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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Carpenter Technlogy Corporation
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / 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:
___________________________________________________________________________
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[CARPENTER LETTERHEAD]
September 26, 1997
To Our Stockholders:
It is my pleasure to invite you to attend the 1997 Annual Meeting of
Stockholders of Carpenter Technology Corporation, to be held at 4:00 p.m. on
October 20, 1997. The meeting will be held at The Inn At Reading, located in
Wyomissing, Pennsylvania. The doors of the ballroom will open at 3:00 p.m.
Business scheduled to be considered at the meeting includes the election of
four (4) Directors, the approval of the appointment of Coopers & Lybrand,
L.L.P., as independent public accountants for the Corporation for 1998, and the
approval of the amended and restated Non-Qualified Stock Option Plan for
Non-Employee Directors including an increase in the number of shares reserved
for the revised Plan. Additional information concerning these matters is
included in the Notice of Annual Meeting and Proxy Statement. I will review
with you the Corporation's operations during the past year and will be
available to respond to questions during the meeting.
If you plan to attend the meeting, please bring the Admission Ticket located on
the bottom half of your Proxy Card with you to the meeting. If your shares are
currently held in the name of your broker, bank or other nominee, and you wish
to attend the meeting, you should obtain a letter from your broker, bank or
other nominee indicating that you are the beneficial owner of a stated number
of shares of stock as of the record date, September 2, 1997.
To ensure proper representation of your shares at the meeting, please carefully
mark the enclosed Proxy Card, then sign, date and return it at your earliest
convenience.
I look forward to seeing you at the meeting.
Sincerely,
/s/ ROBERT W. CARDY
- -------------------------------------
ROBERT W. CARDY
Chairman,
President and Chief Executive Officer
<PAGE>
September 26, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
------
<S> <C>
NOTICE OF ANNUAL MEETING ...................................................... Cover
PROXY STATEMENT ............................................................... 1
General Information ............................................................ 1
Board of Directors .............................................................. 2
Committees of the Board ........................................................ 3
Election of Directors ......................................................... 4
The Board of Directors ......................................................... 5
Beneficial Ownership ......................................................... 8
Executive Compensation ......................................................... 9
Human Resources Committee Report ............................................. 10
Description of Director Compensation Program ................................. 13
Stockholder Return Performance Presentation .................................... 14
Compliance with Section 16(a) .................................................. 15
Retirement Benefits ............................................................ 15
Savings Plan of Carpenter Technology Corporation ............................... 17
Employee Stock Ownership Plan ................................................ 17
Stock Option .................................................................... 18
Stock Options/SAR Grants in Fiscal Year 1997 .................................... 19
Stock Option/SAR Exercises and Year End Holdings .............................. 19
Appointment of Auditors ......................................................... 20
Approval of Amended and Restated Non-Qualified Stock Option Plan for Non-Employee
Directors ..................................................................... 20
1998 Stockholder Proposals ................................................... 22
Other Business ............................................................... 22
Stock Based Compensation Plan for Non-Employee Directors ........................ A-1
</TABLE>
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[CARPENTER LOGO]
------------
Notice of Annual Meeting of Stockholders
on
October 20, 1997
------------
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders of
CARPENTER TECHNOLOGY CORPORATION will be held at The Inn At Reading,
Wyomissing, Pennsylvania on Monday, October 20, 1997 at 4:00 p.m., local time,
for the purpose of:
(1) Electing four (4) Directors (Proposal No. 1);
(2) Approving the appointment of independent accountants of the Corporation
for the fiscal year ending June 30, 1998 (Proposal No. 2);
(3) Approving an amendment and restatement of the Non-Qualified Stock
Option Plan for Non-Employee Directors including an increase in the
number of reserved shares (Proposal No. 3); and
(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,
1997, 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.
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. If
you plan to attend the meeting, please use the Admission Ticket attached to
your Proxy Card. You may, of course, attend the meeting without an Admission
Ticket upon proper identification.
By Order of the Board of Directors,
/s/ JOHN R. WELTY
--------------------------------------
JOHN R. WELTY
Vice President,
General Counsel and Secretary
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[CARPENTER LOGO]
September 26, 1997
------------
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
20, 1997, 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, 1997, there were 19,503,518 shares of common stock issued
and outstanding, each of which is entitled to one vote. There were also 446.097
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
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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.
The Board of Directors believes that as of September 2, 1997, the
following individuals and entity owned more than 5% of the Corporation's issued
and outstanding shares of common stock:
Number of Shares Percent
Name and Address of Beneficial Owner Beneficially Owned of Class
- -------------------------------------- -------------------- ---------
Mr. & Mrs. Peter C. Rossin 2,434,494(1) 12.3%
1500 Oliver Bldg.
Pittsburgh, PA 15222
State Street Bank and Trust Company 1,986,954(2) 10.0%
P.O. Box 1389
Boston, MA 02104
- ------------
1) As a result of Carpenter's acquistion of Dynamet Incorporated, Mr. Peter C.
Rossin became Director of the Corporation. He and his wife own of record or
beneficially a total of 2,434,494 shares of the Corporation's common stock
or approximately 12% of the shares outstanding as of September 2, 1997.
These shares are subject to a Standstill Agreement which provides for
certain limitations on either the increase or disposal of their interest in
the Corporation's common stock, solicitation of proxies, involvement in
tender offers, business combinations or restructuring of voting securities
affecting the Corporation and on their ability to seek control of or
influence the Corporation's Board of Directors or Management. In addition,
the Standstill Agreement provides that the Board will recommend the
election, as a Director of the Corporation, of Mr. Rossin or another person
that he and the other former Dynamet shareholders designate, if, after
consultation, the Board determines such person is reasonably acceptable.
The Standstill Agreement expires in 2007, unless terminated earlier as a
result of a change in control of the Corporation or a reduction of the
voting power of the former Dynamet shareholders below 5% of the
Corporation's outstanding shares.
2) State Street Bank and Trust Company has advised the Corporation that, acting
as Trustee for various collective investment funds for employee benefit
plans, other index accounts, and various personal trusts; it had sole
voting power with respect to 75,700 shares of common stock; sole
dispositive power with respect to 77,700 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 1,017,060 shares of common stock;
and acting as Trustee for the Corporation's ESOP, it had shared voting
power and shared dispositive power with respect to 892,194 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 paid 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 expenses in forwarding proxy material to beneficial
owners of the Corporation's stock.
Board of Directors
The Corporation's Board of Directors held 12 meetings during fiscal year
1997. Mr. Peter C. Rossin was elected February 28, 1997, to the Board of
Directors. From the date of Mr. Rossin's election through the end of the fiscal
year, he was scheduled to attend six Board of Directors and Committee meetings.
Due to an illness, Mr. Rossin was unable to attend two of the six scheduled
meetings, therefore, Mr. Rossin's attendance was 66%. The average attendance
for all Directors at these meetings was 94%.
2
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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 currently 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 and the
Corporation's Manager-Internal Audit. The Committee held three meetings during
fiscal year 1997. 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; Bennett; Evarts; Fitzpatrick; Langenberg; Miller; 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. The Committee also considers the
performance and 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 three times during fiscal year 1997. 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; Dietrich; Fitzpatrick; Garr; Kay; Langenberg;
Lawless; and Wolfe.
The Corporate Governance Committee will consider sound and meritorious
nomination suggestions from stockholders. All letters of recommendation for
nomination at the 1998 Annual Meeting of Stockholders should be received by the
Corporate Secretary at the Corporation's headquarters on or before August 21,
1998, but not sooner than July 22, 1998. 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
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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 1997. 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; Humphrey; Rossin; and Ms. Turner.
The Finance Committee reviews and recommends certain actions to the Board
of Directors relating primarily to the Corporation's capital structure, cash
management strategies, pension fund asset management and dividend policy. The
Committee met two times during fiscal year 1997. Current members of the
Committee are Messrs. Miller, Chairman; Cardy; Garr; Humphrey; Lawless; Roedel;
Rossin; and Wolfe.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Corporation's Board of Directors consists of 16 Directors serving in
three classes, the respective terms of which expire alternately over a
three-year period.
As of the date of this meeting, the following four Directors are retiring
from service on the Board: Carl R. Garr, Arthur E. Humphrey, Frederick C.
Langenberg and Paul R. Roedel. They will retire from the Board in accordance
with the By-Laws which generally require any Director to retire at the next
annual meeting of stockholders after the Director attains age 70. Arthur E.
Humphrey, whose current term expires in 1998, has chosen not to serve the
remaining period of his term.
Unless otherwise specified by the stockholders, the shares represented by
the proxies will be voted for the four nominees for Directors listed below.
