--------------------------------------------------------------------------------

Exhibit 10.A
 
AGREEMENT AND PLAN OF MERGER
 
Dated January 6, 1997
 
By and Among
 
DYNAMET INCORPORATED,
 
THE SHAREHOLDERS OF DYNAMET INCORPORATED
 
and
 
CARPENTER TECHNOLOGY CORPORATION
 

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

 
TABLE OF CONTENTS
 

--------------------------------------------------------------------------------

 

         
Page

--------------------------------------------------------------------------------

ARTICLE I
    
THE TRANSACTION
  
1
1.1.
  
Merger
  
1
1.2.
  
Closing
  
2
ARTICLE II
    
REPRESENTATIONS AND WARRANTIES OF DI AND DI SHAREHOLDERS
  
3
2.1.
  
Organization, Qualification, Authority and Good Standing
  
3
2.2.
  
Capitalization
  
3
2.3.
  
Subsidiaries and Affiliates
  
4
2.4.
  
Authorization and Enforceability
  
4
2.5.
  
No Violation of Laws or Agreements
  
4
2.6.
  
Financial Statements
  
4
2.7.
  
Undisclosed Liabilities
  
5
2.8.
  
No Changes
  
5
2.9.
  
Taxes
  
7
2.10.
  
Inventories
  
8
2.11.
  
Accounts Receivable
  
9
2.12.
  
No Pending Litigation or Proceedings
  
9
2.13.
  
Contracts; Compliance
  
9
2.14.
  
Compliance with Laws
  
10
2.15.
  
Consents
  
11
2.16.
  
Title
  
11
2.17.
  
Real Estate
  
12
2.18.
  
Transactions with Related Parties
  
12
2.19.
  
Condition of Assets
  
12
2.20.
  
Compensation Arrangements; Bank Accounts, Directors, Officers and Fiduciaries
  
13
2.21.
  
Labor Relations
  
13
2.22.
  
Insurance
  
13
2.23.
  
Patents and Intellectual Property Rights
  
14
2.24.
  
Employee Benefits Plans
  
14
2.25.
  
Environmental Matters
  
16
2.26.
  
Brokers
  
19
2.27.
  
Disclosure
  
19

 

(i)

--------------------------------------------------------------------------------

 

         
Page

--------------------------------------------------------------------------------

ARTICLE III
    
REPRESENTATIONS AND WARANTIES OF CTC
  
19
3.1.
  
Organization, Qualification, Authority and Good Standing of CTC
  
19
3.2.
  
Organization, Qualification, Authority and Good Standing of Merger Sub
  
19
3.3.
  
Capitalization
  
19
3.4.
  
Authorization and Enforceability
  
20
3.5.
  
No Violation of Laws or Agreements
  
20
3.6.
  
Financial Statements; 1934 Act Filings
  
20
3.7.
  
Consents
  
21
3.8.
  
Brokers
  
21
3.9.
  
Disclosure
  
21
ARTICLE IV
    
CERTAIN OBLIGATIONS OF DI AND DI SHAREHOLDERS PENDING CLOSING
  
21
4.1.
  
Conduct of Business Pending Closing
  
21
4.2.
  
Insurance, Environmental Permits
  
23
4.3.
  
Fulfillment of Agreements
  
23
4.4.
  
Access, Information and Documents
  
23
4.5.
  
H-S-R Act of Compliance
  
24
4.6.
  
Delivery of Financial Statements for Subsequent Periods
  
24
4.7.
  
Environmental Lists
  
24
ARTICLE V
    
CERTAIN OBLIGATIONS OF CTC PENDING CLOSING
  
24
5.1.
  
Fulfillment of Agreements
  
24
5.2.
  
H-S-R Act Compliance
  
25
5.3.
  
Formation of Merger Sub
  
25
5.4.
  
Listing of CTC Stock
  
25
5.5.
  
Delivery of 1934 Act Reports for Subsequent Periods
  
25
5.6.
  
Environment Audit
  
25
5.7.
  
Agreements
  
26
5.8.
  
Confidentiality
  
26
ARTICLE VI
    
CONDITIONS TO CLOSING; TERMINATION
  
27
6.1.
  
Conditions Precedent to Obligation of CTC
  
27
6.2.
  
Conditions Precedent to Obligations of DI and DI Shareholders
  
29
6.3.
  
Termination
  
30

 

(ii)

--------------------------------------------------------------------------------

 

         
Page

--------------------------------------------------------------------------------

ARTICLE VII
    
RESTRICTIONS ON TRANSFER OF CTC STOCK; REGISTRATION RIGHTS; BOARD REPRESENTATION
  
31
7.1.
  
Restrictions on Transfer and Certain Activities
  
31
7.2.
  
Registration of CTC Stock
  
36
7.3.
  
Board Representation
  
38
7.4.
  
No Disposition Inconsistent with Reorganization
  
39
ARTICLE VIII
    
SURVIVAL AND INDEMNIFICATION
  
39
8.1.
  
Nature and Survival of Representations
  
39
8.2.
  
Indemnification by DI Shareholders
  
40
8.3.
  
Indemnification by CTC
  
40
8.4.
  
Notification of Actions; Control of Proceedings and Cooperation
  
41
8.5.
  
Limitations
  
41
8.6.
  
Satisfaction of Claims with CTC Stock
  
42
8.7.
  
Definition of Material Adverse Effect
  
42
ARTICLE IX
    
MISCELLANEOUS
  
42
9.1.
  
Costs, Expenses and Taxes
  
42
9.2.
  
Further Assurances; Cooperation
  
42
9.3.
  
Option to Purchase or Sell Forged Products Assets
  
42
9.4.
  
Post-Closing Access; Preservation of Books and Records
  
43
9.5.
  
Communications
  
43
9.6.
  
Assignability; Successors and Assigns
  
44
9.7.
  
Governing Law; Remedies
  
44
9.8.
  
Headings
  
45
9.9.
  
Amendment and Waiver
  
45
9.10.
  
Entire Agreement
  
45
9.11.
  
Execution in Counterparts
  
45
9.12.
  
Appointment of Agent for Delivery
  
45

 

(iii)

--------------------------------------------------------------------------------

 
EXHIBITS
 
Designation

--------------------------------------------------------------------------------

  
Description

--------------------------------------------------------------------------------

  
Section Where First Reference

--------------------------------------------------------------------------------

A
  
Plan of Merger
  
Preamble
B
  
Forms of Consulting and Non-Competition Agreements
  
1.2(b)(iii)
C
  
Form of Opinion of Counsel for DI
  
6.1(c)
D
  
Opinion of Counsel for CTC
  
6.2(c)
E
  
Form of Option Agreement
  
9.3

 

(iv)

--------------------------------------------------------------------------------

 
SCHEDULES
 
Designation

--------------------------------------------------------------------------------

  
Description

--------------------------------------------------------------------------------

    
Section Where
First Reference

--------------------------------------------------------------------------------

2.01
  
Jurisdiction Where Qualified
    
2.1
2.02
  
Capital Stock
    
2.2
2.03
  
Affiliated Company
    
2.3
2.05
  
Violation of Laws or Agreements
    
2.5
2.06
  
Financial Disclosure
    
2.6
2.07
  
Disclosed Liabilities
    
2.7
2.08
  
Changes Since Balance Sheet Date
    
2.8
2.09
  
Taxes
    
2.9
2.10
  
Inventories
    
2.10
2.11
  
Accounts Receivable
    
2.11
2.12
  
Pending Litigation or Proceedings
    
2.12
2.13
  
Contracts, Leases and Other Commitments
    
2.13
2.14
  
Permits & Registrations
    
2.14
2.15
  
Necessary Consents and Approvals
    
2.15
2.16
  
Liens
    
2.16
2.17
  
Real Estate Interests
    
2.17
2.18
  
Permitted Related Party Transactions
    
2.18

(v)

--------------------------------------------------------------------------------

Designation

--------------------------------------------------------------------------------

  
Description

--------------------------------------------------------------------------------

    
Section Where
First Reference

--------------------------------------------------------------------------------

 
2.20
  
Compensation Arrangements and Bank Accounts
    
2.8
(n)
2.21
  
Labor Relations
    
2.21
 
2.22
  
Insurance Policies
    
2.22
 
2.23
  
Patents and Intellectual Property Rights
    
2.23
 
2.24
  
ERISA Disclosures
    
2.8
(f)
2.25
  
Environmental Matters
    
2.25
 
4.01
  
Property Distribution
    
4.1
(c)(vi)
5.07
  
Employment Agreements and Programs
    
5.7
 
9.03
  
FPD Assets and Liabilities
    
9.3
 

 

(vi)

--------------------------------------------------------------------------------

 
INDEX OF DEFINED TERMS
 
The following terms used herein are defined in the Sections indicated:
 
Term

--------------------------------------------------------------------------------

 
Section in Which Defined

--------------------------------------------------------------------------------

DI
 
Preamble
DI Shareholders
 
Preamble
Warranting Shareholders
 
Preamble
CTC
 
Preamble
Merger
 
Preamble
Merger Sub
 
Preamble
Plan of Merger
 
Preamble
DI Stock
 
1.1(b)
CTC Stock
 
1.1(b)
CTC Market Price
 
1.1(b)
Closing
 
1.2(a)
Closing Date
 
1.2(a)
Time of Closing
 
1.2(a)
Effective Time
 
1.2(a)
State Merger Filings
 
1.2(b)(i)
Exchange Agent
 
1.2(b)(ii)
Disclosure Statement
 
2.1
Material Adverse Effect
 
2.5
Financial Statements
 
2.6
GAAP
 
2.6
Balance Sheet
 
2.6
Balance Sheet Date
 
2.6
Ordinary Course of Business
 
2.7
Related Party
 
2.8(n)
Taxes
 
2.9(a)
Tax
 
2.9(a)
Code
 
2.9(d)
Proceedings
 
2.12
Permits and Licenses
 
2.14
H-S-R Act
 
2.15
Real Properties
 
2.17
Permitted Related Party Transactions
 
2.18
ERISA
 
2.24(a)
Benefit Plans
 
2.24(a)
Affiliate
 
2.24(i)
Former Affiliate
 
2.24(i)
Environmental Laws
 
2.25(a)
Environmental Permits
 
2.25(a)

(vii)

--------------------------------------------------------------------------------

Term

--------------------------------------------------------------------------------

 
Section in Which Defined

--------------------------------------------------------------------------------

Management
 
2.25(c)
Managed
 
2.25(c)
Hazardous Substances
 
2.25(c)
PCBs
 
2.25(f)
ACM
 
2.25(f)
CERCLA
 
2.25(g)
CERCLIS
 
2.25(g)
Released
 
2.25(h)
NYSE
 
3.3
CTC MAE
 
3.5
Most Recent 10-Ks
 
3.6
SEC
 
3.6
1934 Act
 
3.6
CTC Financial Statements
 
3.6
Permitted Distributions
 
4.1(c)(vi)
Aggregate AAA Value
 
4.1(c)(vi)
FTC
 
4.5
AT Division
 
4.5
NYSE Application
 
5.4
Environmental Auditors
 
5.6
Environmental Report
 
5.6
Merger Shares
 
7.1(a)(i)
1933 Act
 
7.1(a)(i)
Rule 144
 
7.1(a)(i)
Limited 144 Resale Period
 
7.1(a)(ii)
Response Period
 
7.1(a)(iii)
Repurchase Right
 
7.1(a)(iii)
Offered Merger Shares
 
7.1(a)(iii)
Unrestricted Permitted Transferee
 
7.1(e)(i)
Permitted Transferee
 
7.1(e)(ii)
Affiliate
 
7.1(e)(iii)
Disposition
 
7.1(e)(iii)
Standstill Term
 
7.1(f)(i)
CTC Change of Control Event
 
7.1(f)(ii)
CTC Voting Securities
 
7.1(f)(iii)
Voting Power
 
7.1(f)(iii)
Participating Sellers
 
7.2(c)
DI Designee
 
7.3(a)
Damages
 
8.2(a)
Indemnitee
 
8.4
Indemnitor
 
8.4
FPD Assets
 
9.3
Stelkast Preferred Stock
 
9.3
Agent for Delivery
 
9.12(a)

(viii)

--------------------------------------------------------------------------------

 
AGREEMENT AND PLAN OF MERGER
 
AGREEMENT AND PLAN OF MERGER dated January 6, 1997 by and among DYNAMET
INCORPORATED, a Pennsylvania corporation (“DI”), PETER C. ROSSIN, PETER N.
STEPHANS, ADA E. ROSSIN, and JOAN R. STEPHANS, individually and as trustees,
holders of all of the issued and outstanding shares of capital stock of DI
(collectively, the “DI Shareholders,” with Messrs. Rossin and Stephans being
hereinafter sometimes referred to as the “Warranting Shareholders”) and
CARPENTER TECHNOLOGY CORPORATION, a Delaware corporation (“CTC”).
 
The parties hereto desire to provide for the merger (the “Merger”) of DI with
and into a newly-formed corporation to be organized as a wholly-owned subsidiary
of CTC (“Merger Sub”) pursuant to the Plan of Merger attached hereto as Exhibit
A (the “Plan of Merger”) and further to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
Merger, all for the purpose of effecting a reorganization under the provisions
of sections 368(a)(1)(A) and (a)(2)(D) of the Internal Revenue Code of 1986, as
amended.
 
INTENDING TO BE LEGALLY BOUND, the parties agree as follows:
 
 
ARTICLE I
 
THE TRANSACTION
 
1. 1.    Merger.
 
(a)    Effective Date.    At the time of Closing (as hereinafter defined)
hereunder, DI will be merged into Merger Sub pursuant to the terms of the Plan
of Merger.
 
(b)    Conversion of DI Capital Stock.    As a result of the Merger, each share
of Common Stock, par value $5 per share, of DI (“DI Stock”) outstanding at the
time of Closing hereunder will be converted into (i) the right to receive
$166.0581 in cash and (ii) 9.0704 shares of Common Stock, par value $5 per
share, of CTC (“CTC Stock”); provided, however, that in the event that the
average of the closing sale prices of CTC Stock as reported on the New York
Stock Exchange Composite Tape for the most recent 15 days on which trading in
CTC Stock has occurred ending on the day immediately preceding the Closing Date
(as hereinafter defined) (the “CTC Market Price”), is greater than $40 or less
than $28, DI and CTC shall each have the right to terminate this Agreement
pursuant to Section 6.3(a)(iv) hereof.
 
(c)    Fractional Shares.    No fractional shares of CTC Stock will be issued as
a result of the Merger; fractional interests will be provided for in accordance
with the terms of the Plan of Merger.

--------------------------------------------------------------------------------

 
1.2.    Closing.
 
(a)    Time and Place.    The closing under this Agreement (the “Closing”) will
take place at 10:00 a.m., local time, on the later to occur of February 28, 1997
or the third business day after all consents and authorizations referred to in
Sections 6.1(e) and 6.2(e) have been obtained and the parties have otherwise
determined that all conditions to Closing contemplated by Article VI hereof riot
theretofore waived have been or can be satisfied, at the offices of Kirkpatrick
& Lockhart LLP, 1500 Oliver Building, Pittsburgh, Pennsylvania, or at such other
time, date or place as the parties may mutually agree. The date on which and the
time of day at which Closing occurs are sometimes respectively referred to
herein as the “Closing Date” and the “time of Closing.” The Closing will be
deemed to be effective as of the close of business on the Closing Date, such
time being sometimes referred to herein as the “Effective Time.”
 
(b)    Deliveries and Proceedings at the Closing.    At the time of Closing:
 
(i)    Filing of Articles and Certificate of Merger.    Articles of merger and a
certificate of merger (collectively, the “State Merger Filings”), having been
duly executed and delivered by the parties thereto, shall be filed with the
Department of State of the Commonwealth of Pennsylvania and the Office of the
Secretary of State of the State of Delaware, respectively, thereby effecting the
Merger.
 
(ii)    Exchange of Stock Certificates and Cash.    Upon receipt of notice of
the effectiveness of the Merger, Peter C. Rossin, as Agent for Delivery (as
hereinafter defined) for those holders of DI Stock who have duly appointed him
as such, will surrender to CTC or to the Exchange Agent designated pursuant to
Paragraph 4(a) of the Plan of Merger (the “Exchange Agent”), if so designated,
certificates representing all the shares of DI Stock of which each such holder
is then the registered owner, in exchange for which CTC or the Exchange Agent
will deliver to the Agent for Delivery a stock certificate for the number of
shares of CTC Stock to which such holder is entitled by the terms of this
Agreement and the Plan of Merger, with each such stock certificate to be
registered in the name of the appropriate holder and to bear the legend referred
to in Section 7. 1 (b) hereof and shall wire transfer the amount of the cash
payment for such holder in immediately available funds to an account designated
by such holder no later than two days prior to the Closing Date.
 
(iii)    Execution of Consulting and Non-Competition Agreements.    Consulting
and Non-Competition Agreements in substantially the forms attached hereto as
Exhibits B-1 and B-2 will be executed and delivered by CTC, DI and Messrs.
Rossin and Stephans, respectively.

2

--------------------------------------------------------------------------------

 
(iv)    Other Deliveries.    The Closing certificates, opinions of counsel and
other documents required to be delivered pursuant to this Agreement will be
exchanged.
 
 
ARTICLE II
 
REPRESENTATIONS AND WARRANTIES OF DI AND DI SHAREHOLDERS
 
Each DI Shareholder hereby individually and severally and not jointly represents
to CTC that such DI Shareholder has full legal right, power and authority to
execute and deliver this Agreement and perform such DI Shareholder’s obligations
hereunder, without need for any consent, approval, authorization or order of any
court or governmental agency or body.
 
Each of DI and the Warranting Shareholders hereby individually and severally and
not jointly represents and warrants to CTC as follows:
 
2.1.    Organization, Qualification, Authority and Good Standing.    DI is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania and has all requisite corporate power and
authority to own or lease its properties and assets as now owned or leased, to
carry on its business as and where now being conducted, to enter into this
Agreement and the Plan of Merger, and to perform its obligations hereunder and
thereunder. DI is duly qualified and in good standing as a foreign corporation,
duly authorized to do business, in those jurisdictions referred to in Schedule
2.01 of the Disclosure Statement delivered by DI to CTC in connection with this
Agreement (the “Disclosure Statement”), except where the failure to be so
qualified, in good standing and duly authorized is not likely to have a Material
Adverse Effect (as hereinafter defined). The copies of DI’s articles of
incorporation and bylaws, as amended to date, which have been delivered to CTC
are correct and complete and such instruments are in full force and effect on
the date hereof.
 
2.2.    Capitalization.    Schedule 2.02 of the Disclosure Statement sets forth
the authorized and outstanding capital stock of DI. All of such outstanding
shares have been duly authorized and validly issued, are fully paid and
nonassessable, were not issued in violation of the terms of any agreement or
other understanding binding upon DI and were issued in compliance with all
applicable federal and state securities or “blue sky” laws and regulations.
There are no outstanding or unexercised options, warrants, rights, agreements,
calls, commitments or demands of any character relating to the capital stock of
DI to which DI is a party or of which DI has knowledge and there are no
securities convertible into or exchangeable for any of DI’s capital stock issued
by DI.

3

--------------------------------------------------------------------------------

 
2.3.    Subsidiaries and Affiliates.    DI does not directly or indirectly
control any other corporation or business organization with the exception of
those listed on Section 2.03 of the Disclosure Statement, which are not material
to the core business of DI.
 
2.4.    Authorization and Enforceability.    The execution, delivery and
performance of this Agreement by DI have been duly authorized by the Board of
Directors of DI and have been duly approved by all necessary action on the part
of the holders of DI Stock. This Agreement has been and the Plan of Merger will
be duly executed and delivered by DI and each of them constitutes or will
constitute, when so executed and delivered, the legal, valid and binding
obligation of DI, enforceable in accordance with its terms except as such
enforceability may be limited or affected by (i) bankruptcy, insolvency,
reorganization, moratorium, liquidation, arrangement, fraudulent transfer,
fraudulent conveyance and other similar laws (including court decisions) now or
hereafter in effect and affecting the rights and remedies of creditors generally
or providing for the relief of debtors, (ii) the refusal of a particular court
to grant equitable remedies, including, without limitation, specific performance
or injunctive relief, and (iii) general principles of equity (regardless whether
such remedies are sought in a proceeding in equity or at law).
 
2.5.    No Violation of Laws or Agreements.    Except as disclosed on Schedule
2.05 of the Disclosure Statement, the execution and delivery of this Agreement
by DI do not, and its consummation of the transactions contemplated hereby and
its compliance with the terms, conditions and provisions of this Agreement will
not, (a) contravene any provision of the articles of incorporation or bylaws of
DI; (b) conflict with or result in a breach of or constitute a default (or an
event which would with the passage of time or the giving of notice or both
constitute a default) under any of the terms, conditions or provisions of any
material indenture, mortgage, loan or credit agreement or other agreement or
instrument to which DI is a party or by which it or any of its assets may be
bound, or any judgment or order to which DI is subject of any court or
governmental department, commission, board, agency or instrumentality, domestic
or foreign, or any applicable law, rule or regulation, any of which
contraventions, conflicts, breaches or defaults, individually or in the
aggregate, is likely to have a material adverse effect on the financial
condition of DI or the results of its operations (a “Material Adverse Effect”);
(c) result in the creation or imposition of any lien, charge or encumbrance of
any nature whatsoever upon the assets of DI or give to others any interest or
right therein which is likely to have a Material Adverse Effect; (d) result in
the maturation or acceleration of any liability of DI with a value in excess of
$500,000 (or give others the right to cause such a maturation or acceleration)
which is likely to have a Material Adverse Effect; or (e) result in the
termination of or loss of any right (or give others the right to cause such a
termination or loss) under any material agreement or contract to which DI is a
party or by which it may be bound which is likely to have a Material Adverse
Effect.
 
2.6.    Financial Statements.    The books of account and related records of DI
fairly and accurately reflect in reasonable detail its assets, liabilities and
transactions. DI has delivered to CTC the following financial statements of DI
(the “Financial Statements”):

4

--------------------------------------------------------------------------------

 
(a)    Audited balance sheets as at December 31, 1995 and 1994, and related
statements of income, shareholders’ equity and cash flows for the years then
ended, audited by Price Waterhouse LLP; and
 
(b)    Unaudited balance sheet as at November 30, 1996 and related statements of
income, shareholders’ equity and cash flows for the eleven months then ended.
 
The Financial Statements (i) have been prepared in accordance with the books and
records of DI and (ii) except as disclosed on Schedule 2.06 of the Disclosure
Statement, present fairly in all material respects the financial condition of DI
as at the respective dates and the results of operations, shareholders’ equity
and cash flows for the periods covered thereby, in accordance with generally
accepted accounting principles (“GAAP”) consistently applied. All references in
this Agreement to the “Balance Sheet” shall mean the balance sheet of DI as at
December 31, 1995 included in the Financial Statements, and all references to
the “Balance Sheet Date” shall mean December 31, 1995.
 
2.7.    Undisclosed Liabilities.    As of the date hereof, DI has no liability
or obligation of any nature, whether due or to become due, absolute, contingent
or otherwise (including liabilities for or in respect of federal, state, local
or foreign taxes or any interest or penalties relating thereto) that would be
required to be disclosed on a balance sheet and related notes thereto prepared
in accordance with GAAP, except liabilities (a) reflected on the Balance Sheet
and related notes thereto, (b) incurred in the Ordinary Course of Business (as
hereinafter defined) since the Balance Sheet Date and appropriately reflected on
DI’s books of account, or (c) as disclosed on Schedule 2.07 of the Disclosure
Statement. For purposes of this Agreement, “Ordinary Course of Business” shall
mean with respect to any transaction, series of transactions or activities
undertaken by DI that such transactions or activities are consistent in amount
or volume, timing and purposes with similar transactions or activities
undertaken by DI in the 24-month period ended on the Balance Sheet Date.
 
2.8.    No Changes.    Except as contemplated by this Agreement or as disclosed
on Schedule 2.08 of the Disclosure Statement, from the Balance Sheet Date to the
date hereof, DI has conducted its business only in the Ordinary Course of
Business. Without limiting the generality of the foregoing sentence, except as
disclosed on such Schedule 2.08, between the Balance Sheet Date and the date of
this Agreement there has not been:
 
(a)    Any change in the financial condition, assets, liabilities, net worth or
business of DI except changes in the Ordinary Course of Business, which,
individually or in the aggregate, has had or is likely to have a Material
Adverse Effect;
 
(b)    Any damage, destruction or loss, whether or not covered by insurance,
which has had or is likely to have a Material Adverse Effect;

5

--------------------------------------------------------------------------------

 
(c)    Any entering into a material mortgage or pledge of, or any granting of a
material security interest in, any of DI’s tangible or intangible assets except
in the Ordinary Course of Business;
 
(d)    Any strike, walkout, labor trouble or any similar event, development or
condition which has had a Material Adverse Effect;
 
(e)    Any declaration, setting aside or payment of a dividend or other
distribution in respect of any capital stock of DI, or any direct or indirect
redemption, purchase or other acquisition by DI of any such stock or any rights
or options to purchase such stock or securities convertible into or exchangeable
for such stock;
 
(f)    Any material increase in the salaries or other compensation payable or to
become payable to, or any material advance (excluding advances in the Ordinary
Course of Business) or loan to, any officer or director of DI (except normal
merit increases made in the Ordinary Course of Business), or any payments to any
pension, retirement, profit sharing, bonus or similar plan except payments in
the Ordinary Course of Business made pursuant to the plans described on Schedule
2.24 of the Disclosure Statement, or any other payment of any kind to (or on
behalf of) any such officer or director other than payment of base compensation
and reimbursement for reasonable business expenses in the Ordinary Course of
Business or as disclosed on Schedule 2.08 of the Disclosure Statement;
 
(g)    Any making or authorization of any single capital expenditure by DI in
excess of $250,000;
 
(h)    Any cancellation or waiver of any right material to the operation of the
business of DI or any cancellation (other than upon satisfaction) or any waiver
of any material debts or claims or any cancellation or waiver of any debts or
claims against any Related Party (as such term is hereinafter defined), except
in the Ordinary Course of Business;
 
(i)    Any sale, transfer or other disposition of any material assets of DI,
except in the Ordinary Course of Business;
 
(j)    Any payment, discharge or satisfaction of any material liability or
obligation (whether accrued, absolute, contingent or otherwise) by DI, other
than the payment, discharge or satisfaction of liabilities or obligations in the
Ordinary Course of Business;
 
(k)    Any change or, to the knowledge of DI or either of the Warranting
Shareholders, threat of any change in any of the relations of DI with its
significant suppliers, clients or customers other than in the Ordinary Course of
Business;

6

--------------------------------------------------------------------------------

 
(1)    Any material write-off as uncollectible of any notes or accounts
receivable of DI or material write-downs of the value of any assets or inventory
by DI other than in the Ordinary Course of Business;
 
(m)    Any change by DI in any method of accounting or keeping its books of
account or accounting practices or policies or method of application thereof,
including but not limited to changes in estimates or valuation methods;
 
(n)    Any material payment, loan or advance to, or sale, transfer or lease of
any properties or assets (whether real, personal or mixed, tangible or
intangible) to, or the entering into of any agreement, arrangement or
transaction with, any Related Party, except for (i) advisory fees disclosed on
Schedule 2.08 of the Disclosure Statement and (ii) compensation to the officers
and employees of DI at rates not exceeding the rates of compensation disclosed
on Schedule 2.20 of the Disclosure Statement or expense or other advances to
such persons made in the Ordinary Course of Business (as used herein, a “Related
Party” means any of the officers, directors or shareholders of DI, any
affiliate, associate or relative of DI or of any shareholder of DI, or any of
their respective officers or directors, or any business or entity in which any
shareholder of DI or any affiliate, associate or relative of any such person or
of DI has any direct or indirect interest); or
 
(o)    Any disposition of, or failure to keep in effect any rights in, to or for
the use of, any patent, trademark, service mark, trade name or copyright, other
than in the Ordinary Course of Business, except for any such disposition or
failure that is likely to have a Material Adverse Effect.
 
2.9.    Taxes.
 
(a)    DI has (i) timely filed all federal, state and local or foreign income,
payroll, withholding, excise, sales, use, personal property, use and occupancy,
business and occupation, mercantile, real estate, capital stock and franchise or
other tax returns or extensions in respect thereof (all the foregoing taxes,
including interest and penalties thereon and including estimated taxes, being
hereinafter collectively referred to as “Taxes” and individually referred to as
a “Tax”) and (ii) paid all Taxes which are shown to have become due pursuant to
such returns or extensions and (iii) paid all other Taxes for which a notice of
assessment or demand for payment has been received, other than any such Taxes
which DI is disputing in good faith proceedings. All such returns are correct
and complete in all material respects, have been prepared in accordance with all
applicable laws and requirements and accurately reflect in all material respects
the taxable income (or other measure of Tax) of the party filing the same. The
accruals for Taxes contained in the Balance Sheet are adequate to cover all
liabilities for Taxes for all periods ending on or before the Balance Sheet Date
and nothing has occurred subsequently to make any of such accruals inadequate.
All Taxes for periods beginning after the Balance Sheet Date and ending on the
date hereof have been paid or are adequately reserved against on the books of
DI.

7

--------------------------------------------------------------------------------

 
(b)    DI has filed all information returns or reports, including 1099 forms,
which are required to be filed and has accurately reported all information
required to be included on such returns or reports. True copies of federal and
state income tax returns of DI for each of the years ended December 31, 1994 and
1995 will be delivered to CTC within twenty (20) days of the signing of this
Agreement. Except as disclosed on Schedule 2.09 of the Disclosure Statement,
there are no proposed assessments of Tax against DI, or proposed adjustments
with respect to any tax returns filed by DI, or proposed adjustments to the
manner in which any Tax of DI is determined pending. Except as disclosed on such
Schedule 2.09, each Tax return of DI has been audited by the relevant
authorities (and all deficiencies or proposed deficiencies resulting from such
audits have been paid or are adequately provided for or reserved against in the
Financial Statements), or the statute of limitations with respect to such Tax
return has expired, and no Tax return is under examination by any taxing
authority, and no notification of intention to examine has been received from
any taxing authority. No claim has been made by any taxing authority in a
jurisdiction where DI does not file tax returns that DI is or may be subject to
taxation by that jurisdiction.
 
(c)    There is no agreement or arrangement with any person or entity pursuant
to which DI would have any obligation with respect to Taxes of another person
following the Closing.
 
(d)    Except as disclosed on Schedule 2.09 of the Disclosure Statement, DI has
never (i) filed any consent agreement under section 341(f) of the Internal
Revenue Code of 1986 or any predecessor or successor statute (the “Code”), (H)
executed or had executed by a parent company a waiver or consent extending any
statute of limitation for the assessment or collection of any Tax which waiver
or consent remains in effect, (iii) joined in or been required to join in filing
a consolidated federal income tax return or consolidated or combined state
income tax return, (iv) applied for a tax ruling, (v) entered into a closing
agreement with any taxing authority, or (vi) filed or been the subject of an
election under section 338(g) or section 338(h)(10) of the Code or caused or
been the subject of a deemed election under section 338(e) thereof. DI timely
and properly filed an election to be taxed as an “S corporation” within the
meaning of section 1361 of the Code for federal income tax purposes effective
for the taxable year beginning January 1, 1993 and has continued to be taxed as
an “S corporation” at all times thereafter. DI timely and properly elected or
otherwise qualified under the income tax laws of the states of Pennsylvania and
Florida to be taxed as an “S corporation” (or analogous provisions) effective
for the taxable year beginning January 1, 1993 and has continued to be taxed as
an “S corporation” (or analogous provisions) at all times thereafter in such
jurisdictions.
 
