<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/x/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 FOR THE QUARTER ENDED SEPTEMBER 30, 1995
OR
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 1-3258
LUKENS INC.
50 South First Avenue
Coatesville, PA 19320-0911
(610) 383-2000
Incorporated in Delaware
I.R.S. Employer Identification Number 23-2451900
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes /x/ No
SHARES OUTSTANDING AS OF OCTOBER 27, 1995
Common Stock, $.01 Par Value, 14,733,351
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Statements of Earnings
(Dollars and shares in thousands except per share amounts)
<TABLE>
<CAPTION>
THIRD QUARTER YEAR-TO-DATE
13 Weeks Ended 39 Weeks Ended
September September September September
30, 1995 24, 1994 30, 1995 24, 1994
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales $ 254,660 231,463 786,442 694,589
Operating Costs and Expenses
Cost of products sold 222,825 202,959 689,245 624,304
Selling and administrative expenses 14,307 12,595 43,512 39,667
--------- -------- --------- ---------
Total operating costs and expenses 237,132 215,554 732,757 663,971
--------- -------- --------- ---------
Operating Earnings 17,528 15,909 53,685 30,618
Interest expense (3,545) (3,831) (9,729) (11,825)
--------- -------- --------- ---------
Earnings Before Income Taxes 13,983 12,078 43,956 18,793
Income tax expense 5,285 4,710 16,615 7,329
--------- -------- --------- ---------
Net Earnings $ 8,698 7,368 27,341 11,464
========= ======== ========= =========
Dividend requirements for preferred stock (488) (498) (1,472) (1,503)
--------- -------- --------- ---------
Net Earnings Applicable to Common Stock $ 8,210 6,870 25,869 9,961
========= ======== ========= =========
Earnings Per Common Share
Primary $ .55 .47 1.75 .68
Fully diluted $ .52 .44 1.65 .67
Common Shares and Equivalents Outstanding
Primary 14,853 14,774 14,820 14,739
Fully diluted 16,352 16,356 16,351 16,342
Cash Dividends on Common Stock - Per Share $ .25 .25 .75 .75
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
September December
30, 1995 31, 1994
---------- ----------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 7,166 9,806
Receivables, less allowance of $7,906
in 1995 and $7,569 in 1994 133,059 120,592
Inventories
Products finished and in process 132,866 99,120
Raw materials 33,751 31,064
Supplies 5,297 4,744
---------- ----------
171,914 134,928
Deferred income taxes 13,192 13,695
Prepaid expenses and other 2,291 2,015
---------- ----------
Total current assets 327,622 281,036
---------- ----------
Plant and Equipment 884,744 843,405
Less accumulated depreciation 371,438 365,276
---------- ----------
Net plant and equipment 513,306 478,129
---------- ----------
Intangible Assets, net of accumulated amortization
of $6,567 in 1995 and $5,038 in 1994 50,354 45,522
Deferred Income Taxes 16,406 19,990
Other Assets 1,236 1,757
---------- ----------
Total Assets $ 908,924 826,434
========== ==========
Liabilities and Stockholders' Investment
Current Liabilities
Accounts payable $ 97,985 87,463
Accrued employment costs 49,273 50,526
Other accrued expenses 24,836 29,433
Current maturities of long-term debt 10,680 7,134
---------- ----------
Total current liabilities 182,774 174,556
---------- ----------
Long-Term Debt 250,386 201,351
Retirement Benefits
Pensions 26,572 23,336
Medical and life insurance 145,101 140,773
Other Liabilities 8,669 9,361
---------- ----------
Total liabilities 613,502 549,377
---------- ----------
Commitments and Contingencies (Note 4)
Stockholders' Investment
Series preferred stock, 1,000,000 shares authorized
Series B ESOP convertible preferred 29,717 30,635
(495,283 shares outstanding in 1995 and
510,592 in 1994)
Common stock, 40,000,000 shares authorized
and 15,813,259 issued 158 158
Capital in excess of par value 85,152 84,088
Earnings invested 214,442 199,586
Foreign currency translation adjustments (894) (1,303)
Deferred compensation - ESOP (20,425) (22,767)
Repurchased stock, at cost (1,079,910 shares (12,728) (13,340)
in 1995 and 1,161,460 in 1994)
---------- ----------
Total stockholders' investment 295,422 277,057
---------- ----------
Total Liabilities and Stockholders' Investment $ 908,924 826,434
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
YEAR-TO-DATE
39 Weeks Ended
September September
30, 1995 24, 1994
----------- -----------
<S> <C> <C>
Operating Activity
Net earnings $ 27,341 11,464
Adjustments to Reconcile Net Earnings to
Cash Flow from Operating Activity
Depreciation and amortization 31,018 33,223
Income taxes deferred 4,415 2,369
Provision for uncollectible accounts 7,340 7,852
Retirement benefit funding less than expense 750 10,251
Changes in working capital affecting operations
Accounts receivable (24,856) (36,835)
Inventories (38,535) 16,593
Prepaid expenses and other (480) 1,246
Accounts payable 12,646 8,072
Accrued expenses (845) (12,932)
Other, net 727 (1,083)
----------- -----------
Cash flow from operating activity 19,521 40,220
Financing Activity
Long-term debt
Borrowed 70,350 15,100
Repaid (15,475) (22,338)
Dividends paid (12,843) (12,860)
Proceeds from stock options exercised 408 581
Other, net (12) -
----------- -----------
Net from (for) financing activity 42,428 (19,517)
Investing Activity
Capital expenditures (77,769) (79,116)
Proceeds from sale of assets/subsidiaries 17,007 57,182
Other, net (3,827) 395
----------- -----------
Net for investing activity (64,589) (21,539)
Cash and Cash Equivalents
Increase (decrease) (2,640) (836)
Start of period 9,806 11,483
----------- -----------
End of period $ 7,166 10,647
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
1. Basis of Presentation
The financial statements are unaudited but reflect all adjustments
(consisting of normal recurring accruals) which are, in the opinion of
management, necessary to a fair statement of the results for the interim
periods presented. These financial statements should be read in
conjunction with the financial statements and related notes in the 1994
Annual Report to Stockholders. Results from any interim period are not
necessarily indicative of the results for a full year.
2. Discontinued Operations
During the second quarter of 1995, our pipe-coating subsidiary was sold for
approximately $10,000. With this divestiture, all subsidiaries that were
classified as discontinued operations in 1993 have been sold.
3. Future Accounting Changes
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," was issued in March 1995. This statement requires review and
measurement methods to calculate impairment of long-lived assets, including
certain identifiable intangibles and goodwill, whenever events or
circumstances indicate that the carrying amount of an asset may not be
recoverable. The statement also requires that long-lived assets to be
disposed of be reported at the lower of the carrying amount or fair value
less costs to sell. Although asset impairment is always a possibility from
changes in business condition, strategy and organization, we do not expect
the adoption of this statement in 1996 to result in any significant write-
downs of assets.
4. Commitments and Contingencies
The company is party to various claims, disputes, legal actions and other
proceedings involving product liability, contracts, equal employment
opportunity, occupational safety, environmental issues and various other
matters. In the opinion of management, the outcome of these matters should
not have a material adverse effect on the consolidated financial condition
or results of operations of the company.
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
(Dollars in thousands)
Changes in Financial Condition during
the Thirty-nine Weeks Ended September 30, 1995
Capital Structure
Cash and cash equivalents totaled $7,166 at the end of the third quarter, a
decrease of $2,640 from the end of 1994. Working capital of $144,848 was up
$38,368 from year-end 1994, with higher receivable and inventory balances
contributing to the increase. The current ratio was 1.8 compared to 1.6 at
year-end 1994.
Debt at the end of the third quarter totaled $261,066, an increase of $52,581
from the beginning of the year. The increase reflected borrowings under our
revolving credit agreements, primarily for capital expenditures and working
capital requirements. Included in working capital requirements was a $10,144
pension contribution to the bargaining unit plan of Lukens Steel Company in
Coatesville, Pennsylvania. The contribution resulted in an increase of
Intangible Assets recognized in the Consolidated Balance Sheets. The ratio of
long-term debt to capital (long-term debt plus stockholders' investment) was
45.9 percent compared to 42.1 percent at year-end 1994.
Liquidity
Cash flow from operating activity totaled $19,521 for the first three quarters
compared to $40,220 in the comparable 1994 period. The decrease from 1994
primarily reflected higher inventory requirements. The pension contribution
discussed above also reduced 1995 cash flow compared to 1994.
Financing activity generated $42,428 with net borrowings of $54,875 partially
offset by dividend payments of $12,843. Investing activity required $64,589,
primarily for capital expenditures of $77,769. Proceeds from the sale of
subsidiaries and assets for the first three quarters totaled $17,007.
During the third quarter, coiled carbon steel production was initiated at the
Steckel Mill Advanced Rolling Technology (SMART/SM/) system at Conshohocken,
Pennsylvania. The start-up of the SMART system continued to result in
production disruptions, including the loss of significant carbon steel
production. The start-up program is expected to continue on schedule during the
fourth quarter, although we should be past the peak expenditures and
disruptions.
<PAGE>
During the third quarter, a customer inventory correction put pressure on order
rates and shipments of cold-rolled stainless products, and is expected to
continue for the remainder of the year. Order backlog was $153,700 at the end
of the third quarter, down 9 percent from the beginning of the year and 5
percent from the same time last year. Overall, we still anticipate an earnings
improvement from 1994.
Cash flow during the fourth quarter of 1995 should benefit from a reduction in
inventory, and we expect that 1995 cash flow from operating activity will
approach 1994 levels. Our ability to implement the start-up of significant
capital projects as planned will continue to be a significant factor to cash
flow.
Preliminary discussions in preparation for negotiations have begun with the
bargaining unit of Lukens Steel Company in Coatesville, Pennsylvania. The
current contract expires on January 31, 1996.
In the long term, Lukens relies on the ability to generate sufficient cash flows
from operating activity to fund investing and financing requirements and to
maintain a target long-term debt-to-capital ratio of 35 percent. Because of our
aggressive capital expenditure program, however, we anticipate exceeding our
target long-term debt-to-capital ratio until the projected benefits of the
program improve cash flow from operations and enable us to reach our target in
the long run.
Results of Operations for the Quarters Ended
September 30, 1995 and September 24, 1994
Operating Results
Sales for the quarter were $254,660, up 10 percent from 1994 sales of $231,463.
Third quarter operating earnings of $17,528 were 10 percent ahead of 1994 third
quarter earnings of $15,909. The increase was attributable to the Washington
Stainless Group, which benefited from higher selling prices and higher earnings
from the service center operations. The Lukens Steel Group recorded lower
results largely from expenses and production disruptions associated with the
start-up of capital projects. The increase in 1995 selling and administrative
expenses included higher incentive compensation accruals.
