Document:

Exhibit 10.1

 

	
 
    	

    

 

June 15, 2015

 

Via E-Mail

 

Joseph E. Haniford

2525 Bridge Valley Lane

Knoxville, TN 37932

 

Dear Joe:

 

We are pleased to extend an offer of employment to you with Carpenter Technology Corporation. The terms of this agreement are contingent upon approval of the Human Resources Committee, and may be modified upon consultation with the Committee.  Should you accept this offer, your position will be Senior Vice President — Specialty Alloys Operations reporting to Tony R. Thene, Chief Executive Officer. You will work out of our Athens, Alabama location.  Your first day of employment will be July 13, 2015.  Highlights of your new position include:

 

·                              Annual Base Salary: $400,000 paid bi-weekly.

 

·                              Annual Bonus Plan: You will be eligible to participate in the Company’s Executive Bonus Compensation Plan or such successor arrangement (if any) as the Board may from time to time establish.  Your target annual bonus opportunity for the fiscal year ending June 30, 2016  is 80% of your annual base salary pro-rated based on earnings received during the fiscal year.  Zero to 200% of target will be earned based on achievement of Operating Income, Operating Margin, and Safety performance objectives, as well as a measure of your personal contribution towards overall results,  during the fiscal year ending June 30, 2016.  The relevant corporate performance objectives are determined by the Board or its Human Resources Committee each fiscal year.

 

·                              Sign-On Bonus: You will be paid a one-time lump sum payment of $100,000.00 less applicable taxes.  Payment will be made shortly after your start date, which is typically in your first normally scheduled paycheck.  All terms and conditions related to the Sign-On Bonus are contingent upon your execution of the  Employee Reimbursement Agreement — Sign-On Bonus attached hereto as Exhibit A.

 

·                              One-Time Restricted Stock Unit Award: On your start date, you will receive a one-time restricted stock unit award with respect to shares of common stock of the Company with a fair market value on that date of $100,000.00.  This award will vest, and 100% of the shares subject thereto will become deliverable, on the first anniversary of the grant date. This award will be documented in an individual award agreement as soon as practical following your start date, and such award agreement will then constitute the exclusive terms of the award.

 

·                              Long Term Incentive Grants:  The Company generally grants equity awards to its senior executives 

 

 

annually. The terms of these awards are determined by the Human Resources Committee of  Carpenter’s Board of Directors. You will be eligible to receive an annual award at the time these grants are made to all employees in similar positions. The next anticipated grant will be made in the first fiscal quarter of  2016. The current value of the annual equity incentive for your position is $500,000, but the actual award may vary based upon the plan design as reviewed and approved by the Human Resources Committee of the Board of Directors.

 

·                              Health, Welfare and Retirement Benefits:  You will be eligible to participate in the employee benefit programs applicable to our salaried employees generally, including the Company’s health and welfare plans, as well as the defined contribution plan.  In addition, you will be eligible to participate in the Deferred Compensation Plan for Officers and Key Employees of Carpenter Technology Corporation.  Your annual vacation entitlement will be 5 weeks. Except as herein provided, or as may be hereafter approved by the Board or its Human Resources Committee, you will not be entitled to further compensation or benefits.

 

·                              Executive Severance Plan: Your employment by the Company is “at will” and may be terminated by the Company or by you at any time.  However, if your employment terminates due to a termination by the Company without “cause” or a resignation by you with “good reason” (each, as defined in the attached Plan document), you will be entitled to receive the severance benefits included in the Severance Pay Plan for Executives of Carpenter Technology Corporation attached hereto as Exhibit D.

 

·                              Change in Control Severance: You will be entitled to severance benefits in the event of a change in control, as described in the Change in Control Severance Plan attached hereto as Exhibit E. For avoidance of doubt, benefits under this section will be in lieu of, not in addition to, the severance benefits described in the Severance Pay Plan for Executives of Carpenter Technology Corporation.

 

·                              Intellectual Property, Confidentiality and Restrictive Covenants: In your capacity as an executive of the Company, you will be exposed to the Company’s most sensitive and proprietary information and technology, and will be provided with access to the Company’s most valuable and carefully cultivated business relationships.  Accordingly, your employment is conditioned upon your execution of the Intellectual Property Agreement and Non-Competition Agreement     attached hereto as Exhibit F.

 

You represent and warrant that there are no restrictions, agreements or understandings whatsoever that would prevent or make unlawful your execution of this letter, that would be inconsistent or in conflict with this letter or your obligations hereunder, or that would otherwise prevent, limit or impair your ability to be employed by the Company.

 

Your ownership of or transactions in securities of the Company will be subject to the Company’s insider trading policies and stock ownership guidelines from time to time in effect.

 

Reimbursement by the Company of any expense will be subject to Company policies and practices in effect from time to time and will be further subject to the requirements of Treas. Reg. §§ 1.409A-3(i)(1)(iv)(A)(3), (4) and (5).

 

Any payment or transfer of property to you will be subject to tax withholding to the extent required by applicable law.

 

 

This letter constitutes our entire agreement and understanding regarding the matters addressed herein, and  merges and supersedes all prior or contemporaneous discussions, agreements, and understandings of every nature between us regarding these matters.

 

This letter will be governed by, and enforced in accordance with, the laws of the Commonwealth of Pennsylvania, without regard to the application of the principles of conflicts of laws.

 

This offer of employment is contingent upon your successfully meeting all of Carpenter’s terms of employment.  Among those is a pre-employment physical examination and providing documentation that verifies both your identity and eligibility for employment in the United States in compliance with the Immigration Reform and Control Act of 1986.

 

To acknowledge your consent and agreement to with the foregoing, please execute and date this letter in the space provided below and return an executed copy to me.  This letter may be signed in multiple counterparts, each of which will be deemed an original, and all of which together will constitute a single instrument.

 

Congratulations!

 

Sincerely,

 

	
/s/   John L. Rice
    	
 
    	
 
    
	
John   L. Rice
    	
 
    	
 
    
	
Vice   President Human Resources
    	
 
    	
 
    
	
Carpenter   Technology Corp.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
ACCEPTED:
    	
 
    	
DATE:
    
	
 
    	
 
    	
 
    
	
/s/ Joseph E. Haniford
    	
 
    	
6/16/15
    
	
Joseph   E. Haniford
    	
 
    	
 
    

 

 

	
Exhibit A
    	
 
    	

    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Carpenter Technology   Corporation
    	
 
    
	
CARPENTER   TECHNOLOGY CORPORATION
    	
 
    	
P.O. Box 14662
    	
 
    
	
EMPLOYEE   REIMBURSEMENT AGREEMENT
    	
 
    	
Reading, PA 19612-4662
    	
 
    
	
- SIGN-ON BONUS
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Tel.: 610.208.2000
    	
 
    

 

Directions: In order to receive a sign-on bonus, the Employee Reimbursement Agreement must be signed and returned to the Employment Department prior to payment.

 

	
Employee Name:
    	
Joseph E. Haniford
    
	
 
    	
 
    
	
Social Security Number:
    	
 
    
	
 
    	
 
    
	
Effective Start Date:
    	
July 1, 2015
    
	
 
    	
 
    
	
Department/Location:
    	
Carpenter Technology   Corp/Athens
    
	
 
    	
 
    
	
Hiring Manager:
    	
Tony Thene
    

 

This Agreement is effective as of the date signed. It is between Carpenter Technology Corporation (“Carpenter”) and, Joseph E. Haniford (the “Employee”), under the following terms and conditions.

 

1.              As part of the offer of employment made to you on June 4, 2015, Carpenter will pay a sign-on bonus of $100,000.00 less applicable taxes. Payment is made after your start date, usually in your first regularly scheduled pay.

 

2.              Both parties agree that the Employee’s employment with Carpenter Technology Corporation is at will. Both parties further agree that should the Employee voluntarily terminate employment with Carpenter Technology Corporation, or should Carpenter Technology Corporation terminate the Employee for cause within two (2) years after commencing work, the Employee agrees to repay the sign-on bonus in accordance with the schedule as indicated below. For the purposes of this agreement, For Cause shall mean:

 

a.              your conviction of a crime involving moral turpitude;

 

b.              you become incapable of performing the duties of your employment with Carpenter due to loss or suspension of any license or certification required for the performance of those duties;

 

c.               conduct by you that is found by Carpenter to constitute fraud, embezzlement, or theft that occurs during or in the course of your employment with Carpenter;

 

 

d.              intentional damage by you to Carpenter’s assets or property or the assets or property of Carpenter’s customers, vendors, or employees;

 

e.               intentional disclosure by you of Carpenter’s confidential information contrary to Carpenter’s policies or instructions received by you during or in the course of your employment with Carpenter;

 

f.                intentional engagement by you in any activity which would constitute a breach of duty of loyalty to Carpenter;

 

g.               conduct by you found by Carpenter to constitute a willful and continued failure or refusal by you to substantially perform your duties for Carpenter (except as a result of incapacity due to physical or mental illness),

 

h.              your failure to comply with Carpenter’s policies or practices despite having been advised and/or instructed regarding those policies or practices; or

 

i.                  conduct by you that is demonstrably and materially injurious to Carpenter, monetarily or otherwise, as determined by Carpenter, including injury to Carpenter’s reputation or conduct by you otherwise having an adverse effect upon Carpenter’s interests, as determined by Carpenter.

 

	
Length of Service from Effective Date of Hire
    	
 
    	
Amount of Reimbursement
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
6 months or less
    	
 
    	
100
    	
%
    
	
7 to 12 months
    	
 
    	
75
    	
%
    
	
13 to 18 months
    	
 
    	
50
    	
%
    
	
19 to 24 months
    	
 
    	
25
    	
%
    

 

3. The Employee acknowledges that his/her final pay may be applied to the repayment of the sign-on bonus.

 

	
/s/ Joseph E. Haniford
    	
 
    	
6/16/15
    
	
Joseph E. Haniford
    	
 
    	
Date
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/ Tony Thene
    	
 
    	
6/16/15
    
	
Tony Thene, Senior Vice   President & CFO
    	
 
    	
Date
    
	
Carpenter Technology   Corporation
    	
 
    	
 
    

 

 

Exhibit D

 

[Severance Pay Plan for Executives of Carpenter Technology Corporation]

 

D-1

 

Severance Pay Plan for Executives

of Carpenter Technology Corporation

As adopted July 1, 2010

 

Carpenter Technology Corporation, a Delaware corporation (the “Employer”), hereby adopts the Carpenter Technology Corporation Severance Pay Plan for Executives (the “Plan”) for the benefit of certain of its executives on the following terms and conditions:

 

The Plan, as set forth herein, provides consideration that is intended to assist with the transition period which may be experienced by executives of the Employer covered by the Plan in the event of a termination of employment under the enumerated circumstances in return for the executive’s execution of a valid and binding release (that is not subsequently revoked, rescinded, invalidated or challenged in any way), that releases the Employer from any and all legal or equitable claims related to the executive’s employment, or termination of employment, with the Employer notwithstanding any indemnification agreements that were in effect indemnifying the executives during their employment with the Employer.

 

This Plan is a “top-hat” plan within the meaning of Sections 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). As such, this Plan is subject to limited ERISA reporting and disclosure requirements, and is exempt from all other ERISA requirements. Distributions required or contemplated by this Plan or actions required to be taken under this Plan shall not be construed as creating a trust of any kind or a fiduciary relationship between the Employer and any Employee, any beneficiary, or any other person.

 

ARTICLE I

 

Definitions

 

In the Plan the singular includes the plural, use of the masculine pronoun includes the feminine pronoun and initially capitalized words shall have the following meanings unless the context clearly indicates otherwise. The use of any definition given to terms within this Plan shall be strictly limited to the interpretation of this Plan and shall in no way modify definitions of those same terms established elsewhere under law or contract.

 

Section 1.01. Base Salary. The total annual base salary payable to such Employee at the rate in effect on the Date of Termination. Base Salary shall not be reduced for any salary reduction contributions: (a) to cash or deferred arrangements under Code § 401(k), (b) to a cafeteria plan under Code § 125, or (c) to a nonqualified deferred compensation plan. Base Salary shall not take into account any bonuses, reimbursed expenses, credits or benefits (including benefits under any plan of deferred compensation), or any additional cash compensation or compensation payable in a form other than cash.

 

Section 1.02. Cause. Any termination of an Employee’s employment with an Employer which results from:

 

 

	
(i)
    	
Employee’s conviction of a crime involving   moral turpitude;
    
	
 
    	
 
    
	
(ii)
    	
Employee becoming incapable of performing   the duties of his or her employment with Employer due to loss or suspension   of any license or certification required for the performance of those duties;
    
	
 
    	
 
    
	
(iii)
    	
conduct by Employee that is found by   Employer to constitute fraud, embezzlement, or theft that occurs during or in   the course of Employee’s employment with Employer;
    
	
 
    	
 
    
	
(iv)
    	
intentional damage by Employee to Employer’s   assets or property or the assets or property of Employer’s customers,   vendors, or employees;
    
	
 
    	
 
    
	
(v)
    	
intentional disclosure by Employee of   Employer’s confidential information contrary to Employer’s policies or   instructions received by Employee during or in the course of Employee’s   employment with Employer;
    
	
 
    	
 
    
	
(vi)
    	
intentional engagement by Employee in any   activity which would constitute a breach of duty of loyalty to Employer;
    
	
 
    	
 
    
	
(vii)
    	
conduct by Employee found by Employer to   constitute a willful and continued failure or refusal by Employee to   substantially perform Employee’s duties for Employer (except as a result of   incapacity due to physical or mental illness),
    
	
 
    	
 
    
	
(viii)
    	
Employee’s failure to comply with Employer’s   policies or practices despite having been advised and/or instructed regarding   those policies or practices; or
    
	
 
    	
 
    
	
(ix)
    	
conduct by Employee that is demonstrably and   materially injurious to Employer, monetarily or otherwise, as determined by   Employer, including injury to Employer’s reputation or conduct by Employee   otherwise having an adverse affect upon Employer’s interests, as determined   by Employer.
    

