DEFERRED COMPENSATION PLAN FOR
OFFICERS AND KEY EMPLOYEES OF
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
As amended April 1, 1997
This is the Deferred Compensation Plan for Officers and Key
Employees of Carpenter Technology Corporation, effective
January 1, 1995, established by Carpenter Technology Corporation
and its subsidiaries expressly included herein to provide its
senior executives with an additional method of planning for their
retirement. The Plan is intended to be an "unfunded" plan
maintained for the purpose of providing deferred compensation for
a select group of management or highly compensated employees for
purposes of Title I of the Employee Retirement Income Security
Act of 1974.
ARTICLE I - DEFINITIONS
-----------------------
The following words and phrases as used herein have the
following meanings unless the context plainly requires a
different meaning:
1.1 Account means the total amount credited to the
-------
bookkeeping accounts in which a Participant's Contributions are
maintained, including earnings thereon. The Accounts will
consist of subaccounts for each type of Contribution made under
Article IV, as the Plan Administrator deems necessary.
1.2 Beneficiary means the person that the Participant
-----------
designates to receive any unpaid portion of the Participant's
Account should the Participant's death occur before the
Participant receives the entire balance to the credit of such
Participant's Account. If the Participant does not designate a
beneficiary, his Beneficiary shall be his spouse if he is married
at the time of his death, or his estate if he is unmarried at the
time of his death.
1.3 Board of Directors means the board of directors of
------------------
Carpenter Technology Corporation or the Human Resources Committee
thereof (including any successor committee performing similar
duties), whenever said Board delegates responsibilities under
this Plan to such Committee.
1.4 Code means the Internal Revenue Code of 1986, as
----
amended.
1.5 Company means Carpenter Technology Corporation or any
-------
successor by merger, purchase or otherwise.
1.6 Compensation means all amounts that are treated as
------------
wages for Federal income tax withholding under Section 3401(a) of
the Code for the Plan Year plus amounts that would be paid to the
Employee during the year but for the Employee's election under a
cash or deferred arrangement described in Section 401(k) of the
Code or a cafeteria plan described in Section 125 of the Code.
Notwithstanding the preceding sentence, Compensation shall not
include:
1.6.1 bonuses or other amounts payable under the
Annual Extra Compensation Plan, the Executive Annual Compensation
Plan, and the Quarterly Profit Sharing Program;
1.6.2 contributions by the Employer to this or any
other plan or plans for the benefit of its employees, except as
otherwise expressly provided in this Section 1.6; or
1.6.3 amounts identified by the Employer as expense
allowances or reimbursements regardless of whether such amounts
are treated as wages under the Code.
1.7 Contribution means an amount deferred under the Plan
------------
pursuant to a Participant's election or an Employer Addition
under Article IV, and credited to a Participant's Account. No
money or other assets will actually be contributed to such
Accounts.
1.8 Effective Date means January 1, 1995.
--------------
1.9 Employee means an individual who is employed by an
--------
Employer.
1.10 Employer means the Company and any subsidiary that (1)
--------
the Board of Directors designates as an Employer and (2) the
Board of such subsidiary approves participation in the Plan. A
list of the subsidiaries currently designated as an Employer is
attached hereto as Appendix A.
1.11 Employer Addition means contributions made on behalf of
-----------------
a Participant by an Employer.
1.12 Executive Annual Compensation Plan means the Carpenter
----------------------------------
Technology Corporation Executive Annual Compensation Plan, as may
be amended from time to time.
1.13 Five-Year Medium Term Note Borrowing Rate means the
-----------------------------------------
Company's Five-Year Medium Term Note Borrowing Rate, as provided
by one of the Company's investment bankers for any such medium
term note that would have been issued on November 15 (or the next
business day thereafter if November 15 is not a business day) of
each Plan Year.
1.14 Participant means a Senior Executive who elects to
-----------
participate or is otherwise granted participation in the Plan
pursuant to Section 2.2.
