and Chief Executive Officer of The
Polymer Corporation, then an affiliate of Chesebrough-Pond's Inc.
Dr. Garr has been a Director of the Corporation since 1977, and is
a member of the Corporate Governance Committee and the Finance
Committee.
PICTURE MARLIN MILLER, JR., age 64, is President, Chief Executive Officer
and Director, Arrow International, Inc. Mr. Miller founded Arrow
International, Inc., in 1975. Arrow is located in Reading,
Pennsylvania, and is a leading producer of medical devices for
critical care medicine. He is also a Director of CoreStates
Financial Corporation, and Conners Investor Services, Inc. He
serves as a member of the Board of Trustees of Alfred University
and of the Reading Hospital & Medical Center. Mr. Miller has been
a Director of the Corporation since 1989, chairs the Finance
Committee, and serves as a member of the Audit Committee.
Although the Board of Directors and management do not contemplate that any
of the nominees will be unable to serve, in the event that prior to the
meeting any of the nominees becomes unable to serve because of special
circumstances, the shares of stock represented by the proxies may be voted
for the election of a nominee who shall be designated by the Board.
The following are the other directors whose terms continue after this
year's meeting, as indicated:
Term to Expire 1997
PICTURE DR. C. McCOLLISTER EVARTS, age 65, is Chief Executive Officer,
Senior Vice President for Health Affairs, Dean, College of
Medicine, and Professor of Orthopaedics, The Pennsylvania State
University, College of Medicine and University Hospitals, The
Milton S. Hershey Medical Center. He has held these positions
since 1987. He is Chairman of the Board of Directors of the
Association of Academic Health Centers, a member of the
Association of American Medical Colleges, Society of Medical
Administrators, and serves on the Board of Directors of Hershey
Foods Corporation, Hershey Trust Company, M.S. Hershey Foundation,
Capital Region Health Futures Project, the Capital Region Economic
Development Corporation, and the Lehigh Valley Hospital; and is a
member of the Board of Managers, Milton Hershey School. He is
President of The Alliance(4) Health -- a partnership of four
hospitals in central Pennsylvania. Dr. Evarts has been a Director
of the Corporation since 1990, and is a member of the Audit
Committee and Human Resources Committee.
PICTURE WILLIAM J. HUDSON, JR., age 62, is Chief Executive Officer and
President and Director, AMP Incorporated. Mr. Hudson joined AMP
Incorporated in 1961, and he has held a variety of management
positions, becoming Executive Vice President, International in
1991, a Director in 1992, and elected Chief Executive Officer and
President in 1993. He also serves as a Director of The Goodyear
Tire & Rubber Company. Mr. Hudson has been a Director of the
Corporation since 1992, chairs the Corporate Governance Committee
and serves as a member of the Human Resources Committee.
5
<PAGE>
PICTURE PAUL R. ROEDEL, age 69, Director and retired Chairman of the Board
and Chief Executive Officer of Carpenter Technology Corporation.
Mr. Roedel joined Carpenter in 1948 and became President and Chief
Executive Officer in 1981. He became Chairman of the Board and
Chief Executive Officer in 1987, until his retirement in 1992. He
is a Director of General Public Utilities Corporation and P. H.
Glatfelter Company. He is Chairman of the Berks Business Education
Coalition, Treasurer of the Wyomissing Foundation, and a member of
ASM International. He is also Chairman of the Board of Gettysburg
College and a Director of the Pennsylvania 2000 Education
Coalition. Mr. Roedel has been a Director of the Corporation since
1973 and is a member of the Finance Committee.
PICTURE KENNETH L. WOLFE, age 57, is Chairman of the Board, Chief
Executive Officer and Director, Hershey Foods Corporation. Mr.
Wolfe was elected President and Chief Operating Officer in 1985,
positions he held through 1993. He was elected Vice President,
Finance and Chief Financial Officer of the Corporation in 1981,
and Senior Vice President, Chief Financial Officer and Director in
1984. He serves as a Director of Bausch & Lomb Inc., the Hershey
Trust Company and is a member of the Board of Managers, Milton
Hershey School. Mr. Wolfe has been a Director of the Corporation
since 1995, and is a member of the Audit Committee and Corporate
Governance Committee.
Term to Expire 1998
PICTURE ROBERT W. CARDY, age 60, is Chairman of the Board, President and
Chief Executive Officer and Director of Carpenter Technology
Corporation. Mr. Cardy joined Carpenter in 1962 and held a variety
of management positions, becoming Executive Vice President in
1989, President and Chief Operating Officer in 1990, and Chairman
of the Board, President and Chief Executive Officer in 1992. He
also serves as Director of CoreStates Financial Corporation, the
Reading Hospital & Medical Center, United Way of Berks County, and
the Executive Committee of the Pennsylvania Business Round Table.
Mr. Cardy has been a Director of the Corporation since 1990 and is
a member of the Finance Committee.
PICTURE ARTHUR E. HUMPHREY, age 68, is Professor of Chemical Engineering,
Pennsylvania State University and Vice President and Provost
Emeritus, Lehigh University. From 1980 to 1986, Dr. Humphrey
served as Vice President and Provost of Lehigh University, and in
1986, became T. L. Diamond Professor of Chemical Engineering and
Director of the Center of Molecular Bioscience and Biotechnology
at Lehigh. He assumed his present position in July of 1992. He is
the co-author of a number of technical books, is the holder of
four U.S. Patents, and is a member of the National Academy of
Engineering, the American Institute of Chemical Engineers (past
President), the American Chemical Society and the American Society
of Microbiology. He has been a Fulbright lecturer in Japan and
Australia and has received other scientific awards. Dr. Humphrey
has been a Director of the Corporation since 1980, and serves on
the Audit Committee and Finance Committee.
6
<PAGE>
PICTURE EDWARD W. KAY, age 68, is retired Co-Chairman and Chief Operating
Officer, Ernst & Whinney, now in practice as Ernst & Young LLP.
Mr. Kay served as Co-Chairman and Chief Operating Officer of Ernst
& Whinney from 1984 to his retirement in 1988. He held numerous
positions with Ernst & Young LLP, including Managing Partner of
the Pittsburgh office from 1966 to 1978, and Regional Managing
Partner of the Mid-Atlantic region from 1978 to 1984. He also
serves as a Director of Constellation Holdings, Inc., and Meridian
International Center. Mr. Kay has been a Director of the
Corporation since 1989, chairs the Audit Committee and serves as a
member of the Finance Committee.
PICTURE FREDERICK C. LANGENBERG, age 69, Director and retired Chairman of
the Board and Chief Executive Officer of The Interlake
Corporation. Dr. Langenberg joined Interlake, Inc. (predecessor of
The Interlake Corporation) in 1979 as President and Chief
Operating Officer, became Chief Executive Officer in 1982, and was
elected Chairman of the Board in 1983, until his retirement in
1991. He is also a Director of Peoples' Energy Corporation,
Chicago and Dietrich Industries. Dr. Langenberg has been a
Director of the Corporation since 1981, and serves as a member of
the Corporate Governance Committee and the Human Resources
Committee.
PICTURE KATHRYN C. TURNER, age 49, is Chairperson and Chief Executive
Officer of Standard Technology, Inc. Ms. Turner founded Standard
Technology, Inc., an engineering and manufacturing firm in 1985.
Standard Technology, Inc., is headquartered in Rockville,
Maryland, with offices in Northern Virginia and Jacksonville,
Florida. She was appointed to the President's Export Council in
1994, and also serves as a Director of Phillips Petroleum Company.
She is actively involved with both the Urban League and The Boy
Scouts. Ms. Turner has been a Director of the Corporation since
1994, and is a member of the Audit Committee and Human Resources
Committee.
There is no family relationship between any of the directors or nominees.
7
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
The following table sets forth information regarding beneficial ownership
as of September 2, 1996, of the Corporation's common stock of each director,
the Corporation's five most highly compensated officers and the directors and
officers as a group:
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP(1)
<TABLE>
<CAPTION>
Aggregate Number
of Shares Percent of
Beneficially Outstanding
Name Owned(2)(3) Shares(4)
---- -------------------- -------------
<S> <C> <C>
Bennett, M. C. ............................................ 6,400
Cardy, R. W. .............................................. 80,767(a) .5
Dietrich, W. S. ........................................... -0-
Evarts, C. M. ............................................. 9,200
Garr, C. R. ............................................... 11,100
Hudson, W. J. ............................................. 6,092
Humphrey, A. E. ........................................... 9,600
Kay, E. W. ................................................ 10,000
Langenberg, F. C. ......................................... 13,000
Miller, M. ................................................ 9,800
Roedel, P. R. ............................................. 72,618(b) .4
Turner, K. C. ............................................. 3,685
Wolfe, K. L. .............................................. 5,000
Cottrell, G. W. ........................................... 41,429(a) .2
Fiore, N. F. .............................................. 36,338(a) .2
Torcolini, R. J. .......................................... 29,543(a) .2
Weiler, R. J. ............................................. 36,472(a) .2
All directors and officers as a group (24 in all) ......... 475,773 2.9
</TABLE>
- ------
(1) Excludes fractional shares owned under the Corporation's Dividend
Reinvestment Plan.