 

Section 1.03. Code. The Internal Revenue Code of 1986, as now in effect or as hereafter amended. All citations to sections of the Code are to such sections as they may from time to time be amended or renumbered.

 

Section 1.04. Date of Termination. The Date of Termination shall be the date on which a Termination occurs.

 

Section 1.05. Employee. A full-time salaried employee of an Employer who is a United States resident, except a person (1) who has an individual employment or severance agreement which is then currently effective with an Employer, (2) is covered by a statutory severance entitlement, or (3) is a member of a bargaining unit.

 

Section 1.06. Employer. Employer means Carpenter Technology Corporation.

 

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Section 1.07. Good Reason. An Employee’s voluntary Termination within the ninety (90) day period following the initial existence of one or more of the following conditions arising without the Employee’s consent:

 

(a) a material diminution in the Employee’s Base Salary;

 

(b) a material permanent diminution in the Employee’s authority, duties, or responsibilities;

 

(c) a material change in the geographic location at which the Employee must perform services which is at least fifty (50) miles from his or her current principal place of work; or

 

(d) any other action or inaction that constitutes a material breach by the Employer of any employment agreement between the Employee and the Employer; and

 

within thirty (30) days following the initial existence of a condition described in subsections (a) through (d) above, the Employee must provide notice to the Employer of the existence of the condition, and the Employer must fail to remedy the condition within thirty (30) days of receipt of such notice.

 

Section 1.08. Severed Employee. An Employee who has experienced a Termination.

 

Section 1.09. Termination. An Employee’s termination of employment with the Employer, as described in Treas. Reg. § 1.409A-1(h); provided, however, that a Termination shall include only an involuntary discontinuance of the Employee’s employment without Cause as a result of the independent exercise of the unilateral authority of the Employer, as described in Treas. Reg. § 1.409A-1(n)(1), or a voluntary separation from service for Good Reason.

 

ARTICLE II

 

Eligibility and Participation

 

Section 2.01. Eligibility. An Employee shall be eligible to participate in the Plan if the Employee is:

 

(a) a Chief Executive Officer, Executive/Senior Vice President, Vice President, or Assistant Vice President of the Employer on the Date of Termination; and

 

(b) a member of the Employer’s “select group of management or highly compensated employees,” as defined in ERISA Sections 201(2), 301(a)(3), and 401(a)(1).

 

Section 2.02. Participation. An Employee who is eligible under Section 2.01 shall become a participant as of the effective date of the Plan, or, if later, the date the Employee becomes eligible to participate under Section 2.01.

 

Section 2.03. Duration of Participation. A Severed Employee shall cease to participate in the Plan on the date the Severed Employee is no longer entitled to a benefit under this Plan.

 

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ARTICLE III

 

Benefits

 

Section 3.01. Amount of Severance Benefit. Each Severed Employee shall be entitled, upon Termination and the execution of all required waivers, to the severance benefit provided below:

 

	
 
    	
 
    	
Chief Executive
   Officer
    	
 
    	
Executive/Senior
   Vice President
    	
 
    	
Vice President
    	
 
    	
Assistant Vice
   President
    
	
Continuation of Base Salary
    	
 
    	
18 months
    	
 
    	
12 months
    	
 
    	
12 months
    	
 
    	
6 months
    

 

Section 3.02. Payment of Severance Benefit. A Severed Employee shall receive his or her severance benefit following the Severed Employee’s execution of all required and appropriate releases and waivers, to be paid, at the Employer’s discretion, either in a lump sum payment or in equal monthly installment payments beginning as soon as practicable but no later than sixty (60) days following his or her Date of Termination. To the maximum extent permitted under Code § 409A, the severance benefits payable under this Plan are intended to comply with the “separation pay exception” under Treas. Reg. § 1.409A-1(b)(9)(iii); provided, however, that any portion of the severance benefits that exceeds the dollar limitation under Treas. Reg. §1.409A-1(b)(9)(iii) in effect on the Date of Termination shall be paid in a single lump sum payment no later than two and one half (2  1/2) months following the Date of Termination in a manner that is intended to comply with the “short-term deferral exception” under Treas. Reg. §1.409A-1(b)(4).

 

Section 3.03. Mitigation and Offset. An Employee shall not be required to mitigate the amount of any payment provided for in this Article by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Article be reduced by any compensation earned by the Employee as the result of employment by another employer.

 

Section 3.04. Medical and Prescription Coverage. If the Severed Employee elects continuing group coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Employer shall provide reimbursement of the Employer and Employee portion of the cost of such continuation coverage until the earlier of (a) the end of the period the Severed Employee is receiving Base Salary continuation payments under Section 3.01 above, or (b) such earlier date that the Severed Employee is covered under another group health plan, subject to the terms of such plan and applicable law.

 

Section 3.05. Cash-Incentive Plan Benefits. All benefits under the Cash-Incentive Plan for the fiscal year of the Date of Termination shall become nonforfeitable, subject to the satisfaction of the performance criteria set forth in such plan. The Severed Employee shall be entitled to payment of an amount equal to the Severed Employee’s actual base salary multiplied by the Severed Employee’s bonus target multiplied by the attainment of the performance criteria as of the end of the fiscal year of the Date of termination Such benefits shall be paid no later than two and one half (2  1/2) months following the later of the end of the calendar year that includes the Date of Termination or the end of the Cash-Incentive Plan fiscal year that includes the Date of Termination.

 

4

 

Section 3.06. Outstanding Equity RSUs. The Severed Employee shall forfeit all unvested shares or units (“Equity Awards”) outstanding under the Stock-Based Incentive Compensation Plan for Officers and Key Employees (“Equity Incentive Plan”) as of the Date of Termination. Notwithstanding the preceding, the Employer’s Board of Directors may, in its sole discretion, provide that the Severed Employee’s right to the outstanding Equity Awards shall become 100% fully vested, and nonforfeitable as of the Date of Termination provided:

 

(i) such accelerated vesting does not accelerate or alter the time and form of payment of any Equity Award that is subject to the application of Code § 409A, or

 

(ii) the payment of any Equity Award that is not subject to the application of Code § 409A shall be made no later than two and one half (2  1/2) months following the later of the end of the calendar year that includes the Date of Termination or the end of the Equity Incentive Plan fiscal year that includes the Date of Termination.

 

Section 3.07. Options. All vested options granted to the Severed Employee that remain outstanding as of the Date of Termination shall become nonforfeitable. The Severed Employee may exercise such options for a period of three (3) months after the Date of Termination (but in no event later than the expiration date of the option under the terms of the option’s grant). To the extent that the Severed Employee does not exercise the options within the time specified herein, the options shall terminate.

 

Section 3.08. Outplacement Services. If requested by Severed Employee, Employer shall provide Severed Employee with reasonable outplacement counseling and services through an outplacement specialty firm designated by Employer at the Employer’s expense. Severed Employee may utilize the outplacement services until either (i) Severed Employee obtains other employment (full-time or part-time), or (ii) the expiration of twelve (12) months (six (6) months with respect to an Assistant Vice President) after Severed Employee begins utilizing the outplacement services, whichever occurs first.

 

Section 3.09. Reimbursements or In-Kind Benefits. Any reimbursements or in-kind benefits provided under this Plan that are subject to Code § 409A shall be made or provided in accordance with the requirements of Code § 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during the period of time specified in the Plan, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year, (iii) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

 

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ARTICLE IV

 

Amendment and Termination

 

Section 4.01. Amendment and Termination. The Human Resources Committee of the Employer’s Board of Directors may amend or terminate this Plan at any time.

 

ARTICLE V

 

Non-competition Covenant

 

Section 5.01. Employee’s Promises. Employee shall not for a period of eighteen (18) months after termination of employment by Employer, either himself or herself or together with other persons, directly or indirectly, (i) own, manage, operate, join, control or participate in the ownership, management, operation or control of or become the employee, consultant or independent contractor of any business engaged in the research, development, manufacture, sale, marketing or distribution of stainless steel, titanium, specialty alloys, or metal fabricated parts or components similar to or competitive with those manufactured by the Employer as of the date the Employee’s employment with Employer ends; (ii) offer services to any business that is or has been at any time during a period of three (3) years prior to the Employee’s termination of employment with Employer a customer, vendor or contractor of the Employer; or (iii) solicit any employee of the Employer to terminate his or her employment with the Employer for purposes of hiring such employee or hire any person who is an employee of the Employer.

 

Section 5.02. Remedies. Employee acknowledges and agrees that in the event that Employee breaches any of the covenants in this Article V, the Employer will suffer immediate and irreparable harm and injury for which the Employer will have no adequate remedy at law. Accordingly, in the event that Employee breaches any of the covenants in Article V, the Employer shall be absolutely entitled to obtain equitable relief, including without limitation temporary restraining orders, preliminary injunctions, permanent injunctions, and specific performance. The foregoing remedies and relief shall be cumulative and in addition to any other remedies available to the Employer. In addition to the other remedies in this Article to which the Employer may be entitled, the Employer shall receive attorneys’ fees and any other expenses incident to its maintenance of any action to enforce its rights under this Agreement.

 

Section 5.03 Severability. The covenants in this Article are severable, and if any covenant or portion thereof is held to be invalid or unenforceable for any reason, such covenant or portion thereof shall be modified to the extent necessary to cure such invalidity or unenforceability and all other covenants and provisions shall remain valid and enforceable.

 

ARTICLE VI

 

Miscellaneous

 

Section 6.01. Administration. The general administration of the Plan, and the responsibility for carrying out the provisions hereof, shall be placed in the Human Resources Committee designated by the Employer.

 

The Human Resources Committee shall have complete discretionary authority to interpret this Plan and to determine all questions arising in the administration, construction and application of the Plan. The Human Resources Committee’s discretionary authority includes, but is not limited to, determinations of all questions of fact relating to the eligibility of Employees for benefits under this

 

6

 

Plan and the amount of such benefits to which an Employee may become entitled hereunder. It shall have complete discretion to correct any defect, supply any omission, reconcile any inconsistency or resolve any ambiguity in such manner and to such extent as it shall deem necessary to carry out the purpose of this Plan. The decision of the Human Resources Committee upon all matters within the scope of its authority shall be final, conclusive and binding on all parties.

 

The Human Resources Committee may appoint such agents, who need not be members of the Human Resources Committee, as it deems necessary for the effective exercise of its duties and may delegate to such agents any powers and duties, both ministerial and discretionary, as the Human Resources Committee may deem expedient and appropriate.

 

The members of the Human Resources Committee, including any Human Resources Committee appointee or designee, shall use that degree of care, skill, prudence and diligence that a prudent person acting in a like capacity and familiar with such matters would use in the Human Resources Committee member’s conduct of a similar situation.

 

With respect to the exercise of authority hereunder, and to the extent not insured by an insurance company pursuant to the provisions of any applicable insurance policy and to the extent permitted by law and Employer policy, the Employer may indemnify and hold harmless each member of the Human Resources Committee against any personal liability or expense incurred as a result of any act or omission in the capacity as a member of the Human Resources Committee.

 

Section 6.02. Claims. An Employee, who has not begun to receive benefits under this Plan and who believes he or she is entitled to benefits hereunder, or the Employee’s representative must submit a claim to the Human Resources Committee or its designee (the “Administrator”). A claim must be submitted in writing and in a manner acceptable to the Administrator. A claim will not be considered complete until the Administrator has received all documentation it has requested to verify the validity of the claim. If the claim is wholly or partially denied, the Administrator shall, within 90 days (or in special cases, and upon prior written notice to the claimant, 180 days) of receipt of the completed claim inform the claimant of the reason(s) for the denial, the specific reference to the Plan provisions on which the denial was based, any additional information that may be necessary to perfect the claim and the procedure for appealing the denial of the claim.

 

Section 6.03. Appeals. The denial of any claim or application of the provisions of this Plan must be appealed to the Human Resources Committee by the claimant within 60 days of notification of such denial. The claimant shall have a right to review all pertinent documents and submit comments in writing. Any appeal must include a written statement of the claimant’s position. Upon its receipt of the appeal the Human Resources Committee shall schedule an opportunity for a full hearing of the issue and shall review and decide such appeal within 60 days (or in special cases, and upon prior written notice to the claimant, 120 days) of receipt of such appeal. Its decision shall be promptly communicated in writing to the claimant.

 

Section 6.04. Legal Action. An Employee or any person claiming rights through the Employee must complete the above claims and appeal procedures as a mandatory precondition to any legal or equitable action in connection with this Plan, and such legal or equitable action must be filed within 120 days of the receipt of a final decision regarding the appeal or, if later, within one year of the Termination (or alleged Termination) of the Employee, or benefits under this Plan will be irrevocably barred.