Interest Expense
Interest expense of $3,545 was down 7 percent from the 1994 expense of $3,831.
The reduction reflected higher amounts of capitalized interest in 1995 that were
partially offset by interest expense from higher debt levels and higher interest
rates in 1995.
<PAGE>
Income Taxes
The effective tax rate was 37.8 percent in 1995 and 39.0 percent in 1994.
Included in the 1994 rate was the unfavorable impact from the revaluation of net
deferred tax assets following changes to Pennsylvania corporate tax rates and
net operating loss deduction rules.
Net Earnings
Net earnings of $8,698 in the 1995 third quarter were 18 percent higher than
1994 third quarter net earnings of $7,368.
Business Group Results
<TABLE>
<CAPTION>
Operating
Net Sales Earnings (Loss)
3Q 1995 3Q 1994 3Q 1995 3Q 1994
<S> <C> <C> <C> <C>
Lukens Steel $135,133 113,955 8,376 8,912
Washington Stainless 149,136 120,517 13,679 10,775
Corporate - - (4,377) (3,890)
Inter-group eliminations(a) (29,609) (3,009) (150) 112
-------- ------- ------ ------
$254,660 231,463 17,528 15,909
======== ======= ====== ======
</TABLE>
(a) Eliminations primarily reflected sales from the Lukens Steel Group to the
Washington Stainless Group and the related profit-in-inventory recognition.
With the completion of stainless melting facilities in Coatesville,
Pennsylvania, during the first quarter of 1995, stainless slabs were
manufactured and sold to the Washington Stainless Group.
Lukens Steel Group
Earnings for the third quarter were down 6 percent. The decline reflected
production disruptions and expenses associated with the start-up of capital
expenditure projects. Higher scrap costs also impacted results. Sales for the
quarter were up 19 percent from the combination of higher selling prices and
from the inter-group sales of stainless slabs, referenced in the above chart.
Production disruptions were evident in the 10 percent decline in shipments,
particularly in carbon product lines. Shipped tons in 1995 were 154,900
compared to 171,700 tons in 1994.
<PAGE>
Washington Stainless Group
The group recorded a 27 percent earnings improvement on a 24 percent sales
increase. Higher selling prices combined with improved results from our service
center operations resulted in the increase. The earnings increase was limited
by higher raw material costs and a customer inventory correction that reduced
shipments in cold-rolled products. Shipments totaled 61,000 tons in 1995, 16
percent below the 72,500 tons in 1994.
Results of Operations for the Thirty-nine Weeks Ended
September 30, 1995 and September 24, 1994
Operating Results
Operating earnings of $53,685 were 75 percent higher than 1994 earnings of
$30,618. The increase primarily reflected the favorable impact of higher
selling prices and productivity gains in the Washington Stainless Group.
Included in 1994 earnings was the impact of production disruptions and
maintenance costs associated with severe weather conditions during the first
quarter. The increase in 1995 selling and administrative expenses included
higher incentive compensation accruals.
Sales of $786,442 for the three quarters were 13 percent ahead of 1994 sales of
$694,589. Most of the increase resulted from the Washington Stainless Group,
which benefited from higher selling prices.
Interest Expense
Interest expense of $9,729 was down 18 percent compared to the 1994 expense of
$11,825. The 1995 expense included higher amounts of capitalized interest that
were partially offset by interest expense from higher debt levels and higher
interest rates.
Income Taxes
The effective tax rate was 37.8 percent in 1995 and 39.0 percent in 1994.
Included in the 1994 rate was the unfavorable impact from the revaluation of net
deferred tax assets following changes to Pennsylvania corporate tax rates and
net operating loss deduction rules.
Net Earnings
Net earnings were $27,341 in 1995 compared to $11,464 in 1994.
<PAGE>
Business Group Results
<TABLE>
<CAPTION>
Operating
Net Sales Earnings (Loss)
YTD 1995 YTD 1994 YTD 1995 YTD 1994
<S> <C> <C> <C> <C>
Lukens Steel $402,160 346,507 19,852 17,055
Washington Stainless 458,904 357,137 50,281 25,802
Corporate - - (13,594) (11,881)
Inter-group eliminations(a) (74,622) (9,055) (2,854) (358)
-------- ------- ------- -------
$786,442 694,589 53,685 30,618
======== ======= ======= =======
</TABLE>
(a) Eliminations primarily reflected sales from the Lukens Steel Group to the
Washington Stainless Group and the related profit-in-inventory recognition.
With the completion of stainless melting facilities in Coatesville,
Pennsylvania, during the first quarter of 1995, stainless slabs were
manufactured and sold to the Washington Stainless Group.
Lukens Steel Group
Sales for the first three quarters of 1995 were up 16 percent from the
combination of higher selling prices and the inter-group sales of stainless
slabs, referenced in the above chart. Shipments for the period were 482,400
tons, down 10 percent from 1994 shipments of 534,700 tons. The decline,
particularly in carbon product lines, reflected the impact of production
disruptions from the start-up of capital expenditure projects.
Earnings were also up 16 percent. The 1995 earnings were limited by production
disruptions and expenses associated with the start-up of capital expenditure
projects. Included in 1994 results was the impact of production disruptions and
maintenance costs associated with severe weather conditions that resulted in a
loss for the first quarter of 1994.
Washington Stainless Group
Higher selling prices led to a 28 percent increase in sales. A customer
inventory correction during the third quarter, which reduced order rates and
shipments of cold-rolled products, is expected to continue for the remainder of
the year. Shipments for the first three quarters were 194,300 tons, slightly
lower than 1994 shipments of 196,900 tons. The sales improvement coupled with
productivity gains translated into a strong earnings improvement from the first
three quarters of 1994. Higher raw material costs partially offset the earnings
improvement.
<PAGE>
PART II - OTHER INFORMATION
Item 5. Other Information.
During the third quarter, Rod F. Dammeyer was appointed to the Board of
Directors. Mr. Dammeyer, 54, is president, chief executive officer and a
director of Anixter International Inc. (formerly known as Itel Corporation until
August 31, 1995), based in Chicago, Illinois.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(10.1) Lukens Inc. Supplemental Retirement Plan for Designated Executives,
as amended and restated
(10.2) Lukens Inc. Supplemental Retirement Plan for Lukens Performance
Incentive Plan Participants, as amended and restated
(10.3) Lukens Performance Incentive Plan, effective commencing in 1995
(11) Statement regarding computation of per share earnings
(27) Financial Data Schedule
(b) Reports on Form 8-K
No report on Form 8-K was filed during the quarter ended September 30,
1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LUKENS INC.
November 2, 1995 R. W. Van Sant
----------------------
R. W. Van Sant
Chairman and Chief Executive Officer
November 2, 1995 C. B. Houghton, Jr.
----------------------
C. B. Houghton, Jr.
Vice President and Controller
<PAGE>
Exhibit 10.1
LUKENS INC. SUPPLEMENTAL RETIREMENT PLAN
FOR DESIGNATED EXECUTIVES
(AMENDED AND RESTATED, EFFECTIVE APRIL 29, 1992)
Lukens Inc., a Delaware corporation, pursuant to resolution of its
Board of Directors, has established the following Supplemental Retirement Plan
for Designated Executives (the "Plan"), originally effective January 1, 1990, as
amended and restated effective April 29, 1992, to provide retirement benefits to
designated executives which are supplemental to benefits under the Lukens Inc.
Salaried Employees Retirement Plan and the Lukens Inc. Supplemental Retirement
Plan for Lukens Performance Incentive Plan Participants.
ARTICLE I
Definitions
-----------
Section 1.01. As used herein:
------------
(a) "Accrued Benefit" means with respect to any Participant the
portion of the benefit earned under the Plan to the date of a Change in Control
calculated in accordance with Article IV. To the extent that (i) a
Participant's Accrued Benefit is calculated under Article IV by reference to
monthly retirement income benefits payable to the Participant under the
Retirement Plan or the Lukens Inc. Supplemental Retirement Plan or the Lukens
Inc. Supplemental Retirement Plan for Lukens Performance Incentive Plan
Participants, and (ii) no such
<PAGE>
benefits are or would upon termination of employment and application therefor be
payable to the Participant as of the date of a Change in Control, the
Participant's Accrued Benefit shall be calculated under Article IV by reference
to the amounts of the monthly retirement income benefits accrued with respect to
the Participant under the Retirement Plan and the Lukens Inc. Supplemental
Retirement Plan and the Lukens Inc. Supplemental Retirement Plan for Lukens
Performance Incentive Plan Participants as of the date of the Change in Control
and payable to him at the earliest dates on which he would be eligible to begin
to receive such benefits under the terms of such plans, respectively.
(b) "Actuarial Equivalent" means an amount which, when payable
at a time or in a form different from another amount is of equivalent actuarial
value to such other amount, as determined by the Committee in its sole
discretion.
(c) "Board" means the Board of Directors of Lukens Inc.
(d) "Cause" means the basis for a Participant's termination of
employment by the Company defined as "cause" in the Participant's Employment
Agreement, and as determined under such Employment Agreement.
(e) "Change in Control" means any of the following events:
(i) (A) Any "person" or "group" (as such terms
are used in Sections 3(a)(9), 13(d)(3) and 14(d)(2) of
2
<PAGE>
the Securities Exchange Act of 1934, as amended), considered together with its
or their "affiliates" and "associates" (as such terms are defined in Rule 12b-2
of the General Rules and Regulations under the Securities Exchange Act of 1934,
as amended), is or becomes the beneficial owner (as defined in Rule 13d-3 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended), or acquires or holds voting control, directly or indirectly, of
securities of the Company which, when considered together with any other
securities of the Company held by such person or group of their affiliates or
associates which by their terms are convertible, even if not then convertible,
represent twenty percent (20%) or more of the voting power of the then
outstanding securities of the Company, and (B) the Board as it existed
immediately prior to any such acquisition of or change in ownership or control,
after having been advised thereof, does not, within ten days after being so
advised, adopt a resolution specifically determining that such acquisition of or
change in ownership or control does not constitute a change of control event
within the meaning of this paragraph; or
(ii) A change in the composition of a majority of
the Board within 24 months after any "person" or "group" (as such terms are used
in Sections 3(a)(9), 13(d)(3) and 14(d)(2) of the Securities Exchange Act of
1934, as amended), considered together with its or their "affiliates" or
"associates" (as such terms are defined in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act
3
<PAGE>
of 1934, as amended), is or becomes the beneficial owner (as defined in Rule
13d-3 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended) or acquires or holds voting control, directly or indirectly,
of securities of the Company which, when considered together with any other
securities held by such person or group of their affiliates or associates which
by their terms are convertible, even if not then convertible, represent twenty
percent (20%) of the voting power of the then outstanding securities of the
Company; or
(iii) (A) Any "person" or "group" (as such
terms are used in Section 3(a)(9), 13(d)(3) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended) commences a tender offer or exchange offer for
securities of the Company if, upon consummation thereof, the offeror, considered
together with its "affiliates" and "associates" (as such terms are defined in
Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended), would own or control, directly or indirectly,
securities of the Company which, when considered together with any other
securities held by such person or group or their affiliates or associates which
by their terms are convertible, even if not then convertible, represent thirty
percent (30%) or more of the voting power of the then outstanding securities of
the Company, and (B) the Board of Directors of the Company as it existed
immediately prior to any such offer, after having been advised thereof, does
not, within ten business days after being so advised, adopt a resolution
4
<PAGE>
specifically determining that such offer does not constitute a change of control
event within the meaning of this paragraph. The terms "person" and "group," as
used in this Subsection (c), shall not include (i) the Company; (ii) any
corporation in which the Company owns, directly or indirectly, voting securities
sufficient to elect at least a majority of the directors of such corporation;
(iii) any employee benefit plan of the Company or of any corporation described
in clause (ii), above; (iv) any individual or entity organized, appointed or
established by the Company for, or pursuant to the terms of any employee benefit
plan described in clause (iii), above.