(2) The amounts include common shares which are subject to outstanding
stock options exercisable within 60 days of September 2, 1996, as
follows: R. W. Cardy 49,320 shares; G.W. Cottrell, 36,520 shares; N.F.
Fiore, 32,600 shares; R. J. Weiler, 34,679 shares; R. J. Torcolini
27,867 shares; C.R. Garr and M. Miller, 9,000 shares each; A.E.
Humphrey, 8,100 shares; M.C. Evarts and F.C. Langenberg, 8,000 shares;
P.R. Roedel, 7,000 shares; M.C. Bennett, E.W. Kay 6,000 shares each;
K.L. Wolfe, 4,000 shares; K.C. Turner, 3,102 shares; W.J. Hudson, 2000
shares; and directors and officers as a group 319,178.
(a) Share ownership for Messrs. Cardy, Cottrell, Fiore, Torcolini, and
Weiler respectively, include 2,614, 1,182, 11, 1,629 and 1,746 held
under the Savings Plan of Carpenter Technology. Share ownership also
includes 47 shares for each individual held under the Employee Stock
Ownership Plan (ESOP) respectively the equivalent amount of common
stock if the amounts of the ESOP preferred stock actually held were
converted into common stock using the ratio of one preferred share
equal to 2,000 shares of common stock.
(b) Share ownership shown for Mr. Roedel includes 11,550 shares held under
the Savings Plan of Carpenter Technology Corporation and 18,000 shares
held as a co-trustee with daughters.
(3) The amount shown for all officers as a group represents 10,893 shares
held under the Savings Plan of Carpenter Technology Corporation; and
836 shares held under the Employee Stock Ownership Plan (ESOP),
representing the equivalent amount of common stock if the amounts of
the ESOP preferred stock actually held were converted into common stock
using the ratio of one preferred share equal to 2,000 shares of common
stock.
(4) Less than 0.1% except where indicated.
8
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation paid by the Corporation during the fiscal years ended June 30,
1996, 1995 and 1994 to the Corporation's Chief Executive Officer and each of
the Corporation's four other most highly compensated executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
-------------------------------- ------------------------------------
Awards Payouts All
------------------------- --------- Other
Re- Securities Compen-
Name and Other stricted Underlying sation
Principal Fiscal Salary Bonus Annual Stock $ Options/ LTIP ($)
Position Year $ $ Comp. $ (1) SARS # $ (2)
- ------------------------- ------- --------- --------- --------- --------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert W. Cardy 1996 411,200 230,709 0 0 32,000 0 4,471
Chairman, President, 1995 374,404 259,835 0 130,250 20,000 0 4,468
and CEO 1994 347,596 189,440 0 105,053 13,920 0 6,658
G. Walton Cottrell 1996 196,046 81,566 0 0 10,700 0 4,540
Senior Vice President 1995 187,592 90,417 0 29,958 5,600 0 4,632
Finance & CFO 1994 178,000 67,284 0 33,206 4,280 0 5,340
Nicholas F. Fiore 1996 190,888 79,410 0 0 10,600 0 4,586
Senior Vice President 1995 182,208 87,821 0 29,306 5,400 0 4,643
Engineered Products Group 1994 172,354 65,150 0 38,640 5,020 0 5,171
Richard J. Weiler 1996 170,844 62,868 0 0 4,600 0 4,518
Vice President 1995 165,485 68,014 0 23,119 4,200 0 4,562
Corporate Development 1994 159,237 51,433 0 24,150 3,200 0 4,805
Robert J. Torcolini 1996 167,384 61,590 0 0 7,100 0 4,526
Vice President 1995 159,915 65,723 0 22,468 4,200 0 4,797
Manufacturing Operations 1994 153,347 49,531 0 28,376 3,720 0 4,500
Steel Division
</TABLE>
- ------
(1) 7,220 common shares awarded in the aggregate to the named officers on
June 28, 1995, valued at $32.5625 per share. 7,600 common shares
awarded in the aggregate to the named officers on June 22, 1994, valued
at $30.1875 per share. At the end of fiscal year 1996, Messrs. Cardy,
Cottrell, Fiore, Weiler, and Torcolini respectively held 7,136, 1,996,
2,088, 1,448, and 1,516 shares of restricted stock valued at $228,352,
$63,872, $66,816, $46,336, and $48,512 based on the June 28, 1996,
closing price of $32.00. Shares are scheduled to vest at 20% per year
over five years. Dividends on all stock awards are paid at the same
rate as paid to all stockholders.
(2) Amounts of All Other Compensation are amounts contributed for fiscal
1996, 1995 and 1994 for the named Officers under the Corporation's
Savings Plan.
Any director may elect to defer a portion or all of his or her
compensation and any key employee may elect to defer (1) up to 25% of his or
her regular salary, and (2) a portion or all of his or her cash-bonus
compensation, subject to the terms of the Corporation's deferred compensation
plans. Deferral may be, at the Participant's election, until the key
employee's or director's termination of services, or the date of his or her
death, or any other date or event certain to occur. Amounts deferred will
earn interest and are payable in 10 or 15 annual installments or in a lump
sum, at the Participant's election.
The Corporation entered into Special Severance Agreements dated April 3,
1995, with Robert W. Cardy, G. Walton Cottrell and Nicholas F. Fiore. Under
such Agreements, if a named officer's employment is terminated after a
"change in control" of the Corporation, he will receive his full salary and
all other bonuses, pension and other benefits through the termination date
plus, if the termination is by the Corporation (other than for cause)
9
<PAGE>
or by the named officer for good reason, he will receive an additional lump
sum payment equal to two years' salary, bonus and pension benefits and the
value of all outstanding options and restricted stock, whether or not then
vested. The Special Severance Agreements continue until December 31, 1998,
and automatically renew for additional one-year periods, subject to
termination upon appropriate notice.
HUMAN RESOURCES COMMITTEE REPORT
The Human Resources Committee of the Board of Directors (the "Committee")
is composed entirely of non-management Directors, and the Committee is
responsible for the establishment and oversight of the Corporation's
executive compensation and equity compensation programs.
COMPENSATION PHILOSOPHY
The Corporation's executive compensation programs are designed to fulfill
the following objectives:
-- Attract, retain, and motivate highly effective executives.
-- Link executive reward with enhanced stockholder value and
profitability.
-- Reward sustained corporate, functional, and/or individual performance
with an appropriate base salary and incentive opportunity.
-- Communicate the Corporation's goals through performance measures linked
to pay that focus executives on achievement of business objectives.
-- Increase management ownership in the Corporation.
The Corporation targets pay at market competitive (median) levels for
achievement of planned performance. During fiscal 1996, the Committee worked
with an outside consulting firm to conduct an extensive review of the
competitiveness of the executive compensation program. The analysis compared
the Corporation's pay levels to the pay levels of a comparator group made up
of general industrial and capital goods manufacturers. These comparators were
selected to reflect the Corporation's labor pool for executive talent as
opposed to the industry competitors depicted in the Corporation's performance
graph. On an overall basis, the Corporation's pay levels fall below the
market median - the gap caused primarily due to a shortfall in long-term
incentive opportunities. Based on these findings, the Committee is
recommending approval by stockholders of an amendment to its long-term
incentive plan (Stock-Based Incentive Compensation Plan For Officers and Key
Employees), (the "Plan") which is designed to:
-- More clearly focus executives on enhancing stockholder value;
-- Place a greater emphasis on pay at risk; and
-- Provide competitive long-term incentive opportunities.
The amended Plan will enable the Committee to make grants of stock
options, performance shares, restricted stock, and stock appreciation rights,
the Committee envisions that stock options and performance shares will be the
primary forms of long-term incentive. Additional information on the Plan
amendment is provided under the Long-Term Incentive section below. A full
description of the amended Plan is provided on pages A-1 through A-7.
BASE SALARY
Base salaries are targeted at market levels and are adjusted by the
Committee to recognize responsibility, experience, and reference to
competitive rates for jobs with comparable content. Increases to base salary
are driven primarily by individual performance. Base salary ranges were
adjusted by 3% in fiscal year 1996 to reflect competitive market movement.
Actual base salary adjustments for executives varied based on performance,
job content, and pay position within the range. As a group, the named
officers' base salaries fall below the market median (adjusted for company
size differences).
10
<PAGE>
ANNUAL INCENTIVES
The Corporation's executive annual incentive awards include two plans: the
Profit Sharing Plan and the Executive Annual Compensation Plan.
The Profit Sharing Plan of the Corporation allows all eligible employees
to share proportionally in the profits of the Corporation's Steel Division.