 

7

 

Section 6.05. Nonalienation of Benefits. None of the payments, benefits or rights of any Employee shall be subject to any claim of any creditor of such Employee, and, in particular, to the full extent permitted by law, all such payments, benefits and rights shall be free from attachment, garnishment, trustee’s process, or any other legal or equitable process available to any creditor of such Employee. No Employee shall have the right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits or payments which such Employee may expect to receive, contingently or otherwise, under this Plan.

 

Section 6.06. No Contract of Employment. Neither the establishment of the Plan, nor any modification thereof, nor the creation of any fund, trust or account, nor the payment of any benefits shall be construed as giving an Employee, or any person whomsoever, the right to be retained in the service of any Employer, and all Employees shall remain subject to discharge to the same extent as if the Plan had never been adopted.

 

Section 6.07. Severability of Provisions. The invalidity or unenforceability of any provision of this Plan shall not affect the validity or enforceability of any other provision of this Plan, which shall remain in full force and effect.

 

Section 6.08. Headings and Captions. The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan.

 

Section 6.09. Unfunded Plan. All payments of monetary benefits provided under the Plan shall be paid from the general assets of the Employer and no separate fund shall be established to secure payment of vested amounts. Notwithstanding the foregoing, the Employer may establish a grantor trust to assist it in funding Plan obligations; provided, however, that such trust shall at all times remain located within the United States. Any payments of vested amounts made to an Employee or other person from any such trust shall relieve the Employer from any further obligations under the Plan only to the extent of such payment. Nothing herein shall constitute the creation of a trust or other fiduciary relationship between the Employer and any other person. No Employee shall have any right to, or interest in, any particular assets of any Employer which may be applied by such Employer to the payment of benefits or other rights under this Plan.

 

Section 6.10. Payments to Incompetent Persons, Etc. Any benefit payable to or for the benefit of a minor, an incompetent person or other person incapable of giving a receipt therefor shall be deemed paid when paid to such person’s guardian or to the party providing or reasonably appearing to provide for the care of such person, and such payment shall fully discharge the Employer, the Human Resources Committee and all other parties with respect thereto.

 

Section 6.11. Controlling Law. This Plan shall be construed and enforced according to the internal laws of the Commonwealth of Pennsylvania to the extent not preempted by federal law, which shall otherwise control.

 

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Section 6.12. Binding Effect. Obligations incurred by the Employer pursuant to this Plan shall be binding upon and inure to the benefit of the Employer, its successors and assigns, and the Employee and any beneficiary or other successor in interest of the Employee.

 

Section 6.13. Code § 409A. The Plan is intended to be exempt from the application of Code § 409A. To the extent this Plan is determined to be subject to Code § 409A and a provision of the Plan is contrary to or fails to address the requirements of Code § 409A and related Treasury Regulations, the Plan shall be construed and administered as necessary to comply with such requirements to the extent allowed under applicable Treasury Regulations until the Plan is appropriately amended to comply with such requirements. Furthermore, to the extent this Plan is determined to be subject to Code § 409A, any payment made on account of the Termination of a “specified employee” (as determined under Treas. Reg. § 1.409A-1(i)) shall be made on the date that is six (6) months after the date of the Employee’s Termination to the extent necessary to comply with the requirements of Code § 409A and related Treasury Regulations; provided, however, that the payments of vested amounts to which the Employee would have been entitled during such 6-month period, but for this Section, shall be accumulated and paid to the Employee on the first (1st) day of the seventh (7th) month following the Employee’s Termination.

 

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Exhibit E

 

[Change in Control Severance Plan]

 

E-1

 

AMENDED AND RESTATED

CARPENTER TECHNOLOGY CORPORATION

CHANGE IN CONTROL SEVERANCE PLAN

 

INTRODUCTION

 

As is the case with many publicly held corporations, there exists the possibility of a Change in Control of the Company. This possibility and the uncertainty it creates may result in the loss or distraction of employees of the Company and its Subsidiaries to the detriment of the Company and its stockholders. The avoidance of such loss and distraction is essential to protecting and enhancing the best interests of the Company and its stockholders.

 

When a Change in Control is perceived as imminent, or is occurring, the Company should be able to receive and rely on disinterested service from employees regarding the best interests of the Company and its stockholders without concern that employees might be distracted or concerned by the personal uncertainties and risks created by the perception of an imminent or occurring Change in Control.

 

It is consistent with the employment practices and policies of the Company and its Subsidiaries and in the best interests of the Company and its stockholders to treat fairly its employees whose employment terminates in connection with or following a Change in Control. Accordingly, it has been determined that appropriate steps should be taken to assure the Company and its Subsidiaries of the continued employment and attention and dedication to duty of their employees and to seek to ensure the availability of their continued service, notwithstanding the possibility, threat or occurrence of a Change in Control.

 

Therefore, in order to fulfill the above purposes, the Carpenter Technology Corporation Change in Control Severance Plan was developed and adopted.

 

The Company now desires to make certain amendments to the Carpenter Technology Corporation Change in Control Severance to provide benefits that are more comparable to other companies in the Company’s industry.

 

Therefore, in order to fulfill the immediately preceding purpose, the Carpenter Technology Corporation Change in Control Severance Plan has been amended and restated in its entirety effective September 1, 2010, with the exception of certain prospective amendments which are effective on such other dates as set forth herein.

 

ARTICLE I

ESTABLISHMENT OF PLAN

 

As of the Effective Date, the Company hereby establishes a separation compensation plan known as the Carpenter Technology Corporation Change in Control Severance Plan, as set forth in this document.

 

 

ARTICLE II

DEFINITIONS

 

As used herein the following words and phrases shall have the following meanings unless the context clearly indicates otherwise:

 

(a) Affiliated Company. Any company controlled by, controlling or under common control with the Company.

 

(b) Annual Salary. The Participant’s regular annual base salary immediately prior to his or her termination of employment, including compensation converted to other benefits under a flexible pay arrangement maintained by the Company or any Subsidiary or deferred pursuant to a written plan or agreement with the Company or any Subsidiary, but excluding overtime pay, allowances, premium pay, compensation paid or payable under any Company bonus or incentive plan of the Company or any Subsidiary or any similar payment.

 

(c) Board. The Board of Directors of Carpenter Technology Corporation.

 

(d) Cause. With respect to any Participant: (i) the willful and continued failure of the Participant to perform substantially the Participant’s duties with the Company or any Subsidiary (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Participant by an executive officer of the Company which specifically identifies the manner in which the executive officer believes that the Participant has not substantially performed the Participant’s duties, or (ii) the willful engaging by the Participant in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company or any Subsidiary. For purposes of this definition, no act or failure to act on the part of the Participant shall be considered “willful” unless it is done, or omitted to be done, by the Participant in bad faith or without reasonable belief that the Participant’s action or omission was in the best interests of the Company or any Subsidiary. Any act or failure to act based upon authority (A) given pursuant to a resolution duly adopted by the Board, or if the Company is not the ultimate parent corporation of the Affiliated Companies and is not publicly-traded, the board of directors of the ultimate parent of the Company, (B) upon the instructions of the Chief Executive Officer or another executive officer of the Company or any Subsidiary or (C) based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Participant in good faith and in the best interests of the Company. Effective on the later of September 1, 2013 or the third anniversary of the date on which notice of the amendment of this section of the Plan is provided to Participants, “Cause” shall mean any termination of a Participant’s employment with the Company or a Subsidiary which results from:

 

(i) Participant’s conviction of a crime involving moral turpitude;

 

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(ii) Participant becoming incapable of performing the duties of his or her employment with Company or Subsidiary due to loss or suspension of any license or certification required for the performance of those duties;

 

(iii) conduct by Participant that is found by Company or Subsidiary to constitute fraud, embezzlement, or theft that occurs during or in the course of Participant’s employment with Company or Subsidiary;

 

(iv) intentional damage by Participant to Company’s or Subsidiary’s assets or property or the assets or property of Company’s or Subsidiary’s customers, vendors, or employees;

 

(v) intentional disclosure by Participant of Company’s or Subsidiary’s confidential information contrary to Company’s or Subsidiary’s policies or instructions received by Participant during or in the course of Participant’s employment with Company or Subsidiary;

 

(vi) intentional engagement by Participant in any activity which would constitute a breach of duty of loyalty to Company or Subsidiary;

 

(vii) conduct by Participant found by Company or Subsidiary to constitute a willful and continued failure or refusal by Participant to substantially perform Participant’s duties for Company or Subsidiary (except as a result of incapacity due to physical or mental illness);

 

(viii) Participant’s failure to comply with Company’s or Subsidiary’s policies or practices despite having been advised and/or instructed regarding those policies or practices; or

 

(ix) conduct by Participant that is demonstrably and materially injurious to Company or Subsidiary, monetarily or otherwise, as determined by Company or Subsidiary, including injury to Company’s or Subsidiary’s reputation or conduct by Participant otherwise having an adverse affect upon Company’s or Subsidiary’s interests, as determined by Company or Subsidiary.

 

(e) Change in Control. The occurrence of any of the following events:

 

(i) Any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of either (x) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (y) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that,

 

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for purposes of this subsection (i), the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company, or (D) any acquisition pursuant to a transaction that complies with clauses (A), (B), and (C) of paragraph (iii) of this definition of Change in Control;

 

(ii) Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board during any 12 month period; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

 

(iii) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company or the acquisition of the assets or stock of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors (or, for a non-corporate entity, equivalent governing body), as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors (or, for a non-corporate entity, equivalent governing body) of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

 

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(iv) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

 

(f) Code. The Internal Revenue Code of 1986, as amended from time to time.

 

(g) Committee. The Human Resources Committee of the Board.

 

(h) Company. Carpenter Technology Corporation and any successor or assignee to the business or assets which becomes bound by this Plan by reason of Article V.

 

(i) Date of Termination. The date on which a Participant ceases to be an Employee of an Employer within the meaning of Treasury Regulation Section 1.409A-1(h) and which constitutes a “separation from service.”

 

(j) Disability. A qualified physician designated by the Company or a Subsidiary has reviewed and approved the determination that a Participant is either:

 

(i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or

 

(ii) by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Company or a Subsidiary.

 

(k) Effective Date. August 20, 2007.

 

(l) Employee. A full-time employee of an Employer and a member of the Employer’s “select group of management or highly compensated employees,” as defined in ERISA Sections 201(2), 301(a)(3), and 401(a)(1).

 

(m) Employer. The Company or any Subsidiary (or any parent corporation of the Company or any of such parent corporation’s subsidiaries) by which a Participant is employed.

 

(n) ERISA. The Employee Retirement Income Security Act of 1974, as amended from time to time.

 

(o) Good Reason. With respect to any Participant, without such Participant’s written consent, actions taken by the Company resulting in a material negative change in the employment relationship. For these purposes, a “material negative change in the employment relationship” includes: (i) any reduction in the Participant’s Annual Salary or Target Annual

 

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Bonus opportunity, as in effect during the 120-day period immediately preceding the Change in Control (or as such amounts may be increased from time to time), other than as a result of an isolated and inadvertent action not taken in bad faith; (ii) the Employer requiring the Participant to relocate his or her principal place of business to a location which is more than 35 miles from his or her previous principal place of business; (iii) the assignment to the Participant of any duties inconsistent in any material and adverse respect with the duties assigned to the Participant during the 120-day period immediately prior to a Change in Control, other than an isolated, insubstantial and inadvertent action that is not taken in bad faith; or (iv) any material reduction in benefits of the Participant, as in effect during the 120-day period immediately preceding the Change in Control, other than as a result of an isolated and inadvertent action not taken in bad faith; provided, however, that no material reduction shall be deemed to have occurred following a Change in Control if the benefits provided to the Participant are (A) reasonably equivalent to the benefits provided to similarly situated employees of the company resulting from a Business Combination and its subsidiaries, and (B) comparable to the benefits provided to the Participant immediately prior to the Change in Control; (v) any purported termination of the Plan otherwise than as expressly permitted by the Plan; or (vi) any failure by the Employer to comply with and satisfy Article VI of the Plan. Notwithstanding the foregoing, a Participant’s mental or physical incapacity following the occurrence of a material negative change in the employment relationship shall not affect a Participant’s ability to terminate employment for Good Reason. In order to invoke a termination for Good Reason, the Participant shall provide written notice to the Company of the existence of one or more of the conditions described in clauses (i) through (iv) within 90 days after the Participant has knowledge of such condition or conditions, and the Company shall have 30 days following receipt of such written notice (the “Cure Period”) during which it may remedy the condition. In the event that the Company fails to remedy the condition constituting Good Reason during the Cure Period, the Participant must terminate employment, if at all, within 90 days following the Cure Period in order to terminate employment for Good Reason. Effective on the later of September 1, 2013 or the third anniversary of the date on which notice of the amendment of this section of the Plan is provided to Participants, “Good Reason” shall mean a Participant’s voluntary termination of employment within the ninety (90) day period following the initial existence of one or more of the following conditions arising without the Participant’s consent:

 

(i) a material diminution in the Participant’s Annual Salary;

 

(ii) a material permanent diminution in the Participant’s authority, duties, or responsibilities;

 

(iii) a material change in the geographic location at which the Participant must perform services which is at least fifty (50) miles from his or her current principal place of work;

 

(iv) change in title from Chief Executive Officer or Chief Financial Officer to a non-Chief Executive Officer or non-Chief Financial Officer title; or

 

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(v) any other action or inaction that constitutes a material breach by the Company or a Subsidiary of any employment agreement between the Participant and the Company or Subsidiary; and

 

within thirty (30) days following the initial existence of a condition described in subsections (i) through (iv) above, the Participant must provide notice to the Company or Subsidiary of the existence of the condition, and the Company or Subsidiary must fail to remedy the condition within thirty (30) days of receipt of such notice.

