10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934 (No Fee Required)

For the fiscal year ended June 30, 2007

Commission file number 1-5828

CARPENTER TECHNOLOGY CORPORATION

(Exact name of Registrant as specified in its Charter)

Delaware	23-0458500
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

P. O. Box 14662, Reading, PA	19610
(Address of principal executive offices)	(Zip Code)

610-208-2000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

(Title of each class)	(Name of each exchange on which registered)
Common stock, par value $5 per share	New York Stock Exchange

Securities registered pursuant to 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days.    Yes  x.    No  ¨.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined by Rule 12b-2 of the Act).

Large accelerated filer  x    Accelerated filer   ¨    Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

As of August 21, 2007, 25,827,130 shares of Common Stock of Carpenter Technology Corporation were outstanding.

The aggregate market value of Common Stock held only by non-affiliates at December 31, 2006 was $2,579,549,291, based on the closing price per share of Common Stock on that date of $102.52 as reported on the New York Stock Exchange.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates by reference certain information from the 2007 definitive Proxy Statement.

The Exhibit Index appears on pages E-1 to E-5.

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TABLE OF CONTENTS

			Page Number
PART I
	Item 1	Business	4 – 9
	Item 1A	Risk Factors	10 – 14
	Item 1B	Unresolved Staff Comments	14
	Item 2	Properties	14 – 15
	Item 3	Legal Proceedings	15
	Item 4	Submission of Matters to a Vote of Security Holders	15
PART II
	Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16 – 18
	Item 6	Selected Financial Data	19
	Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20 – 35
	Forward-Looking Statements		36
	Item 7A	Quantitative and Qualitative Disclosures about Market Risk	36 – 37
	Item 8	Financial Statements and Supplementary Data	38 – 77
	Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	77
	Item 9A	Controls and Procedures	77
	Item 9B	Other Information	77
PART III
	Item 10	Directors and Executive Officers of the Registrant	78 – 80
	Item 11	Executive Compensation	80
	Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	80
	Item 13	Certain Relationships, Related Transactions and Director Independence	81
	Item 14	Principal Accounting Fees and Services	81
PART IV
	Item 15	Exhibits, Financial Statement Schedules	82
SIGNATURES			83 – 84
SCHEDULE II		Valuation and Qualifying Accounts	85
EXHIBIT INDEX			E-1 – E-5

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PART I

Item 1. Business

(a) General Development of Business:

Carpenter Technology Corporation (“Carpenter”), incorporated in 1904, is engaged in the manufacturing, fabrication and distribution of specialty metals and engineered products. We made no significant changes in the form of our organization or mode of conducting business during the year ended June 30, 2007.

(b) Financial Information About Segments:

We are organized in the following business units: Specialty Alloys Operations, Dynamet, Carpenter Powder Products, and Engineered Products. For segment reporting, the Specialty Alloys Operations, Dynamet and Carpenter Powder Products operating units have been aggregated into one reportable segment, Specialty Metals, because of the similarities in products, processes, customers, distribution methods and economic characteristics. See Note 20 to our consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data” for additional segment reporting information.

(c) Narrative Description of Business:

(1) Products:

We primarily process basic raw materials such as nickel, titanium, chromium, iron scrap and other metal alloying elements through various melting, hot forming and cold working facilities to produce finished products in the form of billet, bar, rod, wire, narrow strip, special shapes, and hollow forms in many sizes and finishes. We also produce certain metal powders and fabricated metal products. In addition, ceramic products are produced from various raw materials using molding, heating and other processes.

Our Specialty Metals segment includes the manufacturing and distribution of stainless steels, titanium, high temperature alloys, electronic alloys, tool steels and other alloys in billet, bar, wire, rod, strip and powder forms. Specialty Metals sales are distributed directly from our production plants and distribution network as well as through independent distributors.

Our Engineered Products segment includes the manufacture and sale of structural ceramic products, ceramic cores for the investment casting industry and custom shaped bar.

Our major classes of products are:

Special alloys –

Special purpose alloys used in critical components such as bearings and fasteners. Heat resistant alloys that range from slight modifications of stainless steels to complex nickel and cobalt base alloys. Alloys for electronic, magnetic and electrical applications with controlled thermal expansion characteristics, or high electrical resistivity or special magnetic characteristics.

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Stainless steels –

A broad range of corrosion resistant alloys including conventional stainless steels and many proprietary grades for special applications.

Titanium products –

A corrosion resistant, highly specialized metal with a combination of high strength and low density. Most common uses are in aircraft fasteners, medical devices, sporting equipment and chemical and petroleum processing.

Ceramics and other materials –

Certain engineered products, including ceramic cores for investment castings ranging from small simple configurations to large complex shapes and structural ceramic components, as well as drawn solid shapes.

Tool and other steels –

Tool and die steels, which are extremely hard metal alloys, used for tooling and other wear-resisting components in metalworking operations such as stamping, extrusion and machining. Other steels include carbon and alloy steels purchased for distribution and other miscellaneous products.

(2) Classes of Products:

The amounts and percentages of our net sales contributed by our major classes of products for the last three fiscal years are summarized in the following table:

($ in millions)	2007				2006				2005
Special alloys	$	895.6	46	%	$	703.8	45	%	$	515.6	39	%
Stainless steels		696.8	36			528.1	34			531.9	40
Titanium products		187.7	10			176.3	11			112.5	9
Ceramics and other materials		104.1	5			102.2	6			98.7	8
Tool and other steels		60.6	3			57.8	4			55.5	4
Total net sales	$	1,944.8	100	%	$	1,568.2	100	%	$	1,314.2	100	%

(3) Raw Materials:

Our Specialty Metals segment depends on continued delivery of critical raw materials for its day-to-day operations. These raw materials include nickel, ferrochrome, cobalt, molybdenum, titanium, manganese and scrap. Some of these raw materials sources, many of which are international, could be subject to potential interruptions of supply as a result of political events, labor unrest or other reasons. These potential interruptions could cause material shortages and affect availability and price.

We have long-term relationships with major suppliers who provide availability of material at competitive prices. Purchase prices of certain raw materials have historically been volatile, and have been especially volatile over the past few years. We use pricing surcharges, indexing mechanisms and base price adjustments to reduce the impact of increased costs for the most significant of these materials. There can be delays between the time of the increase in the price of raw materials and the realization of the benefits of such mechanisms or actions that could have a short-term impact on our results.

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(4) Patents and Licenses:

We own a number of United States and international patents and have granted licenses under some of them. Certain of our products are covered by patents held or owned by other companies from whom licenses have been obtained. Although these patents and licenses are believed to be of value, we do not consider our business to be materially dependent upon any single patent or patent rights.

(5) Seasonality of Business:

Our sales are normally influenced by seasonal factors. Historically, our sales in the first two fiscal quarters (three months ending September 30 and December 31) are typically the lowest – principally because of annual plant vacation and maintenance shutdowns by us as well as by many of our customers. However, the timing of major changes in the general economy or the markets for certain products can alter this pattern, particularly when certain raw materials are in short supply.

The chart below summarizes the percent of net sales by quarter for the past three fiscal years:

Quarter Ended
	2007		2006		2005
September 30	21	%	22	%	23	%
December 31	22		22		24
March 31	28		27		26
June 30	29		29		27
	100	%	100	%	100	%

(6) Customers:

On a consolidated basis, we are not dependent upon a single customer, or a very few customers, to the extent that the loss of any one or more would have a materially adverse effect on our consolidated statement of operations. In our Engineered Products segment (see Note 20 to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data” for further segment discussion), which accounted for $105.7 million, $102.9 million and $129.1 million of our sales in fiscal years 2007, 2006 and 2005, respectively, approximately 27 percent ($28.0 million), 24 percent ($24.6 million) and 18 percent ($23.6 million) of segment sales were attributable to one customer in fiscal 2007, 2006 and 2005, respectively. There were no other significant individual customer sales volumes during fiscal years 2007, 2006 or 2005.

(7) Backlog:

As of June 30, 2007 we had a backlog of orders, believed to be firm, of approximately $438 million, substantially all of which is expected to be shipped within fiscal year 2008. Our backlog as of June 30, 2006 was approximately $481 million. Our backlogs have become less indicative of future sales levels due to shifting product mixes and customer ordering patterns.

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(8) Competition:

Our business is highly competitive. We supply materials to a wide variety of end-use market sectors and compete with various companies depending on end-use market, product or geography.

There are approximately ten domestic companies producing one or more similar specialty metal products that are considered to be major competitors to the specialty metals operations in one or more end-use markets. There are several dozen smaller producing companies and converting companies in the United States that are competitors. We also compete directly with several hundred independent distributors of products similar to those distributed by us. Additionally, numerous foreign producers export into the United States various specialty metal products similar to those produced by us. Furthermore, a number of different products may, in certain instances, be substituted for our finished product.

Imports of foreign specialty steels, particularly stainless steels, have long been a concern to the domestic steel industry because of the potential for unfair pricing by foreign producers. Foreign governments through direct and indirect subsidies have often supported such pricing practices. These unfair trade practices have resulted in high import penetration into the U.S. stainless steel markets, with calendar year 2006 levels at approximately 52 percent for stainless bar, 44 percent for stainless rod and 58 percent for stainless wire.

Because of the unfair trade practices and the resulting injury, we have joined with other domestic producers of specialty metals in the filing of trade actions against foreign producers as well as lobbying various government agencies for the creation of laws and regulations to eliminate the competitive benefits realized by the unfair trade practices. These proposals are aimed at tax and regulatory reform needed to provide incentives to domestic producers and disincentives for foreign producers to import products into the United States. We will continue to monitor developments related to what we consider unfairly traded imports from foreign competitors and develop appropriate actions in response.

Under the provisions of the Continued Dumping and Subsidy Offset Act of 2000 (the “Act”), which was signed into law on October 28, 2000, we have received distributions from the United States Customs Service (“Customs”). Under the Act, Customs establishes special accounts for funds to be distributed annually to eligible domestic producers. The special accounts are sourced with duties collected by Customs on pre-existing anti-dumping or countervailing duty orders. We have received distributions under the Act totaling $6.4 million, $4.7 million and $4.1 million in fiscal years 2007, 2006 and 2005, respectively.

(9) Research, Product and Process Development:

Our expenditures for company-sponsored research and development were $11.5 million, $10.2 million and $10.0 million in fiscal 2007, 2006 and 2005, respectively. We believe that our ability to be a product innovator in special material development and manufacturing is an important factor in the success of the Company. Our strong commitment to setting new industry standards is evidenced by our Specialty Alloys Research and Development Center, where teams work in such areas as physical metallurgy, analytical chemistry, materials characterization and process and systems development. We have highly skilled engineering teams specializing in specific products at each of our operations. We anticipate continued increases in our devotion of resources for these efforts in fiscal 2008.

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(10) Environmental Regulations:

We are subject to various stringent federal, state, local and international environmental laws and regulations relating to pollution, protection of public health and the environment, natural resource damages and occupational safety and health. Management evaluates the liability for future environmental remediation costs on a quarterly basis. We accrue amounts for environmental remediation costs representing management’s best estimate of the probable and reasonably estimable costs relating to environmental remediation. For further information on environmental remediation, see the Contingencies section included in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 13 to our consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data”.

Our costs of maintaining and operating environmental control equipment were $12.0 million, $11.3 million and $11.2 million for fiscal 2007, 2006 and 2005, respectively. The capital expenditures for environmental control equipment were $0.2 million for each of the fiscal years ending June 30, 2007, 2006 and 2005, respectively. We anticipate spending approximately $1.0 million on major domestic environmental capital projects over the next five fiscal years. This includes approximately $0.2 million in fiscal 2008 and $0.2 million in fiscal 2009. Due to the possibility of future regulatory developments, the amount of future capital expenditures may vary from these estimates.

(11) Employees:

As of June 30, 2007, our total workforce was 4,152 employees, of which approximately 400 employees were covered under collective bargaining agreements. The largest agreement, which covers 280 employees of Certech, Inc., in Wood-Ridge and Carlstadt, New Jersey, is effective through January 2010. The collective bargaining agreement for our Dynamet production employees in Washington, Pennsylvania covers 113 employees and will expire on August 31, 2007.

(d) Financial information about foreign and domestic operations and export sales:

Sales outside of the United States, including export sales, were $574.7 million, $496.4 million and $365.0 million in fiscal 2007, 2006 and 2005, respectively.

For further information on domestic and international sales, see Note 20 to our consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data”.

(e) Available Information:

The Board of Directors adopted a Code of Ethics for the Chief Financial Officer and Senior Financial Officers of Carpenter Technology Corporation. There were no waivers of the Code in fiscal 2007. The Code and any information regarding any waivers of the Code are disclosed on Carpenter’s website at www.cartech.com. Our Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge through our Internet website as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the Securities and Exchange Commission (SEC). Our Internet website and the content contained therein or

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connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.

The public may read and copy any materials the Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and other information regarding issuers that file electronically. Such information can be accessed through the Internet at www.sec.gov.

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Item 1A. Risk Factors.

There are inherent risks and uncertainties associated with all businesses that could adversely affect operating performances or financial conditions. The following discussion outlines the risks and uncertainties that management believes are the most material to our business. However, these are not the only risks or uncertainties that could affect our business. Certain risks are associated specifically with our business, industry or customer base, while others are broader.

Cyclical Demand for Certain Products. Demand in our end-use markets, including companies in the aerospace, industrial supply, consumer, automotive, medical, energy and power generation markets, can be cyclical in nature and sensitive to general economic conditions, competitive influences and fluctuations in inventory levels throughout the supply chain. As a result, our results of operations, financial condition, cash flows and availability of credit could fluctuate significantly from period to period.

Commercial Aerospace. A growing portion of our sales represents products sold to customers in the commercial aerospace market. The commercial aerospace market is historically cyclical due to both external and internal market factors. These factors include general economic conditions, airline profitability, consumer demand for air travel, varying fuel and labor costs, price competition, and international and domestic political conditions such as military conflict and the threat of terrorism. The length and degree of cyclical fluctuation can be influenced by any one or combination of these factors and therefore are difficult to predict with certainty. A downturn in the commercial aerospace industry would adversely affect the demand for our products and/or the prices at which we are able to sell our products, and our results of operations, business and financial condition could be materially adversely affected.

Excess Worldwide Capacity. The steel industry continues to operate in an environment of excess supply. Continued domestic and international over-capacity could lead to an overall reduction in prices of certain non-specialty products. Continued availability of lower cost, substitute materials may also cause significant fluctuation in future results as our customers opt for a lower cost alternative. In addition, developing economies such as China and India have led to a rapid increase in demand for certain products resulting in price and supply variations and causing companies to implement plans to meet that increased demand. If the demand from these economically developing countries subsides, additional excess worldwide capacity could significantly impact future worldwide pricing or export practices of certain products.

Product Pricing. Periodically, factors such as competition and excess manufacturing capacity have resulted in reduced selling prices for certain products. These selling price reductions have had and may have a significant negative impact on our revenues, profit margins and overall financial condition.

Although inflationary trends in recent years have been moderate, certain critical raw material costs, such as nickel, chromium, titanium, and scrap containing iron and nickel have been volatile. While we are able to mitigate most of the adverse impact of rising raw material costs through raw material surcharges or indices to customers, changes in business conditions could adversely affect our ability to recover rapid increases in raw material costs and may adversely affect our results of operations.

We change prices on certain of our products from time-to-time. The timing of pricing actions can be dependent on market conditions, various economic factors, raw material costs and

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availability, competitive factors, operating costs and other factors, which may be beyond our control. The effects of any pricing actions may be delayed due to long manufacturing lead times or the terms of existing contracts. There is no guarantee that pricing actions implemented will be able to offset rising material costs or maintain the Company’s profit margin levels.

Dependence on Critical Raw Materials Subject to Price and Availability Fluctuations. We rely on third parties to supply certain raw materials that are critical to the manufacture of our products. These raw materials include nickel, chromium, titanium and scrap containing iron and nickel. Purchase prices and availability of these critical raw materials are subject to volatility due to factors that are not in our control. In some cases, these materials are purchased from suppliers operating in countries that may be subject to unstable political and economic conditions. At any given time we may be unable to obtain an adequate supply of these critical raw materials on a timely basis, at prices and other terms acceptable to us, or at all.

If suppliers increase the price of critical raw materials or are unwilling or unable to meet our demand, we may not have alternative sources of supply. In addition, to the extent that we have quoted prices to customers and accepted customer orders for products prior to purchasing necessary raw materials, or have existing contracts, we may be unable to raise the price of products to cover all or part of the increased cost of the raw materials to our customers.

The manufacture of some of our products is a complex process and requires long lead times. As a result, we may experience delays or shortages in the supply of raw materials. If unable to obtain adequate and timely deliveries of required raw materials, we may be unable to timely manufacture sufficient quantities of products. This could cause us to lose sales, incur additional costs, delay new product introductions or suffer harm to our reputation.

Implementation of Operations Expansion Projects. We are undertaking a capital project, which will continue through 2009, in connection with our recently announced premium melt expansion. Any delay or inability to successfully expand our operations in a timely and cost effective manner could materially adversely affect our business, financial condition and results of operations. This growth places a significant demand on management and operational resources. Our success will depend upon numerous factors including the ability of management to ensure the necessary resources are in place to properly execute this project and the ability of key suppliers to deliver the necessary equipment according to schedule.

Medical Costs and Retirement Benefits. We provide medical benefits to active and retired employees throughout most of our company. Most of the cost is paid by the company and is not covered by insurance. In addition, certain of our employees are covered by defined benefit pension plans with the majority of our plans covering employees in the United States. As of June 30, 2007, the defined benefit pension plan was funded in accordance with the requirements of the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code. We do not expect to be required to make contributions to the defined benefit pension plans for at least the next several years, based upon current actuarial projections. A decline in the value of plan investments in the future, an increase in costs or liabilities or unfavorable changes in laws or regulations that govern pension plan funding could materially change the timing and amount of required pension funding. A requirement to fund any deficit created in the future could have a material adverse effect on our results of operations and financial condition. Many domestic and international competitors do not provide defined benefit retiree health care and other international

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competitors operate in jurisdictions with government sponsored health care plans that may offer them a cost advantage.

Environmental Matters. We are subject to various federal, state, local and international environmental laws and regulations relating to pollution, protection of public health and the environment, natural resource damages and occupational safety and health. We could incur substantial cleanup costs, fines and civil or criminal sanctions, third party property damage or personal injury claims as a result of violations or liabilities under these laws or non-compliance with environmental permits required at our facilities.

We have environmental remediation liabilities at some of our owned operating facilities and have been designated as a potentially responsible party (“PRP”) with respect to certain third-party Superfund or similar waste disposal sites and other third party owned sites. Additionally, we have been notified that we may be a PRP with respect to other Superfund sites as to which no proceedings have been instituted against us. From time-to-time, we are a party to lawsuits and other proceedings involving alleged violations of, or liabilities arising from, environmental laws.

When our liability is probable and we can reasonably estimate our costs, we record environmental liabilities in our financial statements. In many cases, we are not able to determine whether we are liable, or if liability is probable, to reasonably estimate the loss or range of loss. Estimates of our liability remain subject to additional uncertainties, including the nature and extent of site contamination, available remediation alternatives, the extent of corrective actions that may be required, and the number and financial condition of other PRPs, as well as the extent of their responsibility for the remediation. We adjust our accruals to reflect new information as appropriate. Future adjustments could have a material adverse effect on our results of operations in a given period, but we cannot reliably predict the amounts of such future adjustments. At June 30, 2007, our reserves for environmental matters totaled approximately $5.5 million. Future developments, administrative actions or liabilities relating to environmental matters could have a material adverse effect on our financial condition or results of operations.

Current or Future Litigation and Claims. We are defending various claims and legal actions that have been or may be asserted against us relating to the conduct of our currently and formerly owned businesses, including those pertaining to product liability, commercial disputes, employment actions, employee benefits, compliance with domestic and federal laws, personal injury and tax issues. Due to the uncertainties of litigation, we can give no assurance that we will prevail on claims made against us in the lawsuits that we currently face or that additional claims will not be made against us in the future. The outcome of litigation cannot be predicted with certainty, and some of these lawsuits, claims or proceedings may be determined adversely to us. The resolution in any reporting period of one or more of these matters could have a material adverse effect on our results of operations for that period. We can give no assurance that any other matters brought in the future will not have a material effect on our financial condition, liquidity or results of operations.

Labor Matters. We have approximately 4,152 full-time employees, the majority of which are not covered by a collective bargaining agreement. Approximately 400 total employees at two of our business units are covered by various collective bargaining agreements. The agreements expire at various times in the future, with the largest agreement covering 280 employees of Certech, Inc., in Wood-Ridge and Carlstadt, New Jersey, and is effective through January 2010. The collective bargaining agreement for our Dynamet production employees located in Washington, Pennsylvania, which covers 113 employees, will expire in August, 2007. There can be no assurance that we will succeed in concluding collective

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bargaining agreements with the unions to replace those that expire. From time to time, the employees at our primary manufacturing facility in Reading, Pennsylvania, participate in election campaigns or union organizing attempts as to whether they should be represented by a union for collective bargaining. There is no guarantee that future organization attempts will not result in union representation.