In fiscal year 1996, the Profit Sharing Plan covered all permanent employees,
except those with the Special Products Division, those in locations outside
the United States, certain warehouse system employees and employees of
subsidiary corporations. Profit Sharing Plan payments are based on Steel
Division performance during the fiscal year and are paid quarterly based on
year-to-date Steel Division pretax profits and base pay. A profit pool is
established equal to 10% of the first $40 million earned year to date in
Steel Division pretax profit, plus 20% of the profit above $40 million. The
profit pool is divided by the total base pay paid year to date to
Participants to arrive at the profit sharing percentage. Amounts paid to
Participants are determined by multiplying their base pay by the profit
sharing percentage. Payments made for prior quarters of the fiscal year are
deducted from the result to determine the amount of the current quarterly
payment to each Participant. The amount paid for fiscal year 1996 to all
eligible employees was 17.5% of base pay. The amounts paid under this Plan to
the named officers for fiscal year 1996 are included in the Summary
Compensation Table.
The Executive Annual Compensation Plan provides variable compensation for
designated executives with payments based on corporate financial performance
and individual performance. For fiscal year 1996, the Committee established a
return on equity objective of 21.7% and a target performance threshold level
before any payout was made of 80% of target. The Corporation achieved a 21.3%
return on equity in fiscal 1996. Given the Corporation's performance in
relation to target, actual payouts were 96.5% of target. The amounts paid
under the Executive Annual Compensation Plan to the named officers for fiscal
year 1996 are included in the Summary Compensation Table.
Effective for fiscal year 1997, Messrs. Cardy, Cottrell, Fiore, and Weiler
will participate exclusively in the Executive Annual Compensation Plan and
will no longer participate in the Profit Sharing Plan. The Executive Annual
Compensation Plan will be based on a target return on equity with a threshold
at 80% of target. The Executive Annual Compensation Plan will target awards
to produce a total cash compensation opportunity for planned performance
equivalent to the market median. Corporate performance determines 80% of the
total Executive Annual Compensation Plan performance and individual
performance determines the remaining 20%. Personal performance is measured
against personal performance goals. The Plan provides the flexibility to
grant personal Executive Annual Compensation Plan awards if the financial
threshold is not achieved (subject to Board of Directors approval).
LONG-TERM INCENTIVES
The Corporation exclusively uses equity-based long-term incentives to
ensure a significant portion of total compensation is linked to the creation
of stockholder value. Currently, the Corporation's long-term incentive plan
provides for the grant of restricted stock, stock appreciation rights, and
both non-qualified stock options and incentive stock options. Stock options
have focused executives on long-term strategy design and implementation and
increasing stockholder equity value. Restricted stock has been used to
provide executives with a vehicle for increasing stock ownership.
In an effort to create an enhanced linkage between pay and performance,
the Committee has recommended that stockholders approve an additional
long-term incentive vehicle. The Committee advocates shifting away from the
use of restricted stock toward a performance share arrangement that
introduces a greater performance/reward orientation. Under the performance
share plan, Participants would be issued common shares contingent on the
Corporation's return on equity (ROE) achievement over three-year performance
periods. ROE would be measured relative to the performance of the Standard &
Poors 500 Index, as follows:
-- Performance equal to that of the S&P 500 yields a target grant of
shares;
-- Performance greater than the S&P 500 generates a larger grant; and
11
<PAGE>
-- Performance lower than the S&P 500 generates a smaller grant - with the
potential for no grant if performance fails to reach a threshold level.
Stock option grants in combination with performance share awards will be
increased over time to provide a competitive (median) long-term incentive
opportunity.
During fiscal 1996, the Committee recommended that Participants receive an
award of stock options and performance shares (subject to stockholder
approval). Grant sizes are expressed as a percent of base salary and vary by
grade level ranging from 10% to 200% for stock options and 11% to 35% for
performance shares. The Committee decides on grant guidelines for each fiscal
year based on analysis of competitive norms. In addition, the Committee can
modify individual award sizes on the basis of performance. Personal
performance is measured against strategic performance goals (for example,
expansion into new markets). Previous grants are not considered in award size
determination. The Committee elected to award non-qualified stock options
rather than incentive stock options, so that the Corporation will be entitled
to a tax deduction on the exercise of an option by the Participant.
Grants approved by the Committee on June 28, 1996, mark the introduction
of the performance share program (subject to stockholder approval). In future
years, the Committee intends to make performance share awards on an annual
basis with shares earned in relation to three-year ROE performance. To
transition to the three-year performance periods, the first grant was divided
into three parts (with the total grant equal to a competitive annual award).
One third of the total award will be earned contingent on ROE results for
fiscal 1997; one third will be earned on the basis of fiscal 1997 through
fiscal 1998 ROE performance; the remaining third will be earned contingent on
fiscal 1997 through fiscal 1999 ROE performance.
STOCK OWNERSHIP GUIDELINES
In keeping with the objectives of increasing management's equity ownership
stake, in fiscal year 1997, the Corporation will implement stock ownership
guidelines for its key executives. Over time, named executives are expected
to achieve and maintain ownership of three times base salary for the Chief
Executive Officer, 1.5 times base salary for Senior Vice Presidents and Vice
Presidents, and 1.0 times base salary for other covered executives. The
primary intent of these guidelines is to significantly increase the extent
that each executive's personal wealth is directly linked to the performance
of the Corporation's common stock.
To provide executives another means to attain these ownership levels,
beginning in fiscal 1997, executives will be permitted to voluntarily elect
to receive all or a portion of their Executive Annual Compensation Plan Award
in the Corporation's stock.
POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT
Section 162(m) of the Internal Revenue Code generally limits the corporate
deduction for compensation paid to executive officers named in the proxy to
$1 million, unless certain requirements are met. Based on the Corporation's
current pay levels, it is unlikely this limitation would impact the
deductibility of pay, however, the performance share and stock option grants
authorized under the Corporation's new Long-Term Incentive Plan (subject to
stockholder approval), are designed to meet Section 162(m)'s
performance-based deductibility requirements. The Committee will continue to
monitor the potential deductibility of other components of the Corporation's
pay package.
CEO COMPENSATION
Under Mr. Cardy's leadership, the Corporation made significant
improvements in operating performance. Earnings per share increased to $3.51
in fiscal 1996 from $2.81 in fiscal 1995, an increase of 25%, while return on
equity increased to 21.3% in fiscal 1996 from 19.3% in fiscal 1995. Net
income rose 28% to $60.7 million in fiscal 1996 from $47.5 million in fiscal
1995. In addition to improved financial performance, Mr. Cardy also directed
a number of strategic actions (including expansion into foreign markets and
three new acquisitions) to position the Corporation for future growth.
12
<PAGE>
In conjunction with the review of the executive compensation program
during fiscal 1996, the Committee worked with an outside consulting firm to
assess the competitive positioning of Mr. Cardy's fiscal 1996 compensation
opportunity. Comparisons were made to the same group of companies used for
executive officer pay review. These general industrial and capital goods
companies are intended to reflect the Corporation's labor market for
executive talent. The study reviewed base salary, annual and long-term
incentives, and concluded that Mr. Cardy's base salary was below the 50th
percentile market levels for companies of similar size; annual incentives
were about equal to market norms, and long-term incentive opportunities were
well below typical market levels.
BASE SALARY
Based on his level of contribution and on findings from the external
review of executive compensation, Mr. Cardy's base salary has been increased
by 10% to $456,000. This adjustment is effective August 1, 1996.
ANNUAL INCENTIVES
The CEO received a $71,986 Profit Sharing Plan payout (17.5% of base).
This is the same percentage of base salary received by all eligible
employees.
The CEO received a $158,723 payout from the Executive Annual Compensation
Plan (38.6% of base salary) determined based on the Corporation's return on
equity and on Mr. Cardy's personal performance.
LONG-TERM INCENTIVES
During fiscal 1996, the Committee approved a CEO grant of 32,000
non-qualified stock options. These options will vest fully one year after
grant. In addition, the Committee is recommending, subject to stockholder
approval, a grant of 4,300 performance shares. Of which:
-- 1,433 shares will be contingent on fiscal year 1997 ROE performance;
-- 1,433 shares will be contingent on ROE performance for fiscal years
1997 and 1998; and
-- 1,434 shares will be contingent on ROE performance for fiscal years
1997, 1998, and 1999.
This grant represents the transition from restricted stock to performance
shares. Beginning in fiscal 1997, performance share grants will be made
annually and will be earned on the basis of three-year performance periods.
SUBMITTED BY THE HUMAN RESOURCES COMMITTEE OF THE CORPORATION'S BOARD OF
DIRECTORS
Marcus C. Bennett, Chairman
Dr. C. McCollister Evarts
William J. Hudson, Jr.