Messrs. C. McCollister Evarts, M.D., William J. Hudson, Jr., Peter C. Rossin,
and Kenneth L. Wolfe are nominated for terms which will expire at the October,
2000 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 persons who have been nominated to stand for election at the
1997 Annual Meeting of Stockholders and the remaining eight Directors whose
terms are continuing appear below.
The Board of Directors recommends that you vote FOR the election of
Messrs. Evarts, Hudson, Rossin and Wolfe.
Nominees -- Term to Expire 2000
[PICTURE] DR. C. McCOLLISTER EVARTS, age 66, is Chief Executive Officer,
Senior Vice President for Health Affairs, Dean, College of
Medicine, and Professor of Ortho paedics, The
Pennsylvania State University, College of Medicine and
University Hospitals, The Milton S. Hershey Medical Center. He
has held these positions since 1987. He also became President
and Chief Academic Officer of the Pennsylvania State Health
System in July 1997. He is past Chair 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, the Board of Managers of Milton Hershey School,
Capital Region Health Futures Project, the Capital Region
Economic Development Corporation, and the Lehigh Valley
Hospital. Dr. Evarts has been a Director of the Corporation
since 1990, and is a member of the Audit Committee and Human
Resources Committee.
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[PICTURE] WILLIAM J. HUDSON, JR., age 63, 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.
[PICTURE] PETER C. ROSSIN, age 73, is the former Chairman, CEO and
founder of Dynamet. Before founding Dynamet in 1967, Mr.
Rossin had held various production and operations positions at
Crucible Steel Corporation, Fansteel Metallurgical
Corporation, and Cyclops Corporation. He has been a Director
of the Corporation since February 28, 1997, and is a member of
the Finance Committee and Human Resources Committee.
(PICTURE) KENNETH L. WOLFE, age 58, 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
Corporate Governance Committee and Finance 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 1998
[PICTURE] ROBERT W. CARDY, age 61, 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.
5
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[PICTURE] EDWARD W. KAY, age 69, 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 Corporate Governance Committee.
[PICTURE] ROBERT J. LAWLESS, age 50, is Chief Executive Officer and
Director, McCormick & Company, Incorporated. Mr. Lawless had
been serving as President and Chief Operating Officer
since January 1996. He served as Executive Vice President and
Chief Operating Officer since 1995. Mr. Lawless serves as a
member of the Board of Directors of the United Way of Central
Maryland, the Greater Baltimore Committee and the Grocery
Manufacturers of America, Inc., is a member of the Maryland
Economic Development Commission and serves on the Junior
Achievement of Central Maryland Executive Council. Mr. Lawless
has been a Director of the Corporation since April 1997, and
serves on the Corporate Governance Committee and Finance
Committee.
[PICTURE] KATHRYN C. TURNER, age 50, is Chairman 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
COMSAT Corporation and Phillips Petroleum Company. She is
actively involved in 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.
Term to Expire 1999
[PICTURE] MARCUS C. BENNETT, age 61, is Executive Vice President and
Chief Financial Officer and a Director of Lockheed Martin
Corporation. He joined Martin Marietta Corporation in
1959 and has held various administrative and finance positions
with Martin Marietta and Lockheed Martin Corporation. He also
is a Director of COMSAT Corporation and Martin Marietta
Materials, Inc. and a member of the Board of Directors of the
Private Sector Council and the Georgia Tech Advisory Board. Mr.
Bennett has been a Director of the Corporation since 1993,
chairs the Human Resources Committee and serves on the Audit
Committee.
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[PICTURE] WILLIAM S. DIETRICH II, age 59, President of Dietrich
Industries, Inc. Mr. Dietrich has served as President of
Dietrich Industries, Inc., since 1968. Dietrich Industries, a
subsidiary of Worthington Industries, Inc. is a manufacturer
of metal framing for commercial and residential construction
markets. 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 1996 and is a
member of the Corporate Governance Committee and Human
Resources Committee.
[PICTURE] J. MICHAEL FITZPATRICK, age 50, is Vice President and Chief
Technology Officer, Rohm and Haas. Dr. Fitzpatrick was named
Chief Technology Officer in 1995. He was elected Vice
President and Director of Research in 1993. Dr. Fitzpatrick is
a member of The Scientific Advisory Board of Ampersand
Ventures and is also a member of the Corporate Advisory Board
of the southeastern Pennsylvania region of the American Cancer
Society. Dr. Fitzpatrick has been a Director of the
Corporation since January 1997, and is a member of the Audit
Committee and Corporate Governance Committee.
[PICTURE] MARLIN MILLER, JR., age 65, 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.
There is no family relationship between any of the Directors or nominees.
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Security Ownership of Directors and Officers
The following table sets forth information regarding beneficial ownership
as of September 2, 1997, 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 Percent of
of Shares Outstanding
Name Beneficially Owned(2)(3) Shares(4)
---- -------------------------- ------------
<S> <C> <C>
Bennett, M.C. .......................................... 3,828
Cardy, R. W. .......................................... 70,285(a) .4
Dietrich, W. S. ....................................... 5,000
Evarts, C. M. .......................................... 9,200
Fitzpatrick, J. M. .................................... -0-
Garr, C. R. ............................................. 11,100 .1
Hudson, W. J. .......................................... 6,092
Humphrey, A.E. .......................................... 9,600(b)
Kay, E. W. ............................................. 10,000 .1
Langenberg, F. C. ....................................... 13,000 .1
Lawless, R. J. .......................................... -0-
Miller, M. ............................................. 9,800
Roedel, P. R. .......................................... 63,172(c) .3
Rossin, P.C. .......................................... 2,434,494(d) 12.3
Turner, K. C. .......................................... 3,555
Wolfe, K.L. ............................................. 5,000
Draeger, D. M. .......................................... 25,400(a) .1
Cottrell, G. W. ....................................... 52,757(a) .3
Fiore, N. F. .......................................... 45,752(a) .2
Weiler, R. J. .......................................... 39,916(a) .2
All directors and officers as a group (29 in all) ...... 2,949,749 14.9
</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, 1997, as follows: R.
W. Cardy, 32,000 shares; G. W. Cottrell, 47,220 shares; N. F. Fiore,
40,453 shares; R. J. Weiler, 33,500 shares; D. M. Draeger, 19,000 shares;
C. R. Garr and M. Miller, 11,000 shares each; A. E. Humphrey, 10,100
shares; C. M. Evarts and F. C. Langenberg, 10,000 shares each; E. W. Kay,
7,000 shares; P. R. Roedel, 9,000 shares; K. L. Wolfe, 6,000 shares; M. C.
Bennett, W. S. Dietrich and W. J. Hudson, 4,000 shares each; K. C. Turner,
4,702 shares, and Directors and Officers as a group 352,523.
(a) Share ownership for Messrs. Cardy, Draeger, Cottrell, Fiore, and
Weiler respectively include 2,723; 327; 1,214; 11; and 336 held under
the Savings Plan of Carpenter Technology Corporation. Share ownership
also includes 94 shares for Messrs. Cardy, Cottrell, Fiore and Weiler
each and 12 shares for Mr. Draeger held under the 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.
(b) Share ownership shown for Mr. Humphrey includes 500 shares held in a
custodial account for grandchild.
(c) Share ownership shown for Mr. Roedel includes 11,873 shares held under
the Savings Plan of Carpenter Technology Corporation and 16,035 shares
as a co-trustee with daughters.
(d) Mr. Peter C. Rossin's holdings are subject to a Standstill Agreement
as detailed in footnote 2, on page 2 of this Proxy Statement.
(3) The amount shown for all Officers as a group represent 13,159 shares held
under the Savings Plan of Carpenter Technology Corporation; and 1,137
shares held under the 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,
1997, 1996 and 1995 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) (3)
- ------------------------ -------- --------- --------- --------- ---------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert W. Cardy 1997 451,585 165,732 0 0 30,000 65,560 4,500
Chairman, President, 1996 411,200 230,709 0 0 32,000 0 4,471
and CEO 1995 374,404 259,835 0 130,250 20,000 0 4,468
Dennis M. Draeger 1997 294,231 104,452 0 0 15,000 33,535 8,827
Senior Vice President
Specialty Alloys
Operations
G. Walton Cottrell 1997 212,679 54,658 0 0 8,000 22,875 4,703
Senior Vice President 1996 196,046 81,566 0 0 10,700 0 4,540
Finance & CFO 1995 187,592 90,417 0 29,958 5,600 0 4,632
Nicholas F. Fiore 1997 200,014 116,608 0 0 6,900 22,875 4,633
Senior Vice President 1996 190,888 79,410 0 0 10,600 0 4,586
Engineered Products 1995 182,208 87,821 0 29,306 5,400 0 4,643
Group
Richard J. Weiler 1997 177,173 38,978 0 0 3,700 12,215 4,569
Vice President 1996 170,844 62,868 0 0 4,600 0 4,518
Corporate Development 1995 165,485 68,014 0 23,119 4,200 0 4,562
</TABLE>
- ------------
(1) 6,530 common shares awarded in the aggregate to the named Officers on June
28, 1995, valued at $32.5625 per share. At the end of fiscal year 1997,
Messrs. Cardy, Cottrell, Fiore, and Weiler held 4,716; 1,292; 1,352; and
946 shares, respectively of restricted stock valued at $215,757, $59,109;
$61,854; and $43,280 based on the June 30, 1997, closing price of $45.75.