2.10.    Inventories.    Except for the inventory relating to the Forged
Products Division, all of the inventories of DI reflected on the Balance Sheet
are valued on a last in, first out (LIFO) basis. Except as disclosed on Schedule
2. 10 of the Disclosure Statement, all of the finished goods inventories of DI
reflected on the Balance Sheet and all such inventories acquired since the
Balance Sheet Date consist of items of a quality and quantity

8

--------------------------------------------------------------------------------

generally useable and merchantable in the Ordinary Course of Business, and all
of the raw materials and work in process inventory of DI reflected in the
Balance Sheet and all such inventories acquired since the Balance Sheet Date are
reasonably expected to be consumed in the Ordinary Course of Business (taking
into account any reserves accrued by the Company). Except as set forth on such
Schedule 2. 10, no material portion of the finished goods inventory of DI is
consigned to any third party or is located anywhere other than on the Real
Properties (as hereinafter defined) or in transit.
 
2.11.    Accounts Receivable.    All of the trade accounts and notes receivable
of DI reflected on the Balance Sheet as well as those arising after the Balance
Sheet Date represent amounts receivable for merchandise actually delivered or
services actually provided (or, in the case of non-trade accounts or notes,
represent amounts receivable in respect of other bona fide business
transactions), have arisen in the Ordinary Course of Business, are not subject
to any counterclaims or offsets (except to the extent adequately reserved) and
have been billed and are generally due within 30 days (90 days in the case of
foreign customers) after such billing. Except as set forth on Schedule 2.11 of
the Disclosure Statement, to the knowledge of DI and each of the Warranting
Shareholders, all such receivables were at the Balance Sheet Date and are
presently fully collectible in the Ordinary Course of Business except to the
extent reserved on the Balance Sheet or since the Balance Sheet Date on DI’s
books of account.
 
2.12.    No Pending Litigation or Proceedings.    Except as set forth on
Schedule 2.12 of the Disclosure Statement, there are no actions, suits,
investigations or proceedings pending or, to the knowledge of DI or either of
the Warranting Shareholders, threatened against DI, any of its directors or
officers, or any of its assets (including with respect to claims involving
alleged defects in products sold to consumers) or affecting its ability to
consummate the transactions contemplated by this Agreement, at law or in equity,
by or before any court, arbitrator, governmental department, agency or
instrumentality (collectively, “Proceedings”), other than those which are not
likely to have a Material Adverse Effect. There are presently no outstanding
judgments, decrees or orders of any court, arbitrator or any governmental or
administrative agency against DI or any of its assets.
 
2.13.    Contracts; Compliance.    Except as listed on Schedule 2.13 of the
Disclosure Statement or as reflected on the Balance Sheet, DI is not a party to
or bound by any written agreement or contract of the following types:
 
(a)    mortgages, indentures, security agreements or other agreements and
instruments relating to the borrowing of money or the extension of credit
involving more than $250,000, individually;
 
(b)    employment and consulting agreements;
 
(c)    union or other collective bargaining agreements;

9

--------------------------------------------------------------------------------

(d)    guaranty, surety and accommodation agreements;
 
(e)    sales agency, manufacturer’s representative and distributorship
agreements;
 
(f)    licenses of patent, trademark and other intellectual property rights;
 
(g)    agreements, orders or commitments for the purchase of services, raw
materials, supplies or finished products from any one supplier or related
suppliers for an amount in excess of $250,000;
 
(h)    agreements, orders or commitments for the sale of products or services in
excess of $250,000 to a single customer or purchaser;
 
(i)    contracts or options relating to the sale by DI of any material asset,
other than sales of inventory in the Ordinary Course of Business;
 
(j)    agreements or commitments for capital expenditures in excess of $250,000
for any single project;
 
(k)    joint venture agreements;
 
(1)    agreements, arrangements or understandings with any Related Party;
 
(m)    lease agreements under which it is either lessor or lessee;
 
(n)    non-competition and non-disclosure or secrecy agreements;
 
(o)    agreements, contracts or commitments for any charitable, educational or
political contribution; and
 
(p)    other agreements, contracts and commitments which involve payments or
receipts of more than $500,000 in any single year and which were entered into
other than in the Ordinary Course of Business.
 
All such agreements and contracts are in full force and effect; DI has complied
in all material respects with all provisions thereof; DI is not in material
default under any of the terms thereof; and no event has occurred that with the
passage of time or the giving of notice or both would constitute a material
default by DI under any provision thereof.
 
2.14.    Compliance with Laws.    Schedule 2.14 of the Disclosure Statement sets
forth a list of all material permits, certificates, licenses, orders,
registrations, franchises,

10

--------------------------------------------------------------------------------

authorizations and other approvals from all federal, state, local and foreign
governmental and regulatory bodies held by DI, other than Environmental Permits
(as hereinafter defined) which are separately addressed in Sections 2.25 and
4.7, (collectively, “Permits and Licenses”). All Permits and Licenses are in
fall force and effect and DI is in substantial compliance with the terms and
conditions thereof except where the failure to be in compliance is not likely to
have a Material Adverse Effect. DI holds and is in substantial compliance with
all Permits and Licenses required under all laws, rules and regulations
applicable to DI except where the failure to so hold or be in compliance is not
likely to have a Material Adverse Effect. Except as disclosed on such Schedule
2.14, DI has substantially complied with and is in substantial compliance with
all applicable federal, state and local laws, rules, regulations and orders
(including those relating to occupational safety and health and equal employment
practices and excluding all laws referred to in Section 2.17 and all
Environmental Laws (as hereinafter defined)) presently in effect and those no
longer in effect if the applicable statute of limitations for violations has not
yet lapsed except where the failure to be in compliance is not likely to have a
Material Adverse Effect. Except as disclosed on Schedule 2.14 of the Disclosure
Statement, no notice, citation, summons, order or request for information has
been issued, no complaint has been filed, no penalty has been assessed and no
investigation or review is pending or, to the knowledge of DI or either of the
Warranting Shareholders, threatened by any governmental, administrative or other
entity with respect to any (a) alleged violation by DI of any law, rule,
regulation or order of any governmental, administrative or other entity or (b)
alleged failure by DI to have any Permit or License required in connection with
its business.
 
2.15.    Consents.    Except as (a) required by the HartScott-Rodino Antitrust
Improvements Act of 1976, as amended (“H-S-R Act”), (b) contemplated by Section
1.2(b)(i) hereof, and (c) disclosed on Schedule 2.15 of the Disclosure
Statement, no consent, approval or authorization of, or registration or filing
with, any person, including any governmental authority or other regulatory
agency, is required to be obtained or made by DI in connection with the
execution and delivery of this Agreement and the Plan of Merger by DI or the
consummation by DI of the Merger or the other transactions contemplated hereby
except for any consents, approvals, authorizations or registrations the failure
to obtain which and any filings the failure to make which are not likely to have
a Material Adverse Effect.
 
2.16.    Title.    DI has good insurable and valid title (fee or leasehold) to
all of its, properties and assets, including the properties and assets reflected
on the Balance Sheet (except those disposed of in the Ordinary Course of
Business since the Balance Sheet Date), and none of such properties or assets is
subject to any material mortgage, pledge, lien, restriction, encumbrance,
tenancy, license, encroachment, covenant, right of way, easement, claim,
security interest or charge except for (a) minor imperfections of title, none of
which individually or in the aggregate materially detracts from the value of or
impairs the current use of the affected properties or impairs any current
operations of DI, (b) liens for current taxes and assessments not yet due and
payable or for taxes, assessments, governmental charges or levies, the validity
of which are being contested in good faith by appropriate

11

--------------------------------------------------------------------------------

proceedings, (c) mechanics’, carriers’, workmen’s, repairmen’s or other similar
liens arising in the Ordinary Course of Business, or (d) as disclosed on
Schedule 2.16 of the Disclosure Statement.
 
2.17.    Real Estate.    Schedule 2.17 of the Disclosure Statement sets forth-a
list and summary description of all real properties owned (beneficially or of
record) or leased by DI, and identifies all title insurance policies covering
any of, and all leases relating to, such properties (the “Real Properties”). The
use and operation of each Real Property substantially complies with all
applicable material building, zoning, safety and other laws, ordinances,
regulations, codes, permits, licenses and certificates (excluding Environmental
Laws and Environmental Permits) and all restrictions and conditions affecting
title except where the failure to be in compliance is not likely to have a
Material Adverse Effect. DI has not received any notice for assessments for
public improvements against any of the Real Properties which remain unpaid
except as disclosed in such Schedule 2.17, and, to the knowledge of DI and each
of the Warranting Shareholders, no such assessment has been proposed. Except as
disclosed in such Schedule 2.17, DI has not received any notice or order of any
governmental, zoning or other public authority which (a) relates to violations
of building, safety, fire or other ordinances or regulations, (b) claims any
defect or deficiency with respect to any of the Real Properties or (c) requests
the performance of any repairs, alterations or other work to or in any of such
Real Properties or in the streets bounding the same. There is no pending
condemnation, expropriation, eminent domain or similar proceeding affecting all
or any portion of any of the Real Properties and there is no indication that any
such proceeding is contemplated.
 
2.18.    Transactions with Related Parties.    Except as disclosed on Schedule
2.18 of the Disclosure Statement (the transactions so disclosed being
hereinafter referred to as “Permitted Related Party Transactions”), no Related
Party has:
 
(a)    borrowed money from or loaned money to DI which has not been repaid;
 
(b)    any contractual or other claim, express or implied, of any kind
whatsoever against DI;
 
(c)    any interest in any property or assets used by DI in its business; or
 
(d)    engaged in any other transaction with DI or Subsidiary (other than
employment relationships at the salaries disclosed in Schedule 2.20 of the
Disclosure Statement).
 
2.19.    Condition of Assets.    The buildings, machinery, equipment, tools,
furniture and improvements of DI reflected in the Balance Sheet are in good
operating condition and repair (reasonable wear and tear excepted) and are
suitable for the purposes for

12

--------------------------------------------------------------------------------

which they are used in the business of DI (other than any such assets disposed
of in the Ordinary Course of Business).
 
2.20.    Compensation Arrangements: Bank Accounts, Directors, Officers and
Fiduciaries.    Schedule 2.20 of the Disclosure Statement sets forth the
following information:
 
(a)    the names and current annual salaries, including any bonus and
commissions, if applicable, of all present officers and employees of DI whose
current annual salary, including any promised, expected or customary bonus,
equals or exceeds $75,000, together with a statement of the fall amount of all
remuneration paid by DI to each such person during the 12 month period ending
December 31, 1995 and, on an estimated basis, for the 12 month period ending
December 31, 1996;
 
(b)    the name of each bank in which DI has an account or safe deposit box, the
identifying numbers or symbols thereof and the names of all persons authorized
to draw thereon or to have access thereto; and
 
(c)    the names and titles of all directors and officers of DI and of each
trustee, fiduciary or plan administrator of each employee benefit plan of DI.
 
2.21.    Labor Relations.     Except as disclosed on Schedule 2.21 of the
Disclosure Statement, (a) no employee of DI is represented by any union or other
labor organization, (b) there is no unfair labor practice complaint against DI
pending before the National Labor Relations Board; (c) there is no labor strike,
dispute, slow-down or stoppage actually pending against or involving DI; (d) no
grievance which is likely to have a Material Adverse Effect is pending; and (e)
no private agreement restricts DI from relocating, closing or terminating any of
its operations or facilities. As a result of the Merger, Merger Sub will become
the successor in interest to DI as a party to all collective bargaining
agreements referred to on such Schedule 2.21 without the need for the consent of
or further action by any other party thereto.
 
2.22.    Insurance.    Schedule 2.22 of the Disclosure Statement contains a list
of all property and casualty and workers compensation insurance policies (and
does not include any life insurance policies) in force at the date of this
Agreement of which DI is the owner, insured or beneficiary, indicating for each
policy the carrier, the insured, risks insured, premium rate, deductible
amounts, expiration date and any pending claims thereunder. All such policies
are and will be outstanding and will be in full force and effect until the
respective termination dates indicated on such Schedule 2.22. There has not been
any failure to give any notice or present any claim under any such policy ire a
timely fashion or in the manner or detail required by the policy, except where
such failure is not likely to have a Material Adverse Effect. Except as set
forth on such Schedule 2.22, there are no outstanding unpaid premiums or claims
under such policies with respect to the coverage afforded DI.

13

--------------------------------------------------------------------------------

 
2.23.    Patents and Intellectual Property Rights.    Schedule 2.23 of the
Disclosure Statement contains a list of all patents, patent applications,
trademarks and trade names, copyrights, patent and trademark licenses, service
marks, logos and the like owned by DI. To the knowledge of DI and each of the
Warranting Shareholders, no claim has been made that any of them infringes the
patents, trademarks or other rights of others. To the knowledge of DI and each
of the Warranting Shareholders, the manufacture or sale of any products now or
heretofore manufactured or sold by DI did not and does not infringe (nor has any
claim been made that any such action infringes) the patents or Tights of others.
DI owns or possesses licenses or other rights to use all patents, patent
applications, copyrights, trademarks, trade names and other intellectual
property necessary to conduct its business as presently conducted.
 
2.24.    Employee Benefit Plans.
 
(a)    The only employee pension benefit plans (as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)),
welfare benefit plans (as defined in Section 3(l) of ERISA), bonus, stock
purchase, stock ownership, stock option, deferred compensation, incentive or
other compensation plans and arrangements, and other material employee fringe
benefit plans presently maintained or contributed to by DI, other than a
multiemployer plan as defined in Section 3(37) of ERISA, are those listed on
Schedule 2.24 of the Disclosure Statement (the “Benefit Plans”), and a complete
copy of each of such plans will be furnished to CTC within twenty (20) days of
the signing of this Agreement.
 
(b)    Each of the Benefit Plans is in compliance in all material respects with
the applicable provisions of ERISA and those provisions of the Code applicable
to the Benefit Plans.
 
(c)    Except as disclosed in Schedule 2.24 of the Disclosure Statement and
except where the failure so to do is not likely to have a Material Adverse
Effect, all contributions to the Benefit Plans which may have been required to
be made in accordance with the Benefit Plans and, when applicable, Section 302
of ERISA or section 412 of the Code, have been timely made. All such
contributions to the Benefit Plans, except those that are not yet, but will be,
required to be made prior to the time of Closing are properly accrued and
reflected on the Balance Sheet or are disclosed on such Schedule 2.24.
 
(d)    Except as disclosed on Schedule 2.24 of the Disclosure Statement and
except where the failure so to do is not likely to have a Material Adverse
Effect, all material reports, returns and similar documents with respect to the
Benefit Plans required to be filed with any governmental agency or distributed
to any Benefit Plan participant have been duly and timely filed or distributed.
 
(e)    Except as disclosed on Schedule 2.24 of the Disclosure Statement, all of
the Benefit Plans which are pension benefit plans are qualified and exempt

14

--------------------------------------------------------------------------------

from federal income taxes under sections 401(a) and 501(a), respectively, of the
Code, and no such qualification with respect to any such Benefit Plan has been
revoked nor, to the knowledge of DI or either of the Warranting Shareholders,
has any such revocation been threatened in writing.
 
(f)    Each of the Benefit Plans has been administered at all times, and in all
material respects, in accordance with its terms except that in any case in which
any Benefit Plan is currently required to comply with a provision of ERISA or of
the Code but is not yet required to be amended to reflect such provision, it has
been administered in accordance with such provision. Except as disclosed on
Schedule 2.24 of the Disclosure Statement, there are no pending investigations
by any governmental agency involving the Benefit Plans, no termination
proceedings involving the Benefit Plans, and no pending or, to the knowledge of
DI or either of the Warranting Shareholders, threatened claims (except for
claims for benefits payable in the normal operation of the Benefit Plans), suits
or proceedings against any Benefit Plan or asserting any rights or claims to
benefits under any Benefit Plan which could give rise to any material liability.
 
(g)    None of the Benefit Plans nor, to the knowledge of DI or either of the
Warranting Shareholders, any trusts created thereunder or any trustee,
administrator or other fiduciary thereof has engaged in a “prohibited
transaction” (as such term is defined in section 4975 of the Code or Section 406
of ERISA) which could subject any thereof to the tax or penalty on prohibited
transactions imposed by such section 4975 Or the sanctions imposed under Title I
of ERISA. Except as indicated on Schedule 2.24 of the Disclosure Statement,
neither any of the Benefit Plans nor any such trust has been terminated nor have
and “reportable events” (as defined in Section 4043 of ERISA and the regulations
thereunder) with respect to either thereof.
 
(h)    No Benefit Plan is or ever has been subject to Title IV of ERISA other
than the Dynamet Powder Products Defined Benefit Pension Plan, which was
terminated in December, 1995.
 
(i)    At no time since September 2, 1974 has (i) DI, (ii) any other employer
(an “Affiliate”) that is, together with DI, treated as a “single employer” under
section 414(b), 414(c) or 414(m) of the Code, or (iii) any employer which was at
any time after September 2, 1974 an Affiliate of DI (a “Former Affiliate”)
incurred an liability which could subject CTC to liability under Section 4062 of
ERISA.
 
(j)    Except as to (i) the National Industrial Group MultiEmployer Group
Pension Plan as to which DI was obligated to make contributions through
September, 1995, and (ii) the UIU MultiEmployer Group Pension Plan to which DI
has been obligated to contribute subsequent to September 30, 1995, as reflected
on Schedule 2.24 of the Disclosure Statement, at no time since September 26,
1980, has DI or any Affiliate or Former Affiliate been required to contribute
to, or incurred any withdrawal liability, within the meaning of Section 4201 of
ERISA, to, any multiemployer pension plan, within the meaning of

15

--------------------------------------------------------------------------------

Section 3(37) of ERISA, which liability has not been fully paid as of the date
hereof, nor has any such employer announced an intention to withdraw, but not
yet completed such withdrawal, from any multiemployer plan.
 
(k)    Each Benefit Plan that is a “group health plan”, within the meaning of
Section 607(l) of ERISA and which is subject to section 4980B of the Code (or
section 162(k) as in effect prior to 1989), has complied with the continuation
coverage requirements of those provisions and Part 6 of Title I of ERISA.
 
(l)    There are no “leased employees” within the meaning of section 414(n) of
the Code who perform services for DI.
 
(m)    No Benefit Plan provides for “parachute payments” within the meaning of
section 28OG of the Code. There is no plan, fund or arrangement under which any
employee of DI is entitled to claim or receive severance pay or benefits, except
for non-qualified supplemental retirement plans for one retired executive
employee and two active executive employees as disclosed on Schedule 2.24 of the
Disclosure Statement.
 
(n)    After Closing, neither DI nor CTC shall have any obligations to make
payments, contributions or transfers in respect of any Benefit Plan on account
of service performed before the time of Closing, except for (i) monthly
contributions and (ii) annual contributions to the Dynamet defined contribution
plans listed on Schedule 2.24 of the Disclosure Statement, to be made, in both
cases, in the Ordinary Course of Business and consistent with past practices.
 
2.25.    Environmental Matters.    Except as disclosed on Schedule 2.25 of the
Disclosure Statement:
 
(a)    DI is in compliance with all applicable environmental statutes, rules,
regulations, ordinances and common laws and settlement agreements, consent
decrees or orders of any governmental entity to which DI is a party, all as in
effect as of the date hereof (“Environmental Laws”), except where the failure to
be in compliance is not likely to have a Material Adverse Effect. DI holds and
is in compliance with all environmental permits, certificates, licenses,
approvals, registrations and authorizations required for its business as
currently operated and required under Environmental Laws (“Environmental
Permits”), which are in full force and effect as of the date hereof, except
where the failure of such Environmental Permits to be so held or in fall force
and effect or of the Company to be in compliance therewith is not likely to have
a Material Adverse Effect.
 
(b)    DI has made timely application for renewals of all such Environmental
Permits as are to expire by December 31, 1996, except Environmental Permits, for
which, by their terms or by operation of law, renewal applications need not be
made before their expiration or the failure to renew which is not likely to have
a Material Adverse Effect. To the knowledge of DI and each of the Warranting
Shareholders, all such

16

--------------------------------------------------------------------------------

Environmental Permits should be renewed in the ordinary course and should not be
renewed with conditions which would require the expenditure of money in such
amounts or result in changes that are likely to have a Material Adverse Effect.
 
(c)    No notice of violation, citation, summons or order has been received, no
complaint has been served, no penalty has been assessed and, to the knowledge of
DI, no investigation or review is pending or has been threatened by any
governmental or other entity within the five-year period immediately preceding
the date hereof or if prior to that time period which remains unresolved, which
could require DI to expend money or abide by conditions contained in settlement
agreements or consent decrees to which DI is a party to an extent which is
likely to have a Material Adverse Effect on Merger Sub as the successor to DI
following the Merger: (i) with respect to any alleged violation by DI or any of
its predecessors in interest of any Environmental Law; or (ii) with respect to
any alleged failure b DI to have complied with any Environmental Permit required
in connection with its business; or (iii) with respect to any use, possession,
generation, treatment, storage, recycling, transportation or disposal
(collectively, “Management” or when used as a verb, “Managed”) or Release (as
hereinafter defined) of any hazardous or toxic or polluting substance or waste,
pollutant or contaminant, including, without limitation, petroleum products and
radioactive materials, (“Hazardous Substances”) by or on behalf of DI or any of
its predecessors in interest.
 
(d)    DI has not received any request for information, notice of claim, demand
or notification that it is or may be potentially responsible, with respect to
any investigation or clean-up of any threatened or actual release of any
Hazardous Substance within the five-year period immediately preceding the date
hereof or if prior to that time period which remains unresolved, which could
require DI to expend money to an extent which is likely to have a Material
Adverse Effect on Merger Sub as the successor to DI following the Merger.
 
(e)    DI has not and, to the knowledge of DI or either of the Warranting
Shareholders, no one else has generated, treated, stored for more than 90 days,
recycled or disposed of any Hazardous Substances on any property now or
previously owned or leased by DI, except for any such actions which are not
likely to have a Material Adverse Effect on Merger Sub as the successor to DI
following the Merger.
 
(f)    No polychlorinated biphenyls (“PCBs”) or asbestos-containing materials
(“ACM”) are present at any property now owned or leased by DI, nor, to the
knowledge of DI, were PCBs or ACM present at any property during the time in
which DI previously owned or leased such property, nor are there any underground
storage tanks owned or operated by DI at any property now or previously owned or
leased by DI or, to the knowledge of DI or either of the Warranting
Shareholders, by anyone else at any property now owned or leased by DI, except
for the presence of any such PCBs, ACM or tanks which are not likely to have a
Material Adverse Effect.

17

--------------------------------------------------------------------------------

 
(g)    To the knowledge of DI or either of the Warranting Shareholders, no
Hazardous Substance Managed by or on behalf of DI or any predecessor in interest
of DI has come to be located at any site which is listed under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
(“CERCLA”), the Comprehensive Environmental Response Compensation and Liability
Information System (“CERCLIS”) or on any similar published state list, or which
is the subject of federal, state or local enforcement actions or other
investigations which may lead to claims against DI, CTC or Merger Sub for
cleanup costs, remedial work, damages to natural resources or for personal
injury claims, including, but not limited to, claims under CERCLA.
 
(h)    To the knowledge of DI or either of the Warranting Shareholders, no
Hazardous Substance has been released, spilled, leaked, discharged, disposed of,
pumped, poured, emitted, emptied, injected, leached, dumped or allowed to escape
(“Released”) at, on, about or under any property now or previously owned or
leased by DI or any predecessor in interest of DI which is likely to have a
Material Adverse Effect on Merger Sub as the successor to DI following the
Merger.
 
(i)    To the knowledge of DI or either of the Warranting Shareholders, during
the last three years ending on the date hereof, no written notification of a
Release or threat of Release of a Hazardous Substance has been filed by or on
behalf of DI in relation to any property now or previously owned or leased by
DI. No property now or previously owned or leased by DI is, to the knowledge of
DI or either of the Warranting Shareholders, listed on the National Priority
List promulgated pursuant to CERCLA, on CERCLIS, or on any similar published
state list of sites requiring investigation or cleanup.
 
(j)    To the knowledge of DI or either of the Warranting Shareholders, there
are no environmental liens on any properties now owned or leased by DI and no
governmental actions have been taken or are in process or pending which could
subject any of such properties to such liens.
 
(k)    DI would not be required to place any notice or restriction relating to
the presence of Hazardous Substances in the deed to any property now owned by
it, and, to the knowledge of DI or either of the Warranting Shareholders, no
property now or previously owned by DI has such a notice or restriction in its
deed.
 
(l)    Except as listed in Schedule 2.25 of the Disclosure Statement and
heretofore made available for review by CTC, there have been no environmental
inspections, investigations, studies, audits, tests, reviews or other analyses,
other than those required to be done routinely pursuant to Environmental Permits
or Environmental Laws, conducted in relation to any property or business now or
previously owned or leased by DI which have been performed by or on behalf of DI
or, to the knowledge of DI or either of the Warranting Shareholders, by any
other person.

18

--------------------------------------------------------------------------------

 
2.26.    Brokers.    Neither DI nor any DI Shareholder has made any agreement or
taken any other action which might cause anyone to become entitled to a broker’s
fee, commission or other similar compensation as a result of the transactions
contemplated hereby.
 
2.27.    Disclosure.    No representation or warranty by DI or either of the
Warranting Shareholders in this Agreement and no Schedule furnished or to be
furnished to CTC pursuant hereto knowingly contains or will contain as of the
time made or provided any untrue statement of a material fact or knowingly omits
or will omit as of the time made or provided to state any material fact
necessary to make the statements contained herein or therein not misleading.
 
ARTICLE III
 
REPRESENTATIONS AND WARRANTIES OF CTC
 
CTC hereby represents and warrants to DI and the DI Shareholders as follows:
 
3. 1.    Organization, Qualification, Authority and Good Standing of CTC.    CTC
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to own or lease its properties and assets as now owned or leased, to
carry on its business as and where now being conducted, to enter into this
Agreement and the Plan of Merger, and to perform its obligations hereunder and
thereunder.
 
3.2.    Organization, Qualification, Authority and Good Standing of Merger
Sub.    At the time of Closing, Merger Sub will be a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and will have all requisite power and authority to enter into the Plan of Merger
and to perform its obligations thereunder.
 
3.3.    Capitalization.    CTC’s authorized capital stock consists solely of
2,000,000 shares of Preferred Stock, par value $5 per share, of which 451.40
have been issued and are outstanding as Series A Convertible Preferred Shares
and 50,000,000 shares of CTC Stock, of which 16,626,844 are issued and
outstanding and of which an additional 2,930,916 are held in CTC’s treasury as
of the date hereof. All of such outstanding shares have been duly authorized and
validly issued, are fully paid and non-assessable, were not issued in violation
of the terms of any agreement or other understanding binding upon CTC and are
duly listed upon and admitted to trading on the New York Stock Exchange (the
“NYSE”).

19

--------------------------------------------------------------------------------

 
3.4.    Authorization and Enforceability.    The execution, delivery and
performance by CTC of this Agreement and each of the other instruments to be
delivered by CTC at Closing have been duly authorized by all necessary corporate
action on the part of CTC, and this Agreement constitutes, and each of such
other instruments, when executed and delivered, will constitute, the legal,
valid and binding obligation of CTC, enforceable in accordance with its terms
except as such enforceability may be limited or affected by (i) bankruptcy,
insolvency, reorganization, moratorium, liquidation, arrangement, fraudulent
transfer, fraudulent conveyance and other similar laws (including court
decisions) now or hereafter in effect and affecting the rights and remedies of
creditors generally or providing for the relief of debtors, (ii) the refusal of
a particular court to grant equitable remedies, including, without limitation,
specific performance or injunctive relief, and (iii) general principles of
equity (regardless whether such remedies are sought in a proceeding in equity or
at law).
 
3.5.    No Violation of Laws or Agreements.    The execution and delivery of
this Agreement by CTC do not, and its consummation of the transactions
contemplated hereby and its compliance with the terms, conditions and provisions
of this Agreement will not, (a) contravene any provision of CTC’s certificate of
incorporation or bylaws; (b) conflict with or result in a breach of or
constitute a default (or an event which would with the passage of time or the
giving of notice or both constitute a default) under any of the terms,
conditions or provisions of any material indenture, mortgage, loan or credit
agreement or other agreement or instrument to which CTC or any of its
subsidiaries is a party or by which any of them or any of their assets may be
bound, or any judgment or order to which CTC or any of its subsidiaries is
subject of any court or governmental department, commission, board, agency or
instrumentality, domestic or foreign, or any applicable law, rule or regulation,
any of which contraventions, conflicts, breaches or defaults, individually or in
the aggregate, is likely to have a materially adverse effect on the financial
condition of CTC and its subsidiaries or the results of their operations taken
as a whole (a “CTC MAE”), (c) result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of their assets or give
to others any interest or right therein which is likely to have a CTC MAE, (d)
result in the maturation or acceleration of any liability or obligation of any
of them in excess of $500,000 (or give others the right to cause such a
maturation or acceleration) which is likely to have a CTC MAE, or (e) result in
the termination of or loss of any right (or give others the right to cause such
a termination or loss) under any material agreement or contract to which any of
them is a party or by which any of them may be bound which is likely to have a
CTC MAE.
 
3.6.    Financial Statements; 1934 Act Filings.    CTC has delivered to DI
copies of its 1995 and 1996 Annual Reports to Shareholders, its proxy statements
for its 1994, 1995 and 1996 annual meetings of stockholders, its Form 10-K
Annual Reports for the years ended June 30, 1995 and 1996 (collectively, the
“MostRecent 10-Ks”) as filed with the Securities and Exchange Commission (“SEC”)
under the Securities Exchange Act of 1934, as amended (the “1934 Act”), and all
its Form 10-Q quarterly Reports and Form 8-K Current Reports filed under the
1934 Act since June 30, 1996. All such documents fairly present the

20

--------------------------------------------------------------------------------

information contained therein as at their respective dates and for their
respective periods and no statement or information set forth therein or included
as a part thereof knowingly contains any untrue statement of a material fact or
knowingly omits to state any material fact necessary to make it not misleading
or necessary to provide proper information with respect to the matters covered
thereby. The consolidated financial statements as at and for the three years
ended June 30, 1996, audited by Coopers & Lybrand, which are included in the
Most-Recent 10-Ks (the “CTC Financial Statements”) (a) have been prepared in
accordance with the books and records of CTC and its consolidated subsidiaries
and (b) present fairly in all material respects the financial condition of CTC
and its consolidated subsidiaries as at the dates thereof and the results of
their operations and cash flows for the periods covered thereby, in accordance
with GAAP consistently applied since the beginning of the periods covered
thereby.
 
3.7.    Consents.    Except as (a) required by the H-S-R Act and (b)
contemplated by Sections 1.2(b)(i), 5.3 and 5.4 hereof, no consent, approval or
authorization of, or registration or filing with, any person, including any
governmental authority or other regulatory agency, is required to be obtained or
made by CTC or Merger Sub in connection with the execution, delivery,
negotiation and performance of this Agreement and the Plan of Merger by CTC and
Merger Sub or the consummation by CTC and Merger Sub of the transactions
contemplated hereby and thereby except for any consents, approvals,
authorizations or registrations the failure to obtain which and any filings the
failure to make which are not likely to have a CTC MAE.
 
3.8.    Brokers.    CTC has not made any agreement or taken any other action
which might cause anyone to become entitled to a broker’s fee or commission from
DI or any DI Shareholder as a result of the transactions contemplated by this
Agreement.
 
3.9.    Disclosure.    No representation or warranty by CTC in this Agreement
and no Schedule furnished or to be furnished to DI pursuant hereto knowingly
contains or will contain as of the time made or provided any untrue statement of
a material fact or knowingly omits or will omit as of the time made or provided
to state any material fact necessary to make the statements contained herein or
therein not misleading.
 