Frederick C. Langenberg
Kathryn C. Turner
13
<PAGE>
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly change in the
cumulative total stockholder return on the Corporation's common stock against
the cumulative total return of the S&P Composite - 500 Stock Index and the
Peer Group Index for the period of five years commencing June 30, 1991 and
ending June 30, 1996.
STOCKHOLDER RETURN PERFORMANCE TABLE
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN(1)
CARPENTER TECHNOLOGY and S&P 500 and Peer Group
June 30, 1991 to June 30, 1996
|------------------------------------------------------------------------------|
| 220--------------------------------------------------------------------------|
| |
| # |
| |
| 200--------------------------------------------------------------------------|
| |
| |
| |
| |
| 180--------------------------------------------------------------------------|
| & |
| |
| |
| * &*|
| 160---------------------------------------------------------#----------------|
| |
| & |
| |
| |
| 140-------------------------------------------*&-----------------------------|
| |
| |
| |
| & # # |
| 120-----------------------------*--------------------------------------------|
| |
| |
| # |
| * |
| 100--*#&---------------------------------------------------------------------|
| |
| |
| |
| |
| 80--|------------|-------------|-------------|-------------|--------------|-|
| 1991 1992 1993 1994 1995 1996|
|------------------------------------------------------------------------------|
* = CRS # = S&P 500 & = PEER GROUP
Notes:
(1) Assumes that the value of the investment in the company's Common stock,
and each index, was $100 on June 30, 1991, and that all dividends were
reinvested.
The Peer Group Index is comprised of the following companies: Allegheny
LudLum, A.M. Castle, Armco Inc., Slater Steel, The Timken Company. The Peer
Group consists of publicly traded companies which have some similarity to the
Corporation. In particular, the Peer Group companies are involved in the
distribution and/or manufacture of specialty metal products in the United
States and each Peer Group company has a division or unit which competes with
the Corporation or has competed with the Corporation during the period shown
in the table.
14
<PAGE>
The total stockholder return assumes reinvestment of dividends and the
total return of each company included in the S&P 500 Index and the Peer Group
has been weighted in accordance with the Corporation's market capitalization
as of the end of each respective period. The weighting was accomplished by
(1) calculating the year-end market capitalization for each company based on
the closing stock price and outstanding shares; (2) determining the
percentage that each such market capitalization represents against the total
of such market capitalizations for all companies included in the Index or the
Peer Group as the case may be; and (3) multiplying the percentage determined
in (2) above by the total stockholder return of the company in question for
each respective period.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Based solely upon the Corporation's review of copies of such reports
furnished to it and upon representations by persons required to file reports
under Section 16(a), to the Corporation's knowledge, all of the Section 16(a)
filing requirements applicable to such persons with respect to fiscal year
1996 were met.
RETIREMENT BENEFITS
The General Retirement Plan of the Corporation, as amended, provides for
retirement benefits for employees, including officers, at the age of 65 (with
5 years service), or as early as age 55 (with 15 years service); or at any
age with 30 years service. Pensions are based on the number of years of
service, or on the product of 1.26% times the number of years of service
multiplied by the individual's average earnings during the greater of either
(1) the eight highest earnings years or (2) the five highest consecutive
earnings years, of the last 12 years of continuous service prior to
retirement. For pension purposes, individual earnings include all salaries,
bonuses, and extra compensation. As of June 30, 1996, the years of service
credited under the Plan were as follows: Mr. Cardy, 33.9 years; Mr. Cottrell,
7.3 years; Dr. Fiore, 6.3 years; Mr. Torcolini, 22.5 years; and Mr. Weiler,
37.6 years. All funds required for the payment of benefits under the Plan are
provided by the Corporation and these funds may be paid into one or more
pension trusts.
The Corporation has established two retirement plans, the Benefit
Equalization Plan and the Earnings Adjustment Plan, for those participants in
the General Retirement Plan for whom benefits are reduced by reason of the
limitations imposed under Section 415 and/or Section 401(a)(17) of the
Internal Revenue Code of 1986, as amended. The Plans will pay the difference
between the amount payable to the Participant under the General Retirement
Plan and the amount which the Participant would have been paid but for the
Section 415 and/or Section 401(a)(17) limitations. In general, benefits under
these Plans are subject to the same terms and conditions as the benefits
payable to the Participant under the General Retirement Plan.
Employees who have been designated by the Board of Directors as
Participants are entitled to receive benefits under the Supplemental
Retirement Plan for Executives. Participants or their beneficiaries are
entitled to receive an annual supplemental retirement benefit for 15 years
commencing in the month following the month in which retirement occurs, or,
at the election of a disabled Participant, commencing at a later specified
date. In the event of the death of the Participant before retirement, but
subsequent to the attainment of eligibility for a Normal Retirement or Early
Retirement benefit under the Supplemental Retirement Plan for Executives, the
benefit will be paid to the Participant's beneficiary for the said 15-year
period. The benefit is calculated so that following retirement, Participants
may receive General Retirement Plan benefits, Benefit Equalization Plan
benefits, Earnings Adjustment Plan benefits, Primary Social Security
benefits, pension benefits from any prior employment and supplemental
retirement benefits, the aggregate of which will be equivalent to 60% of the
Participant's earnings (calculated in the same manner as the General
Retirement Plan) if retirement takes place upon the Participant's attaining
30 years service with the Corporation. However, the benefits for Messrs.
Cottrell, Lodge and Fiore are calculated without regard to pension benefits
from prior employment. Messrs. Cardy, Cottrell, Fiore, Torcolini, and Weiler
have been designated participants in the Plan.
The Officers' Supplemental Retirement Plan of the Corporation provides
supplemental pension benefits to certain key employees who qualify for
benefits under the General Retirement Plan and for whom benefits under the
General Retirement Plan are reduced by reason of amounts deferred pursuant to
the Deferred Compensation Plan. The Officers' Supplemental Retirement Plan
will pay the difference between the amount payable (prior to
15
<PAGE>
application of Internal Revenue Code limitations) to the Participant under
the General Retirement Plan and the amount which the Participant would have
been paid by disregarding the above-mentioned deferred compensation. Benefits
under this Plan are subject to the same terms and conditions as the benefits
payable to the Participant under the General Retirement Plan.
The following table illustrates the total annual retirement benefits
payable under the retirement plans described in this Section. All such
retirement plans are payable for the life of the Participant and, if
applicable, the life of a survivor with the exception of the Supplemental
Retirement Plan for Executives which is payable for 15 years certain.
<TABLE>
<CAPTION>
Average Annual
Earnings for the Annual Gross Pension Benefits
Applicable Years of for Years of Service Shown(1)
Service Period ---------------------------------------------------------------
Preceding Retirement 15 Years 20 Years 25 Years 30 Years 35 Years
------------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$125,000 ............... $ 70,375 $ 75,000 $ 75,000 $ 75,000 $ 76,563
150,000 ............... 84,450 90,000 90,000 90,000 91,875
175,000 ............... 98,525 105,000 105,000 105,000 107,188
200,000 ............... 112,600 120,000 120,000 120,000 122,500
250,000 ............... 140,750 150,000 150,000 150,000 153,125
300,000 ............... 168,900 180,000 180,000 180,000 183,750
350,000 ............... 197,050 210,000 210,000 210,000 214,375
400,000 ............... 225,200 240,000 240,000 240,000 245,000
450,000 ............... 253,350 270,000 270,000 270,000 275,625
500,000 ............... 281,500 300,000 300,000 300,000 306,250
</TABLE>
- ------
(1) Amounts payable under the General Retirement Plan that exceed the maximum
permitted by the Internal Revenue Code are paid under the Benefit
Equalization Plan and/or the Earnings Adjustment Plan. A pension based on
the amount of any deferred compensation is paid under the Officer's
Supplemental Retirement Plan.
The Corporation has established a retirement plan for directors who have
at least three years of service with the Corporation as a director and who
are not entitled to receive benefits under any other pension plan of the
Corporation. The Plan provides an annual benefit equal to the basic director
annual retainer fee in effect at the time of the director's departure from
the Board. This benefit, payable only during the lifetime of the Participant,
continues for a period equal to the amount of time the director was an active
director up to a maximum of ten years, during which period the Participant
will be available to the Chief Executive Officer for consultation.
Trust agreements have been established by the Corporation with Chase
Manhattan Bank (as Trustee) to assure the satisfaction of the obligations of
the Corporation under the non-qualified retirement benefit and deferred
compensation plans previously described, to present and future participants,
including the named officers, and to assure the satisfaction of the
obligations of the Corporation to present and future participants under the
Director Retirement Plan and the Deferred Compensation Plan for
Non-Management Directors of Carpenter Technology Corporation. The Corporation
has purchased corporate-owned life insurance (COLI) on the lives of certain
key executives, including the named officers. These policies have been
assigned to the trusts with the Trustee granted authority to manage these
policies as trust-owned life insurance (TOLI) and to use the proceeds to pay
benefits under these same non-qualified retirement benefit and deferred
compensation plans.