 

(p) Participant. Any Employee whose employment is classified as job class 9 or above and any other Employee employed by the Company or any of its Affiliated Companies in an equivalent position who is designated as a Participant by the Chief Executive Officer of the Company; provided, however, that no individual who is a party to a separately executed change in control or similar agreement with the Company or any of its Affiliated Companies entered into prior to a Change in Control shall be a Participant so long as such agreement remains in force. Each individual who is a Participant immediately prior to a Change in Control shall remain a Participant at least until the second anniversary of the Change in Control. Notwithstanding the foregoing, individuals employed primarily outside of the United States are not eligible to be Participants. Effective on the later of September 1, 2013 or the third anniversary of the date on which notice of the amendment of this section of the Plan is provided to Participants, this subsection shall be applied by substituting “Job Profile E1 or above” for “ job class 9 or above.”

 

(q) Plan. Amended and Restated Carpenter Technology Corporation Change in Control Severance Plan.

 

(r) Separation Benefits. The benefits described in Section 4.2 and Appendices A, B and C that are provided to qualifying Participants under the Plan.

 

(s) Subsidiary. Any corporation in which the Company, directly or indirectly, holds a majority of the voting power of such corporation’s outstanding shares of capital stock.

 

(t) Target Annual Bonus. The Participant’s target bonus under the Company’s annual incentive plans for the fiscal year in which such Participant’s Date of Termination occurs (or, if no target bonus has been set for such fiscal year, the Participant’s target bonus for the immediately preceding fiscal year).

 

ARTICLE III

ELIGIBILITY

 

A Participant shall cease to be a Participant in the Plan only as a result of an amendment or termination of the Plan complying with Article VI of the Plan, or when the Participant ceases to be an Employee of any Employer, unless, at the time the Participant ceases to be an Employee, such Participant is entitled to payment of a Separation Benefit as provided in the Plan. A Participant entitled to payment of a Separation Benefit or any other amounts under the Plan shall remain a Participant in the Plan until the full amount of the Separation Benefit and any other amounts payable under the Plan have been paid to the Participant.

 

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ARTICLE IV

SEPARATION BENEFITS

 

3.1 Terminations of Employment Which Give Rise to Separation Benefits Under This Plan. A Participant shall be entitled to Separation Benefits as set forth in Section 4.2 below if, at any time during the two-year period immediately following a Change in Control, the Participant’s employment is terminated (i) by the Employer for any reason other than Cause, death, or Disability or (ii) by the Participant for Good Reason.

 

3.2 Separation Benefits. If a Participant’s employment is terminated in circumstances entitling such participant to Separation Benefits pursuant to Section 4.1, the Company shall provide to such Participant, within ten days following the Date of Termination, a lump sum cash payment and the continued benefits and outplacement as set forth in Appendix A, B or C, as applicable, For purposes of determining the benefits set forth in Appendix A, B or C, if the termination of the Participant’s employment is for Good Reason based upon a reduction of the Participant’s Annual Salary, opportunity to earn Target Annual Bonuses, or other compensation or employee benefits, such reduction shall be ignored.

 

3.3 Other Benefits Payable. To the extent not theretofore paid or provided, the Company shall timely pay or provide (or cause to be paid or provided) to a Participant entitled to the Separation Benefits, any amounts or benefits required to be paid or provided to the Participant, or which the Participant is eligible to receive, under the General Retirement Plan for Employees of Carpenter Technology Corporation (the “GRP”), and the Separation Benefits shall be reduced, dollar for dollar (but not below zero), by any amounts received by the Participant pursuant to the GRP. Any other severance pay or pay in lieu of notice required to be paid to such Participant under applicable law or under any other severance pay plan or policy of the Company or any Employer, including, without limitation, under the Severance Pay Plan for Salaried Employees of Carpenter Technology Corporation (but excluding the GRP) shall be reduced, dollar for dollar (but not below zero), by the Separation Benefits. The Separation Benefits shall in no event affect a Participant’s eligibility for or entitlement to benefits under the GRP or any other qualified or nonqualifed retirement or pension benefit or welfare or fringe benefit plan, program, policy, practice, contract or agreement of the Company and its Affiliated Companies. Without limiting the generality of the foregoing, the Participant’s resignation under this Agreement with or without Good Reason, shall in no way affect the Participant’s ability to terminate employment by reason of the Participant’s “retirement” under any compensation and benefits plans, programs or arrangements of the Affiliated Companies, including without limitation any retirement or pension plans or arrangements or to be eligible to receive benefits

 

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under any compensation or benefit plans, programs or arrangements of the Affiliated Companies, including without limitation any retirement or pension plan or arrangement of the Affiliated Companies or substitute plans adopted by the Company or its successors, and any termination which otherwise qualifies as Good Reason shall be treated as such even if it is also a “retirement” for purposes of any such plan.

 

3.4 Certain Reduction of Payments by the Company.

 

(a) Reduction of Certain Payments. For purposes of this Section 4.4: (i) a “Payment” shall mean any payment or distribution in the nature of compensation to or for the benefit of the Participant, whether paid or payable pursuant to this Plan or otherwise; (ii) “Plan Payment” shall mean a Payment paid or payable pursuant to this Plan (disregarding this Section 4.4); (iii) “Present Value” shall mean such value determined in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code; and (iv) “Reduced Amount” shall mean an amount expressed in Present Value that maximizes the aggregate Present Value of Plan Payments without causing any Payment to be nondeductible by the Company or Employer because of Section 280G of the Code.

 

(b) Anything in this Plan to the contrary notwithstanding, in the event PricewaterhouseCoopers LLP or such other accounting firm selected by the Company prior to the Change in Control (the “Accounting Firm”) shall determine that receipt of all Payments would subject the Participant to tax under Section 4999 of the Code, the aggregate Plan Payments shall be reduced (but not below zero) to meet the definition of Reduced Amount.

 

(c) If the Accounting Firm determines that aggregate Plan Payments should be reduced to the Reduced Amount, the Company shall promptly give the Participant notice to that effect and a copy of the detailed calculation thereof, and the Participant may then elect, in his or her sole discretion, which and how much of the Plan Payments shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Plan Payments equals the Reduced Amount), and shall advise the Company in writing of his or her election within 30 days of his or her receipt of notice. If no such election is made by the Participant within such 30-day period, the Company may elect which of such Plan Payments shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Plan Payments equals the Reduced Amount) and shall notify the Participant promptly of such election. All determinations made by the Accounting Firm under this Section shall be binding upon the Company and the Participant and shall be made within 60 days of a termination of employment of the Participant. As promptly as practicable following such determination, the Company shall pay to or distribute for the benefit of the Participant such Plan Payments as are then due to the Participant under this Plan and shall promptly pay to or distribute for the benefit of the Participant in the future such Plan Payments as become due to the Participant under this Plan.

 

(d) As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Company to or for the benefit of the

 

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Participant pursuant to this Plan which should not have been so paid or distributed (“Overpayment”) or that additional amounts which will have not been paid or distributed by the Company to or for the benefit of the Participant pursuant to this Plan could have been so paid or distributed (“Underpayment”), in each case, consistent with the calculation of the Reduced Amount hereunder. In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against either the Company or the Participant which the Accounting Firm believes has a high probability of success determines that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for the benefit of the Participant shall be treated for all purposes as a loan to the Participant which the Participant shall repay to the Company together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no such loan shall be deemed to have been made and no amount shall be payable by the Participant to the Company if and to the extent such deemed loan and payment would not either reduce the amount on which the Participant is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the Participant together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.

 

(e) All fees and expenses of the Accounting Firm in implementing the provisions of this Section 4.4 shall be borne by the Company.

 

ARTICLE V

SUCCESSOR TO COMPANY

 

4.1 This Plan shall bind any successor of the Company or to all or substantially all of its assets or its businesses (whether direct or indirect, by purchase, merger, consolidation or otherwise), in the same manner and to the same extent that the Company would be obligated under this Plan if no succession had taken place.

 

4.2 In the case of any transaction in which a successor would not by the foregoing provision or by operation of law be bound by this Plan, the Company shall require such successor expressly and unconditionally to assume and agree to perform the Company’s obligations under this Plan, in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

 

ARTICLE VI

DURATION, AMENDMENT AND TERMINATION

 

5.1 Duration of Plan. If a Change in Control has not occurred and the Board does not have knowledge of an event that could reasonably be expected to constitute a Change in Control, this Plan may be terminated by resolution adopted by the Board; provided that the

 

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Participants are given written notice of such termination three years in advance of such termination. If a Change in Control occurs while this Plan is in effect, this Plan shall continue in full force and effect for at least two years following such Change in Control, and shall not terminate or expire until after all Participants who become entitled to any payments hereunder shall have received such payments in full.

 

5.2 Amendment or Termination. The Board may amend or terminate this Plan; provided, that this Plan may not be terminated or amended in a manner adverse to Participants prior to the third anniversary of the date on which notice of such amendment or termination is provided to the Participants or during the two-year period following a Change in Control.

 

5.3 Procedure for Extension, Amendment or Termination. Any extension, amendment or termination of this Plan by the Board in accordance with the foregoing shall be made by action of the Board in accordance with the Company’s charter and by-laws and applicable law.

 

5.4 Delegation of Power to Amend or Termination. The powers of the Board under this Section 6 may be delegated to the Human Resources Committee of the Board.

 

ARTICLE VII

MISCELLANEOUS

 

6.1 Full Settlement. The Company’s obligation to make the payments provided for under this Plan and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against a Participant or others. In no event shall a Participant be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Participant under any of the provisions of this Plan and such amounts shall not be reduced whether or not the Participant obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which a Participant may reasonably incur as a result of any contest by the Company, the Participant or others of the validity or enforceability of, or liability under, any provision of this Plan or any guarantee of performance thereof (including as a result of any contest by the Participant about the amount of any payment pursuant to this Plan), provided, that the Participant shall be required to reimburse the Company for such payments if the Participant does not prevail on substantially all of the issues in connection with such dispute.

 

6.2 Employment Status. This Plan does not constitute a contract of employment or impose on the Participant or the Participant’s Employer any obligation for the Participant to remain an Employee or change the status of the Participant’s employment or the policies of the Company and its Subsidiaries regarding termination of employment. For purposes of this Plan, employment with any of the Company’s Subsidiaries or any parent corporation of the Company or any of its subsidiaries shall be treated as continued employment with the Company.

 

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6.3 Confidential Information. Each Participant shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its Affiliated Companies, and their respective businesses, which shall have been obtained by the Participant during the Participant’s employment by the Company or any of its Affiliated Companies and which shall not be or become public knowledge (other than by acts by the Participant or representatives of the Participant in violation of this Plan). After termination of a Participant’s employment with the Company, the Participant shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 7.3 constitute a basis for deferring or withholding any amounts otherwise payable under this Plan.

 

6.4 Named Fiduciary; Administration. The Company is the named fiduciary of the Plan, and shall administer the Plan, acting through the Plan Committee of the GRP (the “Administrative Committee”).

 

6.5 Claim Procedure. If an Employee or former Employee makes a written request alleging a right to receive benefits under this Plan or alleging a right to receive an adjustment in benefits being paid under the Plan, the Company shall treat it as a claim for benefit. All claims for benefit under the Plan shall be sent to the Administrative Committee and must be received within 30 days after termination of employment. If the Company determines that any individual who has claimed a right to receive benefits, or different benefits, under the Plan is not entitled to receive all or any part of the benefits claimed, it will inform the claimant in writing of its determination and the reasons therefor in a manner calculated to be understood by the claimant. The notice will be sent within 60 days of the claim. The notice shall make specific reference to the reasons for denial and pertinent Plan provisions on which the denial is based, and describe any additional material or information necessary for the claim to succeed and a description of why it is necessary. Such notice shall, in addition, inform the claimant what procedure the claimant should follow to take advantage of the review procedures set forth below in the event the claimant desires to contest the denial of the claim. The claimant may within 90 days thereafter submit in writing to the Company a notice that the claimant contests the denial of his or her claim by the Company and desires a further review. The Administrative Committee shall within 60 days thereafter review the claim and authorize the claimant to appear personally and review pertinent documents and submit issues and comments relating to the claim to the persons responsible for making the determination on behalf of the Company. The Company will render its final decision with specific reasons therefor and in a manner calculated to be understood by the claimant, and will transmit it to the claimant within 60 days of the written request for review. If the Company fails to respond to a claim filed in accordance with the foregoing within 60 days, the Company shall be deemed to have denied the claim. This Section 7.5 shall not serve to prohibit any Participant from bringing an action in a court of competent

 

12

 

jurisdiction to enforce his or her rights under the Plan after satisfaction of the foregoing procedures. Notwithstanding the foregoing, the claims and appeals procedure provided for in this Section 7.5 will be provided for the use and benefit of Participants who may choose to use such procedures, but compliance with the provisions of these claims and appeals procedures will not be mandatory for any Participant claiming benefits after a Change in Control. It will not be necessary for any Participant to exhaust these procedures and remedies after a Change in Control prior to bringing any legal claim or action, or asserting any other demand, for payments or other benefits to which such participant claims entitlement.