(f) "Committee" means the Executive Development and Compensation
Committee of the Board.
(g) "Compensation" means the average during the highest five
Plan Years of the last ten Plan Years preceding the year of the Participant's
Normal Retirement Date, calculated as follows:
(i) for Plan Years beginning on or after January 1,
1994, the sum of (A) one hundred percent (100%) of the Participant's
compensation as defined in the Retirement Plan (including amounts deferred as
salary reduction contributions under the Lukens Inc. Employees Capital
Accumulation Plan, but without regard to any applicable dollar limitation in the
Retirement Plan on the amount of compensation that may be taken into account),
plus (B) one hundred percent (100%) of the cash portion of the incentive
compensation payable
5
<PAGE>
under the Lukens Performance Incentive Plan (in the year accrued).
(ii) for Plan Years beginning on or after January 1,
1988 and before January 1, 1994, one hundred percent (100%) of the Participant's
compensation as defined in the Retirement Plan (including amounts deferred as
salary reduction contributions under the Lukens Inc. Employees Capital
Accumulation Plan, but without regard to any applicable dollar limitation in the
Retirement Plan on the amount of compensation that may be taken into account).
(iii) for Plan Years beginning before January 1,
1988, one hundred percent (100%) of the Participant's annual base salary,
computed by converting the last regular full pay period base salary rate paid in
the Plan Year to an annual amount, including amounts deferred as salary
reduction contributions under the Lukens Inc. Employees Capital Accumulation
Plan, but excluding any amount resulting from a cost-of-living adjustment which
took effect after May 1, 1974, plus one hundred percent (100%) of the incentive
compensation allocated under the Lukens Incentive Compensation Plan, the Lukens
Inc. 1983 Target Incentive Plan or the Lukens Profit Sharing Program.
(h) "Continuous Service" means the period of time
preceding a Participant's Normal Retirement Date, not exceeding 30 years, during
which a Participant shall be deemed continuously employed by the Company or any
subsidiary in accordance with past
6
<PAGE>
employment practices. A Participant shall be treated as continuously employed
during any period of time following a Participant's actual termination of
employment with the Company which is included in the Participant's Period of
Employment. For purposes of determining Continuous Service, each Participant
shall be treated as if hired by the Company at age 35.
(i) "Employment Agreement" means the employment agreement, if
any, between a Participant and the Company.
(j) "Good Reason" means the basis for a Participant's
termination of employment defined as "good reason" in the Participant's
Employment Agreement, and as determined under such Employment Agreement.
(k) "Lukens" or "Company" means Lukens Inc. or any successor
thereto.
(l) "Lukens Inc. Supplemental Retirement Plan for Lukens
Performance Incentive Plan Participants" means such Plan, as it may be in effect
from time to time, including, as applicable, as the Lukens Inc. Supplemental
Retirement Plan for Target Incentive Plan Participants.
(m) "Normal Retirement Date" means the first day of the month
coincident with or next following the month in which a Participant attains age
65.
(n) "Participant" means only executives of Lukens Inc. who are
designated as Participants in this Plan by the Committee. Such designation shall
be recorded in the minutes of
7
<PAGE>
the meeting of the Committee in which such executive is designated a
Participant.
(o) "Period of Employment" means the contractual period of
employment described in a Participant's Employment Agreement, as determined
under such Employment Agreement .
(p) "Plan" means the supplemental retirement plan described
herein which shall be known as the "Lukens Inc. Supplemental Retirement Plan for
Designated Executives."
(q) "Plan Year" means any twelve-month period commencing on any
January 1 and ending on the following December 31.
(r) "Retirement" means:
(i) retirement at Normal Retirement Date or later and
commencement of benefits under the Retirement Plan;
(ii) retirement prior to Normal Retirement Date but after
attaining age 62, and commencement of benefits under the Retirement Plan;
(iii) retirement with the consent of the Committee after
attaining age 55 but prior to attaining age 62, and commencement of benefits
under the Retirement Plan;
(iv) the end of the Participant's Period of Employment
following his termination of employment with the Company for Good Reason; or
(v) the end of the Participant's Period of Employment
following his termination of employment by the Company other than for Cause or
disability.
8
<PAGE>
(s) "Retirement Plan" means the Lukens Inc. Salaried Employees
Retirement Plan as from time to time amended and any other defined benefit
employee pension plan maintained by the Company and/or its subsidiaries and
affiliated companies.
(t) "Social Security Benefit" means any Social Security benefit
which a Participant is entitled or would upon application be entitled to receive
under the Social Security Act in any month for which he receives benefits under
this Plan. The amount of the Social Security Benefit shall be determined upon
termination of the Participant's employment with the Company under the
provisions of the Social Security Act in effect at that time by assuming that
(i) the Participant receives no earnings covered by the Social Security Act in
any year following the year his employment with the Company terminates and (ii)
the Participant received wages in excess of the Social Security taxable wage
base for each year preceding and including the year his employment with the
Company terminates. Notwithstanding the foregoing, for purposes of calculating a
distribution in the event of a Change in Control, such distribution shall be
calculated based on a Social Security Benefit determined under the provisions of
the Social Security Act in effect at the time of the Change in Control, by
assuming that the Participant receives no earnings covered by the Social
Security Act after the Change in Control and, if the Participant has not yet
reached an age at which he would be entitled to receive benefits under the
Social Security Act, that the Participant will be entitled to
9
<PAGE>
receive a Social Security benefit beginning at the earliest age then provided
under the Social Security Act.
Section 1.02. Wherever used herein, masculine pronouns include the
------------
feminine, and the plural includes the singular.
ARTICLE II
Cost of Plan
------------
Section 2.01. The cost of the supplemental retirement benefits
------------
payable hereunder shall be paid for by the Company.
ARTICLE III
Eligibility to Receive Benefits
-------------------------------
Section 3.01.
------------
(a) A Participant who retires on or after his Normal Retirement
Date shall be eligible to receive full benefits hereunder in accordance with
Article IV.
(b) Each Participant whose Retirement is prior to his Normal
Retirement Date shall be eligible to receive benefits hereunder in accordance
with Article V.
(c) The surviving spouse of a Participant who dies before or
after his Normal Retirement Date and who meets the requirements set forth in
Section 7.02 shall be eligible for surviving spouse benefits as in Section 7.02.
(d) Except in the event of a Change in Control or Retirement
within the meaning of paragraph (iv) or (v) of the definition of the term
"Retirement," no Participant shall be
10
<PAGE>
eligible to receive benefits under Subsection (a) or (b) until the Participant
has commenced to receive retirement benefits under the Retirement Plan.
ARTICLE IV
Computation of Benefits
-----------------------
Section 4.01. Subject to section 4.02, the monthly retirement benefit
------------
payable to a Participant at or after his Normal Retirement Date shall be an
amount equal to (a) minus (b) minus (c) where
(a) is one-twelfth (1/12) of the sum determined as follows:
(i) two percent (2%) of the Participant's Compensation
multiplied by each year or fraction thereof of the Participant's Continuous
Service not exceeding 25, plus (ii) one percent (1%) of the Participant's
Compensation multiplied by each year or fraction thereof of the Participant's
Continuous Service in excess of 25, and
(b) is the monthly amount of any retirement income benefits
(computed on a straight life annuity basis) payable to the Participant under (i)
the Retirement Plan (determined without regard to any reduction thereof for
payments made on account of disability), (ii) the Lukens Inc. Supplemental
Retirement Plan, (iii) the Lukens Inc. Supplemental Retirement Plan for Lukens
Performance Incentive Plan Participants, (iv) the Supplemental Retirement Plan
of General Steel Industries, Inc.,
11
<PAGE>
as of his date of Retirement and (v) any retirement plans of the Participant's
immediate prior employer and such other employers' plans as designated by the
Committee in the minutes of their meeting in which such executive is designated
a Participant, and
(c) is four percent (4%) of the Participant's Social Security
Benefit multiplied by each year or fraction thereof of the Participant's
Continuous Service not exceeding 25.
Section 4.02. Notwithstanding any provision contained herein to the
------------
contrary, the minimum benefit payable to a Participant hereunder shall be the
excess of (a) over (b) where
(a) is the amount of any monthly retirement income benefit
(computed on a straight life annuity basis) that would have been payable to the
Participant under the Retirement Plan and the Lukens Inc. Supplemental
Retirement Plan for Lukens Performance Incentive Plan Participants, determined
without regard to any reduction thereof for payments made on account of
disability, as of his date of Retirement, but for the maximum compensation and
benefit limitations contained therein and in Section 401(a)(17) and 415 of the
Internal Revenue Code of 1986, as amended, and
(b) is the amount of the monthly retirement income benefit
(computed on a straight life annuity basis) payable to him under the Retirement
Plan and the Lukens Inc. Supplemental Retirement Plan for Lukens Performance
Incentive Plan Participants, determined without regard to any reductions
12
<PAGE>
thereof for payments made on account of disability, as of his date of
Retirement.
ARTICLE V
Early Retirement
----------------
Section 5.01. A Participant who retires prior to his Normal
------------
Retirement Date, but after attaining age 62 and after completing at least ten
years of Continuous Service, shall be eligible to receive benefits hereunder
computed as of his Retirement in accordance with Article IV, without actuarial
reduction for such early retirement.