CARPENTER TECHNOLOGY CORPORATION SAVINGS PLAN
The Savings Plan is a profit sharing plan established pursuant to Sections
401(a) and 401(k) of the Internal Revenue Code. Under this Plan, the
Corporation contributes 3% of the base pay of each eligible employee,
including officers, to a trustee for investment into one or more
pre-established investment funds as the Participant may choose. In addition,
a Participant may authorize the Corporation to make further salary deferral
con-
16
<PAGE>
tributions, limited to the lesser of $9,500 or 17% of total pay. Amounts in
the Summary Compensation Table include such amounts deferred. Participants
may also invest up to 17% of total compensation pursuant to the provisions of
Section 401(a). The maximum combined allowable savings rate for a Participant
may not exceed 17% of total pay.
Withdrawals of contributions and earnings from the Savings Plan may be
made at the Participant's discretion from funds invested under the provisions
of Section 401(a); or, in the event of hardship or attainment of age 59 1/2,
from funds invested under the provision of Section 401(k). Other
distributions may occur following separation from service or the occurrence
of a permanent disability. In addition, loans to a Participant from his or
her 401(k) account are available.
EMPLOYEE STOCK OWNERSHIP PLAN
The Carpenter Technology Corporation Employee Stock Ownership Plan (ESOP)
was established on September 6, 1991. The Trustee of the ESOP, State Street
Bank and Trust Company, purchased 461.5384615 shares of series A convertible
preferred stock from the Corporation at a price of $65,000 per share, or an
aggregate purchase price of approximately $30 million, for a fifteen year
note issued by the Trustee to the Corporation and a small amount of cash.
The shares of series A convertible preferred stock have a liquidation
preference of $65,000 per share, plus any accrued and unpaid dividends.
Dividends on the preferred stock are paid annually and accrue quarterly at
the rate of the higher of (1) $1,340.625 per share of preferred stock or (2)
the dividends paid for such quarter on the number of shares of common stock
into which the share of preferred stock is convertible. Each share of
preferred stock is convertible, at the Trustee's option, into at least 2,000
shares of common stock at a conversion price of $32.50 per share of common
stock. The conversion price (and the conversion ratio) will be adjusted to
reflect any future stock splits, stock dividends, combinations,
reclassifications, certain distributions of rights or warrants and certain
other issuances of stock or stock repurchases with respect to the common
stock. The preferred stock votes together with the common stock as a single
class on matters upon which the common stock is entitled to vote and has the
equivalent of 1.3 votes per share of the common stock into which it is
convertible, subject to anti-dilution adjustments and to limitations under
applicable securities laws and stock exchange regulations. The ESOP preferred
shares are divided into units, representing a fraction (1/2000) of each
convertible preferred share. Each ESOP unit was initially convertible into
one whole share of common stock. On the effective date of the ESOP, September
6, 1991, an initial unit allocation was made to each eligible employee.
Additional units are allocated among employees as the loan is repaid.
Generally, only those employees who are actively employed with the
Corporation on the last day of the Plan year, December 31, will receive an
allocation in respect of such Plan year. The funds used by the ESOP to repay
the ESOP loan are acquired from contributions by the Corporation and
dividends on the shares held by the ESOP.
ESOP Participants are fully vested in their accounts after five years of
employment with the Corporation. Any Participants who terminate employment
with the Corporation after vesting are guaranteed the greater of the floor
redemption value or the current equivalent common share price of the units.
Participants who terminate employment before vesting forfeit their accounts
and their units are reallocated to remaining ESOP Participants' accounts.
During fiscal 1996, 18.234 units of ESOP preferred stock (including
dividends) were allocated to each of the accounts of Messrs. Cardy, Cottrell,
Fiore, Torcolini, and Weiler.
STOCK OPTIONS
The Corporation had three incentive stock option plans in effect during
fiscal year 1996, i.e., the Stock- Based Incentive Compensation Plan for
Officers and Key Employees, adopted at the 1993 Annual Meeting of
Stockholders (the "1993 Plan"), the Incentive Stock Option Plan for Officers
and Key Employees, adopted in June 1982 (the "1982 Plan"), and the Management
and Officers Capital Appreciation Plan adopted in May 1977 (the "1977 Plan").
The 1993 Plan provides that the Board of Directors may grant incentive
stock options, non-qualified stock options, stock appreciation rights and
restricted stock, and will determine the terms and conditions of each grant.
In fiscal 1996, the 1993 Plan was amended, subject to stockholder approval,
to provide for performance share
17
<PAGE>
awards and authorizing an additional fixed amount of 1,500,000 shares to
replace the "evergreen" feature of the Plan. As of June 30, 1996, and 1995,
1,530,303 and 10,186 shares respectively, were reserved for options and share
awards which may be granted under this Plan. Options granted 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. The restricted stock awarded
vests equally at the end of each year of employment during the five-year
period from the date of grant.
Performance share awards are earned only if the Corporation achieves
certain performance levels over a three-year period. The awards are payable
in shares of common stock and expensed over the three-year performance
period. In June 1996, 18,400 performance share awards were granted contingent
on performance over the next three fiscal years. There was no charge to
expense for these awards in fiscal 1996.
The 1982 Plan automatically expired in June 1992, in accordance with its
terms, i.e., ten years after its adoption on June 10, 1982. However, all
outstanding, unexpired options granted under the 1982 Plan prior to its
termination remain in effect in accordance with its terms. Under the 1982 and
1977 plans, options are granted at the market value of the Corporation's
common stock on the date of grant, and are exercisable after one year of
employment following the date of grant. Options granted under the 1982 Plan
expire five years after grant if granted prior to August 9, 1990, and all the
options granted since that date expire ten years after grant. Options granted
under the 1977 Plan expire ten years after grant. At June 30, 1996, and 1995,
164,620 and 284,720 shares; respectively, were reserved for options which may
be granted under the 1977 Plan.
All three Plans contain change in control provisions which provide that,
in the event of a change in control of the Corporation, previously granted
stock options vest and become immediately exercisable and, for the 1993 Plan,
for any remaining restrictions on restricted stock shall immediately lapse,
and each SAR then outstanding shall be fully exercisable for the sixty-day
period immediately following the occurrence of the Change in Control Event
using the Change in Control Price to determine the spread.
The following table shows as to the named officers, certain information
with respect to stock options and stock appreciation rights granted as of the
end of fiscal year 1996. Each stock appreciation right entitles the holder to
receive a payment in cash or the Corporation's common stock, upon the
exercise of the underlying stock option, in an amount equivalent to the
excess of the market value over the option price of the Corporation's common
stock at the date exercised. The method of payment of stock appreciation
rights is determined by the Board of Directors at the time of grant. There
are currently no stock appreciation rights outstanding.
18
<PAGE>
STOCK OPTIONS/SAR GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------------------
Number of % of
Securities Total Options/ Exercise
Underlying SARs Granted to or Base Grant Date
Options/SARs Employees in Price Expiration Present
Name Granted Fiscal Year ($/SH) Date Value(2)
---- -------------- --------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Robert W. Cardy 32,000 13.1% $33.00 06/27/2006 $253,651
G. Walton Cottrell 10,700 4.4% $33.00 06/27/2006 $ 84,815
Nicholas F. Fiore 10,600 4.3% $33.00 06/27/2006 $ 84,022
Richard J. Weiler 4,600 1.9% $33.00 06/27/2006 $ 36,462
Robert J. Torcolini 7,100 2.9% $33.00 06/27/2006 $ 56,279
</TABLE>
- ------
(1) Options granted 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.
(2) Based on the Black-Scholes option pricing model adapted for use in
valuing officer stock options. The actual value, if any, an executive may
realize will depend on the excess of the stock price over the exercise
price on the date the option is exercised, so that there is no assurance
the value realized by an executive will be at or near the value estimated
by the Black-Scholes model. The estimated values under that model are
based on arbitrary assumptions as to variables such as stock price
volatility, interest rates, and future dividend yield. Specifically, the
Black-Scholes evaluation employed the following factors: risk-free rate
of return of 6.9% based upon the ten-year T-Bill rate as of grant date,
dividend yield of 4.0% based upon average annual dividend payout for the
prior two years (from grant date), exercise term of ten years, stock
price volatility of 19.1% based upon the quarterly stock price for the
prior three years (from grant date), and that no adjustments have been
made for transferability of risk or forfeiture of the options.
STOCK OPTION/SAR EXERCISES AND YEAR END HOLDINGS
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Shares Options/SARs at Options/SARs at
Acquired Fiscal Year End Fiscal Year End (2)
on Exercise Value -------------------------------- --------------------------------
Name (#) Realized(1) Exercisable Unexercisable Exercisable Unexercisable
---- ------------- ----------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Cardy 32,300 $439,415 49,320 32,000 $101,267 $0
G. Walton Cottrell 36,520 10,700 $193,685 $0
Nicholas F. Fiore 32,600 10,600 $161,329 $0
Richard J. Weiler 33,040 4,600 $186,790 $0
Robert J. Torcolini 26,820 7,100 $137,505 $0
</TABLE>
- ------
(1) Calculated as fair market value at exercise minus grant price.