 

6.6 Unfunded Plan Status. All payments pursuant to the Plan shall be made from the general funds of the Company and no special or separate fund shall be established or other segregation of assets made to assure payment. No Participant or other person shall have under any circumstances any interest in any particular property or assets of the Company as a result of participating in the Plan. Notwithstanding the foregoing, the Company may (but shall not be obligated to) create one or more grantor trusts, the assets of which are subject to the claims of the Company’s creditors, to assist it in accumulating funds to pay its obligations under the Plan.

 

6.7 Validity and Severability. The invalidity or unenforceability of any provision of the Plan shall not affect the validity or enforceability of any other provision of the Plan, which shall remain in full force and effect, and any prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

6.8 Governing Law. The validity, interpretation, construction and performance of the Plan shall in all respects be governed by the laws of the State of Delaware without reference to principles of conflict of law, except to the extent pre-empted by Federal law.

 

6.9 Top-Hat Plan. For purposes of ERISA, the Plan is intended to constitute a “top-hat” plan, as described in Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA and the regulations promulgated thereunder.

 

6.10 Section 409A. Notwithstanding any provision of this Agreement to the contrary, to the extent that the benefits provided under subsections (b) and (c) of Appendices A, B and C, Section 4.4, and Section 7.1 are not “disability pay” or “death benefit” plans within the meaning of Treasury Regulation Section 1.409A-1(a)(5), then (i) the amount of such benefits provided during one calendar year shall not affect the amount of such benefits provided in any other taxable year, except to the extent such benefits consist of the reimbursement of expenses referred to in Section 105(b) of the Code in which case a limitation may be imposed on the amount of such reimbursements as described in Treasury Regulation Section 1.409A-3(i)(1)(iv)(B); (ii) any benefits that are reimbursements must be made on or before the last day of the calendar year following the calendar year in which the fee or expense was incurred (provided, that the Participant shall have submitted an invoice for such fee or expense at least 10 days before the end of the calendar year next following the calendar year in which such fee or expense was incurred) or, in the case of the benefits under Section 4.4, the tax was due to the

 

13

 

applicable taxing authority; and (iii) to the extent any such benefit is an in-kind benefit, such benefit may not be liquidated or exchanged for another benefit. In addition, within the time period permitted by the applicable Treasury Regulations, the Company may, in consultation with the Participant, modify the Agreement, in the least restrictive manner necessary and without any diminution in the value of the payments to the Participant, in order to cause the provisions of the Agreement to comply with the requirements of Section 409A of the Code, so as to avoid the imposition of taxes and penalties on the Participant pursuant to Section 409A of the Code. The Plan is intended to be exempt from the application of Code Section 409A. To the extent this Plan is determined to be subject to Code Section 409A and a provision of the Plan is contrary to or fails to address the requirements of Code Section 409A and related Treasury Regulations, the Plan shall be construed and administered as necessary to comply with such requirements to the extent allowed under applicable Treasury Regulations until the Plan is appropriately amended to comply with such requirements. Furthermore, to the extent this Plan is determined to be subject to Code Section 409A, any payment made on account of the termination of a “specified employee” (as determined under Treas. Reg. §1.409A-1(i)) shall be made on the date that is six (6) months after the Employee’s Date of Termination to the extent necessary to comply with the requirements of Code Section 409A and related Treasury Regulations; provided, however, that the payments of vested amounts to which the Employee would have been entitled during such 6-month period, but for this Section, shall be accumulated and paid to the Employee on the first (1st) day of the seventh (7th) month following the Employee’s Date of Termination.

 

14

 

APPENDIX A

 

(E4 PROFILE)

 

If the Participant is a Chief Executive Officer of the Employer on the Date of Termination, he or she shall receive the following Separation Benefits in accordance with Section 4.2.

 

(a) A cash lump sum which shall be the aggregate of the amounts set forth in clauses (i), (ii), (iii) and (iv):

 

(i) the sum of (A) any portion of the Participant’s Annual Salary earned through the Date of Termination that was not previously paid and (B) any accrued vacation pay, in each case to the extent not theretofore paid and in full satisfaction of the rights of the Participant thereto;

 

(ii) an amount equal to three (3) times the Participant’s Annual Salary;

 

(iii) an amount equal to one (1) times the Participant’s Target Annual Bonus; and

 

(iv) an amount equal to eighteen (18) months of the Employer and Employee portion of the cost at the Date of Termination of continuing group medical, prescription and dental coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), with interest on the amount at the applicable federal rate provided for in Section 7872(f)(2) of the Code.

 

(b) The Company shall at its sole expense provide the Participant with reasonable outplacement services during the one-year period following the Participant’s Date of Termination. The Participant shall not, however, be entitled to any payment in lieu of accepting outplacement assistance services.

 

(c) If the Participant (and eligible family members) elect COBRA, the Employer shall continue coverage until the earlier of (a) the end of the COBRA period, or (b) such earlier date that the Participant is covered under another group health plan, subject to the terms of such plan and applicable law.

 

(d) Any reimbursements or in-kind benefits provided under this Plan that are subject to Code Section 409A shall be made or provided in accordance with the requirements of Code Section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during the period of time specified in the Plan, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year, (iii) the

 

15

 

reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

 

16

 

APPENDIX B

 

(E3 PROFILE)

 

If the Participant is an Executive Vice President or Senior Vice President of the Employer on the Date of Termination, he or she shall receive the following Separation Benefits in accordance with Section 4.2.

 

(a) A cash lump sum which shall be the aggregate of the amounts set forth in clauses (i), (ii), (iii) and (iv):

 

(i)             the sum of (A) any portion of the Participant’s Annual Salary earned through the Date of Termination that was not previously paid and (B) any accrued vacation pay, in each case to the extent not theretofore paid and in full satisfaction of the rights of the Participant thereto;

 

(ii)          an amount equal to two (2) times the Participant’s Annual Salary;

 

(iii)       an amount equal to one (1) times the Participant’s Target Annual Bonus; and

 

(iv)      an amount of six (6) months of the Employer and Employee portion of the cost at the Date of Termination of continuing group medical, prescription and dental coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), with interest on the amount at the applicable federal rate provided for in Section 7872(f)(2) of the Code.

 

(b) The Company shall at its sole expense provide the Participant with reasonable outplacement services during the one-year period following the Participant’s Date of Termination. The Participant shall not, however, be entitled to any payment in lieu of accepting outplacement assistance services.

 

(c) If the Participant (and eligible family members) elect COBRA, the Employer shall continue coverage until the earlier of (a) the end of the COBRA period, or (b) such earlier date that the Participant is covered under another group health plan, subject to the terms of such plan and applicable law.

 

(d)         Any reimbursements or in-kind benefits provided under this Plan that are subject to Code Section 409A shall be made or provided in accordance with the requirements of Code Section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during the period of time specified in the Plan, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits

 

17

 

provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year, (iii) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

 

18

 

APPENDIX C

 

(E1/E2 PROFILE)

 

If the Participant is a Vice President or Assistant Vice President of the Employer on the Date of Termination, he or she shall receive the following Separation Benefits in accordance with Section 4.2.

 

(a) A cash lump sum which shall be the aggregate of the amounts set forth in clauses (i), (ii) and (iii):

 

(i) the sum of (A) any portion of the Participant’s Annual Salary earned through the Date of Termination that was not previously paid and (B) any accrued vacation pay, in each case to the extent not theretofore paid and in full satisfaction of the rights of the Participant thereto;

 

(ii) an amount equal to one (1) times the Participant’s Annual Salary; and

 

(iii) an amount equal to one (1) times the Participant’s Target Annual Bonus.

 

(b) The Company shall at its sole expense provide the Participant with reasonable outplacement services during the one-year period following the Participant’s Date of Termination. The Participant shall not, however, be entitled to any payment in lieu of accepting outplacement assistance services.

 

(c) If the Participant (and eligible family members) elect COBRA, the Employer shall continue coverage until the earlier of (a) six months before the end of the COBRA period, or (b) such earlier date that the Participant is covered under another group health plan, subject to the terms of such plan and applicable law.

 

(d) Any reimbursements or in-kind benefits provided under this Plan that are subject to Code Section 409A shall be made or provided in accordance with the requirements of Code Section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during the period of time specified in the Plan, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year, (iii) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

 

19

 

Exhibit F

 

NON-COMPETITION AGREEMENT

 

This Non-Competition Agreement, made this 4th day of June, 2015 (“Agreement”), is by and between Carpenter Technology Corporation (the “Company”), and Joseph E. Haniford (hereinafter the “Employee”).

 

WHEREAS, the Company desires to employ the Employee in the position of Senior Vice President Specialty Alloys Operations in accordance with the Offer Letter, dated June 4, 2015;

 

WHEREAS, Employee desires to accept employment with the Company;

 

WHEREAS, the relationship between the Company and the Employee will be one in which the Company reposes special trust and confidence in the Employee and the Employee will be exposed to confidential information not previously known to Employee.

 

NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this Agreement, the parties, intending to be legally bound, hereby agree as follows:

 

1.                                      Non-Competition and Non-Solicitation. In consideration of the acceptance of the terms and conditions set forth in this Agreement, as well as the Offer Letter, dated June 4, 2015, attached hereto, Employee shall be subject to the following restrictions:

 

While employed by the Company and, in the event Employee voluntarily terminates his/her employment, or the Company involuntarily terminates Employee’s employment with the Company for “Cause,” then, for a period of eighteen (18) months after termination of employment, Employee shall not, unless in accordance with the terms herein or with the prior written consent of the Company’s Vice President, Human Resources of the Company:

 

(A)                               Either directly or indirectly, solicit or divert to any Competing Business, as defined below, any individual or entity that is a customer or prospective customer of the Company or its subsidiaries or affiliates, or was such a customer or prospective customer at any time during the 18 months prior to the date of Employee’s employment termination with the Company

 

(B)                               Either directly or indirectly own, manage, operate, finance, join, control or participate in the ownership, management, operation, financing or control of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with, or have any financial interest in, or aid or assist anyone else in the conduct of, or use or permit Employee’s name to be used in connection with, any Competing Business or any other entity which would require Employees use of Confidential Information even though such entity may not be a Competing Business; provided, however, that nothing herein shall prevent you from investing in the securities of any company listed on a national securities exchange, provided that your involvement with any such company is solely that of a stockholder of 5% or less of any class of the outstanding securities thereof.

 

(C)                               Induce, offer, assist, encourage or suggest (i) that another business or enterprise offer employment to or enter into a business affiliation with any Company employee, agent or representative, or any individual who acted as an employee, agent or representative of the Company in the previous six months; or (ii) that any Company employee, agent or representative (or individual who acted as an

 

1

 

employee, agent or representative of the Company in the previous six months) terminate his or her employment or business affiliation with the Company; or

 

(D) Hire or, directly or indirectly, participate in the hiring of any Company employee or any person who was an employee of the Company in the previous six months, by any business, enterprise or employer.

 

In the event that any of the provisions of this Section 1 should be adjudicated to exceed the time, geographic, product or other limitations permitted by applicable law in any jurisdiction, then such provisions shall be deemed reformed in such jurisdiction to the maximum time, geographic, product or other limitations permitted by applicable law.

 

The term “Cause” as used herein means:

 

(i)                                     Employee’s conviction of a crime involving moral turpitude;

 

(ii)                                  Employee become incapable of performing the duties of his employment with Company due to loss or suspension of any license or certification required for the performance of those duties;

 

(iii)                               conduct by Employee that is found by Company to constitute fraud, embezzlement, or theft that occurs during or in the course of Employee’s employment with Company;

 

(iv)                              intentional damage by Employee to Company’s assets or property or the assets or property of Company’s customers, vendors, or employees;

 

(v)                                 intentional disclosure by Employee of Company’s confidential information contrary to Company’s policies or instructions received by Employee during or in the course of his employment with Company;

 

(vi)                              intentional engagement by Employee in any activity which would constitute a breach of duty of loyalty to Company;

 

(vii)                           conduct by Employee found by Company to constitute a willful and continued failure or refusal by Employee to substantially perform his duties for Company (except as a result of incapacity due to physical or mental illness),

 

(viii)                        Employee’s failure to comply with Company’s Code of Business Conduct and Ethics as well as any other Company policy or practice (despite having been advised and/or instructed regarding those policies or practices); or

 

(ix)                              conduct by Employee that is demonstrably and materially injurious to Company, monetarily or otherwise, as determined by Company, including injury to Company’s reputation or conduct by Employee otherwise having an adverse effect upon Company’s interests, as determined by Company.