ARTICLE IV
 
CERTAIN OBLIGATIONS OF DI AND
DI SHAREHOLDERS PENDING CLOSING
 
4. 1.    Conduct of Business Pending Closing.    From and after the date hereof
and pending Closing, unless CTC shall otherwise consent or agree in writing and
except as otherwise provided in this Agreement, DI covenants and agrees that:

21

--------------------------------------------------------------------------------

 
(a)    Ordinary Course.     The business of DI will be conducted only in the
Ordinary Course of Business.
 
(b)    Preservation of Business.     DI will use diligent efforts to preserve
the business organization of DI intact, to keep available to CTC the services of
the present officers and employees of DI and to preserve for the benefit of CTC
the good will of the material suppliers, customers and others having business
relations with DI, to the extent consistent with the Ordinary Course of
Business.
 
(c)    Material Transactions.     DI will not:
 
(i)    Enter into any contract or commitment the performance of which may extend
beyond the Closing Date, except those made in the Ordinary Course of Business;
 
(ii)    Enter into any employment or consulting contract or arrangement with any
person which is not terminable, without penalty or other owed compensation, at
will;
 
(iii)    Incur or create any mortgage, pledge, lien, restriction, encumbrance,
tenancy, license, encroachment, covenant, condition, right-of-way, easement,
claim, security interest, charge or other matter affecting title on any of its
assets or other property other than in the Ordinary Course of Business;
 
(iv)    Waive or permit the loss of any substantial right except to the extent
consistent with the Ordinary Course of Business;
 
(v)    Guarantee or become a co-maker or accommodation maker or otherwise become
contingently liable in connection with any liability or obligation of any person
or business entity except in the Ordinary Course of Business;
 
(vi)    Except for distributions (“Permitted Distributions”) to the DI
Shareholders of cash and the property comprised exclusively of the assets of DI
described on Schedule 4.01 of the Disclosure Statement, the aggregate fair
market value of which, together with the amount of such cash, shall not, as of
the Closing Date, exceed the good faith estimate of the Warranting Shareholders
of the amount of the accumulated adjustments account (as defined in section
1368(e)(1) of the Code) of DI (the “Aggregate AAA Value”) as of such date, take
any action set forth in Section 2.8(e);
 
(vii)    Take any action set forth in Section 2.8(f), (g), (i) or (m);
 
(viii)    Enter into any transaction with, or make any payment to, any Related
Party, except for those Permitted Related Party Transactions contemplated by
Schedules 2.18 and 2.20 of the Disclosure Statement; or

22

--------------------------------------------------------------------------------

 
(ix)    Amend its articles of incorporation or bylaws;
 
provided, however, that if and to the extent that the aggregate amount of
Permitted Distributions is not equal to the Aggregate AAA Value, as determined
by an audit of such value to be conducted by the independent auditors for CTC as
soon as practicable after the Closing but in any case prior to June 30, 1997, if
such amount exceeds such Aggregate AAA Value, such excess shall be repaid by the
DI Shareholders to Merger Sub and, if such amount is less than such Aggregate
AAA Value, such difference shall be paid by Merger Sub to the DI Shareholders.
 
4.2.    Insurance; Environmental Permits.
 
(a)    Maintenance of Policies.    Except as otherwise indicated on Schedule
2.22 of the Disclosure Statement, DI shall maintain in full force and effect the
policies of insurance listed on such Schedule 2.22 or will obtain, prior to the
lapse of any such policy, substantially similar coverage with insurers of
recognized standing. DI shall promptly advise CTC in writing of any change of
insurer or type of coverage in respect of the policies listed on such Schedule
2.22.
 
(b)    Permit Transfers.    To the extent practicable and permitted by or under
applicable Environmental Laws, DI will prepare and file all applications for
transfer of its Environmental Permits to Merger Sub in adequate time for
transfer to occur as of the time of Closing hereunder.
 
4.3.    Fulfillment of Agreements.    DI shall use its reasonable commercial
efforts to (i) cause all of the conditions precedent to the obligation of CTC
under Section 6.1 of this Agreement which are within its control or influence to
be satisfied at or prior to the time of Closing, and (ii) conduct its business
in such a manner that at the time of Closing the representations and warranties
of DI and the Warranting Shareholders contained in this Agreement shall be true
and correct in all material respects as though such representations and
warranties were made on the Closing Date. DI will promptly notify CTC in writing
of any event or fact which is or is likely to cause a breach of any of the
representations, warranties, covenants or agreements of DI and the Warranting
Shareholders and shall promptly advise CTC in writing of the occurrence of any
condition that is materially adverse to the business, operations, properties,
assets or condition (financial or otherwise) of DI.
 
4.4.    Access, Information and Documents.    DI will provide to CTC and to
CTC’s counsel, accountants and other representatives reasonable access during
normal business hours to all properties, books, tax returns, contracts,
commitments, records, documents, officers, personnel and accountants of DI and
will furnish to CTC all such documents and copies of documents (certified to be
true copies if requested) and all information with respect to the affairs of DI
as CTC may reasonably request, including, without limitation, access to perform
such inspections and surveys as CTC deems necessary

23

--------------------------------------------------------------------------------

in the conduct of the environmental examination and study contemplated by
Section 5.6 hereof.
 
4.5.    H-S-R Act Compliance.    DI shall promptly file with the Federal Trade
Commission (“FTC”) and the Antitrust Division of the Department of Justice (“AT
Division”) the notifications required by the H-S-R Act in respect of the Merger,
shall not intentionally delay submission of information requested by FTC or AT
Division under the H-S-R Act and shall use its reasonable commercial efforts to
obtain early termination of the applicable waiting period.
 
4.6.    Delivery of Financial Statements for Subsequent Periods.    DI will
deliver to CTC promptly after the close of each of its interim accounting
periods hereafter until the Closing Date copies of interim financial statements
for such period comparable to those described in Section 2.6 and, if otherwise
available prior to the Closing Date, its audited balance sheet as at December
31, 1996, and related statements of income, shareholders’ equity and cash flows
for the year then ended, audited by Price Waterhouse LLP.
 
4.7.    Environmental Lists.    (a) Within twenty (20) business days of the date
hereof, DI shall deliver to CTC a true and complete list of all Environmental
Permits held by it. Such list shall set forth, to the extent known by DI, which
Environmental Permits may be transferred to Merger Sub as of the Closing Date
without the prior approval of any governmental department, commission, board,
agency or instrumentality.
 
(b)    Within twenty (20) business days of the date hereof, DI shall deliver to
CTC a true and complete list of each entity that has recycled, treated, stored,
disposed of or transported any Hazardous Substance generated by DI based on
either the documents retained by DI at its principal executive offices or the
knowledge of Alfred L. Donlevy.
 
ARTICLE V
 
CERTAIN OBLIGATIONS OF CTC PENDING CLOSING
 
5. 1.    Fulfillment of Agreements.    CTC shall use its reasonable commercial
efforts to (i) cause all of the conditions precedent to the obligations of DI
and the DI Shareholders under Section 6.2 of this Agreement which are within its
control or influence to be satisfied at or prior to the time of Closing and (ii)
conduct its business in such a manner that at the time of Closing the
representations and warranties of CTC contained in this Agreement shall be true
and correct in all material respects as though such representations and
warranties were made on the Closing Date. CTC will promptly notify DI in writing
of any event or fact which is or is likely to cause a breach of any of its
representations, warranties, covenants or agreements.

24

--------------------------------------------------------------------------------

 
5.2.    H-S-R Act Compliance.    CTC shall promptly file with the FTC and the AT
Division the notifications required by the H-S-R Act in respect of the Merger,
shall not intentionally delay submission of information requested by FTC or AT
Division under the H-S-R Act and shall use its reasonable commercial efforts to
obtain early termination of the applicable waiting period.
 
5.3.    Formation of Merger Sub.    Prior to the time of Closing, CTC shall
cause Merger Sub to be incorporated and organized under the laws of the State of
Delaware and thereafter to execute and deliver the Plan of Merger. Immediately
after the incorporation of Merger Sub, CTC shall purchase all of the authorized
shares of capital stock of Merger Sub and shall make no disposition or transfer
of such shares pending the Closing.
 
5.4.    Listing of CTC Stock.    Upon receipt of the requisite financial
statements of DI in appropriate form and any other necessary background
information relating thereto, CTC will promptly file with the NYSE an
Application for Additional Listing for the shares of CTC Stock to be issued and
delivered pursuant hereto and the Plan of Merger (the “NYSE Application”) and,
to the extent reasonably requested, DI and the DI Shareholders will use their
reasonable commercial efforts to assist CTC in the preparation and filing of the
NYSE Application.
 
5.5.    Delivery of 1934 Act Reports for Subsequent Periods.    CTC will deliver
to DI and the DI Shareholders (i) promptly after the filing thereof with the SEC
copies of all its Form 10-Q Quarterly Reports and Form 8-K Current Reports (if
any) filed under the 1934 Act prior to Closing and (ii) promptly after the
distribution thereof any interim financial reports or other communications
distributed generally to the holders of CTC Stock.
 
5.6.    Environmental Audit.    CTC has engaged Dames & Moore (the
“Environmental Auditors”) for the purpose of conducting a site assessment or
assessments of the Real Properties and compliance audit of DI and rendering to
counsel for CTC a report thereon (the “Environmental Report”). In performing
such assessments, CTC shall cause the Environmental Auditors not to conduct
their work in any manner that could create an unsafe or hazardous condition on
any Real Property and shall cause the Environmental Auditors not to interfere
unreasonably with the conduct of DI’s business. CTC shall cause all work
performed by the Environmental Auditors to be done in accordance with all
applicable laws, shall be solely responsible for all fees and expenses of the
Environmental Auditors and shall not permit (i) any claims to be made against DI
with respect to the activities being performed by the Environmental Auditors or
their contractors or agents, except to the extent that such claims are for
negligent or willful misconduct by DI’s employees, or (ii) any liens to be
created against any Real Property by the Environmental Auditors or their
contractors or agents. Prior to the commencement of any work by the
Environmental Auditors on the Real Properties, CTC shall (i) deliver to DI’s
counsel evidence that the Environmental Auditors have in fall force and effect
workers’ compensation insurance in at least the amount required by applicable
laws and a comprehensive general liability policy with a single incident limit
of at least $2,000,000 in respect of the injury or death of any one person or
damage to property

25

--------------------------------------------------------------------------------

and DI shall be named as an additional insured thereunder; and (ii) provide DI
with a copy of the proposed scope of the work for the site assessment or
assessments in accordance with this Section. DI shall not be liable to CTC or
the Environmental Auditors, their contractors or agents and CTC shall release,
indemnify and hold DI harmless from any claims by any person on account of any
injury, damages or loss to personal property resulting from, incident to or
arising out of the performance of any assessment or any entry upon the Real
Properties in accordance with this Section and from all costs incurred by DI in
defending against any such claim. CTC shall keep DI informed in a timely manner
as to the findings of the Environmental Auditors and shall arrange to have
provided to DI’s counsel copies of the final written report prepared by the
Environmental Auditors promptly following receipt thereof by CTC or its counsel.
CTC shall insure that all factual information is reported accurately and
completely by the Environmental Auditors in the Environmental Report consistent
with the information supplied by DI or developed by the Environmental Auditors
from published databases or information contained in governmental agency files,
to the extent that such information accurately describes the state of affairs,
and that no legal conclusions are contained in the Environmental Report. Within
ten days of its receipt of the Environmental Report, DI will provide to CTC
notice of incomplete or erroneous factual information or legal conclusions with
appropriate supporting information, if any, contained in the Environmental
Report. Any such incomplete or erroneous factual information shall be corrected
and any such legal conclusions shall be removed and the Environmental Report
shall be reissued. Once the Environmental Report is reissued, all copies of the
original version shall be destroyed. All information obtained by CTC or the
Environmental Auditors shall be treated as confidential in accordance with
Section 5.8 and CTC shall instruct the Environmental Auditors, their
representatives, employees and contractors regarding the confidentiality of all
such information.
 
5.7.    Agreements.    After the Closing, CTC shall, and shall cause Merger Sub
to, honor all employment agreements and supplemental employee retirement
programs of DI set forth in Schedule 5.7 of the Disclosure Statement.
 
5.8.    Confidentiality.    CTC shall use all information and documents obtained
prior to the date hereof from DI or its representative or pursuant to Section
4.4 or in accordance with Section 5.6 only in connection with the transactions
contemplated by this Agreement and shall not use them for any purpose unrelated
to the consummation of the transactions contemplated by this Agreement. Prior to
the Effective Time, CTC shall keep all such information and documents
confidential and shall not (except as required by applicable law, regulation or
legal process, and then only after compliance with the procedure set forth
below), without DI’s prior written consent, disclose any such information or
documents in any manner whatsoever, other than any information or documents
which (i) are or become publicly available other than as a result of a
disclosure by CTC or any of its representatives or (ii) are or become available
to CTC on a nonconfidential basis from a source (other than DI or any of its
representatives) which, to CTC’s knowledge, is not prohibited from disclosing
such information to CTC by a legal, contractual or fiduciary obligation to DI.
In the event that, prior to the Effective Time, CTC or any of its

26

--------------------------------------------------------------------------------

representatives is requested pursuant to, or required by, applicable law,
regulation or legal process to disclose any of such information and documents,
CTC will notify DI promptly so that DI may seek a protective order or other
appropriate remedy or, in its sole discretion, waive compliance with the terms
of this Section 5.8. CTC agrees not to oppose any action to obtain a protective
order or other appropriate remedy. In the event that no such protective order or
other remedy sought is obtained, CTC will furnish only that portion of such
information and documents which CTC is advised by counsel is legally required
and will exercise all reasonable efforts to obtain reliable assurance that
confidential treatment will be accorded such information and documents. If this
Agreement is terminated, CTC shall return all such information and documents to
DI and convey and release to DI whatever right, title and interest CTC may have
in such documents and information.
 
ARTICLE VI
 
CONDITIONS TO CLOSING; TERMINATION
 
6. 1.    Conditions Precedent to Obligation of CTC.    The obligation of CTC to
proceed with the Closing under this Agreement is subject to the fulfillment,
prior to or at the time of Closing, of the following conditions (any one or more
of which may be waived in whole or in part by CTC at CTC’s option):
 
(a)    Representations and Warranties of DI and Warranting Shareholders.    The
representations and warranties of DI, the DI Shareholders and the Warranting
Shareholders contained in Article II of this Agreement shall be true and correct
in all material respects on the Closing Date with the same force and effect as
though such representations and warranties had been made on such date, and CTC
shall have received a certificate to such effect with respect to the
representations and warranties of DI signed by the Chairman of the Board and
President of DI.
 
(b)    Performance and Compliance.    DI and the DI Shareholders shall have in
all material respects performed all of the covenants and complied with all of
the provisions required by this Agreement to be performed or complied with by
any of them at or before Closing, and CTC shall have received a certificate to
such effect signed by the Chairman of the Board and President of DI with respect
to DI and by each of the DI Shareholders with respect to himself or herself.
 
(c)    Opinion of Counsel for DI.    CTC shall have received from Kirkpatrick &
Lockhart LLP, counsel for DI, an opinion dated the Closing Date in substantially
the form of Exhibit C hereto.
 
(d)    Satisfactory Instruments.    All instruments and documents required to be
delivered on the part of DI and the DI Shareholders to effectuate and consummate
the transactions contemplated hereby to be consummated at or prior to the time

27

--------------------------------------------------------------------------------

of Closing shall be delivered to CTC and shall be in form and substance
reasonably satisfactory to CTC and its counsel.
 
(e)    Required Consents.    All consents and approvals of all governmental
departments, agencies and authorities required for the consummation of the
transactions contemplated hereby shall have been obtained, and all waiting
periods specified by law, the ending of which are necessary for the consummation
of such transactions, shall have expired or been terminated.
 
(f)    Litigation.    No order of any court, arbitrator or governmental,
regulatory or administrative agency or commission shall be in effect which
restrains or prohibits the Merger or any of the other transactions contemplated
hereby or which would limit or adversely affect CTC’s ownership or control of
the business of DI, and there shall not be pending any action or proceeding by
or before any court, arbitrator or governmental, regulatory or administrative
agency or commission challenging any of the transactions contemplated by this
Agreement or seeking monetary relief by reason of the consummation of such
transactions.
 
(g)    Related Party Indebtedness.    Except as expressly contemplated by this
Agreement, DI shall have been discharged in full as a guarantor of any
indebtedness of any Related Party, and there shall be no outstanding debts,
obligations or amounts due existing between any Related Party and DI other than
debts, obligations or amounts incurred in the Ordinary Course of Business.
 
(h)    Consulting and Non-Competition Agreements.    Each of Messrs. Rossin and
Stephans shall have executed and delivered Consulting and Non-Competition
Agreements with DI and CTC in substantially the forms attached hereto as
Exhibits B-1 and B-2 respectively.
 
(i)    Approval of NYSE Listing Application.    The NYSE Listing Application to
be filed by CTC pursuant to Section 5.4 hereof shall have been duly approved by
the NYSE and CTC shall have received written notice of such approval.
 
(j)    Environmental Report.    The Environmental Auditors shall have delivered
their final Environmental Report which Environmental Report discloses no fact,
event or condition which would make any of the representations and warranties
contained in Section 2.25 not true and correct in all material respects on the
Closing Date; provided, that for purposes of this Section 6.1(j) any
qualification or limitation of the representations and warranties contained in
Section 2.25 on account of the knowledge of DI or either of the Warranting
Shareholders shall be disregarded and that, except to the extent that any
inspections, investigations, studies, audits, tests, reviews or other analyses
that are listed on Schedule 2.25 of the Disclosure Statement in response to
Section 2.25(l) hereof or any information contained therein are specifically
referred to elsewhere in such Schedule 2.25, for purposes of this Section 6.1(j)
any information set forth therein shall be disregarded.

28

--------------------------------------------------------------------------------

 
6.2.    Conditions Precedent to Obligations of DI and DI Shareholders.    The
obligations of DI and the DI Shareholders to proceed with the Closing under this
Agreement is subject to the fulfillment, prior to or at the time of Closing, of
the following conditions (any one or more of which may be waived in whole or in
part by DI at DI’s option):
 
(a)    Representations and Warranties of CTC.    The representations and
warranties of CTC contained in Article III of this Agreement shall be true and
correct in all material respects on the Closing Date with the same force and
effect as though such representations and warranties had been made on such date,
and CTC shall have delivered to the DI Shareholders a certificate to such effect
signed by its Chairman of the Board and President.
 
(b)    Performance and Compliance.    CTC shall have in all material respects
performed all of the covenants and complied with all of the provisions required
by this Agreement to be performed or complied with by it at or before Closing,
and CTC shall have delivered to the DI Shareholders a certificate to such effect
signed by its Chairman of the Board and President.
 
(c)    Opinion of Counsel for CTC.    The DI Shareholders shall have received
from Dechert Price & Rhoads, counsel for CTC, an opinion dated the Closing Date
and in form and substance reasonably satisfactory to the DI Shareholders, to the
effects set forth in Exhibit D hereto.
 
(d)    Satisfactory Instruments.    All instruments and documents required to be
delivered on CTC’s part to effectuate and consummate the transactions
contemplated hereby to be consummated at or prior to the time of Closing shall
be delivered by CTC and shall be in form and substance reasonably satisfactory
to the DI Shareholders and their counsel.
 
(e)    Required Consents.    All consents and approvals of all governmental
departments, agencies and authorities required for the consummation of the
transactions contemplated hereby shall have been obtained, and all waiting
periods specified by law, the ending of which are necessary for the consummation
of such transactions, shall have expired or been terminated.
 
(f)    Litigation.    No order of any court, arbitrator or governmental,
regulatory or administrative agency or commission shall be in effect which
restrains or prohibits the transactions contemplated hereby, and there shall not
be pending any action or proceeding by or before any court, arbitrator or
governmental, regulatory or administrative agency or commission challenging any
of the transactions contemplated by this Agreement or seeking monetary relief by
reason of the consummation of such transactions.
 

29

--------------------------------------------------------------------------------

 
(g)    Approval of NYSE Listing Application.    The NYSE Listing Application to
be filed by CTC pursuant to Section 5.4 hereof shall have been duly approved by
the NYSE and DI shall have received written notice of such approval.
 
(h)    Consulting and Non-Competition Agreements.    Each of CTC and DI shall
have executed and delivered the Consulting and Non-Competition Agreements with
Messrs. Rossin and Stephans in substantially the forms attached hereto as
Exhibits B-1 and B-2, respectively.
 
6.3.    Termination.
 
(a)    When Agreement May Be Terminated.    This Agreement may be terminated at
any time prior to Closing:
 
(i)    By mutual written consent of CTC and DI;
 
(ii)    By CTC if there has been a material misrepresentation or a material
breach by DI or the DI Shareholders of any of their warranties or covenants, or
if any of the conditions specified in Section 6.1 hereof shall not have been
fulfilled by the time required and shall not have been waived by CTC;
 
(iii)    By DI if there has been a material misrepresentation or a material
breach by CTC of any of its warranties or covenants, or if any of the conditions
specified in Section 6.2 hereof shall not have been fulfilled by the time
required and shall not have been waived by DI in writing;
 
(iv)    By CTC or DI if the CTC Market Price is greater than $40 or less than
$28; or
 
(v)    By CTC or DI if Closing shall not have occurred prior to or on March 30,
1997; provided, that CTC or DI may terminate this Agreement pursuant to this
subparagraph (v) only if the Closing shall not have occurred by such date for a
reason other than a willful or grossly negligent failure by the party seeking to
terminate this Agreement to provide for the satisfaction of the conditions to
the obligation of the other party to proceed with Closing as set forth in
Section 6.1 or 6.2 hereof, respectively, which were in the control of the party
seeking to terminate this Agreement.
 
(b)    Effect of Termination.    In the event of any termination of this
Agreement by either DI or CTC as herein provided, there shall be no liability on
the part of either DI or CTC, except for liabilities arising from a willful or
deliberate breach of this Agreement with respect to which a claim has accrued
prior to such termination. If this Agreement is terminated as provided in this
Section 6.3: (i) CTC and DI shall deliver all documents, work papers and other
material relating to the transactions contemplated hereby, whether obtained
before or after the execution hereof, to the party furnishing the same or

30

--------------------------------------------------------------------------------

will deliver to such party a duly executed officer’s certificate to the effect
that all copies of such material have been destroyed; (ii) no information
received by any party hereto with respect to the business of the other party of
its affiliated companies (other than information which is a matter of public
knowledge or which has heretofore been or is hereafter published in any
publication for public distribution or filed or available as public information
with any governmental authority) shall at any time be used for the advantage of,
or disclosed to third parties by, such party for any reason whatsoever; (iii)
CTC shall deliver to DI all studies, reports or other documents prepared in
connection with its investigation in accordance with Section 5.6; and (iv) the
obligations of CTC under this Section and Sections 5.6 and 5.8 shall survive for
a period of five years following such termination.
 
ARTICLE VII
 
RESTRICTIONS ON TRANSFER OF CTC STOCK;
REGISTRATION RIGHTS; BOARD REPRESENTATION
 
7.1.    Restrictions on Transfer and Certain Activities.
 
(a)    Representations of DI Shareholders.    Each DI Shareholder hereby
covenants and represents that such DI Shareholder:
 
(i)    understands that the shares of CTC Stock which such DI Shareholder is to
receive pursuant to Article I hereof and the Plan of Merger (the “Merger
Shares”) have not been registered under the Securities Act of 1933, as amended
(the “1933 Act”), and, when delivered in accordance with the terms of this
Agreement, will be “restricted securities” (securities acquired from an issuer
in a transaction not involving any public offering) as defined in Rule 144 of
the General Rules and Regulations of the SEC under the 1933 Act (“Rule 144”);
 
(ii)    has no present plan or intention to effect any transfer of the Merger
Shares to any person or other entity (including a Permitted Transferee as
hereinafter defined), and, except as otherwise contemplated by the provisions of
Section 7.2 hereof, will hold the Merger Shares for a minimum of two years
following the Closing Date (unless the holding period applicable to resales of
restricted securities (the “Limited 144 Resale Period”) is reduced from two
years to one year as proposed in SEC 1933 Act Release No. 7187 (6-27-95), in
which case such two-year period shall be automatically reduced to one year), and
will not consummate any sale or transfer of any Merger Shares in the absence of
registration thereof under the 1933 Act (other than in accordance with the
provisions of Rule 144), unless and until such DI Shareholder shall have
delivered to CTC an opinion of Kirkpatrick & Lockhart LLP, or other counsel
chosen by such DI Shareholder, which counsel shall be reasonably satisfactory to
CTC and its counsel, to the effect that such sale or transfer may be effected
without registration under the 1933 Act;

31

--------------------------------------------------------------------------------

 
(iii)    undertakes that, throughout the Standstill Term (as hereinafter
defined), such DI Shareholder will not agree to or arrange for or effect the
transfer (other than pursuant to the procedures contemplated by Section 7.2) in
a single transaction or related series of transactions (other than a disposition
to a Permitted Transferee) to a single purchaser or related or affiliated group
of purchasers of more than the maximum number of Merger Shares which such DI
Shareholder could then sell or transfer in a transaction or transactions
effected in fall compliance with Rule 144(e)(1), assuming that such Rule was
then applicable, unless and until such DI Shareholder first advises CTC of the
intention so to do in writing and provides CTC with an opportunity to respond to
such advice within ten business days of receipt thereof by CTC (the “Response
Period”) by agreeing to repurchase (the “Repurchase Right”) such Merger Shares
(the “Offered Merger Shares”) at the same price offered by such purchaser or
group; provided, however, that such DI Shareholder will be obligated to effect
such sale to CTC only if capital gain treatment of the transaction is assured
under section 302(b) of the Code; and
 
(iv)    throughout the Standstill Term, except with the prior express written
consent of CTC or in the capacity of a DI Designee (as defined in Section 7.3),
neither such DI Shareholder nor any of such DI Shareholder’s affiliates (as
hereinafter defined), will, nor will such DI Shareholder or any of such
affiliates assist or encourage others to, directly or indirectly:
 
(A)    effect, or offer, seek or propose to effect, or cause to be effected, any
(i) acquisition of ownership (including,but not limited to, “beneficial
ownership” as defined in Rule 13d-3 under the 1934 Act) by such DI Shareholder
of any additional shares of CTC Stock (which hereby waives any right such DI
Shareholder might otherwise have as a DI Designee to participate in CTC’s
Non-Qualified Stock Option Plan for Non-Employee Directors) or any other CTC
Voting Securities (as hereinafter defined) other than CTC Voting Securities
issued pursuant to a stock split or dividend or distribution in respect of CTC
Stock or any material portion of CTC’s assets or any rights or options to
acquire such ownership (including from a third party); or (ii) tender or
exchange offer, merger or other business combination involving CTC or any of its
subsidiaries (which shall not prevent any DI Shareholder from accepting any such
offer or voting for and participating in any such merger or other business
combination; provided, however, that such DI Shareholder shall advise CTC with
reasonable promptness of such DI Shareholder’s intention to accept any tender or
exchange offer in order to permit CTC to exercise the Repurchase Right with
respect to the applicable Merger Shares, and such DI Shareholder shall not
accept such offer until the final day prior to its then-scheduled expiration);
or (iii) recapitalization or restructuring resulting in an increase in the
proportional percentage of CTC Voting Securities held by such DI Shareholder or
liquidation, dissolution or other extraordinary transaction involving CTC or any
of its subsidiaries (which shall not prevent any DI Shareholder from voting for
and participating in any such transaction);
 
(B)    make or in any way participate in any “solicitation” of “proxies” (as
such terms are defined or used in Regulation 14A under the

32

--------------------------------------------------------------------------------

1934 Act) or become a “participant” in any “election contest” (as such terms are
defined or used in Rule 14a-11 under the 1934 Act) with respect to CTC; seek to
advise or influence any person (within the meaning of Section 13(d)(3) of the
1934 Act), other than members of the initial “group” referred to in clause (C),
with respect to the voting of any CTC Voting Securities; or execute any written
consent in lieu of a meeting of holders of CTC Voting Securities;
 
(C)    form, join or in any way participate in a “group” (within the meaning of
Section 13(d)(3) of the 1934 Act) with respect to any CTC Voting Securities or
otherwise act (other than by the voting of CTC Voting Securities), alone or in
concert with others, to seek to control or influence CTC’s Board of Directors,
management or corporate policies, other than any such actions undertaken solely
with other DI Shareholders and their Permitted Transferees; or
 
(D)    enter into any negotiations, arrangements, agreements or understandings
with any third party with respect to any of the foregoing.
 
(b)    Legend on Certificates.    The certificates representing the Merger
Shares will bear the following legend:
 
“The shares of stock evidenced by this certificate have not been registered
pursuant to the Securities Act of 1933, as amended, and are transferable only
upon such registration or upon proof of exemption therefrom. Certain conditions
precedent to the transfer of these shares are set forth in an Agreement and Plan
of Merger dated January 6, 1997 among Dynamet Incorporated, the shareholders of
Dynamet Incorporated and Carpenter Technology Corporation (which Agreement and
Plan of Merger is on file with Carpenter Technology Corporation).”
 
(c)    Stop Transfer Instructions.    At the time of the delivery of the
certificates representing the Merger Shares, stop transfer instructions with
respect to such certificates will be given by CTC to the transfer agent for CTC
Stock.
 
(d)    Procedure for Repurchases by CTC.    In the event that CTC elects to
exercise its Repurchase Right with respect to Offered Merger Shares under
subsection (a)(iii), CTC will within the Response Period deliver to the
disposing DI Shareholder written notice stating the date, time and place for the
closing of the repurchase transaction, which date shall not be more than five
business days after the notice date. Such notice shall be accompanied by an
opinion of Dechert Price & Rhoads, or other counsel reasonably satisfactory to
the disposing DI Shareholder, to the effect that the repurchase by CTC will
result in capital gain treatment to such DI Shareholder under section 302(b) of
the Code. Unless otherwise agreed, the purchase price for the Offered Merger
Shares shall be paid in fall at such closing by certified check or wire transfer
against delivery of the appropriate stock certificates, duly endorsed or
accompanied by duly executed stock transfer

33

--------------------------------------------------------------------------------

powers. If CTC does not deliver such notice and opinion within the Response
Period, the disposing DI Shareholder shall be free to dispose of the Offered
Merger Shares to any third party (subject to compliance with all applicable
federal and state securities laws), and CTC will take all action necessary to
permit such disposition to be effected without further restrictions, including
removal of the legend contemplated by subsection (b) hereof and voiding of the
stop transfer instructions contemplated by subsection (c).
 
(e)    Permitted Transferees.
 
(i)    Nothing in this Section 7.1 shall prevent the disposition of Merger
Shares by a DI Shareholder or a Permitted Transferee to one or more of his, her
or its Permitted Transferees, to another DI Shareholder or to CTC; provided,
however, that each such DI Shareholder or Permitted Transferee (except a
Permitted Transferee pursuant to clause (D), (E), (F) or (G) of subsection
(e)(ii), hereinafter referred to as an “Unrestricted Permitted Transferee”)
shall take such Merger Shares subject to and be fully bound by the terms of this
Agreement applicable to such person with the same effect as if such person were
a party hereto; and provided, further, that
 
(A)    no such transferee (other than an Unrestricted Permitted Transferee)
shall be a Permitted Transferee unless such transferee executes a representation
letter embodying the substantive provisions of Article VII of this Agreement,
reasonably satisfactory in form and substance to CTC, and
 
(B)    no disposition shall be effected except in compliance with the
registration requirements of the 1933 Act or pursuant to an available exemption
therefrom.
 