Shares are scheduled to vest over the next three years. Dividends on all
stock awards are paid at the same rate as paid to all stockholders.
(2) This column reports the cash value earned in Performance Share payouts
following fiscal year 1997.
(3) Amounts of All Other Compensation are amounts contributed for fiscal 1997,
1996, and 1995 for the named Officers under the Corporation's Savings
Plan.
Currently any Director may elect to defer a portion or all of his or her
compensation. 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.
All such deferrals are 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 with Robert W.
Cardy, G. Walton Cottrell and Nicholas F. Fiore dated April 3, 1995, and Dennis
M. Draeger dated August 8, 1996. 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) or by the named Officer for good reason, he will receive
an additional lump sum payment equal to two
9
<PAGE>
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 nonmanagement Directors, and the Committee is
responsible for the establishment and oversight of the Corporation's executive
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.
This philosophy remains unchanged in 1997 and continues to serve as the
foundation for executive compensation policy and program application.
The Corporation targets pay at market competitive (median) levels for
achievement of expected levels of performance. During fiscal 1997, 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 of similar size.
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--with gaps appearing in base salary, annual
bonuses, and long-term incentive opportunities. The nature and magnitude of any
shortfalls vary for each named Executive Officer.
Base Salary
In the aggregate, base salaries are targeted at market 50th percentile
levels and are adjusted by the Committee to recognize each individual's
responsibility, experience, and value to the organization. Increases to base
salary are driven primarily by assessments of individual performance. Base
salary ranges were adjusted by 3% in fiscal year 1997 to reflect competitive
market movement. Actual base salary adjustments for executives varied based on
performance, position value, current pay in relation to competitive norms, and,
to a lesser extent, positioning within respective job grades. As a group, the
named Officers' base salaries fall below the market 50th percentile (adjusted
for company size differences).
Annual Incentives
The Executive Annual Compensation Plan (EACP) provides short-term variable
compensation for named Executive Officers and other eligible Executives with
payments based on combinations of
10
<PAGE>
Corporation and business unit financial performance and, to a lesser extent,
based on individual contributions. At targeted levels of performance, 80% of
each award is tied to financial results and 20% is tied to individual
performance. For purposes of EACP administration, corporate financial
performance is defined by return on equity (ROE) whereas unit financial
performance is characterized by return on assets or controllable earnings
(EBIT). Threshold levels of financial results must be attained to earn awards
under the Plan. The Plan does provide the Committee with the flexibility to
adjust awards for other material factors influencing performance.
For fiscal year 1997, the Committee established a ROE objective of 19.5%
and a target performance threshold level before any payout was made of 80% of
target. The Corporation achieved a 16.9% ROE in fiscal year 1997. Given the
Corporation's performance in relation to target, actual payouts based upon
total Corporation financial performance were 66.8% of target, except for Dr.
Fiore. Dr. Fiore's EACP payment was based upon a combination of business unit
performance of the Engineered Products Group and total Corporation performance,
resulting in a payout of 166.5% of target. The amounts paid under the EACP to
the named Officers for fiscal year 1997 are included in the Summary
Compensation Table.
Long-Term Incentives
The Corporation continues to deliver a significant portion of an
executive's total pay opportunity in the form of long-term incentive
compensation. Long-term incentives are viewed to be a key program element given
the Committee's desire to reinforce connections between sustainable financial
performance, shareholder value creation and executive pay. Consistent with
direction set in 1996, long-term incentive awards in 1997 included grants of
non-qualified stock options and performance shares. All 1997 stock option
awards were issued with exercise prices equal to the fair market value of the
underlying shares. Under the performance share plan, 1997 Participants were
granted the opportunity to receive common shares at the conclusion of a
three-year performance period. All performance share awards are contingent on
the Corporation's ROE achievement measured relative to the performance of the
Standard & Poors (S&P) 500 Index. 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 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.
Participants were issued common shares for the 1997 transaction period.
The Corporation achieved a 16.9% ROE, compared to the ROE performance of the
S&P 500 Index of 16.7%. Based on this achievement, Participants were awarded
100% of their target shares.
The magnitude of stock option grants and performance share opportunities
is reviewed annually. Based on the results of a review conducted by an outside
consulting firm, long-term incentive grant guidelines were increased to more
closely match 50th percentile pay opportunities. New award guidelines affect
stock option and performance share opportunities granted or initiated on or
after June 26, 1997. Although competitive practices influence long-term
incentive grant guidelines, actual grants can be increased or decreased based
on the Committee's assessment of the Corporation's performance, individual
contribution, and other relevant factors.
Stock Ownership Guidelines
In keeping with the objectives of increasing management's ownership stake,
the Corporation introduced stock ownership guidelines in 1997. Over time,
Executives are expected to achieve and maintain ownership of 3 times base
salary for the Chief Executive Officer, 1.5 times base salary for Senior Vice
Presidents and Vice Presidents, and 1 times base salary for other covered
Executives. The primary intent of these guidelines is to significantly increase
the extent to which each Executive's personal wealth is directly linked to the
performance of the Corporation's common stock. During 1997, beneficial
ownership of this entire group of executives increased 47% over 1996 levels.
Policy with Respect to the $1 Million Deduction Limit
Section 162(m) of the Internal Revenue Code generally limits the corporate
tax deduction for compensation paid to Executive Officers named in the Proxy to
$1 million, unless certain requirements
11
<PAGE>
are met. The Corporation's long-term incentive arrangements have been
structured to conform with Internal Revenue Code guidelines for
performance-based compensation and, as such, should preserve the deductibility
of these amounts. 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 had another excellent year.
Net sales were a record $939 million, a 9% increase over the prior year.
Earnings per share were $3.30 on net income of $60 million. The ROE for the
Corporation was 16.9%. Compared to the ROE of the S&P 500 of 16.7%, the
Corporation's results were quite impressive, particularly in view of the major
strategic actions, which included the acquisition of Dynamet and $94 million of
capital spending to increase capacity and reduce costs. Although fiscal 1997
was an excellent year, it was below targeted levels, resulting in Mr. Cardy's
annual bonus being lower than in fiscal 1996.
Findings of the competitive analysis of compensation for executive
officers found that pay levels, in the aggregate, were below 50th percentile
levels. The study also indicated that compensation opportunities and actual pay
for the Chairman and Chief Executive Officer were well below 50th percentile
levels. The quality of results attained by the Corporation and Mr. Cardy's
consistent record of achievement suggest that pay opportunities should be
competitive in nature. To that end, Mr. Cardy's compensation has been adjusted
accordingly.
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 to
$520,000. This adjustment is effective August 1, 1997.
Annual Incentives
Mr. Cardy received a $165,732 award in connection with the EACP (36.7% of
base salary) determined based on the Corporation's ROE and on Mr. Cardy's
personal performance. If the goals of the Corporation were achieved in fiscal
year 1997, Mr. Cardy would have received a bonus equal to 50% of his base
salary.
Long-Term Incentives
During fiscal 1997, the Committee approved a grant of 30,000 non-qualified
stock options. These options will vest fully one year after the date of grant.
The Committee also granted the opportunity to earn 5,200 performance shares.
The actual number of shares awarded to Mr. Cardy in connection with this grant
will vary with the Corporation's actual ROE relative to the S&P 500 during the
period 1998-2000. Mr. Cardy also received an award of 1,433 common shares in
connection with his 1997 performance share grant. This award of shares reflects
the Corporation's ROE performance relative to the S&P 500 during fiscal 1997.
SUBMITTED BY THE HUMAN RESOURCES COMMITTEE OF THE CORPORATION'S BOARD OF
DIRECTORS
Marcus C. Bennett, Chairman
William S. Dietrich II
Dr. C. McCollister Evarts
William J. Hudson, Jr.