Complex Manufacturing Processes Requiring High Cost Capital Equipment. Our manufacturing processes are complex and depend upon critical, high cost equipment for which there may be only limited or no production alternatives. It is possible that we could experience prolonged periods of reduced production due to unplanned equipment failures, and we could incur significant repair or replacement costs in the event of those failures. It is also possible that operations could be disrupted due to other unforeseen circumstances such as power outages, explosions, fires, floods, accidents and severe weather conditions. We must make regular, substantial capital investments and changes to our manufacturing processes to lower production costs, improve productivity, manufacture new or improved products and remain competitive. We may not be in a position to take advantage of business opportunities or respond to competitive pressures if we fail to update, replace or make additions to our equipment or our manufacturing processes in a timely manner. The cost to repair or replace much of our equipment or facilities would be significant. We cannot be certain that we will have sufficient internally generated cash or acceptable external financing to make necessary capital expenditures in the future.

Concentration of Manufacturing Locations. A significant portion of our manufacturing and production facilities are located in Reading, Pennsylvania. It is possible that we could experience prolonged periods of reduced production due to unforeseen catastrophic events occurring in or around our manufacturing facilities in Reading, Pennsylvania. The Company may be unable to shift manufacturing capabilities to alternate locations, accept materials from suppliers, meet customer shipment needs or result in other severe consequences. As a result our financial condition and results of our operations could be materially adversely affected.

Availability of Energy Resources. We rely on third parties to supply energy consumed at each of our energy-intensive production facilities. The prices for and availability of electricity, natural gas, oil and other energy resources are subject to volatile market conditions. These market conditions often are affected by political and economic factors beyond our control. Disruptions or lack of availability in the supply of energy resources could temporarily impair the ability to operate our production facilities. Further, increases in energy costs, or changes in costs relative to energy costs paid by competitors, has and may continue to adversely affect our profitability. To the extent that these uncertainties cause suppliers and customers to be more cost sensitive, increased energy prices may have an adverse effect on our results of operations and financial condition.

Acquisition and Disposition Strategies. We consider acquisition, joint ventures and other business combination opportunities as well as possible business unit dispositions as part of our overall business strategy. From time-to-time, management holds discussions with management of other companies to explore such opportunities. As a result, the relative makeup of the businesses comprising our Company is subject to change. Acquisitions, joint ventures and other business combinations involve various inherent risks, such as difficulties in integrating the operations, technologies, products and personnel of the acquired companies, diversion of management’s attention from existing operations, difficulties in entering markets in which we have limited or no direct prior experience, dependence on unfamiliar supply chains, insufficient revenues to offset increased expenses associated with acquisitions, loss of key employees of the acquired companies, inaccurate assessment of undisclosed liabilities, difficulties in realizing projected efficiencies, synergies and cost

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savings and increases in our debt or limitation in our ability to access additional capital when needed.

Internal Controls Over Financial Reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements or inaccuracies. Effectiveness of reporting results in future periods is subject to the risk that controls may become inadequate, or that the degree of compliance with the policies or procedures may deteriorate.

Political and Social Turmoil and Other World Issues. War, civil conflict, terrorism, natural disasters and public health issues including domestic or international pandemic have caused and could cause damage or disruption to domestic or international commerce by creating economic or political uncertainties. These events could result in a decrease in demand for our products, make it difficult or impossible to deliver orders to customers or receive materials from suppliers, effect the availability or pricing of energy sources or result in other severe consequences that may or may not be predictable. As a result, our business, financial condition and results of operations could be materially adversely affected.

International Sales. We believe that international sales will continue to account for a significant percentage of our future revenues. Risks associated with international sales include without limitation: political and economic instability, including weak conditions in the world’s economies; accounts receivable collection; export controls; changes in legal and regulatory requirements; policy changes affecting the markets for our products; changes in tax laws and tariffs; and exchange rate fluctuations (which may affect sales to international customers and the value of profits earned on international sales when converted into dollars). Any of these factors could materially adversely affect our results for the period in which they occur.

Safety Issues. Various federal, state, local and international worker safety laws and regulations are applicable to our operations. We have used, and currently use and manufacture substantial quantities of substances that are considered hazardous, extremely hazardous or toxic under worker safety and health laws and regulations. Although we implement controls and procedures designed to reduce continuing risk of health and safety issues, we could incur substantial costs, fines and civil or criminal sanctions or personal injury claims as a result of violations or liabilities under these laws.

Retention of Key Personnel. Much of our future success depends on the continued service and availability of skilled personnel, including members of our executive management team, management, metallurgists and production positions. The loss of key personnel could adversely affect our ability to perform until suitable replacements are found.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties

The primary locations of our specialty metals manufacturing plants are: Reading, Pennsylvania; Hartsville, South Carolina; Washington, Pennsylvania; Orangeburg, South Carolina; Bridgeville, Pennsylvania; Orwigsburg, Pennsylvania; Clearwater, Florida; Elyria, Ohio; Torshalla, Sweden; and

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Crawley, England. The Reading, Hartsville, Washington, Orangeburg, Bridgeville, Orwigsburg, Elyria, Torshalla and Crawley plants are owned. The Clearwater plant is owned, but the land is leased. The Torshalla facilities are leased.

The primary locations of our engineered products manufacturing operations are: Wood-Ridge and Carlstadt, New Jersey; Wilkes-Barre, Pennsylvania; Twinsburg, Ohio; Auburn, California; Palmer, Massachusetts; Derby and Corby, England; Queretaro, Mexico; and Clayton, Australia. The Corby and Queretaro plants are owned, while the other locations are leased.

Our corporate offices, located in Wyomissing, Pennsylvania, are leased.

We also operate regional customer service and distribution centers, most of which are leased, at various locations in several states and foreign countries.

Our plants, customer service centers, and distribution centers were acquired or leased at various times over several years. There is an active maintenance program to ensure a safe operating environment and to keep facilities in good condition. In addition, we have had an active capital spending program to replace equipment as needed to keep it technologically competitive on a world-wide basis. We believe our facilities are in good condition and suitable for our business needs. As a specialty materials and alloys producer with considerable diversity in the types of product we manufacture, any measurement of the practical capacities at our facilities is affected by product mix and is therefore not meaningful in total.

Item 3. Legal Proceedings

Pending legal proceedings involve ordinary routine litigation incidental to our business. We are not aware of any material proceedings to which any of our Directors, Officers, or affiliates, or any owners of more than five percent of any class of our voting securities, or any associate of any of our Directors, Officers, affiliates, or security holders, is a party adverse to us or has a material interest adverse to our interests or those of our subsidiaries. There is no administrative or judicial proceeding arising under any Federal, State or local provisions regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment that (1) is material to our business or financial condition, (2) involves a claim for damages, potential monetary sanctions or capital expenditures exceeding ten percent of our current assets, or (3) includes a governmental authority as a party and involves potential monetary sanctions in excess of $100,000.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of our stockholders during the fourth quarter of fiscal 2007.

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PART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is listed on the New York Stock Exchange (“NYSE”) and traded under the symbol “CRS”. The following table sets forth, for the periods indicated, the high and low closing prices for our common stock as reported by the NYSE.

	Fiscal 2007				Fiscal 2006
Quarter Ended:	High		Low		High		Low
September 30	$	120.15	$	90.67	$	64.94	$	51.28
December 31	$	119.09	$	97.91	$	71.30	$	51.64
March 31	$	125.16	$	97.29	$	97.82	$	72.01
June 30	$	136.53	$	120.23	$	139.75	$	95.18
Annual	$	136.53	$	90.67	$	139.75	$	51.28

The range of our common stock price on the NYSE from July 1, 2007 to August 21, 2007 was $103.75 to $148.06. The closing price of the common stock was $110.75 on August 21, 2007.

We have paid quarterly cash dividends on our common stock for over 100 consecutive years. We paid a quarterly dividend of $0.225 per common share during the first, second and third quarters and $0.30 per common share during the fourth quarter of fiscal 2007.

We paid a quarterly dividend of $0.15 per common share during each quarter of fiscal 2006.

As of August 21, 2007, there were 3,411 common stockholders of record.

Cumulative Total Stockholder Return

The graph below compares the cumulative total stockholder return on Carpenter’s common stock to the cumulative total return of the Russell 2000 Index, S&P MidCap Index, our New Peer Group and our Old Peer Group for each of the last five fiscal years ended June 30, 2007. The cumulative total return assumes an investment of $100 on June 30, 2002 and the reinvestment of any dividends during the period. The Russell 2000 is a broad-based index that includes smaller market capitalization stocks. The S&P MidCap 400 Index is the most widely used index for mid-sized companies. In June 2007, Carpenter’s common stock was added to the S&P MidCap 400 Index. We believe that the S&P MidCap 400 is more representative of companies with similar market and economic characteristics to Carpenter. We do not believe the Russell 2000 index is representative of our current market capitalization status and we will cease using this index in future reports. The companies in the Old Peer Group Index were: Allegheny Technologies, Inc., A.M. Castle & Co., Quanex Corporation, RTI International Metals, Inc., Ryerson Tull, Inc. and the Timken Company. The companies included in the New Peer Group Index are: Allegheny Technologies, Inc., Titanium Metals Corporation, RTI International Metals, Inc., Haynes International, Inc., AK Steel Holding Corp., Steel Dynamics, Inc. and Universal Stainless & Alloy Products, Inc. We believe that the companies included in our New Peer Group, taken as a whole, provide a more meaningful comparison in terms of competition, product offerings and other relevant factors. The total stockholder return for the peer groups is weighted according to the respective issuer’s stock market capitalization at the beginning of each period.

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	6/02	6/03	6/04	6/05	6/06	6/07
Carpenter Technology Corporation	100.00	56.20	124.25	190.46	428.03	487.20
Russell 2000	100.00	98.36	131.18	143.57	164.50	191.53
S&P Midcap 400	100.00	99.29	127.07	144.90	163.71	194.01
New Peer Group	100.00	51.05	108.04	142.14	421.55	596.87
Old Peer Group	100.00	66.31	119.90	140.95	285.87	385.92

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Issuer Purchases of Equity Securities

The following table contains information about purchases by us of our common stock during the fourth quarter of fiscal 2007:

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)
April 1-30, 2007	—		—	—	$	236.1
May 1-31, 2007	—		—	—	$	236.1
June 1-30, 2007	126,325	$	130.43	115,002	$	221.1
Quarter ended June 30, 2007	126,325	$	130.43	115,002	$	221.1

The shares purchased in June included 11,323 shares which were purchased pursuant to the exercise by 1993 Plan and Directors’ Plan participants of their right to elect stock-for-tax withholding in connection with the vesting of restricted shares under the plans.

The remaining 115,002 shares were purchased under a share repurchase program authorized by the Company’s Board of Directors. The program authorizes the repurchase of up to $250 million of Carpenter’s outstanding common stock. As of June 30, 2007, approximately $221 million of the $250 million remained available for future repurchases. The above purchases were all made on the open market. The repurchases will occur at such times and at such prices as the management of the Company determines. The share repurchase program will be funded with the Company’s cash after giving consideration to capital investments, acquisitions and future cash flows. The timing or amount of the shares to be repurchased cannot be assured. The share repurchase program expires in September 2008.

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Item 6. Selected Financial Data

Five-Year Financial Summary

Dollar amounts in millions, except per share data

(years ended June 30)

	2007		2006		2005(a)		2004(b)		2003(c)
Summary of Operations
Net sales	$	1,944.8	$	1,568.2	$	1,314.2	$	1,016.7	$	871.1
Operating income	$	323.8	$	310.7	$	204.2	$	68.1	$	8.1
Net income (loss)	$	227.2	$	211.8	$	135.5	$	36.0	$	(10.9	)
Financial Position at Year-End
Cash	$	300.8	$	352.8	$	159.5	$	80.0	$	53.5
Marketable securities	$	372.7	$	141.8	$	110.9	$	25.4	$	—
Total assets	$	2,025.7	$	1,887.9	$	1,653.4	$	1,456.2	$	1,399.9
Long-term obligations, net of current portion (including convertible preferred stock)	$	299.5	$	333.1	$	333.7	$	332.7	$	396.7
Per Share Data
Net earnings (loss):
Basic	$	8.79	$	8.33	$	5.54	$	1.51	$	(0.56	)
Diluted	$	8.63	$	8.08	$	5.37	$	1.49	$	(0.56	)
Cash dividend-common	$	0.975	$	0.60	$	0.4075	$	0.330	$	0.5775

^(a) Fiscal 2005 included an $8.7 million pre-tax gain on the sale of Carpenter Special Products Corporation in June 2005, which was sold for a total sales price of $19.5 million. See Note 21 to the consolidated financial statements included in Item 8. “Financial Statements and Supplemental Data”.

^(b) Fiscal 2004 included a $2.3 million pre-tax loss on early retirement of debt related to a $20 million open market purchase of certain medium term notes previously issued by the company and the termination of interest rate swaps associated with the partial repayment of foreign currency loans. See Note 10 to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data”.

^(c) Fiscal 2003 included restructuring costs of $26.1 million related principally to workforce reduction, pension plan curtailment loss, and writedown of certain assets. Fiscal 2003 also included $0.9 million gain on sale of business related to the sale of two business units. In addition, fiscal 2003 included a $4.5 million loss on the early retirement of debt related to the redemption of approximately $90 million of the Company’s 9 percent debentures due 2022.

See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for discussion of factors that affect the comparability of the “Selected Financial Data”.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

This Overview is intended to provide a context for the following Management’s Discussion and Analysis of Financial Condition and Results of Operation. Management’s Discussion and Analysis of Financial Condition and Results of Operation should be read in conjunction with our consolidated financial statements, including the notes thereto, included in this annual report on Form 10-K. We have attempted to identify the most important matters on which our management focuses in evaluating our financial condition and operating performance and the short-term and long-term opportunities, challenges and risks (including material trends and uncertainties) which we face. We also discuss the actions we are taking to address these opportunities, challenges and risks. The Overview is not intended as a summary of, or a substitute for review of, Management’s Discussion and Analysis of Financial Condition and Results of Operation

Business

Carpenter is engaged in the manufacturing, fabrication, and distribution of specialty metals and engineered products. We primarily process basic raw materials such as nickel, titanium, chromium, iron scrap and other metal alloying elements through various melting, hot forming and cold working facilities to produce finished products in the form of billet, bar, rod, wire, narrow strip, special shapes and hollow forms in many sizes and finishes. We also produce certain metal powders and fabricated metal products. In addition, ceramic products are produced from various raw materials using molding, heating and other processes.

Our Specialty Metals segment includes the manufacturing and distribution of stainless steels, titanium, high temperature alloys, electronic alloys, tool steels and other alloys in billet, bar, wire, rod, strip and powder forms. Specialty Metals sales are distributed directly from our production plants and distribution network as well as through independent distributors.

Our Engineered Products segment includes the manufacture and sale of structural ceramic products, ceramic cores for the investment casting industry and custom shaped bar.

In July 2007, we announced certain changes to our organization which management believes will allows us to better focus on the customer, end-use markets and to reach our operational excellence goals. The announcement included the key appointments of a Senior Vice President – Advanced Metals Operations and a Senior Vice President – Premium Alloys Operations. These changes will impact the Company’s financial reporting related to segment information. The Company is currently evaluating the impact of the changes and expects that the segment information reported during fiscal 2008 will reflect the organizational changes discussed above.

The table below shows our net sales by major product class for the past three fiscal years:

($ in millions)	2007				2006				2005
Special alloys	$	895.6	46	%	$	703.8	45	%	$	515.6	39	%
Stainless steels		696.8	36			528.1	34			531.9	40
Titanium products		187.7	10			176.3	11			112.5	9
Ceramics and other materials		104.1	5			102.2	6			98.7	8
Tool and other steels		60.6	3			57.8	4			55.5	4
Total net sales	$	1,944.8	100	%	$	1,568.2	100	%	$	1,314.2	100	%

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Unlike many other specialty steel producers, we operate our own worldwide network of service/distribution centers. These service centers, located in the United States, Canada, Mexico and Europe, allow us to work more closely with customers and to offer various just-in-time stocking programs. As a result, we often serve as a technical partner in customizing specialty metals or in developing new ones.

Our sales are across a diversified list of end-use markets. The table below summarizes our estimated sales by market over the past three fiscal years.

($ in millions)	2007				2006				2005
Aerospace	$	725.8	37	%	$	636.6	41	%	$	383.5	29	%
Industrial		440.2	23			302.0	19			327.1	25
Consumer		206.5	11			176.5	11			210.3	16
Automotive		236.8	12			181.8	12			182.9	14
Medical		131.2	7			139.7	9			96.0	7
Energy		204.3	10			131.6	8			114.4	9
Total net sales	$	1,944.8	100	%	$	1,568.2	100	%	$	1,314.2	100	%

In an effort to increase revenue and profits, we have increased our presence in fast-growing international markets. In recent years, we have expanded our sales and marketing efforts in Europe, Asia, and North America. Our European headquarters are based in Brussels, with our Asian sales directed from Singapore. Outside the United States, company-owned distribution facilities are located in Mexico, Canada, the United Kingdom and Belgium. In addition to the United States, where the majority of our manufacturing exists, we have manufacturing facilities in the United Kingdom, Mexico, Sweden and Australia. In fiscal 2007, 2006 and 2005, 29.6 percent ($574.7 million), 31.7 percent ($496.4 million) and 27.8 percent ($365.0 million) of our sales were to customers outside of the United States, respectively.

We believe that our ability to be a product innovator in special material development and manufacturing is an important factor in the success of the Company. Our strong commitment to setting new industry standards is evidenced by our Specialty Alloys Research and Development Center, where teams work in such areas as physical metallurgy, analytical chemistry, materials characterization and process and systems development. We have highly skilled engineering teams specializing in specific products at each of our operations.

As part of our overall business strategy, we have sought out and considered opportunities related to strategic divestitures, acquisitions, and joint venture propositions. Management has participated in discussions with other companies to explore potential terms and structure of such opportunities. The Company expects that it will continue to evaluate these opportunities.

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Business Trends

Net sales, earnings, free cash flow and pounds sold for the past three fiscal years are summarized below:

(in millions, except per share data)	2007		2006		2005
Net sales	$	1,944.8	$	1,568.2	$	1,314.2
Net income	$	227.2	$	211.8	$	135.5
Diluted earnings per share	$	8.63	$	8.08	$	5.37
Free Cash Flow	$	202.3	$	202.8	$	133.8
Pounds Sold (in thousands)*		223,246		221,329		238,640

* includes specialty and titanium alloys, stainless steel and powder materials

Our results of operations have improved significantly over the past three fiscal years largely as a result of favorable market conditions and our focus on lean and waste reduction, especially in the aerospace, energy and medical markets. The key components of our business strategy are as follows:

• A shift in product mix to higher value materials;

• Improved margins from an intentional reduction in the sale of marginally profitable products;

• Pricing products for the value delivered;

• Expansion of sales in markets outside of the U.S.;

• Efforts to achieve operational excellence through our focus on lean and waste reduction.

Specifically, we use the phrase “lean and waste reduction” to refer to eliminating or reducing non-value added activities, process variation reduction, process control, work concentration, product flow based on specific customer quantity demand and constraint removal. Our lean and waste reduction philosophy applies to all aspects of our business, including product development, order taking and scheduling, manufacturing, logistics and administrative processes.

We value most of our inventory utilizing the last-in, first-out (“LIFO”) inventory costing methodology. Under the LIFO inventory costing method, changes in the cost of raw materials and production activities are recognized in cost of sales in the current period even though these materials may have been acquired at potentially significantly different values due to the length of time from the time the raw materials are acquired to the time the processed finished goods are sold to the customer. In a period of rising raw material costs, the LIFO inventory valuation normally results in higher costs of sales. Increases in the cost of raw materials have impacted our operations over the past few years. We, and others in our industry, generally have been able to pass these cost increases through to our customers using surcharges which are structured to recover high raw material costs. In the last several years, as raw material prices have escalated, surcharges have become an increasingly significant component of our net sales. This has impacted our sales numbers and had a dilutive effect on our gross margin and operating margin percentages as described later in this discussion. The formula used to calculate the surcharge is based on prices quoted on the London Metal Exchange (“LME”) for the previous month for the respective raw materials. Surcharge revenues, which are included in net sales, were $497.1 million, $199.6 million and $148.9 million for the years ended June 30, 2007, 2006 and 2005, respectively.

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Special Items Recorded in Fiscal Years 2005

During the fourth quarter of 2005, we recorded a gain of $8.7 million before taxes on the sale of our subsidiary, Carpenter Special Products Corporation (“CSPC”). The divestiture was part of the Company’s strategy to focus on its specialty material businesses. CSPC had sales of less than $30 million in fiscal 2005 and accounted for less than 2 percent of consolidated operating income.