1.15 Pension Board means the Pension Board appointed
-------------
pursuant to the General Retirement Plan for Employees of
Carpenter Technology Corporation, as constituted from time to
time.
1.16 Plan means the Deferred Compensation Plan for Officers
----
and Key Employees of Carpenter Technology Corporation, as may be
amended from time to time.
1.17 Plan Administrator means the Pension Board.
------------------
1.18 Plan Year means the 12-month period beginning January 1
---------
and ending December 31.
1.19 Quarterly Profit Sharing Program means the Profit
--------------------------------
Sharing Plan of Carpenter Technology Corporation, as may be
amended from time to time.
1.20 Senior Executive means an Employee who is classified as
----------------
"exempt" under the Fair Labor Standards Act of 1938, as amended,
and whose salary grade is at least 19, or any other Employee who
the Board of Directors expressly designates as a Senior
Executive.
1.21 Carpenter Special Products Corporation Extra
--------------------------------------------
Compensation Plans means the Profit Sharing Plan for Carpenter
- ------------------
Special Products Corporation Employees (formerly the Profit
Sharing Plan for Special Products Division Employees), as may be
amended from time to time; the Management Bonus Plan for
Carpenter Special Products Corporation Employees (formerly the
Management Bonus Plan for Special Products Division Employees),
as may be amended from time to time; and, prior to July 1, 1995,
the Carpenter Technology Corporation Annual Extra Compensation
Plan for Special Products Division Management Employees.
ARTICLE II - PARTICIPATION
--------------------------
2.1 Eligibility to Participate. All Senior Executives are
--------------------------
eligible to participate in the Plan.
2.2 Participation. Any Senior Executive who elects to
-------------
participate in the Plan shall become a Participant in the Plan
immediately upon enrolling as a Participant by the method
required by the Plan Administrator. Any Senior Executive
receiving Employer Additions shall become a Participant on the
date of the initial Employer Addition, if the Participant has not
enrolled under the preceding sentence. An individual shall
remain a Participant under the Plan until all amounts credited to
the Participant's Account have been distributed to the
Participant or the Participant's Beneficiary.
ARTICLE III - VESTING
---------------------
Participants are always fully vested in all amounts credited
to their Accounts.
ARTICLE IV - CONTRIBUTIONS
--------------------------
4.1 Eligibility to Receive Contributions. Subject to
------------------------------------
Section 5.5.2, a Participant may receive Contributions in each
Plan Year that the Participant is a Senior Executive.
4.2 Elective Participant Contributions.
----------------------------------
4.2.1 Salary Deferral Contributions. A Participant
-----------------------------
may elect to defer up to 25% of the Participant's Compensation
and to have the Employer make a Contribution of that amount to
the Participant's Account under the Plan.
4.2.2 Profit Sharing Deferral Contributions. A
-------------------------------------
Participant may elect to defer up to 100% of the amount the
Participant is eligible to receive under the Quarterly Profit
Sharing Program in any Plan Year and to have the Employer make a
Contribution of that amount to the Participant's Account under
the Plan.
4.2.3 Annual Executive Compensation Deferral
--------------------------------------
Contributions. A Participant may elect to defer up to 100% of
- -------------
the amounts the Participant is eligible to receive under the
Executive Annual Compensation Plan or the Carpenter Special
Products Corporation Extra Compensation Plans in any Plan Year
and to have the Employer make a Contribution of that amount to
the Participant's Account under the Plan.
4.2.4 Other Deferral Contributions. A Participant
----------------------------
may elect to defer up to 100% of the amount the Participant is
eligible to receive under any compensation plan that the Board
designates a compensation plan for purposes of this Section
4.2.4, and to have the Employer make a Contribution of that
amount to the Participant's Account under the Plan.
4.3 Employer Additions. The Participant's Employer will
------------------
contribute to a separate subaccount on behalf of a Senior
Executive whose Company Basic Contributions [as defined in the
Savings Plan of Carpenter Technology Corporation ("Savings
Plan")] are limited by Code section 401(a)(17). The amount of
the Employer Addition will equal the amount that would have been
contributed to the Savings Plan as Company Basic Contributions
except for such limitation.