Section 5.02. A Participant who retires with the consent of the
------------
Committee, prior to attaining age 62, but after attaining age 55 and completing
ten years of Continuous Service, or a Participant who has attained age 55 and
whose Retirement is described in paragraphs (iv) or (v) of the definition of the
term "Retirement" in Article I, shall be eligible to receive benefits hereunder;
provided, however, that such Participant's monthly retirement benefit shall be
calculated (i) by first determining the amount pursuant to Section 4.01(a) as of
the date of his Retirement, reduced by 4% or a proportionate part thereof for
each full or partial year by which the participant's age at the time benefits
commence hereunder is less than 62, except that no such reduction shall apply if
the Participant is entitled to benefits under the Retirement Plan which are not
reduced by reason of early commencement, (ii) by next reducing such amount
13
<PAGE>
by the amount determined pursuant to Section 4.01(b) as of the date of the
Participant's Retirement, or, in the case of a Participant whose Retirement is
described in paragraph (iv) or (v) of the definition of the term "Retirement"
and who is not entitled to commence benefits under the Retirement Plan upon his
Retirement hereunder, by the Actuarial Equivalent of the amount determined
pursuant to section 4.01(b) if Retirement Plan benefits commenced at the same
time as benefits under this Plan, and (iii) by then reducing such amount further
pursuant to Section 4.01(c) for any month during which the Participant is
entitled or would upon application be entitled to receive benefits under the
Social Security Act.
ARTICLE VI
Forfeiture
----------
Section 6.01.
------------
(a) A Participant shall forfeit his right to any benefits that
may accrue hereunder in the event of the termination of his employment with the
Company as the result of (i) his death, except as set forth in Section 7.02,
(ii) resignation or Retirement (other than a Retirement described in paragraph
(iv) of the definition of the term "Retirement" in Article I) without the
consent of the Committee prior to attaining age 62 or (iii) his discharge from
the Company prior to attaining age 62 for any reason which, in the sole judgment
of the Committee, shall constitute cause therefor.
14
<PAGE>
(b) A Participant shall also forfeit his right to any benefits
hereunder if, within a five year period following termination of employment with
the Company and within the regular geographic marketing area of the Company or a
subsidiary, such Participant shall enter into a business or employment
determined by the Committee to be both competitive with the business of the
Company or a subsidiary, and injurious to the Company's interests.
ARTICLE VII
Payments
--------
Section 7.01. The monthly retirement benefits payable to a
------------
Participant in accordance with Articles IV and V shall commence on the first day
of the month following the Participant's Retirement (provided that for a
Participant whose Retirement is described in paragraph (iv) or (v) of the
definition of the term "Retirement" in Article I, such benefits shall commence
on the first day of the month following the later of the Participant's
Retirement or his attainment of age 55) and shall be payable on the first day of
each month thereafter during his lifetime. At the prior written request of the
Participant, the Committee may, in its sole discretion, select a different
commencement date or method of payment or both, provided that such commencement
date and method of payment are available under the Retirement Plan, and provided
further that the benefit payments commencing on such date and under such method
are the
15
<PAGE>
actuarially equivalent value of the benefits payable on the Participant's
Retirement under a straight life annuity as provided hereinabove.
Notwithstanding any provision of this Plan to the contrary, benefits hereunder
may not be paid in lump sum form except in the event of a Change in Control. If
the Committee approves a method of payment pursuant to which amounts may be paid
to another person subsequent to the death of the Participant, the Participant
shall designate a beneficiary thereunder pursuant to rules adopted by the
Committee.
Section 7.02.
------------
(a) In the event of the death of a Participant for whom benefits
have commenced under Section 7.01, a monthly benefit equal to 50% of the benefit
payable to such Participant (determined on the basis of a straight life annuity)
shall be paid to such Participant's surviving spouse, if any, commencing on the
first day of the month following the month in which the Participant died and
continuing throughout the spouse's lifetime; provided, however, that this
Section 7.02(a) shall only be applicable to a spouse to whom the Participant was
married at the time of his Retirement.
(b) In the event of the death of a Participant to whom benefits
have not commenced under Section 7.01:
(i) A monthly benefit shall be paid to the spouse, if
any, to whom the Participant was married on the date of his death, calculated as
hereinafter provided. The benefit shall commence on a date determined pursuant
to
16
<PAGE>
Section 7.02(b)(ii) and continue throughout the spouse's lifetime.
(ii) The spouse's benefit payable pursuant to Section
7.02(b)(i) shall commence as of the first day of any month following the month
in which the Participant died, as the spouse shall elect, but not later than the
later of (A) the first day of the month in which the Participant would have
attained age 65 but for his death or (B) the first day of the month coincident
with or next following the Participant's death.
(iii) Except as otherwise provided in this Section
7.02(b), the amount of benefit payable under this Section 7.02(b) shall be fifty
percent (50%) of (A) the amount determined under Section 4.01(a) and (b) or
Section 4.02(a) and (b), whichever is appropriate, as if the Participant's
Retirement occurred on the date the spouse elects to have benefits commence
under this Section, determined on the basis of a straight life annuity.
(iv) The amount payable pursuant to this Section 7.02(b)
shall be determined without regard to any benefit payable to the Participant
under the Lukens Inc. Supplemental Retirement Plan or the Supplemental
Retirement Plan of General Steel Industries, Inc., or the Lukens Inc.
Supplemental Retirement Plan for Lukens Performance Incentive Plan Participants,
or any plans of the Participant's immediate prior employer and such other
employers' plans as designated by the Committee .
17
<PAGE>
(v) The amount payable pursuant to this Section 7.02(b)
shall be determined without regard to the Participant's ineligibility to receive
benefits under this Plan (or the Retirement Plan, if applicable) prior to age 55
or with fewer than ten years of Continuous Service, if applicable, but reduced
by 4% or a proportionate part thereof for each full or partial year by which the
date benefits commence precedes the date the Participant would have attained age
55 but for his death, and based only on the Participant's years of Continuous
Service as of the date of his death.
(vi) The amount payable pursuant to this Section 7.02(b)
shall be reduced by the amount determined under Section 4.01(c) based on the
Participant's eligibility or ineligibility to receive a Social Security benefit
as of the date of his death.
(vii) In the event that, after benefits commence under this
Section 7.02(b), surviving spouse's benefits payable to the spouse under the
Retirement Plan are reduced by reason of the spouse's eligibility for Social
Security widow's or widower's benefits, benefits under this Section 7.02(b)
shall be increased by an amount equal to such reduction for each month surviving
spouse's benefits under the Retirement Plan are so reduced.
18
<PAGE>
ARTICLE VIII
Continuance of Plan
-------------------
Section 8.01. It is the intent that the obligations of the Company to
------------
pay benefits accrued or payable hereunder shall be binding upon any successor
corporation or organization which shall succeed to substantially all of the
assets and business of the Company, and the term "Company" wherever used herein
shall mean and include any such corporation or organization after such
succession, and such obligations shall be deemed to have been expressly assumed
by any such successor corporation or organization.
Section 8.02.
------------
(a) In the event there is a Change in Control, the following
benefits shall become immediately due and payable in a single sum amount. For
purposes of this Section 8.02, present value shall be determined on the basis of
the UP 1984 mortality table and an interest assumption of 7% or the PBGC
interest rates for deferred annuities in effect for the month of the
distribution, whichever produces the greater benefit.
(i) With respect to each Participant to whom benefits under
the Plan have not commenced as of the date of the Change in Control, the present
value of his Accrued Benefit, determined by assuming that the Participant is
eligible to begin receiving benefits under the Plan as of the date of the Change
in Control and that no reduction for early commencement is applicable under
Section 5.02, plus, if such Participant is
19
<PAGE>
married as of the date of the Change in Control, the present value of the
spouse's benefit calculated pursuant to Section 7.02(b) as if the Participant
had died on the date of the Change in Control and had attained age 65 as of the
date of his death.
(ii) With respect to each spouse of a Participant who is
deceased as of the date of a Change in Control and who is eligible for benefits
under Section 7.02(a) or (b) but to whom such benefits have not commenced as of
the date of a Change in Control, the present value of the benefits payable under
Section 7.02(a) or (b), whichever is applicable, calculated in the case of
benefits under Section 7.02(b) as if the Participant would have attained age 65
on the date of the Change in Control.
(iii) With respect to each Participant to whom benefits under
the Plan have commenced as of the date of a Change in Control, the present value
of the benefits payable to the Participant, plus, if the Participant is married
as of the date of a Change in Control, the present value of the spouse's benefit
calculated pursuant to Section 7.02(a) as if the Participant had died on the
date of the Change in Control.
(iv) With respect to each spouse to whom benefits under
Section 7.02(a) or (b) have commenced as of date of a Change in Control, the
present value of the benefits payable to such spouse under Section 7.02(a) or
(b), whichever is applicable.
20
<PAGE>
(b) As of the date of a Change in Control, the provisions of
Article VI shall be of no effect with respect to events that occur after the
Change in Control, and shall not cause the forfeiture of any benefits under the
Plan, except with respect to events that occurred prior to the date of the
Change in Control.
ARTICLE IX
No Right, Title or Interest
---------------------------
Section 9.01. No Participant shall have any right, title, or interest
------------
whatsoever in or to any investments which the Company may make to aid it in
meeting its obligations hereunder. Nothing contained in the Plan, and no action
taken pursuant to its provisions, shall create or be construed to create a trust
of any kind, or a fiduciary relationship between the Company and the Participant
or any other person. To the extent that any person acquires a right to receive
payments from the Company under this Plan, such right shall be no greater than
the right of an unsecured general creditor of the Company. All payments to be
made hereunder shall be paid in cash from the general funds of the Company, and
no special or separate fund shall be established and no segregation of assets
shall be made, to assure payment of such amounts.
21
<PAGE>
ARTICLE X
General
-------
Section 10.01. This Plan may be amended in whole or in part or
-------------
terminated by resolution of the Board, provided that any benefits which have
accrued or which have become payable hereunder shall not be reduced or
terminated by reason of any such amendment to or termination of this Plan. For
purposes of this Section, any Participant at the time of termination or
amendment of this Plan shall be deemed to have accrued a benefit equal to the
benefit calculated under Section 4.01 or 4.02 based upon such Participant's
Compensation and actual number of years of Continuous Service as determined
under this Plan.
Section 10.02. Except as otherwise provided herein, this Plan shall
-------------
be administered by the Committee, which shall be deemed to have all powers
necessary to administer the Plan in accordance with its terms and provisions.
All determinations made by the Committee shall be conclusive upon the Company,
each Participant and his beneficiaries. If one or more members of the Committee
are disqualified by personal interest from taking part in a particular decision,
the remaining member or members of the Committee (although less than a quorum)
shall have full power to act on the matter. Any claims for a benefit under this
Plan shall be filed with the Committee and resolved in accordance with the
provisions of the Claims Procedure provided in the Retirement Plan, except that
the Committee shall be responsible for handling, reviewing and disposing of any
claim filed under this
22
<PAGE>
Plan. The Committee shall have full discretion and authority to interpret the
provisions of this Plan and the eligibility for benefits under the Plan with
respect to any claim for benefits submitted to the Committee.