(ii)    “Permitted Transferee” shall mean:
 
(A)    in the case of any DI Shareholder or Permitted Transferee who is a
natural person, his or her spouse or lineal descendants, any trust for his or
her benefit or the benefit of his or her spouse or lineal descendants or the
benefit of any combination thereof, or any corporation or partnership in which
the direct and beneficial owners of all of the equity interests are any
combination of such individual DI Shareholder or Permitted Transferee and his or
her spouse and lineal descendants and any trusts for the benefit of any
combination of such persons; provided, that any such trust, partnership or
corporation shall not be subject to any obligations inconsistent with the
obligations of a DI Shareholder or Permitted Transferee under this Agreement;
 
(B)    in the case of any DI Shareholder or Permitted Transferee who is a
natural person, his or her heirs, executors, administrators or personal
representatives upon the death of such DI Shareholder or Permitted Transferee or
upon the incompetency or disability of such DI Shareholder or Permitted
Transferee for purposes of the protection and management of his or her assets;

34

--------------------------------------------------------------------------------

 
(C)    in the case of any DI Shareholder or Permitted Transferee that is a
corporation, partnership or trust, its shareholders, partners or beneficiaries,
as the case may be (other than any person who becomes a shareholder, partner or
beneficiary solely to enable him, her or it to become a Permitted Transferee)
and, in the case of any DI Shareholder or Permitted Transferee, any affiliate
thereof;
 
(D)    the Rossin Foundation or any other charitable, religious or philanthropic
organization qualified under section 501(c)(3) of the Code and any charitable
remainder trust as defined in Section 664 of the Code, either of which is an
affiliate of any DI Shareholder, which shall be an Unrestricted Permitted
Transferee only with respect to the initial 200,000 Merger Shares transferred
thereto, and which shall acquire any additional Merger Shares subject to the
general restrictions of subsection (e)(i);
 
(E)    any charitable, religious or philanthropic organization qualified under
section 501(c)(3) of the Code and any charitable remainder trust as defined in
Section 664 of the Code, other than the Rossin Foundation or any other such
organization which is an affiliate of any DI Shareholder;
 
(F)    any person or other entity if such person or other entity takes such
Merger Shares in a transaction in accordance with Section 7.2 hereof or another
public offering under the 1933 Act or in a transaction in accordance with Rule
144; or
 
(G)    any person acquiring Merger Shares from any DI Shareholder or Permitted
Transferee after full compliance with subsection (d) hereof.
 
(iii)    As used in this Section 7. 1, “affiliate” means any person controlling,
controlled by or under common control with a specified person. “Disposition”
includes any sale, exchange, assignment, hypothecation, gift, donation or any
voting trust or other agreement or arrangement with respect to the transfer of
voting rights or any other beneficial interest in any of the Merger Shares.
 
(f)    Duration of Standstill Term.
 
(i)    The period during which the provisions of this Section 7.1 shall be
effective (the “Standstill Term”) shall begin on the Closing Date and shall end
on the earlier to occur of (A) the date upon which the percentage of the voting
power of the CTC Voting Securities held by the DI Shareholders and their
Permitted Transferees bound by the provisions of Article VII of this Agreement
is less than 5% of the voting power of all outstanding CTC Voting Securities or
(B) the tenth anniversary of the Closing Date; provided, however, that the
Standstill Term shall terminate immediately upon CTC’s failure to honor or to
carry out its obligations with respect to the election of a DI Designee to the
CTC Board of Directors under Section 7.3(a) hereof or the occurrence of a CTC
Change of Control Event (as hereinafter defined).

35

--------------------------------------------------------------------------------

 
(ii)    As used in this Section 7. 1, a “ CTC Change of Control Event” means a
transaction or series of transactions (including any tender or exchange offer,
merger, sale of assets or other business combination, contested election of
directors or any combination thereof) as the result of which (A) any person,
together with all affiliates of such person, or group (other than CTC, any
subsidiary of CTC, any employee benefit plan of CTC or of any subsidiary of CTC,
any person or entity organized, appointed or established by CTC for or pursuant
to the terms of any such employee benefit plan or any group of which any DI
Shareholder is a member and in which such DI Shareholder participates in his
capacity as a stockholder of the Company) shall become the beneficial owner of
30% or more of the voting power of all CTC Voting Securities then outstanding,
other than a transaction to which CTC is a party and in connection with which
such person or group enters into a “standstill” agreement with CTC which has a
duration not less than the remaining term of the Standstill Term and contains
covenants and conditions, which shall not thereafter be modified or waived prior
to the end of the Standstill Term, relating to the sale and acquisition of CTC
Voting Securities and the exercise of voting rights which are at least as
restrictive as those contained herein; or (B) during any period of two
consecutive calendar years there is a change of 50% or more in the membership of
the Board of Directors of CTC from the directors in office at the beginning of
such period except for changes approved by at least two-thirds of the directors
then in office who were directors at the beginning of the period; or (C) persons
who were the holders of CTC Voting Securities immediately prior to such
transaction do not, immediately thereafter, own more than 50% of the voting
power of the reorganized, merged, consolidated, combined or acquiring
corporation’s then outstanding voting securities. A CTC Change of Control Event
shall be deemed to have occurred on the date upon which any of the foregoing
results is consummated or becomes effective.
 
(iii)    “CTC Voting Securities” shall mean CTC Stock and any other securities
of CTC entitled to vote generally for the election of directors of CTC; and
“voting power” means, with respect to any CTC Voting Security, the maximum
number of votes that such security is entitled to cast generally for the
election of directors.
 
7.2.    Registration of CTC Stock.
 
(a)    Form S-3 or Other Registration Statement on Demand.    On one occasion at
any time after the first to occur of (i) the first anniversary of the Closing
Date or (ii) the death of either Peter or Ada Rossin, CTC will file with the SEC
within 60 days after being so requested by the holders of a majority of the
Merger Shares then held by the DI Shareholders a registration statement on Form
S-3 (Or, if such form shall not then be available for use by CTC in connection
with such proposed offering, on any other appropriate form) under the 1933 Act
and will include therein such number of the Merger Shares as the DI Shareholders
shall designate in writing to CTC no later than ten days prior to the proposed
date of such filing. CTC will use its reasonable commercial efforts to have such
registration statement declared effective as promptly as practicable after the
filing thereof, subject to the provisions hereinafter set forth.

36

--------------------------------------------------------------------------------

 
(b)    Additional Registration Rights.    If, at any time, CTC files a
registration statement (including a registration statement filed under Rule 415
under the 1933 Act), contemplating a public offering of CTC Voting Securities,
other than in connection with a business acquisition or combination transaction
or a stock purchase, stock option or other employee benefit plan or a dividend
reinvestment plan, the DI Shareholders will have the right to have all or a
portion of the Merger Shares included in such registration to the extent
designated in writing to CTC within ten days following receipt of notice by DI
Shareholders of the proposed registration from CTC; provided, however, that the
period during which CTC shall be required to keep such registration statement
effective shall be limited to 90 days; and provided, further, that CTC may delay
the filing or suspend the effectiveness of such registration statement for a
reasonable period of time if it reasonably believes that such filing would
require the disclosure of information then held confidential or would disrupt or
prejudice the negotiation, or completion of any contemplated or pending
financing, acquisition, disposition or other significant corporate transaction,
and that CTC may exclude all or a portion of such Merger Shares from any
offering under such registration statement if it is advised by the managing
underwriter for such offering if the offering is underwritten that the inclusion
of such shares or such portion, in the offering would prejudice or impair the
marketability thereof, so long as any such reduction is effected pro rata with
the shares of any other shareholder exercising rights similar to the rights
provided in this Section 7.2(b).
 
(c)    Undertakings of Participating Sellers.    As a condition of any such
registration under Section 7.2(a) or (b), the DI Shareholders electing to
participate therein (the “Participating Sellers”) will (i) furnish such
information to CTC and take such additional action as CTC and its counsel may
reasonably request in connection with such registration statement and the
offering contemplated thereby; (ii) agree to indemnify CTC (to the extent
reasonably deemed necessary by CTC) with respect to the accuracy of any
information so furnished; (iii) pay all (or a pro rata portion, if CTC itself,
or other holders of CTC Stock, elect to participate in such registration, of)
the underwriting discounts and commissions or brokerage commissions, and the
fees and expenses of their own counsel in excess of $10,000, it being understood
that all other costs and expenses associated with such registration, including
SEC registration fees, printing costs and blue sky fees and expenses will be
borne by CTC; and (iv) cooperate with CTC and its representatives to cause such
registration statement to become effective at the earliest practicable time.
Upon request, CTC will furnish the Participating Sellers with such number of
copies of the prospectus related to any such registration statement as the
Participating Sellers may reasonably request.
 
(d)    Indemnification by CTC.    In connection with any offering and
registration statement contemplated by the foregoing provisions, CTC shall
indemnify each Participating Seller against any and all loss, liability, claim,
damage and expense whatsoever (i) arising out of any untrue statement of a
material fact contained in such registration statement at the time it becomes
effective or the final prospectus or any supplement thereto is filed in
connection with such registration statement, or any omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein, in light of the

37

--------------------------------------------------------------------------------

circumstances under which they were made, not misleading, unless such statement
or omission was made in reliance upon and in conformity with information
furnished to CTC by a Participating Seller for use in such registration
statement, prospectus or supplement, or (ii) arising out of any violation by CTC
of any law or rule or regulation relating to action or inaction required of CTC
in connection with such registration statement or the offering thereunder;
provided, however, that CTC shall not be liable hereunder with respect to any
claim made against any Participating Seller unless CTC shall be notified in
writing of the existence of the claim within thirty days after the assertion
thereof in writing; and provided, further, that CTC shall be entitled to
participate at its own expense in the defense or, if it so elects within thirty
days after receipt of such notice, to assume the defense of any suit brought to
enforce any such claim. If a Participating Seller’s right to the indemnification
hereinbefore provided for is for any reason held unenforceable although
otherwise applicable in accordance with its terms, CTC will contribute to the
loss, liability, claim, damage or expense for which such indemnification is held
unenforceable in such proportion as is appropriate to reflect the relative
benefits to CTC, on the one hand, and such Participating Seller, on the other
hand, of the transaction giving rise to such loss, liability, claim, damage or
expense and the relative fault of CTC, on the one hand, and such Participating
Seller, on the other hand, with respect to such loss, liability, claim, damage
or expense, as well as any other relevant equitable considerations.
 
(e)    Underwritten Offerings.    In any case where the shares of CTC Stock
registered pursuant to this Section 7.2 are to be sold and distributed by means
of or as part of an underwritten public offering,
 
(i)    if the offering is pursuant to Section 7.2(a), the managing underwriter
shall be J. P. Morgan Securities Inc. or such other investment banking firm of
national reputation as CTC shall select and to the selection of whom the
majority of Participating Sellers shall consent (which consent shall not be
unreasonably withheld);
 
(ii)    CTC will use its best efforts to cause the registration statement to
remain current (including the filing of necessary supplements or post-effective
amendments) throughout the period commencing on the initial effective date
thereof and ending on the earlier of (A) the date on which the underwriting
distribution is completed or (B) the expiration of nine months; and
 
(iii)    CTC will agree to indemnify all participating underwriters and
controlling persons thereof, such indemnification to be in substantially the
form and to the effect customarily proposed by the managing underwriter in
similar transactions, with such modifications therein as may be agreed upon by
such underwriters and CTC.
 
7.3.    Board Representation.
 
(a)    Designation of Candidate.    CTC will cause Peter C. Rossin or, if he is
unable for any reason to serve, a person designated by the DI Shareholders then

38

--------------------------------------------------------------------------------

holding a majority of the Merger Shares and reasonably acceptable to CTC, to be
elected to CTC’s Board of Directors as of the Closing Date. Thereafter, during
the Standstill Term and subject to the further provisions hereof, CTC’s
Corporate Governance Committee (or any other committee of its Board of Directors
exercising a similar function) shall recommend to CTC’s Board of Directors that
such person or any other person designated by the DI Shareholders then holding a
majority of the Merger Shares after consultation with and reasonably acceptable
to CTC (any such person including Mr. Rossin being hereinafter referred to as
the “DI Designee”) be included and such person shall be included in the slate of
nominees recommended by CTC’s Board of Directors to stockholders for election as
directors at each annual meeting of stockholders of CTC at which members of the
class of directors to which the DI Designee is originally appointed are to be
elected, commencing with the next annual meeting of stockholders. In the event
that any DI Designee shall cease to serve as a director for any reason, the
vacancy resulting thereby shall be filled by another DI Designee. Upon
expiration of the Standstill Term, CTC shall have no further obligations under
this Section 7.3.
 
(b)    Acceptability.    Notwithstanding the provisions of this Section 7.3, the
DI Shareholders shall not be entitled to designate any person as the DI Designee
to CTC’s Board of Directors if the election of such person as a director would
result in any violation of any applicable law or order. CTC shall not be
obligated to elect to its Board of Directors any person whose service as a
member thereof would have or be reasonably likely to have a material adverse
effect on CTC’s conduct of its business or such Board’s ability to carry out or
discharge its responsibilities. If any such person has been designated by the DI
Shareholders and rejected by CTC, the DI Shareholders shall be permitted to
designate a substitute DI Designee in accordance with this Section.
 
7.4.    No Disposition Inconsistent with Reorganization.    Notwithstanding any
provisions set forth in this Article VII to the contrary, the DI Shareholders
will make no disposition of any of the Merger Shares which, on a stand-alone
basis or together with any other dispositions previously made by the DI
Shareholders, would disqualify the Merger as a reorganization under sections
368(a)(1)(A) and (a)(2)(D) of the Code, and in no event will the aggregate
number of Merger Shares disposed of by the DI Shareholders in the first year of
the Standstill Term (including dispositions to Permitted Transferees) exceed
630,000, except dispositions occasioned by the death of a DI Shareholder or a
Permitted Transferee or as otherwise contemplated by Section 7.2(a).
 
ARTICLE VIII
 
SURVIVAL AND INDEMNIFICATION
 
8.1.    Nature and Survival of Representations.    The representations,
warranties, covenants and agreements of CTC, DI, the Warranting Shareholders and
the DI Shareholders contained in this Agreement and all statements contained in
any Schedule hereto or any

39

--------------------------------------------------------------------------------

certificate or financial statement delivered pursuant to this Agreement shall be
deemed to constitute representations, warranties, covenants and agreements of
the party delivering the same. All such representations and warranties shall
survive the Closing hereunder for a period extending until February 28, 1998,
except those set forth in (a) Section 2.27, which, in the event of fraud, shall
survive until February 28, 2000, (b) Section 2.14, which shall survive until
February 28, 1999 and (c) Section 2.25, which shall not survive the Closing.
 
8.2.    Indemnification by DI Shareholders.    Subject to the terms and
conditions of this Article VIII, the DI Shareholders shall severally (in
proportion to their respective DI stockholdings) indemnify, defend and hold
harmless CTC and DI from and against:
 
(a)    any loss, liability, claim, obligation, fine, penalty, damage, deficiency
or cost of investigation, remediation or other response activity (collectively,
“Damages”) arising out of or resulting from any misrepresentation, breach of
warranty or nonfulfillment of any agreement (other than Section 4.7) on the part
of DI and the DI Shareholders contained in this Agreement or in any certificate
famished to CTC pursuant hereto; and
 
(b)    any actions, judgments, costs and expenses (including reasonable
attorneys’ fees and all other expenses incurred in investigating, preparing for
or defending any litigation, settlement or other proceeding) incident to any of
the foregoing or the enforcement of this Section 8.2; provided, however, that,
notwithstanding anything to the contrary contained herein, no DI Shareholder
shall have any obligation to indemnify, defend or hold harmless CTC or DI from
and against any (i) Damages arising out of, resulting from or otherwise relating
to (x) any violation of, default under, breach of, or conflict with, any
Environmental Law or Environmental Permit or (y) the subject matter of Section
2.25 in any manner or (ii) any actions, judgments, costs and expenses (including
reasonable attorneys’ fees and all other expenses incurred in investigating,
preparing for or defending any litigation, settlement or other proceeding)
incident to any of the foregoing.
 
8.3.    Indemnification by CTC.    (a) CTC shall indemnify, defend and hold
harmless the DI Shareholders from and against:
 
(i)    any Damages arising out of or resulting from any misrepresentation,
breach of warranty or nonfulfillment of any agreement on the part of CTC
contained in this Agreement or in any certificate furnished pursuant hereto; and
 
(ii)    any actions, judgments, costs and expenses (including reasonable
attorneys’ fees and all other expenses incurred in investigating, preparing for
or defending any litigation, settlement or other proceeding) incident to any of
the foregoing or the enforcement of this Section.

40

--------------------------------------------------------------------------------

 
(b)    CTC and DI shall indemnify, defend and hold harmless Mr. Rossin and Mr.
Stephans from and against any Damages arising out of or resulting from any
third-party or governmental claims relating to any violations or alleged
violations of Environmental Laws or Environmental Permits by DI prior to the
Closing Date and any actions, judgments, costs and expenses (including
reasonable attorneys’ fees and all other expenses incurred in investigating,
preparing for or defending any litigation, settlement or other proceeding)
incident to any of the foregoing or the enforcement of this Section other than
any such Damages, actions, judgments, costs or expenses arising out of or
resulting from or otherwise incident to any such claims relating to any such
violations by DI’s Forged Products Division if the transactions contemplated by
Section 9.3 are consummated.
 
8.4.    Notification of Actions; Control of Proceedings and Cooperation.    A
party potentially entitled to indemnification (“Indemnitee”) hereunder shall
give the party under the obligation to provide indemnification hereunder
(“Indemnitor”) written notice of any third-party claim for which the Indemnitee,
may be entitled to indemnification hereunder specifying the nature of the claim
in reasonable detail and amount, all to the extent known, within 60 days after
the Indemnitee has knowledge of such third-party claim. The Indemnitor shall
have the right, by giving written notice to the Indemnitee within 30 days after
receipt of the notice hereinbefore described, to assume control of such defense
using counsel of its choice at its expense, If the Indemnitor shall not so
assume control of such defense, or, having assumed control, shall fail to defend
the claim diligently, the Indemnitee shall retain or reassert control and
dispose of the claim without in any way affecting its rights to indemnification
hereunder. The parties hereto will cooperate with one another in any defense and
the Indemnitee, with respect to any claim, shall be entitled to participate at
its own expense in the defense of any such claim following assumption of control
of such defense of any such claim by Indemnitor as hereinbefore provided. Except
as hereinbefore provided, neither Indemnitee nor Indemnitor shall enter into any
agreement, compromise or settlement in respect of any such claim without first
obtaining the other party’s written consent thereto, which consent shall not be
unreasonably withheld.
 
8.5.    Limitations.    With respect to any Damages resulting from
misrepresentations and breaches of warranties of any party hereto, (a) any
calculation of such Damages or costs shall take into account any actual tax
benefit realized or tax cost incurred by either the Indemnitee or the Indemnitor
in connection therewith, (b) such Damages or costs shall only be a basis for a
claim against an Indemnitor to the extent that the aggregate dollar amount of
all Damages and costs incurred by an Indemnitee for which such Indemnitee is
otherwise entitled to indemnification hereunder have exceeded $1,000,000, and
(c) only claims with respect to Damages of which an Indemnitor receives written
notice from an Indemnitee prior to the expiration of the relevant survival
period specified in Section 8.1 shall survive such expiration and be enforceable
as otherwise provided in this Article VIII. Any such written notice, to be
effective, must specify with reasonable detail the nature and amount of the
indemnity claim.

41

--------------------------------------------------------------------------------

 
8.6.    Satisfaction of Claims with CTC Stock.    Any obligation of any DI
Shareholder under this Article VIII may be discharged by payment in cash or, in
whole or in part at the election of such DI Shareholder, by the delivery to CTC,
in negotiable form and free from any lien, security interest, encumbrance or
claim, of a certificate or certificates representing on the date of delivery
thereof to CTC such number of shares of CTC Stock as shall have an aggregate
fair market value (as hereinafter defined) on such date equal to that portion of
the obligation for which such election has been made. For purposes of this
Section 8.6, the term fair market value of one share of CTC Stock shall mean,
with respect to any particular date, the average of the closing sale prices of
CTC Stock as reported on the New York Stock Exchange Composite Tape for the
immediately preceding ten days on which trading in CTC Stock occurred.
 
8.7.    Definition of Material Adverse Effect.    For purposes of the
determination of any Damages and the application of the indemnification
provisions of this Article VIII only, the term “Material Adverse Effect” as such
term appears in the representations and warranties of DI and the Warranting
Shareholders in Article II hereof (or any qualification or limitation of any
such representations and warranties as to materiality) shall exclude the assets,
liabilities, revenues and income attributable to DI’s Forged Products Division
if the transactions contemplated by Section 9.3 are consummated.
 
ARTICLE IX
 
MISCELLANEOUS
 
9. 1.    Costs, Expenses and Taxes.    CTC and DI will each pay all its own
expenses incurred in connection with this Agreement and the transactions
contemplated hereby and by the Plan of Merger, including (a) all costs and
expenses stated herein to be borne by a party, and (b) all accounting, legal and
appraisal fees and settlement charges.
 
9.2.    Further Assurances, Cooperation.    At and after the Closing, each party
hereto will execute and deliver such further instruments and documents and
perform such acts as may be reasonably necessary or appropriate to cause the
satisfactory completion and consummation of the transactions contemplated by
this Agreement and the Plan of Merger. Following the Closing Date, CTC will use
its best efforts to have the DI Shareholders released from any personal
guarantees which any of them may have previously given in connection with
financing for DI to the extent such guarantees are disclosed in the Disclosure
Statement, and CTC will indemnify and hold harmless such DI Shareholders from
and against liability thereunder after the Closing Date to the extent so
disclosed.
 
9.3.    Option to Purchase or Sell Forged Products Assets.    Pursuant to the
Option Agreement in substantially the form attached hereto as Exhibit E, CTC and
Merger Sub will have the option to require Mr. Stephans to purchase from Merger
Sub and Mr. Stephans will have the option to require CTC and Merger Sub to sell
at any time during the

42

--------------------------------------------------------------------------------

60-day period immediately following the Closing Date the assets of DI’s Forged
Products Division (the “FPD Assets”) and its holding of preferred stock of
Stelkast Corporation (the “Stelkast Preferred Stock”), all as more fully
described in Schedule 9.03 of the Disclosure Statement. The purchase price for
the FPD Assets and Stelkast Preferred Stock shall consist of $2,600,000 in cash
and the assumption by the purchaser of specified liabilities, including
long-term debt of approximately $1,022,000, accounts payable and accrued
expenses, as described on such Schedule 9.03.
 
9.4.    Post-Closing Access; Preservation of Books and Records.    CTC shall,
following the Closing, give to the DI Shareholders and their respective
authorized representatives such reasonable access, during normal business hours
and upon prior written notice, to books and records of DI (including, without
limitation, all books of account and tax records) as the DI Shareholders may
reasonably request in connection with (a) the preparation and filing of
individual tax returns and (b) the verification of any claim of CTC for
indemnification under this Agreement and shall permit the DI Shareholders to
make copies of such books and records.
 
9.5.    Communications.    All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) personally delivered, (ii) sent by facsimile transmission
(with transmission confirmed), (iii) sent by overnight courier (with delivery
confirmed) or (iv) mailed by United States first-class, certified or registered
mail, postage prepaid, to the other parties at the following addresses (or at
such other address as shall be given in writing by any party to the others):
 
(a)    If to DI and the DI Shareholders, to:
 
Dynamet Incorporated
195 Museum Road
Washington, PA 15301
 
Attention: Peter C. Rossin,
        Chairman of the Board
 
Fax Number: 412-228-2087
 
With required copy to:
 
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
 
Attention:    Charles J. Queenan, Jr.
 
Fax Number:    412-355-6501

43

--------------------------------------------------------------------------------

 
(b)    If to CTC, to:
 
    Carpenter Technology Corporation
    101 W. Bern Street
    Reading, PA 19612-4662
 
    Attention: John R. Welty,
    Vice President, General
    Counsel and Secretary
 
    Fax Number: 610-208-3068
 
With required copy to:
 
    Dechert Price & Rhoads
    4000 Bell Atlantic Tower
    1717 Arch Street
    Philadelphia, PA 19103-2793
 
    Attention: Herbert F. Goodrich, Jr.
 
    Fax Number: 215-994-2222
 
9.6.    Assignability, Successors and Assigns.    Except as hereinafter
contemplated, this Agreement and the rights of the parties hereunder may not be
assigned by any party without the prior written consent of the other parties.
Notwithstanding the foregoing, nothing herein contained shall prohibit the
assignment by CTC of certain or all of its rights hereunder to Merger Sub or one
or more other wholly-owned subsidiaries of CTC; provided, however, that no such
assignment shall limit or affect CTC’s obligations hereunder; nor shall any
assignment by operation of law in connection with the merger, consolidation or
dissolution of any party hereto be prohibited. Subject to the foregoing, this
Agreement and all rights and powers granted and obligations created hereby will
bind and inure to the benefit of the parties hereto and their respective
successors, assigns and personal representatives.
 
9.7.    Governing-Law; Remedies.    This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
applicable to agreements made and to be performed wholly within such
jurisdiction, without regard to the conflicts of laws provisions thereof. The
parties acknowledge that a breach by a party hereto of the provisions of Article
VII will cause irreparable damage to the other parties, the exact amount of
which will be difficult or impossible to ascertain, and that such other parties’
remedies at law for any such breach will be inadequate. Accordingly, upon breach
or threatened breach of the covenants and undertakings contained in Article VII,
such other

44

--------------------------------------------------------------------------------

parties shall be entitled to injunctive or other equitable relief in any court
of the United States or any state thereof having jurisdiction.
 
9.8.    Headings.    The headings preceding the text of the sections and
subsections hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Agreement, nor shall they affect its meaning,
construction or effect.
 
9.9.    Amendment and Waiver.    CTC and DI may by mutual written agreement
amend this Agreement in any respect. CTC and DI may also (a) extend the time for
the performance of any of the obligations of any other party, and (b) waive (i)
any inaccuracies in representations by any other party, (ii) compliance by any
other party with any of the agreements contained herein and performance of any
obligations by such other party, and (iii) the fulfillment of any condition that
is required prior to the performance by such party of any of its obligations
under this Agreement. To be effective, any such amendment or waiver must be
signed by an authorized representative of the party against whom enforcement of
the same is sought.
 
9.10.    Entire Agreement.    This Agreement and the Exhibits and Schedules
hereto, each of which is hereby incorporated herein, set forth all of the
promises, covenants, agreements, conditions and undertakings between the parties
hereto with respect to the subject matter hereof, and supersede all prior and
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written with respect to the subject matter hereof.
 
9.11.    Execution in Counterparts.    This Agreement may be executed in any
number of counterparts, each of which shall be termed an original and all of
which together shall constitute one and the same instrument.
 
9.12.    Appointment of Agent for Delivery.
 
(a)    Each DI Shareholder hereby irrevocably constitutes and appoints Peter C.
Rossin his or her agent and attorney-in-fact (the “Agent for Delivery”) to
effectuate the delivery to CTC of the DI Stock held by him or her as
contemplated by Section 1.2(b)(ii) hereof, the receipt from CTC of the cash
payment and stock certificate contemplated by such Section and the delivery to
such DI Shareholder of such cash payment and stock certificate. Any action taken
by the Agent for Delivery pursuant to the authority granted hereby will be
effective and absolutely binding on each DI Shareholder and without recourse
notwithstanding any contrary action of or direction from such DI Shareholder,
except in the case of willful misconduct or actions taken in bad faith by the
Agent for Delivery. The death or incapacity of any DI Shareholder will not
terminate the authority and agency of the Agent for Delivery. CTC will not be
obligated to inquire into the authority of the Agent for Delivery and will be
fully protected in dealing with the Agent for Delivery in lieu of the several DI
Shareholders as to matters set forth herein.

45

--------------------------------------------------------------------------------

 
(b)    The Agent for Delivery is hereby fully authorized by the DI Shareholders
for each of them and in their respective names to:
 
(i)    Receive all notices or documents given or to be given to the DI
Shareholders in connection with this Agreement or the transactions contemplated
hereby;
 
(ii)    Deliver at the Closing on behalf of the DI Shareholders certificates for
the shares of DI Stock owned by each in exchange for the cash payment and a
certificate for the shares of CTC Stock to which such DI Shareholder is
entitled, all as contemplated by Section 1.2;
 
(iii)    Sign and deliver to CTC at the Closing a receipt for the cash payment
and the certificate representing such shares of CTC Stock;
 
(iv)    Deliver to CTC at the Closing all such other certificates and documents
to be delivered to CTC by such DI Shareholder as hereinbefore provided; and
 
(v)    Deliver to each DI Shareholder, personally or by registered mail
addressed to the address of each such DI Shareholder on the books of DI, the
cash and stock certificate referred to in subparagraph (ii) above.

46

--------------------------------------------------------------------------------

 
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
 
 
DYNAMET INCORPORATED
By:
 
/s/    PETER C. ROSSIN        

--------------------------------------------------------------------------------

   
Peter C. Rossin
Chairman of the Board
By:
 
/s/    PETER C. ROSSIN        

--------------------------------------------------------------------------------

   
Peter C. Rossin
By:
 
/s/    ADA E. ROSSIN        

--------------------------------------------------------------------------------

   
Ada E. Rossin,
individually and as
Trustee under the irrevocable
Deeds of Trust each dated
July 12, 1989 for the
benefit of Katherine Rossin
Stephans and Elizabeth Lee
Stephans, respectively.
By:
 
/s/    PETER N. STEPHANS        

--------------------------------------------------------------------------------

   
Peter N. Stephans
By:
 
/s/    JOAN R. STEPHANS        

--------------------------------------------------------------------------------

   
Joan R. Stephans,
individually and as
Trustee under the irrevocable
Deeds of Trust each dated
July 12, 1989 for the
benefit of Katherine Rossin
Stephans and Elizabeth Lee
Stephans, respectively.

47

--------------------------------------------------------------------------------

 
CARPENTER TECHNOLOGY CORPORATION
By:
 
/s/    ROBERT W. CARDY        

--------------------------------------------------------------------------------

   
Robert W. Cardy
Chairman of the Board,
President & Chief Executive
Officer

48

--------------------------------------------------------------------------------

 
EXHIBIT A
 
PLAN OF MERGER
 
PLAN OF MERGER, dated as of February             , 1997, between DYNAMET
INCORPORATED, a Pennsylvania corporation (“DI”), and [DI ACQUISITION
CORPORATION], a Delaware corporation (“DIAC”) (such corporations being
hereinafter sometimes collectively referred to as the “Constituent
Corporations”). All of the outstanding capital stock of DIAC is owned by
CARPENTER TECHNOLOGY CORPORATION, a Delaware corporation (“CTC”).
 
The Boards of Directors of DI, DIAC and CTC have determined that it is advisable
and in the best interests of their respective corporations and shareholders that
DI be merged into DIAC upon the terms and conditions set forth herein and in
that certain Agreement and Plan of Merger dated January 6, 1997 by and among DI,
the shareholders of DI and CTC (the “Merger Agreement”) and in accordance with
the Business Corporation Law of 1988, as amended, of the Commonwealth of
Pennsylvania (the “PA BCL”) and the General Corporation Law of the State of
Delaware (the “DE GCL”).
 
1.    MERGER.    DI shall merge into DIAC (the “Merger”) and the separate
existence of DI shall cease. DIAC shall be the surviving corporation of the
Merger (hereinafter sometimes referred to as the “Surviving Corporation”) and
shall continue its existence under Delaware law under the name “DYNAMET
INCORPORATED.” The Merger shall become effective at the close of business on the
date upon which appropriate articles of merger, to which this Plan of Merger
will be attached, are filed with the Department of State of the Commonwealth of
Pennsylvania and a certificate of merger is filed with the Office of the
Secretary of State of the State of Delaware (the “Merger Date”).
 