(2) Based on June 28, 1996 market closing price of $32.00 per share of common
stock.
The Corporation also has in effect the 1990 Stock Option Plan for
Non-Employee Directors ("Directors Option Plan"), which was adopted by the
Board in 1990 and amended in 1995. Both the original and amended Plan were
approved by the stockholders. The Plan provides for the grant by the
Corporation of non-qualified options to the directors of the Corporation who
are not otherwise employees of the Corporation to purchase shares of common
stock at not less than the fair market value of the common stock at the date
of the grant. Any non-employee director who joins the Board of Directors
after August 1990, is granted an option to purchase 2,000 shares. In
addition, each non-employee director is granted an option to acquire 2,000
shares of common stock after each annual meeting. Options are exercisable
only after the director has completed one year of ser-
19
<PAGE>
vice on the Board of Directors since the date of grant, and the options
expire ten years from the date of the grant unless sooner exercised or
terminated pursuant to the terms of the Plan. There is a provision in the
Plan which provides that, in the event of a change in control of the
Corporation, options previously granted vest and become immediately
exercisable. At June 30, 1996, and 1995, 157,000 and 89,000 shares,
respectively, were reserved for options which may be granted under this Plan.
PROPOSAL NO. 2
APPROVAL OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Unless otherwise specified by the stockholders, the shares of stock
represented by the proxies will be voted for the approval of the appointment
of Coopers & Lybrand L.L.P. ("Coopers & Lybrand"), a firm of independent
accountants, to audit and report upon the financial statements of the
Corporation for fiscal year 1997. Coopers & Lybrand has been the independent
accountants of the Corporation since 1918 and, in the opinion of the Board of
Directors and management, is well qualified to act in this capacity.
Audit services performed by Coopers & Lybrand in fiscal year 1996 included
audits of the financial statements of the Corporation and certain of the
pension and other employee benefit plans of the Corporation, limited reviews
of quarterly financial statements of the Corporation, and other accounting
related matters. Fees and expenses in fiscal year 1996 for these audit
services were $469,000.
A representative of Coopers & Lybrand is expected to be present at the
annual meeting. The representative will have the opportunity to make a
statement if he or she desires to do so and will be available to respond to
appropriate questions. The Corporation has been advised by Coopers & Lybrand
that the firm has no financial interest, direct or indirect, in the
Corporation, except its providing tax counseling, acquisition auditing, and
independent accounting services during the period stated.
The Board of Directors recommends that stockholders vote FOR the approval of
the appointment of Coopers & Lybrand as independent accountants.
PROPOSAL NO. 3
APPROVAL OF AMENDMENT AND RESTATEMENT OF THE STOCK-BASED
INCENTIVE COMPENSATION PLAN FOR OFFICERS AND KEY EMPLOYEES
AMENDED AND RESTATED, JUNE 27, 1996
In order to facilitate the retention by the Corporation and its subsidiaries
of valued officers and employees, on June 22, 1993, the Board of Directors
considered and adopted the Stock-Based Incentive Compensation Plan for Officers
and Key Employees (the "Incentive Plan"), which the stockholders of the
Corporation approved on October 25, 1993. The Incentive Plan is intended to
encourage stock ownership in the Corporation by key employees and to provide a
greater community of interest between such employees and the Corporation's
stockholders. On June 27, 1996, the Board of Directors considered and adopted an
amendment to the Incentive Plan, subject to the approval of the stockholders of
the Corporation. Further, the Board of Directors reconsidered the "evergreen"
feature of the Incentive Plan which automatically increased the shares available
for award which would have allowed the Incentive Plan to operate in perpetuity.
As this feature did not provide for periodic review and approval by the
stockholders, the Board changed the shares available for grant to a fixed amount
equivalent to 1,500,000 shares plus previously ungranted shares and lapsed
grants. Depending on the number of awards, the Plan will now have a defined
term. As a result, the Plan will expire when all of the authorized shares are
utilized unless renewed by stockholder approval. The Incentive Plan, as amended,
is set forth in Appendix A to this proxy statement and the summary provided
below is qualified in its entirety by reference to the amended Incentive Plan.
The following proposal for stockholder ratification and approval of the
amendment will be presented at the 1996 Annual Meeting of Stockholders:
RESOLVED, that the stockholders of Carpenter Technology Corporation hereby
approve the amendment and restatement of the Stock-Based Incentive
Compensation Plan for Officers and Key Employees; and
FURTHER RESOLVED, that the total number of shares reserved with respect to
awards not yet granted under the Stock-Based Incentive Compensation Plan
for Officers and Key Employees shall be increased by an additional
1,500,000 shares and the "evergreen" feature of the Plan be eliminated as
recommended by the Board of Directors of the Corporation.
All outstanding grants of stock options, stock appreciation rights
("SARs") and shares of restricted stock under the Incentive Plan before the
amendment will remain in effect in accordance with its terms. As of June
20
<PAGE>
30, 1996, options to purchase 428,830 shares of common stock were outstanding
under the Incentive Plan. After the amendment, a new category of awards will
be available for grants under the Incentive Plan. These new awards,
performance shares and performance units, will be granted to specified
eligible employees upon the attainment of predetermined performance goals.
The following is a summary of the Incentive Plan, as amended:
Administration. The Board of Directors has delegated certain
responsibilities to administer the Incentive Plan to the Human Resources
Committee (the "Committee") of the Board of Directors. Before its amendment,
the Incentive Plan was administered by the Compensation and Stock Committee
of the Board of Directors. The Committee must consist of at least two
directors who are "disinterested persons" as defined under rules promulgated
by the U.S. Securities and Exchange Commission ("SEC") under Section 16 of
the Securities and Exchange Act of 1934, as amended (the "Exchange Act").
Those directors must also be "outside directors" as defined under the rules
promulgated by the U.S. Department of Treasury under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"). The Board, unless
delegated to the Committee, and subject to the provisions of the Incentive
Plan, is authorized to interpret and administer the Incentive Plan, to select
employees to whom awards will be granted, to determine the type and amount of
awards and the terms and conditions of such awards, and to adopt and make
changes in regulations for carrying out the Incentive Plan. The Incentive
Plan, as amended, is intended to comply with Code Section 162(m), and
qualifying awards based on the attainment of performance goals will not be
subject to the million dollar deduction limit on compensation. Only the
Committee may establish performance goals, which when met, will result in the
grant of specified awards under the Incentive Plan.
Eligibility. Any employee who is an officer or key employee of the
Corporation or its subsidiaries, including a director who is such an employee
(other than Committee members), is eligible to participate in the Incentive
Plan. Approximately 287 key employees and officers will be eligible to
participate in the Incentive Plan. As of June 30, 1996, 278 employees have
received awards under the Incentive Plan. It is not possible to state at this
time which officers or key employees will receive future awards under the
Incentive Plan because those awards will be granted in the discretion of the
Board and, in certain instances, the Committee, based on factors as they deem
pertinent in selecting participants under the Incentive Plan and establishing
awards.
Awards. Under the amended Incentive Plan, eligible employees may be
awarded performance shares, in addition to options, SARs and shares of
restricted stock. Options granted pursuant to the Incentive Plan may be
either incentive stock options or non-qualified stock options. Incentive
stock options are intended to be "incentive stock options" under Section 422
of the Code. The exercise price of an option will be determined by the
Committee, but it may not be less than the fair market value of a share of
common stock on the date of the grant. Except as otherwise determined by the
Board, an option granted pursuant to the Incentive Plan will become
exercisable by a Participant only after completion of one year of employment
immediately following the date of the grant. However, the aggregate fair
market value of the incentive stock options first exercisable by any one
individual in any calendar year may not exceed $100,000. The closing price of
common stock reported on the New York Stock Exchange for the last business
day on or before June 30, 1996, was $32. Payment by option holders upon the
exercise of an option may be made in cash or previously owned shares of
common stock held by a Participant for at least three months.
An SAR is the right to receive the increase in the fair market value of
shares of common stock. As a result of the amendment, the Board may grant
SARs independent of any options, or in tandem with options. Before the
amendment, SARs could only be granted in tandem with options.
An award of "restricted stock" is a grant of shares of common stock which
is subject to forfeiture upon the happening of certain events, and such
shares are held in escrow by the Corporation during the restriction period.
During the restriction period, the Board has the discretion to allow the
Participant to receive cash payments equal to the dividends declared and
paid, if any, in respect of shares of restricted stock and to vote such
shares. Before the amendment, such rights were granted to Participants who
received restricted stock. The Board may accelerate the vesting or waive the
limitations on restricted stock before the end of the restriction period.