Section 10.03. The records of the Company shall be presumed to be
-------------
conclusive of the facts concerning the employment or non-employment of a
Participant unless shown beyond a reasonable doubt to be incorrect.
Section 10.04. Neither this Plan nor any action taken hereunder shall
-------------
be construed as giving to any employee the right to be retained in the employ of
the Company or as affecting the right of the Company to dismiss any employee.
Section 10.05. Each Participant shall file with the Committee such
-------------
pertinent information concerning himself and any beneficiary designated by him
as the Committee may demand, and no Participant or other person shall have any
rights or be entitled to any benefits under this Plan unless such information is
filed by the Participant with respect to them.
Section 10.06. If the Committee shall find that any person to whom
-------------
any payment is payable under this Plan is unable to care for his affairs because
of illness or accident, or is a minor, then any payment due (unless a prior
claim therefor shall have been made by a duly appointed guardian, committee or
other legal representative) may be paid to his spouse, child, parent, brother or
sister, or any other person deemed by the Committee to have incurred expenses
for such person otherwise entitled to
23
<PAGE>
payment, in such manner and proportions as the Committee may determine. Any
such payment shall be a complete discharge of the liabilities of the Company
under this Plan.
Section 10.07. The right of any person to the payment of benefits
-------------
under the Plan may not be assigned, transferred, pledged or encumbered, either
voluntarily or by operation of law, except as may otherwise be required by law.
If any person shall attempt to, or shall, assign, transfer, pledge or encumber
any amount payable hereunder, or if by reason of his bankruptcy or other event
happening at any time any such payment would be made subject to his debts or
liabilities or would otherwise devolve upon anyone else and not be enjoyed by
him or his beneficiary, the Committee may, in its sole discretion, terminate his
interest in any such payment and direct that the same be held and applied to or
for the benefit of such person, his spouse, children or other dependents, or any
other persons deemed to be the natural objects of his bounty, or any of them, in
such manner as the Committee may deem proper.
Section 10.08. This Plan shall be governed by and construed in
-------------
accordance with laws of the Commonwealth of Pennsylvania.
24
<PAGE>
This undersigned hereby certifies that this Plan has been amended and
restated, effective as of April 29, 1992, by the Board of Directors of Lukens
Inc.
LUKENS INC.
WILLIAM D. SPRAGUE
-------------------------
Secretary to the Board of
Directors of Lukens Inc.
25
<PAGE>
Exhibit 10.2
LUKENS INC. SUPPLEMENTAL RETIREMENT PLAN
FOR LUKENS PERFORMANCE INCENTIVE PLAN PARTICIPANTS
(Amended and Restated, Effective January 1, 1994)
Lukens Inc., a Delaware corporation, pursuant to resolution of its
Board of Directors, has established the following Supplemental Retirement Plan
("Plan") originally effective January 1, 1988, as amended and restated effective
January 1, 1994, and renamed the Lukens Inc. Supplemental Retirement Plan for
Lukens Performance Incentive Plan Participants, to provide retirement benefits
to eligible Participants which are supplemental to benefits under the Lukens
Inc. Salaried Employees Retirement Plan.
This Plan shall apply only to Participants who terminate employment
with the Company after December 31, 1993. The right of an employee who
terminated employment with the Company before January 1, 1994 to a supplemental
retirement benefit shall be governed by the Lukens Inc. Supplemental Retirement
Plan for Target Incentive Plan Participants as in effect as of the employment
termination date, or any other pre-existing supplemental retirement plan.
ARTICLE I
Definitions
-----------
Section 1.01. As used herein:
-------------
<PAGE>
(a) "Accrued Benefit" means with respect to any Participant the
portion of the benefit earned under the Plan to the date of a Change in Control
calculated in accordance with Article IV. To the extent that (i) a Participant's
Accrued Benefit is calculated under Article IV by reference to monthly
retirement income benefits payable to the Participant under the Retirement Plan
or the Lukens Inc. Supplemental Retirement Plan, and (ii) no such benefits are
or would upon termination of employment and application therefor be payable to
the Participant as of the date of a Change in Control, the Participant's Accrued
Benefit shall be calculated under Article IV by reference to the amounts of the
monthly retirement income benefits accrued with respect to the Participant under
the Retirement Plan and the Lukens Inc. Supplemental Retirement Plan as of the
date of the Change in Control and payable to him at the earliest dates on which
he would be eligible to begin to receive such benefits under the terms of such
plans, respectively.
(b) "Board" means the Board of Directors of Lukens Inc.
(c) "Change in Control" means any of the following events:
(i) (A) Any "person" or "group" (as such terms are used
in Sections 3(a)(9), 13(d)(3) and 14(d)(2) of the Securities Exchange Act
of 1934, as amended), considered together with its or their "affiliates"
and "associates" (as such terms are defined in Rule 12b-2 of the General
Rules
2
<PAGE>
and Regulations under the Securities Exchange Act of 1934, as amended), is
or becomes the beneficial owner (as defined in Rule l3d-3 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as
amended), or acquires or holds voting control, directly or indirectly, of
securities of the Company which, when considered together with any other
securities of the Company held by such person or group or their affiliates
or associates which by their terms are convertible, even if not then
convertible, represent twenty percent (20%) or more of the voting power of
the then outstanding securities of the Company, and (B) the Board as it
existed immediately prior to any such acquisition of or change in ownership
or control, after having been advised thereof, does not, within ten days
after being so advised, adopt a resolution specifically determining that
such acquisition of or change in ownership or control does not constitute a
change of control event within the meaning of this paragraph; or
(ii) A change in the composition of a majority of the Board
within 24 months after any "person" or "group" (as such terms are used in
Sections 3(a)(9), 13(d)(3) and 14(d)(2) of the Securities Exchange Act of
1934, as amended), considered together with its or their "affiliates" or
"associates" (as such terms are defined in Rule 12b-2 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended), is
or becomes
3
<PAGE>
the beneficial owner (as defined in Rule l3d-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended) or
acquires or holds voting control, directly or indirectly, of securities of
the Company which, when considered together with any other securities held
by such person or group or their affiliates or associates which by their
terms are convertible, even if not then convertible, represent twenty
percent (20%) of the voting power of the then outstanding securities of the
Company; or
(iii) (A) Any "person" or "group" (as such terms are used
in Section 3(a)(9), 13(d)(3) and 14(d)(2) of the Securities Exchange Act of
1934, as amended) commences a tender offer or exchange offer for securities
of the Company if, upon consummation thereof, the offeror, considered
together with its "affiliates" and "associates" (as such terms are defined
in Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended), would own or control, directly or
indirectly, securities of the Company which, when considered together with
any other securities held by such person or group or their affiliates or
associates which by their terms are convertible, even if not then
convertible, represent thirty percent (30%) or more of the voting power of
the then outstanding securities of the Company, and (B) the Board of
Directors of the Company as it existed immediately prior to
4
<PAGE>
any such offer, after having been advised thereof, does not, within ten
business days after being so advised, adopt a resolution specifically
determining that such offer does not constitute a change of control event
within the meaning of this paragraph.
The terms "person" and "group," as used in this Subsection (c), shall not
include (i) the Company; (ii) any corporation in which the Company owns,
directly or indirectly, voting securities sufficient to elect at least a
majority of the directors of such corporation; (iii) any employee benefit plan
of the Company or of any corporation described in clause (ii), above; (iv) any
individual or entity organized, appointed or established by the Company for, or
pursuant to the terms of any employee benefit plan described in clause (iii),
above.
(d) "Committee" means the Executive Development and Compensation
Committee of the Board.
(e) "Compensation" means the average during the highest five Plan
Years of the last ten Plan Years preceding the year of the Participant's Normal
Retirement Date, calculated as follows:
(i) for Plan Years beginning on or after January 1, 1994,
the sum of (A) one hundred percent (100%) of the Participant's compensation
as defined in the Retirement Plan (including amounts deferred as salary
reduction contributions under the Lukens Inc. Employees Capital
Accumulation Plan, but without regard to any
5
<PAGE>
applicable dollar limitation in the Retirement Plan on the amount of
compensation that may be taken into account), plus (B) for any Participant
who receives an award of non-qualified stock options pursuant to the Lukens
Performance Incentive Plan, one hundred percent (100%) of the cash portion
of the incentive compensation payable under the Lukens Performance
Incentive Plan (in the year accrued).
(ii) for Plan Years beginning on or after January 1, 1988
and before January 1, 1994, one hundred percent (100%) of the Participant's
compensation as defined in the Retirement Plan (including amounts deferred
as salary reduction contributions under the Lukens Inc. Employees Capital
Accumulation Plan, but without regard to any applicable dollar limitation
in the Retirement Plan on the amount of compensation that may be taken into
account).
(iii) for Plan Years beginning before January 1, 1988, one
hundred percent (100%) of the Participant's annual base salary, computed by
converting the last regular full pay period base salary rate paid in the
Plan Year to an annual amount, including amounts deferred as salary
reduction contributions under the Lukens Inc. Employees Capital
Accumulation Plan, but excluding any amount resulting from a cost-of-living
adjustment which took effect after May 1, 1974, plus one hundred percent
(100%) of the incentive compensation allocated under the Lukens Incentive
6
<PAGE>
Compensation Plan, the Lukens Inc. 1983 Target Incentive Plan or the Lukens
Profit Sharing Program.
(f) "Continuous Service" means the period of time preceding a
Salaried Employee's or Participant's Normal Retirement Date, not exceeding 40
years, during which a Salaried Employee or Participant shall be deemed
continuously employed by the Company or any subsidiary in accordance with past
employment practices.
(g) "Lukens" or "Company" means Lukens Inc. or any successor
thereto.
(h) "Management Group" means those employees of the Company who
participate in the Lukens Inc. 1983 Target Incentive Plan.
(i) "Normal Retirement Date" means the first day of the month
coincident with or next following the month in which a Participant attains age
65.
(j) "Participant" means any Salaried Employee with at least five
(5) years of Continuous Service who (i) either (A) is a member of the Management
Group at the time of his Retirement or death or at the time of a Change in
Control, or (B) was a member of the Management Group at any time within one year
prior to his Retirement or death or within one year prior to a Change in
Control, and (ii) is designated as a Participant by the Committee.
(k) "Plan" means the supplemental retirement plan described
herein which shall be known as the "Lukens Inc.
7
<PAGE>
Supplemental Retirement Plan for Lukens Performance Incentive Plan
Participants."
(l) "Plan Year" means any twelve-month period commencing on any
January 1 and ending on the following December 31.