2.    CERTIFICATE OF INCORPORATION; BYLAWS.
 
(a)    Certificate of Incorporation.    The Certificate of Incorporation of DIAC
as in effect on the Merger Date, amended to reflect the corporate name specified
in Section 1, shall be the Certificate of Incorporation of the Surviving
Corporation until changed as provided in the DE GCL.
 
(b)    Bylaws.    The Bylaws of DIAC as in effect on the Merger Date shall be
the Bylaws of the Surviving Corporation until changed as provided therein and in
the DE GCL.
 
3.    CONVERSION OF SHARES OF CAPITAL STOCK.    On the Merger Date, as a result
of the effectiveness of the Merger:
 
(a)    Conversion of DIAC Capital Stock.    Each share of Common Stock, par
value $5 per share, of DIAC issued and outstanding immediately prior to the
Merger Date shall, by virtue of the Merger and without any action on the part of
the holder

--------------------------------------------------------------------------------

thereof, be converted into and become one share of Common Stock, par value $5
per share, of the Surviving Corporation.
 
(b)    Conversion of DI Stock.    Each share of Common Stock, par value $5 per
share, of DI (“DI Stock”) issued and outstanding immediately prior to the Merger
Date shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into, in lieu of shares or other securities or
obligations of the Surviving Corporation, (i) the right to receive $166.0581 in
cash and (ii) 9.0704 shares of Common Stock, par value $5 per share, of CTC
(“CTC Stock”).
 
(c)    Effect of Recapitalization.    In the event that, between the date of
this Plan of Merger and the Merger Date, and the number of outstanding shares of
CTC Stock is increased by a stock split, stock dividend or recapitalization, a
proportionate adjustment will be made in the number of shares of CTC Stock into
which each share of DI Stock will be converted pursuant hereto.
 
4.    EXCHANGE OF CERTIFICATES AND CASH PAYMENTS; FRACTIONAL INTERESTS.
 
(a)    Surrender of DI Stock Certificates.    The stock transfer books of DI
shall be closed as of the Merger Date, and the holders of record of outstanding
shares of DI Stock as of that date shall be the shareholders entitled to
surrender their certificates to CTC, or to an exchange agent to be designated by
CTC if CTC determines in its sole discretion to appoint such an agent (if so
appointed, the “Exchange Agent”), in exchange for the cash amounts and
certificates representing the number of whole shares of CTC Stock to which they
are entitled pursuant to the conversion provisions set forth in Section 3(b)
hereof. In the event that any transfer or assignment of the record ownership of
any of the outstanding shares of DI Stock has occurred which has not been
registered in the stock transfer books of DI at or before the Merger Date, or
shall occur after the Merger Date, payment of the appropriate cash amount and
delivery of the appropriate CTC Stock certificate shall be made to such
transferee upon presentation to CTC (or to the Exchange Agent) of the
certificates representing such shares of DI Stock, duly endorsed or assigned and
accompanied by such documents as may be required to evidence such transfer or
assignment and by the amount of any transfer or other taxes due in respect
thereof.
 
(b)    Fractional Interests.    Fractional shares of CTC Stock will not be
issued, but in lieu thereof cash in an amount equal to the fractional part of a
share of CTC Stock to which a holder of DI Stock would otherwise be entitled
multiplied by the Per Share Value (as hereinafter defined), rounded up to the
next full cent, will be paid by check by CTC (or the Exchange Agent) to such
holder. For purposes of this paragraph, “Per Share Value” shall mean $34.
 
5.    PAYMENT OF DIVIDENDS.    No holder of a certificate representing shares of
DI Stock shall be entitled to receive any dividends with respect to the shares
of CTC Stock to which such holder is entitled pursuant hereto, unless and until
such holder shall have surrendered such certificate to CTC (or the Exchange
Agent, if appointed) for the

2

--------------------------------------------------------------------------------

cash amount and the certificates representing the shares of CTC Stock
deliverable in exchange therefor. When the exchange is made, dividends which
would otherwise have been payable on such shares of CTC Stock, if any, shall
then be paid to such holder without interest.
 
6.    EFFECT OF MERGER.    Upon the effectiveness of the Merger, all of the
property, real, personal and mixed, and franchises of each of the Constituent
Corporations and all debts due on whatever account to either of them, shall be
deemed to be transferred to and vested in the Surviving Corporation without
further action and the title to any real estate, or any interest therein, vested
in either of the Constituent Corporations shall not revert or be in any way
impaired by reason of the Merger. The Surviving Corporation shall thenceforth be
responsible for all the liabilities and obligations of each of the Constituent
Corporations (including any liabilities in respect of demands made by holders of
DI Stock dissenting from the Merger) and the liabilities of the Constituent
Corporations or of their shareholders, directors or officers shall not be
affected, nor shall the rights of the creditors thereof or of any persons
dealing with such corporations or any liens upon the property of such
corporations be impaired by the Merger, and any claim existing or action or
proceeding pending by or against either of such corporations may be prosecuted
to judgment as if the Merger had not taken place or the Surviving Corporation
may be proceeded against or substituted in its place.
 
7.    INDEMNIFICATION OF DI DIRECTORS AND OFFICERS.
 
(a)    Undertaking to Indemnify.    From and after the Merger Date and subject
to the terms and conditions hereinafter set forth, the Surviving Corporation
shall indemnify and hold harmless for a period of six years from the Merger
Date, to the fullest extent consistent with and permitted by applicable law,
each present and former director and officer of DI (collectively, the
“Indemnified Parties”) from and against any threatened, pending or completed
action or proceeding brought against any such Indemnified Party in such party’s
capacity as a director or officer of DI (individually, a “Claim”) as provided in
the articles of incorporation and bylaws of DI as of the date hereof. In the
event any claim is asserted or made and written notice thereof is received by
the Surviving Corporation within such six-year period, all rights of the
Indemnified Parties hereunder in respect of such Claim shall continue until
final disposition thereof. The Surviving Corporation, to the fullest extent
consistent with and permitted by applicable law, shall periodically advance as
incurred reasonable expenses directly related to the defense of a Claim;
provided, that the Indemnified Party to whom such expenses are advanced provides
an undertaking to repay such advances if it is ultimately determined that such
person is not entitled to indemnification hereunder.
 
(b)    Procedures for Defense of Claims.    In the event of the assertion of any
Claim with respect to which the Surviving Corporation may be obligated to
indemnify hereunder, the Indemnified Party or Parties against whom such Claim is
asserted will promptly notify the Surviving Corporation thereof in writing,
specifying the nature of such Claim in reasonable detail and including copies of
any pleadings or correspondence relating thereto, and the Surviving Corporation
shall assume the defense thereof with legal counsel of its choice, who will be
reasonably satisfactory to the Indemnified Party or Parties. The

3

--------------------------------------------------------------------------------

Surviving Corporation shall not be responsible for any fees, costs or expenses
of other counsel or any other expenses subsequently incurred by any such
Indemnified Party in connection with the defense of such Claim, unless the
Surviving Corporation fails to assume such defense within 15 days after receipt
of written notice of such Claim, in which case such Indemnified Party may retain
counsel reasonably satisfactory to the Surviving Corporation, and the Surviving
Corporation shall pay promptly all reasonable fees, costs and expenses of such
counsel; provided, however, that the Surviving Corporation shall be obligated
for the fees and expenses of only one firm of counsel (together with appropriate
local counsel) for all of the Indemnified Parties in respect of any Claim,
unless such use of one counsel would present a conflict of interest of such a
nature as to render impossible the provision of a reasonably adequate defense
for certain of the Indemnified Parties, in which case the Surviving
Corporation’s obligation will include the reasonable fees, costs and expenses of
separate counsel for such parties. The Indemnified Parties shall cooperate with
the Surviving Corporation and each other in the defense of any Claim.
 
(c)    Settlement Conditions.    No settlement shall be effected by or on behalf
of any Indemnified Party without the prior written consent of the Surviving
Corporation, which shall not be unreasonably withheld. In addition, the
Surviving Corporation shall be released from any further obligation to an
Indemnified Party hereunder in respect of any Claim upon the unreasonable
refusal of such Indemnified Party to consent to any settlement, compromise or
entry of judgment with respect to such Claim which would result in a
completerelease of such Indemnified Party from all liability arising from such
Claim.
 
8.    FURTHER ASSURANCE.    If requested by the Surviving Corporation or by its
successors or assigns, DI will execute and deliver such instruments and take or
cause to be taken such other or further action as the Surviving Corporation may
deem necessary or desirable in order to vest or perfect in, or confirm of record
or otherwise to, the Surviving Corporation title to and possession of all of its
property, rights, privileges, powers or franchises, and otherwise to carry out
the purpose hereof.
 
9.    DIRECTORS OF SURVIVING CORPORATION.    Upon the Merger Date, the following
persons shall constitute the Board of Directors of the Surviving Corporation,
each of whom shall hold office until the next annual meeting of the shareholders
of the Surviving Corporation and until their successors have been duly elected
and shall have qualified:
 
Robert W. Cardy
G. Walton Cottrell
John R. Welty
 
If, at the Merger Date, any vacancy exists on the Board of Directors it will be
filled in the manner provided in the Bylaws of the Surviving Corporation.
 
10.    DI SHAREHOLDER APPROVAL.    This Plan of Merger has been submitted to and
unanimously approved by the shareholders of DI as provided by the PA

4

--------------------------------------------------------------------------------

BCL and by CTC as the sole stockholder of DIAC as provided by the DE GCL and, in
accordance with the requirements of such law, there shall be filed with the
appropriate state authorities such documents, executed in such a manner as may
be necessary to effect the Merger at the Merger Date.
 
11.    TERMINATION OF PLAN.    This Plan of Merger shall be terminated and the
Merger abandoned upon termination of the Merger Agreement pursuant to the
provisions of Section 6.3 thereof.
 
12.    MODIFICATION OF PLAN.    This Plan of Merger may be amended or
supplemented in any manner at any time and from time to time prior to the Merger
Date by mutual consent of the Boards of Directors of the Constituent
Corporations, except that no change may be made in the conversion amount set
forth in Section 3(b) hereof without the prior approval thereof by the
shareholders of DI.
 
IN WITNESS WHEREOF, each of the Constituent Corporations has executed this Plan
of Merger on the date first above written.
 
DYNAMET INCORPORATED
 
 
By:
 

--------------------------------------------------------------------------------

   
Peter C. Rossin
   
Chairman of the Board
 
[DI ACQUISITION CORPORATION]
 
 
By:
 

--------------------------------------------------------------------------------

   
Robert W. Cardy
   
President

 

5

--------------------------------------------------------------------------------

 
EXHIBIT B-I
 
NON-COMPETITION AGREEMENT
 
NON-COMPETITION AGREEMENT (“Agreement”) dated February    , 1997 by and among
CARPENTER TECHNOLOGY CORPORATION, a Delaware corporation (“CTC”), DYNAMET
INCORPORATED, a Delaware corporation formerly known as “DI Acquisition
Corporation (“DI”) and PETER C. ROSSIN, formerly a principal shareholder
(“Rossin”) of Dynamet Incorporated, a Pennsylvania corporation (“Old DI”) CTC
and DI are hereinafter sometimes referred to collectively as the “ Companies.”
 
The Companies and Rossin are parties to an Agreement and Plan of Merger dated
January 6, 1997 (the “Merger Agreement”), which provides for the merger on the
date hereof of Old DI with and into DI. It is a condition to the obligations of
the parties to the Merger Agreement that this Non-Competition Agreement be
executed and delivered by the parties hereto, as an undertaking ancillary to the
Merger Agreement.
 
In consideration of the mutual covenants contained herein, and INTENDING TO BE
LEGALLY BOUND HEREBY, the parties hereto agree as follows:
 
1.    PAYMENTS.    In consideration of the covenants and undertakings in
Sections 2 and 3 hereof, Rossin has received a cash payment in the amount of
$100,000 contemporaneously with the execution and delivery of this Agreement.
 
2.    CONFIDENTIAL INFORMATION.    Rossin acknowledges that by reason of his
relationship with and service to Old DI and his services to the Companies,
Rossin has had and will have access to confidential information relating to
operations and technology and know-how which have been developed by Old DI and
may be developed in the future by the Companies, including, without limitation,
information and knowledge pertaining to products and their design and
manufacture, methods of operation, sales and profit data, customer and supplier
lists and relationships between Old DI and its customers, suppliers and others
who have business dealings with it, other information not readily available to
the public, and plans for future developments relating thereto. In recognition
of the foregoing, Rossin will maintain the confidentiality of all such
information and other matters of DI (as the successor to Old DI) and CTC known
to Rossin which are not other-wise in the public domain and will not disclose
any such information to any person outside the respective organizations of DI
and CTC, wherever located, during the term of this Agreement except as required
by law or with CTC’s prior written authorization and consent.
 
3.    COVENANT NOT TO COMPETE.    During the Non-Compete Term, Rossin shall not,
unless acting with the prior written consent of CTC, directly or indirectly (i)
own, manage, operate, finance, join, control or participate in the ownership,
management, operation, financing or control of, or be associated as an officer,
director, employee, partner,

--------------------------------------------------------------------------------

principal, agent, representative, consultant or otherwise with, or use or permit
his name to be used in connection with, any profit or not-for-profit business or
enterprise which at any time during such period designs, manufactures,
assembles, sells, distributes or provides products (or related services) in
competition with those designed, manufactured, assembled, sold, distributed or
provided, or under active development, by Old DI (including all future
developments in and improvements on such products and services), other than
products (or related services) designed, manufactured, assembled, sold,
distributed or provided, or under active development by the Forged Products
Division of Old DI (including all future developments in and improvements on
such products and services), immediately prior to the effective time of the
merger contemplated by the Merger Agreement in any part of the world or (ii)
offer or provide employment to, interfere with or attempt to entice away from
either of the Companies, either on a full-time or, part-time or consulting
basis, any person who then currently is, or who within one year prior thereto
had been, employed by DI, Old DI or CTC; provided, however, that this provision
shall not be construed to prohibit the ownership by Rossin of not more than 2%
of any class of securities of any corporation which is engaged in any of the
foregoing businesses that has a class of securities registered pursuant to the
Securities Exchange Act of 1934. If Rossin’s spouse engages in any of the
restricted activities set forth in the preceding sentence, Rossin shall be
deemed to have indirectly engaged in such activities in violation of this
covenant.
 
4.    REMEDIES.    Rossin acknowledges that a breach of the provisions of
Section 2 or Section 3 will cause irreparable damage to the Companies, the exact
amount of which will be difficult or impossible to ascertain, and that
Companies’ remedies at law for any such breach will be inadequate. Accordingly,
upon a breach of the covenants and agreements contained in Section 2 or Section
3, the Companies shall be entitled to injunctive or other equitable relief,
without posting bond or other security. Rossin shall be liable for any monetary
damages awarded by a court of competent jurisdiction to either of the Companies
as the result of any breach or violation of the provisions of this Agreement,
such liability to be borne in accordance with the judgment of such court.
 
5.    NON-COMPETE TERM.    The term of this Agreement with respect to which the
covenants in Sections 2 and 3 shall remain in effect (the “Non-Compete Term”)
shall begin on the date hereof and shall extend for five years thereafter,
ending on the fifth anniversary of such date.
 
6.    NOTICES.    Any notice, request, demand, waiver, consent, approval or
other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed given only if delivered to the
party personally or sent to the party by overnight courier or facsimile
transmission or by registered or certified mail (return receipt requested) with
postage and registration or certification fees thereon prepaid, addressed to the
party at the address set forth below:

2

--------------------------------------------------------------------------------

 
(a)    If to DI or CTC, to:
 
Carpenter Technology Corporation
101 West Bern Street
P. 0. Box 14662
Reading, PA 19612-4662
 
Attention: John R. Welty,
      Vice President & General
      Counsel
 
Fax Number: 610-208-3068
 
(b)    If to Rossin, to:
 
Mr. Peter C. Rossin
621 Trotwood Circle
Pittsburgh, PA 15241
 
or to such other person or address as either party shall furnish to the other
party in writing. All notices required or permitted hereunder shall be deemed
duly given and received on the second day next succeeding the date of mailing if
sent by certified or registered mail and on the next day if delivered by
overnight courier.
 
7.    SEVERABILITY.    If any term or provision of this Agreement or the
application thereof to any person or circumstance shall, to any extent, be held
invalid or unenforceable by a court of competent jurisdiction, the remainder of
this Agreement or the application of any such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable
shall not be affected thereby, and each term and provision of this Agreement
shall be valid and enforceable to the fullest extent permitted by law. If any of
the provisions contained in this Agreement shall for any reason be held to be
excessively broad as to duration, scope, activity or subject, it shall be
construed by limiting and reducing it, so as to be valid and enforceable to the
extent compatible with the applicable law or the determination by a court of
competent jurisdiction.
 
8.    UNCONDITIONAL OBLIGATIONS.    This Agreement establishes and vests in
Rossin a contractual right to the benefits to which he is entitled hereunder.
Except in the event of a material breach by Rossin of the covenants and
undertakings in Sections 2 and 3 hereof, the Companies’ obligations under this
Agreement shall be absolute and unconditional, and shall not be affected by any
circumstances, including, without limitation, any offset, counterclaim,
recoupment, defense, or other right which the Companies or their affiliates may
have against Rossin or any other party. Each and every payment made hereunder by
the Companies shall be final, and the Companies shall not seek to recover all or
any part of such payment from Rossin or from whomsoever may be entitled thereto,
for any reasons whatsoever.

3

--------------------------------------------------------------------------------

 
9.    JOINT AND SEVERAL OBLIGATIONS.    Notwithstanding any provision of this
Agreement to the contrary, the Companies shall be jointly and severally liable
to Rossin and his heirs or estate for all payment obligations under this
Agreement.
 
10.    BINDING EFFECT.    This Agreement shall be binding upon and inure to the
benefit of the heirs and representatives of Rossin and the successors and
assigns of the Companies. CTC and DI shall each require any successor (whether
direct or indirect, by purchase, merger, reorganization, consolidation,
acquisition of property or stock, liquidation, or otherwise) to all or a
significant portion of their respective assets, by agreement in form and
substance satisfactory to Rossin, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that CTC or DI, as the case
may be, would be required to perform this Agreement if no such succession had
taken place. Regardless whether such agreement is executed, this Agreement shall
be binding upon any successor of CTC or DI in accordance with the operation of
law and such successor shall be deemed “CTC” or “DI”, as the case may be, for
purposes of this Agreement.
 
11.    MISCELLANEOUS PROVISIONS.
 
(a)    This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania without regard to its choice of law
doctrine.
 
(b)    This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
 
(c)    This Agreement constitutes the entire agreement with respect to the
subject matter hereof between the parties hereto and replaces and supersedes as
of the date hereof and all prior oral or written agreements and understandings
between the parties hereto. This Agreement may be modified only by an agreement
in writing executed by the Companies and Rossin.
 
[Remainder of this page is intentionally left blank.]

4

--------------------------------------------------------------------------------

 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
 
CARPENTER TECHNOLOGY CORPORATION
 
By:
 

--------------------------------------------------------------------------------

   
[Name]
   
[Title]
 
DYNAMET INCORPORATED
 
By:
 

--------------------------------------------------------------------------------

   
[Name]
   
[Title]
 
By:
 

--------------------------------------------------------------------------------

   
Peter C. Rossin

 

5

--------------------------------------------------------------------------------

 
EXHIBIT B-2
 
CONSULTING AND NON-COMPETITION AGREEMENT
 
CONSULTING AND NON-COMPETITION AGREEMENT (“Agreement”) dated February    , 1997
by and among CARPENTER TECHNOLOGY CORPORATION, a Delaware corporation (“CTC”),
DYNAMET INCORPORATED, a Delaware corporation formerly known as “DI Acquisition
Corporation” (“DI”) and PETER N. STEPHANS, formerly a principal shareholder
(“Stephans”) of Dynamet Incorporated, a Pennsylvania corporation (“Old DI”). CTC
and DI are hereinafter sometimes referred to collectively as the “Companies.
 
The Companies and Stephans are parties to an Agreement and Plan of Merger dated
January 6, 1997 (the “Merger Agreement”), which provides for the merger on the
date hereof of Old DI with and into DI. It is a condition to the obligations of
the parties to the Merger Agreement that this Consulting and Non-Competition
Agreement be executed and delivered by the parties hereto, as an undertaking
ancillary to the Merger Agreement.
 
In consideration of the mutual covenants contained herein, and INTENDING TO BE
LEGALLY BOUND HEREBY, the parties hereto agree as follows:
 
1.    SERVICES.    During the Consulting Term, Stephans will diligently provide
consulting services to the Companies on such projects as may be designated by
the Chief Executive Officer of CTC and as are reasonable and appropriate in
light of Stephans’ former role as President of Old DI (“Services”). During the
Consulting Term, Stephans shall make himself available to perform Services on
such reasonable basis as may from time to time be agreed with CTC. The Companies
will provide such office and secretarial support as Stephans may reasonably
require in his performance of Services.
 
2.    CONSULTING TERM.    The term of this Agreement during which Stephans will
provide Services (the “Consulting Term”) shall begin on March 1, 1997 and shall
continue for a period of six months, unless sooner terminated as hereinafter
provided or extended by mutual agreement.
 
3.    PAYMENTS.    In consideration of the covenants and undertakings in
Sections 1, 7 and 8 hereof, Stephans has received a cash payment in the amount
of $3,700,000 contemporaneously with the execution and delivery of this
Agreement and will receive additional monthly payments of $135,416.67 throughout
the first four years of the Non-Compete Term, payable on the last day of each
such month.
 
4.    EXPENSES.    CTC or DI shall pay or reimburse Stephans for any expenses
reasonably incurred by him in furtherance of Services rendered hereunder,
including, without limitation, expenses for travel (including automobile
operating expenses, meals, hotel accommodations and the like), upon submission
by him of vouchers or itemized lists thereof prepared in compliance with such
rules and policies relating thereto as CTC may

--------------------------------------------------------------------------------

from time to time adopt generally with respect to its executives and consultants
and as may be required in order to permit such payments as proper deductions to
the Companies under the Internal Revenue Code and the rules and regulations
adopted pursuant thereto now or hereafter in effect.
 
5.    ACCELERATED TERMINATION.    The Consulting Term shall automatically
terminate upon the death of Stephans or the date upon which CTC reasonably
determines that the state of Stephans’s health no longer permits Stephans to
fulfill his responsibilities hereunder, but such termination shall have no
effect on the obligation of the Companies to continue to make the payments
contemplated by Section 3 hereof.
 
6.    RELATIONSHIP.    Stephans will act hereunder as an independent contractor
with no entitlement to any rights or benefits as an employee of the Companies.
 
7.    CONFIDENTIAL INFORMATION.    Stephans acknowledges that by reason of his
relationship with and service to Old DI and his Services to the Companies,
Stephans has had and will have access to confidential information relating to
operations and technology and know-how which have been developed by Old DI and
may be developed in the future by the Companies, including, without limitation,
information and knowledge pertaining to products and their design and
manufacture, methods of operation, sales and profit data, customer and supplier
lists and relationships between Old DI and its customers, suppliers and others
who have business dealings with it, other information not readily available to
the public, and plans for future developments relating thereto. In recognition
of the foregoing, Stephans will maintain the confidentiality of all such
information and other matters of DI (as the successor to Old DI) and CTC known
to Stephans; which are not otherwise in the public domain and will not disclose
any such information to any person outside the respective organizations of DI
and CTC, wherever located, during the term of this Agreement except as required
by law or with CTC’s prior written authorization and consent.
 
8.    COVENANT NOT TO COMPETE.    During the Non-Compete Term, Stephans shall
not, unless acting with the prior written consent of CTC, directly or indirectly
(i) own, manage, operate, finance, join, control or participate in the
ownership, management, operation, financing or control of, or be associated as
an officer, director, employee, partner, principal, agent, representative,
consultant or otherwise with, or use or permit his name to be used in connection
with, any profit or not-for-profit business or enterprise which at any time
during such period designs, manufactures, assembles, sells, distributes or
provides products (or related services) in competition with those designed,
manufactured, assembled, sold, distributed or provided, or under active
development, by Old DI (including all future developments in and improvements on
such products and services), other than products (or related services) designed,
manufactured, assembled, sold, distributed or provided, or under active
development by the Forged Products Division of Old DI (including all future
developments in and improvements on such products and services), immediately
prior to the effective time of the merger contemplated by the Merger Agreement
in any part of the world or (ii) offer or provide employment to, interfere with
or attempt to entice away from either of the Companies, either on a full-time or
part-time or consulting basis, any person who then currently is, or who within
one year prior thereto had been, employed by DI, Old DI or

--------------------------------------------------------------------------------

CTC (other than employees of the Forged Products Division of Old DI); provide,
however, that this provision shall not be construed to prohibit the ownership by
Stephans of not more than 2 % of any class of securities of any corporation
which is engaged in any of the foregoing businesses that has a class of
securities registered pursuant to the Securities Exchange Act of 1934. If
Stephans’s spouse engages in any of the restricted activities set forth in the
preceding sentence, Stephans shall be deemed to have indirectly engaged in such
activities in violation of this covenant.
 
9.    REMEDIES.    Stephans acknowledges that a breach of the provisions of
Section 7 or Section 8 will cause irreparable damage to the Companies, the exact
amount of which will be difficult or impossible to ascertain, and that
Companies’ remedies at law for any such breach will be inadequate. Accordingly,
upon a breach of the covenants and agreements contained in Section 7 or Section
8, the Companies shall be entitled to injunctive or other equitable relief,
without posting bond or other security. Stephans shall be liable for any
monetary damages awarded by a court of competent jurisdiction to either of the
Companies as the result of any breach or violation of the provisions of this
Agreement, such liability to be borne in accordance with the judgment of such
court.
 
10.    NON-COMPETE TERM.    The term of this Agreement with respect to which the
covenants in Sections 7 and 8 shall remain in effect (the “Non-Compete Term”)
shall begin on the date hereof and shall extend for five years thereafter,
ending on the fifth anniversary of such date.
 
11.    NOTICES.    Any notice, request, demand, waiver, consent, approval or
other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed given only if delivered to the
party personally or sent to the party by overnight courier or facsimile
transmission or by registered or certified mail (return receipt requested) with
postage and registration or certification fees thereon prepaid, addressed to the
party at the address set forth below:
 
(a)    If to DI or CTC, to:
 
Carpenter Technology Corporation
101 West Bern Street
P. 0. Box 14662
Reading, PA 19612-4662
 
Attention:  John R. Welty,
       Vice President & General
       Counsel
 
Fax Number: 610-208-3068

--------------------------------------------------------------------------------

 
(b)    If to Stephans, to:
 
Mr. Peter N. Stephans
601 Trotwood Circle
Pittsburgh, PA 15241
 
or to such other person or address as either party shall furnish to the other
party in writing. All notices required or permitted hereunder shall be deemed
duly given and received on the second day next succeeding the date of mailing if
sent by certified or registered mail and on the next day if delivered by
overnight courier.
 
12.    SEVERABILITY.    If any term or provision of this Agreement or the
application thereof to any person or circumstance shall, to any extent, be held
invalid or unenforceable by a court of competent jurisdiction, the remainder of
this Agreement or the application of any such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable
shall not be affected thereby, and each term and provision of this Agreement
shall be valid and enforceable to the fullest extent permitted by law. If any of
the provisions contained in this Agreement shall for any reason be held to be
excessively broad as to duration, scope, activity or subject, it shall be
construed by limiting and reducing it, so as to be valid and enforceable to the
extent compatible with the applicable law or the determination by a court of
competent jurisdiction.
 
13.    UNCONDITIONAL OBLIGATIONS.    This Agreement establishes and vests in
Stephans a contractual right to the benefits to which he is entitled hereunder.
Except in the event of a material breach by Stephans of the covenants and
undertakings in Sections 7 and 8 hereof, the Companies’ obligations under this
Agreement shall be absolute and unconditional, and shall not be affected by any
circumstances, including, without limitation, any offset, counterclaim,
recoupment, defense, or other right which the Companies or their affiliates may
have against Stephans or any other party. Each and every payment made hereunder
by the Companies shall be final, and the Companies shall not seek to recover all
or any part of such payment from Stephans or from whomsoever may be entitled
thereto, for any reasons whatsoever.
 
14.    JOINT AND SEVERAL OBLIGATIONS.    Notwithstanding any provision of this
Agreement to the contrary, the Companies shall be jointly and severally liable
to Stephans and his heirs or estate for all payment obligations under this
Agreement.
 
15.    BINDING EFFECT.    This Agreement shall be binding upon and inure to the
benefit of the heirs and representatives of Stephans and the successors and
assigns of the Companies. CTC and DI shall each require any successor (whether
direct or indirect, by purchase, merger, reorganization, consolidation,
acquisition of property or stock, liquidation, or otherwise) to all or a
significant portion of their respective assets, by agreement in form and
substance satisfactory to Stephans, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that CTC or DI, as the
case may be, would be required to perform this Agreement if no such succession
had taken place. Regardless whether such agreement is executed, this Agreement
shall be binding upon any

--------------------------------------------------------------------------------

successor of CTC or DI in accordance with the operation of law and such
successor shall be deemed “CTC” or “DI”, as the case may be, for purposes of
this Agreement.
 
16.    MISCELLANEOUS PROVISIONS.
 
(a)    This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania without regard to its choice of law
doctrine.
 
(b)    This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
 
(c)    This Agreement constitutes the entire agreement with respect to the
subject matter hereof between the parties hereto and replaces and supersedes as
of the date hereof and all prior oral or written agreements and understandings
between the parties hereto. This Agreement may be modified only by an agreement
in writing executed by the Companies and Stephans.
 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
 
CARPENTER TECHNOLOGY CORPORATION
 
By:
 
 

--------------------------------------------------------------------------------

   
[Name]
   
[Title]
 
DYNAMET INCORPORATED
 
By:
 

--------------------------------------------------------------------------------

   
[Name]
   
[Title]
 

--------------------------------------------------------------------------------

   
Peter N. Stephans

--------------------------------------------------------------------------------

 
EXHIBIT C
 
February    , 1997
 
Carpenter Technology Corporation
101 West Bern Street
Reading, PA 19601
 
Ladies and Gentlemen:
 
We have acted as counsel for Dynamet Incorporated, a Pennsylvania corporation
(the “Company”), in connection with the Agreement and Plan of Merger dated
January 6, 1997 (the “Merger Agreement”) by and among the Company, the
shareholders of the Company (the “Shareholders”) and Carpenter Technology
Corporation, a Delaware corporation (“CTC”). This letter is being delivered to
you pursuant to Section 6.1(c) of the Merger Agreement. Capitalized terms used
herein without definition have the meanings set forth in the Merger Agreement.
 
In connection with the preparation of this letter, we have made such legal and
factual examinations and inquiries as we have deemed advisable or necessary,
including examination of the originals or certified copies or copies otherwise
identified to our satisfaction as being true copies of the originals of the
following:
 
a.    The Merger Agreement;
 
b.    The Plan of Merger, dated as of February    , 1997 (the “Plan of Merger”),
between the Company and Merger Sub;
 
c.    Resolutions adopted by the Board of Directors and shareholders of the
Company on             and             respectively;
 
d.    The certificate of merger, dated February    , 1997, to be filed with the
Secretary of State of the State of Delaware and the articles of merger, dated
February    , 1997, to be filed with the Department of State of the Commonwealth
of Pennsylvania in connection with the Merger (the “State Merger Filings”); and
 
e.    The Articles of Incorporation and the By-Laws of the Company, as amended
to date.