 

2

 

The term “Confidential Information” means any item of information, or compilations of information in any form, related to the Company’s business, that the Company has not made public and that is not generally known to the public, and specifically includes, but is not limited to, trade secrets, proprietary information, internal financial information, financial, marketing and strategic plans, product costs, customer lists, pricing, and key contact information, dealer and supplier data, inventions, new product plans, pending patent or copyright applications, formulas, proprietary compounds, product styles, manufacturing processes, manufacturing equipment, methods of doing business presently in existence or that come in to existence during Employee’s employment, methods of processing or producing materials presently in existence or that come in to existence during Employee’s employment, key personnel information, lists of employees, organizational charts and database information, and any other information that is identified or protected as confidential information, whether or not marked “confidential”.

 

The term “prospective customer” shall mean a person or business entity that the Company has identified as a user or potential user of the Company’s products and toward which the Company plans to direct sales or marketing activities.

 

The term “Competing Business” shall mean any business or enterprise that is engaged in the research, development, manufacture, sale, marketing or distribution of stainless steel, titanium, specialty alloys, or metal fabricated parts or components similar to or competitive with those manufactured by Carpenter.

 

2.                                      Equitable Relief.

 

(A)                               Employee has carefully considered the promises made here and acknowledges that the restrictions set forth in paragraph 1 of this Agreement are, in view of the nature of the business of the Company, reasonable and necessary to protect the legitimate interests of the Company, that the restrictions do not confer any benefit on the Company disproportionate to the detriment of the Employee, and that any violation of any provision of those Sections will result in immediate and irreparable injury to the Company. Employee also acknowledges that in the event of any such violation, the Company, in addition to any other remedies available, shall be entitled to seek preliminary and permanent injunctive relief, without the necessity of proving actual damages and to an equitable accounting of all earnings, profits and other benefits arising from any such violation, which right shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled.

 

(B)                               Employee agrees that a lawsuit arising out of or relating to this Agreement must be brought by either party in the Court of Common Pleas for Berks County, Pennsylvania, or the United States District Court for the Eastern District of Pennsylvania. Employee hereby waives, to the fullest extent permitted by law, any objection that Employee may now, or hereafter, have to such jurisdiction or to the laying of the venue of any such lawsuit in such courts and any claim that such suit, action or proceeding has been brought in an inconvenient forum.

 

(C)                               In the event the Company files suit against Employee for any reason, including, but not limited to, enforcement of any provision of this Agreement, or in the event the Company is otherwise involved in litigation with Employee concerning this Agreement, and a court of competent jurisdiction finds in favor of the Company, Employee shall reimburse the Company its reasonable costs and attorneys’ fees incurred in connection with such a suit.

 

(D)                               Employee further agrees that any breach of the non-competition obligations set forth in Section 1 of this Agreement will extend the term of the non-compete obligation by the amount of time

 

3

 

that Employee has breached this agreement so that Employee honors the non-competition provision for eighteen (18) full months.

 

3.                                      Survival.   Employee acknowledges that the Company has given Employee, and Employee has received, full and adequate consideration for the promises made and the restrictions contained herein. The promises and restrictions contained in this section shall run in favor of the Company and its successors and assigns, subsidiaries and affiliates, and shall survive the expiration, termination and/or non-renewal of this Agreement and/or the termination of Employee’s employment with the Company.

 

Employee acknowledges that the Company has given Employee, and Employee has received, full and adequate consideration for the promises made and the restrictions contained herein. The promises and restrictions contained in this section shall run in favor of the Company and its successors and assigns, subsidiaries and affiliates, and shall survive the expiration, termination and/or non-renewal of this Agreement and/or the termination of Employee’s employment with the Company.

 

I have read, understand and accept the terms of this Non-Competition Agreement extended to me by Carpenter Technology Corporation.

 

 

	
/s/ Joseph E. Haniford
    	
 
    	
6/16/15
    
	
Joseph E. Haniford
    	
 
    	
Date
    

 

4

 

Exhibit F

 

INTELLECTUAL PROPERTY AGREEMENT

 

This Agreement sets forth the agreement between Joseph E. Haniford and CARPENTER TECHNOLOGY CORPORATION or any of its subsidiaries (“Carpenter”) concerning any inventions you may make in connection with your employment by Carpenter and your treatment of Carpenter’s confidential and proprietary information. In consideration of your employment by Carpenter and the use of Carpenter’s facilities, know-how and experience, you agree to and will abide by the following terms and conditions for the duration of your employment by Carpenter and thereafter.

 

SECTION 1. INVENTIONS.

 

The term “Inventions” shall mean any and all inventions and discoveries made, created or conceived by you, whether alone or jointly with others, relating to Carpenter’s business. This shall include, but not be limited to, improvements, designs, formulas, processes, computer programs, databases, trade secrets, proprietary information, documentation and materials. In the event of any dispute, it is agreed that Carpenter shall be the sole judge as to whether or not an invention relates to Carpenter business.

 

A.                                    CARPENTER’S RIGHTS TO INVENTIONS

 

(i)                                    Disclosure.

 

You agree to immediately make full written disclosure to Carpenter of any and all inventions that are conceived or reduced to practice during your employment by Carpenter and relate to the business and products, or to the actual or demonstrably anticipated research or development of Carpenter (“Carpenter Inventions”).

 

(ii)                                Assignment to Carpenter.

 

You agree that all Inventions that: (i) are Carpenter Inventions; (ii) are developed using Carpenter’s confidential and proprietary information, facilities, equipment and supplies; or (iii) result from work performed by you for Carpenter, will be the sole and exclusive property of Carpenter and you hereby assign all of your right, title and interest in such Carpenter Inventions to Carpenter. You also agree to perform any acts necessary to accomplish this assignment;

 

(iii)                            Assignment of Moral Rights.

 

To the extent permitted by law, you hereby assign any “moral” rights you may have in Carpenter Inventions to Carpenter and agree to forever waive and never assert any “moral” rights you may have in Carpenter Inventions during or after the termination of your employment with Carpenter.

 

B.                                    YOUR RIGHT TO INVENTIONS

 

(i)                                    Prior Inventions

 

“Prior Inventions” are inventions you made and claim an ownership interest in prior to your employment by Carpenter or prior to executing this Agreement.

 

Please place your initials on one of the following two lines: 

 

	
/s/ JEH
    	
 
    	
I have not made   any Prior Inventions.
    
	
 
    	
 
    
	
 
    	
Prior Inventions   I claim to have made are attached on a separate piece of paper.
    

 

 

 

 

If you have not listed any Prior Inventions, you agree that no Prior Inventions exist. To the extent Prior Inventions do exist, you hereby waive any and all rights or claims of ownership in such Prior Inventions.

 

If you have listed Prior Inventions, you hereby grant to Carpenter a royalty-free, irrevocable, perpetual, world-wide license to any Prior Invention that is now or hereafter infringed by a Carpenter product, process or method of doing business (“Carpenter Product”) if:

 

(a)                                 if you were involved in the development or implementation of that portion of the Carpenter Product that infringes upon your Prior Invention;

 

(b)                                 you acquiesced or permitted other Carpenter employees to utilize your Prior Invention in the course of their development or implementation of the carpenter product; or

 

(c)                                  upon first learning of Carpenter’s use of your Prior Invention, you do not immediately notify in writing Carpenter’s Vice President of Technology of the infringement of your Prior Invention and the need for a license.

 

The listing of Prior Inventions does not constitute an acknowledgement by Carpenter of the existence or extent of such Prior Inventions nor of your ownership of such Prior Inventions.

 

(ii)                                Future Inventions

 

Carpenter agrees that you will own any inventions you develop while employed by Carpenter or thereafter as long as you develop such inventions: (1) on your own time; (2) not while performing Carpenter work; (3) without the use of Carpenter confidential and proprietary information, facilities, equipment and supplies; and (4) outside the scope of Carpenter’s business.

 

SECTION 2. PROTECTION OF CARPENTER INVENTIONS

 

You agree (at Carpenter’s expense) to assist Carpenter in every proper way in obtaining and enforcing patents, copyrights and other legal protections for Carpenter Inventions in any and all countries. You further agree to execute all lawful documents deemed necessary or advisable by Carpenter to obtain or enforce such patents, copyrights and other legal protections. You acknowledge that all original works of authorship that are made by you within the scope of your employment by Carpenter, and that are protectable by copyright, are works made for hire, pursuant to the United States Copyright Act (17 U.S.C. §101).

 

SECTION 3. CONFIDENTIAL PROPRIETARY INFORMATION

 

You understand that your employment by Carpenter creates a relationship of confidence and trust with respect to any information of a confidential, proprietary and secret nature that may be disclosed to you or otherwise learned by you in the course of your employment at Carpenter, including but not limited to, any confidential information of third parties disclosed to Carpenter. Such confidential, proprietary, and secret information includes, but is not limited to, information and material relating to past, present or future Inventions, marketing plans, manufacturing and product plans, technical specifications, hardware design and prototypes, business strategies, financial information, and forecasts, personnel information, and customer lists, and is referred to collectively in this Agreement as “Proprietary Information.”

 

A.                                    CONFIDENTIALITY OF PROPRIETARY INFORMATION

 

You understand and agree that your employment by Carpenter requires you to keep all Proprietary Information in confidence and trust for the tenure of your employment and thereafter, and that you will not use or disclose Proprietary information without the written consent of Carpenter, except as necessary to perform your duties as an employee of Carpenter. Upon termination of your employment with Carpenter, you will promptly deliver to Carpenter all documents and materials of any kind pertaining to your work at

 

2

 

Carpenter, and you agree that you will not take with you any documents, materials or copies thereof, whether on paper, magnetic or optical media or any other medium, containing any Proprietary Information.

 

B.                                    INFORMATION OF OTHERS

 

You agree that during the tenure of your employment by Carpenter and thereafter, you will not improperly use or disclose to Carpenter any confidential, or proprietary, or secret information of your former employers or any other person. You further agree that you have not, and during your employment with Carpenter will not, bring any confidential, proprietary or secret information of your former employer(s) or any other person(s) onto Carpenter Property.

 

SECTION 4. MISCELLANEOUS PROVISIONS

 

A.                                    SEVERABILITY

 

If one or more of the provisions of this Agreement are deemed void or unenforceable by law, then the remaining provisions will continue in full force and effect.

 

B.                                    GOVERNING LAW

 

This Agreement will be governed by the laws of the Commonwealth of Pennsylvania. Any legal action arising out of this Agreement shall be venued in Berks County, Pennsylvania.

 

C.                                    SUCCESSORS AND ASSIGNS

 

This Agreement will be binding upon your heirs, executors, administrators, and other legal representatives and will be for the benefit of Carpenter, its successors and assigns.

 

BY EXECUTING THIS AGREEMENT, I INTEND TO BE LEGALLY BOUND BY ALL OF THE TERMS AND CONDITIONS CONTAINED IN THIS AGREEMENT.

 

 

	
/s/ Joseph E.   Haniford
    	
 
    	
6/16/15
    
	
Joseph E.   Haniford
    	
 
    	
Date
    
	
Signature
    	
 
    	
 
    

 

3Exhibit
10.1

 

Digital
Ally, Inc.

 

2015
Stock Option and Restricted Stock Plan

 

1. Purposes.

 

(a)
Background. This 2015 Stock Option and Restricted Stock Plan was adopted on March 27, 2015 by the Board of Directors,
subject to the approval of the Company’s stockholders. Options granted under the Plan prior to the stockholders’ approval
will be effective upon approval of the stockholders as of their respective dates of grant.

 

(b)
Eligible Award Recipients. The persons eligible to receive Awards are the Employees and Directors of the Company and
its Affiliates.

 

(c)
Available Awards. The purpose of the Plan is to provide a means by which eligible recipients may be given an opportunity
to benefit from increases in value of the Common Stock through the granting of the following: (i) Incentive Stock Options, (ii)
Nonqualified Stock Options, (iii) rights to acquire restricted stock, and (iv) stock appreciation rights.

 

(d)
General Purpose. The Company, by means of the Plan, seeks to retain the services of the group of persons eligible to
receive Awards, to secure and retain the services of new members of this group and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its Affiliates.

 

2. Definitions.

 

(a)
“Affiliate” means any entity that controls, is controlled by, or is under common control with the
Company.

 

(b)
“Award” means any right granted under the Plan, including an Option, a right to acquire restricted
Common Stock, and a stock appreciation right.

 

(c)
“Award Agreement” means a written agreement between the Company and a holder of an Award (other than
an Option) evidencing the terms and conditions of an individual Award grant.

 

(d)
“Board” means the board of directors of the Company.

 

(e)
“Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated
thereunder.

 

(f)
“Committee” means a pre-existing or newly formed committee of members of the Board appointed by the
Board in accordance with subsection 3(c).

 

    	 

    	 

    

 

(g)
“Common Stock” means the shares of the Company’s common stock par value $0.001 and other rights
with respect to such shares.

 

(h)
“Company” means Digital Ally, Inc., a Nevada corporation.

 

(i)
“Continuous Service” means that the Participant’s service with the Company or an Affiliate,
whether as an Employee or Director is not interrupted or terminated. Unless otherwise provided in an Award Agreement or
Option Agreement, as applicable, the Participant’s Continuous Service shall not be deemed to have terminated merely
because of a change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee or
Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or
termination of the Participant’s service to the Company or an Affiliate as an Employee or Director. The Board, in its
sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of
absence, including sick leave, military leave or any other personal leave.