Results of Operations – Fiscal 2007 compared to Fiscal 2006

Our net income for fiscal 2007 was $227.2 million, or $8.63 per diluted share, versus net income of $211.8 million, or $8.08 per diluted share, for fiscal 2006.

For fiscal 2007, Carpenter generated record sales and net income. Sales growth, excluding surcharge, was driven primarily by the Company’s increased focus on the energy market and strong demand from the industrial market.

Record fiscal year net income was achieved primarily as a result of the Company’s growth in sales and continued focus on operational excellence.

Free cash flow (see page 30 for Carpenter’s definition and a reconciliation to GAAP) was $202.3 million in fiscal 2007. At June 30, 2007, our cash and marketable securities exceeded our total debt by $340.8 million.

Net Sales

Net sales for fiscal 2007 were $1.9 billion, which was an increase of 24 percent from $1.6 billion in fiscal 2006. The $376.6 million increase in net sales was due to increases in surcharge revenues and volume as well as improved product mix. Excluding surcharges, fiscal 2007 sales increased by 6 percent compared to fiscal 2006.

International sales in fiscal 2007 increased 16 percent from fiscal 2006 to $574.7 million primarily as a result of higher surcharges and increased shipments to the energy market. Sales outside of the U.S. accounted for 29.6 percent of total sales in fiscal 2007 compared to 31.7 percent in fiscal 2006. Details of sales by geographical region for the past three fiscal years are presented in Note 20 to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data”.

In terms of end-use markets, sales to the aerospace market of $725.8 million in fiscal 2007 increased 14 percent from fiscal 2006. Excluding surcharge revenues, sales to the aerospace market increased by 1 percent. The static sales level reflects supply chain inventory adjustments stemming from the robust demand for nickel based alloys and titanium coil that took place in the second half of fiscal 2006, which resulted in reduced purchasing levels by customers throughout fiscal 2007. In addition, sales reflected a decline in business with a key customer during fiscal 2007, who is now procuring a portion of its material needs internally from a recently acquired subsidiary.

Sales to the industrial sector of $440.2 million, which includes materials used in equipment and other capital goods applications, increased by 46 percent in fiscal 2007 from fiscal 2006. Excluding surcharge revenues, sales to the industrial market increased by 25 percent. The growth was driven by increased shipments of higher value materials used in capital equipment and the manufacture of valves and fittings used in applications such as the construction and maintenance of chemical and food processing facilities. Additionally, the sales growth reflected increased shipments to the semiconductor sector.

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Consumer market sales increased by 17 percent from the prior year, to $206.5 million. Adjusted for surcharge revenues, sales decreased by 9 percent. The reduction was primarily a result of reduced sales of materials used in consumer electronics and fasteners used in consumer products.

Sales to the automotive market in fiscal 2007 increased 30 percent to $236.8 million during fiscal 2007. Sales, excluding surcharge revenue, increased 4% from the prior year. The marginal increase reflected the lower automotive production rates in North America and Europe. In addition, the Company elected not to participate in certain marginally profitable business.

Sales to the medical market of $131.2 million were 6 percent below a year ago. Adjusted for surcharge revenue, sales declined 13 percent. The decline mostly reflected continuing inventory adjustments taking place within the supply chain for titanium and specialty alloy materials.

Gross Profit

Gross profit in fiscal 2007 grew to $457.7 million, or 23.5 percent of sales, from $436.1 million, or 27.8 percent of sales, a year ago. The increased gross profit was achieved despite the negative impact from record high nickel prices throughout most of the year. As a result of the rise in nickel prices, the Company’s surcharge revenue increased to approximately $497 million or 150 percent more than fiscal 2006. The Company’s surcharge mechanism is structured to recover high raw material costs. While the surcharge protects the absolute gross profit dollars, it does have a dilutive effect on gross margin. In fiscal 2007, the dilutive effect on the gross margin from the increased surcharge versus fiscal 2006 was approximately 450 basis points.

Additionally, the Company’s gross profit was negatively impacted by the lag effect in the surcharge mechanism. This lag effect can result in additional margin decline during periods of rapidly escalating raw material prices. The Company has estimated that the lag effect negatively impacted gross margin by approximately 140 basis points when comparing fiscal 2007 to fiscal 2006.

Adjusted for the dilutive effect of the surcharge and the negative impact from the lag in the surcharge mechanism, the gross margin would have improved in fiscal 2007 by 170 basis points from fiscal 2006. The underlying improvement was driven by a richer product mix as well as ongoing cost controls.

Selling and Administrative Expenses

Selling and administrative expenses in fiscal 2007 were $133.9 million, or 6.9 percent of net sales, compared to $125.4 million, or 8.0 percent of net sales, in fiscal 2006. The increase primarily reflected $4.4 million related to executive transition costs and $1.6 million associated with the review of a possible acquisition.

Interest Expense

Fiscal 2007 interest expense of $22.8 million decreased 2 percent from $23.3 million in fiscal 2006. Interest on substantially all of our debt was at a fixed rate and the level of debt was consistent throughout the two-year period.

Other Income, Net

The higher amount reflected $8.1 million of increased interest income due to higher investment balances in cash and marketable securities and $1.7 million of increased receipts from the “Continued Dumping and Subsidy Offset Act of 2000.”

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Income Taxes

Our effective tax rate (income tax expense as a percent of income before taxes) for fiscal 2007 was 31.4 percent as compared to 31.5 percent last year. The fiscal year 2007 tax rate was more favorable than the statutory rate of 35 percent primarily due to the following items. We recorded a reduction in income tax expense of $3.5 million, or 1.1 percent of pretax income, reflecting the reversal of valuation allowances that had been recorded against state net operating loss carryforwards in prior years. Under Statement of Financial Accounting Standards No. 109 (SFAS109), valuation allowances should be reviewed each year and an assessment must be made as to the likelihood of recovery of those deferred taxes. Based on current year and forecasted taxable income in certain jurisdictions, we determined that it was appropriate to reverse a portion of this valuation allowance in fiscal 2007. We recognized a benefit of $4.2 million, or 1.3 percent due to a favorable state tax settlement. We recognized a benefit of $2.8 million, or 0.8 percent of pretax income, in connection with the domestic manufacturing deduction, which was part of the American Jobs Creation Act of 2004 allowing a special deduction for qualified manufacturing activities.

The fiscal year 2006 tax rate was more favorable than the statutory rate of 35 percent due to several reasons. We recorded a reduction in income tax expense of $5.8 million, or 1.9 percent of pretax income, reflecting the reversal of valuation allowances that had been recorded against state and foreign net operating loss carryforwards in prior years. Based on fiscal 2006 and forecasted taxable income in certain jurisdictions, we determined that it was appropriate to reverse a portion of this valuation allowance in fiscal 2006. We recognized a benefit of $4.6 million, or 1.5 percent of pretax income, related to US export incentives. We recognized a benefit of $3.2 million, or 1.0 percent of pretax income, in connection with the domestic manufacturing deduction, which was part of the American Jobs Creation Act of 2004 allowing a special deduction for qualified manufacturing activities.

See Note 18 to the consolidated financial statements in Item 8. “Financial Statements and Supplementary Data” for a full reconciliation of the statutory federal tax rate to the effective tax rates.

Business Segment Results (See Note 20 to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data”):

Specialty Metals Segment

Net sales in fiscal 2007 for this segment, which aggregates the Specialty Alloys Operations (SAO), Dynamet, and Carpenter Powder Products (CPP), of $1.84 billion were $371 million, or 25 percent, higher than the $1.47 billion for fiscal 2006. Adjusted for surcharge revenue, sales increased 6 percent from the prior year.

Sales of stainless steel products grew 32 percent to $696.8 million from $528.1 million a year ago. Excluding surcharge revenue, sales increased 11 percent. Stainless sales benefited primarily from increased shipments to the industrial market and from the sale of higher value products.

Sales of specialty alloys increased 27 percent to $895.6 million from $703.8 million a year ago. Adjusted for surcharge revenue, specialty alloys sales increased 2 percent. Growth in the energy market and increased sales of higher value products were the primary drivers of the sales growth which was partially offset by reduced shipments to the aerospace and medical markets.

Titanium sales rose 6 percent to $187.7 million from $176.3 million a year ago. Sales benefited from increased shipments of fastener wire to the aerospace market.

Operating income for the Specialty Metals segment was a record $323.0 million or 17.6 percent of sales compared to $311.8 million or 21.3 percent a year ago. The change in operating income primarily reflected the Company’s growth in sales, a richer product mix and the Company’s continued focus on operational improvements.

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Operating income as a percent of sales decreased due to the dilutive effect on margins from the increase in surcharge revenue and the negative impact from the lag effect of the Company’s surcharge mechanism.

Engineered Products Segment

Fiscal 2007 net sales for the Engineered Products segment increased 3 percent to $105.7 million from $102.9 million for the same period a year ago.

Operating income was $19.1 million or 18.1 percent of sales for fiscal 2007 compared to $17.1 million or 16.6 percent of sales a year ago. Increased volume and better operating efficiencies at certain operating locations were the primary drivers of the increase.

Results of Operations – Fiscal 2006 compared to Fiscal 2005

Our net income for fiscal 2006 was $211.8 million, or $8.08 per diluted share, versus net income of $135.5 million, or $5.37 per diluted share, for fiscal 2005.

Sales and operating profits were driven by strong demand for our higher value materials, especially from the aerospace and medical markets, higher selling prices, and cost savings and containment due to our continued focus on lean and variation reduction. Sales grew in most of our major product classes.

Free cash flow (see page 30 for Carpenter’s definition and a reconciliation to GAAP) was $202.8 million in fiscal 2006. At June 30, 2006, our cash and marketable securities exceeded our total debt by $161.3 million.

Net Sales

Net sales for fiscal 2006 were $1.6 billion, which was an increase of 19 percent from $1.3 billion in fiscal 2005. The $254.0 million increase in net sales was due to improved demand in our aerospace and medical markets, higher prices including surcharges and base price increases and product mix. Excluding surcharges, fiscal 2006 sales increased by 19 percent compared to fiscal 2005.

International sales in fiscal 2006 increased 36 percent to $496.4 million from the prior year primarily as a result of strong demand for higher value materials, particularly in the European aerospace and medical markets. Sales outside of the U.S. accounted for 31.7 percent of total sales in fiscal 2006 compared to 27.8 percent in fiscal 2005. Details of sales by geographical region for the past three fiscal years are presented in Note 20 to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data”.

Sales of our special alloys in fiscal 2006 increased 37 percent from the prior year, to $703.8 million. The increase was driven by strong demand from the aerospace markets for alloys used in the manufacture of aircraft engines and structural components. The increase also reflected higher sales to the medical, automotive and energy markets, as well as higher base selling prices and surcharges.

Stainless steel sales of $528.1 million in fiscal 2006 were relatively flat compared to the prior year. Higher selling prices and improved product mix offset reduced shipments of marginally profitable products and lower sales to the industrial and automotive markets.

Titanium alloy sales of $176.3 million in fiscal 2006 were 57 percent more than fiscal 2005. Increased sales to the aerospace and medical markets and higher selling prices due to the effect of passing through significantly higher titanium costs drove the increase.

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Sales of our ceramic and other materials in fiscal 2006 increased by 4 percent from fiscal 2005, to $102.2 million. Higher sales of ceramic cores and related products used in casting turbine blades for the aerospace market and fuel injectors for diesel engines were offset by lower sales of structural ceramic components sold to the industrial market and ceramic cores sold to the consumer market.

In terms of end-use markets, sales to the aerospace market of $636.6 million in fiscal 2006 increased 66 percent from fiscal 2005. The increase was driven primarily by demand for high temperature alloys used in jet engine components and for titanium and special alloys used in airframe structural components. We have seen continued strength in the underlying demand for our materials due to the number and type of aircraft being built.

Sales to the industrial sector of $302.0 million, which includes materials used in equipment and other capital goods applications, decreased by 8 percent in fiscal 2006 from fiscal 2005. The decrease primarily reflects reduced sales of marginally profitable products.

Consumer market sales in fiscal 2006 decreased by 16 percent from the prior year, to $176.5 million. This decrease resulted from reduced sales to the sporting goods, housing, and electronic markets.

Sales to the automotive market in fiscal 2006 remained relatively flat at $181.8 million. The increased popularity of high performance engines and more stringent emissions standards resulted in higher demand for special alloys and ceramic components, which offset reduced demand of other products driven by lower automobile production levels and corresponding adjustments in inventory within the supply chain.

Sales to the medical market of $139.7 million were 45 percent above fiscal 2005, with strong growth in both domestic and international markets for our titanium materials and special alloys. Sales also benefited from pricing actions driven by the higher cost of materials and a favorable product mix.

Gross Profit

Gross profit in fiscal 2006 grew to $436.1 million, or 27.8 percent of sales, from $316.1 million, or 24.1 percent of sales, a year ago. The improvement in our gross profit percentage was due to higher base prices, product mix improvement due to increased demand for higher value materials and the elimination of marginally profitable product lines, increased productivity, and cost reduction attributed to continued success from our focus on lean and variation reduction.

Selling and Administrative Expenses

Selling and administrative expenses in fiscal 2006 were $125.4 million, or 8.0 percent of net sales, compared to $120.6 million, or 9.2 percent of net sales, in fiscal 2005. The increase in dollars primarily reflected increases in stock based compensation and other variable compensation expenses of $4.0 million, increases in outside professional fees of $3.0 million, and higher non-cash pension costs of $2.3 million. Fiscal 2005 included $4.2 million of expense representing the increase in a reserve related to ongoing cleanup costs at a location that was closed in 1987. Fiscal 2006 expense related to this location was $0.7 million.

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Interest Expense

Fiscal 2006 interest expense of $23.3 million was approximately equal to fiscal 2005. Interest on substantially all of our debt is at a fixed rate and the level of debt was consistent throughout the two-year period.

Other Income, Net

Other income, net was $21.7 million in fiscal 2006 versus $8.8 million in fiscal 2005. Interest income was $13.9 million in fiscal 2006 compared to $5.6 million in the prior year. This increase reflected higher average balances of cash during the year, and higher interest rates. Foreign exchange gains resulted in other income of $1.5 million in fiscal 2006 while we recorded a loss of $1.4 million in fiscal 2005. Fiscal 2006 included the receipt of $4.7 million of tariffs from the U.S. Customs Department under the “Dumping and Subsidy Offset Act of 2001”. Fiscal 2005 included $4.1 million of these funds.

Income Taxes

Our effective tax rate for fiscal 2006 was 31.5 percent as compared to 28.7 percent for fiscal 2005. The fiscal year 2006 tax rate was more favorable than the statutory rate of 35 percent primarily due to the following items. We recorded a reduction in income tax expense of $5.8 million, or 1.9 percent of pretax income, reflecting the reversal of valuation allowances that had been recorded against state and foreign net operating loss carryforwards in prior years. Under Statement of Financial Accounting Standards No. 109 (SFAS109), valuation allowances should be reviewed each year and an assessment must be made as to the likelihood of recovery of those deferred taxes. Based on fiscal 2006 and forecasted taxable income in certain jurisdictions, we determined that it was appropriate to reverse a portion of this valuation allowance in fiscal 2006. We recognized a benefit of $4.6 million, or 1.5 percent of pretax income, related to US export incentives. We recognized a benefit of $3.2 million, or 1.0 percent of pretax income, in connection with the domestic manufacturing deduction, which was part of the American Jobs Creation Act of 2004 allowing a special deduction for qualified manufacturing activities.

The fiscal year 2005 tax rate was more favorable than the statutory rate of 35 percent due to several reasons. We recognized a benefit of $4.5 million representing the conclusion of an IRS review of prior year’s tax returns. Also, we recorded a reduction in income tax expense of $3.0 million reflecting the reversal of a portion of state tax net operating loss carryforward valuation allowances that had been recorded in prior years. During fiscal 2005, we adjusted the rates used to value state deferred taxes based on our review of effective tax rates in those states, which resulted in a decrease in tax expense of $2.8 million.

See Note 18 to the consolidated financial statements in Item 8. “Financial Statements and Supplementary Data” for a full reconciliation of the statutory federal tax rate to the effective tax rates.

Business Segment Results (See Note 20 to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data”):

Specialty Metals Segment

Net sales in fiscal 2006 for this segment, which aggregates the Specialty Alloys Operations (SAO), Dynamet, and Carpenter Powder Products (CPP), of $1,467.1 million were $278.8 million, or 23 percent higher than the $1,188.3 million for fiscal 2005. SAO sales increased 21 percent from fiscal 2005 due to solid demand from the aerospace market, the sale of higher value materials to the medical and automotive markets, and pricing actions. Dynamet’s sales increased 57 percent in fiscal 2006 compared to fiscal 2005 due to robust demand from the aerospace market, continued growth in the

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domestic and international medical markets, higher base selling prices, and higher prices reflecting the pass through of significantly higher titanium costs. CPP’s sales in fiscal 2006 were 10 percent higher than the prior year due to higher selling prices, stronger demand from the industrial market, and a better product mix.

Operating income for the Specialty Metals segment was $311.8 million in fiscal 2006 compared to $183.9 million in fiscal 2005. The increase in operating income reflected increased sales of higher value materials, base pricing actions and continued operational improvements.

Engineered Products Segment

Fiscal 2006 sales for this segment were $102.9 million, a 20 percent decrease from $129.1 million for the prior year. The exclusion of the sales of $29.2 million from a company divested at the end of fiscal 2005 represents the majority of this decrease.

Operating income for the Engineered Products segment for fiscal 2006 was $17.1 million compared to $22.2 million for fiscal 2005. The decrease in income was primarily due to the exclusion of the profits from the divested company and reduced sales in our structural ceramics component business.

Management’s Discussion of Liquidity and Capital Resources

We have maintained the ability to generate cash to meet our needs through cash flow from operations, management of working capital and the flexibility to use outside sources of financing to supplement internally generated funds.

Free cash flow as defined on page 30 was $202.3 million in fiscal 2007 versus $202.8 million a year ago.

Our cash flow from operations was $275.1 million for fiscal 2007 and $237.6 million a year ago. Accounts receivable were $63.9 million higher than a year ago due to the increased level of sales, however, days sales outstanding remained relatively consistent at 46 days in fiscal 2007 compared to 44 days in fiscal 2006. Capital expenditures for plant, equipment and software were $47.1 million during fiscal 2007 versus $19.3 million for fiscal 2006. During fiscal 2007, the Company paid $25.7 million in quarterly cash dividends as well as repurchasing $28.9 million of common shares under the announced share repurchase program in an effort to build stockholder value.

The Company maintains a $150 million revolving credit facility which expires in August 2010. The revolving credit facility includes a minimum EBITDA-to-interest expense coverage covenant and a maximum debt-to-capital ratio covenant.

At June 30, 2007, we had $11.0 million of issued letters of credit under the revolving credit facility. The balance of the revolving credit facility ($139.0 million) was available to us. In addition to this facility, we had $50.0 million available under an accounts receivable purchase facility maintained with an independent financial institution with an expiration date of March 2010. As of June 30, 2007, there was no utilization of the facility.

In fiscal 2008, the Company will be required to make payments related to maturities of long-term debt totaling $33.2 million.

For the years ended June 30, 2007, 2006 and 2005, interest cost totaled $23.3 million, $23.6 million, and $23.1 million, of which $0.5 million, $0.3 million, and $0.1 million, respectively, were capitalized as part of the cost of plant, equipment and software.

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As part of our financing strategy, we consider the levels of fixed rate debt versus floating rate debt in order to optimize our cost of debt. Historically, we have used interest rate swaps to achieve this targeted level. These instruments obligate us to pay a swap counterparty either a floating rate of interest in return for us receiving a fixed rate of interest or obligate us to pay a fixed rate of interest in return for us receiving a floating rate of interest. We had no significant swaps in effect as of June 30, 2007 or 2006. Favorable market conditions during fiscal 2005 allowed the company to unwind its remaining swaps at a gain. These gains are amortized over the remaining life of the underlying debt issue as a reduction to interest expense.

We believe that our current financial resources, both from internal and external sources, will be adequate to meet our foreseeable needs. At June 30, 2007, we had approximately $189.0 million available under our credit facility and our accounts receivable purchase facility.

Non-GAAP Financial Measures

The following tables provide additional information regarding certain non-GAAP financial measures. Our definitions and calculations of these items may not necessarily be the same as those used by other companies.

FREE CASH FLOW	Year Ended June 30,
(in millions)	2007			2006			2005
Net cash provided from operations	$	275.1		$	237.6		$	142.5
Purchases of plant, equipment and software		(47.1	)		(19.3	)		(13.8	)
Proceeds from the sale of business		—			—			15.4
Proceeds from disposals of plant and equipment		—			1.0			1.1
Dividends paid		(25.7	)		(16.5	)		(11.4	)
Free cash flow	$	202.3		$	202.8		$	133.8

Management believes that the presentation of free cash flow provides useful information to investors regarding our financial condition because it is a measure of cash generated which management evaluates for alternative uses. It is management’s current intention to apply excess cash to the repayment of debt when economically feasible, or for other general corporate purposes.