(m) "Retirement" means:
(i) (A) retirement at Normal Retirement Date or later,
(B) retirement prior to Normal Retirement Date but after attaining age 62,
or (C) retirement with the consent of the Committee after attaining age 55,
but prior to attaining age 62; and
(ii) commencement of benefits under the Retirement Plan.
(n) "Retirement Plan" means the Lukens Inc. Salaried Employees
Retirement Plan as from time to time amended and any other defined benefit
employee pension plan maintained by the Company and/or its subsidiaries and
affiliated companies.
(o) "Salaried Employee" means any salaried employee of the
Company or any subsidiary of the Company who is paid on a periodic or yearly
salary basis, but shall not include a Director of the Company unless he is also
a regular salaried employee.
(p) "Social Security Benefit" means any Social Security benefit
which a Participant is entitled or would upon application be entitled to receive
under the Social Security Act in any month for which he receives benefits under
this Plan, and
8
<PAGE>
which Social Security benefit the Participant does or would, assuming proper and
timely application therefor had been made, in fact receive for such month
pursuant to the payment procedures of the Social Security Administration then in
effect. The amount of such Social Security Benefit shall be determined upon
termination of the Participant's employment with the Company under the
provisions of the Social Security Act in effect at that time by assuming that
(i) the Participant receives no earnings covered by the Social Security Act in
any year following the year his employment with the Company terminates and (ii)
the Participant received wages in excess of the Social Security taxable wage
base for each year preceding and including the year his employment with the
Company terminates. Notwithstanding the foregoing, for purposes of calculating a
distribution in the event of a Change in Control, such distribution shall be
calculated based on a Social Security Benefit determined under the provisions of
the Social Security Act in effect at the time of the Change in Control, by
assuming that the Participant receives no earnings covered by the Social
Security Act after the Change in Control and, if the Participant has not yet
reached an age at which he would be entitled to receive benefits under the
Social Security Act, that the Participant will be entitled to receive a Social
Security benefit beginning at the earliest age then provided under the Social
Security Act.
Section 1.02 Wherever used herein, masculine pronouns include the
------------
feminine, and the plural includes the singular.
9
<PAGE>
ARTICLE II
Cost of Plan
------------
Section 2.01. The cost of the supplemental retirement benefits
-------------
payable hereunder shall be paid for by the Company.
ARTICLE III
Eligibility to Receive Benefits
-------------------------------
Section 3.01.
-------------
(a) A Participant who retires on or after his Normal Retirement
Date and, on the date of his Retirement, has completed at least five years of
Continuous Service as a member of the Management Group shall be eligible to
receive full benefits hereunder in accordance with Article IV.
(b) Each Participant who, on the date of his Retirement, has
completed at least five years of Continuous Service as a member of the
Management Group but whose Retirement is prior to his Normal Retirement Date
shall be eligible to receive benefits hereunder in accordance with Article V.
(c) The surviving spouse of a Participant who dies before or
after his Normal Retirement Date and who meets the requirements set forth in
Section 7.02 shall be eligible for surviving spouse benefits as set forth in
Section 7.02.
(d) Except in the event of a Change in Control, no Participant
shall be eligible to receive benefits under Subsections (a) or (b) until the
Participant has commenced to receive retirement benefits under the Retirement
Plan.
10
<PAGE>
ARTICLE IV
Computation of Benefits
-----------------------
Section 4.01. Subject to section 4.02, the monthly retirement benefit
-------------
payable to a Participant at or after his Normal Retirement Date shall be an
amount equal to (a) minus (b) minus (c) where
(a) is one-twelfth (1/12) of the sum determined as follows:
(i) (A) two percent (2%) of the Participant's
Compensation multiplied by each year or fraction thereof of the
Participant's Continuous Service not exceeding 25, plus
(ii) one percent (1%) of the Participant's Compensation
multiplied by each year or fraction thereof of the Participant's Continuous
Service in excess of 25, and
(b) is the monthly amount of any retirement income benefits
(computed on a straight life annuity basis) payable to the Participant under (i)
the Retirement Plan (determined without regard to any reduction thereof for
payments made on account of disability), (ii) the Lukens Inc. Supplemental
Retirement Plan, and (iii) the Supplemental Retirement Plan of General Steel
Industries, Inc., as of his date of Retirement, and
(c) is four percent (4%) of the Participant's Social Security
Benefit multiplied by each year or fraction thereof of the Participant's
Continuous Service not exceeding 25.
11
<PAGE>
Section 4.02. Notwithstanding any provision contained herein to the
-------------
contrary, the minimum benefit payable to a Participant hereunder shall be the
excess of (a) over (b) where
(a) is the amount of any monthly retirement income benefit
(computed on a straight life annuity basis) that would have been payable to the
Participant under the Retirement Plan, determined without regard to any
reduction thereof for payments made on account of disability, as of his date of
Retirement, but for the maximum compensation and benefit limitations contained
therein and in Sections 401(a)(17) and 415 of the Internal Revenue Code of 1986,
as amended, and
(b) is the amount of the monthly retirement income benefit
(computed on a straight life annuity basis) payable to him under the Retirement
Plan, determined without regard to any reduction thereof for payments made on
account of disability, as of his date of Retirement.
ARTICLE V
Early Retirement
----------------
Section 5.01. A Participant who retires prior to his Normal
-------------
Retirement Date, but after attaining age 62 and after completing at least ten
years of Continuous Service and at least five years of Continuous Service as a
member of the Management Group, shall be eligible to receive benefits hereunder
computed as of the date of his Retirement in accordance with Article IV, without
actuarial reduction for such early retirement.
12
<PAGE>
Section 5.02. A Participant who retires with the consent of the
-------------
Committee, prior to attaining age 62, but after attaining age 55 and completing
ten years of Continuous Service and five years of Continuous Service as a member
of the Management Group, shall be eligible to receive benefits hereunder;
provided, however, that such Participant's monthly retirement benefit shall be
calculated (i) by first determining the amount pursuant to Section 4.01(a) as of
the date of his Retirement, reduced by 4% or a proportionate part thereof for
each full or partial year by which the Participant's age at the time benefits
commence hereunder is less than 62, except that no such reduction shall apply if
the Participant is entitled to benefits under the Retirement Plan which are not
reduced by reason of early commencement, (ii) by next reducing such amount by
the amount determined pursuant to Section 4.01(b) as of the date of the
Participant's Retirement, and (iii) by then reducing such amount further
pursuant to Section 4.01(c) for any month during which the Participant is
entitled or would upon application be entitled to receive benefits under the
Social Security Act.
ARTICLE VI
Forfeiture
----------
Section 6.01.
-------------
(a) A Participant shall forfeit his right to any benefits that
may accrue hereunder in the event of the
13
<PAGE>
termination of his employment with the Company as the result of (i) his death,
except as set forth in Section 7.02, (ii) resignation or Retirement without the
consent of the Committee prior to attaining age 62 or (iii) his discharge from
the Company prior to attaining age 62 for any reason which, in the sole judgment
of the Committee, shall constitute cause therefor.
(b) A Participant shall also forfeit his right to any benefits
hereunder if, within a five year period following termination of employment with
the Company and within the regular geographic marketing area of the Company or a
subsidiary, such Participant shall enter into a business or employment
determined by the Committee to be both competitive with the business of the
Company or a subsidiary, and injurious to the Company's interests.
ARTICLE VII
Payments
--------
Section 7.01. The monthly retirement benefits payable to a
-------------
Participant in accordance with Articles IV and V shall commence on the first day
of the month following the Participant's Retirement and shall be payable on the
first day of each month thereafter during his lifetime. At the prior written
request of the Participant, the Committee may, in its sole discretion, select a
different commencement date or method of payment or both, provided that such
commencement date and method of payment are available under the Retirement Plan,
and provided
14
<PAGE>
further that the benefit payments commencing on such date and under such method
are the actuarially equivalent value of the benefits payable on the
Participant's Retirement under a straight life annuity as provided hereinabove.
Notwithstanding any provision of this Plan to the contrary, benefits hereunder
may not be paid in lump sum form except in the event of a Change in Control. If
the Committee approves a method of payment pursuant to which amounts may be paid
to another person subsequent to the death of the Participant, the Participant
shall designate a beneficiary thereunder pursuant to rules adopted by the
Committee.
Section 7.02.
-------------
(a) In the event of the death of a Participant for whom benefits
have commenced under Section 7.01, a monthly benefit equal to 50% of the benefit
payable to such Participant (determined on the basis of a straight life annuity)
shall be paid to such Participant's surviving spouse, if any, commencing on the
first day of the month following the month in which the Participant died and
continuing throughout the spouse's lifetime; provided, however, that this
Section 7.02(a) shall only be applicable to a spouse to whom the Participant was
married at the time of his Retirement.
(b) In the event of the death of a Participant to whom benefits
have not commenced under Section 7.01 and who has completed at least five years
of Continuous Service as a member of the Management Group:
15
<PAGE>
(i) A monthly benefit shall be paid to the spouse, if any,
to whom the Participant was married on the date of his death, calculated as
hereinafter provided. The benefit shall commence on a date determined
pursuant to Section 7.02(b)(ii) and continue throughout the spouse's
lifetime.
(ii) The spouse's benefit payable pursuant to Section
7.02(b)(i) shall commence as of the first day of any month following the
month in which the Participant died, as the spouse shall elect, but not
later than the later of (A) the first day of the month in which the
Participant would have attained age 65 but for his death or (B) the first
day of the month coincident with or next following the Participant's death.
(iii) Except as otherwise provided in this Section 7.02(b),
the amount of benefit payable under this Section 7.02(b) shall be fifty
percent (50%) of (A) the amount determined under Section 4.01(a) and (b) or
Section 4.02(a) and (b), whichever is appropriate, based only on the
Participant's years of Continuous Service as of the date of his death, as
if the Participant's Retirement occurred on the date the spouse elects to
have benefits commence under this Section, determined on the basis of a
straight life annuity and as if the Participant's age on such date would
have been the greater of 55 or his actual age had he lived, (B) reduced in
accordance with Section 4.01(b), based only
16
<PAGE>
on the Participant's years of Continuous Service as of the date of his
death, as if the Participant's Retirement occurred on the date the spouse
elects to have benefits commence under this Section 7.02(b).
(iv) The amount payable pursuant to this Section 7.02(b)
shall be determined without regard to any benefit payable to the
Participant under the Lukens Inc. Supplemental Retirement Plan or the
Supplemental Retirement Plan of General Steel Industries, Inc.