Arthur E. Humphrey
Kathryn C. Turner
Peter C. Rossin
12
<PAGE>
Description of Director Compensation Program
Under the current and proposed compensation program, no Director who is an
employee of the Corporation is compensated as a member of the Board or any
Committee of the Board. In 1997, cash compensation for non-employee Directors
consisted of an annual retainer of $20,000 and a $1,000 meeting fee, plus
travel expenses, where appropriate, for each Board meeting attended. Non-
employee Directors received an $800 fee for each Committee meeting attended.
Committee chairpersons also received an annual retainer of $3,000. Stock-based
compensation opportunities were awarded in the form of periodic grants of
non-qualified options. After the 1996 Annual Meeting of Stockholders, the
non-employee Directors each received a grant of 2,000 options of the
Corporation's common shares, with an exercise price equal to the stock's fair
market value on that date. Directors are also subject to share ownership
guidelines that encourage the accumulation of a specified number of shares over
a period of three years.
Based on an extensive review of the Corporation's Director compensation
program, several revisions were proposed for the fiscal 1998 program contingent
upon shareholder approval. These changes are proposed to ensure the Director
compensation program will be fully competitive, highly performance oriented,
and link future compensation more closely to Corporation performance and
shareholder returns.
Following the 1997 Annual Meeting of Stockholders and upon shareholder
approval of Proposal No. 3, at least 50% of the annual retainer for Board
service will be paid in the Corporation's stock units that convert to an
equivalent number of shares at retirement. The value of these stock units will
vary based on the fair market value of the Corporation's common shares. The
remaining 50% can be paid in cash or, if elected, deferred and paid in either
cash or shares of stock at the time of distribution.
Upon shareholder approval of Proposal No. 3, active Directors will no
longer (with the exception of Edward W. Kay, who will retire in October 1998)
be eligible to receive retirement benefits offered in connection with the
Director Retirement Plan. The value earned to date under this Plan by active
Directors will be awarded to these Directors in the form of stock units that
convert to an equivalent number of shares at retirement.
Under the new program, non-employee Directors will receive an opportunity
to earn a target share award. This will replace the Director Retirement Plan
and link future compensation more closely with the Corporation's performance
and shareholder returns. However, due to Mr. Peter C. Rossin's Standstill
Agreement with the Corporation, he will not be eligible for target share awards
nor will he participate in the Directors Option Plan as a non-employee
Director. The target share award is reviewed annually and is initially set at
200 shares. The actual number of performance shares awarded to each Director is
tied to the Corporation's ROE relative to the S&P 500's average ROE. If the
Corporation's actual ROE is less than 85% of the average S&P 500's ROE, no
performance shares will be awarded. The number of performance shares awarded
will be greater or lesser than the original share target based upon actual ROE
measurements and, assuming the 85% threshold is achieved, will be made after
the completion of fiscal year 1998.
In combination, these revisions place a greater portion of the total
compensation for non-employee Directors "at risk" and reinforce the shared
interests of Carpenter Technology Corporation Directors and shareholders.
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, 1992 and ending
June 30, 1997.
Stockholder Return Performance Table
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
CARPENTER TECHNOLOGY, S&P 500 and Peer Group
June 1992-June 1997
CARPENTER TECHNOLOGY
300 |-------------------------------------------------------------------------|
| |
| |
250 |-------------------------------------------------------------------------|
| #& |
| * |
225 |-------------------------------------------------------------------------|
| |
| |
200 |-------------------------------------------------------------------------|
| |
| # |
175 |-------------------------------------------------------------------------|
| * & |
| * |
150 |-------------------------------------------------------------------------|
| #& |
| * |
125 |-------------------------------------------------------------------------|
| *& |
| # #& |
100 |-*#&---------------------------------------------------------------------|
| |
| |
75 |-------------------------------------------------------------------------|
| |
| |
50 |-------------------------------------------------------------------------|
| |
| |
25 |-------------------------------------------------------------------------|
| |
| |
0 |-------------------------------------------------------------------------|
92 93 94 95 96 97
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
CARPENTER TECHN100GY * 100 117.014 133.225 158.067 153.792 228.053
S&P 500 # 100 113.572 115.199 145.144 182.778 246.082
Peer Group & 100 115.582 103.699 147.434 166.357 242.337
</TABLE>
Notes:
(1) Assumes that the value of the investment in the Corporation's common stock,
and each index, was $100 on June 30, 1992, and that all dividends were
reinvested.
The Peer Group Index is comprised of the following companies: Allegheny
Teledyne, A.M. Castle, Armco Inc., Slater Industries and 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
Except as noted below, 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), all persons subject to Section
16(a) filing requirements were in compliance during fiscal year 1997. Mr.
William S. Dietrich II inadvertently filed a Form 4 late and Dr. Nicholas F.
Fiore reported a transaction on a Form 5 instead of a Form 4.
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
five years service), or as early as age 55 (with ten years service); or at any
age with 30 years service. Pensions are based on: (1) a fixed monthly rate for
each year of service; or (2) on the product of 1.3% times each of the first 20
years of service, plus 1.4% times the number years of service over 20,
multiplied by the individual's highest average earnings paid during any five
consecutive years that ends (within the last ten years of service) on the
pensioner's retirement anniversary. For pension purposes, individual earnings
include all salaries, bonuses, and extra compensation. As of June 30, 1997, the
years of service credited under the Plan were as follows: Mr. Cardy, 34.9
years; Mr. Draeger, 1 year; Mr. Cottrell, 8.3 years; Dr. Fiore, 7.3 years; and
Mr. Weiler 38.6 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 and Fiore are calculated without regard to
pension benefits from prior employment. Messrs. Cardy, Draeger, Cottrell,
Fiore, and Weiler have been designated Participants in the Plan.
15
<PAGE>
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 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 for Years of Service Shown(1)
of 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. Contingent upon
shareholder approval of Proposal No. 3, Plan benefits will be curtailed for
active Directors with the exception of Mr. Kay who retires in October, 1998.
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.
16
<PAGE>
Savings Plan of Carpenter Technology Corporation
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. For some employees, this 3%
Corporation contribution under the Savings Plan is limited by Section
401(a)(17) of the Internal Revenue Code of 1986, as amended. Employees, who are
otherwise eligible for the Company's Deferred Compensation Plan for Key
Employees, will have such lost Savings Plan contributions granted under the
Deferred Compensation Plan. In addition, a Participant may authorize the
Corporation to make further salary deferral contributions, 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 Section 401(k)
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 1997, 18.5 units of ESOP preferred stock (including dividends) were
allocated to each of the accounts of Messrs. Cardy, Cottrell, Fiore, and
Weiler; and 12.9 units were allocated to the account of Mr. Draeger based on
his July 1, 1996 employment date.
17
<PAGE>
Stock Options
The Corporation had three incentive stock option plans in effect during
fiscal year 1997, 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,
restricted stock and performance share awards, and will determine the terms and
conditions of each grant. As of June 30, 1997, and 1996, 1,358,455 and
1,545,965 shares respectively, were reserved for options and share awards which
may be granted under this Plan.
Stock 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.
Restricted stock awarded vests equally at the end of each year of
employment during the five year period from the date of grant. When the
restricted shares are issued, deferred compensation is recorded in the
shareholders' equity section of the consolidated balance sheet. The deferred
compensation is charged to expense over the vesting period. During fiscal 1997,
1996, and 1995, $.6 million, $.6 million and $.3 million, respectively, were
charged to expense for vested restricted shares.
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.
Having completed the first of these annual performance periods, 6,695
performance shares were earned by Participants for fiscal year 1997. During
fiscal year 1997, $.3 million was charged to expense for earned performance
shares. 13,072 performance share awards remain from the June 1996 grant
contingent on performance over the next two fiscal years.
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, 1997, and 1996, 48,520 and
164,620 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,
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 1997. 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 1997
<TABLE>
<CAPTION>
Individual Grants(1)
--------------------------------------------------------------
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 30,000 12.3% $45.5625 06/26/2007 $309,871
Dennis M. Draeger 15,000 6.2% $45.5625 06/26/2007 $154,935
G. Walton Cottrell 8,000 3.3% $45.5625 06/26/2007 $ 82,632
Nicholas F. Fiore 6,900 2.8% $45.5625 06/26/2007 $ 71,270
Richard J. Weiler 3,700 1.5% $45.5625 06/26/2007 $ 38,217
</TABLE>
- ------------
(1) Options granted must be 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
certain assumptions for stock price volatility, risk-free interest rates,
and future dividend yield. Specifically, the Black-Scholes valuation
employed the following factors; risk-free rate of return of 6.4% based
upon the five year Treasury rates as of grant date, dividend yield of 2.9%
based upon the annualized value of the quarterly dividend preceding the
option grant date, exercise term of five years, stock price volatility of
21.0% based upon the variance in daily stock price changes for the three
years preceding the option grant date, and that no adjustments have been
made for transferability or risk of option forfeiture.