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Critical Accounting Policies and Estimates:

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an on-going basis, we evaluate our estimates, including those related to bad debts, customer claims, inventories, goodwill, intangible assets, income taxes, pensions and other postretirement benefits, contingencies and litigation, environmental liabilities, and derivative instruments and hedging activities.

We believe the following are the critical accounting policies and areas affected by significant judgments and estimates impacting the preparation of our consolidated financial statements.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts for estimated losses resulting from the failure of our customers to make required payments. We perform ongoing credit evaluations of our customers and monitor their payment patterns. Should the financial condition of our customers deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Inventories

Inventories are stated at the lower of cost or market. The cost of inventories is determined primarily using the last-in, first-out (LIFO) method. We write down our inventory for estimated obsolescence or unmarketable inventory equal to the difference between our cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory writedowns may be required.

Pension and Other Postretirement Benefits

The amount of the pension expense, which is determined annually, is based upon the value of the assets in the pension trust at the beginning of the fiscal year as well as actuarial assumptions, such as the discount rate and the expected long-term rate of return on plan assets. The assumed long-term rate of return on pension plan assets is reviewed at each year end based on the plan’s investment policies, an analysis of the historical returns of the capital markets, and current interest rates. The plan’s current allocation policy is to have approximately 60 percent U.S. and international equities and 40 percent fixed income. The discount rate for the U.S. plan is determined by reference to Moody’s AA corporate bond index with maturities that approximate the anticipated cash outflows from the plan. The fluctuations in stock and bond markets could cause actual investment results to be significantly different from those assumed, and therefore, significantly impact the valuation of the assets in our pension trust. Changes in actuarial assumptions could significantly impact the accounting for the pension assets and liabilities. If the assumed long-term rate of return on plan assets was changed by 1 percent, the net pension expense would change by approximately $8.8 million. If the discount rate was changed by 0.25 percent, the net pension expense would change by approximately $2.1 million.

Long-Lived Assets

Long-lived assets are reviewed for impairment and written down to fair value whenever events or changes in circumstances indicate that the carrying value may not be recoverable through estimated future undiscounted cash flows. The amount of the impairment loss is the excess of the carrying amount of the impaired assets over the fair value of the assets based upon estimated future discounted cash flows. We evaluate long-lived assets for impairment by individual business unit. Changes in

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estimated cash flows could have a significant impact on whether or not an asset is impaired and the amount of the impairment.

Goodwill

Goodwill is not amortized, but instead is tested for impairment, at least annually. Potential impairment is identified by comparing the fair value of a reporting unit to its carrying value, including goodwill. The fair value is estimated based upon discounted cash flow analysis and the use of market multiples. If the carrying value of the reporting unit exceeds its fair value, any impairment loss is measured by comparing the carrying value of the reporting unit’s goodwill to its implied fair value. Changes in anticipated discounted cash flows and comparable market multiples could have a significant impact on whether or not goodwill is impaired and the amount of impairment.

Environmental Expenditures

Environmental expenditures that pertain to current operations or to future revenues are expensed or capitalized consistent with Carpenter’s capitalization policy for property, plant and equipment. Expenditures that result from the remediation of an existing condition caused by past operations and that do not contribute to current or future revenues are expensed. Liabilities are recognized for remedial activities when the remediation is probable and the cost can be reasonably estimated. Recoveries of expenditures for environmental remediation are recognized as assets only when recovery is deemed probable. Estimated liabilities are not discounted to present value, but estimated assets are measured on a discounted basis.

Income Taxes

Deferred income taxes result from temporary differences in the recognition of income and expense for financial and income tax reporting purposes, or differences between the fair value of assets acquired in business combinations accounted for as purchases for financial reporting purposes and their corresponding tax bases. Deferred income taxes represent future tax benefits (assets) or costs (liabilities) to be recognized when those temporary differences reverse. We evaluate on a quarterly basis whether, based on all available evidence, we believe that our deferred income tax assets will be realizable. Valuation allowances are established when it is estimated that it is probable (more likely than not) that the tax benefit of the deferred tax assets will not be realized. The evaluation, as prescribed by Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes,” includes the consideration of all available evidence, both positive and negative, regarding historical operating results including recent years with reported losses, the estimated timing of future reversals of existing taxable temporary differences, estimated future taxable income exclusive of reversing temporary differences and carryforwards, and potential tax planning strategies which may be employed to prevent an operating loss or tax credit carryforward from expiring unused. Future realization of deferred income tax assets ultimately depends upon the existence of sufficient taxable income within the carryback, carryforward period available under tax law.

Derivate Financial Instruments

Our current risk management strategies include the use of derivative instruments to reduce certain risks. The critical strategies include: (1) the use of commodity options to fix the price of a portion of anticipated future purchases of certain raw materials and energy to offset the effects of changes in the costs of those commodities; and (2) the use of foreign currency forwards and options to hedge a portion of anticipated future sales denominated in foreign currencies, principally the Euro, Pound Sterling and Australian dollar, in order to offset the effect of changes in exchange rates. Historically, we have also used interest rate swaps to maintain a certain level of floating rate debt relative to fixed rate debt. The commodity options and foreign currency forwards and options have been designated as cash flow hedges and unrealized net gains and losses are recorded in the

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accumulated other comprehensive income (loss) component of stockholders’ equity. When used, interest rate swaps were designated as fair value hedges and the changes in fair value of these instruments were immediately recorded in earnings. The mark-to-market values of both the fair value hedging instruments and the underlying debt obligations were recorded as equal and offsetting gains and losses in the interest expense component of the consolidated statement of income. As of June 30, 2007 and 2006, substantially all interest rate swap agreements were terminated. We evaluate all derivative instruments each quarter to determine that they are highly effective. Any ineffectiveness is recorded in our consolidated statement of operations. If the anticipated future transactions were no longer expected to occur, unrealized gains and losses on the related hedges would be reclassified to the consolidated statement of operations.

New Accounting Pronouncements

For information with respect to new accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 1, Summary of Significant Accounting Policies, to Notes to Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data.”

Off Balance Sheet Arrangements

We had no off balance sheet arrangements during the periods presented.

Contractual Obligations

At June 30, 2007, we had the following contractual cash obligations and other commercial commitments and contingencies:

(in millions)	Total		Fiscal 2008		Fiscal 2009		Fiscal 2010		Fiscal 2011		Fiscal 2012		There- after
Long-term debt	$	332.7	$	33.2	$	23.3	$	20.0	$	—	$	100.0	$	156.2
Accrued post-retirement benefits		140.4		12.1		12.1		12.7		13.4		14.0		76.1
Interest on long-term debt		122.7		23.0		21.3		19.7		18.5		11.8		28.4
Operating leases		21.6		8.3		6.7		2.6		1.6		1.0		1.4
Purchase commitments		451.1		430.4		20.7		—		—		—		—
Total contractual obligations	$	1,068.5	$	507.0	$	84.1	$	55.0	$	33.5	$	126.8	$	262.1

We have entered into purchase commitments primarily for various key raw materials and equipment purchases at market related prices, all made in the normal course of business.

In addition, we had $11.0 million of outstanding letters of credit as of June 30, 2007.

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Market Sensitive Instruments and Risk Management

See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” for discussion of market sensitive instruments and associated market risk for Carpenter.

Contingencies

Environmental

We are subject to various federal, state, local and international environmental laws and regulations relating to pollution, protection of public health and the environment, natural resource damages and occupational safety and health. Although compliance with these laws and regulations may affect our costs of operations, compliance costs to date have not been material. We have environmental remediation liabilities at some of our owned operating facilities and have been designated as a potentially responsible party (“PRP”) with respect to certain third-party Superfund waste disposal sites and other third party owned sites. Additionally, we have been notified that we may be a PRP with respect to other Superfund sites as to which no proceedings have been instituted against us. Neither the exact amount of remediation costs nor the final method of their allocation among all designated PRPs at these Superfund sites has been determined. The liability for future environmental remediation costs is evaluated by management on a quarterly basis. We accrue amounts for environmental remediation costs that represent management’s best estimate of the probable and reasonably estimable costs related to environmental remediation. During fiscal years 2007, 2006 and 2005, an additional $0.1 million, $0.3 million and $0.5 million, respectively, was accrued related to three of our environmental remediation sites. The liabilities recorded for environmental remediation costs at Superfund sites, at other third party-owned sites and at Carpenter-owned current or former operating facilities remaining at June 30, 2007, 2006 and 2005, were $5.5 million, $5.9 million and $6.1 million, respectively. The estimated range at June 30, 2007 of the reasonably possible future costs of remediation at Superfund sites, at other third party-owned sites and at Carpenter-owned current or former operating facilities is between $5.5 million and $9.9 million.

Estimates of the amount and timing of future costs of environmental remediation requirements are inherently imprecise because of the continuing evolution of environmental laws and regulatory requirements, the availability and application of technology, the identification of currently unknown remediation sites and the allocation of costs among the PRPs. Based upon information currently available, such future costs are not expected to have a material effect on our financial position, results of operations or cash flows. However, such costs could be material to our financial position, results of operations or cash flows in a particular future quarter or year.

Other

We are also defending various claims and legal actions, and are subject to contingencies that are common to our operations, including those pertaining to product claims, commercial disputes, employment actions, employee benefits, compliance with domestic and federal laws, personal injury claims and tax issues. We provide for costs relating to these matters when a loss is probable and the amount is reasonably estimable. The effect of the outcome of these matters on our future results of operations and liquidity cannot be predicted because any such effect depends on future results of operations and the amount and timing (both as to recording future charges to operations and cash expenditures) of the resolution of such matters. While it is not feasible to determine the outcome of these matters, management believes that the total ultimate liability will not have a material effect on our financial position, results of operations or cash flows. However, such costs could be material to our financial position, results of operations or cash flows in a particular future quarter or year.

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Future Outlook

As we enter fiscal 2008, we anticipate another year of record results, despite some initial headwinds from continued supply chain adjustments in the medical market and reduced sales to the industrial market. We expect sales to the aerospace market will strengthen in the second half of fiscal 2008 as a result of increasing demand for nickel-based alloys used in engine and structural applications.

We will continue to focus on high performance materials in order to be well positioned to capitalize on growth opportunities in our key end-use markets.

The Company plans to invest $150 million in capital expenditures in fiscal 2008 to support our customers as well as invest in markets where we have significant opportunity based on our portfolio of products. The planned capital expenditures includes approximately $75 million associated with the Company’s previously announced $115 million expansion of its premium let operations. Additionally, the planned capital expenditures include approximately $14 million related to the Company’s previously announced upgrade of its hot rolling facility.

The Company expects that cash flows from operations will approach $300 million in fiscal 2008 and anticipates that free cash flow will be approximately $100 million.

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Forward-looking Statements

This Form 10-K contains various “Forward-looking Statements” pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements, which represent our expectations or beliefs concerning various future events, include statements concerning future revenues and continued growth in various market segments. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ from those projected, anticipated or implied. The most significant of these uncertainties are described in this Form 10-K. They include but are not limited to: 1) the cyclical nature of the specialty materials business and certain end-use markets, including aerospace, industrial, automotive, consumer, medical and energy, or other influences on our business such as new competitors, the consolidation of customers and suppliers or the transfer of manufacturing capacity from the United States to foreign countries; 2) our ability to achieve cost savings, productivity improvements or process changes; 3) our ability to recoup increases in the costs of energy and raw materials or other factors; 4) domestic and foreign excess manufacturing capacity for certain metals; 5) fluctuations in currency exchange rates; 6) the degree of success of government trade actions; 7) the valuation of the assets and liabilities in our pension trusts and the accounting for pension plans; 8) possible labor disputes or work stoppages; and 9) the potential that our customers may substitute alternate materials or adopt different manufacturing practices that replace or limit the suitability of our products. Any of these factors could have an adverse and/or fluctuating effect on our results of operations. The forward-looking statements in this document are intended to be subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We undertake no obligation to update or revise any forward-looking statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We use derivative financial instruments to reduce certain types of financial risk. Raw material cost fluctuations for our Specialty Metals segment are normally offset by selling price adjustments, primarily through the use of surcharge mechanisms and base price adjustments. Firm price sales contracts involve a risk of profit margin decline in the event of raw material increases. We reduce this risk on certain raw materials by entering into commodity forward contracts, which are effective hedges of the risk, on these firm sales contracts.

We are actively involved in managing risks associated with energy resources. Risk containment strategies include interaction with primary and secondary energy suppliers as well as obtaining adequate insurance coverage to compensate us for potential business interruption related to lack of availability of energy resources. In addition, we have used forwards and options to fix the price of a portion of our anticipated future purchases of certain energy to protect against the impact of significant increases in energy costs. We also use surcharge mechanisms to offset a portion of these charges where appropriate.

Fluctuations in foreign currency exchange rates could subject us to risk of losses on anticipated future cash flows from our international operations or customers. Foreign currency forward contracts are used to hedge certain foreign exchange risk.

Historically, we have used interest rate swaps to achieve a level of floating rate debt relative to fixed rate debt where appropriate.

All hedging strategies are reviewed and approved by senior financial management before being implemented. Senior financial management has established policies regarding the use of derivative instruments that prohibit the use of speculative or leveraged derivatives. Market valuations are performed at least quarterly to monitor the effectiveness of our risk management programs.

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The status of our financial instruments as of June 30, 2007 is provided in Note 10 to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data”. Assuming on June 30, 2007 (a) an instantaneous 10 percent decrease in the price of raw materials and energy for which we have commodity forward contracts, our results of operations would not have been materially affected and (b) a 10 percent strengthening of the U.S. dollar versus foreign currencies for which foreign exchange forward contracts existed, our results of operations would not have been materially affected.

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Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements and Supplementary Data

	Page
Consolidated Financial Statements:
Management’s Responsibilities for Financial Reporting	39
Management’s Report on Internal Control Over Financial Reporting	39
Report of Independent Registered Public Accounting Firm	40 – 41
Consolidated Statements of Income for the Years Ended June 30, 2007, 2006 and 2005	42
Consolidated Statements of Cash Flows for the Years Ended June 30, 2007, 2006 and 2005	43
Consolidated Balance Sheets as of June 30, 2007 and 2006	44
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended June 30, 2007, 2006 and 2005	45 – 46
Consolidated Statements of Comprehensive Income for the Years Ended June 30, 2007, 2006 and 2005	46
Notes to Consolidated Financial Statements	47 – 75
Supplementary Data:
Quarterly Financial Data (Unaudited)	76 – 77
Schedule II	85

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Management’s Responsibilities for Financial Reporting

Carpenter’s management prepared the financial statements included in this Annual Report on Form 10-K and is responsible for their integrity and objectivity. The statements were prepared in conformity with accounting principles generally accepted in the United States of America and, as such, include amounts based on management’s best judgments and estimates. Financial information elsewhere in this Annual Report is consistent with that in the financial statements.

Carpenter maintains a system of internal controls, supported by a code of conduct, designed to provide reasonable assurance that assets are safeguarded and transactions are properly executed and recorded for the preparation of financial information. We believe Carpenter’s system of internal controls provides this appropriate balance. The system of internal controls and compliance is continually monitored by Carpenter’s internal audit staff.

The Audit/Finance Committee of the Board of Directors, composed of independent directors who are neither current nor former employees of Carpenter, meets regularly with management, Carpenter’s internal auditors and our independent registered public accounting firm to consider audit results and to discuss significant internal control, auditing and financial reporting matters. Both the independent registered public accounting firm and internal auditors have unrestricted access to the Audit/Finance Committee.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluations of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of Carpenter’s internal control over financial reporting as of June 30, 2007. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework. Based on our assessment, we concluded that as of June 30, 2007, Carpenter’s internal control over financial reporting is effective based on those criteria.

Management’s assessment of Carpenter’s internal control over financial reporting as of June 30, 2007 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing herein, which expresses unqualified opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting as of June 30, 2007.

/s/ Anne L. Stevens

Anne L. Stevens

Chairman, President and Chief Executive Officer

/s/ K. Douglas Ralph

K. Douglas Ralph

Senior Vice President – Finance and Chief Financial Officer

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Stockholders of Carpenter Technology Corporation:

We have completed integrated audits of Carpenter Technology Corporation’s consolidated financial statements and of its internal control over financial reporting as of June 30, 2007 in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements and financial statement schedule

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Carpenter Technology Corporation and its subsidiaries (the Company) at June 30, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2007 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(1) presents fairly in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements and schedule in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for defined benefit pension and other postretirement plans effective June 30, 2007.

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in the accompanying “Management’s Report on Internal Control Over Financial Reporting”, that the Company maintained effective internal control over financial reporting as of June 30, 2007 based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commissions (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2007, based on criteria established in Internal Control – Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal

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control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

August 24, 2007

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Consolidated Statements of Income

Carpenter Technology Corporation

For the years ended June 30, 2007, 2006 and 2005

(in millions, except per share data)	2007			2006			2005
NET SALES	$	1,944.8		$	1,568.2		$	1,314.2
Cost of sales		1,487.1			1,132.1			998.1
Gross profit		457.7			436.1			316.1
Selling and administrative expenses		133.9			125.4			120.6
Gain on sale of business		—			—			(8.7	)
Operating income		323.8			310.7			204.2
Interest expense		22.8			23.3			23.0
Other income, net		(30.0	)		(21.7	)		(8.8	)
Income before income taxes		331.0			309.1			190.0
Income tax expense		103.8			97.3			54.5
NET INCOME	$	227.2		$	211.8		$	135.5
EARNINGS PER COMMON SHARE:
Basic	$	8.79		$	8.33		$	5.54
Diluted	$	8.63		$	8.08		$	5.37
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		25.7			25.2			24.2
Diluted		26.3			26.1			25.1

See accompanying notes to consolidated financial statements.

42

Consolidated Statements of Cash Flows

Carpenter Technology Corporation

For the years ended June 30, 2007, 2006 and 2005

(in millions)	2007			2006			2005
OPERATING ACTIVITIES
Net income	$	227.2		$	211.8		$	135.5
Adjustments to reconcile net income to net cash provided from operations:
Depreciation and amortization		48.7			47.6			50.2
Deferred income taxes		5.7			(11.0	)		7.7
Net pension expense		4.9			10.8			2.4
Net loss on asset disposals		1.3			1.0			1.2
Gain on sale of business		—			—			(8.7	)
Changes in working capital and other:
Accounts receivable		(63.9	)		(39.5	)		(31.8	)
Inventories		(8.1	)		3.6			(49.8	)
Other current assets		(4.5	)		7.2			(9.2	)
Accounts payable		77.8			4.0			26.2
Accrued current liabilities		(14.6	)		16.6			46.1
Contribution to VEBA		—			—			(25.0	)
Other, net		0.6			(14.5	)		(2.3	)
Net cash provided from operations		275.1			237.6			142.5
INVESTING ACTIVITIES
Purchases of plant, equipment and software		(47.1	)		(19.3	)		(13.8	)
Proceeds from disposals of plant and equipment		—			1.0			1.1
Proceeds from sale of business		—			—			15.4
Purchases of marketable securities		(680.3	)		(411.8	)		(135.7	)
Proceeds from sales of marketable securities		449.4			381.1			50.2
Net cash used for investing activities		(278.0	)		(49.0	)		(82.8	)
FINANCING ACTIVITIES
Net change in short-term debt		—			—			(2.3	)
Payments on long-term debt		(0.2	)		(0.2	)		(20.2	)
Dividends paid		(25.7	)		(16.5	)		(11.4	)
Purchase of treasury stock		(28.9	)		—			—
Tax benefits on share-based compensation		7.7			8.0			—
Proceeds from common stock options exercised		4.2			15.0			54.2
Net cash (used for) provided from financing activities		(42.9	)		6.3			20.3
Effect of exchange rate changes on cash and cash equivalents		(6.2	)		(1.6	)		(0.5	)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(52.0	)		193.3			79.5
Cash and cash equivalents at beginning of year		352.8			159.5			80.0
Cash and cash equivalents at end of year	$	300.8		$	352.8		$	159.5

See accompanying notes to consolidated financial statements.