Awards of "performance shares" are added by the amendment. Under current
awards, a performance share has no voting rights or dividend payments but no
stock or related rights is ever transferred to the employee until
21
<PAGE>
certain performance targets are achieved. On achievement of performance
targets, the performance shares will be issued to the Participants and will
bear full voting and dividend rights. The amount of performance shares or
units awarded are dependent upon the Corporation's attainment of performance
goals that will be predetermined by the Committee. The Committee has the
discretion to grant voting and dividend rights together with the performance
shares. No Participant shall receive more than 500,000 performance shares
during any calendar year.
Under the amended Incentive Plan, 1,500,000 shares of common stock are
available for awards.
The amendment of the Incentive Plan gives the Board the discretion to
allow payments under the Incentive Plan to be deferred to a date specified by
the Participant.
Change of Control. The Incentive Plan provides for acceleration of
exercisability of options, SARs, performance shares, and the lapsing of
restrictions on restricted stock upon the occurrence of a change of control
of the Corporation. The amendment provides that SARs will be exercisable
immediately following the change of control at a price equal to the higher of
the highest price paid per share of common stock in the change of control
transaction or the highest fair market value of common stock at any time
during the sixty day period immediately preceding the change of control. A
change of control means, subject to certain exceptions, the acquisition by
any person or group (other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation or certain
corporations owned by the Corporation's stockholders) of 20% or more of the
combined voting power of the Corporation's then outstanding securities;
certain changes in the composition of the Board of Directors over a period of
two consecutive years; the stockholders' approval of a merger or
consolidation of the Corporation with another entity; the stockholders'
approval of a plan of complete liquidation; or an agreement for the sale of
all or substantially all of the Corporation's assets. The Committee may
determine the effect of a change of control of the Corporation upon
outstanding awards under the Incentive Plan, consistent with the change of
control provisions described above. However, the amendment provides that a
Participant who is part of the purchasing group that consummates a change in
control will not get any of the benefits or protections of these change in
control provisions.
Federal Tax Treatment. Under the present federal tax laws, the federal
income tax treatment of options, SARs, restricted stock and performance
shares under the Incentive Plan is as follows: A Participant recognizes no
taxable income and the Corporation is not entitled to a deduction when an
incentive stock option is granted or exercised. If Participant sells shares
acquired upon exercise, after complying with the requisite holding periods,
any gain or loss realized upon such sale will be long-term capital gain or
loss. The Corporation will not be entitled to take a deduction as a result of
any such sale. If the Participant disposes of such shares before complying
with the requisite holding periods, the Participant will recognize ordinary
income and the Corporation will be entitled to a corresponding deduction.
A Participant recognizes no taxable income and the Corporation is not
entitled to a deduction when a nonqualified option is granted. Upon exercise
of a non-qualified option, a Participant will realize ordinary income in an
amount equal to the excess of the fair market value over the exercise price,
and the Corporation will be entitled to a corresponding deduction. Special
rules may apply in the case of a non-qualified option exercised by a
Participant who is subject to the short-swing profit recapture rules of
Section 16(b) of the Exchange Act. Upon the sale of the option shares, the
Participant will realize short-term or long-term capital gain or loss,
depending on whether the shares have been held for more than one year, equal
to the difference between the sale price of the shares and the fair market
value of the shares on the date that the Participant recognized income with
respect to the option exercise. A Participant recognizes no taxable income
and the Corporation is not entitled to a deduction when an SAR is granted.
Upon exercise of an SAR, a Participant will realize ordinary income in an
amount equal to the difference between fair market value of the stock on the
date of its exercise and its fair market value on the date of grant, and the
Corporation will be entitled to a corresponding deduction. Special rules may
apply if a Participant who is subject to Section 16(b) of the Exchange Act
receives shares upon exercising an SAR.
A Participant realizes no taxable income and the Corporation is not
entitled to a deduction when a restricted stock award is made. When the
restrictions on the shares of restricted stock lapse, the Participant will
realize ordinary income equal to the fair market value of the shares, and the
Corporation will be entitled to a corresponding deduction. Upon the sale of
the shares, the Participant will realize short-term or long-term capital gain
22
<PAGE>
or loss, depending on whether the shares have been held for more than one
year. Such gain or loss will be equal to the difference between the sale
price of the shares and the fair market value of the shares on the date that
the Participant recognized the income. A Participant will be not be taxed on
the grant of performance shares but will recognize ordinary income on the
full amount received in payment for such shares when they are paid, based on
the extent to which the Corporation has met the specified performance goals.
At the time of payment for the performance shares, the Corporation will be
entitled to a deduction equal to the income that the Participant recognizes.
The Board of Directors recommends that stockholders vote FOR the proposal to
ratify and approve the amendment and restatement of the Stock-Based Incentive
Compensation Plan for Officers and Key Employees.
1997 STOCKHOLDER PROPOSALS
In the event that a stockholder desires to have a proposal included in the
proxy statement for the 1997 Annual Meeting of Stockholders; the proposal
must be received by the Corporation in writing on or before June 1, 1997, by
certified mail, return receipt requested, and must comply in all respects
with applicable rules and regulations of the Securities and Exchange
Commission, the laws of the state of Delaware and the Corporation's By-Laws
relating to such inclusion. Stockholder proposals may be mailed to the
Corporate Secretary, Carpenter Technology Corporation, 101 West Bern Street,
Reading, PA 19601.
OTHER BUSINESS
The Board of Directors and management know of no matters to be presented
at the meeting other than those set forth in this proxy statement. However,
if any other business is properly brought before the meeting or any
adjournment thereof, the proxy holders will vote in regard thereto according
to their discretion insofar as such proxies are not limited to the contrary.
By order of the Board of Directors.
JOHN R. WELTY
Secretary
23
<PAGE>
APPENDIX A
PROPOSED AMENDMENT AND RESTATEMENT
CARPENTER TECHNOLOGY CORPORATION
STOCK-BASED INCENTIVE COMPENSATION PLAN FOR
OFFICERS AND KEY EMPLOYEES
AMENDED AND RESTATED, JUNE 27, 1996
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 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
"disinterested persons" as defined in Rule 16b-3(c)(2)(i) 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. Section 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.
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 9 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 individu-
A-1
<PAGE>
ally 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; (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 Section 11, 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 the Corporation or a combination thereof, is
1,500,000 (such shares being referred to herein as "Shares"); provided,
however, that in no event shall the number of Shares to be issued upon the
exercise of ISOs granted under Section 6 at any time exceed 500,000. Shares
reserved for issuance or delivery in respect of any terminated, expired or
forfeited awards may again be subject to award under the Plan. 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 related Option upon exercise
of the corresponding Tandem SAR), any Shares subject to such award shall be
available for the grant of an 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) 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. 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 ISO 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 other than by death, an Option that is an ISO must be
exercised prior to its expiration during the three month period beginning on
the last day of employment (one year period in the event of a separation from
service due to "disability" within the meaning of Section 422(c)(6) of the
Code). Notwithstanding the above, the agreement under which a NQSO is granted
shall set forth the extent to which the participant shall have the right to
exercise the NQSO 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 NQSOs issued pursuant to this Section 6, and may
reflect distinctions based on the reasons for termination of employment.
A-2
<PAGE>
(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
three months.
(e) The Committee may grant Options pursuant to the achievement of
Performance Goals, as described in Section 10 of this Plan, and it may impose
restrictions upon the vesting and exercise of Options 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
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 the 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 and to vote such shares.
(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.
(d) The Restricted Stock agreement shall set forth the extent to which the
participant shall have the right to exercise 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 10 of this Plan, and it may
impose restrictions upon the vesting of Restricted Stock on the attainment of
Performance Goals.
8. 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.
A-3
<PAGE>
(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 8, 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 10 of this Plan, and it may impose
restrictions upon the vesting and exercise of SARs on the attainment of
Performance Goals.
9. 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 10 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 totalling 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 10, 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.
(d) 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 which
have been earned, but not yet distributed to participants. In addition,
participants may, at the discretion of the Committee, be entitled to exercise
their voting rights with respect to such Shares.
A-4
<PAGE>
(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.
(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 9(g), all Performance Units or Performance Shares shall be forfeited
by the participant to the 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
12(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 with 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.
10. 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 Section 162(m) and Treas.
Reg. Section 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.
11. ADJUSTMENT PROVISIONS.
If the Corporation shall at any time change the number of issued shares of
Stock without new consideration to the Corporation (such as by stock
dividends, stock splits, stock combinations, stock exchanges or recapital-
A-5
<PAGE>
ization), the total number of Shares reserved for issuance under this Plan
and the number of Shares covered by each outstanding award shall be adjusted
so that the aggregate consideration payable to the 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 the 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.
12. 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 9(j).