STOCK OPTION / SAR EXERCISES AND FISCAL 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 49,320 $518,581 32,000 30,000 $408,000 $5,625
Dennis M. Draeger 4,200 $ 30,638 19,000 15,000 $268,375 $2,813
G. Walton Cottrell 0 $ 0 47,220 8,000 $829,110 $1,500
Nicholas F. Fiore 2,747 $ 49,789 40,453 6,900 $682,287 $1,294
Richard J. Weiler 4,140 $ 94,444 33,500 3,700 $607,850 $ 694
</TABLE>
- ------------
(1) Calculated as fair market value at exercise minus grant price.
(2) Based on June 30, 1997, market closing price of $45.75 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 of Directors 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 service 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, 1997, and 1996, 129,000 and 157,000
shares, respectively, were reserved for options which may be granted under this
Plan. Proposal No. 3, contingent upon stockholder approval, will increase
shares reserved for grant under the Plan, as amended, by an additional 200,000
shares.
19
<PAGE>
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 1998. 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 1997 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 1997 for these audit services were
$520,000.
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 TO THE NON-QUALIFIED
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
AMENDED AND RESTATED, AUGUST 7, 1997
To more closely align the compensation for non-employee Directors with
shareholders' interests, and based on an extensive review of the Corporation's
director remuneration program, a number of changes in the method of
compensating those Directors who are not employees of the Corporation are being
proposed. These changes are designed to ensure that the Director compensation
program is both fully competitive and highly performance oriented, thereby
enabling the Corporation to attract and retain valued outside Directors.
Directors who are also employees are not compensated for their services as
Directors and these proposals do not affect them.
These changes are to be accomplished by amending and restating the
Carpenter Technology Corporation Non-Qualified Stock Option Plan for
Non-Employee Directors, as amended through October 23, 1995, as the Carpenter
Technology Corporation Stock Based Compensation Plan for Non-Employee Directors
(the "Stock Based Compensation Plan"). The amended and restated Plan 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 and restated Plan. The
following proposals for stockholder ratification and approval of the amendment
and restatement will be presented at the 1997 Annual Meeting of Stockholders.
RESOLVED, that the stockholders of Carpenter Technology hereby approve the
amendment and restatement of the Carpenter Technology Corporation Non-Qualified
Stock Option Plan for Non-Employee Directors in substantially the form
presented in Appendix A of Carpenter Technology's Proxy Statement; as the
retitled Carpenter Technology Corporation Stock Based Compensation Plan for
Non-Employee Directors ("Stock Based Compensation Plan") and
FURTHER RESOLVED, that the total number of unallocated reserve shares
under the Stock Based Compensation Plan be increased by an additional 200,000
shares as recommended by the Board of Directors of the Corporation.
20
<PAGE>
Summary of Plan Changes. In summary, the proposed changes, which will
generally be effective beginning October 20, 1997, following approval by the
stockholders, are as follows:
1. The Stock Based Compensation Plan will be amended to provide stock
units, performance units and stock appreciation rights ("SARs") as well as
previously approved stock options. A stock unit will entitle a Director to
receive one share of the Corporation's common stock, payable at the Director's
retirement. Dividend equivalents will be paid on stock units, both those paid
as part of the annual retainer and those awarded in lieu of accrued pensions,
in the form of additional stock units. A performance unit will entitle a
Director to one share of the Corporation's common stock, payable upon
certification that the performance goals upon which the performance units are
based have been met. An SAR will entitle a Director to the increase in the
value of a share of the Corporation's common stock over the period between the
date of grant of the SAR and the date of its exercise by a Director. That
amount will be payable in cash or shares of the Corporation's common stock, as
determined by the Board of Directors when the SAR is granted.
2. The current Directors' annual retainer, $20,000, will be paid 50% in
deferred stock units and upon the Director's election, the remaining 50% in
cash or deferred stock units. If the Director elects cash, that cash may be
deferred in accordance with the existing Directors' Deferred Compensation Plan.
If the Director elects deferred stock units, upon the Director's termination of
Board service, distribution of the equivalent shares (plus dividend
equivalents) will be made.
3. The Directors' Retirement Plan will be curtailed for all Directors
retiring after the 1998 Annual Meeting of Stockholders. The value of the
benefits accrued under that Plan by current Directors will be converted to
deferred stock units using the same actuarial methods and assumptions as are
used in computing the Corporation's pension expense under FAS 87 for the year
ended June 30, 1997, and the fair market value of the Corporation's common
stock. When the Director retires from the Board, distribution of the equivalent
shares (plus dividend equivalents) will be made.
4. To better align Directors' compensation with the Corporation's
performance and shareholder returns, Directors will receive an opportunity to
earn shares based on performance units. Initially each eligible Director will
be granted a target award of 200 performance units, that will entitle the
Director to receive an equivalent number of shares upon achievement of target
paramaters. The actual number of shares will depend on the relationship between
the Corporation's ROE to that of the average S&P 500 ROE. The target number of
shares and the maximum number of shares that can be earned if annual corporate
performance exceeds that of the S&P 500 will be determined during the first 90
days of such year. If the Corporation's performance is less than that of the
S&P 500, the number of shares to be awarded will be reduced. If performance
falls below predetermined levels, no shares will be awarded.
5. The Board will also have the authority to award SARs, either in tandem
with stock options or independently of any options. An SAR will entitle the
eligible Director, on exercise, to receive the increase in the value of a share
of the Corporation's common stock between the date the SAR was granted and the
date it is exercised. At the time of grant, the Board will determine whether
that difference will be payable in cash or in shares of the Corporation's
common stock. Freestanding SARs, if granted, will be based upon the attainment
of performance goals, set in advance, and based on one or more of (1) the price
of the Corporation's stock, (2) the Corporation's market share, (3) the
Corporation's sales, (4) earnings per share of the Corporation's stock, (5)
return on the Corporation's stockholders' equity, and (6) corporate costs.
6. In the event of change in control of the Corporation, in addition to
vesting all stock options, as is currently provided, the Plan will also vest
all unvested stock units and SARs.
Eligibility. As described above, eligibility will be limited to
non-employee Directors of the Corporation.
Administration. The Plan will continue to be administered on behalf of the
Corporation by the Board of Directors, including, for this purpose Directors
who may be employees of the Corporation.
21
<PAGE>
Federal Tax Treatment. Under present federal income tax laws, the tax
treatment of the awards under the Plan is as follows:
1. Stock Options and SARs. A Director recognizes no taxable income and the
Corporation receives no tax deduction upon the grant of an option or SAR. Upon
exercise, the Director will recognize ordinary income, and the Corporation will
receive a corresponding deduction for, in the case of an option, the spread
between the option exercise price and the fair market value of the stock on the
date the option is exercised, and in the case of an SAR, the spread between the
value of the SAR when granted and its value when exercised. Special timing
rules may apply because of the application of Section 16(b) of the Exchange
Act. Upon the sale of shares of Corporation stock acquired by exercise of an
option or SAR, any gain or loss will be long term or short term capital gain or
loss depending upon how long the Director has held the shares. The Corporation
will realize no deduction in connection with such a sale.
2. Stock Units and Performance Units. A Director recognizes no taxable
income and the Corporation receives no deduction upon the grant of either Stock
Units or Performance Units. Upon delivery of the underlying shares to the
Director, at retirement in the case of a Stock Unit and upon satisfaction of
the Performance Goals in the case of a Performance Unit, the Director will
recognize ordinary income to the extent of the fair market value of the shares
delivered to the Director and the Corporation will be entitled to a
corresponding deduction, subject to the special timing rules that may apply by
reason of the application of Section 16(b) of the Exchange Act. Upon the sale
of shares of Corporation stock acquired pursuant to a Stock Unit or Performance
Unit, any gain or loss will be long term or short term capital gain or loss
depending upon how long the Director has held the shares. The Corporation will
realize no deduction in connection with such a sale.
The Board of Directors recommends that stockholders vote FOR the proposal to
ratify and approve the amendment and restatement of the Non-Qualified Stock
Option Plan for Non-Employee Directors and the increase in the number of shares
reserved under the Plan.
1998 Stockholder Proposals
In the event that a stockholder desires to have a proposal included in the
Proxy Statement for the 1998 Annual Meeting of Stockholders; the proposal must
be received by the Corporation in writing on or before May 28, 1998, 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
22
<PAGE>
APPENDIX A
CARPENTER TECHNOLOGY CORPORATION
STOCK BASED COMPENSATION PLAN FOR
NON-EMPLOYEE DIRECTORS
EFFECTIVE OCTOBER 20, 1997
1. Purpose:
The purposes of the Plan are to attract and retain the services of
experienced and knowledgeable non-employee Directors, to encourage Eligible
Directors of Carpenter Technology Corporation (the "Company") to acquire a
proprietary and vested interest in the growth and performance of the Company,
and to generate an increased incentive for Directors to contribute to the
Company's future success and prosperity, thus enhancing the value of the
Company for the benefit of its stockholders.