43

Consolidated Balance Sheets

Carpenter Technology Corporation

June 30, 2007 and 2006

(in millions, except share data)	2007			2006
ASSETS
Current assets:
Cash and cash equivalents	$	300.8		$	352.8
Marketable securities		372.7			141.8
Accounts receivable, net of allowance for doubtful accounts of $4.0 and $3.8 at June 30, 2007 and 2006, respectively		303.2			234.7
Inventories		235.0			224.3
Deferred income taxes		13.3			13.7
Other current assets		30.7			32.0
Total current assets		1,255.7			999.3
Property, plant and equipment, net		537.4			541.1
Prepaid pension cost		132.4			247.1
Goodwill		46.4			46.4
Trademarks and trade names, net		19.2			20.1
Other assets		34.6			33.9
Total assets	$	2,025.7		$	1,887.9
LIABILITIES
Current liabilities:
Accounts payable	$	215.9		$	137.4
Accrued liabilities		117.1			133.8
Current portion of long-term debt		33.2			0.2
Total current liabilities		366.2			271.4
Long-term debt, net of current portion		299.5			333.1
Accrued postretirement benefits		90.9			102.2
Deferred income taxes		143.5			189.0
Other liabilities		57.9			45.9
Total liabilities		958.0			941.6
Contingencies and commitments (see Note 13)
STOCKHOLDERS’ EQUITY
Convertible preferred stock – authorized 2,000,000 shares; issued 290.4 shares at June 30, 2006		—			18.0
Common stock – authorized 100,000,000 shares; issued 27,276,122 shares and 26,505,018 shares at June 30, 2007 and 2006, respectively		136.4			132.5
Capital in excess of par value – common stock		328.0			294.2
Reinvested earnings		751.3			549.8
Common stock in treasury (1,154,351 shares and 990,610 shares at June 30, 2007 and 2006, respectively), at cost		(65.7	)		(37.3	)
Deferred compensation		—			(1.5	)
Accumulated other comprehensive loss		(82.3	)		(9.4	)
Total stockholders’ equity		1,067.7			946.3
Total liabilities and stockholders’ equity	$	2,025.7		$	1,887.9

See accompanying notes to consolidated financial statements.

44

Consolidated Statement of Changes in Stockholders’ Equity

Carpenter Technology Corporation

For the years ended June 30, 2007, 2006 and 2005

				Common Stock
(in millions, except per share data)	Convertible Preferred Stock Par Value of $5			Par Value Of $5		Capital in Excess of Par Value			Reinvested Earnings			Common Stock in Treasury			Deferred Compensation			Accumulated Other Comp. Loss			Total Stockholders’ Equity
Balances at June 30, 2004	$	20.8		$	120.7	$	215.1		$	230.4		$	(38.0	)	$	(9.5	)	$	(1.5	)	$	538.0
Net income										135.5												135.5
Cash Dividends:
Common @ $0.4075 per share										(9.8	)											(9.8	)
Preferred @ $5,362.50 per share										(1.6	)											(1.6	)
Stock options exercised					8.9		45.3															54.2
Minimum pension liability, net of tax																			(4.0	)		(4.0	)
Other		(1.1	)		0.1		17.7						2.2			0.3			(7.3	)		11.9
Balances at June 30, 2005	$	19.7		$	129.7	$	278.1		$	354.5		$	(35.8	)	$	(9.2	)	$	(12.8	)	$	724.2
Net income										211.8												211.8
Cash Dividends:
Common @ $0.60 per share										(15.0	)											(15.0	)
Preferred @ $5,362.50 per share										(1.5	)											(1.5	)
Stock options exercised					2.5		12.5															15.0
Minimum pension liability, net of tax																			0.3			0.3
Reclassification of unamortized share-based compensation							(5.8	)								5.8						—
Tax benefit on share-based compensation							8.0															8.0
Other		(1.7	)		0.3		1.4						(1.5	)		1.9			3.1			3.5
Balances at June 30, 2006	$	18.0		$	132.5	$	294.2		$	549.8		$	(37.3	)	$	(1.5	)	$	(9.4	)	$	946.3
Net income										227.2												227.2
Cash Dividends:
Common @ $0.60 per share										(24.9	)											(24.9	)
Preferred @ $5,362.50 per share										(0.8	)											(0.8	)
Stock options exercised					1.0		3.2															4.2
Minimum pension liability, net of tax																			(6.2	)		(6.2	)
Tax benefit on share-based compensation							7.7															7.7
Purchase of treasury stock													(28.9	)								(28.9	)
Conversion of preferred shares to common shares		(18.0	)		2.9		15.1															—
Adjustment to initially apply SFAS 158, net of tax																			(70.6	)		(70.6	)
Share-based compensation							6.2						4.5									10.7
Other							1.6						(4.0	)		1.5			3.9			3.0
Balances at June 30, 2007	$	—		$	136.4	$	328.0		$	751.3		$	(65.7	)	$	—		$	(82.3	)	$	1,067.7

See accompanying notes to consolidated financial statements.

45

Consolidated Statement of Changes in Stockholders’ Equity (continued)

Carpenter Technology Corporation

For the years ended June 30, 2007, 2006 and 2005

	Preferred		Common Shares
	Shares Issued		Issued		Treasury		Net Outstanding
Balances at June 30, 2004	333.7		24,141,150		(1,106,772	)	23,034,378
Stock options exercised			1,774,261				1,774,261
Restricted stock awards					100,600		100,600
Other	(16.9	)	33,826		(20,676	)	13,150
Balances at June 30, 2005	316.8		25,949,237		(1,026,848	)	24,922,389
Stock options exercised			500,992				500,992
Restricted stock awards			5,400		73,908		79,308
Other	(26.4	)	49,389		(37,670	)	11,719
Balances at June 30, 2006	290.4		26,505,018		(990,610	)	25,514,408
Stock options exercised			192,958				192,958
Restricted stock awards					99,587		99,587
Conversion of preferred shares to common shares	(290.4	)	580,857				580,857
Purchase of treasury stock					(235,072	)	(235,072	)
Other			(2,711	)	(28,256	)	(30,967	)
Balances at June 30, 2007	—		27,276,122		(1,154,351	)	26,121,771

Consolidated Statements of Comprehensive Income

Carpenter Technology Corporation

For the years ended June 30, 2007, 2006 and 2005

(in millions)	2007			2006		2005
Net income	$	227.2		$	211.8	$	135.5
Unrealized gain on securities classified as available-for-sale, net of tax of $0.0, $(0.1) and $0.0 million, respectively		—			0.1		—
Net (losses) gains on derivative instruments, net of tax of $1.9 million, $(1.1) million, and $6.3 million, respectively		(3.1	)		1.9		(9.0	)
Minimum pension liability, net of taxes of $4.0 million, $(0.1) million, and $2.3 million, respectively		(6.2	)		0.3		(4.0	)
Foreign currency translation		7.0			1.1		1.7
Comprehensive income	$	224.9		$	215.2	$	124.2

See accompanying notes to consolidated financial statements.

46

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies

Basis of Consolidation – The consolidated financial statements include the accounts of Carpenter and all majority-owned subsidiaries. All significant intercompany accounts and transactions are eliminated. Investments in companies in which Carpenter exercises significant influence, but which it does not control (generally a 20 to 50 percent ownership interest), are accounted for on the equity method of accounting and Carpenter’s share of their income or loss is included in other income, net in the Consolidated Statement of Income.

Revenue Recognition – Revenue, net of related discounts and allowances, is recognized when product is shipped and title and risk of loss has transferred to the customer.

Freight and Handling Fees and Costs – Freight and handling costs billed separately to customers are included as part of sales, and freight and handling costs expensed are included as part of cost of sales on the Consolidated Statement of Income.

Research and Development – Research and development expenditures, which amounted to $11.5, $10.2 and $10.0 million in fiscal 2007, 2006 and 2005, respectively, are expensed as incurred and are generally reported in cost of sales in the Consolidated Statement of Income. Substantially all development costs are related to developing new products or designing significant improvements to existing products.

Cash Equivalents – Cash equivalents consist of highly liquid instruments with maturities at the time of acquisition of three months or less. Cash equivalents are stated at cost, which approximates market.

Marketable Securities – Carpenter considers all highly liquid investments with an original maturity of more than three months when purchased and all auction-rate securities and variable rate demand notes to be marketable securities. Carpenter has determined that all of its marketable securities are to be classified as available-for-sale. These securities are carried at market value, with the unrealized gains and losses reported as a component of accumulated other comprehensive loss. Interest and dividends on securities classified as available-for-sale are included in other income, net.

Accounts Receivable – Trade receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of outstanding amounts. Trade credit is extended based upon periodic evaluation of each customer’s ability to perform its obligations. The Company determines accounts receivable allowances based on an aging of accounts and a review of specific accounts identified as collection risks. We do not require collateral to secure accounts receivable.

Inventories – Inventories are valued at the lower of cost or market. Cost for inventories is principally determined by the Last-In, First-Out (LIFO) method. Carpenter also uses the First-In, First-Out (FIFO) and average cost methods. For fiscal 2007 and 2006, $76.6 million and $62.1 million of inventory, respectively, was accounted for using a method other than the LIFO method.

Fixed Assets and Depreciation – Fixed assets are stated at historical cost less accumulated depreciation. Depreciation for financial reporting purposes is computed by the straight-line

47

Notes to Consolidated Financial Statements (continued)

method over the estimated useful lives of the assets. Depreciation for income tax purposes is computed using accelerated methods. Upon disposal, assets and related depreciation are removed from the accounts and the differences between the net amounts and proceeds from disposal are included in cost of goods sold in the consolidated statement of operations.

Computer Software and Amortization – Computer software is included in other assets on the consolidated balance sheet, and is amortized for financial reporting purposes on a straight-line basis over the respective estimated useful lives, ranging principally from 3 to 7 years.

Goodwill – Goodwill, representing the excess of the cost over the net tangible and identifiable intangible assets of acquired businesses, is stated at cost.

Goodwill is not amortized but instead is annually tested for impairment, or more frequently if events or circumstances indicate that the carrying amount of goodwill may be impaired. Potential impairment is identified by comparing the fair value of a reporting unit to its carrying value, including goodwill. The fair value is estimated using discounted cash flow and the use of market multiples valuation techniques. These valuation techniques require the use of estimates and assumptions related to projected operating results, capital expenditures and working capital levels as well as the cost of capital. If the carrying value of the reporting unit exceeds its fair value, any impairment loss is measured by comparing the carrying value of the reporting unit’s goodwill to its implied fair value.

Trademarks and Trade Names – The costs of trademarks and trade names are amortized on a straight-line basis over the estimated useful lives of 30 years.

Impairment of Long-Lived Assets – Long-lived assets, including property, plant and equipment and intangible assets subject to amortization, are reviewed for impairment and written down to fair value whenever events or changes in circumstances indicate that the carrying value may not be recoverable through future undiscounted cash flows. The amount of the impairment loss is the excess of the carrying amount of the impaired assets over the fair value of the assets based upon discounted future cash flows.

Environmental Expenditures – Environmental expenditures that pertain to current operations or to future revenues are expensed or capitalized consistent with Carpenter’s capitalization policy for property, plant and equipment. Expenditures that result from the remediation of an existing condition caused by past operations and that do not contribute to current or future revenues are expensed. Liabilities are recognized for remedial activities when the remediation is probable and the cost can be reasonably estimated. Recoveries of expenditures for environmental remediation are recognized as assets only when recovery is deemed probable. Estimated liabilities are not discounted to present value, but estimated assets are measured on a discounted basis.

Derivative Financial Instruments – All derivative financial instruments are recorded on the balance sheet at their fair value and changes in fair value are recorded each period in current earnings or comprehensive income. Carpenter enters into derivative financial instruments to hedge certain anticipated transactions, firm commitments, or assets and liabilities denominated in foreign currencies. Historically, Carpenter has utilized interest rate swaps to convert floating rate debt to fixed rate, or to convert fixed rate debt to floating rate.

Foreign Currency Translation – Assets and liabilities of most international operations are translated into U.S. dollars at exchange rates in effect at year-end, and their income statements

48

Notes to Consolidated Financial Statements (continued)

are translated at the average monthly exchange rates prevailing during the year. The resulting translation gains and losses are recorded each period as a component of accumulated other comprehensive income until the international entity is sold or liquidated. Gains and losses from transactions denominated in foreign currencies are reported in other income, net in the consolidated statement of operations.

Deferred Income Taxes – Deferred income taxes are recognized by applying enacted statutory tax rates, applicable to future years, to temporary differences between the tax bases and financial statement carrying values of Carpenter’s assets and liabilities. Valuation allowances are recorded to reduce deferred tax assets to amounts that are more likely than not to be realized.

Earnings per Share – Basic earnings per share is calculated by dividing net income available to common shareholders by the weighted average number of shares outstanding for the period. Diluted earnings per share is calculated by dividing net income adjusted for the assumed shortfall between common and preferred dividends by the weighted average number of shares outstanding for the period, adjusted for the effect of an assumed conversion of preferred shares and the effect of all potentially dilutive stock options and stock units at the end of the period.

Litigation – Periodically, Carpenter and its subsidiaries are parties to lawsuits arising out of the normal course of business. Carpenter records liabilities when a loss is probable and can be reasonably estimated. These estimates are based on an analysis made by internal and external legal counsel considering information known at the time.

Share-Based Compensation – As of June 30, 2007, Carpenter has two share-based employee compensation plans, which are described in detail in Note 14. Beginning July 1, 2005, Carpenter adopted Statement of Financial Accounting Standards No. 123 (R) “Share Based Payment” (“SFAS 123R”) using the modified prospective method. The adoption of SFAS 123R did not have a material effect on operating income, income before taxes, net income, basic earnings per share or diluted earnings per share. In connection with the adoption of SFAS 123R during fiscal 2006, $8.0 million related to the tax benefits associated with share-based compensation was reclassified from net cash provided from operations to net cash provided from financing activities.

For the year ended June 30, 2005, Carpenter accounted for its stock option plans and other stock-based compensation in accordance with the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees”, and related Interpretations. No share-based employee compensation cost related to stock options was reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the proforma effect on net income and earnings per share had Carpenter accounted for share-based compensation in accordance with SFAS 123R for the year ended June 30, 2005:

(in millions, except per share data)	2005
Net income as reported	$	135.5
Deduct: Total share-based employee compensation expense determined under fair value based method for all stock option awards, net of related tax effect		(0.4	)
Pro forma net income	$	135.1

49

Notes to Consolidated Financial Statements (continued)

Earnings per share:
Basic – as reported	$	5.54
Basic – pro forma	$	5.53
Diluted – as reported	$	5.37
Diluted – pro forma	$	5.36

For the year ended June 30, 2005, Carpenter accounted for stock-based compensation with retirement eligible provisions using the nominal vesting period approach. Beginning in fiscal 2006, with the adoption of FASB 123R, the Company began using the non-substantive vesting period approach for new awards granted with retirement eligible provisions. Applying the nominal vesting period approach rather than the non-substantive vesting period approach did not have a material effect on net income for any of the periods presented.

Concentration of Credit Risk – Financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash and cash equivalents, investments in marketable securities and trade receivables. Investment and cash management policies have been implemented that limit deposit concentrations and limit investments to investment grade securities. The risk with respect to trade receivables is mitigated by monitoring payment terms and periodic credit evaluations we perform on our customers, the short duration of our payment terms and by the diversification of our customer base. No single customer accounted for more than 10% or more of total sales in fiscal 2007, 2006 and 2005.

Use of Estimates – The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

New Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 provides clarification related to accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes”, and prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Additionally, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The provisions of FIN 48 are required to be adopted for fiscal years beginning after December 15, 2006. During the first quarter of our fiscal year ended June 30, 2008, we will adopt and apply the provisions of FIN 48 to all tax positions upon initial adoption with any cumulative effect adjustment to be recognized as an adjustment to retained earnings. Based on our evaluation as of June 30, 2007, we expect that the adoption of FIN 48 will result in an increase of noncurrent liabilities of approximately $1.0 million to $2.0 million with an offsetting decrease to reinvested earnings in the same amount.

50

Notes to Consolidated Financial Statements (continued)

In September 2006, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 addresses the diversity in practice in quantifying financial statement misstatements and establishes an approach that requires quantification of financial statement misstatements based on the effects of the misstatements in a company’s financial statements and related disclosures. SAB 108 is effective for fiscal years ending after November 15, 2006. The application of SAB 108 did not have a material impact on our consolidated financial statements.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”), which establishes a framework for measuring the fair value of assets and liabilities. This framework is intended to provide increased consistency in how fair value determinations are made under various existing accounting standards that permit, or in some cases require, estimates of fair market value. SFAS 157 also expands financial statement disclosure requirements about a company’s use of fair value measurements, including the effect of such measures on earnings. The Company is required to adopt this new accounting guidance effective the first quarter of fiscal 2009. The Company is currently evaluating the provisions of SFAS 157; however, the adoption is not expected to have a material impact on its consolidated financial statements.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Post-Retirement Plans” (“SFAS 158”). SFAS 158 requires employers to recognize the obligations associated with the funded status of a benefit plan in their statement of financial position. The provisions of SFAS 158 were adopted as of the year ended June 30, 2007. Adoption resulted in a decrease in assets of $114.3 million and a decrease in liabilities of $43.7 million and a reduction in shareholders’ equity through an adjustment to accumulated other comprehensive loss of $70.6 million. The adoption had no impact on our results of operations or cash flows.

In February 2007, FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115” (“SFAS 159”). This Statement permits entities to choose to measure many financial instruments and certain other items at fair value and report unrealized gains and losses on these instruments in earnings. SFAS 159 is effective for fiscal years that begin after November 15, 2007 (July 1, 2008 for the Company). The Company is currently evaluating the provisions of SFAS 159.

2. Financial Statement Revision

Certain prior year amounts have been revised to present variable rate demand notes or other financial instruments properly as marketable securities or cash equivalents, based on the underlying characteristics of the investments. As a result, the Consolidated Statements of Cash Flows for the years ended June 30, 2006 and 2005 and the Consolidated Balance Sheet as of June 30, 2006 have been revised to reflect the proper classification of these securities. This revision had no impact on Carpenter’s net income, changes in stockholders’ equity, net cash provided from operating activities or free cash flow. The effects of this revision are as follows:

51

Notes to Consolidated Financial Statements (continued)

	Years Ended June 30,
	2006						2005
	As Originally Reported			As Revised			As Originally Reported			As Revised
Statement of Cash Flows:
Purchases of marketable securities	$	(450.4	)	$	(411.8	)	$	(172.4	)	$	(135.7	)
Sales of marketable securities	$	476.0		$	381.1		$	94.6		$	50.2
Net cash provided from (used for) investing activities	$	7.3		$	(49.0	)	$	(75.1	)	$	(82.8	)
Increase in cash and cash equivalents	$	249.6		$	193.3		$	87.2		$	79.5
Cash and cash equivalents at beginning of period	$	163.8		$	159.5		$	76.6		$	80.0
Cash and cash equivalents at end of period	$	413.4		$	352.8		$	163.8		$	159.5

(in millions)	June 30, 2006
	As Originally Reported		As Revised
Balance Sheet:
Cash and cash equivalents	$	413.4	$	352.8
Marketable securities	$	81.2	$	141.8
Total current assets	$	999.3	$	999.3

3. Earnings Per Common Share

The calculations of earnings per share for the years ended June 30, 2007, 2006 and 2005 are shown below.

(in millions, except per share data)	2007			2006			2005
Basic EPS:
Net income	$	227.2		$	211.8		$	135.5
Dividends accrued on convertible preferred stock, net of tax benefits		(0.8	)		(1.5	)		(1.6	)
Earnings available to common stockholders	$	226.4		$	210.3		$	133.9
Weighted average common shares outstanding		25.7			25.2			24.2
Basic earnings per share	$	8.79		$	8.33		$	5.54

52

Notes to Consolidated Financial Statements (continued)

Diluted EPS:
Net income	$	227.2		$	211.8		$	135.5
Assumed shortfall between common and preferred dividends		(0.4	)		(0.8	)		(1.0	)
Earnings available for common stockholders	$	226.8		$	211.0		$	134.5
Weighted average number of common shares outstanding		25.7			25.2			24.2
Assumed conversion of preferred shares		0.4			0.6			0.7
Effect of shares issuable under stock option plans		0.2			0.3			0.2
Adjusted weighted average common shares		26.3			26.1			25.1
Diluted net earnings per share	$	8.63		$	8.08		$	5.37

4. Investments in Marketable Securities

The fair value of Carpenter’s investments in marketable securities is based on quoted market prices as of June 30, 2007 and 2006. The following is a summary of marketable securities as of June 30, 2007 and 2006, all of which were classified as available-for-sale:

June 30, 2007 (in millions)	Corporate Bonds		Government Bonds		Other Fixed Income Securities		Total
Cost	$	—	$	371.5	$	1.2	$	372.7
Unrealized losses		—		—		—		—
Estimated fair value	$	—	$	371.5	$	1.2	$	372.7
Due in one year or less	$	—	$	371.5	$	1.2	$	372.7
Due in one through three years		—		—		—		—
	$	—	$	371.5	$	1.2	$	372.7

June 30, 2006 (in millions)	Corporate Bonds		Government Bonds		Other Fixed Income Securities		Total
Cost	$	23.4	$	101.3	$	17.1	$	141.8
Unrealized losses		—		—		—		—
Estimated fair value	$	23.4	$	101.3	$	17.1	$	141.8
Due in one year or less	$	23.4	$	101.3	$	17.1	$	141.8
Due in one through three years		—		—		—		—
	$	23.4	$	101.3	$	17.1	$	141.8

Substantially all of the Company’s marketable securities are variable rate demand notes (“VRDN”). VRDN are variable rate bonds tied to short-term interest rates, but with stated

53

Notes to Consolidated Financial Statements (continued)

maturities greater than 90 days. VRDN trade at par value, therefore no realized or unrealized gains/losses occur.