(v) The amount payable pursuant to this Section 7.02(b)
shall be determined (A) without regard to the Participant's ineligibility
to receive benefits under this Plan (or the Retirement Plan, if applicable)
because he has fewer than ten years of Continuous Service, if applicable,
(B) on the basis of a straight life annuity and as if the Participant's age
on the date benefits commence to the spouse would have been the greater of
55 or his actual age had he lived, and (C) if the Participant would not
have attained age 55 as of the date the spouse elects to have benefits
commence under this Section 7.02(b), reduced further by 4% or a
proportionate part thereof for each full or partial year by which the date
benefits commence precedes the date the Participant would have attained age
55 but for his death, and based only on the Participant's years of
Continuous Service as of the date of his death.
17
<PAGE>
(vi) The amount payable pursuant to this Section 7.02(b)
shall be reduced by the amount determined under Section 4.01(c) based on
the Participant's eligibility or ineligibility to receive a Social Security
benefit as of the date of his death.
(vii) In the event that, after benefits commence under this
Section 7.02(b), surviving spouse's benefits payable to the spouse under
the Retirement Plan are reduced by reason of the spouse's eligibility for
Social Security widow's or widower's benefits, benefits under this Section
7.02(b) shall be increased by an amount equal to such reduction for each
month surviving spouse's benefits under the Retirement Plan are so reduced.
18
<PAGE>
ARTICLE VIII
Continuance of Plan
-------------------
Section 8.01. It is the intent that the obligations of the Company to
-------------
pay benefits accrued or payable hereunder shall be binding upon any successor
corporation or organization which shall succeed to substantially all of the
assets and business of the Company, and the term "Company" wherever used herein
shall mean and include any such corporation or organization after such
succession, and such obligations shall be deemed to have been expressly assumed
by any such successor corporation or organization.
Section 8.02. (a) In the event there is a Change in Control, the
-------------
following benefits shall become immediately due and payable in a single sum
amount. For purposes of this Section 8.02, present value shall be determined on
the basis of the UP 1984 mortality table and an interest assumption of 7% or the
PBGC interest rates for immediate or deferred annuities, whichever is
appropriate, in effect for the month of the distribution, whichever produces a
greater benefit.
(i) With respect to each Participant to whom benefits
under the Plan have not commenced as of the date of the Change in Control
and who is not a party to an individual agreement with the Company
providing for benefits in the event of a Change in Control, the present
value of his Accrued Benefit, determined by assuming that the Participant
is eligible to begin receiving benefits under
19
<PAGE>
the Plan as of the date of the Change in Control, regardless of his age,
and that no reduction for early commencement is applicable under Section
5.02, plus, if such Participant is married as of the date of the Change in
Control, the present value of the spouse's benefit calculated pursuant to
Section 7.02(b) as if the Participant had died on the date of the Change in
Control and had attained age 65 as of the date of his death.
(ii) With respect to each other Participant to whom
benefits under the Plan have not commenced as of the date of the Change in
Control, the present value of his Accrued Benefit, determined by assuming
that the Participant is or would be eligible and would have begun to
receive benefits in accordance with section 5.02 upon the later of
attainment of age 55 or occurrence of the Change in Control.
(iii) With respect to each spouse of a Participant who is
deceased as of the date of a Change in Control and who is eligible for
benefits under Section 7.02(a) or (b) but to whom such benefits have not
commenced as of the date of a Change in Control, the present value of the
benefits payable under Section 7.02(a) or (b), whichever is applicable,
calculated in the case of benefits under Section 7.02(b) as if the
Participant would have attained age 65 on the date of the Change in
Control.
(iii) With respect to each Participant to whom benefits
under the Plan have commenced as of the date of a
20
<PAGE>
Change in Control, the present value of the benefits payable to the
Participant, plus, if the Participant is married as of the date of a Change
in Control, the present value of the spouse's benefit calculated pursuant
to Section 7.02(a) as if the Participant had died on the date of the Change
in Control.
(iv) With respect to each spouse to whom benefits under
Section 7.02(a) or (b) have commenced as of the date of a Change in
Control, the present value of the benefits payable to such spouse under
Section 7.02(a) or (b), whichever is applicable.
(b) As of the date of a Change in Control, the provisions of
Article VI shall be of no effect with respect to events that occur after the
Change in Control, and shall not cause the forfeiture of any benefits under the
Plan, except with respect to events that occurred prior to the date of the
Change in Control.
ARTICLE IX
No Right, Title or Interest
---------------------------
Section 9.01. No Participant shall have any right, title, or interest
-------------
whatsoever in or to any investments which the Company may make to aid it in
meeting its obligations hereunder. Nothing contained in the Plan, and no action
taken pursuant to its provisions, shall create or be construed to create a trust
of any kind, or a fiduciary relationship between the Company and
21
<PAGE>
the Participant or any other person. To the extent that any person acquires a
right to receive payments from the Company under this Plan, such right shall be
no greater than the right of an unsecured general creditor of the Company. All
payments to be made hereunder shall be paid in cash from the general funds of
the Company, and no special or separate fund shall be established and no
segregation of assets shall be made, to assure payments of such amounts.
ARTICLE X
General
-------
Section 10.01. This Plan may be amended in whole or in part or
--------------
terminated by resolution of the Board; provided, however, that any benefits
which have accrued or which have become payable hereunder shall not be reduced
or terminated by reason of any such amendment to or termination of this Plan.
For purposes of this Section, any Participant who is a Salaried Employee who has
five or more years of Continuous Service as a member of the Management Group at
the time of termination or amendment of this Plan shall be deemed to have
accrued a benefit equal to the benefit calculated under Section 4.01 or 4.02
based upon such Participant's Compensation and actual number of years of
Continuous Service.
Section 10.02. Except as otherwise provided herein, this Plan shall
--------------
be administered by the Committee, which shall be deemed to have all powers
necessary to administer the Plan in
22
<PAGE>
accordance with its terms and provisions. All determinations made by the
Committee shall be conclusive upon the Company, each Participant and his
beneficiaries. If one or more members of the Committee are disqualified by
personal interest from taking part in a particular decision, the remaining
member or members of the Committee (although less than a quorum) shall have full
power to act on the matter. Any claims for a benefit under this Plan shall be
filed with the Committee and resolved in accordance with the provisions of the
Claims Procedure provided in the Retirement Plan, except that the Committee
shall be responsible for handling, reviewing and disposing of any claim filed
under this Plan. The Committee shall have full discretion and authority to
interpret the provisions of this Plan and the eligibility for benefits under the
Plan with respect to any claim for benefits submitted to the Committee.
Section 10.03. The records of the Company shall be presumed to be
--------------
conclusive of the facts concerning the employment or non-employment of a
Participant unless shown beyond a reasonable doubt to be incorrect.
Section 10.04. Neither this Plan nor any action taken hereunder shall
-------------
be construed as giving to any employee the right to be retained in the employ of
the Company or as affecting the right of the Company to dismiss any employee.
Section 10.05. Each Participant shall file with the Committee such
--------------
pertinent information concerning himself and any beneficiary designated by him
as the Committee may demand, and no
23
<PAGE>
Participant or other person shall have any rights or be entitled to any benefits
under this Plan unless such information is filed by the Participant with respect
to them.
Section 10.06. If the Committee shall find that any person to whom
--------------
any payment is payable under this Plan is unable to care for his affairs because
of illness or accident, or is a minor, then any payment due (unless a prior
claim therefor shall have been made by a duly appointed guardian, committee or
other legal representative) may be paid to his spouse, child, parent, brother or
sister, or any other person deemed by the Committee to have incurred expenses
for such person otherwise entitled to payment, in such manner and proportions as
the Committee may determine. Any such payment shall be a complete discharge of
the liabilities of the Company under this Plan.
Section 10.07. The right of any person to the payment of benefits
--------------
under the Plan may not be assigned, transferred, pledged or encumbered, either
voluntarily or by operation of law, except as may otherwise be required by law.
If any person shall attempt to, or shall, assign, transfer, pledge or encumber
any amount payable hereunder, or if by reason of his bankruptcy or other event
happening at any time any such payment would be made subject to his debts or
liabilities or would otherwise devolve upon anyone else and not be enjoyed by
him or his beneficiary, the Committee may, in its sole discretion, terminate his
interest in any such payment and direct that the same be held and applied to or
for the benefit of such person, his spouse, children or
24
<PAGE>
other dependents, or any other persons deemed to be the natural objects of his
bounty, or any of them, in such manner as the Committee may deem proper.
Section 10.08. This Plan shall be governed by and construed in
--------------
accordance with laws of the Commonwealth of Pennsylvania.
The undersigned hereby certifies that this Plan has been amended and
restated, effective as of January 1, 1994, by the Board of Directors of Lukens
Inc.
LUKENS INC.
WILLIAM D. SPRAGUE
-------------------------
Secretary to the Board of
Directors of Lukens Inc.
25
<PAGE>
Exhibit 10.3
LUKENS PERFORMANCE INCENTIVE PLAN
1. Purpose.
-------
The purpose of the Lukens Performance Incentive Plan (the "Plan") is
to promote the interests of Lukens Inc. (the "Company") and its subsidiaries by
affording key employees an incentive to exert their maximum efforts on its
behalf by providing additional compensation for the achievement of specific
profit and individual performance objectives.
2. Definitions. For purposes of the Plan:
-----------
"Black-Scholes Value" means the dollar value of a Stock Option to
--------------------
buy one share of stock based on the Company's stock price at the close of
business on the first trading day of the Year, as determined by the Committee
for each Year with the advice of consultants to the Company.
"Board" means the Board of Directors of the Company.
-----
"Committee" means the Executive Development and Compensation
---------
Committee of the Board.
"Company" means Lukens Inc.
-------
"Date of Grant" means the first business day of each Year, as of
-------------
which date Stock Options are granted to eligible Participants, pursuant to
Paragraph 10.
"Incentive Award" means the amount of incentive compensation
---------------
payable under the Plan for a Year.
<PAGE>
"Officer" means an employee of the Company or of a subsidiary
-------
of the Company who is designated by the Board as an officer.
"Operating Earnings" means the Company's consolidated operating
------------------
earnings, as determined pursuant to Paragraph 4(b).
"Participant" means an employee who is eligible to receive an
-----------
Incentive Award under the Plan.
"Performance Objectives" means Return on Net Assets, Operating
----------------------
Earnings and individual performance goals established pursuant to Paragraph 7.
"Plan" means the Lukens Performance Incentive Plan, as set
----
forth in this document, and as amended from time to time.
"Return on Net Assets" means the Company's Return on Net Assets,
-------------------
as determined pursuant to Paragraph 4(b).
"Stock Option" means a non-qualified stock option, granted to an
------------
Officer as part of his or her Incentive Award pursuant to Paragraph 10 and the
Stock Option Plan.
"Stock Option Plan" means such stock option plan as may be
-----------------
adopted by the Company from time to time and designated by the Committee for the
award of Stock Options under this Plan.