4.4 Elections.
---------
4.4.1 Frequency and Timing of Elections. Elections
---------------------------------
may be made once each Plan Year and they may not be modified
during the Plan Year. For Salary Deferral Contributions, Profit
Sharing Deferral Contributions, Other Deferral Contributions and
Employer Additions, described in Sections 4.2.1, 4.2.2, 4.2.4,
and 4.3 respectively, the Participant must make an election by
December 15 of a Plan Year for it to take effect for the next
Plan Year. For Annual Executive Compensation Deferral
Contributions described in Section 4.2.3, the Participant must
make an election by March 31 of the fiscal year for which the
award is based.
4.4.2 Duration of Elections. Elections to receive
---------------------
Contributions under this Article IV expire at the end of the Plan
Year for which the election was made.
4.4.3 Restriction on Elections. Elections to
------------------------
receive Contributions may be in the form of a whole percentage or
in $1 increments.
4.5 Earnings. All amounts credited to a Participant's
--------
Account shall be credited with earnings at a rate equal to the
Five-Year Medium Term Note Borrowing Rate, established as of
November 15 (or the next business day thereafter if November 15
is not a business day) of the prior Plan Year. For the first
Plan Year, the rate is 8.25%. The Pension Board shall
communicate to all Senior Executives the Five-Year Medium Term
Note Borrowing Rate for the next Plan Year no later than November
30 of the current Plan Year. Earnings on Contributions shall
begin to accrue on the date that such Contributions would have
been paid to the Participant but for an election to defer under
this Article IV. Earnings shall be compounded semi-annually on
each January 1 and July 1. In addition, any distribution not
made on either January 1 or July 1 shall have earnings compounded
as of the date of distribution.
ARTICLE V - DISTRIBUTIONS
-------------------------
5.1 Payment of Distributions. All distributions shall, at
------------------------
the Employer's discretion, be made directly out of the Employer's
general assets or from the Carpenter Technology Corporation Non-
Qualified Employee Benefits Trust.
5.2 Form of Distributions. A Participant may receive
---------------------
distributions in one of the following manners, which the
Participant shall elect on the initial enrollment forms. A
Participant may elect to receive distributions from each
subaccount in different manners and at different times.
5.2.1 A lump sum distribution of the Participant's
entire Account;
5.2.2 Ten annual installments, with the
distribution each year equal to the product resulting from
multiplying the then current Account balance by a fraction. The
numerator of the fraction is always one, and the denominator of
the fraction is ten for the first distribution and is reduced by
one for each subsequent distribution; or
5.2.3 Fifteen annual installments, with the
distribution each year equal to the product resulting from
multiplying the then current Account balance by a fraction. The
numerator of the fraction is always one, and the denominator of
the fraction is fifteen for the first distribution and is reduced
by one for each subsequent distribution.
5.3 Timing of Distributions. Participants shall elect on
-----------------------
their initial enrollment forms when distributions of their
Accounts will begin, which shall either be a specific date or
event. At any point prior to a year in which a distribution of
any or all of a Participant's Account is scheduled for
distribution pursuant to this Article V, the Participant shall
have the option to further defer all or part of the scheduled
distribution to a later year. A scheduled distribution or
portion thereof may, however, be further deferred only once.
5.4 Distributions of Employer Additions. In the case of a
-----------------------------------
Participant who receives an Employer Addition pursuant to Section
4.3, the distribution of such Employer Addition will be governed
by the Participant's election required by December 15 of the
immediately preceding Plan Year, pursuant to Section 4.4.1. If
the Participant did not make such election during the preceding
Plan Year, the Participant will be deemed to have made an initial
election for such Employer's Addition to be paid as a lump sum in
the month following his Termination of Employment.