For the fiscal years ended June 30, 2007, 2006 and 2005, proceeds from sales of marketable securities were $449.4, $381.1 million and $50.2 million, respectively. Realized losses on these sales during each of the fiscal years were approximately $0.1 million.

5. Inventories

(in millions)	June 30
	2007		2006
Raw materials and supplies	$	29.1	$	28.8
Work in process		138.3		132.0
Finished and purchased products		67.6		63.5
	$	235.0	$	224.3

If the first-in, first-out method of inventory had been used instead of the LIFO method, inventories would have been $501.0 and $267.7 million higher as of June 30, 2007 and 2006, respectively. Current cost of LIFO-valued inventories was $659.5 million at June 30, 2007 and $444.1 million at June 30, 2006. The reductions in LIFO-valued inventories decreased cost of sales by $4.4 million during fiscal 2007 and $2.0 million during fiscal 2006. There was no reduction during fiscal 2005.

6. Property, Plant and Equipment

(in millions)	June 30
	2007		2006
Land	$	7.4	$	7.2
Buildings and building equipment		234.7		231.8
Machinery and equipment		1,106.3		1,092.8
Construction in progress		31.4		9.9
Total at cost		1,379.8		1,341.7
Less: accumulated depreciation and amortization		842.4		800.6
	$	537.4	$	541.1

The estimated useful lives of depreciable assets are as follows:

Asset Category	Useful Life (in Years)
Buildings and building equipment	20 – 45
Machinery and equipment	3 – 30

Depreciation and amortization for the years ended June 30, 2007, 2006 and 2005 was $47.1 million, $45.8 million and $46.8 million, respectively.

54

Notes to Consolidated Financial Statements (continued)

7. Goodwill and Trademarks and Trade Names, Net

Goodwill

Carpenter conducted its annual impairment review as of June 30, 2007 and 2006 and determined that there was no goodwill impairment. At June 30, 2007 and 2006 the Specialty Metals segment accounted for $34.6 million of the goodwill and the Engineered Products segment accounted for $11.8 million.

There were no changes to the carrying amount of goodwill during the fiscal years ended June 30, 2007, 2006 or 2005.

Trademarks and Trade Names, Net

(in millions)	June 30,
	2007			2006
Trademarks and trade names, at cost	$	29.9		$	29.9
Less accumulated amortization		(10.7	)		(9.8	)
Trademarks and trade names, net	$	19.2		$	20.1

Carpenter recorded $0.9 million of amortization expense during fiscal year 2007, $1.0 million during fiscal year 2006, and $1.1 million during fiscal year 2005. The estimated annual amortization expense for each of the succeeding five fiscal years is $1.0 million.

8. Debt

The Company maintains a $150 million revolving credit facility which expires in August 2010. The revolving credit facility includes two financial covenants, a minimum EBITDA-to-interest expense coverage and a maximum debt-to-capital ratio.

At fiscal year end, the Company had $11.0 million of issued letters of credit under the revolving credit facility. The balance of the revolving credit facility ($139.0 million) was available to the Company. In addition to this facility, the Company had $50 million available to it under an Accounts Receivable Purchase Facility (see Note 9).

Long-term debt outstanding at June 30, 2007 and 2006 consists of the following:

(in millions)	June 30,
	2007		2006
Senior unsecured notes, 6.625% due May 2013	$	99.5	$	99.4
Medium-term notes, Series B at 6.28% to 7.10% due from April 2008 to 2018 (face value of $132.0 million at June 30, 2007 and 2006)		132.3		132.7
Medium-term notes, Series C at 7.625% due August 2011 (face value of $100.0 million at June 30, 2007 and 2006)		100.4		100.5
Other		0.5		0.7
Total		332.7		333.3
Less amounts due within one year		33.2		0.2
Long-term debt, net of current portion	$	299.5	$	333.1

55

Notes to Consolidated Financial Statements (continued)

The carrying value of the notes includes fair value adjustments for interest swap contracts of $1.0 million and $1.5 million for deferred gains on settled interest rate swaps as of June 30, 2007 and 2006, respectively. The deferred gains on settled interest rate swap contracts are being recognized as reductions to interest expense over the remaining term of the notes, which ranges from one to four years.

Aggregate maturities of long-term debt for the four years subsequent to June 30, 2008, are $23.3 million in fiscal 2009, $20.0 million in fiscal 2010, $0.0 million in fiscal 2011, and $100.0 million in fiscal 2012.

For the years ended June 30, 2007, 2006 and 2005, interest expense totaled $23.3 million, $23.6 million and $23.1 million, of which $0.5 million, $0.3 million and $0.1 million, respectively, were capitalized as part of the cost of plant, equipment and software.

9. Accounts Receivable Purchase Facility

Carpenter maintains a $50 million accounts receivable purchase facility (“Purchase Facility”) with an independent financial institution which expires in March 2010. Pursuant to the terms of the Purchase Facility, Carpenter may sell a participating interest in certain accounts receivable to an independent financial institution.

During the fiscal years ended June 30, 2007, 2006 and 2005, no sales of interests in accounts receivable were initiated and accordingly as of June 30, 2007, 2006 and 2005, there was no utilization of the Purchase Facility.

10. Financial Instruments

The carrying amounts and estimated fair values of Carpenter’s financial instruments were as follows:

	June 30,
(in millions)	2007						2006
	Carrying Value			Fair Value			Carrying Value			Fair Value
Cash and cash equivalents	$	300.8		$	300.8		$	352.8		$	352.8
Marketable securities	$	372.7		$	372.7		$	141.8		$	141.8
Company-owned life insurance	$	11.4		$	11.4		$	10.2		$	10.2
Long-term debt	$	332.7		$	341.9		$	333.3		$	345.1
Commodity forwards and options	$	8.7		$	8.7		$	13.4		$	13.4
Foreign currency forwards and options	$	(1.4	)	$	(1.4	)	$	(1.8	)	$	(1.8	)

The carrying amounts for cash, cash equivalents and short-term debt approximate their fair values due to the short-term maturities of these instruments. The carrying amount for marketable securities is based on quoted market prices. The carrying amount for company-owned life insurance reflects cash surrender values based upon the market values of underlying securities.

The fair values of long-term debt as of June 30, 2007 and 2006 were determined by using current interest rates.

56

Notes to Consolidated Financial Statements (continued)

The Company formally documents all relationships between its hedging instruments and hedged items, as well as its risk management objective and strategy for establishing various hedge relationships. The Company formally assesses, both at the inception of the hedge and on an on-going basis, whether each derivative instrument is highly effective in offsetting changes in the fair values or cash flows of hedged items.

Carpenter’s current risk management strategies include the use of derivative instruments to reduce certain risks. These strategies are:

• The use of commodity forwards and options to fix the price of a portion of future purchases of certain raw materials and energy to offset the effects of changes in the costs of those commodities.

• The use of foreign currency forwards and options to hedge a portion of future sales denominated in foreign currencies, principally the Euro, Pound Sterling and Australian Dollar, in order to offset the effect of changes in exchange rates.

• The use of foreign currency forwards and options to hedge certain foreign currency denominated intercompany receivables, primarily in Euro, Pound Sterling and Australian Dollar, to offset the effect on earnings of changes in exchange rates until these receivables are collected.

In addition, the Company has historically considered the use of interest rate swaps to achieve appropriate levels of floating rate debt relative to fixed rate debt.

The Company has designated commodity forwards and options, foreign currency forwards and options and floating to fixed interest rate swaps as cash flow hedges of anticipated commodity transactions, anticipated foreign exchange transactions and scheduled interest payments, respectively. Fair values for outstanding derivative instruments that are designated as cash flow hedges are accumulated in other comprehensive income in stockholders’ equity. The fair values are released to earnings when the related hedged items impact earnings. Amounts reclassified to the Consolidated Statement of Income are included in cost of sales (commodity hedges), interest expense (interest rate swaps) and sales (foreign currency hedges). If an anticipated transaction is no longer expected to occur, unrealized gains and losses on the related hedge are reclassified to the Consolidated Statement of Income. The changes in other accumulated comprehensive income associated with derivative hedging activities during the year ended June 30, 2007, 2006 and 2005 were as follows:

	2007			2006			2005
Balance at July 1	$	5.6		$	3.8		$	12.7
Current period changes in fair value, net of tax		35.2			11.2			5.4
Reclassifications to earnings, net of tax		(38.4	)		(9.4	)		(14.3	)
Balance at June 30	$	2.4		$	5.6		$	3.8

The Company has designated fixed to floating interest rate swaps as fair value hedges. Accordingly, the changes in the fair value of these instruments are immediately recorded in earnings. The mark-to-market values of both the fair value hedging instruments and the underlying debt obligations are recorded as equal and offsetting gains and losses in the interest expense component of the Consolidated Statement of Income. As of June 30, 2007 and 2006, substantially all interest rate swap agreements had been terminated. All existing fair value hedges were highly effective. As a result, there was no impact to earnings due to hedge ineffectiveness.

57

Notes to Consolidated Financial Statements (continued)

The hedges of intercompany receivables denominated in foreign currencies do not qualify for hedge accounting through other comprehensive income; therefore the hedges are marked to market on a quarterly basis and any gains or losses are recorded within other income, net on the Consolidated Statement of Income. All unrealized gains or losses on intercompany receivables denominated in foreign currencies are recorded in other income, net each quarter.

Any ineffectiveness is recorded in the Consolidated Statement of Income. The ineffectiveness for existing derivative instruments for the years ended June 30, 2007, 2006 and 2005 was immaterial.

As of June 30, 2007, $2.4 million after taxes of net gains from derivative instruments was included in accumulated other comprehensive loss. Gains of $3.0 million after taxes are expected to be reclassified to the Consolidated Statement of Income within one year. Losses of $0.6 million are expected to be reclassified to the Consolidated Statement of Income after one year.

Carpenter is exposed to credit risk related to its financial instruments in the event of non-performance by the counterparties. Carpenter does not generally require collateral or other security to support these financial instruments. However, the counterparties to these transactions are major financial institutions deemed creditworthy by Carpenter. Carpenter does not anticipate non-performance by the counterparties.

11. Accrued Liabilities

(in millions)	June 30,
	2007		2006
Compensation	$	37.7	$	40.8
Employee benefits		30.0		30.4
Income taxes		19.9		28.4
Interest		5.5		5.7
Taxes, other than income		4.2		4.5
Derivative financial instruments		2.1		4.7
Deferred revenue		2.1		2.6
Environmental costs		1.5		1.8
Professional services		0.8		1.3
Other		13.3		13.6
	$	117.1	$	133.8

12. Pension and Other Postretirement Benefits

Carpenter provides several noncontributory defined benefit pension plans to certain employees. The plans provide defined benefits based on years of service and final average salary.

Carpenter also provides other postretirement benefit plans to certain of its employees. The postretirement benefit plans consist of health care and life insurance plans. From June 1999 to December 2003, retired employees benefit payments were paid by a Voluntary Employee Benefit Association Trust (“VEBA”). Beginning in January 2004, benefit payments were paid from Corporate assets. During the fourth quarter of fiscal 2005, Carpenter made voluntary cash contributions of $25.0 million into the VEBA. Prior to 2002, Carpenter contributed discretionary

58

Notes to Consolidated Financial Statements (continued)

amounts, which have not exceeded the amount deductible for tax purposes, into the VEBA. Plan assets are primarily invested in equity securities.

In fiscal 2005, Carpenter amended the General Retirement Plan to change the maximum benefit and top-heavy rules in accordance with the Economic Growth & Tax Relief Reconciliation Act of 2001.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Post-Retirement Plans” (“SFAS 158”). SFAS 158 requires employers to recognize the obligations associated with the funded status of a benefit plan in their statement of financial position. The provisions of SFAS 158 were adopted as of the year ended June 30, 2007. The impacts of adoptions are presented within this note.

Carpenter uses a measurement date of June 30 for the majority of its plans.

The following provides a reconciliation of benefit obligations, plan assets, and funded status of the plans.

(in millions)	Pension Plans						Other Postretirement Plans
	2007			2006			2007			2006
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	773.1		$	832.3		$	182.4		$	222.6
Service cost		17.5			19.0			2.3			2.7
Interest cost		46.8			40.4			11.0			10.7
Benefits paid		(50.0	)		(50.0	)		(11.7	)		(12.2	)
Actuarial (gain) loss		25.6			(68.6	)		8.3			(42.1	)
Plan amendments		1.5			—			—			—
Other		0.5			—			1.3			0.7
Projected benefit obligation at end of year	$	815.0		$	773.1		$	193.6		$	182.4
Change in plan assets:
Fair value of plan assets at beginning of year	$	819.4		$	797.6		$	72.5		$	69.0
Actual return on plan assets		134.5			69.1			14.9			3.7
Benefits paid from plan assets		(50.0	)		(50.0	)		(11.7	)		(12.2	)
Contributions		3.2			2.7			11.4			12.0
Other		—			—			—			—
Fair value of plan assets at end of year	$	907.1		$	819.4		$	87.1		$	72.5
Funded status of the plans:	$	92.1		$	46.3		$	(106.5	)	$	(109.9	)
Unrecognized net loss					172.6						43.4
Unrecognized prior service cost (benefit)					8.3						(51.2	)
Unrecognized transition obligation					—						—
Net amount recognized	$	92.1		$	227.2		$	(106.5	)	$	(117.7	)

59

Notes to Consolidated Financial Statements (continued)

Amounts recognized in the Consolidated Balance Sheets :
Accrued postretirement benefits	$	(40.3	)	$	(26.4	)	$	(106.5	)	$	(117.7	)
Prepaid pension cost		132.4			247.1			—			—
Accumulated other comprehensive income					6.5						—
Net amount recognized	$	92.1		$	227.2		$	(106.5	)	$	(117.7	)
Amounts recognized in accumulated other comprehensive loss:
Net actuarial loss	$	125.7					$	41.0
Prior service cost (credit)		8.9						(43.3	)
Total	$	134.6					$	(2.3	)
Additional information:
Increase (decrease) in minimum liability included in other comprehensive income	$	10.3		$	(0.4	)	$	—		$	—
Accumulated benefit obligation for all pension plans	$	737.0		$	707.6			N/A			N/A

Effect of applying SFAS 158 on individual line items in the Consolidated Balance Sheet at June 30, 2007	Before Application of SFAS 158			Adjustments			After Application of SFAS 158
Prepaid pension cost	$	246.7		$	(114.3	)	$	132.4
Total assets	$	2,140.0		$	(114.3	)	$	2,025.7
Other liabilities	$	54.4		$	3.5		$	57.9
Accrued postretirement benefits	$	93.2		$	(2.3	)	$	90.9
Deferred income taxes	$	188.4		$	(44.9	)	$	143.5
Total liabilities	$	1,001.7		$	(43.7	)	$	958.0
Accumulated other comprehensive loss	$	(11.7	)	$	(70.6	)	$	(82.3	)
Total stockholders’ equity	$	1,138.3		$	(70.6	)	$	1,067.7

Carpenter has several underfunded pension plans that are included in the data presented above. As of June 30, 2007 and 2006, the projected benefit obligation of the underfunded plans was $46.1 million and $35.6 million, the total fair value of assets was $5.7 million and $4.7 million, and the accumulated benefit obligation was $43.2 million and $31.5 million, respectively.

60

Notes to Consolidated Financial Statements (continued)

The components of the net periodic benefit cost related to Carpenter’s pension and other postretirement benefits are as follows:

	Pension Plans									Other Postretirement Plans
(in millions)	2007			2006			2005			2007			2006			2005
Service cost	$	17.5		$	19.0		$	15.3		$	2.3		$	2.7		$	2.3
Interest cost		46.8			40.4			42.0			11.0			10.7			11.3
Expected return on plan assets		(67.6	)		(66.2	)		(64.3	)		(6.1	)		(5.8	)		(3.6	)
Amortization of net loss		6.2			11.9			3.9			2.1			5.1			2.7
Amortization of prior service cost (benefit)		0.9			0.9			0.7			(7.9	)		(7.9	)		(7.9	)
Net expense (income)	$	3.8		$	6.0		$	(2.4	)	$	1.4		$	4.8		$	4.8

The service cost component of Carpenter’s net pension expense, which represents the estimated cost of future pension liabilities earned associated with active employees, is included in the operating income of the business segments. The residual net pension expense, which is comprised of the expected return on plan assets, interest costs on the projected benefit obligations of the plans, and amortization of actuarial gains and losses and prior service costs, is included under the heading “Pension earnings, interest & deferrals” in the segment data presented in Note 20.

Principal actuarial assumptions at June 30:

	Pension Plans						Other Postretirement Plans
	2007		2006		2005		2007		2006		2005
Weighted-average assumptions used to determine benefit obligations at fiscal year end
Discount rate	6.25	%	6.25	%	5.00	%	6.25	%	6.25	%	5.00	%
Rate of compensation increase	3.64	%	3.64	%	3.64	%	N/A		N/A		N/A
Weighted-average assumptions used to determine net periodic benefit cost for the fiscal year
Discount rate	6.25	%	5.00	%	6.25	%	6.25	%	5.00	%	6.25	%
Expected long-term rate of return on plan assets	8.50	%	8.50	%	8.50	%	8.50	%	8.50	%	8.50	%
Long-term rate of compensation increase	3.64	%	3.64	%	3.50	%	N/A		N/A		N/A

The following table shows the expected health care rate increase and the future rate and time at which it is expected to remain constant.

	June 30,
	2007		2006
Assumed health care cost trend rate	10	%	10	%
Rate to which the cost trend rate is assumed to decline and remain (the ultimate trend rate)	5	%	5	%
Year that the rate reaches the ultimate trend rate	2013		2012

61

Notes to Consolidated Financial Statements (continued)

Assumed health care cost trend rates have an effect on the amounts reported for other postretirement benefits. A one percentage point increase in the assumed health care cost trend rate would increase service and interest cost by $0.6 million and increase the postretirement benefit obligation by $9.2 million. A one percentage point decrease in the assumed health care cost trend rate would decrease service and interest cost by $0.5 million and decrease the postretirement benefit obligation by $8.1 million.

Net pension expense (income) in fiscal 2008 is estimated to be $(2.8) million, comprised of $(3.6) million of net periodic benefit credit for pension plans and $0.8 million of net periodic benefit costs for other post-retirement benefit plans. Amounts in other comprehensive loss that are expected to be recognized as components of net periodic benefit cost (credit) in fiscal 2008 are:

(in millions)	Pension Plans		Other Postretirement Plans			Total
Amortization of prior service cost (credit)	$	1.1	$	(7.8	)	$	(6.7	)
Amortization of net actuarial loss		2.3		1.8			4.1
Amortization of accumulated other comprehensive loss	$	3.4	$	(6.0	)	$	(2.6	)

Plan Assets

Carpenter’s U.S. pension plans’ weighted-average asset allocations at June 30, 2007 and 2006, by asset category are as follows:

	June 30,
	2007		2006
Equity securities	63.4	%	60.2	%
Fixed income securities	36.6		39.7
Cash and cash equivalents	—		0.1
Total	100.0	%	100.0	%

Carpenter’s policy for developing a pension plan investment strategy includes the periodic development of an asset and liability study by an independent investment consultant. Management considers this study in establishing an asset allocation that is presented to and approved by the Pension Committee. Management determines an asset allocation that will provide the highest level of return for an acceptable level of risk. Accordingly, Carpenter invests in different asset classes including large-, mid- and small-cap growth and value funds, index and international equity funds, short-term and medium-term duration fixed-income funds and high yield funds. The plan’s current allocation policy is to have approximately 60 percent U.S. and international equities and 40 percent fixed income securities.

The Company may vary the actual asset mix based on the ratio of the plan assets and liabilities. The investment policy prohibits the use of derivative financial instruments that create or add leverage to an existing security position. Management reviews the asset allocation on a quarterly basis and makes revisions as deemed necessary.

62

Notes to Consolidated Financial Statements (continued)

Management establishes the expected long-term rate of return assumption by reviewing historical trends and analyzing the current and projected market conditions in relation to the plan’s asset allocation and risk management objectives. In determining the expected long-term rate of return, Carpenter considered historical returns for individual asset classes and the impact of active portfolio management.

The assets related to Carpenter’s other postretirement benefit plans were invested 100 percent in equity securities as of June 30, 2007 and 2006.

Cash Flows – Employer Contributions

Carpenter’s pension plan remains well funded as measured under ERISA rules, and the Company was not required to make a contribution to the plan during fiscal years 2007, 2006 or 2005. No contribution is anticipated for fiscal 2008. During the fourth quarter of fiscal 2005, the Company made a $25.0 million, voluntary contribution to a VEBA trust to fund future retiree medical expenses.