 

(j)
“Covered Employee” means the Company’s chief executive officer and the four (4) other highest
compensated officers of the Company for whom total compensation is required to be reported to stockholders under the Exchange
Act, as determined for purposes of Section 162(m) of the Code.

 

(k)
“Director” means a member of the Board of the Company.

 

(l)
“Disability” means the Participant’s inability, due to illness, accident, injury, physical or
mental incapacity or other disability, to carry out effectively the duties and obligations to the Company and its Affiliates
performed by such person immediately prior to such disability for a period of at least six (6) months, as determined in the
good faith judgment of the Board.

 

(m)
“Dollars” or “$” means United States dollars.

 

(n)
“Employee” means any person employed by the Company or an Affiliate. Service as a Director or payment
of a director’s fee by the Company or an Affiliate alone shall not be sufficient to constitute “employment”
by the Company or an Affiliate.

 

(o)
“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(p)
“Fair Market Value” means, as of any date, the value of the Common Stock determined as
follows:

 

(i) If
the Common Stock is listed on any established stock exchange, or traded on the Nasdaq Global Market, the Nasdaq Capital
Market or the Nasdaq OTC Bulletin Board, the Fair Market Value of the Common Stock shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with
the greatest volume of trading in Common Stock if such stock is traded on more than one such exchange or market) on the last
market trading day prior to the day of determination, as reported by such exchange or market or such other source as the
Board reasonably deems reliable.

 

(ii) In
the absence of such markets for the Common Stock, the Fair Market Value shall be determined in good faith by
the Board.

 

    	 

    	 

    

 

(q)
“Incentive Stock Option” means an option designated as an incentive stock option in an Option
Agreement and that is granted in accordance with the requirements of, and that conforms to the applicable provisions of,
Section 422 of the Code.

 

(r)
“Independent Director” means (i) a Director who satisfies the definition of Independent Director or
similar definition under the applicable stock exchange or Nasdaq rules and regulations upon which the Common Stock is traded
from time to time and (ii) a Director who either (A) is not a current employee of the Company or an “affiliated
corporation” (within the meaning of Treasury Regulations promulgated under Section 162(m) of the Code), is not a former
employee of the Company or an “affiliated corporation” receiving compensation for prior services (other than
benefits under a tax qualified pension plan), was not an officer of the Company or an “affiliated corporation” at
any time and is not currently receiving direct or indirect remuneration from the Company or an “affiliated
corporation” for services in any capacity other than as a Director or (B) is otherwise considered an “outside
director” for purposes of Section 162(m) of the Code.

 

(s)
“Nonqualified Stock Option” means an option that is not designated in an Option Agreement as an
Incentive Stock Option or was not granted in accordance with the requirements of, and does not conform to the applicable
provisions of, Section 422 of the Code.

 

(t)
“Officer” means a person who is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.

 

(u)
“Option” means an Incentive Stock Option or a Nonqualified Stock Option granted pursuant to the
Plan.

 

(v)
“Option Agreement” means a written agreement between the Company and an Optionholder evidencing the
terms and conditions of an individual Option grant.

 

(w)
“Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable,
such other person who holds an outstanding Option.

 

(x)
“Participant” means a person to whom an Award is granted pursuant to the Plan or, if applicable, such
other person who holds an outstanding Award.

 

(y)
“Plan” means this Digital Ally, Inc. 2015 Stock Option and Restricted Stock Plan.

 

(z)
“Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in
effect from time to time.

 

(aa)
“Securities Act” means the Securities Act of 1933, as amended.

 

(bb)
“Ten Percent Stockholder” means a person who owns (or is deemed to own pursuant to Section 424(d) of
the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the
Company or any parent corporation or any subsidiary corporation, both as defined in Section 424 of the Code.

 

    	 

    	 

    

 

3. Administration.

 

(a)
Administration by Board. The Board shall administer the Plan unless and until the Board delegates administration to
a Committee, as provided in subsection 3(c). The Board may, at any time and for any reason in its sole discretion, rescind some
or all of such delegation.

 

(b)
Powers of Board. The Board shall have the power, subject to, and within the limitations of, the express provisions
of the Plan:

 

(i) To
determine from time to time which of the persons eligible under the Plan shall be granted Awards; when and how each Award
shall be granted; what type or combination of types of Award shall be granted; the provisions of each Award granted (which
need not be identical), including the time or times when a person shall be permitted to receive Common Stock pursuant to an
Award; and the number of shares of Common Stock with respect to which an Award shall be granted to each such
person.

 

(ii) To
construe and interpret the Plan, Awards granted under it, Option Agreements and Award Agreements, and to establish, amend
and revoke rules and regulations for their administration. The Board, in the exercise of this power, may correct any defect,
omission or inconsistency in the Plan or in any Option Agreement or Award Agreement, in a manner and to the extent it shall
deem necessary or expedient to make the Plan fully effective.

 

(iii)
To amend the Plan, an Award, an Award Agreement or an Option Agreement as provided in Section 12, provided that,
the Board shall not amend the Fair Market Value of an Award or extend the term of an Option or Award without obtaining the approval
of the stockholders if required by the rules of any stock exchange upon which the Common Stock is listed.

 

(iv)
To reprice any Options granted under the Plan by lowering the exercise price of an Option after it is granted, canceling an
Option at a time when its exercise price exceeds the Fair Market Value of the stock underlying the Option, in exchange for
another Option or Award, as well as any other action that is treated as a repricing under generally accepted accounting
principles.

 

(v) Generally,
to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of
the Company which are not in conflict with the provisions of the Plan.

 

(c)
Delegation to Committee. 

 

(i)
General. The Board may delegate administration of the Plan and its powers and duties thereunder to a Committee or Committees,
and the term “Committee” shall apply to any person or persons to whom such authority has been delegated. Upon such
delegation, the Committee shall have the powers theretofore possessed by the Board, including the power to delegate to a subcommittee
any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter
be deemed to include the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions
of the Plan, as may be adopted from time to time by the Board. In its absolute discretion, the Board may at any time and from
time to time exercise any and all rights and duties of the Committee under this Plan, except respecting matters under Rule 16b-3
of the Exchange Act or Section 162(m) of the Code, or any rules or regulations issued thereunder, which are required to be determined
in the sole discretion of the Committee.

 

    	 

    	 

    

 

(ii)
Committee Composition. A Committee shall consist solely of two (2) or more Independent Directors. Within the scope
of its authority, the Board or the Committee may (1) delegate to a committee of one or more members of the Board who are not Independent
Directors the authority to grant Awards to eligible persons who are either (a) not then Covered Employees and are not expected
to be Covered Employees at the time of recognition of income resulting from such Award or (b) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code, and/or (2) delegate to a committee of one or more members of the
Board who are not Independent Directors or to the Company’s Chief Executive Officer the authority to grant Awards to eligible
persons who are not then subject to Section 16 of the Exchange Act.

 

(d)
Effect of Board’s Decision; No Liability. All determinations, interpretations and constructions made by the Board
in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons. No member
of the Board or the Committee or any person to whom duties hereunder have been delegated shall be liable for any action, interpretation
or determination made in good faith, and such persons shall be entitled to full indemnification and reimbursement consistent with
applicable law and in the manner provided in the Company’s Articles of Incorporation and Bylaws, as the same may be amended
from time to time, or as otherwise provided in any agreement between any such member and the Company.

 

4. Stock
Subject to the Plan.

 

(a)
Stock Reserve. Subject to the provisions of Section 11 relating to adjustments upon changes in Common Stock, the shares
of Common Stock that may be issued pursuant to Awards shall not exceed in the aggregate three hundred thousand (300,000) shares
of Common Stock.

 

(b)
Reversion of Stock to the Stock Reserve. If any Award shall for any reason expire or otherwise terminate, in whole
or in part, without having been exercised in full, the shares of Common Stock not acquired under such Award shall revert to and
again become available for issuance under the Plan.

 

(c)
Source of Stock. The Common Stock subject to the Plan may be unissued stock or reacquired stock, bought on the market
or otherwise.

 

5. Eligibility.

 

(a)
Eligibility for Specific Awards. Incentive Stock Options may be granted only to Employees. Awards other than Incentive
Stock Options may be granted to Employees and Directors.

 

(b)
Ten Percent Stockholders. A Ten Percent Stockholder shall not be granted an Incentive Stock Option unless the exercise
price of such Option is at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock at the date of grant
and the Option is not exercisable after the expiration of five (5) years from the date of grant.

 

    	 

    	 

    

 

6. Option
Provisions. 

 

Each
Option Agreement shall be subject to the terms and conditions of this Plan. Each Option and Option Agreement shall be in such
form and shall contain such terms and conditions as the Board shall deem appropriate. All Options shall be separately designated
Incentive Stock Options or Nonqualified Stock Options at the time of grant, and, if certificates are issued, a separate certificate
or certificates will be issued for the shares of Common Stock purchased on exercise of each type of Option. The provisions of
separate Options need not be identical.

 

(a)
Provisions Applicable to All Options. 

 

(i)
Consideration. The purchase price of the shares of Common Stock acquired pursuant to an Option shall be paid as follows:
(a) in cash or by certified or official bank check, payable to the order of the Company, in the amount (the “Purchase Price”)
equal to the exercise price of the Option multiplied by the number of shares plus payment of all taxes applicable upon such exercise;
(b) with shares owned by the Optionholder having a Fair Market Value at the time the Option is exercised equal to the Purchase
Price plus payment in cash of all taxes applicable upon such exercise, with the prior approval of the Board; (c) by surrendering
to the Company the right to acquire a number of shares having an aggregate value such that the amount by which the Fair Market
Value of such shares exceeds the aggregate exercise price is equal to the Purchase Price plus payment in cash of all taxes applicable
upon such exercise, with the prior approval of the Board; (d) any combination of the foregoing; or (e) a manner acceptable to
the Board.

 

(ii)
Vesting Generally. An Option may (A) vest, and therefore become exercisable, in periodic installments that may, but
need not, be equal, or (B) be fully vested at the time of grant. The Option may be subject to such other terms and conditions
on the time or times when it may be exercised (which may be based on performance or other criteria) as the Board may deem appropriate.
The vesting provisions, if any, of individual Options may vary. The provisions of this subsection 6(a)(ii) are subject to any
Option Agreement provisions governing the minimum number of Common Stock as to which an Option may be exercised.

 

(iii)
Termination of Continuous Service. Unless otherwise provided in the Option Agreement, in the event an Optionholder’s
Continuous Service terminates (other than upon the Optionholder’s death, Disability, retirement or as a result of a Change
of Control), all Options held by the Optionholder shall immediately terminate; provided, however, that an Option
Agreement may provide that if an Optionholder’s Continuous Service is terminated for reasons other than for cause, all vested
Options held by such person shall continue to be exercisable until the earlier of the expiration date of such Option or ninety
(90) days after the date of such termination. All such vested Options not exercised within the period described in the preceding
sentence shall terminate.

 

(iv)
Disability or Death of Optionholder. Unless otherwise provided in the Option Agreement, in the event of an Optionholder’s
Disability or death, all unvested Options shall immediately terminate, and all vested Options held by such person shall continue
to be exercisable for twelve months after the date of such Disability or death. All such vested Options not exercised within such
twelve-month period shall terminate.

 

(v)
Retirement. Unless otherwise provided in the Option Agreement, in the event of the Optionholder’s retirement,
all unvested Options shall automatically vest on the date of such retirement and all Options shall be exercisable for the earlier
of twelve (12) months after such retirement date or the expiration date of such Options. All such Options not exercised within
the period described in the preceding sentence shall terminate.

 

    	 

    	 

    

 

(b)
Provisions Applicable to Incentive Stock Options.

 

(i)
Term. Subject to the provisions of subsection 5(b) regarding Ten Percent Stockholders, no Incentive Stock Option shall
be exercisable after the expiration of ten (10) years from the date it was granted. Further, no grant of an Incentive Stock Option
shall be made under this Plan more than ten (10) years after the date the Plan is approved by the stockholders of the Company.

 

(ii)
Exercise Price of an Incentive Stock Option. Subject to the provisions of subsection 5(b) regarding Ten Percent Stockholders,
the exercise price of each Incentive Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of
the Common Stock subject to the Option on the date the Option is granted.

 

(iii)
Transferability of an Incentive Stock Option. An Incentive Stock Option shall not be transferable except by will or
by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder.

 

(iv)
Incentive Stock Option $100,000 Limitation. Notwithstanding any other provision of the Plan or an Option Agreement,
the aggregate Fair Market Value of the Common Stock with respect to which Incentive Stock Options are exercisable for the first
time by an Optionholder in any calendar year, under the Plan or any other option plan of the Company or its Affiliates, shall
not exceed One Hundred Thousand Dollars ($100,000). For this purpose, the Fair Market Value of the Common Stock shall be determined
as of the time an Option is granted. The Options or portions thereof which exceed such limit (according to the order in which
they were granted) shall be treated as Nonqualified Stock Options.

 

(c)
Provisions Applicable to Nonqualified Stock Options.

 

(i)
Exercise Price of a Nonqualified Stock Option. The exercise price of each Nonqualified Stock Option shall be not less
than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted.

 

(ii)
Transferability of a Nonqualified Stock Option. A Nonqualified Stock Option shall be transferable, if at all, to the
extent provided in the Option Agreement. If the Option Agreement does not provide for transferability, then the Nonqualified Stock
Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the
lifetime of the Optionholder only by the Optionholder.