5.5 Accelerated Distributions. Subject to the following
-------------------------
forfeiture and suspension provisions, a Participant may elect to
receive a distribution of all or a portion of his Account prior
to the date or dates originally elected under Section 5.3, as
long as such distribution is at least $5,000.
5.5.1 Forfeiture of Earnings. A Participant shall
----------------------
forfeit any earnings attributable to the amount distributed
pursuant to Section 5.5 that accrued during the six-month period
ending on the date of the distribution. The amount of forfeited
earnings shall be calculated using the highest interest rate that
was in effect during the six-month period. If, however, the
actual earnings credited to a Participant's Account are less than
the amount determined in the immediately preceding sentence, no
amount beyond the actual earnings shall be forfeited. Any
amounts forfeited under this Section shall not be distributed or
allocated to any other Account in the Plan and shall be forfeited
to the Employer.
5.5.2 Suspension of Participation. If a
---------------------------
Participant elects to accelerate a distribution under Section
5.5, he will not be entitled to receive any Contributions under
Article IV of the Plan for the Plan Year immediately following
the Plan Year in which the Participant elected to accelerate a
distribution. Any election made to receive Elective Participant
Contributions for a Plan Year in which participation is suspended
shall be disregarded.
5.6 Termination of Employment. Upon termination of
-------------------------
employment, a Participant, or the Beneficiary if the termination
is caused by the Participant's death, shall have the following
options with respect to the distribution of the Participant's
Account:
5.6.1 Reaffirm Current Election. The Participant
-------------------------
or Beneficiary may elect to reaffirm the Participant's election
under Section 5.3 that was in effect at the time of the
Participant's termination; or
5.6.2 Request a New Election. The Participant or
----------------------
Beneficiary may elect new distribution option available under
Section 5.2, subject to the Employer's consent.
ARTICLE VI - PLAN ADMINISTRATION
--------------------------------
6.1 General. The Plan shall be administered by the Pension
-------
Board, which is the Plan Administrator.
6.2 Responsibilities and Reports. The Plan Administrator
----------------------------
may, pursuant to a written resolution, allocate, among one or
more of its members, specific responsibilities under the Plan,
and the Plan Administrator may name other persons to carry out
such responsibilities. The Plan Administrator shall be entitled
to rely conclusively upon all tables, valuations, certificates,
opinions and reports that are furnished by any actuary,
accountant, controller, counsel, investment banker or other
person who is employed or engaged for such purposes.
6.3 Governing Law. This Plan shall be governed by and
-------------
construed in accordance with the laws of the Commonwealth of
Pennsylvania, to the extent not preempted by federal law.
ARTICLE VII - CLAIMS PROCEDURE
------------------------------
7.1 Plan Interpretation. The Human Resources Committee of
-------------------
the Board of Directors shall have the authority and
responsibility to interpret and construe the Plan and to decide
all questions arising thereunder, including, without limitation,
questions of eligibility for participation, eligibility for
Contributions, the amount of Account balances, and the timing of
the distribution thereof, and shall have the authority to deviate
from the literal terms of the Plan to the extent it shall
determine to be necessary or appropriate to operate the Plan in
compliance with the provisions of applicable law.
Notwithstanding the above, a member of the Human Resources
Committee shall not take any part in decisions regarding his
participation in the Plan.
7.2 Denial of Claim for Benefits. Any denial by the Human
----------------------------
Resources Committee of any claim for benefits under the Plan by a
Participant or Beneficiary shall be stated in writing by the
Human Resources Committee and delivered or mailed to the
Participant or Beneficiary. The Human Resources Committee shall
furnish the claimant with notice of the decision not later than
90 days after receipt of the claim, unless special circumstances
require an extension of time for processing the claim. If such
an extension of time for processing is required, written notice
of the extension shall be furnished to the claimant prior to the
termination of the initial 90 day period. In no event shall such
extension exceed a period of 90 days from the end of such initial
period. The extension notice shall indicate the special
circumstances requiring an extension of time and the date by
which the Human Resources Committee expects to render the final
decision. The notice of the Human Resources Committee's decision
shall be written in a manner calculated to be understood by the
claimant and shall include (i) the specific reasons for the
denial, including, where appropriate, references to the Plan,
(ii) any additional information necessary to perfect the claim
with an explanation of why the information is necessary, and
(iii) an explanation of the procedure for perfecting the claim.