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid. Pension Benefits are currently paid from plan assets and Other Benefits are currently paid from corporate assets:

($ millions)	Pension Benefits		Other Benefits
2008	$	53.9	$	12.1
2009	$	56.0	$	12.1
2010	$	57.1	$	12.7
2011	$	58.3	$	13.4
2012	$	61.2	$	14.0
2013 – 2017	$	332.2	$	76.1

Other Benefit Plans

Carpenter also maintains defined contribution retirement and savings plans for substantially all domestic employees. Company contributions were $5.5 million in fiscal 2007, $4.8 million in fiscal 2006 and $4.8 million in fiscal 2005.

13. Contingencies and Commitments

Environmental

Carpenter is subject to various federal, state, local and international environmental laws and regulations relating to pollution, protection of public health and the environment, natural resource damages and occupational safety and health. Although compliance with these laws and regulations may affect the costs of Carpenter’s operations, compliance costs to date have not been material. Carpenter has environmental remediation liabilities at some of its owned operating facilities and has been designated as a potentially responsible party (“PRP”) with respect to certain third-party Superfund waste disposal sites and other third party owned sites. Additionally, Carpenter has been notified that it may be a PRP with respect to other Superfund sites as to which no proceedings have been instituted against Carpenter. Neither the exact

63

Notes to Consolidated Financial Statements (continued)

amount of remediation costs nor the final method of their allocation among all designated PRPs at these Superfund sites has been determined. The liability for future environmental remediation costs is evaluated by management on a quarterly basis. Carpenter accrues amounts for environmental remediation costs that represent management’s best estimate of the probable and reasonably estimable costs related to environmental remediation. During fiscal years 2007, 2006 and 2005, an additional $0.1 million, $0.3 million and $0.5 million, respectively, was accrued related to three environmental remediation sites. The liabilities recorded for environmental remediation costs at Superfund sites, at other third party-owned sites and at Carpenter-owned current or former operating facilities remaining at June 30, 2007, 2006 and 2005, were $5.5 million, $5.9 million and $6.1 million, respectively. The estimated range at June 30, 2007 of the reasonably possible future costs of remediation at Superfund sites, at other third party-owned sites and at Carpenter-owned current or former operating facilities is between $5.5 million and $9.9 million.

Estimates of the amount and timing of future costs of environmental remediation requirements are inherently imprecise because of the continuing evolution of environmental laws and regulatory requirements, the availability and application of technology, the identification of currently unknown remediation sites and the allocation of costs among the PRPs. Based upon information currently available, such future costs are not expected to have a material effect on Carpenter’s financial position, results of operations or cash flows. However, such costs could be material to Carpenter’s financial position, results of operations or cash flows in a particular future quarter or year.

Guarantees/Indemnification Obligations

In connection with the divestitures of several previously owned companies, Carpenter undertook certain indemnification obligations as part of the definitive agreements for sale of those businesses. The indemnification obligations relate to Carpenter’s covenants, representations and warranties under the sale agreements, potential liability for operations of the businesses prior to the sale and other similar matters. The indemnification obligations are subject to conditions and limitations that are normal in agreements of this type. Further, certain of the indemnification obligations may be limited or barred by a monetary cap or a time limitation. However, other indemnifications are not subject to a monetary cap, therefore, we are unable to estimate the maximum potential future liability under the indemnity provisions of these agreements. The obligation to provide indemnification will normally arise only after the indemnified party makes a claim subject to review by Carpenter and in compliance with applicable procedures with respect to the method and timeliness of notice. Recourse may be available in limited situations against third parties from which Carpenter purchased the businesses. As of June 30, 2007 and 2006, there was approximately $2.0 million recorded related to these indemnifications.

Other

Carpenter also is defending various claims and legal actions, and is subject to contingencies that are common to its operations, including those pertaining to product claims, commercial disputes, employment actions, employee benefits, personal injury claims and tax issues. The Company provides for costs relating to these matters when a loss is probable and the amount is reasonably estimable. The effect of the outcome of these matters on Carpenter’s future results of operations and liquidity cannot be predicted because any such effect depends on future results of operations and the amount and timing (both as to recording future charges to operations and cash expenditures) of the resolution of such matters. While it is not feasible to

64

Notes to Consolidated Financial Statements (continued)

determine the outcome of these matters, management believes that the total ultimate liability will not have a material effect on Carpenter’s financial position, results of operations or cash flows. However, such costs could be material to Carpenter’s financial position, results of operations or cash flows in a particular future quarter or year.

Carpenter has entered into purchase agreements primarily for various key raw materials and equipment at market related prices, all made in the normal course of business. The purchase commitments covered by these agreements aggregate approximately $451.1 million. Of this amount, $430.4 million relates to fiscal 2008 and $20.7 million to fiscal 2009.

14. Operating Leases

Carpenter leases certain facilities and equipment under operating leases. Total rent expense was $8.9 million (net of sub-lease rental receipts), $5.4 million (net of sub-lease rental receipts) and $7.7 million (net of sub-lease rental receipts) for the fiscal years ended June 30, 2007, 2006 and 2005, respectively.

Future minimum payments (net of sub-lease rental receipts) for noncancelable operating leases in effect at June 30, 2007 are: $8.3 million in fiscal 2008, $ 6.7 million in fiscal 2009, $2.6 million in fiscal 2010, $1.6 million in fiscal 2011, $1.0 million in fiscal 2012, and $1.4 million thereafter.

15. Share Repurchase Program

In September 2006, the Company’s Board of Directors authorized a share repurchase program. The program authorizes the repurchase up to $250.0 million of the Company’s outstanding common stock. During fiscal 2007, Carpenter repurchased 235,072 shares of its common stock on the open market for $28.9 million. As of June 30, 2007, approximately $221.1 million of the $250.0 million authorized remained available for future repurchases. According to the terms of the share repurchase program, repurchases will occur at such times and at such prices as the management of the Company determines and will be funded with the Company’s excess cash after giving consideration to capital investments, acquisitions and future cash flows. The timing or amount of the shares to be repurchased cannot be assured. The share repurchase program expires in September 2008.

16. Share-Based Compensation

Carpenter has two share-based compensation plans covering officers and key employees: a 1993 plan and a 1977 plan, and a share-based compensation plan covering non-employee directors. Awards granted under the share-based compensation plans are generally paid from shares held in treasury and any additional required share payments are made with newly issued shares. The total compensation cost that has been charged against income related to these share-based compensation plans was $10.7 million, $7.4 million, and $3.7 million for the years ended June 30, 2007, 2006 and 2005, respectively.

1993 Plan:

The 1993 plan provides that the Board of Directors may grant stock options, restricted stock, and restricted stock units, and determine the terms and conditions of each grant. The 1993 plan provides the Chief Executive Officer with limited authority to grant awards. In October 2006, the stockholders authorized a 2,300,000 share increase to the aggregate number of shares of the

65

Notes to Consolidated Financial Statements (continued)

Company’s common stock issuable under the 1993 plan. As of June 30, 2007, 2,455,143 shares were available for awards which may be granted under this plan.

1977 Plan:

The 1977 plan provides for the granting of stock options and stock appreciation rights. During fiscal 2005, the Board of Directors approved the cancellation of all authorized but unissued shares under this plan. Shares reserved for past grants will be cancelled if the underlying grants expire without being exercised.

Director’s Plan:

The Director’s plan provides for the granting of stock options, performance units and stock units to non-employee Directors. In October 2006, the stockholders authorized a 500,000 share increase to the aggregate number of shares of the Company’s common stock issuable under the Director’s plan. At June 30, 2007, 574,483 shares were reserved for awards which may be granted under this plan.

Stock Options (all plans):

Stock options granted under the plans above are granted with an exercise price equal to at least the fair market value of the Company’s common stock on the date of grant. The options are generally exercisable after one to three years of service and expire no longer than ten years from the grant date.

No options were issued in fiscal 2005 and 2006. The fair value of stock options awarded in fiscal 2007 were estimated on the date of each grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

	2007
Expected volatility	66	%
Dividend yield	1	%
Risk-free interest rate	4.8	%
Expected term (in years)	5.0

The assumptions are based on multiple factors, including historical exercise patterns of employees in relatively homogeneous groups with respect to exercise and post-vesting employment termination behaviors, expected future exercising patterns for these same homogeneous groups and the implied volatility of our stock price based on historical performance for the same expected term of the options granted. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of each grant.

66

Notes to Consolidated Financial Statements (continued)

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (In Millions)
Outstanding at June 30, 2004	2,577,553		$	29.53
Granted	—			—
Exercised	(1,774,261	)		30.57
Cancelled	(9,602	)		36.31
Outstanding at June 30, 2005	793,690			27.13
Granted	—			—
Exercised	(500,992	)		29.90
Cancelled	(7,000	)		22.02
Outstanding at June 30, 2006	285,698			22.40
Granted	34,250			118.58
Exercised	(192,958	)		21.97
Cancelled	(600	)		45.56
Outstanding at June 30, 2007	126,390		$	49.00	6.2 Years	$	10.3
Exercisable at June 30, 2007	92,140		$	23.13	4.9 Years	$	9.9

Outstanding and Exercisable Options:

Exercise Price Range	Number Outstanding at June 30, 2007	Weighted Average Remaining Contractual Term (in Years)	Weighted Average Exercise Price		Number Exercisable at June 30, 2007	Weighted Average Exercise Price
$10 - $30	77,250	5.4	$	20.12	77,250	$	20.12
$30 - $51	14,890	2.5		38.75	14,890		38.75
$107 -$129	34,250	9.7		118.58	—		—
	126,390		$	49.00	92,140	$	23.13

The weighted average grant date fair value of options awarded during fiscal 2007 was $66.34. No stock options were awarded in fiscal 2006 or 2005. Share based compensation charged against income related to stock options for the years ended June 30, 2007 and 2006 was $0.7 million and $0.2 million, respectively. As of June 30, 2007, $1.6 million of compensation cost related to non vested stock options remains to be recognized over a weighted average remaining life of 1.1 year.

Of the options outstanding at June 30, 2007, 68,190 relate to the 1993 plan, 1,200 relate to the 1977 plan and 57,000 relate to the Directors’ Plan.

Restricted Stock Awards (all plans):

Performance-based restricted share awards are earned only if Carpenter achieves certain performance goals during a specified performance period according to the terms determined by the Board at the date of the grant. These shares vest from one to two years from the date of the attainment of the specified performance goals. When performance-based restricted shares are

67

Notes to Consolidated Financial Statements (continued)

earned, compensation cost is determined and charged to expense beginning in the performance period through the vesting period. During fiscal years 2007, 2006 and 2005, 35,757 shares, 63,358 shares and 51,600 shares, respectively, were earned and, $5.3 million, $5.4 million and $3.0 million, respectively, was charged to expense related to performance-based restricted shares.

Time-based restricted share awards vest from the date of grant to periods ranging principally from three to five years. When time-based restricted shares are awarded, compensation cost is determined using the grant-date fair value and charged to expense over the vesting period. During fiscal years 2007, 2006 and 2005, 83,480, 15,950 and 49,000 shares, respectively, were granted. Amounts charged to expense for the vesting of time-based restricted shares were $4.2 million, $1.4 million and $0.3 million, respectively.

The following table represents nonvested restricted shares that were granted and outstanding as of June 30, 2007 and 2006:

	Number of Shares		Weighted- Average Grant Date Fair Value
Nonvested Balance at June 30, 2005	228,400		$	40.82
Time-based granted	15,950		$	96.04
Performance-based earned	63,358		$	115.50
Vested	(128,550	)	$	44.17
Forfeited	(7,425	)	$	47.97
Nonvested Balance at June 30, 2006	171,733		$	70.68
Time-based granted	83,480		$	110.21
Performance-based earned	35,757		$	111.51
Vested	(90,125	)	$	89.72
Forfeited	(23,858	)	$	64.54
Nonvested Balance at June 30, 2007	176,987		$	92.65

As of June 30, 2007, $9.6 million of compensation cost related to nonvested restricted stock awards remains to be recognized over a weighted average remaining life of 2.2 years.

Director Stock Units:

According to the provisions of the Director’s plan, on the date of each annual stockholders’ meeting, each Director shall be granted, in place of cash compensation, a number of stock units determined by dividing 50 percent of the Director’s annual retainer by the fair market value of the Company’s common stock on that date. Each Director may elect to increase the percentage up to 100 percent of the annual retainer to be paid in stock units in lieu of cash. Stock units granted at each annual meeting will be forfeited if the Director terminates service as a Director for any reason other then retirement, disability or death before the next annual stockholders’ meeting. Additional units are credited to each Director on a quarterly basis to reflect dividend equivalents on the Company’s common stock.

Following a Director’s retirement, the Director will be paid the number of the Company’s common stock shares equal to the number of stock units credited to the Director’s account.

68

Notes to Consolidated Financial Statements (continued)

The following table represents director stock units that were granted and outstanding as of June 30, 2007 and 2006:

	Number of Units		Weighted- Average Grant Date Fair Value
Outstanding at June 30, 2006	42,650		$	34.20
Granted	4,511		$	113.25
Dividend equivalents	293			—
Converted to common stock	(13,983	)	$	27.80
Outstanding at June 30, 2007	33,471		$	45.78

Compensation cost is determined using the grant-date fair value and charged to expense over the vesting period of one year and amounted to $0.5 million, $0.4 million and $0.4 million in the years ended June 30, 2007, 2006 and 2005, respectively. As of June 30, 2007, $0.1 million of compensation cost related to director stock units remains to be recognized over a weighted average remaining life of 0.2 years.

17. Employee Stock Ownership Plan

Carpenter had established a leveraged employee stock ownership plan (“ESOP”). Carpenter issued 461.5 shares of convertible preferred stock in fiscal 1992 at $65,000 per share to the ESOP in exchange for a $30.0 million, 15-year, 9.345 percent note, which was included in the stockholders’ equity section of the consolidated balance sheet as deferred compensation. The amount recorded related to the note as of June 30, 2006 was $1.5 million. As of January 2, 2007, in accordance with its terms, the note was repaid in full.

The ESOP satisfied principal and interest obligations on the note as Carpenter made contributions to the ESOP and dividends were paid on the preferred stock. As payments were made on the note, shares of preferred stock are allocated to participating employees’ accounts within the ESOP. Carpenter contributed $2.1 million in fiscal 2007, $2.3 million in fiscal 2006, and $2.2 million in fiscal 2005 to the ESOP. Compensation expense related to the plan was $0.3 million in fiscal 2007, $0.9 million in fiscal 2006 and $1.2 million in fiscal 2005.

As of June 30, 2006, the ESOP held 290.4 shares of the convertible preferred stock, consisting of 261.9 allocated shares and 28.5 unallocated shares. In January 2007, Carpenter spun off and merged part of the ESOP for active U.S. employees and terminated the ESOP with respect to non-active U.S. employees. All of the remaining 284.2 preferred shares held by the ESOP had been allocated to the participants and were converted into 568,360 common shares. The common shares representing the value of each active U.S. employee’s account in the ESOP were transferred to an account established in his or her name in the Company’s Savings Plan and the value of each non-active U.S. employee’s account was paid to the ESOP participant.

69

Notes to Consolidated Financial Statements (continued)

18. Income Taxes

Income before taxes were derived as follows:

(in millions)	2007		2006		2005
Domestic operations	$	294.2	$	276.4	$	163.4
International operations		36.8		32.7		26.6
	$	331.0	$	309.1	$	190.0

Carpenter’s provision (benefit) for income taxes consisted of the following:

(in millions)	2007			2006			2005
Current:
Federal	$	86.3		$	86.1		$	36.9
State		1.3			12.5			3.9
Foreign		10.6			9.7			6.0
Deferred:
Federal		7.8			(3.6	)		11.1
State		(1.9	)		(3.8	)		(5.5	)
Foreign		(0.3	)		(3.6	)		2.1
	$	103.8		$	97.3		$	54.5

The following is a reconciliation of the United States statutory federal income tax rate to the actual effective income tax rate:

(% of pre-tax income )	2007		2006		2005
Statutory federal income tax rate	35.0	%	35.0	%	35.0	%
Extraterritorial income exclusion	(0.2	)	(1.5	)	(1.3	)
IRS and state tax examinations settlements	(1.3	)	—		(2.2	)
State income taxes, net of federal tax benefit	2.2		2.7		0.2
Reversal of prior year tax valuation allowances	(1.1	)	(1.9	)	(1.0	)
Domestic manufacturing deduction	(0.8	)	(1.0	)	—
Nontaxable income	(1.4	)	(0.7	)	(0.9	)
Other, net	(1.0	)	(1.1	)	(1.1	)
Effective income tax rate	31.4	%	31.5	%	28.7	%

Deferred taxes are recorded based upon temporary differences between financial statement and tax bases of assets and liabilities. The following deferred tax liabilities and assets were recorded as of June 30, 2007 and 2006:

(in millions)	2007		2006
Deferred tax liabilities:
Depreciation	$	156.8	$	164.0
Prepaid pension cost		96.5		98.1
Intangible assets		9.0		8.7
Inventories		7.2		6.9
Other		0.7		1.5
Total deferred tax liabilities		270.2		279.2

70

Notes to Consolidated Financial Statements (continued)

(in millions)	2007			2006
Deferred tax assets:
Postretirement provisions		51.9			62.3
Net operating loss carryforwards		20.2			22.5
Other reserve provisions		21.0			23.6
Pensions		59.0			9.2
Tax credit carryforwards		2.0			3.9
Valuation allowances		(14.1	)		(17.6	)
Total deferred tax assets		140.0			103.9
Net deferred tax liability	$	130.2		$	175.3

As of June 30, 2007, the Company had federal net operating losses of $2.9 million, state net operating losses of $295 million, and foreign net operating losses of $2.8 million available to be carried forward to future years. The $20.2 million deferred tax asset in 2007 consists of $1.0 million federal net operating loss carryforwards, $18.4 million state net operating loss carryforwards, and $0.8 million foreign net operating loss carryforwards. The federal net operating losses begin to expire in 2021, the state net operating losses begin to expire in 2008, and there is no expiration date for the foreign net operating losses.

The tax credit carryforwards in 2007 consist of $2.0 million of Foreign Tax Credits, which will begin to expire in 2010.

A valuation allowance is required when it is more likely than not that all or a portion of a deferred tax asset will not be realized. The Company has recorded a valuation allowance against certain of its tax net operating loss carryforwards. In 2007, the valuation allowance was $14.1 million and in 2006 the valuation allowance was $17.6 million. Under Statement of Financial Accounting Standards No. 109 (“SFAS109”), valuation allowances should be reviewed each year and an assessment must be made as to the likelihood of recovery of those deferred taxes. Based on current year and forecasted taxable state income, we determined that it was appropriate to reverse a portion of this valuation allowance in fiscal years 2007 and 2006.

At June 30, 2007, we had undistributed earnings of international subsidiaries, amounting to $81.1 million on which deferred income taxes have not been provided because earnings are expected to be reinvested indefinitely outside of the U.S. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to U.S. income taxes including any adjustments for foreign tax credit, state income taxes, and withholding taxes payable to the various foreign countries.

Carpenter is routinely under audit by federal, state or local authorities in the areas of income taxes and the remittance of sales and use taxes. These audits include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal, state and local tax laws. The Company has settled all IRS examinations through June 30, 2002.

71

Notes to Consolidated Financial Statements (continued)

19. Other Income, Net

Other (income) expense, net consists of the following:

(in millions)	2007			2006			2005
Interest income	$	(22.0	)	$	(13.9	)	$	(5.6	)
Continued dumping and subsidy offset		(6.4	)		(4.7	)		(4.1	)
Foreign exchange (gain) loss		0.8			(1.5	)		1.4
Increase in equity in minority interests of unconsolidated subsidiaries		(1.2	)		(1.6	)		(0.9	)
Other		(1.2	)		—			0.4
	$	(30.0	)	$	(21.7	)	$	(8.8	)

20. Business Segments, Geographic and Product Data

Carpenter operates in two business segments, Specialty Metals and Engineered Products. Specialty Metals includes our Specialty Alloys, Dynamet and Carpenter Powder Products business operations. These operations have been aggregated into one reportable segment because of the similarities in products, processes, customers, distribution methods and economic characteristics.

Specialty Metals includes the manufacture and distribution of stainless steels, titanium, high temperature alloys, electronic alloys, tool steels and other alloys in billet, bar, wire, rod, strip and powder forms. Specialty Metals sales are distributed directly from Carpenter’s production plants and its distribution network and through independent distributors.

Engineered Products includes our business operations involved in the production and sale of structural ceramic products, ceramic cores for the casting industry and custom shaped bar.

In July 2007, we announced certain changes to our organization which management believes will allows us to better focus on the customer, end-use markets and to reach our operational excellence goals. The announcement included the key appointments of a Senior Vice President – Advanced Metals Operations and a Senior Vice President – Premium Alloys Operations. These changes will impact the Company’s financial reporting related to segment information. The Company is currently evaluating the impact of the changes and expects that the segment information reported during fiscal 2008 will reflect the organizational changes discussed above.