--------------------------------------------------------------------------------

 
In addition, with your permission, we have relied without independent
investigation on a certificate of the Senior Vice President, Chief Financial
Officer and Treasurer of the Company, a copy of which is attached hereto, in
connection with the matters addressed in paragraph 5 below. With respect to
factual matters, with your permission, we have relied on the representations and
warranties of the Company and the Shareholders (to the extent applicable) in the
Merger Agreement and on certificates of governmental officials and have not
independently investigated the accuracy of such representations and
certificates.
 
In making such examinations and inquiries and rendering the opinions on the
matters set forth below, we have assumed, with your consent and without
independent investigation or examination: (a) the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, the conformity
to original documents of all documents submitted to us as certified, telecopied
or photostatic copies or as exhibits, and the authenticity of the originals of
such documents; (b) the due completion, execution, acknowledgement (where
provided for in the applicable documents) and delivery of all documents and
instruments, other than the due execution and delivery of the Merger Agreement
by the Company and the Shareholders; (c) that CTC is duly incorporated, validly
existing and in good standing under the laws of the State of Delaware; (d) that
CTC has the requisite corporate power and authority to execute and deliver the
Merger Agreement and to perform its obligations thereunder and all such actions
have been duly and validly authorized by all necessary proceedings on its part
and on the part of its stockholders; (e) that the Merger Agreement constitutes
the legal, valid and binding obligation of CTC enforceable against CTC in
accordance with its terms; and (f) that all certificates and telegraphic or
telephonic confirmations given by governmental officials have been properly
given and are accurate. We express no opinion with respect to any matter that
is’ affected by any actual fact or circumstance that is inconsistent with or
contrary to any assumption set forth in this letter or any factual statement set
forth in any certificate or document on which we have relied.
 
Whenever our opinion is indicated to be based on our knowledge, we are referring
to the actual knowledge of attorneys presently with this Firm who have devoted
substantive attention to matters directly related to the Merger Agreement.
 
We are opining herein only as to the effect on the subject transactions of the
laws of the Commonwealth of Pennsylvania (excluding conflicts of laws rules) and
the federal laws of the United States of America (to the extent specifically
referred to herein), all as in effect on the date hereof. Accordingly, we are
not opining on, and we assume no responsibility as to, the applicability to or
effect on any of the matters covered herein of any other laws, including the
laws of any other jurisdiction.
 
On the basis of and subject to the foregoing, we are of the opinion that:

--------------------------------------------------------------------------------

 
1.    The Company is a corporation duly incorporated and validly subsisting
under the laws of the Commonwealth of Pennsylvania and has the requisite
corporate power and authority to own or lease its properties and assets as now
owned or leased and to carry on its business as and where now being conducted.
 
2.    The authorized capital stock of the Company consists of 10,000,000 shares
of common stock, par value $5 per share, of which 305,616 are issued and
outstanding. All of such outstanding shares have been duly authorized and, to
our knowledge, have been validly issued, are fully paid and non-assessable and
were not issued in violation of the terms of any agreement or other
understanding binding upon the Company. To our knowledge, there are (i) no
outstanding or unexercised options, warrants, rights, agreements, calls,
commitments or demands of any character relating to the capital stock of the
Company to which the Company is a party and (ii) no securities issued by the
Company convertible into or exchangeable for any such capital stock.
 
3.    The Company has the requisite corporate power and authority to execute and
deliver the Merger Agreement and the Plan of Merger and to perform its
obligations thereunder and has taken all corporate action necessary (including
unanimous approval of the Merger Agreement by the Shareholders) to execute and
deliver the Merger Agreement and the Plan of Merger. The Merger Agreement and
the Plan of Merger have been duly executed and delivered by the Company and each
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited or affected by (i) bankruptcy, insolvency, reorganization,
moratorium, liquidation, arrangement, fraudulent transfer, fraudulent conveyance
and other similar laws (including court decisions) now or hereafter in effect
and affecting the rights and remedies of creditors generally or providing for
the relief of debtors, (h) the refusal of a particular court to grant equitable
remedies including, without limitation, specific performance or injunctive
relief, and (iii) general principles of equity (regardless whether such remedies
are sought in a proceeding in equity or at law).
 
4.    To our knowledge, other than the State Merger Filings and the filings
required under the H-S-R Act, no filings are required to be made by the Company
with, nor are any consents, approvals, registrations or authorizations required
to be obtained by the Company from, any governmental authority or regulatory
agency in connection with the execution and delivery by the Company of the
Merger Agreement and the Plan of Merger or the consummation by the Company of
the transactions contemplated thereby, except for any consents, approvals,
authorizations or registrations the failure to obtain which and any filings the
failure to make which are not likely to have a Material Adverse Effect.
 
5.    Except as disclosed in the Disclosure Statement, the execution and
delivery of the Merger Agreement by the Company do not, and its consummation of
the transactions contemplated thereby will not, (i) contravene any provision of
the Articles of Incorporation or By-laws of the Company, as amended to date, or
(ii) conflict with or result

--------------------------------------------------------------------------------

in a breach of or constitute a default (or an event which would with the passage
of time or the giving of notice or both constitute a default) under any
agreement or contract listed on Schedule 2.13 of the Disclosure Statement,
except for such conflicts, breaches or defaults which, individually or in the
aggregate, are not reasonably likely to have a Material Adverse Effect.
 
This letter is furnished to you specifically in connection with the Merger
Agreement and solely for your information and benefit. It may not be relied upon
by you in any other connection, and it may not be relied upon by any other
person for any purpose. It may not be assigned, quoted or used without our prior
written consent. This letter is rendered as of the date hereof, and we have not
undertaken to supplement this letter with respect to factual matters or changes
in law that may occur hereafter. It is limited to the matters set forth herein
and no opinion may be inferred or implied beyond the matters expressly stated
herein.
 
Yours truly,

--------------------------------------------------------------------------------

 
EXHIBIT D
 
OPINION OF COUNSEL FOR CTC
 
(i)    CTC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to own or lease its properties and assets as now owned or
leased and to carry on its business as and where now being conducted and to
enter into the Agreement and to perform its obligations thereunder.
 
(ii)    Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to enter into the Plan of Merger and to perform its
obligations thereunder.
 
(iii)    The Merger Shares will be duly authorized, validly issued and fully
paid and non-assessable, will not be issued in violation of the terms of any
agreement or other understanding binding upon CTC known to such counsel, and are
duly listed and admitted to trading on the NYSE.
 
(iv)    The execution, delivery and performance of the Agreement by CTC and the
Plan of Merger by Merger Sub have been duly authorized by all necessary
corporate action on the respective parts of CTC and Merger Sub; and the
Agreement and the Plan of Merger have been duly executed and delivered
respectively by CTC and Merger Sub and constitute the legal, valid and binding
obligations of CTC and Merger Sub, respectively, enforceable in accordance with
their respective terms, except as such enforceability may be limited or affected
by (a) bankruptcy, insolvency, reorganization, moratorium, liquidation,
arrangement, fraudulent transfer, fraudulent conveyance or other similar laws
(including court decisions) now or hereafter in effect affecting the rights and
remedies of creditors generally or providing for the relief of debtors, (b) the
refusal of a particular court to grant equitable remedies, including without
limitation specific performance or injunctive relief, and (c) general principles
of equity (regardless whether such remedies are sought in a proceeding in equity
or at law).
 
(v)    The execution and delivery of the Agreement and the Plan of Merger do
not, and the consummation of the Merger and the other transactions contemplated
thereby and the compliance with the terms, conditions and provisions of the
Agreement and the Plan of Merger by CTC and Merger Sub, will not (a) contravene
any provision of the certificate of incorporation or bylaws of either CTC or
Merger Sub (the “Corporate Documents”); (b) conflict with or result in a breach
of or constitute a default (or an event which might, with the passage of time or
the giving of notice or both, constitute a default) under any of the terms,
conditions or provisions of any material indenture, mortgage, loan or credit
agreement or any other agreement or instrument to which CTC or Merger Sub is a
party or by which CTC or Merger Sub or any of their respective assets may be
bound or affected and which

--------------------------------------------------------------------------------

after due inquiry is known to such counsel (collectively, the “Agreements”), or
any material judgment or order of any court or governmental department,
commission, board, agency or instrumentality, domestic or foreign and which
after due inquiry is known to such counsel (collectively, with the Agreements
and the Corporate Documents, the “Governing Instruments”), or any applicable
law, rule or regulation, any of which, individually or in the aggregate, would
have a CTC MAE; (c) result in the creation or imposition of any material lien,
charge or encumbrance of any nature whatsoever upon CTC’s or Merger Sub’s assets
or give to others any interests or rights therein under any Governing Instrument
which would have a CTC MAE; (d) result in the maturation or acceleration of any
material liability or obligation of CTC or Merger Sub in excess of $100,000 (or
give others the right to cause such an acceleration or maturation) under any
Governing Instrument which would have a CTC MAE; or (e) result in the
termination of or loss of any material right (or give others the right to cause
such a termination or loss) under any Governing Instrument.
 
(vi)    To such counsel’s knowledge, no order of any court, arbitrator or
governmental, regulatory or administrative agency or commission is in effect
which restrains or prohibits the transactions contemplated by the Agreement and
the Plan of Merger and no action or proceeding by or before any court,
arbitrator or governmental, regulatory or administrative agency or commission
challenging any of the transactions contemplated by the Agreement and the Plan
of Merger or seeking monetary relief by reason of the consummation of such
transactions is pending or threatened.
 
(vii)    No consent, approval or authorization of, or registration or filing
with, any governmental authority or other regulatory agency is required in
connection with the execution and delivery of the Agreement by CTC or the Plan
of Merger by Merger Sub or the consummation of the transactions contemplated
thereby except such as have been made or obtained (including the filing of the
State Merger Filings with and the acceptance thereof by the Department of State
of the Commonwealth of Pennsylvania and the Office of the Secretary of the State
of Delaware), and all proceedings required by law or by the provisions of the
Agreement to be taken by CTC and Merger Sub in connection with the due
consummation of the transactions contemplated by the Agreement and the Plan of
Merger have been duly and validly taken.

2

--------------------------------------------------------------------------------

 
EXHIBIT E
 
OPTION AGREEMENT
 
THIS OPTION AGREEMENT (“Option Agreement”) is made this              day of
February, 1997 by and between DYNAMET INCORPORATED, a Delaware corporation (“New
Dynamet”), and PETER N. STEPHANS (“Buyer”).
 
WITNESSETH:
 
WHEREAS, New Dynamet is the surviving corporation of the merger of Dynamet
Incorporated, a Pennsylvania corporation, into New Dynamet, a wholly-owned
subsidiary of Carpenter Technology Corporation; and
 
WHEREAS, New Dynamet owns certain assets related to its Forged Products Division
and all the outstanding preferred stock of Stelkast Incorporated (together, the
“Assets”); and
 
WHEREAS, New Dynamet desires to acquire an option to sell the Assets to Buyer,
and Buyer is willing to grant such an option to New Dynamet, on the terms and
conditions set forth herein; and
 
WHEREAS, Buyer desires to acquire an option to purchase the Assets from New
Dynamet, and New Dynamet is willing to grant such an option to Buyer, on the
terms and conditions set forth herein.
 
NOW, THEREFORE, the parties hereto, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by the parties, and
intending to be legally bound hereby, agree as follows:
 
1.    Buyer hereby grants to New Dynamet an option (“New Dynamet’s Option”) for
sixty (60) days beginning on the date hereof (the “Option Period”) to sell the
Assets to Buyer, in connection with which Buyer will assume certain liabilities
associated with the Assets (“Assumed Liabilities”) and New Dynamet hereby grants
to Buyer an exclusive option (“Buyer’s Option”) for the Option Period to
purchase the Assets and assume the Assumed Liabilities.
 
2.    New Dynamet shall exercise New Dynamet’s Option by giving Buyer written
notice thereof. Such notice shall be deemed to have been duly given if (i)
personally delivered, (ii) sent by facsimile transmission (with transmission
confirmed) or (iii) sent by

--------------------------------------------------------------------------------

overnight courier (with delivery confirmed), and shall be addressed to Peter N.
Stephans, 601 Trotwood Circle, Pittsburgh, PA 15241, telecopy number: (412)
831-2309.
 
3.    Buyer shall exercise Buyer’s Option by giving New Dynamet written notice
thereof. Such notice shall be deemed to have been duly given if (i) personally
delivered, (ii) sent by facsimile transmission (with transmission confirmed) or
(iii) sent by overnight courier (with delivery confirmed), and shall be
addressed or delivered as follows: to New Dynamet at 195 Museum Road,
Washington, PA 15301, Attention: Robert J. Dickson, Senior Vice President, Chief
Financial Officer and Treasurer with a copy to Carpenter Technology Corporation,
101 W. Bern Street, Reading, PA 19612-4662, Attn: John R. Welty, Vice President,
General Counsel and Secretary, telecopy number: (610) 208-3068.
 
4.    If New Dynamet or Buyer exercises its respective Option, Buyer shall
select a date for the closing of the purchase of the Assets and shall give
notice of such date to New Dynamet at 195 Museum Road, Washington, PA 15301,
Attention: Robert J. Dickson, Vice President—Finance and Treasurer. Such date
shall be not less than five nor more than fifteen days after the date that
notice of exercise of the applicable Option is delivered to Buyer or New
Dynamet. At such closing, the Assets shall be transferred in accordance with the
terms of the asset purchase agreement in the form attached hereto as Annex 1
(the “Asset Purchase Agreement”). Upon exercise by Buyer or New Dynamet of its
respective Option, the other Option provided for in this Agreement shall
terminate.
 
5.    During the Option period, New Dynamet will give to Buyer and Buyer’s
agents, representatives and consultants full access, at all reasonable times and
upon reasonable notice to New Dynamet, to the Assets and to all of New Dynamet’s
records relating to the Assets.
 
6.    (a)    This Option Agreement, the Annex attached hereto and all schedules,
exhibits and documents referenced therein represent the entire agreement between
the parties hereto with respect to the subject matter hereof and may not be
modified except in a writing signed by both parties.
 
(b)    This Option Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania without regard to its
conflicts of laws doctrine.
 
(c)    The right to acquire the Assets in accordance with the Asset Purchase
Agreement may be assigned by Buyer to any entity in which Buyer has an ownership
interest.
 
(d)    This Option Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.

2

--------------------------------------------------------------------------------

 
(e)    This Option Agreement may be executed in two counterparts, each of which
shall be deemed to be an original but both of which together shall be deemed to
be one and the same instrument.
 
IN WITNESS WHEREOF, the parties have executed this Option Agreement as of the
date first set forth above.
 
DYNAMET INCORPORATED
 
By:
 

--------------------------------------------------------------------------------

Title:
 

--------------------------------------------------------------------------------

 
 

--------------------------------------------------------------------------------

   
Peter N. Stephans

3

--------------------------------------------------------------------------------

 
ANNEX 1
 
Asset Purchase Agreement (this “Agreement”), dated as of        , 1997, by and
between Dynamet Incorporated, a Delaware corporation (“Seller”),
and            , a                    “Buyer”).
 
Seller desires to sell and assign to Buyer, and Buyer desires to purchase and
assume from Seller, all of Seller’s assets and certain of Seller’s liabilities
relating to Seller’s Forged Products Division and all of the preferred stock of
Stelkast Incorporated, a Pennsylvania corporation (“Stelkast”), owned by Seller
on the terms and subject to the conditions set forth below. In consideration of
the representations, warranties, covenants and agreements contained herein,
Seller and Buyer, each intending to be legally bound hereby, agree as set forth
below:
 
ARTICLE I
 
DEFINITIONS; CONSTRUCTION
 
1.01.    Definitions.    As used in this Agreement, the following terms have the
meanings specified in this Section:
 
“Affiliate” means, with respect to a specified Person, any other Person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person.
 
“Business” means the business of the Forged Products Division conducted by
Seller at 124 Hidden Valley Road, McMurray, Pennsylvania 15317.
 
“Code” means the Internal Revenue Code of 1986, as amended, and the applicable
rulings and regulations thereunder.
 
“Encumbrance” means any mortgage, pledge, security interest, encumbrance,
easement, lien, encroachment or claim of any kind or nature whatsoever or any
item similar or related to the foregoing,
 
“Governmental Body” means any court, government (federal, state, local or
foreign), commission, bureau, agency or other regulatory, administrative or
governmental authority or instrumentality.
 
“Law” means any applicable federal, state, municipal, local or foreign statute,
law, rule, regulation, judgment or order of any kind or nature whatsoever,
including any judgment or order of any Governmental Body.
 
“Liabilities” with respect to any Person, means all debts, liabilities and
obligations of such Person of any nature or kind whatsoever, whether or not due
or to become due,

--------------------------------------------------------------------------------

 
accrued, fixed, absolute, matured, determined, determinable or contingent,
whether or not incurred directly by such Person or by any predecessor of such
Person and whether or not arising out of any act, omission, transaction,
circumstance, sale of goods or service or otherwise.
 
“Other Agreement” means each other agreement or document to be executed and
delivered in connection with the transactions contemplated by this Agreement.
 
“Person” means and includes a natural person, a corporation, an association, a
partnership, a limited liability company, a trust, a joint venture, an
unincorporated organization, a Governmental Body or any other legal entity.
 
“Stelkast Stock” means the 3,500 currently outstanding shares of Class A 10%
Cumulative Preferred Stock, par value $.01 per share, of Stelkast, plus such
additional shares of such stock as may be issued by Stelkast to Seller at or
before the Closing.
 
“Transitional Services Agreement” means the agreement by and between Seller and
Buyer providing, inter alia, for certain accounting, personnel, information
systems, cash management and administrative services to be provided for a period
of six months following the Closing Date by Seller to Buyer.
 
1.02.    Construction.    As used herein, unless the context otherwise requires:
(i) references to “Article” or “Section” are to an article or section hereof;
(ii) all “Exhibits” and “Schedules” referred to herein are to exhibits and
schedules attached hereto and are incorporated herein by reference and made a
part hereof, (iii) “include,” “includes” and “including” are deemed to be
followed by “without limitation” whether or not they are in fact followed by
such words or words of like import; and (iv) the headings of the various
articles, sections and other subdivisions hereof are for convenience of
reference only and shall not modify, define or limit any of the terms or
provisions hereof.
 
 
ARTICLE 11
THE TRANSACTION
 
2.01.    Sale and Purchase of Assets.    At the closing under this Agreement
(the “Closing”), Seller shall sell and transfer to Buyer, and Buyer shall
purchase from Seller, i) all of Seller’s right, title and interest in and to the
properties, assets and rights of Seller that are used in or are related to the
conduct of the Business, wherever such assets are located and whether real,
personal or mixed, tangible or intangible, and (ii) the Stelkast Stock
(collectively, the “Purchased Assets”). Without limiting the generality of the
foregoing, the Purchased Assets shall include the following assets owned by
Seller and used in the Business:
 
(a)    all those certain lots and pieces of ground, together with the buildings,
structures and other improvements erected thereon, and all easements, rights and
privileges
 

2

--------------------------------------------------------------------------------

 
appurtenant to any of the foregoing, owned by Seller and located in Peters
Township, McMurray, Pennsylvania (“Real Property”), as more particularly
described in Schedule 2.01(a);
 
(b)    all of the inventory, personal property, machinery, equipment, computers,
vehicles, supplies, tools, furniture and fixtures that are owned by Seller and
used in the Business, including those described in Schedule 2.01(b);
 
(c)    all know-how, trade secrets, trademarks, trader names, service marks,
logos, licenses, patents, copyrights and applications and registrations, if
applicable, for any of the foregoing (“Intellectual Property”) owned by Seller
and used in the Business, including those described in Schedule 2.01(c);
 
(d)    all rights of Seller under the purchase and sales orders and contracts,
license agreements, supply agreements, labor contracts and other contracts and
agreements to which Seller is a party and that relate to the Business
(“Contracts”), including those listed in Schedule 2.01(d); and
 
(e)    all of Seller’s cash, trade and other notes and account receivables
(including accounts receivable from Stelkast), advance payments and prepaid
items and expenses arising from the Business.
 
2.02.    Retained Assets.    Seller shall retain and the Purchased Assets shall
not include the following assets: (i) the consideration to be delivered to
Seller pursuant to this Agreement, (ii) Seller’s minute book, stock book and
seal, (iii) all claims, choses in action, causes of action and judgments in
respect of any Retained Liability, and (iv) all of the Seller’s assets,
properties and rights related to businesses of Seller other than the Business
(collectively, the “Retained Assets”).
 
2.03.    Assumption of Liabilities.    At the Closing, Buyer shall, pursuant to
an Assumption Agreement substantially in the form of Exhibit 1 (the “Assumption
Agreement”), assume and agree to perform, pay or discharge, when due, to the
extent not theretofore performed, paid or discharged, (a) the Liabilities of
Seller listed in Schedule 2.03, (b) the Liabilities of Seller specified pursuant
to the express terms of the Contracts and (c) any Liabilities occurring on or
before February     , 1997 relating to or arising from (i) any environmental
condition on the Real Property or any non-compliance with any existing
environmental statute, ordinance, regulation or other governmental requirement,
permit, license or registration (“Environmental Laws”), in connection with the
operation of the Business, or (ii) the generation, treatment, transportation,
storage, recycling, disposal or release by the Business of any toxic, hazardous
or polluting substance or waste, including petroleum or radioactive materials,
regulated under Environmental Laws (collectively, the “Assumed Liabilities”).
 

3

--------------------------------------------------------------------------------

 
2.04.    Retained Liabilities.    Except for the Assumed Liabilities, Buyer does
not hereby, and shall not, assume or in any way undertake to pay, perform,
satisfy or discharge any other Liability of Seller (i) existing on the Closing
Date or (ii) arising out of any transactions entered into, or any state of facts
existing, prior to or on the Closing Date or (iii) arising after the Closing
Date with respect to any assets other than the Purchased Assets (the “Retained
Liabilities”), and Seller shall pay and satisfy when due all Retained
Liabilities.
 
2.05.    Purchase Price.    The aggregate purchase price for the Purchased
Assets shall be $2,600,000 and the assumption of the Assumed Liabilities (the
“Purchase Price”). At the Closing, the Purchase Price shall be paid by Buyer to
Seller as follows: (i) $2,600,000 by wire transfer of immediately available
funds; and (ii) by Buyer’s execution and delivery of the Assumption Agreement.
 
2.06.    Closing.    The consummation of the purchase and sale of the Purchased
Assets, the assumption of the Assumed Liabilities, and the consummation of the
other transactions contemplated hereby shall take place at 10:00 o’clock A.M.,
local time, on             , 1997 at the offices of Kirkpatrick & Lockhart LLP,
1500 Oliver Building, Pittsburgh, Pennsylvania, or at such other time, date or
place as the parties agree (the “Closing Date”).
 
2.07.    Allocation of Purchase Price.    The Purchase Price shall be allocated
among the Purchased Assets in accordance with the allocation set forth in
Schedule 2.07. Buyer and Seller shall report the federal, state and local income
and other tax consequences of the purchase and sale contemplated hereby in a
manner consistent with such allocation and shall not take any position
inconsistent therewith upon examination of any tax return, in any refund claim,
in any litigation, or otherwise.
 
2.08.    Passage of Title.    Title to all Purchased Assets shall pass from
Seller to Buyer at the Closing, subject to the terms and conditions of this
Agreement. Buyer assumes no risk of loss to the Purchased Assets prior to the
Closing.
 
2.09.    Certain Consents.    Nothing in this Agreement shall be construed as an
attempt to assign any Contract, permit, franchise or claim included in the
Purchased Assets which is by its terms or in law nonassignable without the
consent of the other party or parties thereto, unless such consent shall have
been given, or as to which all the remedies for the enforcement thereof enjoyed
by Seller would not as a matter of law, pass to Buyer as an incident of the
assignments provided for by this Agreement. In order, however, to provide Buyer
with the full realization and value of every Contract, permit, franchise and
claim of the character described in the immediately preceding sentence, Seller
after the Closing, shall, at the request and under the direction of Buyer, in
the name of Seller or otherwise as Buyer shall specify take all reasonable
action (including without limitation the appointment of Buyer as
attorney-in-fact for Seller) and do or cause to be done all such things as shall
in the opinion of Buyer or its counsel be necessary or proper (i) to assure that
the rights of Seller under such Contracts, permits, franchises and claims shall
be preserved for the benefit of
 

4

--------------------------------------------------------------------------------

 
Buyer and (ii) to facilitate receipt of the consideration to be received by
Seller in and under every such Contract, permit, franchise and claim, which
consideration shall be held for the benefit of, and shall be delivered to,
Buyer, Nothing in this Section shall in any way diminish Seller’s obligation to
obtain all consents and approvals and to take all such other actions prior to or
at the Closing as are necessary to enable Seller to convey or assign valid title
to all the Purchased Assets to Buyer.
 
2.10.    Pension Plans.    At Buyer’s election, Seller shall transfer from its
pension plans to one or more plans established by Buyer the accrued benefits of
transferring employees and an amount of assets sufficient to comply with the
requirements of Section 414(l) of the Code.
 
 
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
 
As an inducement to Buyer to enter into this Agreement and consummate the
transactions contemplated hereby, Seller represents and warrants to Buyer as
follows:
 
3.01.    Organization.    Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
the corporate power and authority to own or lease its properties, carry on the
Business as now conducted, enter into this Agreement and the Other Agreements to
which it is or is to become a party and perform its obligations hereunder and
thereunder.
 
3.02.    Authorization; Enforceability.    This Agreement and each Other
Agreement to which Seller is or is to become a party have been or will be duly
executed and delivered by Seller and constitute or will constitute the legal,
valid and binding obligations of Seller, enforceable against it in accordance
with their respective terms. All actions contemplated by this Agreement have
been duly and validly authorized by all necessary proceedings by Seller.
 
3.03.    Encumbrances on Purchased Assets.    Seller has not created or
permitted to exist any Encumbrances upon the Purchased Assets except those
existing prior to the effective time of the merger of Dynamet Incorporated with
and into Seller.
 
3.04.    Finders’ Fees.    Neither Seller nor any of its officers, directors or
employees has employed any broker or finder or incurred any Liability for any
brokerage fee, commission or finders’ fee in connection with any of the
transactions contemplated hereby or by any Other Agreement.
 

5

--------------------------------------------------------------------------------

 
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
 
As an inducement to Seller to enter into this Agreement and consummate the
transactions contemplated hereby, Buyer represents and warrants to Seller as
follows:
 
4.01.    Organization.    Buyer is a                     duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, and has the [corporate] power and authority to enter into this
Agreement and the Other Agreements to which it is or is to become a party and
perform its obligations hereunder and thereunder.
 
4.02.    Authorization; Enforceability.    This Agreement and each Other
Agreement to which Buyer is or is to become a party have been or will be duly
executed and delivered by Buyer and constitute or will constitute the legal,
valid and binding obligations of Buyer, enforceable against it in accordance
with their respective terms. All actions contemplated by this Agreement have
been duly and validly authorized by all necessary proceedings by Buyer.
 
4.03.    Finders’ Fees.    Neither Buyer nor any of its officers[, directors] or
employees has employed any broker or finder or incurred any Liability for any
brokerage fee, commission or finders’ fee in connection with any of the
transactions contemplated hereby or by any Other Agreement.
 
 
ARTICLE V
DELIVERIES AT CLOSING
 
5.01.    Deliveries by Seller.    Seller shall deliver or cause to be delivered
to Buyer at the Closing:
 
(i)    A general warranty deed or deeds to the Real Property in a form
acceptable to Buyer, duly executed and acknowledged by Seller.
 
(ii)    A general warranty bill of sale and instrument of assignment to the
other Purchased Assets in a form acceptable to Buyer, duly executed by Seller.
 
(iii)    Assignments of all transferable or assignable Contracts, Intellectual
Property and licenses, permits and warranties relating to the Purchased Assets,
duly executed by Seller and in forms acceptable to Buyer.
 
(iv)    Certificates representing the Stelkast Stock, which certificates will be
in negotiable form with stock powers duly executed in blank and all requisite
stock transfer stamps attached.
 

6

--------------------------------------------------------------------------------

 
(v)    Title certificates to any motor vehicles included in the Purchased
Assets, duly executed by Seller (together with any other transfer forms
necessary to transfer title to such vehicles).
 
(vi)    Any other assignments or certificates necessary or appropriate to
legally and validly transfer title of any Purchased Assets to Buyer, duly
executed by Seller and in forms acceptable to Buyer.
 
(vii)    The Transitional Services Agreement.
 
(viii)    A certificate of the Secretary of Seller setting forth all resolutions
of the Board of Directors of Seller authorizing the execution and delivery of
this Agreement and the Other Agreements and the performance by Seller of the
transactions contemplated hereby and by the Other Agreements.
 
(ix)    Such other documents as Buyer may reasonably request.
 
5.02.    Deliveries by Buyer.    Buyer shall deliver or cause to be delivered to
Seller at the Closing:
 
(i)    A wire transfer in accordance with Section 2.05 pursuant to the wire
transfer instructions delivered by Seller to Buyer in writing at least five days
prior to the Closing.
 
(ii)    The Assumption Agreement.
 
(iii)    A certificate of the [Secretary) of Buyer setting forth all resolutions
of the [Board of Directors) of Buyer authorizing the execution and delivery of
this Agreement and the Other Agreements and the performance by Buyer of the
transactions contemplated hereby and by the Other Agreements.
 
(iv)    Such other documents as Seller may reasonably request.
 
 
ARTICLE VI
SURVIVAL OF REPRESENTATIONS: INDEMNIFICATION
 
6.01.    Survival of Representations.    The representations and warranties made
in this Agreement or pursuant hereto shall survive the Closing.
 
6.02.    Indemnification by Seller.    Seller shall indemnify, defend, save and
hold Buyer and its officers, [directors employees, agents and other Affiliates
(collectively, “Buyer Indemnitees”) harmless from and against any and all
demands, claims, allegations, assertions, actions or causes of action,
assessments, losses, damages, deficiencies, Liabilities,
 

7

--------------------------------------------------------------------------------

 
costs and expenses (including reasonable legal fees, interest, penalties and all
reasonable amounts paid in investigation, defense or settlement of any of the
foregoing, whether or not any such demands, claims, allegations, etc., of third
parties are meritorious; collectively, “Buyer Damages”) asserted against,
imposed upon, resulting to, required to be paid by, or incurred by, any Buyer
Indemnitees, directly or indirectly, in connection with, arising out of, or
resulting from, (i) any Retained Liability, (ii) Seller’s operation of the
Business from February     , 1997 to the Closing Date or (iii) any
misrepresentation or breach of warranty by Seller.
 
6.03.    Indemnification by Buyer.    Buyer shall indemnify, defend, save and
hold Seller and its officers, directors, employees, agents and other Affiliates
(collectively, “Seller Indemnitees”) harmless from and against any and all
demands, claims, allegations, assertions, actions or causes of action,
assessments, losses, damages, deficiencies, Liabilities, costs and expenses
(including reasonable legal fees, interest, penalties and all reasonable amounts
paid in investigation, defense or settlement of any of the foregoing, whether or
not any such demands, claims, allegations, etc., of third parties are
meritorious; collectively, “Seller Damages”) asserted against, imposed upon,
resulting to, required to be paid by, or incurred by, any Seller Indemnitees,
directly or indirectly, in connection with, arising out of, or resulting from,
(i) any Assumed Liability, (ii) Buyer’s operation of the Business after the
Closing Date or (iii) any misrepresentation or breach of warranty by Seller.
 