(b) For purposes of this Plan, a "Change in Control Event" shall be deemed
to have occurred if (i) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) other than a trustee or other
fiduciary holding securities under an employee benefit plan of the
Corporation or a corporation owned, directly or indirectly, by the
stockholders of the Corporation in substantially the same proportions as
their ownership of stock of the Corporation, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing 20% or more of the
combined voting power of the Corporation's then outstanding securities
(unless such person or group has entered into an agreement approved by the
Board imposing limitations or prohibitions on such person or group with
respect to ownership of additional securities of the Corporation or
activities intended to effect the changes in Board composition described in
clause (ii) or the transactions described in clauses (iii) and (iv) of this
subsection); or (ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board and any new director
(other than a director designated by a person who has entered into an
agreement with the Corporation to effect a transaction described in clauses
(i), (iii) or (iv) of this Subsection) whose election by the Board or
nomination for election by the Corporation's stockholders was approved by a
vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof; or (iii) the stockholders of the Corporation
approve a merger or consolidation of the Corporation with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Corporation outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 75% of the
combined voting power of the voting securities of the Corporation or such
surviving entity outstanding immediately after such merger or consolidation,
or (iv) the stockholders of the Corporation approve a plan of complete
liquidation of the Corporation or an agreement for the sale or disposition by
the Corporation of all or substantially all the Corporation's assets.
(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.
(d) Notwithstanding anything in this Section 12 to the contrary, no Change
in Control Event shall be deemed to have occurred with respect to a
participant who is part of a purchasing group which consummates the Change in
Control Event. A participant shall be deemed "part of a purchasing group" for
the purpose of this Section 12(d) if the participant is an equity
participant, has been identified as a potential equity participant or has
agreed to become an equity participant in the purchasing company or group
(except for: (i) passive ownership of less than three percent of shares of
voting securities of the purchasing company; or (ii) ownership of equity
participation in the purchasing company or group which is otherwise not
deemed to be significant, as determined prior to the Change in Control by a
majority of the disinterested Directors).
A-6
<PAGE>
13. 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 11, (ii) permit Options to be
granted at less than fair market value, (iii) permit any person who is not
both a "disinterested person" and an "outside director" from serving as a
member of the Committee contemplated in Section 2, (iv) change the provisions
of this Section 13, 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. 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 13 shall not
affect awards outstanding under the Plan at the time of termination.
14. 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 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 member
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.
15. EFFECTIVE DATE OF THE AMENDED AND RESTATED PLAN.
The amendment and restatement of 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
October 21, 1996. If the stockholders do not ratify the amendment and
restatement of the Plan, the Plan as adopted on June 23, 1993 shall remain in
effect and all Performance Units and Performance Shares awards granted under
Section 9 of the amended and restated Plan shall be null and void.
A-7
<PAGE>
Directions to Site
of Annual Meeting
of
Carpenter Technology Corporation
at
The Inn At Reading
MAP
<PAGE>
/X/ Please mark your 0276
votes as in this
example.
This proxy, when properly executed, will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR election of
directors and FOR proposals 2 and 3.
The Board of Directors recommends a vote FOR all nominees and proposals 2,
and 3.
- --------------------------------------------------------------------------------
FOR WITHHELD 2. Approval of FOR AGAINST ABSTAIN
1. Election of | | | | independent | | | | | |
Directors. accountants.
(See Reverse) 3. Approval of FOR AGAINST ABSTAIN
To withhold your vote for any amendment and | | | | | |
nominee(s), write the name(s) here: restatement of
the Stock-Based
Incentive
- ----------------------------------- Compensation Plan
for Officers and
Key Employees.
4. In the discretion of the proxies named herein, the proxies are authorized
to vote upon other matters as are properly brought before the meeting.
------------------------------------------------------------------------
YES NO
I plan | | | |
to attend the
Meeting.
The signer hereby revokes all proxies heretofore
given by the signer to vote at said meeting or any
adjournments thereof.
Please sign exactly as your name appears hereon.
Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or
guardian, please give full title as such.
-----------------------------------------------------
-----------------------------------------------------
SIGNATURE(S) DATE
THIS IS YOUR PROXY. YOUR VOTE IS IMPORTANT.
[LOGO]
ADMISSION TICKET
ANNUAL MEETING
OF
STOCKHOLDERS OF CARPENTER TECHNOLOGY CORPORATION
MONDAY, OCTOBER 21, 1996
4:00 P.M.
THE INN AT READING
WYOMISSING, PENNSYLVANIA
AGENDA
o Election of four Directors.
o Approving the appointment of independent accountants of the
Corporation for the fiscal year ending June 30, 1997.
o Approving an amendment and restatement of the Stock-Based
Incentive Compensation Plan for Officers and
Key Employees.
o Transacting such other business as may properly come before
the meeting.
It is important that your shares are represented at this
meeting, whether or not you attend the meeting in person.
To make sure your shares are represented, we urge you to
complete and mail the proxy card above.
IF YOU PLAN TO ATTEND THE 1996 ANNUAL MEETING OF STOCKHOLDERS,
PLEASE MARK THE APPROPRIATE BOX ON THE PROXY CARD ABOVE.
Present this ticket to the Carpenter Technology Corporation
representative at the entrance to the Grant Room at The Inn At
Reading.
<PAGE>
CARPENTER TECHNOLOGY CORPORATION
Proxy Solicited on Behalf of the Board of Directors
for the Annual Meeting October 21, 1996
P The undersigned stockholder of Carpenter Technology Corporation
R appoints PAUL R. ROEDEL and JOHN R. WELTY, or either of them, proxies
O with full power of substitution, to vote all shares of stock which
X the stockholder would be entitled to vote if present at the Annual
Y Meeting of Stockholders of CARPENTER TECHNOLOGY CORPORATION to be
held at The Inn At Reading, in the Grant Room, Wyomissing,
Pennsylvania, on Monday, October 21, 1996 at 4 p.m., local time, and
at any adjournments thereof, with all powers the stockholder would
possess if present. The stockholder hereby revokes any proxies
previously given with respect to such meeting.
Election of Directors. Comments: (change of address)
Nominees -- Term to Expire 1999
Marcus C. Bennett ----------------------------
William S. Dietrich II
Carl R. Garr ----------------------------
Marlin Miller, Jr.
THIS PROXY WILL BE VOTED AS SPECIFIED ON THE REVERSE SIDE, BUT IF NO
SPECIFICATION IS MADE, IT WILL BE VOTED FOR PROPOSALS 1, 2 AND 3 and WILL BE
VOTED IN THE DISCRETION OF THE PROXIES ON OTHER MATTERS AS MAY COME BEFORE
THE MEETING OR ANY ADJOURNMENT THEREOF.
THIS CARD ALSO CONSTITUTES VOTING INSTRUCTIONS FOR ANY SHARES HELD FOR THE
STOCKHOLDER IN THE FOLLOWING: CARPENTER TECHNOLOGY CORPORATION'S EMPLOYEE
STOCK OWNERSHIP PLAN, SAVINGS AND STOCK-BASED INCENTIVE COMPENSATION PLANS.
(PLEASE DATE AND SIGN ON REVERSE SIDE.)
FOLD AND DETACH HERE
LOGO
DirectSERVICE(TM)
As part of Carpenter's ongoing effort to provide enhanced shareholder
services, Carpenter Technology Corporation replaced it's existing Dividend
Reinvestment Plan with DirectSERVICE, a new Dividend Reinvestment and Common
Stock Purchase Program.
o The program is available to both registered shareholders and
non-shareholders.
o Shareholders of record are automatically eligible to participate in the
program.
o New shareholders can open an account with as little as $500.00.
o Carpenter pays your transaction fees and brokerage commissions for stock
purchases with additional cash payments and reinvested dividends.
o You can reinvest dividends in full or in part, or receive cash dividend
payments electronically or by check.
o Your purchase and sale orders are processed at least once every five
business days.
o You can deposit your stock certificates for safe keeping or you can
request a certificate for whole shares at any time. In either case, there
is no cost to you.
The plan is administered by First Chicago Trust Company of New York.
SERVICE AVAILABLE -- TO ASSIST OUR STOCKHOLDERS
ELECTRONIC FUNDS TRANSFER (DIRECT DEPOSIT) OF DIVIDENDS
o Dividend monies deposited directly into your bank account.
o No worry of lost dividend checks.
o Immediate access of dividend money, no mail delays.
o Verification of dividend receipts on monthly bank statement.
- --------------------------------------------------------------------------------
Inquiries concerning the DirectSERVICE Program should be directed to the
Agent: First Chicago Trust Company, P.O. Box 2598, Jersey City, NJ
07303-2598 Telephone: 1-201-324-1225.
To attain an Electronic Funds Transfer Authorization Form or a DirectSERVICE
Plan brochure and Authorization Form, please contact:
Carpenter Shareholder Services
First Chicago Trust Company
P.O. Box 2500
Jersey City, NJ 07303-2500
Be sure to include a reference to Carpenter in your correspondence.
If you prefer, you may call First Chicago at (201) 324-1225 between 9:00 a.m.
and 6:00 p.m. Eastern Time.