This Plan is an amendment and restatement of the Carpenter Technology
Corporation Non-Qualified Stock Option Plan for Non-Employee Directors as
adopted effective August 1, 1990 and last amended October 23, 1995. The rights
of any Director whose service as a Director ended on or before October 19, 1997
shall be governed by the terms of the Plan as in effect when that Director's
service ended.
2. Definitions:
As used in the Plan, the following terms shall have the meanings set forth
below:
a) "Annual Retainer" shall mean base compensation for services as a
Director. Annual Retainer shall not include meeting fees, committee service
fees, if any, expense allowances or reimbursements or any other additional
compensation for services as a Director.
b) "Beneficiary" means the person that the Eligible Director designates to
receive any unpaid portion of the Eligible Director's Account should the
Eligible Director's death occur before the Eligible Director receives the
entire balance to the credit of such Eligible Director's Account. If the
Eligible Director does not designate a Beneficiary, the Beneficiary shall be
the person's spouse if the person is married at the time of death, or the
Eligible Director's estate if unmarried at the time of the person's death.
c) "Board" shall mean the Board of Directors of the Company.
d) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
e) "Common Stock" shall mean the Common Stock, $5.00 par value, of the
Company.
f) "Company" shall mean Carpenter Technology Corporation.
g) "Election Date" shall mean with respect to an Option hereunder the date
of the appointment, election, or re-election of the Eligible Director that
prompted the grant of such Option.
h) "Eligible Director" shall mean each Director of the Company who is not
an employee of the Company or any of the Company's subsidiaries (as defined in
Section 425 (f) of the Code), or who is not otherwise excluded from
participation by agreement.
i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
j) "Fair Market Value" shall mean with respect to the Common Stock (i) the
last sale price of the Common Stock on the date on which such value is
determined, as reported on the consolidated tape of New York Stock Exchange
issues or, if there shall be no trades on such date, on the date nearest
preceding such date; (ii) if the Common Stock is not then listed for trading on
the New York Stock Exchange, the last sale price of the Common Stock on the
date of which such value is determined, as reported on another recognized
securities exchange or on the NASDAQ National Market System if the Common Stock
shall then be listed and traded upon such exchange or system or, if there shall
be
A-1
<PAGE>
no trades on such date, on the date nearest preceding such date; or (iii) the
mean between the bid and asked quotations for such stock on such date (as
reported by a recognized stock quotation services) or, in the event that there
shall be no bid or asked quotations on such date, then upon the basis of the
mean between the bid and asked quotations on the date nearest preceding such
date.
k) "Grant Date" shall mean with respect to an Option hereunder the date
upon which such Option is granted.
l) "Option" shall mean any right granted to an Eligible Director allowing
such Eligible Director to purchase Shares at such price or prices and during
such period or periods as set forth under the Plan. All Options shall be
non-qualified options not entitled to special tax treatment under Section 422A
of the Code.
m) "Option Letter" shall mean a written instrument evidencing an Option
granted hereunder and signed by an authorized representative of the Company.
n) "Performance Unit" shall mean the right to receive, following
termination of service as an Eligible Director, one share of Common Stock.
Performance Units will be awarded, if at all, based upon the attainment of a
specified goal ("Performance Goal") by the end of a period specified by the
Board based upon one or more of the following criteria: (i) price of the Stock,
(ii) market share of the Company, (iii) sales by the Company, (iv) earnings per
share of the Stock, (v) return on shareholder equity of the Company, or (vi)
costs of the Company. Such goal shall be pre-determined by the Board at a time
when it is substantially uncertain that the Performance Goals will be met and
subject to verification by the Company's independent auditors using generally
accepted accounting principles, consistently applied. For purposes of this
Plan, fractional Performance Units, measured to the nearest four decimal
places, may be credited.
o) "Release Date" shall mean the fifth business day occurring after the
Company's earnings release for the preceding fiscal period. In calculating the
Release Date, the day of an earnings release shall be counted, if the earnings
release is made before the opening of trading on the New York Stock Exchange
and shall not be counted if such release is made after the opening of trading.
p) "Retirement" shall mean Retirement from the Board with a minimum of
three years service as an Eligible Director.
q) "SAR" or "Stock Appreciation Right" shall mean the right granted to an
Eligible Director to receive the increase in the Fair Market Value of a
specified number of Shares.
r) "Shares" shall mean Shares of Common Stock.
s) "Stock Unit" shall mean the right to receive, following both service as
an Eligible Director for one year following the grant of the Stock Unit and
termination of service as an Eligible Director, one share of Common Stock. For
purposes of this Plan, fractional Stock Units, measured to the nearest four
decimal places, may be credited.
t) "Unit" shall mean a Performance Unit, a Stock Unit, or both, as
required by context.
u) "Window" shall mean a 30 calendar-day period of time beginning on a
Release Date.
3. Administration:
The Plan shall be administered by the Company. Subject to the terms of the
Plan, the Board shall have the power to interpret the provisions and supervise
the administration of the Plan.
4. Shares Subject to the Plan:
a) Total Number. Subject to adjustment as provided in this Section, the
total number of Shares as to which Options may be granted, or Performance
Units, Stock Units and SARs awarded shall be 329,000. Any Shares issued
hereunder may consist, in whole or in part, of authorized and unissued Shares
or treasury Shares.
A-2
<PAGE>
b) Reduction of Shares Available.
(i) The grant of an Option will reduce the Shares as to which Options
may be granted by the number of Shares subject to such Option.
(ii) Any shares issued by the Company through the assumption or
substitution of outstanding grants from an acquired company shall not
reduce the Shares available for grants under the Plan.
(iii) The grant of Performance Units or Stock Units will reduce the
number of Shares available for further grants by the number of Units
granted.
(iv) The exercise of an SAR payable in Shares will reduce the number of
Shares that may be issued upon subsequent exercise of SARs.
c) Increase of Shares Available. The lapse, cancellation or other
termination of an Option, Unit or SAR that has not been fully exercised or paid
shall increase the available Shares for such Options, Units or SARs by the
number of Shares that have not been issued upon exercise of such Option or SAR
or payment of such Unit.
d) Other Adjustments. The total number and kind of Shares available for
Options, Units or SARs under the Plan or which may be allocated to any one
Eligible Director, the number and kind of Shares of Common Stock subject to
outstanding Options, Units or SARs, and the exercise price for such Options or
SARs or the value of Units shall be appropriately adjusted by the Board for any
increase or decrease in the number of outstanding Shares resulting from a stock
dividend, subdivision, combination of Shares, reclassification, or other change
in corporate structure affecting the Shares or for any conversion of the Shares
into or exchange of the Shares for other Shares as a result of any merger or
consolidation (including a sale of assets) or other recapitalization as may be
necessary to maintain the proportionate interest of the Option, SAR or Unit
holder.
5. Initial Options:
Initial Options shall be granted to Eligible Directors as follows:
a) Initial Grant. Each Eligible Director who has not previously received a
grant under this Plan shall be granted an Option to acquire 2,000 shares as
follows: (1) on the Election Date in the event that the Election Date occurs
during a Window, or (2) on the next Release Date in the event that the Election
Date does not occur during the Window.
b) Terms and Conditions. Any Option granted under this Section 5 shall be
subject to the following terms and conditions:
(i) Option Price. The purchase price per Share purchasable under an
Option granted under Section 5 shall be 100% of the Fair Market Value of a
Share on the Grant Date.
(ii) Exercisability. Unless otherwise provided by this Plan, an Option
granted under Section 5 shall become exercisable in whole or in part one
year from the Grant Date.
6. Annual Options:
Annual Options shall be granted to Eligible Directors as follows:
a) Eligible Directors. Each Eligible Director on or after the Effective
Date of the Plan shall be granted an Option to acquire 2,000 Shares immediately
after the annual meeting of the Company's stockholders.
b) Terms and Conditions. Any Option granted under this Section 6 shall be
subject to the following terms and conditions:
A-3
<PAGE>
(i) Option Price. The purchase price per Share purchasable under an
Option shall be 100% of the Fair Market Value of a Share on the Grant Date.
(ii) Exercisability. Unless otherwise provided by this Plan, an Option
granted under this Section 6 shall become exercisable in whole or in part
one year from the Grant Date.