 

7.
Provisions of Awards Other than Options. 

 

(a)
Restricted Stock Awards. Each restricted stock Award agreement shall be in such form and shall contain such restrictions,
terms and conditions, if any, as the Board shall deem appropriate and shall be subject to the terms and conditions of this Plan.
The terms and conditions of restricted stock Award Agreements may change from time to time, and the terms and conditions of separate
restricted stock Award Agreements need not be identical, but each restricted stock Award Agreement shall include (through incorporation
of provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:

 

(i)
Consideration. A restricted stock Award may be awarded in consideration for past services actually rendered, or for
future services to be rendered, to the Company or an Affiliate for its benefit.

 

    	 

    	 

    

 

(ii)
Vesting. Common Stock awarded under the restricted stock Award Agreement may (A) be subject to a vesting schedule to
be determined by the Board or (B) be fully vested at the time of grant.

 

(iii)
Termination of Participant’s Continuous Service. Unless otherwise provided in the restricted stock Award Agreement,
in the event a Participant’s Continuous Service terminates prior to a vesting date set forth in the restricted stock Award
Agreement, any unvested restricted stock Award shall be forfeited and automatically transferred to and reacquired by the Company
at no cost to the Company, and neither the Participant nor his or her heirs, executors, administrators or successors shall have
any right or interest in the restricted stock Award. Notwithstanding the foregoing, unless otherwise provided in the restricted
stock Award agreement, in the event a Participant’s Continuous Service terminates as a result of (A) being terminated by
the Company for reasons other than for cause, (B) death, (C) Disability, (D) retirement, or (E) a Change of Control (subject to
the provisions of Section 11(c) hereof), then any unvested restricted stock Award shall vest immediately upon such date.

 

(iv)
Transferability. Rights to acquire Common Stock under the restricted stock Award Agreement shall be transferable by
the Participant only upon such terms and conditions as are set forth in the restricted stock Award Agreement, as the Board shall
determine in its discretion, so long as Common Stock awarded under the restricted stock Award Agreement remain subject to the
terms of the restricted stock Award Agreement.

 

(b)
Grant of Stock Appreciation Rights. Stock appreciation rights to receive in shares of Common Stock the excess of the
Fair Market Value of Common Stock on the date the rights are surrendered over the Fair Market Value of Common Stock on the date
of grant may be granted to any Employee or Director selected by the Board. A stock appreciation right may be granted (i) in connection
and simultaneously with the grant of another Award, (ii) with respect to a previously granted Award, or (iii) independent of another
Award. A stock appreciation right shall be subject to such terms and conditions not inconsistent with this Plan as the Board shall
impose and shall be evidenced by a written stock appreciation right agreement, which shall be executed by the Participant and
an authorized officer of the Company. The Board, in its discretion, may determine whether a stock appreciation right is to qualify
as performance-based compensation as described in Section 162(m)(4)(C) of the Code and stock appreciation right agreements evidencing
stock appreciation rights intended to so qualify shall contain such terms and conditions as may be necessary to meet the applicable
provisions of Section 162(m) of the Code. The Board may, in its discretion and on such terms as it deems appropriate, require
as a condition of the grant of a stock appreciation right that the Participant surrender for cancellation some or all of the Awards
previously granted to such person under this Plan or otherwise. A stock appreciation right, the grant of which is conditioned
upon such surrender, may have an exercise price lower (or higher) than the exercise price of the surrendered Award, may contain
such other terms as the Board deems appropriate, and shall be exercisable in accordance with its terms, without regard to the
number of shares, price, exercise period or any other term or condition of such surrendered Award.

 

8. Availability
of Stock.

 

Subject
to the restrictions set forth in Section 4(a), during the terms of the Awards, the Company shall keep available at all times the
number of shares of Common Stock required to satisfy such Awards.

 

    	 

    	 

    

 

9. Use
of Proceeds from Stock.

 

Proceeds
from the sale of Common Stock pursuant to Awards shall constitute general funds of the Company.

 

10. Miscellaneous.

 

(a)
Exercise of Awards. Awards shall be exercisable at such times, or upon the occurrence of such event or events as the
Board shall determine at or subsequent to grant. Awards may be exercised in whole or in part. Common Stock purchased upon the
exercise of an Award shall be paid for in full at the time of such purchase.

 

(b)
Acceleration of Exercisability and Vesting. The Board shall have the power to accelerate the time at which an Award
may first be exercised or the time during which an Award or any part thereof will vest in accordance with the Plan, notwithstanding
the provisions in the Award stating the time at which it may first be exercised or the time during which it will vest.

 

(c)
Stockholder Rights.

 

(i)
Options. Unless otherwise provided in and upon the terms and conditions in the Option Agreement, no Participant shall
be deemed to be the holder of, or to have any of the rights of a holder with respect to, any Common Stock subject to an Option
unless and until such Participant has satisfied all requirements for exercise of, and has exercised, the Option pursuant to its
terms.

 

(ii)
Restricted Stock. Unless otherwise provided in and upon the terms and conditions in the restricted stock Award Agreement,
a Participant shall have the right to receive all dividends and other distributions paid or made respecting such restricted stock,
provided, however, no unvested restricted stock shall have any voting rights of a stockholder respecting such unvested restricted
stock unless and until such unvested restricted stock become vested.

 

(d)
No Employment or other Service Rights. Nothing in the Plan or any instrument executed or Award granted pursuant thereto
shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the
time the Award was granted, or any other capacity, or shall affect the right of the Company or an Affiliate to terminate with
or without notice and with or without cause (i) the employment of an Employee or an Affiliate or (ii) the service of a Director
of the Company or an Affiliate.

 

(e)
Withholding Obligations. If the Company has or will have a legal obligation to withhold the taxes related to the grant,
vesting or exercise of the Award, such Award may not be granted, vested or exercised in whole or in part, unless such tax obligation
is first satisfied in a manner satisfactory to the Company. To the extent provided by the terms of an Award Agreement or Option
Agreement, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition
of Common Stock under an Award by any of the following means (in addition to the Company’s right to withhold from any compensation
paid to the Participant by the Company) or by a combination of such means: (i) tendering a cash payment in Dollars; (ii) authorizing
the Company to withhold Common Stock from the Common Stock otherwise issuable to the Participant as a result of the exercise or
acquisition of Common Stock under the Award, provided, however, that no shares of Common Stock are withheld with a value exceeding
the minimum amount of tax required to be withheld by law; or (iii) delivering to the Company owned and unencumbered Common Stock.

 

    	 

    	 

    

 

(f)
Listing and Qualification of Stock. This Plan and the grant and exercise of Awards hereunder, and the obligation of
the Company to sell and deliver Common Stock under such Awards, shall be subject to all applicable United States federal and state
laws, rules and regulations, and any other laws applicable to the Company, and to such approvals by any government or regulatory
agency as may be required. The Company, in its discretion, may postpone the issuance or delivery of Common Stock upon any exercise
of an Award until completion of any stock exchange listing, or the receipt of any required approval from any stock exchange or
other qualification of such Common Stock under any United States federal or state law rule or regulation as the Company may consider
appropriate, and may require any individual to whom an Award is granted, such individual’s beneficiary or legal representative,
as applicable, to make such representations and furnish such information as the Board may consider necessary, desirable or advisable
in connection with the issuance or delivery of the Common Stock in compliance with applicable laws, rules and regulations.

 

(g)
Non-Uniform Determinations. The Board’s determinations under this Plan (including, without limitation, determinations
of the persons to receive Awards, the form, term, provisions, amount and timing of the grant of such Awards and of the agreements
evidencing the same) need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive,
Awards under this Plan, whether or not such persons are similarly situated.

 

11.
Adjustments Upon Changes in Stock.

 

(a)
Capitalization Adjustments. If any change is made in the Common Stock subject to the Plan, or subject to any Award,
without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation,
stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of stock, exchange of stock,
change in corporate structure or other transaction), the Plan will be appropriately adjusted in the class(es) and maximum number
of securities subject to the Plan pursuant to subsection 4(a) and the maximum number of securities subject to award to any person
pursuant to subsection 5(c), and the outstanding Awards will be appropriately adjusted in the class(es) and number of securities
and price per stock of Common Stock subject to such outstanding Awards. The Board shall make such adjustments, and its determination
shall be final, binding and conclusive. (The conversion of any convertible securities of the Company shall not be treated as a
transaction “without receipt of consideration” by the Company.)

 

(b)
Dissolution or Liquidation. In the event of a dissolution or liquidation of the Company, then all outstanding Awards
shall terminate immediately prior to such event.

 

(c)
Asset Sale, Merger, Consolidation or Reverse Merger. In the event of a Change of Control (as defined below), any unvested
Awards shall vest immediately prior to the closing of the Change of Control, and the Board shall have the power and discretion
to provide for the Participant’s election alternatives regarding the terms and conditions for the exercise of, or modification
of, any outstanding Awards granted hereunder, provided, however, such alternatives shall not affect the then current exercise
provisions without such Participant’s consent. The Board may provide that Awards granted hereunder must be exercised in
connection with the closing of such transaction, and that if not so exercised such Awards will expire. Any such determinations
by the Board may be made generally with respect to all Participants, or may be made on a case-by-case basis with respect to particular
Participants. For the purpose of this Plan, a “Change of Control” shall have occurred in the event one or more persons
acting individually or as a group (i) acquires sufficient additional stock to constitute more than fifty percent (50%) of (A)
the total Fair Market Value of all Common Stock issued and outstanding or (B) the total voting power of all shares of capital
stock authorized to vote for the election of directors; (ii) acquires, in a twelve (12) month period, thirty-five percent (35%)
or more of the voting power of all shares of capital stock authorized to vote for the election of directors, or alternatively
a majority of the members of the board is replaced during any twelve (12) month period by directors whose appointment was not
endorsed by a majority of the members of the board; or (iii) acquires, during a twelve (12) month period, more than forty percent
(40%) of the total gross fair market value of all of the Company’s assets. Notwithstanding the foregoing, the provisions
of this Section 11(c) shall not apply to (i) any transaction involving any stockholder that individually or as a group owns more
than fifty percent (50%) of the outstanding Common Stock on the date this Plan is approved by the Company’s stockholders,
until such time as such stockholder first owns less than forty percent (40%) of the total outstanding Common Stock, or (ii) any
transaction undertaken for the purpose of reincorporating the Company under the laws of another jurisdiction, if such transaction
does not materially affect the beneficial ownership of the Company’s capital stock.

 

    	 

    	 

    

 

12.
Amendment of the Plan and Awards.

 

(a)
Amendment of Plan. The Board at any time, and from time to time, may amend the Plan. However, except as provided in
Section 11 relating to adjustments upon changes in Common Stock, no amendment shall be effective unless approved by the stockholders
of the Company to the extent stockholder approval is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any applicable Nasdaq or securities exchange listing requirements.

 

(b)
Stockholder Approval. The Board may, in its sole discretion, submit any other amendment to the Plan for stockholder
approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of Section 162(m) of the
Code and the regulations thereunder regarding the exclusion of performance-based compensation from the limit on corporate deductibility
of compensation paid to certain executive officers.

 

(c)
Contemplated Amendments. It is expressly contemplated that the Board may amend the Plan in any respect the Board deems
necessary or advisable to provide eligible Employees with the maximum benefits provided or to be provided under the provisions
of the Code and the regulations promulgated thereunder relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.

 

(d)
No Impairment of Rights. Rights under any Award granted before amendment of the Plan shall not be impaired by any amendment
of the Plan unless the Participant consents in writing.

 

(e)
Amendment of Awards. Subject to Section 3(b)(iii), the Board at any time, and from time to time, may amend the terms
of any one or more Awards; provided, however, that the rights under any Award shall not be impaired by any such amendment unless
the applicable Participant consents in writing.

 

13.
Termination or Suspension of the Plan. 

 

(a)
Plan Term. The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate
on the day before the tenth (10th) anniversary of the date the Plan is adopted by the stockholders of the Company. No Awards may
be granted under the Plan while the Plan is suspended or after it is terminated.

 

(b)
No Impairment of Rights. Suspension or termination of the Plan shall not impair rights and obligations under any Award
granted while the Plan is in effect except with the written consent of the Participant.

 

(c)
Savings Clause. This Plan is intended to comply in all aspects with applicable laws and regulations. In case any one
or more of the provisions of this Plan shall be held invalid, illegal or unenforceable in any respect under applicable law or
regulation, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired
thereby and the invalid, illegal or unenforceable provision shall be deemed null and void; however, to the extent permissible
by law, any provision which could be deemed null and void shall first be construed, interpreted or revised retroactively to permit
this Plan to be construed in compliance with all applicable laws so as to foster the intent of this Plan.

 

14.
Effective Date of Plan.

 

The
Plan shall become effective as determined by the Board, but no Award shall be exercised (or, in the case of a restricted stock
Award, shall be granted) unless and until the Plan has been approved by the stockholders of the Company, which approval shall
be within twelve (12) months before or after the date the Plan is adopted by the Board.

 

15. Choice
of Law. 

 

The
law of the state of Nevada shall govern all questions concerning the construction, validity and interpretation of this Plan, without
regard to such state’s conflict of laws rules.

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