"Superintendent" means an employee of the Company or of a
--------------
subsidiary of the Company who is designated by the Company as a superintendent.
2
<PAGE>
"Target Amount" means a percentage of a Participant's Base Salary
-------------
established by the Committee as the target Incentive Award amount for a Year.
"Year" means the calendar year.
----
3. Overview.
--------
The Plan provides that the Committee will establish a Target Amount
for each Year for each Participant. The Target Amount will be a percentage of
the Participant's base salary. The actual award of Incentive Awards under the
Plan will depend on Return on Net Assets, Operating Earnings and the
Participant's individual performance. Corporate objectives shall determine 70%
of a Participant's Incentive Award and individual or team objectives shall
determine 30% of a Participant's Incentive Award. The annual corporate
objectives approved by the Committee will become the objectives of this Plan.
When making Incentive Awards after the end of the Year, each Participant's
Target Amount will be adjusted to reflect actual performance above or below the
performance objective as to each component of the Target Amount.
4. Administration.
--------------
(a) The Committee shall have full authority and discretion,
consistent with the Plan, to interpret the Plan, to promulgate such rules and
procedures regarding the Plan as he deems desirable and to make all other
determinations necessary or desirable for the administration of the Plan. All
decisions,
3
<PAGE>
determinations and interpretations of the Committee shall be binding upon all
Participants.
(b) For purposes of this Plan, the Return on Net Assets and
Operating Earnings of the Company shall be conclusively determined by the
Committee in good faith in accordance with the accounting principles employed by
the Company generally. From time to time, the Committee in its sole discretion
may make adjustments in earnings as reported in the Company's books and records
so that changes in accounting principles; extraordinary or unusual charges or
credits; acquisitions, mergers, consolidations and other corporate transactions;
and other elements of or factors influencing the calculation of earnings do not
distort or affect the operation of the Plan in a manner inconsistent with the
achievement of its purposes.
(c) No member of the Committee shall be personally liable by
reason of any contract or other instrument executed by him or on his behalf in
his capacity as a member of the Committee nor for any mistake of judgment made
in good faith, and the Company shall indemnify and hold harmless each member of
the Committee and each other officer, employee or director of the Company or any
of its subsidiary or other affiliated corporations to whom any duty or power
relating to the administration or interpretation of the Plan may be allocated or
delegated, against any cost or expense (including counsel fees) or liability
(including any sum paid in settlement of a claim with the
4
<PAGE>
approval of the Board) arising out of any act or omission to act in connection
with the Plan, unless arising out of such person's own fraud or bad faith.
5. Participants.
------------
Each employee of the Company or any of its subsidiaries who is
classified in the grade of Superintendent or above shall be a Participant.
Incentive Awards to Participants shall be made after the close of the Year in
accordance with the standards contained in Paragraphs 6, 7 and 8 of this Plan.
In the discretion of the Committee, a Participant who has terminated employment
during the Year and who is not employed by the Company on the last day of the
Year may be eligible for an Incentive Award. The base salary on which the
Target Amount and Incentive Award, if any, for a terminated Participant are
based shall be the Participant's base salary accruing prior to termination of
employment.
6. Size of Incentive Awards.
------------------------
Prior to January 31 of each Year, the Chairman shall establish a
Target Amount for each Participant. Attainment of Performance Objectives will
produce an Incentive Award equal to the Target Amount. Actual performance above
or below the Performance Objective for each component of the Target Award will
produce a greater or smaller Incentive Award or no Incentive Award. The maximum
Incentive Award and the minimum Performance Objectives necessary to receive an
Incentive Award shall be determined on an annual basis by the Committee.
5
<PAGE>
7. Profit and Performance Targets.
------------------------------
(a) The Performance Objectives are (i) Return on Net Assets;
(ii) Operating Earnings; and (iii) individual performance goals. Prior to
January 31 of each Year, the Committee shall adopt targets for Return on Net
Assets and Operating Earnings. Individual performance goals for purposes of the
Plan shall be those individual performance goals, including team objectives,
established for eligible employees in the ordinary course of the Company's
business.
(b) The Committee shall establish annually the weight to be
given to each Performance Objective -- Return on Net Assets, Operating Earnings
and the individual performance goals--for all Participants.
8. Performance Range for Awards.
----------------------------
For each Participant and for each Year, the weighted percentage of the
Target Amount attributable to each Performance Objective shall be adjusted
according to the performance level of such Performance Objective. The
adjustment to the weighted percentage of the Target Amount for each Performance
Objective shall correspond to the performance level as determined by the
Committee for each Year and communicated to Participants.
9. Payment - Non-Officers.
----------------------
The Incentive Awards to be paid to Participants who are not Officers
with respect to a Year or portion thereof pursuant to this Plan shall be paid in
a cash lump sum at such time after the end of the Year as the Committee shall
determine.
6
<PAGE>
10. Payment - Officers.
------------------
(a) Form of Payment. Participants who are Officers with respect
---------------
to a Year or portion thereof pursuant to this Plan shall be paid 50% of the
Incentive Award to which they would be entitled but for the provisions of this
Paragraph 10 in a cash lump sum at such time after the end of the Year as the
Committee shall determine. The remainder of the Incentive Award shall be paid in
the form of non-qualified stock options for common stock of the Company.
(b) Grant of Stock Options.
----------------------
(i) Number of Stock Options. The number of Stock Options to
-----------------------
be awarded to a Participant shall be equal to the quotient obtained by dividing
(x) the product of 50% of the Target Amount times 135%, by (y) the Black-Scholes
Value.
(ii) Terms of Stock Options. Each Stock Option awarded
----------------------
pursuant to this Plan shall be granted under the Stock Option Plan designated by
the Committee, under which a sufficient number of shares of common stock of the
Company remain available to be made subject to Stock Options. Each such Stock
Option shall lapse if the Participant terminates employment for any reason other
than death or disability before the third anniversary of the Date of Grant. No
such Stock Option shall become exercisable before the third anniversary of the
Date of Grant, and all such Stock Options shall expire on the seventh
anniversary of the Date of Grant. Each such Stock Option shall be subject to
such other terms not inconsistent with the
7
<PAGE>
foregoing and such terms as may be required pursuant to the Stock Option Plan.
11. No Employment Rights.
--------------------
Nothing in the Plan shall confer upon any employee of the Company or a
subsidiary any right to continued employment, or interfere with the right of the
Company or a subsidiary to terminate his or her employment at any time.
12. Binding Upon Successors.
-----------------------
The obligations of the Company under the Plan shall be binding upon
any successor corporation or organization which shall succeed to substantially
all of the assets and business of the Company and the term "Company," whenever
used in the Plan, shall mean and include any such corporation or organization
after such succession. If the business conducted by the Company shall be
discontinued, any unpaid incentives under the Plan shall become payable in a
lump sum to the person or persons then entitled thereto.
13. Termination.
-----------
The Committee reserves the right at any time to amend, suspend, or
terminate the Plan in whole or in part and for any reason and without the
consent of any Participant or beneficiary; provided, that no such amendment
shall adversely affect rights to receive any amount to which Participants or
beneficiaries have become entitled prior to such amendment.
8
<PAGE>
14. Effective Date.
--------------
The Plan shall become effective commencing in 1995.
Adopted as of this 30th day of November, 1994
LUKENS INC.
WILLIAM D. SPRAGUE
-------------------------
Secretary to the Board of
Directors of Lukens Inc.
9
<PAGE>
Exhibit 11
Computation of Earnings Per Common Share
(Dollars and shares in thousands except per share amounts)
<TABLE>
<CAPTION> THIRD QUARTER YEAR-TO-DATE
13 Weeks Ended 39 Weeks Ended
September September September September
30, 1995 24, 1994 30, 1995 24, 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Primary Earnings per Common Share
Net earnings applicable to common stock
Net earnings $ 8,698 7,368 27,341 11,464
ESOP dividend requirements
Preferred stock dividends declared (594) (623) (1,812) (1,909)
Tax benefit on dividends - unallocated shares 106 125 340 406
--------- -------- ---------- ---------
Net earnings applicable to common stock $ 8,210 6,870 25,869 9,961
--------- -------- ---------- ---------
Weighted average number of common shares and equivalents
outstanding
Weighted average number of common shares outstanding 14,718 14,599 14,683 14,565
Common stock equivalents:
Stock options, assuming exercised at average market price 135 175 137 174
--------- -------- ---------- ---------
Weighted average number of common shares and equivalents
outstanding 14,853 14,774 14,820 14,739
--------- -------- ---------- ---------
Primary Earnings per Common Share $ 0.55 0.47 1.75 0.68
========= ======== ========== =========
Fully Diluted Earnings per Common Share
Net earnings applicable to common stock
Net earnings $ 8,698 7,368 27,341 11,464
Incremental cash contribution to the ESOP assuming
conversion of preferred stock to common (223) (234) (680) (716)
Tax benefit on the incremental cash contribution 78 80 238 249
--------- -------- ---------- ---------
Net earnings applicable to common stock $ 8,553 7,214 26,899 10,997
--------- -------- ---------- ---------
Weighted average number of common shares and equivalents
outstanding
Weighted average number of common shares outstanding 14,718 14,599 14,683 14,565
Common stock equivalents:
Stock options, assuming exercised at greater of ending or
average market price 135 178 152 175
Series B ESOP preferred stock 1,499 1,579 1,516 1,602
--------- -------- ---------- ---------
Weighted average number of common shares and equivalents
outstanding 16,352 16,356 16,351 16,342
--------- -------- ---------- ---------
Fully Diluted Earnings per Common Share $ 0.52 0.44 1.65 0.67
========= ======== ========== =========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM LUKENS INC.
FINANCIAL STATEMENTS FOR THE THIRTY-NINE WEEKS ENDED SEPTEMBER 30, 1995, AND IS
QULAIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 7,166
<SECURITIES> 0
<RECEIVABLES> 140,965
<ALLOWANCES> 7,906
<INVENTORY> 171,914
<CURRENT-ASSETS> 327,622
<PP&E> 884,744
<DEPRECIATION> 371,438
<TOTAL-ASSETS> 908,924
<CURRENT-LIABILITIES> 182,774
<BONDS> 250,386
<COMMON> 158
0
29,717
<OTHER-SE> 265,547
<TOTAL-LIABILITY-AND-EQUITY> 908,924
<SALES> 786,442
<TOTAL-REVENUES> 786,442
<CGS> 689,245
<TOTAL-COSTS> 689,245
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 7,340
<INTEREST-EXPENSE> 9,729
<INCOME-PRETAX> 43,956
<INCOME-TAX> 16,615
<INCOME-CONTINUING> 27,341
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,341
<EPS-PRIMARY> 1.75
<EPS-DILUTED> 1.65
</TABLE>