7. General Terms:
The following provisions shall apply to any Option:
a) Option Period. Each Option shall expire ten years from its Grant Date,
subject to earlier termination as hereinafter provided.
b) Each Option granted under this Plan shall become exercisable by the
Eligible Director only after the completion of one year of Board service
immediately following the Grant Date; provided, however, that for Annual
Options under Section 6, uninterrupted Board service by the Eligible Director
until the annual meeting of the Company's stockholders next following the Grant
Date shall be deemed completion of one year of Board service. Exercise of any
or all prior existing Options shall not be required.
c) No Option under this Plan may be transferrable by the Eligible Director
except by will or the laws of descent and distribution. In the event of the
death of the Eligible Director more than one year after the Grant Date and not
more than three months after the termination of the Eligible Director's Board
service, the Option may be transferred to the Eligible Director's personal
representative, heirs or legatees ("Transferee") and may be exercised by the
Transferee before the earlier of (i) the expiration of one year from the date
of the death of the Eligible Director or (ii) the expiration of ten years from
the Grant Date. In the event of the Retirement from Board service of an
Eligible Director, an Option may be exercised prior to its expiration during
the five year period beginning with the date of Retirement; provided, however,
that in the event of a retiree's death during such five year period,
unexercised Options may be exercised by the Transferee before the earlier of
either items (i) or (ii) of this Section 7(c). In all other cases of
termination of Board service of an Eligible Director except for removal for
cause, the Option, if otherwise exercisable by the Eligible Director at the
time of such termination, may be exercised within three months after such
termination. In the event of removal for cause, all existing Options shall be
of no force and effect.
d) Method of Exercise. Any Option may be exercised by the Eligible
Director in whole or in part at such time or times and by such methods as the
Board may specify. The applicable Option Letter may provide that the Eligible
Director may make payment of the Option price in cash, Shares, held for at
least six months, or such other consideration as the Board may specify, or any
combination thereof, having a Fair Market Value on the exercise date equal to
the total Option price.
8. Stock Units:
a) Grant of Stock Units. On the date of the annual meeting of
stockholders, each Eligible Director shall be awarded each year a number of
Stock Units determined by dividing 50% of the Director's Annual Retainer by the
Fair Market Value on that date.
b) Election of Stock Units. By written election filed with the Board
before the end of any calendar year, an Eligible Director may elect to increase
the percentage in a) above to 100%, and thereby have the entire Director's
Annual Retainer payable in each calendar year beginning after the date of the
election awarded in Stock Units. An election under this Section 8 b) shall
remain in effect until changed, in writing, by the Director. Any such change
shall be effective in the first calendar year beginning after the date of the
written notice of change.
c) Forfeiture of Stock Units. Stock Units awarded at an annual meeting of
stockholders will be forfeited if the Director terminates service as a Director
for any reason other than Board approved Retirement, Board determined
disability, or death, before the immediately following annual meeting of
stockholders.
A-4
<PAGE>
d) Stock Units in Lieu of Pension. Effective October 20, 1997, the present
value on that date of any Eligible Director's accrued pension benefit under the
Carpenter Technology Directors' Retirement Plan, excluding any Eligible
Director who is required to retire on or before the 1998 Annual Meeting of
Stockholders, shall be converted to Stock Units. The number of Stock Units to
be awarded under this Section 8 d) shall be determined by dividing the average
of the Fair Market Value on the last ten business days of October 1997, by the
present value of each Eligible Director's accrued pension. The present value
will be determined using the UP-84 mortality table and a 7.5% interest rate.
Stock Units awarded under this Section 8 d) shall not be subject to the vesting
schedule of Section 8 c). Instead, such Stock Units will be payable upon the
earlier of the Director's Retirement, Board determined disability, or death.
9. Performance Units:
a) Grant of Performance Units. Performance Units may be granted annually
to Eligible Directors in such amounts and subject to such Performance Goals as
shall be determined by the Board. Each Performance Unit shall have an initial
value equal to the Fair Market Value of a Share (or similar fractional Share)
on the Date of Grant. The Board shall set one or more Performance Goals as
described in Section 2(n) of this Plan. The extent to which those Performance
Goals are met will determine the number and value of Performance Units that
will be paid out to the Eligible Director.
b) Form and Timing of Payment of Performance Units. Payment of earned
Performance Units shall be made as soon as practicable following the close of
the applicable period in a manner designated by the Board, in its sole
discretion. The Board, in its sole discretion, may pay earned Performance Units
in the form of cash or in Shares (or in a combination thereof) that have an
aggregate Fair Market Value equal to the value of the earned Performance Units
at the close of the applicable period. Such Shares may be granted subject to
any restrictions deemed appropriate by the Board.
c) Dividends on Earned but Undistributed Shares. Eligible Directors shall
be entitled to receive any dividends declared with respect to Shares that have
been earned in connection with grants of Performance Units, but not yet
distributed to Eligible Directors.
10. Nontransferability of Units:
Neither Performance Units nor Stock Units may be sold, transferred,
pledged, assigned or otherwise alienated, other than by will or by the laws of
descent and distribution.
11. Dividend Equivalents:
An Eligible Director who has been awarded Stock Units will also be awarded
additional Units, determined on a quarterly basis. The number of additional
Units to be awarded will be determined by multiplying the quarterly dividend
per Share for the immediately preceding quarter by the number of Units credited
to the Director on the first day of that calendar quarter and dividing the
result by the Fair Market Value on the last business day of that quarter.
12. Payment of Units:
a) Following an Eligible Director's Retirement, or termination of service
on account of disability, the Director shall be paid a number of Shares equal
to the number of whole Units credited to the Director, with cash paid in lieu
of any fractional Units. The amount of cash to be paid will be based on the
Fair Market Value on the date of the Director's termination of service as a
Director. In the case of the Director's death, the payment will be made to the
Director's Beneficiary.
b) Manner of Payment.
(1) An Eligible Director may elect to receive Shares in payment of Units
credited to the Director's account in a lump sum or in annual installments
payable over either ten or fifteen years.
A-5
<PAGE>
(2) The election shall be made by the Director, in writing, filed with
the Board no later than the end of the calendar year immediately preceding
the Director's termination of service. If no election is made, the
Director's Units will be paid in a lump sum as soon as is practicable
following the Director's termination of service.
(3) If a Director elects installment payments, the amount of each annual
installment will be the number of Units to the Director's credit at the end
of the immediately preceding calendar year multiplied by a fraction the
numerator of which is one and the denominator of which is the number of
years remaining in the original installment period. Dividend equivalents
will continue to be credited to the Director's account through the end of
the calendar quarter immediately preceding the final installment.
(4) An Eligible Director who has elected installment payment of Units
may, with the consent of the Board, which may be given or denied in the
Board's sole discretion, change that election and receive a lump sum
distribution of all remaining Units credited to the Director's account.
13. Stock Appreciation Rights or SARs.
SARs may be granted by the Board from time to time, subject to the
following provisions:
a) The Board may grant a SAR either in connection with the grant of an
Option ("Tandem SAR") or independent of the grant of an Option ("Freestanding
SAR"). The grant of any Freestanding SAR must be related to the attainment of
Performance Goals under Section 9. Each Tandem SAR shall be exercisable only
with the exercise and surrender of the related Option or portion thereof and
shall entitle the Eligible Director to receive the excess of the Fair Market
Value of the Shares on the date the Tandem SAR is exercised over the option
price under the related Option. The excess is hereafter called the "Spread" for
both Tandem SARs and Freestanding SARs. If the Eligible Director elects instead
to exercise the related Option, the Tandem SAR shall be canceled automatically.
b) A Tandem SAR shall be exercisable only to the extent and at the same
time that the related Option is exercisable.
c) A Freestanding SAR shall be exercisable pursuant to the terms and
conditions that are specified in the agreement in which the Freestanding SAR is
granted.
d) Upon the exercise of a SAR, the Company shall pay to the Eligible
Director an amount equivalent to the spread (less any applicable withholding
taxes) in cash, or in Shares, or a combination of both, as the Board shall
determine. Such determination may be made at the time of the granting of the
SAR. No fractional Shares of Stock shall be issued and the Board shall
determine whether cash shall be given in lieu of such fractional Share or
whether such fractional Share shall be eliminated.
e) A Tandem SAR shall terminate and may no longer be exercised upon the
termination or expiration of the related Option.
f) Income attributable to the exercise of a SAR shall not be included in
the calculation of any other benefits payable at any time by reason of the
Eligible Director's service to the Company.
g) No SAR shall be transferable by the Eligible Director.
h) The agreement under which a SAR is granted shall set forth the extent
to which the Eligible Director shall have the right to exercise the SAR
following termination of the Eligible Director's service as a Director. Such
provisions shall be determined at the sole discretion of the Board and need not
be uniform among all SARs issued pursuant to this Section 13, and may reflect
distinctions based on the reasons for termination of service.
i) The Board may only grant Freestanding SARs pursuant to the achievement
of Performance Goals and it may impose additional restrictions upon the vesting
and exercise of such SARs on the attainment of Performance Goals. For all
purposes under this Plan, "Performance Goals" means goals
A-6
<PAGE>
that must be met by the end of a period specified by the Board based upon one
or more of the following criteria: (i) price of the Stock, (ii) market share of
the Company, (iii) sales by the Company, (iv) earnings per share of the Stock,
(v) return on shareholder equity of the Company, or (vi) costs of the Company.
