8-KLeadership ChangesExhibits & Filings

CARPENTER TECHNOLOGY CORP 8-K Report, Executive Changes (Oct 26, 2009)

Filed October 26, 2009For Securities:CRS

Summary

Carpenter Technology Corporation (CRS) has filed an 8-K detailing the compensation package for Gregory A. Pratt, who was appointed Chairperson of the Board and interim President and CEO in October 2009. The filing outlines a comprehensive compensation structure for his dual roles, combining cash retainers, stock options, restricted stock units, and performance-based awards. This significant executive compensation arrangement is designed to incentivize Mr. Pratt during a critical transitional period for the company, with equity awards subject to vesting over one to two years and performance metrics for a portion of the CEO-related equity. The compensation details indicate a substantial commitment to retaining and motivating Mr. Pratt. For his role as Chairperson, he will receive a $90,000 annual cash retainer and equity awards totaling $220,000 in fair value, including stock options, restricted stock units, and deferred stock units, all vesting one year after grant. As interim CEO, his compensation is significantly higher, featuring a $25,000 monthly base salary and substantial equity grants valued at $1.4 million on the grant date. These interim CEO equity grants include performance stock units with potential payouts of 0-200% of a $600,000 target, and stock options with exercise prices at fair market value and 110% of fair market value, with staggered vesting tied to continued service and the duration of his interim service.

Key Highlights

  • 1Gregory A. Pratt appointed Chairperson of the Board and interim President and CEO.
  • 2Mr. Pratt's compensation as Chairperson includes a $90,000 annual cash retainer and approximately $220,000 in equity awards (stock options, restricted stock units, deferred stock units) vesting one year after grant.
  • 3As interim President and CEO, Mr. Pratt receives a $25,000 monthly base salary.
  • 4Significant equity compensation for interim CEO role includes performance stock units ($600,000 target value, 0-200% payout based on performance) and stock options ($800,000 and $300,000 fair value grants).
  • 5Equity grants for interim CEO role have vesting schedules tied to the "Applicable Vesting Date" (later of first anniversary of grant date or six months after new CEO starts) and continued service, with some options requiring longer interim service periods.
  • 6Mr. Pratt will not participate in the Company's Executive Bonus Compensation Plan or other incentive, severance, or retirement plans not detailed in the agreement.
  • 7The agreement includes reimbursement for business expenses, transportation, temporary living, and tax/financial planning expenses for Mr. Pratt's interim service.

Frequently Asked Questions

The total compensation package is substantial and comprises both cash and equity. For his Chairperson role, it includes a $90,000 annual retainer and $220,000 in equity. For his interim CEO role, it includes a $300,000 annual base salary ($25,000/month) and approximately $1.4 million in equity awards. The ultimate value of the performance-based equity can range significantly.

Most equity awards (restricted stock units, deferred stock units, and some stock options) vest on the first anniversary of the grant date, provided Mr. Pratt remains in service with the Company. The performance stock units and some stock options have more complex vesting schedules tied to the "Applicable Vesting Date" (the later of the first anniversary of the grant date or six months after a new CEO commences employment) and may also require Mr. Pratt to remain in service and meet specific duration thresholds for his interim service.

Yes, the performance stock units granted as part of his interim CEO compensation are directly tied to corporate performance. The number of shares awarded can range from 0% to 200% of a $600,000 target value, based on corporate performance metrics set by the Human Resources Committee during a defined performance period.

The "Next Scheduled Grant Date" is defined as the first day following the Company's Q1 FY 2010 earnings release when trading is permitted for officers and directors under the Company's insider trading policies. This is when the equity awards for the current fiscal year will be granted.