7.3 Appeal of Denial. The claimant shall have 60 days
----------------
after receipt of written notification of denial of his or her
claim in which to file a written appeal with the Human Resources
Committee. As a part of any such appeal, the claimant may submit
issues and comments in writing and shall, on request, be afforded
an opportunity to review any documents pertinent to the
perfection of his or her claim. The Human Resources Committee
shall render a written decision on the claimant's appeal
ordinarily within 60 days of receipt of notice thereof but, in no
case, later than 120 days.
ARTICLE VIII - FUNDING
----------------------
8.1 Funding. The Employer shall not segregate or hold
-------
separately from its general assets any amounts credited to the
Accounts, and shall be under no obligation whatsoever to fund in
advance any amounts under the Plan, including Contributions and
earnings thereon.
8.2 Insolvency. In the event that the Employer becomes
----------
insolvent, all Participants and Beneficiaries shall be treated as
general, unsecured creditors of the Employer with respect to any
amounts credited to the Accounts under the Plan.
ARTICLE IX - AMENDMENT AND TERMINATION
--------------------------------------
9.1 Reservation of Rights. The Employer reserves the right
---------------------
to amend or terminate the Plan at any time by action of the Board
of Directors. Notwithstanding the foregoing, no such amendment
or termination shall reduce the balance of any Participant's
Account as of the date of such amendment or termination.
9.2 Funding upon Termination. Upon a complete termination
------------------------
of the Plan, the Employer shall contribute to the Carpenter
Technology Corporation Non-Qualified Employee Benefits Trust an
amount equal to the aggregate of all amounts credited to
Participants' Accounts as of the date of such termination. If
the Carpenter Technology Corporation Non-Qualified Employee
Benefits Trust does not exist at the time the Plan is terminated,
the Employer shall create an irrevocable grantor trust to which
it will contribute such amounts. This newly created trust shall
be designed to ensure that Participants will not be subject to
taxation on amounts contributed to and held under the trust on
their behalf before the amounts are distributed.
9.3 Survival of Accounts and Elections. Notwithstanding
----------------------------------
any termination of the Plan, the trustee of the trust to which
amounts are contributed under Section 9.2 shall maintain the
Accounts for Participants in the same manner as under this Plan
and all elections for distributions under Article V of the Plan
shall survive the termination and remain in effect.
ARTICLE X - MISCELLANEOUS
-------------------------
10.1 Limited Purpose of Plan. The establishment or
-----------------------
existence of the Plan shall not confer upon any individual the
right to be continued as an Employee. The Employer expressly
reserves the right to discharge any Employee whenever in its
judgment its best interests so require.
10.2 Non-alienation. No amounts payable under the Plan
--------------
shall be subject in any manner to anticipation, assignment, or
voluntary or involuntary alienation.
10.3 Facility of Payment. If the Plan Administrator, in its
-------------------
sole discretion, deems a Participant or Beneficiary who is
eligible to receive any payment hereunder to be incompetent to
receive the same by reason of age, illness or any infirmity or
incapacity of any kind, the Plan Administrator may direct the
Employer to apply such payment directly for the benefit of such
person, or to make payment to any person selected by the Plan
Administrator to disburse the same for the benefit of the
Participant or Beneficiary. Payments made pursuant to this
Section 10.3 shall operate as a discharge, to the extent thereof,
of all liabilities of all Employers and the Plan Administrator to
the person for whose benefit the payments are made.
DEFERRED COMPENSATION PLAN FOR
OFFICERS AND KEY EMPLOYEES OF
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
APPENDIX A
PARTICIPATING SUBSIDIARIES
--------------------------
Carpenter Special Products Corporation
Dynamet, Inc.
As of April 1, 1997