6.04.    Notice of Claims.    If any Buyer Indemnitee or Seller Indemnitee (an
“Indemnified Party”) believes that it has suffered or incurred or will suffer or
incur any Buyer Damages or Seller Damages, as the case may be, (“Damages”) for
which it is entitled to indemnification under this Article VI, such Indemnified
Party shall so notify the party or parties from whom indemnification is being
claimed (the “Indemnifying Party”) with reasonable promptness and reasonable
particularity in light of the circumstances then existing. If any action at law
or suit in equity is instituted by or against a third party with respect to
which any Indemnified Party intends to claim any Damages, such Indemnified Party
shall promptly notify the Indemnifying Party of such action or suit. The failure
of an Indemnified Party to give any notice required by this Section shall not
affect any of such party’s rights under this Article VI or otherwise except and
to the extent that such failure is actually prejudicial to the rights or
obligations of the Indemnifying Party.
 
6.05.    Third Party Claims.    The Indemnified Party shall have the right to
conduct and control, through counsel of its choosing, the defense of any third
party claim, action or suit with respect to which it intends to claim any
Damages, and the Indemnified Party may compromise or settle the same; provided,
that the Indemnified Party shall give the Indemnifying Party advance notice of
any proposed compromise or settlement. The Indemnified Party shall permit the
Indemnifying Party to participate in the defense of any such claim, action or
suit through counsel chosen by the Indemnifying Party; provided, that the fees
and expenses of such counsel shall be borne by the Indemnifying Party. If the
Indemnified Party permits the Indemnifying Party to undertake control of the
conduct and settlement of any such claim, action or suit, (i) the Indemnifying
Party shall not thereby
 

8

--------------------------------------------------------------------------------

 
permit to exist any Encumbrance upon any asset of the Indemnified Party; (ii)
the Indemnifying Party shall not consent to any settlement that does not include
as an unconditional term thereof the giving of a complete release from liability
with respect to such claim, action or suit to the Indemnified Party; (iii) the
Indemnifying Party shall permit the Indemnified Party to participate in such
conduct or settlement through counsel chosen by the Indemnified Party; and (iv)
the Indemnifying Party shall promptly reimburse the Indemnified Party for the
full amount of any Damages, including fees and expenses of counsel for the
Indemnified Party incurred prior to the assumption of the control of such claim,
action or suit by the Indemnifying Party.
 
 
ARTICLE VII
MISCELLANEOUS
 
7.01.    Costs and Expenses.    Buyer and Seller shall each pay its respective
expenses, and Seller shall pay all of the pre-Closing expenses of Seller and
Stelkast incurred in connection with this Agreement and the transactions
contemplated hereby, including all accounting, legal and appraisal fees and
settlement charges. All transfer taxes incurred as a result of the transfer of
the Purchased Assets shall be paid by Buyer, other than real estate transfer
taxes which shall be born equally by Buyer and Seller.
 
7.02.    Proration of Expenses.    All accrued expenses associated with the Real
Property, such as electricity, gas, water, sewer, telephone, property taxes,
security services and similar items, shall be prorated between Buyer and Seller
as of the Closing Date. Buyer and Seller shall settle such amounts
on                 , 1997.
 
7.03.    Further Assurances.    Seller shall, at any time and from time to time
on and after the Closing Date, upon request by Buyer and without farther
consideration, take or cause to be taken such actions and execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, such
instruments, documents, transfers, conveyances and assurances as may be required
or desirable for the better conveying, transferring, assigning, delivering,
assuring and confirming the Purchased Assets to Buyer.
 
7.04.    Notices.    All notices and other communications given or made pursuant
to this Agreement shall be in writing and shall be deemed to have been duly
given or made (i) the second business day after the date of mailing, if
delivered by registered or certified mail, postage prepaid, return receipt
requested, (ii) upon delivery, if sent by hand delivery, (iii) upon delivery, if
sent by prepaid courier, with a record of receipt, or (iv) the next day after
the date of dispatch, if sent by cable, telegram, facsimile or telecopy (with a
copy simultaneously sent by registered or certified mail, postage prepaid,
return receipt requested), to the parties at the following addresses:
 

9

--------------------------------------------------------------------------------

 
(a)    if to Buyer, to:
 
Peter N. Stephans
601 Trotwood Circle
Pittsburgh, PA 15241
Telecopy: (412) 831-2309
 
with a required copy to:
 
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
Telecopy: (412) 355-6501
Attention:    Charles J. Oueenan, Jr.
 
(b)    if to Seller, to:
 
Dynamet Incorporated
195 Museum Road
Washington, PA 15301
Telecopy: (412) 229-4131
Attention:    Robert J. Dickson
Senior Vice President, Chief Financial Officer and Treasurer
 
with required copies to:
 
Carpenter Technology Corporation
101 W. Bern Street
Reading, PA 19612-4662
Telecopy: (610) 208-3068
Attention:    John R. Welty
Vice President, General Counsel and Secretary
 
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103-2793
Telecopy: (215) 994-2222
Attention:    Herbert F. Goodrich, Jr.
 
Either party hereto may change the address to which notice to it, or copies
thereof, shall be addressed, by giving notice thereof to the other party hereto
in conformity with the foregoing.
 
7.05.    Assignment; Governing Law.    This Agreement and all the rights and
obligations hereunder shall bind and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. This Agreement and the
rights, interests and obligations hereunder may not be assigned by either party
hereto without the prior written

10

--------------------------------------------------------------------------------

consent of the other party hereto. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
without regard to its conflicts of laws doctrine.
 
7.06.    Amendment and Waiver; Cumulative Effect.    To be effective, any
amendment of or waiver under this Agreement must be in writing and be signed by
the party against whom enforcement of the same is sought. Neither the failure of
either party hereto to exercise any right, power or remedy provided under this
Agreement or to insist upon compliance by the other party with its obligations
hereunder, nor any custom or practice of the parties at variance with the terms
hereof, shall constitute a waiver by either party of its right to exercise any
such right, power or remedy or to demand such compliance. The rights and
remedies of the parties hereto are cumulative and not exclusive of the rights
and remedies that they otherwise might have now or hereafter, at law, in equity,
by statute or otherwise.
 
7.07.    Entire Agreement; No Third Party Beneficiaries.    This Agreement and
the Schedules and Exhibits set forth all of the promises, covenants, agreements,
conditions and undertakings between the par-ties hereto with respect to the
subject matter hereof, and supersede all prior or contemporaneous agreements and
understandings, negotiations, inducements or conditions, express or implied,
oral or written. This Agreement is not intended to confer upon any Person other
than the parties hereto any rights or remedies hereunder, except the provisions
of Article VI.
 
7.08.    Severability.    If any term or other provision of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal or incapable of
being enforced under any rule of law in any particular respect or under any
particular circumstances, such term or provision shall nevertheless remain in
full force and effect in all other respects and under all other circumstances,
and all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to either party, Upon a determination that any such term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to the
fullest extent possible.
 
7.9.    Counterparts.    This Agreement may be executed in two counterparts,
each of which shall be deemed to be an original but both of which together shall
be deemed to be one and the same instrument.
 

11

--------------------------------------------------------------------------------

 
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
 
 
DYNAMET INCORPORATED
By:
 

--------------------------------------------------------------------------------

Title:
 

--------------------------------------------------------------------------------

 
 
[BUYER]
By:
 

--------------------------------------------------------------------------------

Title:
 

--------------------------------------------------------------------------------

12

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

 
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Dated January 6, 1997
 
By and Among
 
DYNAMET INCORPORATED,
 
THE SHAREHOLDERS OF DYNAMET INCORPORATED
 
and
 
CARPENTER TECHNOLOGY CORPORATION
 

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

 
DYNAMET INCORPORATED
 
INDEX TO SCHEDULES
 
Schedule

--------------------------------------------------------------------------------

  
Description

--------------------------------------------------------------------------------

2.01
  
Jurisdictions Where Qualified
2.02
  
Capital Stock
2.03
  
Affiliated Company
2.05
  
Violation of Laws or Agreements
2.06
  
Financial Statement
2.07
  
Undisclosed Liabilities
2.08
  
Changes Since Balance Sheet Date
2.09
  
Taxes
2.10
  
Inventories
2.11
  
Accounts Receivable
2.12
  
Pending Litigation or Proceedings
2.13
  
Contracts, Leases and Other Commitments
2.14
  
Permits and Registrations
2.15
  
Necessary Consents and Approvals
2.16
  
Liens
2.17
  
Real Estate Interests
2.18
  
Permitted Related Party Transactions
2.20
  
Compensation Arrangements and Bank Accounts
2.21
  
Labor Relations
2.22
  
Insurance Policies
2.23
  
Patents and Intellectual Property Rights
2.24
  
ERISA Disclosures

--------------------------------------------------------------------------------

2.25
  
Environmental Matters
4.01
  
Assets to be Distributed
5.07
  
Supplemental Employee Retirement Programs
9.03
  
FPD Assets and Stelkast Preferred Stock

--------------------------------------------------------------------------------

 
SCHEDULE 2.01
 
DYNAMET INCORPORATED
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Jurisdictions Where  Qualified
 
Item 2. 1.
  
Dynamet is registered as a foreign corporation in California and Florida.
Dynamet has not attempted to become qualified in other locations where
inventory is consigned.

--------------------------------------------------------------------------------

SCHEDULE 2.02
 
DYNAMET INCORPORATED
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Capital Stock
 
Item 2.2.
  
Common Stock:
         
Authorized =
  
10,000,000 shares
    
Outstanding =
  
305,616 shares

 
Copies of Dynamet’s by-laws, which were updated as of October 23, 1996, have
been provided to CTC.
 
Dynamet repurchased stock from shareholders and stock options from employees
prior to electing Subchapter S status.

--------------------------------------------------------------------------------

 
SCHEDULE 2.03
 
DYNAMET INCORPORATED
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Affiliates
 
Item 2.3.    Dynamet, through its Chief Executive Officer and President,
controls the following corporations:
 
Stelkast Incorporated1
Pointe South Enterprises Corporation2
Dynamet Technologies Incorporated3
Dynamet Powder Products Incorporated3
 
1
 
See item 9.3.

2
 
See item 4. 1 (c)(vii).

3
 
Inactive, “name holding” subsidiary of Dynamet.

--------------------------------------------------------------------------------

 
SCHEDULE 2.05
 
DYNAMET INCORPORATED
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Violation of Laws or Agreements
 
Item 2.5(b).    The sale of assets of the Forged Products Division to Peter
Stephans, if consents are required, could result in a “default” under agreements
related to the debt of the Forged Products Division to be assumed on the sale of
such Division. These agreements have been provided to CTC.
 
Item 2.5(d).    As a result of this agreement and the retirement of Peter
Rossin, Viola Taboni might decide to retire which would result in a liability to
her under a supplemental retirement agreement. A copy of this agreement has been
provided to CTC. This liability would not exceed $200,000. We understand that
Viola Taboni might elect to retire in early 1997.
 
Item 2.5(e).    The sale of assets of the Forged Products Division to Peter
Stephans could result in certain customer contracts requiring assignment to the
new corporation.

--------------------------------------------------------------------------------

 
SCHEDULE 2.06
 
DYNAMET INCORPORATED
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Financial Statements
 
Item 2.6.    The unaudited financial statements as of November 30, 1996, have
not been prepared in accordance with generally accepted accounting principles
for the following reasons:
 

 
—
 
The footnotes contained with the November 30 financial statements might not
reflect all disclosures required by GAAP.

 

 
—
 
The interim financial statements are not based on the last-in, first-out method
of accounting for inventory.

 

 
—
 
The financial statements do not contain the expense for employee bonuses paid in
November 1996. This expense was deferred until year end closing.

 

 
—
 
The assets related to Stelkast Preferred Stock and the Forged Products Division
identified for sale to Peter Stephans have not been segregated on the balance
sheet and any financial reporting loss on the sale has not been reflected in the
financial statements.

 

 
—
 
Accruals for supplemental retirement plans have not been adjusted to reflect
changes in circumstances resulting from this agreement.

 

 
—
 
Assets, such as the corporate airplane, PCR/PNS insurance policies, Pointe South
preferred stock, etc. to be distributed to shareholders have not been disclosed
in the financial statements or segregated on the balance sheet.

 

 
—
 
Subsequent to December 31, 1995, the reserve for the investment in the preferred
stock of Stelkast has not been increased.

 

 
—
 
Inventories have not been measured by a physical inventory since December 31,
1995.

 

 
—
 
Miscellaneous accruals and depreciation expense have not been updated to reflect
a year end closing since December 31, 1995.

 

 
—
 
The financial statements include accruals for tax liabilities that might not
become payable.

--------------------------------------------------------------------------------

 
 

 
—
 
The notes to the financial statements do not fully reflect related party
transactions, including transactions with Stelkast.

 

 
—
 
The notes to the financial statements do not reflect updated commitments for
inventory and capital expenditures.

--------------------------------------------------------------------------------

SCHEDULE 2.07
 
DYNAMET INCORPORATED
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Undisclosed Liabilities
 
Item 2.7(a).    Tax liabilities for the State of California are subject to
determination of taxable income and the preparation of a corporate tax
return(s).
 
Pennsylvania capital stock returns are subject to determination of a capital
stock value and preparation of a corporate tax return(s).
 
Item 2.7(b).    See Schedule 2.06.
 
Item 2.7(c).    Dynamet has an exclusive contract to supply Huck International
for the period July 1, 1996 to June 30, 1997. A provision of the contract
provides for a rebate to Huck based on their annual volume of purchases. A copy
of the rebate provision and the overall contract with Huck International has
been provided to CTC.
 
Item 2.7(c).    Also see item 2.13(i) for costs of removal of cyanide bath.
 
Item 2.7(c).    Liability, if any, that Dynamet might have to customers as a
result of shipping the Oremet material associated with the high density
inclusion (HDI) problem has not been reflected in the financial statements. A
technical description of this problem, prepared by Oremet as of November 23,
1996, has been provided to CTC. A list of sales of this material to customers is
attached (reference V), Under date of December 19, 1996, the Chief Financial
Officer of Dynamet received a letter from Oremet outlining Oremet’s policy for
reimbursing Dynamet for costs incurred by Dynamet and its customers as a result
of this problem. A copy of this letter has been delivered to CTC.

--------------------------------------------------------------------------------

 
SCHEDULE 2.08
 
DYNAMET INCORPORATED
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Changes Since Balance Sheet Date
 
Item 2.8(a)    Changes in business.
 

 
—
 
In early 1996, Osteonics Corporation informed David Tenison, Vice President and
General Manager of the Forged Products Division, that they planned to produce
50% of their orthopedic cups at Osteonics and utilize another subcontractor for
the other 50%. As of January 3, 1997, Osteonics continued to place orders with
Dynamet; however, it is uncertain if they will continue to place orders with
Dynamet in the future.

 

 
—
 
In October and November of 1996, the shipments of the Forged )Products Division
have declined, which resulted in a net operating loss for the division for these
months.

 

 
—
 
In mid-1996, the Perryman Company announced that they plan to construct a
rolling mill capable of processing up to 12 million pounds of titanium per year.

 

 
—
 
In mid-1996 one of Dynamet’s West Coast salesmen, Bruce Richardson, resigned
from Dynamet and joined the Perryman Company.

 

 
—
 
On January 2, 1997, Robert Plants, Dynamet’s Supervisor of Rolling & Large Bar,
resigned from Dynamet to join the Perryman Company.

 

 
—
 
Boeing is negotiating long term contracts with its fastener suppliers and
Dynamet has long term contracts with Hi-Shear Industries and Huck International.
Copies of these contracts have been provided to CTC.

 

 
—
 
Dynamet is in the process of negotiating a long-term contract with Fairchild
Fasteners.

 
Item 2.8(b).    In early 1996, there was a fire at Dynamet’s Powder Products
Division, which is covered by insurance. The facilities have been repaired and
are in operation. See item 2.22.
 
Item 2.8(c).    In July, 1996, Dynamet provided Peter C. Rossin with a security
interest in Dynamet’s corporate airplane.
 
Item 2.8(e).    Subsequent to the Balance Sheet Date, Dynamet made or plans to
make the following distributions related to the capital stock of Dynamet:

--------------------------------------------------------------------------------

 
Projected Distribution Date

--------------------------------------------------------------------------------

    
Amount (value)

--------------------------------------------------------------------------------

    
Description

--------------------------------------------------------------------------------

February 1997
    
$
3,500,0001,2
    
Corporate aircraft
February 1997
    
$
585,0001,2
    
PCR life insurance policies
February 1997
    
$
950,0001,2
    
PNS life insurance policies
February 1997
    
$
360,0001,2
    
Preferred stock and dividends receivable of Pointe South Enterprises Corporation
February 1997
    
 
—  3    
    
Final pro rata cash distribution
February 1997
    
$
40,0001,2
    
PCR’s automobile
12/15/96
    
$
1,975,062    
    
Tax payments and cash to make distributions pro rata
01/16/96
    
$
1,120,591    
    
Tax payments and cash to make distributions pro rata
04/15/96
    
$
5,186,969    
    
Tax payments and cash to make distributions pro rata
06/17/96
    
$
2,104,308    
    
Tax payments and cash to make distributions pro rata
09/16/96
    
$
2,623,713    
    
Tax payments and cash to make distributions pro rata

--------------------------------------------------------------------------------

1
 
Amount is estimated. Exact amount to be determined.

 
2
 
See Schedule 4.01 on planned distributions,

 
3
 
Amount dependent on balance in accumulated adjustment account. Not determined at
this time.

 
Item 2.8(f).    Under the terms of the supplemental retirement agreements with
Alfred Donlevy and Viola Taboni, contributions to the defined contribution plan
might be due for 1996 and 1997 (V. Taboni only), compensation payments might be
due to V. Taboni for 1997 and life insurance policies might be distributed with
a supplemental payment to gross the policy value up for taxes.
 
Item 2.8(f).    See item 2.20(a).
 
Item 2.8(g).    Subsequent to the Balance Sheet Date, Dynamet purchased or
authorized capital expenditures in excess of $250,000 as outlined on the
schedule following (Reference L.)

--------------------------------------------------------------------------------

 
Item 2.8(i).    See item 2.8(e). Also see item 2.13(i)
 
Item 2.8(k).    See item 2.8(a).
 
Item 2.8(m).    See item 2.6(b).
 
Item 2.8(n)(i).    Dynamet makes payments to its Advisory Board (Queenan,
Marshall and Stewart) currently at an annual retainer rate of $10,000 plus
$5,000 and appropriate expenses for each meeting of the Advisory Board attended.
These payments will be discontinued after closing.
 
Items 2.8(g) and 2.13(j) Capital Expenditures.
 
In order to fully outline Dynamet’s capital expenditure status the two listings
attached (Reference L) were created. Explanations of the columns on the first
attachment follow.
 
PLANNED—Items that operating personnel are reasonably sure are necessary.
Subject to approval by Peter Rossin and Peter Stephans.
 
REVIEW—Items that operating personnel are evaluating but not yet sure that they
want to recommend.
 
UNPLANNED ADDITIONS—Items or expenditures that operating personnel have
identified as necessary after the original plan was created.
 
TOTAL—Total of planned, review and unplanned additions columns.
 
OPEN PO’S—Purchase orders or part of purchase orders that have not been
“vouchered” (invoice processed by accounts payable).
 
RECEIVED/VOUCHERED—Items that have been physically received and/or invoiced and
processed (“vouchered”) by accounts payable.
 
TOTAL COMMITTED—The total of the open purchase order column and the
received/vouchered column.
 
In specific response to item 2.130(j) the open purchase orders column of the
first listing reflects agreements or commitments for capital expenditures.
 
In specific response to item 2.8(g) the second listing reflects the making of
any capital expenditures by Dynamet from January 1, 1996 to October 31, 1996,
including the total of all deposit accounts.

--------------------------------------------------------------------------------

 
SCHEDULE 2.09
 
DYNAMET INCORPORATED
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Taxes
 
Item 2.9(a)(iii).    In connection with the preparation of the 1994 and 1995 tax
returns of Dynamet, Price Waterhouse issued a letter to Dynamet stating that
they did not review Dynamet’s policies for transfer pricing between Dynamet and
Stelkast.
 
Item 2.9(b).    Dynamet’s income tax returns for periods subsequent to 12/31/92
have not been audited by the IRS or any state revenue agent nor have any
notifications of intent to examine been received.
 
Item 2.9(c).    Under the terms of the supplemental retirement agreements for
Alfred Donlevy and Viola Taboni, Dynamet has agreed to make each individual a
payment for their tax liability connected with the transfer of life insurance
policies to them. The payment to Alfred Donlevy was made in December 1996.
 
Item 2.9(d)(ii)+(v).    In connection with an IRS examination of its federal
income tax returns for periods ended prior to and including December 31, 1992,
Dynamet executed consents extending the statute of limitations and subsequently
entered into closing agreements with taxing authorities for those periods. CTC
has been provided with copies of Dynamet’s federal income tax returns for the
periods ended December 31, 1992; June 30, 1992 and June 30, 1991. In addition,
CTC has been provided a copy of the revenue agents report for the examination of
Dynamet’s federal tax returns for the periods ended December 31, 1992 and June
30, 1992.
 
Item 2.9(d)(iv).    Tax Rulings.
 
Dynamet applied for and on June 7, 1996, received a favorable private letter
ruling from the Internal Revenue Service regarding the “spin-off” of assets
comprising the Forged Products Division in McMurray, PA.
 
Dynamet applied for and on May 23, 1996 received a favorable private letter
ruling from the Pennsylvania Department of Revenue regarding the application of
the resale exemption to the purchase of aircraft for resale by Dynamet when both
Dynamet and a lessee make taxable use of aircraft.
 
Item 2.9(d).    Dynamet’s election to be taxed as an “S Corporation” has not
been audited by the Internal Revenue Service or any state revenue agents. CTC
has been provided with a copy of Dynamet’s federal tax return for the six months
ended December 31, 1992. This return includes an explanation of the reason for
the short period.
 
Item 2.9(d)iii.    Dynamet and subsidiaries filed consolidated federal and state
income tax returns for the years ended on and prior to December 31, 1992.

--------------------------------------------------------------------------------

 
SCHEDULE 2.10
 
DYNAMET INCORPORATED
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Item 2.10(i).    The inventories on the attached listing (Reference S) which
were received from Oremet (see items 2.7(c) and 2.22) might not be of a quality
generally useable and merchantable in the ordinary course of business. Oremet
has agreed to accept ownership of this inventory until useability is determined.
 
Item 2.10(ii).    Finished goods inventory might be consigned to the attached
list of third parties (Reference T). In addition, inventory might be at the
attached list of subcontractors (Reference U).

--------------------------------------------------------------------------------

SCHEDULE 2.11
 
DYNAMET INCORPORATED
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Accounts Receivable
 
Item 2.11.    The following accounts receivable of the Forged Products Division
might not be adequately reserved for as of January 3, 1997:
 

 
—
 
Stelkast Incorporated*

 

 
—
 
U. S. Medical Corporation*

 
*
 
Balance to be included with Forged Products Division assets sold to Peter
Stephans. See Schedule 9.03.

--------------------------------------------------------------------------------

 
SCHEDULE 2.12
 
DYNAMET INCORPORATED
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Pending, Litigation or Proceedings
 
Item 2.12.    EEOC and PHRC Claims by Donald C. Marple
 
Donald C. Marple, an applicant for an hourly laborer position at Dynamet, filed
EEOC and PHRC claims against Dynamet. The discrimination bases for the claims
were age and retaliation. These claims are covered by Dynamet’s insurance
policy, with a deductible of $25,000. See Schedule 2.22.
 
Item 2.12.    Request by General Electric
 
GE Aircraft Engines has requested the production of documents from Dynamet
related to products that Dynamet has supplied to GE. GE requested the documents
in connection with a lawsuit, Joseph Trombello. et al v. McDonnell Douglas
Corporation et al. Case number 93LA325 pending in the Circuit Court of Cook
County, IL, which relates to injuries sustained from the July 19, 1989, United
Airlines Flight 232 Sioux City air crash. Dynamet is not named in the lawsuit.
As of January 3, 1997, GE has not produced any documents related to Dynamet.
Dynamet has placed it’s insurance carrier on notice. See Schedule 2.22. CTC has
been provided copies of the information received by Dynamet from GE.
 
Item 2.12.    Dynamet vs. Ecologix, et al.
 
In 1987 Dynamet had a fire in its fine wire and metal preparation building.
Dynamet was reimbursed by the insurance company for the damage. Under the
subrogation terms of the insurance policy, the insurance company, under
Dynamet’s name, is pursuing recovery of the damage amounts from several par-ties
that were involved in the design and construction of the facility. Dynamet has
no liability related to this matter.
 
Item 2.12.    US Sumical vs. Ethicon
 
US Surgical and Ethicon (Johnson & Johnson) are litigating a patent issue. We
understand that the court’s decision has been appealed and is pending. In
connection with this litigation Dynamet received a subpoena to produce documents
and a Dynamet employee (Bob Riffee) was deposed.
 
Item 2.12.    See also Schedule 2.23.

--------------------------------------------------------------------------------

 
SCHEDULE 2.13
 
DYNAMET INCORPORATED
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Contracts, Leases and Other Commitments
 
Item 2.13(a).    In December 1990, Dynamet guaranteed a mortgage on the house
owned by an employee (John Bolin) in Florida. John Bolin has personally
guaranteed Dynamet that Dynamet will be repaid from his assets in the event the
mortgage is not paid. The amount of this guarantee is less than $250,000. A copy
of the letter from John Bolin and the mortgage guarantee have been provided to
CTC.
 
Item 2.13(a).    Dynamet has verbally committed to John Heisey, Corporate
Controller, to establish a split dollar policy arrangement (see Schedule 2.24)
when his health permits.
 
Item 2.13(a).    On September 26, 1996, Dynamet extended the termination date on
a $5,000,000 committed line of credit from PNC Bank. Effective as of October 1,
1996, the termination date was extended from September 30, 1996 to September 30,
1997.
 
Item 2.13(a).    On September 26, 1996, Dynamet extended the termination date on
a Working Cash® Line of Credit from PNC Bank. Effective as of October 1, 1996,
the termination date was extended from April 30, 1997 to September 30, 1997.
 
Item 2.13(a).    As of July 2, 1996, Dynamet entered into a $4,000,000 term/time
note with PNC Bank. This note is collateralized by securities owned by Peter and
Ada Rossin. Peter Rossin has a security agreement on the Dynamet corporate
airplane, if this debt is not paid.
 
Item 2.13(a).    As of January 24, 1996, Dynamet entered into an Amended and
Restated Loan Agreement related to a $5,000,000 line of credit from Mellon Bank.
 
Item 2.13(a).    Dynamet is party to the following debt agreements.
 

 
—
 
Washington County Industrial Revenue Bonds, due 1997 related to Forged Products
Division. 1

 

 
—
 
4% Pennsylvania Industrial Development Authority (PIDA) loan due 1998, related
to Dynamet’s rolling mill. 2

 

 
—
 
4 1/2% PIDA loan due 2001, related to Forged Products Division.1

 

 
—
 
3 % PIDA loan due 2003, related to Forged Products Division. 1

 

 
—
 
0% Urban Development Action Grant (UDAG) loan due 2006, related to Forged
Products Division. 1

 
1
 
The debt agreements have been provided to CTC.

2
 
A copy of the lease agreement related to this debt has been provided to CTC.

--------------------------------------------------------------------------------

 
Item 2.13(b).    On February 2, 1996, Dynamet terminated a Supplemental
Executive Retirement Plan with Alfred Donlevy and entered into an agreement with
him to provide compensation and benefits through January 1, 1997. As of December
19, 1996, Dynamet entered into another agreement with Alfred Donlevy for
part-time employment. Copies of these agreements have been provided to CTC.
 
Item 2.13(b).    On March 21, 1996, Dynamet terminated a Supplemental Executive
Retirement Plan with Viola G. Taboni and entered into a new agreement. A copy of
the new agreement has been provided to CTC.
 
Item 2.13(b).    Dynamet has entered into the following consulting agreements
(verbal and written):
 
Consultant

--------------------------------------------------------------------------------

 
Purpose

--------------------------------------------------------------------------------

AIM Resources
 
Marketing study for Forged Products Division (completed).
Hank Johnson
 
Assistance with identifying opportunities, particularly for federal government
contracts (ongoing).
Jerry Friedman
 
Assistance with work on Rapid Net Shape Form research project (see item 2.14(k))
(ongoing).
Leo Wright Associates
 
Assistance in developing contacts in Washington (ongoing).
Williamette Management Associates
 
Valuation of Dynamet common stock, Forged Products Division and Stelkast
preferred stock (completed).
Price Waterhouse LLP
 
Tax consulting (ongoing).
Kirkpatrick & Lockhart LLP
 
Various corporate and legal issues (ongoing).
William G. Stewart
 
Corporate advisor (see item 2.8(n)(i)).
Charles J. Queenan
 
Corporate advisor (see item 2.8(n)(i)).
Thomas Marshall
 
Corporate advisor (see item 2.8(n)(i)).

--------------------------------------------------------------------------------

 
Southwest Pennsylvania Industrial Resource Center (SPIRC)
 
Corporate ISO 9000 assistance, various programs at Forged Products Division
(completed).
Glenn Malone Electroformed Nickel
 
Electroforming process for for Rapid Net Shape form research project
(ongoing).  
Barry Reichert
 
Hand polishing for Forged Products Division Porous Coating (completed).

 
In addition, Dynamet has entered into an agreement with Alfred Donlevy, a former
employee, to assist with the CTC environmental review in 1997.
 
Item 2.13(b).    Dynamet has entered into a supplemental employment retirement
plan with Edison Speer, Senior Vice President—Titanium Operations. A copy of the
agreement has been provided to CTC.
 
Item 2.13(b).    Dynamet has entered into split-dollar insurance agreements with
various employees. See item 2.24(a).
 
Item 2.13(c).    Dynamet is a party to a collective bargaining agreement with
the United Steel Workers of America, Local 7887, through August 31, 2001. A copy
of the agreement has been provided to CTC.
 
Item 2.13(d).    Dynamet has purchased the following letters of credit from
Mellon Bank:
 
Expiration Date

--------------------------------------------------------------------------------

  
For

--------------------------------------------------------------------------------

  
Approximate Amount

--------------------------------------------------------------------------------

 
10/15/97
  
Industrial Development Bonds
  
$
550,000
*
06/30/97
  
Workers Compensation Insurance
  
$
542,000
 

--------------------------------------------------------------------------------

*
 
This letter of credit will be canceled when the assets of the Forged Products
Division are sold to Peter Stephans. See item 2.5(b).

 
Item 2.13(d).    In connection with various tax and employee benefit matters,
Dynamet has granted Price Waterhouse representatives and Kirkpatrick & Lockhart
representatives power of attorney.
 
Item 2.13(e).    Dynamet is a party to the sales agency, manufacturer’s
representative and/or distributor agreements listed in the attached (Reference
H). Dynamet also sells products to other distributors under terms of specific
purchase orders.

--------------------------------------------------------------------------------

 
Item 2.13(g).    Dynamet is a party to purchase agreements in excess of $250,000
from one or more related suppliers in the attachments, as outlined in the
following table.
 

   
Attachment

--------------------------------------------------------------------------------

Division

--------------------------------------------------------------------------------

 
Inventory

--------------------------------------------------------------------------------

  
Other

--------------------------------------------------------------------------------

Corporate
 
Not Applicable
  
D
Mill Products
 
A
  
D
Fine Wire & Shapes
 
B
  
D
Forged Products
 
C
  
C
Powder Products
 
D
  
D
Technical Services
 
Not Applicable
  
D

 
NA = Not Applicable
 
Item 2.13(h).    Dynamet is a party to sales agreements in excess of $250,000
from one or related customers as outlined in the following table. Note that
these lists only reflect releases under annual contracts and not the total
amount under annual contracts.
 