14. Change in Control:
a) Notwithstanding anything in this Plan to the contrary, in the event of
a change in control of the Company, the Options granted under Sections 5 and 6
and any SARs granted under Section 13 shall vest and become immediately
exercisable and any unvested Stock Units granted under Section 8 shall vest.
b) For purposes of this Plan, "Change in Control of the Company" shall be
deemed to have occurred if: (i) any "person" or "group" (as such term is used
in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any company owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding securities; or (ii)
during any period of two consecutive years (not including any period prior to
the effective date of the Plan), 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 Company 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
Company'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
or the period of whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority thereof; or
(iii) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company 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 Company or such
surviving entity outstanding immediately after such merger or consolidation, or
(iv) the stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets.
c) Payment for Performance Units. Within 30 days following a Change in
Control event, as defined in Section 14(b) of this Plan, there shall be paid in
cash to Eligible Directors holding Performance Units a pro rata amount based
upon the assumed achievement of all relevant Performance Goals at target
levels, and upon the length of time with the performance period that has
elapsed before the Change in Control event; provided, however, that if the
Board 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 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.
15. Amendments and Termination:
a) Board Authority. The Board may amend or terminate the Plan at any time;
provided that no amendment may be made (i) without the appropriate approval of
the Company's stockholders if such approval is necessary to comply with any tax
or other regulatory requirement, including any stockholder approval required as
a condition to exemptive relief under Section 16(b) of the Exchange Act; (ii)
which would adversely impair or affect, without the consent of the Eligible
Director, any rights or obligations under any Option, Unit or SAR theretofore
granted to such Eligible Director; or (iii) more
A-7
<PAGE>
than once every six months with respect to the timing, amount and price of
Options or SARs to be awarded to Eligible Directors, other than to comport with
changes to the Internal Revenue Code, the Employee Retirement Income Security
Act, or the rules thereunder.
b) Prior Stockholder and Eligible Director Approval. Anything herein to
the contrary notwithstanding, in the event that amendments to the Plan are
required in order that the Plan or any other stock-based compensation plan of
the Company comply with the requirements of Rule 16b-3 issued under the
Exchange Act, as amended from time to time, or any successor rules promulgated
by the Securities and Exchange Commission related to the treatment of benefit
and compensation plans under Section 16 of the Exchange Act, the Board is
authorized to make such amendments without the consent of Eligible Directors or
the stockholders of the Company.
16. General Provisions:
a) Compliance Regulations. All certificates for Shares delivered under
this Plan pursuant to any Option, Unit or SAR shall be subject to such
stock-transfer orders and other restrictions as the Board may deem advisable
under the rules, regulations, and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Shares are then listed,
and any applicable federal or state securities law, and the Board of Directors
may cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions. The Company shall not be required
to issue or deliver any Shares under the Plan prior to the completion of any
registration or qualification of such Shares under any federal or state law, or
under any ruling or regulations of any governmental body or national securities
exchange that the Board in its sole discretion shall deem to be necessary or
appropriate.
b) Other Plans. Nothing contained in this Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required by applicable law or the
rules of any stock exchange on which the Common Stock is then listed; and such
arrangements may be either generally applicable or applicable only in specific
cases.
c) Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Delaware and applicable federal law.
d) Conformity With Law. If any provision of this Plan is or becomes or is
deemed invalid, illegal, or unenforceable in any jurisdiction, or would
disqualify the Plan or any Option under any law deemed applicable by the Board,
such provision shall be construed or deemed amended in such jurisdiction to
conform to applicable laws or if it cannot be construed or deemed amended
without, in the determination of the Board, materially altering the intent of
the Plan, it shall be stricken and the remainder of the Plan shall remain in
full force and effect.
e) Insufficient Shares. In the event there are insufficient Shares
remaining to satisfy all of the grants of Options, Units or SARs made on the
same day, such Options, Units or SARs shall be reduced pro-rata.
17. Effective Date and Termination:
The Plan's original effective date, as approved by the Board, was August
9, 1990, and last amended by the Board of Directors on August 10, 1995; and
ratified by the stockholders at the Annual Meeting held October 23, 1995. The
effective date of this amendment and restatement is October 20, 1997, provided
that the Plan, as amended and restated, is ratified by the Company's
stockholders at the Annual Meeting to be held on October 20, 1997. If this
amendment and restatement is not so ratified, the Plan as amended through
October 23, 1995, shall remain in effect. The Plan will terminate upon the date
on which all outstanding Options have expired or terminated and all outstanding
Units and SARs have been paid or otherwise provided for.
A-8
<PAGE>
[MAP OF DIRECTIONS TO SITE OF ANNUAL MEETING OF
CARPENTER TECHNOLOGY CORPORARTION AT THE INN AT READING]
<PAGE>
CARPENTER TECHNOLOGY CORPORATION
Proxy Solicited on Behalf of the Board of Directors
for the Annual Meeting October 20, 1997
p The undersigned stockholder of Carpenter Technology Corporation
appoints PAUL R. ROEDEL and JOHN R. WELTY, or either of them, proxies
R with full power of substitution, to vote all shares of stock which the
stockholder would be entitled to vote if present at the Annual Meeting
O of Stockholders of CARPENTER TECHNOLOGY CORPORATION to be held at The
Inn At Reading, Wyomissing, Pennsylvania, on Monday, October 20, 1997,
X at 4 p.m., local time, and at any adjournments thereof, with all
powers the stockholder would possess if present. The stockholder
Y hereby revokes any proxies previously given with respect to such
meeting.
Comments: (change of address)
Election of Directors:
------------------------------
Nominees -- Term to Expire 2000
C. McCollister Evarts, M.D. ------------------------------
William J. Hudson, Jr.
Peter C. Rossin
Kenneth L. Wolfe
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
NEW LOGO
A Toll-Free Telephone Number for
Shareholders of Carpenter Technology Corporation
Telephone inquiries regarding your stock should be made to
First Chicago Trust Company's new automated Toll-Free
Telephone Response Center at:
1-800-519-3111
Representatives are available at the toll-free number Monday through Friday
from 8:30 a.m. until 7:00 p.m. Eastern Time.
Our automated telephone system will be available Monday 8:00 a.m.
through Saturday 9:00 p.m.
TDD telephone number for the hearing impaired: (201) 222-4955
Internet Address: http://www.fctc.com E-Mail Address: [email protected]
DirectSERVICE(TM)
As part of Carpenter's ongoing effort to provide enhanced shareholder services,
Carpenter Technology Corporation offers a DirectSERVICE, a Dividend
Reinvestment and a 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 receipt 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: 1-800-519-3111
To obtain an Electronic Funds Transfer Authorization Form, please contact:
Carpenter Shareholder Services, First Chicago Trust Company, P.O. Box 2500,
Jersey City, NJ 07303-2500
<PAGE>
Please mark your
|X| votes as in this 9327
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 FOR AGAINST ABSTAIN
1. Election of 2. Approval of
Directors. [ ] [ ] independent [ ] [ ] [ ]
(See Reverse) accountants.
To withhold your vote for any
nominee(s), write the name(s) here:
FOR AGAINST ABSTAIN
3. Approval of [ ] [ ] [ ]
amendment to
Non-Qualified
Stock Option
Plan for Non-
Employee Directors
and increase
in share reserve.
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
<PAGE>
THIS IS YOUR PROXY. YOUR VOTE IS IMPORTANT.
NEW LOGO
ADMISSION TICKET
ANNUAL MEETING
OF
STOCKHOLDERS OF CARPENTER TECHNOLOGY CORPORATION
MONDAY, OCTOBER 20, 1997
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, 1998.
o Approving an amendment and restatement of the Non-Qualified Stock
Option Plan for Non-Employee Directors.
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 1997 Annual Meeting of Stockholders, please
mark the appropriate box on the proxy
card above.
Present this ticket to the Carpenter Technology Corporation
representative.
- ------------------------------------------------------------------------------