Division

--------------------------------------------------------------------------------

 
List Attached

--------------------------------------------------------------------------------

Corporate
 
Not Applicable
Mill Products
 
E
Fine Wire & Shapes
 
E
Forged Products
 
F
Powder Products
 
G
Technical Services
 
None

 
Item 2.13(i).    Dynamet has sold its copper coating facility to Ulbrich
Stainless. Dynamet was responsible for removing the cyanide bath at an estimated
cost of $40,000. The facility was removed prior to January 1, 1997.
 
Item 2.13(j).    Dynamet is party to agreements for capital expenditures in
excess of $250,000 for any single project, as outlined in the attached list
(Reference L).
 
Item 2.13(k).    Dynamet is a party to the following research agreements:
 

 
—
 
1995 Agreement dated September 18, 1995 with Allegheny Singer Research Institute
for research related to a bone replacement system aided by proteins and growth

--------------------------------------------------------------------------------

 
factors bound to the titanium surface. This agreement will be included with the
assets of the Forged Products Division to be sold to Peter Stephans.

 

 
—
 
Agreement number N00014-95-2-0019 dated June 18, 1994 with the U. S. Government
office of Naval Research for the development of a rapid net shape form. Also
parties to the agreement are:

 

 
—
 
Brush Wellman Corporation

 

 
—
 
Matsys Incorporated

 
Item 2.13(m).    Dynamet is a lessor of the following items:
 
Item

--------------------------------------------------------------------------------

 
Location

--------------------------------------------------------------------------------

Photocopy machine
 
Bridgeville, PA
Postage machine meter
 
Washington, PA
Storage building
 
Bridgeville, PA
Florida land
 
Clearwater, FL1
Rolling, Mill building
 
Washington, PA2
Forged Products Division Building
 
McMurray, PA2

--------------------------------------------------------------------------------

1
 
CTC has been provided copies of Amendments to the Lease Agreements for this
land.

 
2
 
CTC has been provided a copy of the lease agreement.

 
Item 2.13(n).    Dynamet is a party to the follow non-competition and/or
nondisclosure or secrecy agreements outlined in the attached (Reference M). In
addition, various Dynamet personnel have periodically signed confidentiality
agreements related to the potential acquisition of other companies. There is no
complete centralized record of the agreements signed.
 
Item 2.13(o).    Dynamet has a policy, a copy of which is attached (Reference
R), to match contributions up to $2,000, to educational institutions that are
made by officers and advisors of Dynamet.
 
Item 2.13(o).    Dynamet has committed to matching employees contributions, to
United Way, up to $15,000, for the current United Way campaign.

--------------------------------------------------------------------------------

 
SCHEDULE 2.14
 
DYNAMET INCORPORATED
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Permits and Registrations
 
Item 2.14    Certificates of occupancy:
 
Number

--------------------------------------------------------------------------------

  
Facility

--------------------------------------------------------------------------------

  
Date

--------------------------------------------------------------------------------

82143:
  
Dynamet—Washington, PA
  
3/8/85
94206:
  
Dynamet—Washington, PA
  
9/11/85
100824:
  
Dynamet—Hidden Valley Road, McMurray
  
6/2/86
112790
  
Dynamet—Hidden Valley Road, McMurray
  
11/24/86
114540
  
Dynamet—Washington, PA (R&D Building)
  
3/16/87
114541
  
Dynamet—Washington, PA (Rolling Mill)
  
3/16/87
146508
  
Dynamet—Hidden Valley Road, McMurray
  
7/14/88
148192
  
Dynamet—Hidden Valley Road, McMurray
  
7/14/88
181145
  
Dynamet—Washington, PA
  
3/7/91

 
Note:    This list is not all inclusive, other certificates are filed at
individual sites.
 
Item 2.14.    Dynamet has not developed and does not have on file, at each
facility, affirmative action programs.
 
Item 2.14.    Also see item 2.12.

--------------------------------------------------------------------------------

 
SCHEDULE 2.15
 
DYNAMET INCORPORATED
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Necessary Approvals
 
Item 2.15(c).    In order to transfer the assets of the Forged Products Division
to Peter Stephans, consents might be required under the terms of debt agreements
and orders from certain customers. The debt agreements have been provided to
CTC.

--------------------------------------------------------------------------------

 
SCHEDULE 2.16
 
DYNAMET INCORPORATED
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Liens
 
Item 2.16.    The long-term debt agreements Dynamet has entered into generally
have placed liens on Dynamet’s property, plant and equipment. See item 2.17 for
title on properties.
 
Item 2.16.    In connection with Dynamet’s purchase of the Powder Productions
facility located in Bridgeville, PA, Dynamet received a Declaration of Easements
and covenants from Cyclops Corporation.
 
Item 2.16.    Also see section 2.17.
 
Item 2.16(d).    Peter C. Rossin has a security interest in Dynamet’s corporate
aircraft. See item 4. 1 (c)(vii).

--------------------------------------------------------------------------------

SCHEDULE 2.17
 
 
DYNAMET INCORPORATED
 
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Real Estate Interests
 
Item 2.17.    List and summary description:
 
Locations

--------------------------------------------------------------------------------

  
Land (Acres)

--------------------------------------------------------------------------------

    
Buildings (Sq. feet)

--------------------------------------------------------------------------------

Washington, PA:
  
22
      
Corporate offices
         
5,800
Rolling Mill
         
99,000
Coil finishing
         
22,300
Fine wire
         
13,500
Shapes
         
21,000
Metal prep
         
9,000
Research and development
         
14,350
           

--------------------------------------------------------------------------------

           
184,950
Clearwater, FL
  
10
    
63,300
Stanton, CA
  
1
    
8,640
McMurray, PA
  
15
    
41,000
Bridgeville, PA
  
3
    
38,000
    

--------------------------------------------------------------------------------

    

--------------------------------------------------------------------------------

Total
  
51
    
335,890
    

--------------------------------------------------------------------------------

    

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

 
Item 2.17.    The following title insurance policies exist on these properties:
 
Property

--------------------------------------------------------------------------------

 
Insurance Company

--------------------------------------------------------------------------------

 
Date of Policy

--------------------------------------------------------------------------------

Washington, PA (Parcel 1)
 
Commonwealth Land Title Insurance
 
December 6, 1982
Stanton, CA
 
Suncoast Title Company
 
January 30, 1991
McMurray, PA (Parcel 1)
 
Commonwealth Land Title Insurance
 
March 25, 1986
McMurray, PA (Parcel 2)
 
Commonwealth Land Title Insurance*
 
September 15, 1989*
Bridgeville, PA
 
Chicago Title Insurance
 
July 2, 1991
Bridgeville, PA
 
Chicago Title Insurance
 
May 16, 1994
Clearwater, FL
 
Commonwealth Land Title Insurance Company
 
February 9, 1980

--------------------------------------------------------------------------------

*
 
Subject to confirmation.

 
Item 2.17.    Titles to Dynamet’s properties are vested in Dynamet Incorporated
except as outlined below:
 
McMurray Property
 
Title to the McMurray property (Parcel 1) is currently vested in the Washington
Industrial Development Corporation by virtue of a deed dated March 24, 1986, and
recorded in the Office of Recorder of Deeds, Washington County, Washington,
Pennsylvania. There is a Memorandum of Lease dated March 25, 1986, between
Washington County Industrial Development Corporation and Dynamet Incorporated.
This Lease Agreement terminates on August 1, 2001, with the right to purchase
the same until August 1, 2001. This deed represents an Installment Sale Contract
associated with financing obtained from the Washington County Industrial
Development Corporation.
 
Rolling Mill
 
Title to the Washington, PA property that Dynamet’s Rolling Mill is located on
(Parcel 1) is currently vested in the Washington Industrial Development
Corporation by virtue of a deed dated December 1, 1982, and recorded in the
Office of Recorder of Deeds, Washington County, Washington, Pennsylvania. There
is a Memorandum of Lease dated December 1, 1982, between Washington County
Industrial Development Corporation and Dynamet Incorporated. This lease
agreement terminates on January 1, 1998, with the right to purchase the same
until January 1, 1998. This deed represents an Installment Sale Contract

--------------------------------------------------------------------------------

associated with financing obtained from the Washington County Industrial
Development Corporation.
 
Florida Land
 
The land Dynamet’s facilities are built on is leased from the St.
Petersburg-Clearwater International Airport. CTC has been provided copies of the
Amendments to the Lease Agreements for this land.
 
Item 2.17(a).    Real Estate—Insurance Companies
 
Liberty Mutual Insurance Company has brought to Dynamet’s attention that Dynamet
might not be in compliance with the National Fire Protection Association Life
Safety Code and the Pennsylvania Code titled “34 Labor and Industry” both
dealing with emergency lighting.

--------------------------------------------------------------------------------

 
SCHEDULE 2.18
 
DYNAMET INCORPORATED
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Permitted Related Party Transactions
 
Item 2.18(a).    Dynamet’s Forged Products Division has accounts receivable due
from Stelkast Incorporated of $520,000 as of January 3, 1997. Note that amount
is estimated.
 
Item 2.18(a).    Dynamet owns approximately 3,500 shares of preferred stock of
Stelkast Incorporated with a face value of approximately $3,500,000 as of
January 3, 1997. Note that amount is estimated.
 
Item 2.18(a).    Dynamet owns 360 shares of preferred stock of Point South
Enterprises Corporation with a face value of $360,000 as of January 3, 1997.
 
Item 2.18(a).    Certain Dynamet employees have agreements with Dynamet (see
Schedule 2.24) related to insurance policies. The terms of these agreements
require certain amounts to be repaid.
 
Item 2.18(b).    Dynamet has entered into Support Service Agreements with
Stelkast Incorporated and Point South Enterprises Corporation.
 
Item 2.18(d).    In August, 1996, Dynamet made a $500,000 contribution to the
Rossin Foundation, a related party to Dynamet.
 
Item 2.18(d).    Subsequent to the Balance Sheet Date, Dynamet made payments on
life insurance related to officers or employees of Dynamet.
 
Item 2.18(d).    Subsequent to the Balance Sheet Date, Dynamet had the following
transactions with Stelkast. See item 2.9(a)(iii). These transactions will
continue through the closing of this transaction.
 

 
—
 
Sales of inventory for which accounts receivable are created.

 

 
—
 
Payment of Stelkast employees payroll (including approximately $85,000 of
bonuses paid to Stelkast personnel in November 1996) and benefits in exchange
for preferred stock.

 

 
—
 
Utilization of Dynamet personnel and facilities at the Forged Products Division
for Stelkast.

--------------------------------------------------------------------------------

 
SCHEDULE 2.20
 
DYNAMET INCORPORATED
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Compensation Arrangements
 
Item 2.20(a).    Salary information for employees whose annual compensation
exceeds $75,000 has been provided to CTC.
 
Bank Accounts
 
Item 2.20(b).    Bank account information is attached (Reference K).
 
Item 2.20(c).    Directors of Dynamet are:
 
Peter C. Rossin
Peter N. Stephans
 
Officers of Dynamet are:
 
Peter C. Rossin, Chairman and Chief Executive Officer
Peter N. Stephans, President
Robert J. Dickson, Senior Vice President and Chief Financial Officer and
Treasurer
Edison C. Speer, Senior Vice President—Titanium Operations
Viola G. Taboni, Secretary and Assistant Treasurer
William B. Kent, Vice President and General Manager—Powder Products Division
David B. Tenison, Vice President and General Manager—Forged Products Division
Louis W. Lherbier, Vice President and Technical Director
John L. Heisey, Corporate Controller
 
PNC Bank is the Trustee for the Dynamet Defined Contribution Plan for Salaried
Employees and the Dynamet Defined Contribution Plan for Non-Union Hourly
Employees.
 
The fiduciary and plan administrator of all Dynamet’s employee benefits plans is
Dynamet Incorporated. Robert Dickson has signed the annual employee benefit
filings, as an officer of Dynamet.

--------------------------------------------------------------------------------

 
SCHEDULE 2.21
 
DYNAMET INCORPORATED
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Labor Relations
 
Item 2.21(a).    The hourly employees of Dynamet located in Washington, PA and
McMurray, PA are represented by the United Steel Workers Union Local No. 7887. A
copy of this agreement has been provided to CTC.
 
Item 2.21(b).    On July 29, 1996 a complaint was filed with the National Labor
Relations Board (NLRB) which alleges that Dynam6t, by unilaterally changing
overtime policies, failed and refused to bargain collectively and in good faith
with United Steelworkers of America, Local 7887. This matter is to be settled
through arbitration, The arbitration hearing has been scheduled for February 19,
1997,
 
Item 2.21(e).    Under the terms of the debt agreements related to the Forged
Products Division and the Rolling Mill, if these facilities are relocated,
closed or terminated, the remaining debt might become immediately payable.

--------------------------------------------------------------------------------

 
SCHEDULE 2.22
 
DYNAMET INCORPORATED
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Insurance Policies
 
Item 2.22.    See attached for details of insurance policies currently in force.
Pending claims under these or previous policies are summarized below. Open
claims under the workers compensation policies are attached (Reference O).
 
Policy

--------------------------------------------------------------------------------

  
Claim Description

--------------------------------------------------------------------------------

  
Date

--------------------------------------------------------------------------------

  
Estimated
Amount

--------------------------------------------------------------------------------

Property Insurance
  
Electrical fire at Dynamet
  
Early 1996
  
$150,0001
Federal (Chubb) Insurance
  
Powder Products
         
Employment Practices
Federal (Chubb) Insurance
  
Donald Marple EEOC claim
  
07/08/96
  
Unknown,
if any
Aircraft Products Liability
Associated Aviation
Underwriters
  
GE request for information2
  
06/20/96
  
Unknown,
if any
Aircraft Products Liability
Association Aviation
Underwriters
  
HDI material provided to3 Dynamet by Oremet
  
11/19/96
  
Unknown,
if any
Boller & Machinery Federal
(Chubb) Insurance
  
Transformer damage
  
10/30/96
  
$20,000

--------------------------------------------------------------------------------

1
 
Partial payments of approximately $113,000 have been received from insurance
company.

 
2
 
CTC has been provided with a copy of the information received from GE.

 
3
 
CTC has been provided with a copy of the notification sent to the insurance
company.

 
Item 2.22.    As of the conclusion of the June 30, 1987 policy year Chubb
Insurance canceled Dynamet’s coverage under the workers compensation insurance
policy. In connection with various requests for quotation over several years,
certain insurance companies have decided not to offer coverage to Dynamet,
particularly for boiler and machinery coverage.

--------------------------------------------------------------------------------

 
Item 2.22.    Dynamet periodically has insurance company representatives tour
the facilities and inspect equipment for safety and operational purposes. A list
of open recommendations is attached (Reference P).

--------------------------------------------------------------------------------

 
SCHEDULE 2.23
 
DYNAMET INCORPORATED
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Patents and Intellectual Property Rights
 
Patents:
 
The following patents are to be sold to Peter Stephans, with the assets of the
Forged Products Division.
 
Number

--------------------------------------------------------------------------------

  
Description

--------------------------------------------------------------------------------

  
Location

--------------------------------------------------------------------------------

  
Date

--------------------------------------------------------------------------------

4,612,160
  
Porous metal coating process and mold
  
US
  
09/16/86
4,854,496
  
Porous metal coated implant
  
US
  
08/08/89
5,027,998
  
Clamping mechanism for porous implant
  
US
  
07/02/91
5,246,530
  
Method of producing porous metal surface
  
US
  
09/02/93
1,243,956
  
Porous metal coating process and mold
  
Canada
  
04/12/88
1,292,189
  
Porous metal coated implant
  
Canada
  
11/19/91

 
Dynamet has also submitted an application for a patent on a powder metallurgy
process for manufacturing a die. This patent, when issued, will be retained by
Dynamet.
 
Trademarks:
 
Name

--------------------------------------------------------------------------------

  
Location

--------------------------------------------------------------------------------

  
Number

--------------------------------------------------------------------------------

  
Expiration Date

--------------------------------------------------------------------------------

Dynamet
  
Germany
  
2,051,361
  
12/07/98
Dynamet
  
Canada
  
416,930
  
09/17/2008
Dynamet
  
Switzerland
  
390,929
  
06/12/2001
Dynamet
  
United Kingdom
  
1,466,985
  
06/11/98
Dynamet
  
Italy
  
00624678
  
06/26/2001
Dynamet
  
France
  
1671128
  
06/13/2001
Dynamet
  
United States
  
1,192,847
  
08/29/2003

--------------------------------------------------------------------------------

 
Porous Coating Patent
 
A Dynamet customer, Osteonics Corporation, approached a competitor, Howmedica,
regarding Howmedica’s potentially violating an Osteonics patent. Howmedica
responded by informing Osteonics that Osteonics could be in violation of
Howmedica’s patents for porous coating. Dynamet supplies porous coated medical
implants to Osteonics. Osteonics has informed Dynamet that Howmedica approached
Osteonics and Osteonics has discussed Dynamet’s patents with Dynamet personnel.
 
Dynamet Technology, Inc. v. Dynamet Incorporated
 
On November 27, 1991, an action was filed against Dynamet Incorporated (Civil
Action No. 91-131225) in the United States District Court for the District of
Massachusetts by Dynamet Technology, Inc. Dynamet Technology, Inc. sought
injunctive relief and damages based upon allegations that Dynamet’s use of
“Dynamet” in connection with powder metal products infringes, dilutes and
unfairly competes with Dynamet Technologies trade name and trademark. The
Complaint was not served on Dynamet. Subsequently, the Complaint was refiled in
the same Court under Civil Action No. 92-11026-4. After counsel for the parties
engaged in discussions concerning the matter, the plaintiff agreed to dismiss
the Complaint without prejudice and a Stipulated Dismissal without Prejudice was
filed on January 20, 1993.

--------------------------------------------------------------------------------

 
SCHEDULE 2.24
 
DYNAMET INCORPORATED
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
ERISA Disclosures
 
Item 2.24(a).    List of employee benefit plans:
 
Pension Plans:
 
Dynamet Defined Contribution Plan For Salaried Employees.
 
Dynamet Defined Contribution Plan for Non-Union Hourly Employees.
 
National Industrial Group Multi-Employer Group Pension Plan (through 9/95).
 
UJU Multi-Employer Group Pension Plan (since 9/95).
 
Dvnamet Powder Products Defined Benefit Pension Plan-Terminated 12/95.
Dynamet did not request a determination letter from the IRS for the termination
of this plan.
 
Employee Welfare Plans:
 
Group Indemnity (Blue Cross, Blue Shield and Major Medical) Medical Plan through
Blue Cross of Western Pennsylvania. Dynamet pays the full premium for non-
Pennsylvania employees and a partial premium for certain Pennsylvania employees,
under the indemnity plan.
 
Section 125 Plan for Portion of Indemnity Plan Premium Paid for by Individuals.
 
Group Point of Service Medical Plan (Select Blue) through Blue Cross of Western
Pennsylvania.
 
Group Life Insurance Plan through TransGeneral Insurance.
 
Group Long-Term Disability Plan through TransGeneral Insurance.
 
Group Short-Term Disability Plan through TransGeneral Insurance.

--------------------------------------------------------------------------------

 
Supplemental Retirement (Non-ERISA)
 
Alfred L. Donlevy (Retired) through January 1, 1997. (Dynamet also has entered
into an agreement with A. Donlevy to assist with the CTC environmental review in
1997.)
 
Viola G. Taboni (Active Employee).
 
Edison C. Speer (Active Employee).
 
Split Dollar Life Insurance Plans: (Non-ERISA)
 
Peter and Ada Rossin (two policies). See item 4.1(c)(vii).
 
Peter and Joan Stephans (three policies). See item 4.1(c)(vii).
 
Additional Split Dollar Policies on Active Employees: (Non-ERISA)
 
Connie J. Allen*
 
Timothy J. Gustafson
Clifford M. Bugle
 
William P. Kent
Kevin J. Cain
 
Philip A. Lodge
Robert J. Dickson
 
Buford Riffee
George K. Farrell
 
Alan R. Rossin
Dennis P. Fitzgerald*
 
Jon B. Sweat
David B. Tenison*
   

 
*
 
Asset (cumulative premiums paid) on Dynamet’s corporate balance sheet. To be
included with the Forged Products Division assets sold to Peter Stephans.

 
In addition, Dynamet has verbally committed to John Heisey to establish a split
dollar policy arrangement when his health permits.
 
Item 2.24(m).    Viola Taboni might elect to retire in early 1997 which would
result in the terms of the supplemental retirement plan covering her becoming
effective, compensation payments might be due to V. Taboni for 1997 and life
insurance policies might be distributed with a supplemental payment to gross the
policy value up for taxes.

--------------------------------------------------------------------------------

SCHEDULE 2.25
 
 
DYNAMET INCORPORATED
 
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Environmental Matters
 
Item 2.25(a).
 

 
(i)
 
A plan approval issued by the Pennsylvania Department of Environmental
Protection may be required with respect to the installation of a new torit
baghouse at the Washington, Pennsylvania facility.

 

 
(ii)
 
An air permit may be required for emissions from a grit blaster at the
Clearwater, Florida facility.

 

 
(iii)
 
 The following air emission sources located at the McMurray, PA facility do not
have permits:

 

 
a)
 
Spray ceramic coating (Yttrium) in an area next to an exhaust fan.

 

 
b)
 
The water blaster unit (steam only).

 

 
c)
 
Ultrasonic cleaner unit with water vapors.

 

 
d)
 
Small Ultrasonic cleaner unit with isopropyl alcohol.

 

 
e)
 
Paint spray booth (as referenced in Section 3.3.1 of the December 1988 Earth
Sciences Consultants, Inc. Environmental Audit, identified in Item 2.25.(l)).

 

 
f)
 
The electrical discharge machine.

 

 
g)
 
Buffing and grinding operation.

 

 
Permits
 
may be required for one or more of these sources.

 

 
(iv)
 
The facilities in Bridgeville, McMurray and Washington, Pennsylvania may not
have maintained records of residual waste generation and off-site disposal or
submitted reports required by the Pennsylvania Department of Environmental
Protection residual waste regulations pertaining to residual waste generator
duties, 25 Pa Code §§ 287.51—287.56.

 

 
(v)
 
The facility in Bridgeville, Pennsylvania has not submitted discharge monitoring
reports to the Pennsylvania Department of Environmental Protection as required
by National Pollution Discharge Elimination System Permit No. PA0205419.

 

 
(vi)
 
See Item 2.25(c)

--------------------------------------------------------------------------------

 
Item 2.25(c).
 

 
(i)
 
The Clearwater facility has, on two occasions in two years, exceeded each of the
pH and fluoride limitations contained in its pretreatment permit issued by the
City of Largo. The cost of capital equipment and/or improvements necessary to
meet the permit limitations for pH and fluoride will not exceed $50,000.

 

 
(ii)
 
On December 5, 1996, Dynamet received a letter from The Washington-East
Washington Joint Authority (WEWJA). The letter served as a Notice of Violation
in accordance with the Pretreatment Compliance Monitoring and Enforcement
Guidance of WEWJA regarding a chromium exceedance. Dynamet is in the process of
resampling. In the event this sample should exceed the WEWJA limits, the Notice
of Violation states that an Administrative Order will be issued to Dynamet. CTC
has been provided with a copy of this letter. The cost of capital equipment
and/or improvements necessary to meet the permit limitations for chromium will
not exceed $50,000.

 

 
(ii)
 
Asbestos-containing materials are present in the roof of the Bridgeville,
Pennsylvania facility as described in Section 3.8 of the Phase I Environmental
Site Assessment for Bridgeville dated December 17, 1990 and in Task 5 in
Addendum No. 1 dated January 7, 1991 to the Phase I Environmental Site
Assessment, both of which are identified in Schedule 2.25(l).

 
Item 2.5(k).    A notice may be required to be placed in a deed for conveyance
of the real property located in Collier Township, Allegheny County,
Pennsylvania, regarding hazardous substances identified in Section 4.1 of the
Phase I Environmental Site Assessment for the Powder Products Division, Cytemp
Specialty Steel dated December 17, 1990 and referenced in Item 2.25(l).
 
Item 2.25(l).    Dynamet has had the following environmental reports prepared:
 
Review

--------------------------------------------------------------------------------

                      
Date

--------------------------------------------------------------------------------

Preliminary Draft Technical Report,
                      
December 17, 1990 *
Phase I Environmental Site
Assessment, Powder Products
Division, Cytemp Specialty Steel,
Bridgeville and Collier Townships,
Allegheny County, Pennsylvania prepared
by Earth Sciences Consultants, Inc.
(“Technical Report”)
                        
Addendum No. 1 to Technical Report
                      
January 7, 1991 *
prepared by Earth Sciences
Consultants, Inc.
                        

--------------------------------------------------------------------------------

Environmental Audits of Dynamet facilities
 
December, 1988 *
as of December, 1988 prepared by
Earth Sciences Consultants, Inc.
   

 
*
 
Copies of these reports have been provided to CTC.

--------------------------------------------------------------------------------

 
SCHEDULE 4.01
 
DYNAMET INCORPORATED
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Assets to be Distributed
 
Item 4. 1(c)(vii).    The assets of Dynamet planned to be distributed to
shareholders are:
 

 
—
 
Corporate aircraft. 1981 Hawker Siddeley 125-700A, (N96PR).

 

 
—
 
Collateral assignment agreements for the following insurance policies on the
lives of Peter C. and Ada E. Rossin:

 
Policy #

--------------------------------------------------------------------------------

 
Insurance Company

--------------------------------------------------------------------------------

4064025*
 
Manufacturers Life Insurance
73869759 *
 
Prudential Insurance

 

 
—
 
Collateral assignment agreements for the following insurance policies on the
lives of Peter N. and Joan R. Stephans:

 
Policy #

--------------------------------------------------------------------------------

 
Insurance Company

--------------------------------------------------------------------------------

63665174 *
 
Prudential Insurance
73761209 *
 
Prudential Insurance
77696993 *
 
Prudential Insurance

 

 
—
 
360 shares of preferred stock of Pointe South Enterprises Corporation and the
dividends receivable from this stock.

 

 
—
 
Corporate automobile of Peter Rossin. 1997 Cadillac Concours SN
IG6KF5297VU223204.

 

 
—
 
Cash in an amount equal to the difference between the above assets, previous
distributions and the total of the “accumulated adjustment account” as of the
Closing Date.

 
*
 
Dynamet is currently evaluating these insurance policies to determine if a
better alternative exists than distributing, with no net impact on the
transaction with CTC.

--------------------------------------------------------------------------------

 
SCHEDULE 5.07
 
DYNAMET INCORPORATED
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Supplemental Employee Retirement Programs
 
Item 5.7.    Dynamet has written agreements providing supplemental employee
retirement programs for the following:
 
Alfred L. Donlevy (Retired) through January 1, 1997 (Dynamet also has entered
into an agreement with A. Donlevy to assist with the CTC environmental review in
1997.)
 
Viola G. Taboni (Active Employee)
 
Edison C. Speer (Active Employee)
 
Dynamet has made an accrual, for financial reporting purposes, for these
programs. However, see item 2.06.
 
Copies of these agreements have been provided to CTC.

--------------------------------------------------------------------------------

 
SCHEDULE 9.03
 
DYNAMET INCORPORATED
SCHEDULES TO AGREEMENT AND PLAN OF MERGER
 
Forged Products Division Assets
 
Item 9.3.    The assets of the Forged Products Division generally consist of all
assets and liabilities reflected in the division financial statements of Forged
Products Division. A more specific list follows:
 

 
—
 
Petty cash fund maintained in McMurray, PA

 

 
—
 
Accounts receivable balances for inventory produced and sold by Forged Products
Division, including the accounts receivable balance from Stelkast

 

 
—
 
Inventory physically located in McMurray or Forged Products Division work-in-
process inventory located at a subcontractor

 

 
—
 
Deposits reflected on the division financial statements

 

 
—
 
Land and building located in McMurray, PA, including all easements, rights and
privileges appurtenant to the land and building.

 

 
—
 
Machinery, equipment, furniture, computers, software and fixtures located in
McMurray, PA

 

 
—
 
All customer orders and agreements related to the business of Forged Products
Division

 

 
—
 
The support services agreements with Stelkast and Pointe South Enterprises

 

 
—
 
The corporate automobile driven by Peter Stephans

 

 
—
 
The Southpointe Golf Club memberships under the names of Peter Rossin and Peter
Stephans (founding members) and Viola Taboni and David Tenison (corporate
members)

 

 
—
 
All intellectual and intangible property related to the operations of Forged
Products Division, including qualifications, applications and permits

 

 
—
 
The patents related to the porous coating process indicated on Schedule 2.23

 

 
—
 
The agreement with Allegheny Singer Research Institute indicated in item 2.13(k)

 

 
—
 
All personnel currently working in McMurray, PA, including hourly personnel
under the terms of the agreement with the United Steelworkers of America

--------------------------------------------------------------------------------

 

 
—
 
All accounts payable and accrued expenses of Forged Products Division as of the
date of the sale of the Forged Products Division assets

 

 
—
 
All accounting, personnel and other administrative records related to Forged
Products Division’s operations

 

 
—
 
The agreements and the assets (cumulative premiums paid) related to the split
dollar life insurance policies of C. Allen, D. Tenison and D. Fitzgerald.

 

 
—
 
All current and long-term debt balances, for the following debt, as of the date
of the sale of the Forged Products Division assets

 

 
—
 
Washington County Industrial Development Bonds

 

 
—
 
Urban Development Action Grant loan

 

 
—
 
1985 Pennsylvania Industrial Development Agency loan

 

 
—
 
1987 Pennsylvania Industrial Development Agency loan

 

 
—
 
Agreements between Dynamet and Forged Products Division for the following:

 

 
—
 
Testing services to be performed by Dynamet Materials Laboratory.

 

 
—
 
Chem milling services from Dynamet’s chemical milling operation.

 

 
—
 
Large diameter bar from Dynamet’s Pennsylvania and Florida facilities.

 

 
—
 
Research and development support.

 

 
—
 
Heat treating services from Dynamet’s finishing operations.

 
Item 9.3.    Stelkast Preferred Stock
 
The Stelkast Preferred Stock represents the shares of the 10% Cumulative
Preferred Stock held by Dynamet and the dividends receivable from the preferred
stock.

--------------------------------------------------------------------------------

 
DYNAMET INCORPORATED
ATTACHMENTS TO SCHEDULES
 
Reference

--------------------------------------------------------------------------------

  
Item(s)

--------------------------------------------------------------------------------

  
Attachment

--------------------------------------------------------------------------------

A
  
2.13(g)
  
Mill Products list of inventory purchase orders.
B
  
2.13(g)
  
Fine Wire & Shapes list of inventory purchase orders.
C
  
2.13(g)
  
Forged Products list of purchase orders.
D
  
2.13(g)
  
Other lists of purchase orders.
E
  
2.13(h)
  
Mill Products, Fine Wire & Shapes list of customer orders.
F
  
2.13(h)
  
Forged Products list of customer orders.
G
  
2.13(h)
  
Powder Products list of customer orders.
H
  
2.13(e)
  
Dynamet sales agency, manufacturer’s representative and/or distributor
agreements.
I
       
Not used.
J
       
Not used,
K
  
2.20(b)
  
Dynamet bank account information.
L
  
2.8(g) & 2.13(j)
  
Capital expenditures.
M
  
2.13(o)
  
Noncompetition and/or nondisclosure or secrecy agreements.
N
  
2.22
  
Insurance policies currently in force.
O
  
2.22
  
Workers’ compensation insurance claims.
P
  
2.22
  
Open insurance company recommendations.
Q
       
Not used.
R
  
2.13(o)
  
Policy re: matching contributions to educational institutions.
S
  
2.10
  
Inventory of a quality that might not be useable.
T
  
2.10
  
Inventory consignment, locations.
U
  
2.10
  
Inventory subcontractors.
V
  
2.07
  
Oremet HDI inventory shipped to customers