The accounting policies of both reportable segments are the same as those described in the Summary of Significant Accounting Policies.

The service cost component of Carpenter’s net pension expense, which represents the estimated cost of future pension liabilities earned associated with active employees, is included in the operating income of the business segments. The residual net pension expense, which is comprised of the expected return on plan assets, interest costs on the projected benefit obligations of the plans, and amortization of actuarial gains and losses and prior service costs, is included under the heading “Pension earnings, interest & deferrals”.

Corporate assets are primarily domestic cash and cash equivalents, marketable securities and prepaid pension cost.

72

Notes to Consolidated Financial Statements (continued)

On a consolidated basis, Carpenter’s sales were not materially dependent on a single customer or a small group of customers. Of the sales of our Engineered Products segment, approximately 27 percent ($28.0 million), 24 percent ($24.6 million) and 18 percent ($23.6 million) of segment sales were to one customer in fiscal 2007, 2006 and 2005, respectively.

Geographic Data

(in millions)	2007		2006		2005
Net Sales:(a)
United States	$	1,370.1	$	1,071.8	$	949.2
Europe		317.0		287.3		193.9
Asia Pacific		95.9		77.0		67.8
Mexico		76.1		64.8		61.9
Canada		43.8		39.6		21.9
Other		41.9		27.7		19.5
Consolidated net sales	$	1,944.8	$	1,568.2	$	1,314.2
Long-lived assets:
United States	$	733.8	$	854.3	$	888.6
Europe		18.5		17.9		16.9
Asia Pacific		13.2		11.8		11.2
Mexico		3.1		3.1		3.6
Canada		0.1		0.2		0.2
Other		1.3		1.3		1.3
Consolidated long-lived assets	$	770.0	$	888.6	$	921.8

^(a) Net sales were attributed to countries based on the location of the customer.

Product Data

(in millions)	2007		2006		2005
Special alloys	$	895.6	$	703.8	$	515.6
Stainless steels		696.8		528.1		531.9
Titanium products		187.7		176.3		112.5
Ceramics and other materials		104.1		102.2		98.7
Tool and other steels		60.6		57.8		55.5
Total net sales	$	1,944.8	$	1,568.2	$	1,314.2

73

Notes to Consolidated Financial Statements (continued)

Segment Data

(in millions)	2007			2006			2005
Net Sales:
Specialty Metals	$	1,840.9		$	1,467.1		$	1,188.3
Engineered Products		105.7			102.9			129.1
Intersegment		(1.8	)		(1.8	)		(3.2	)
Consolidated net sales	$	1,944.8		$	1,568.2		$	1,314.2
Operating Income:
Specialty Metals	$	323.0		$	311.8		$	183.9
Engineered Products		19.1			17.1			22.2
Gain on sale of business		—			—			8.7
Corporate costs		(33.1	)		(28.2	)		(25.2	)
Pension earnings, interest & deferrals		14.5			10.4			14.7
Intersegment		0.3			(0.4	)		(0.1	)
Consolidated operating income	$	323.8		$	310.7		$	204.2
Total Assets:
Specialty Metals	$	1,155.7		$	1,066.3		$	1,033.8
Engineered Products		70.2			66.5			70.7
Corporate assets		799.8			755.1			548.9
Consolidated total assets	$	2,025.7		$	1,887.9		$	1,653.4
Depreciation:
Specialty Metals	$	41.5		$	41.1		$	41.9
Engineered Products		4.0			3.9			4.5
Corporate		1.6			0.8			0.4
Consolidated depreciation	$	47.1		$	45.8		$	46.8
Amortization:
Specialty Metals	$	1.4		$	1.6		$	2.8
Engineered Products		0.2			0.2			0.2
Corporate		—			—			0.4
Consolidated amortization	$	1.6		$	1.8		$	3.4
Capital Expenditures, including software:
Specialty Metals	$	36.9		$	14.7		$	7.6
Engineered Products		2.8			2.5			2.8
Corporate		7.4			2.1			3.4
Consolidated capital expenditures, including software	$	47.1		$	19.3		$	13.8

21. Divestiture

During fiscal 2005, Carpenter sold Carpenter Special Products Corporation (“CSPC”), a business unit within the Engineered Products segment. The total sale price of $19.5 million exceeded the carrying value by approximately $8.7 million. Consideration received in the sale included net cash proceeds of $15.4 million, a $3.0 million long-term note receivable and a $1.1 million current receivable representing final working capital adjustments. The $3.0 million note was included within “Other assets” at June 30, 2006 and was collected in fiscal 2007. The $8.7 million gain on sale was included within “Gain on sale of business” on the consolidated statement of income and in the segment data.

74

Notes to Consolidated Financial Statements (continued)

Due to the immateriality of these operations compared to Carpenter’s overall operations, the divestiture of CSPC was not accounted for as discontinued operations in accordance with Statement of Financial Accounting Standards No. 144 “Accounting for Impairment or Disposal of Long-Lived Assets.”

22. Supplemental Data

The following are additional required disclosures and other material items:

(in millions)	2007			2006			2005
Cost Data:
Repairs and maintenance costs	$	61.6		$	52.2		$	48.2
Cash Flow Data:
Cash paid during the year for:
Interest payments	$	23.3		$	23.3		$	20.8
Income tax payments, net	$	99.8		$	78.1		$	18.6
Supplemental Disclosure of Non-Cash Investing and Financing Transactions:
Conversions of preferred shares to common shares	$	18.0			—			—
Accumulated Other Comprehensive Loss:
Foreign currency translation adjustment	$	(3.9	)	$	(11.0	)	$	(12.1	)
Minimum pension liability adjustment		(10.2	)		(4.0	)		(4.3	)
Effect of adoption of SFAS 158		(70.6	)		—			—
Net unrealized gains on derivatives		2.4			5.6			3.6
	$	(82.3	)	$	(9.4	)	$	(12.8	)

75

SUPPLEMENTARY DATA

Quarterly Financial Data (Unaudited)

Quarterly sales and earnings results are normally influenced by seasonal factors. Historically, the first two fiscal quarters (three months ending September 30 and December 31) are typically the lowest principally because of annual plant vacation and maintenance shutdowns by Carpenter and by many of its customers. However, the timing of major changes in the general economy or the markets for certain products can alter this pattern.

(dollars and shares in millions, except per share amounts)	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Results of Operations
Fiscal 2007
Net sales	$	404.5	$	441.3	$	538.4	$	560.6
Gross profits	$	103.9	$	97.1	$	127.9	$	128.8
Operating income	$	73.1	$	62.7	$	95.7	$	92.3
Net income	$	51.2	$	48.1	$	66.6	$	61.3
Fiscal 2006
Net sales	$	346.0	$	345.7	$	426.0	$	450.5
Gross profits	$	91.7	$	93.8	$	124.1	$	126.6
Operating income	$	63.7	$	63.9	$	92.3	$	90.9
Net income	$	40.1	$	42.9	$	60.8	$	68.0
Earnings per common share
Fiscal 2007
Basic earnings	$	1.99	$	1.87	$	2.59	$	2.34
Diluted earnings	$	1.94	$	1.82	$	2.53	$	2.33
Fiscal 2006
Basic earnings	$	1.59	$	1.69	$	2.39	$	2.66
Diluted earnings	$	1.54	$	1.65	$	2.32	$	2.58

76

	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
Weighted average common shares outstanding (in millions)
Fiscal 2007
Basic	25.5	25.6	25.7	26.2
Diluted	26.3	26.4	26.3	26.3
Fiscal 2006
Basic	25.0	25.2	25.3	25.4
Diluted	25.9	26.0	26.1	26.2

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable

Item 9A. Controls and Procedures

(a) Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in Rules 13a – 15(e) and 15d – 15(e) of the Securities Exchange Act of 1934 as of June 30, 2007. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of June 30, 2007 were effective to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

(b) Management’s Report on Internal Control over Financial Reporting

Management’s Report on the Company’s internal control over financial reporting is included in Item 8 of this Annual Report on Form 10-K under the caption “Management’s Report on Internal Control Over Financial Reporting” and is incorporated herein by reference. The Company’s independent registered public accounting firm has issued a report on management’s assessment of the Company’s internal control over financial reporting and is set forth in Item 8 of this Annual Report on Form 10-K under the caption “Report of Independent Registered Public Accounting Firm” and is incorporated herein by reference.

(c) Changes in Internal Controls over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting that occurred during the quarter ended June 30, 2007 that have materially affected, or are likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

Not applicable

77

PART III

Item 10. Directors and Executive Officers and Corporate Governance

Listed below are the names of our corporate executive officers, including those required to be listed as executive officers for Securities and Exchange Commission purposes, each of whom assumes office after the annual organization meeting of the Board of Directors which immediately follows the Annual Meeting of Stockholders. All of the corporate officers listed below have held responsible positions with the registrant for more than five years except for Anne L. Stevens, who joined Carpenter on October 18, 2006; K. Douglas Ralph, who joined Carpenter on July 9, 2007 and Richard L. Simons, who joined the Company on July 18, 2005.

Anne L. Stevens was elected Chairman, President and Chief Executive Officer effective November 1, 2006. Ms. Stevens most recently served as Executive Vice President of Ford Motor Company and Chief Operating Officer of Ford in the Americas, with responsibility for Ford’s North and South American product development, vehicle launch, manufacturing and material purchasing activities. Before joining Ford in 1990, Ms. Stevens held engineering, manufacturing and marketing positions for over ten years at Exxon Corporation. Ms. Stevens has been a member of the Board of Directors of Lockheed Martin since 2002.

K. Douglas Ralph was elected Senior Vice President and Chief Financial Officer effective July 9, 2007. Mr. Ralph most recently served as Executive Vice President and Chief Financial Officer at Foamex International, Inc. Foamex International, Inc. is a leading manufacturer of flexible polyurethane foam for bedding, furniture, automotive, carpet cushion, and other consumer and industrial applications in North America. At Foamex International, Inc., Mr. Ralph had responsibility for total financial operations, including accounting, treasury, investor relations and information technology of the $1.3 billion global company. Prior to joining Foamex International, Inc., Mr. Ralph spent 21 years as a financial executive for the Procter & Gamble Company.

Richard L. Simons was appointed Vice President and Corporate Controller effective July 18, 2005. In May of 2007, the Company named Mr. Simons Acting Chief Financial Officer pending the outcome of a search for a permanent Chief Financial Officer. Prior to joining Carpenter, Mr. Simons spent twenty-two years with Hardinge, Inc. of Elmira, New York. Hardinge is an independent, global, NASDAQ – traded manufacturer of machine tools. At Hardinge, Mr. Simons served as Executive Vice President & Chief Financial Officer.

Michael L. Shor was elected Senior Vice President – Engineered Products Operations, effective July 1, 2004. Prior to that, Mr. Shor held the following positions within our Specialty Alloys Operations: Senior Vice President – Specialty Alloys Operations from January 31, 2000 through June 20, 2004; Vice President – Manufacturing Operations from March 3, 1997 through January 30, 2000; General Manager – Global Marketing and Product Services from July 13, 1995 through March 2, 1997; and General Manager – Marketing from October 1, 1994 through July 12, 1995.

Mark S. Kamon was appointed Senior Vice President – Advanced Metals Operations, effective July 27, 2007. Mr. Kamon is responsible for Carpenter’s metal powder and bar, strip and wire and finishing operations. Prior to assuming his current position, Mr. Kamon was President of the Company’s Dynamet operations. Mr. Kamon joined Carpenter in November 2000 and has vast experience in carbon and specialty steel manufacturing, spending most of his career with Lukens Steel Company.

David A. Christiansen was elected Vice President, General Counsel and Secretary effective November 1, 2002. Prior to that, Mr. Christiansen held the following positions within Carpenter:

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associate general counsel and assistant secretary from April, 1996 through November 1, 2002; senior staff attorney and assistant secretary from April, 1993 through April, 1996.

Dr. Sunil Y. Widge was elected Senior Vice President and Chief Technology Officer effective April 25, 2007. Prior to that, Dr. Widge was the Vice President for Business Development and Chief Technology Officer for the Specialty Alloys Operations. Dr. Widge joined Carpenter in 1976 as an assistant metallurgist in the High Temperature Alloy operation and was promoted to positions of increasing responsibility in the years that followed, including Director of Research and Development, Vice President for Technology and Quality, and Vice President – Forged Bar Business Group and Technology.

Name	Age	Positions	Assumed Present Position
Anne L. Stevens	57	Chairman, President and Chief Executive Officer Director	November 2006
K. Douglas Ralph	46	Senior Vice President – Finance and Chief Financial Officer	July 2007
Richard L. Simons	51	Vice President and Corporate Controller	July 2005
Michael L. Shor	48	Senior Vice President – Premium Alloys Operations	July 2007
Mark S. Kamon	53	Senior Vice President – Advanced Metals Operations	July 2007
David A. Christiansen	52	Vice President - General Counsel & Secretary	November 2002
Sunil Y Widge	57	Senior Vice President – Chief Technology Officer	April 2007

The information required as to directors and the committees of the Board of Directors is incorporated herein by reference to the fiscal 2007 definitive Proxy Statement under the captions “Election of Directors” and “Corporate Governance.”

The information concerning Carpenter’s Code of Ethics and certain additional information relating to the Company’s Corporate Governance is incorporated herein by reference to the fiscal 2007 definitive Proxy Statement under the caption “Corporate Governance.”

The information concerning the Audit Committee and its financial experts is incorporated herein by reference to the fiscal 2007 definitive Proxy Statement under the caption “Audit/Finance Committee Report.”

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On November 7, 2006, we filed with the New York Stock Exchange (“NYSE”) the Annual CEO Certification regarding our compliance with the NYSE’s Corporate Governance listing standards as required by Section 303 A-12(a) of the NYSE Listed Company Manual. In addition, we have filed as exhibits to our annual report on Form 10-K for the fiscal year ended June 30, 2007, the applicable certifications of our Chief Executive Officer and our Chief Financial Officer required under Section 302 of the Sarbanes-Oxley Act of 2002, regarding the quality of Carpenter’s public disclosures.

Item 11. Executive Compensation

Certain information required by this item is incorporated herein by reference to the fiscal 2007 definitive Proxy Statement under the caption “Executive Compensation.”

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item is incorporated herein by reference to the fiscal 2007 definitive Proxy Statement under the captions “Security Ownership of Certain Beneficial Owners” and “Security Ownership of Management.”

Equity Compensation Plan Information

The following table shows the securities authorized for issuance under equity compensation plans as of June 30, 2007:

Equity Compensation Plan Information

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted- average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	126,390	$	49.00	3,029,626	(1)
Equity compensation plans not approved by security holders	—		—	—
Total	126,390	$	49.00	3,029,626	(1)

⁽¹⁾ Includes 2,455,143 shares available for issuance under the Stock-Based Incentive Compensation Plan for Officers and Key Employees (which provides for the issuance of stock options, restricted stock, and restricted stock units) and 574,483 shares available under the Stock-Based Compensation Plan for Non-Employee Directors (which provides for issuance of stock options, stock units and performance units.)

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Item 13. Certain Relationships, Related Transactions and Director Independence

The information required by this item is incorporated herein by reference to the fiscal 2007 definitive Proxy Statement under the captions “Corporate Governance” and “Executive Compensation.”

Item 14. Principal Accounting Fees and Services

The information required by this item is incorporated herein by reference to the fiscal 2007 definitive Proxy Statement under the caption “Approval of Appointment of Independent Registered Public Accounting Firm”.

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PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) Documents Filed as Part of this Report:

(1) The following consolidated financial statement schedule should be read in conjunction with the consolidated financial statements (see Item 8. “Financial Statements and Supplementary Data:”):

Schedule II – Valuation and Qualifying Accounts

All other schedules are omitted because they are not applicable or the required information is contained in the consolidated financial statements or notes thereto.

(2) The following documents are filed as exhibits:

  3. Articles of Incorporation and By-Laws

  4. Instruments Defining the Rights of Security Holders, Including Indentures

10. Material Contracts

12. Computation of Ratios of Earnings to Fixed Charges (unadited)

21. Subsidiaries of the Registrant

23. Consent of Experts and Counsel

24. Powers of Attorney

31. Rule 13a-14(a)/15d-14(a) Certifications

32. Section 1350 Certifications

99. Additional Exhibits

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CARPENTER TECHNOLOGY CORPORATION
	By	/s/ K. Douglas Ralph
		K. Douglas Ralph
		Senior Vice President – Finance and
		Chief Financial Officer
Date: August 29, 2007

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons on behalf of the registrant in the capacities and on the dates indicated.

/s/ Anne L Stevens	Chairman, President and Chief	August 29, 2007
Anne L. Stevens	Executive Officer and Director
	(Principal Executive Officer)
/s/ K. Douglas Ralph	Senior Vice President – Finance and	August 29, 2007
K. Douglas Ralph	Chief Financial Officer
	(Principal Financial Officer)
/s/ Richard L. Simons	Vice President and Corporate	August 29, 2007
Richard L. Simons	Controller (Principal Accounting Officer)
*	Director	August 29, 2007
Carl G. Anderson, Jr.
*	Director	August 29, 2007
Robert R. McMaster
*	Director	August 29, 2007
Martin Inglis
*	Director	August 29, 2007
Gregory A. Pratt
*	Director	August 29, 2007
Peter N. Stephans
*	Director	August 29, 2007
Kathryn C. Turner

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*	Director	August 29, 2007
Jeffrey Wadsworth
*	Director	August 29, 2007
Stephen M. Ward, Jr.
*	Director	August 29, 2007
Dr. Phillip M. Anderson

Original Powers of Attorney authorizing David A. Christiansen or K. Douglas Ralph to sign this Report on behalf of: Carl G. Anderson, Jr., Robert R. McMaster, Martin Inglis, Gregory A. Pratt, Peter N. Stephans , Kathryn C. Turner, Jeffrey Wadsworth, Stephen M. Ward, Jr. and Dr. Phillip M. Anderson are being filed with the Securities and Exchange Commission.

*By	/s/ David A. Christiansen
	David A. Christiansen
	Attorney-in-fact

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CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES

SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS

(in millions)

Column A	Column B		Column C				Column D			Column E
			Additions
Description	Balance at Beginning of Period		Charged to Costs & Expenses		Charged to Other Accounts		Deductions			Balance at End of Period
Year ended June 30, 2007
Allowance for doubtful accounts receivable	$	3.8	$	0.3	$	—	$	(0.1	)	$	4.0
Deferred tax valuation allowance	$	17.6	$	—	$	—	$	(3.5	)	$	14.1
Year ended June 30, 2006
Allowance for doubtful accounts receivable	$	4.8	$	0.2	$	—	$	(1.2	)	$	3.8
Deferred tax valuation allowance	$	23.5	$	—	$	0.4	$	(6.3	)	$	17.6
Year ended June 30, 2005
Allowance for doubtful accounts receivable	$	3.6	$	1.5	$	—	$	(0.3	)	$	4.8
Deferred tax valuation allowance	$	23.5	$	—	$	—	$	—		$	23.5

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EXHIBIT INDEX

Exhibit No.		Title	Page
3.		Articles of Incorporation and By-Laws
	(A)	Restated Certificate of Incorporation dated October 26, 1998 is incorporated herein by reference to Exhibit 3(A) of Carpenter’s 2005 Annual Report on Form 10-K filed on September 9, 2005.
	(B)	By-Laws, amended as of August 24, 2006 are incorporated herein by reference to Exhibit 3(B) of Carpenter’s 2006 Annual Report on Form 10-K filed August 29, 2006.
4.		Instruments Defining Rights of Security Holders, Including Indentures
	(A)	Restated Certificate of Incorporation and By-Laws set forth in Exhibit Nos. 3A and 3B, above.
	(B)	Carpenter’s Registration Statement No. 333-44757, as filed on Form S-3 on January 22, 1998, and amended on February 13, 1998, with respect to issuance of Common Stock and unsecured debt is incorporated herein by reference.
	(C)	Prospectus, dated February 13, 1998 and Prospectus Supplement, dated March 31, 1998, File No. 333-44757, with respect to issuance of $198,000,000 of Medium Term Notes are incorporated herein by reference.
	(D)	Indenture dated as of January 12, 1994, between Carpenter and U.S. Bank Trust National Association, formerly known as First Trust of New York, National Association, as successor Trustee to Morgan Guaranty Trust Company of New York, related to Carpenter’s i) $100,000,000 of unsecured medium term notes registered on Registration Statement No. 33-51613 and ii) $198,000,000 of unsecured medium term notes registered on Registration Statement No. 333-44757 is incorporated herein by reference to Exhibit 4(c) to Carpenter’s Registration Statement No. 33-51613, as filed on Form S-3 on January 6, 1994.
	(E)	Forms of Fixed Rate and Floating Rate Medium-Term Note, Series B are incorporated herein by reference to Exhibit 4(F) of Carpenter’s 2004 Annual Report on Form 10-K filed September 3, 2004.

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	(F)	Pricing Supplements No. 1 through 25 dated and filed from April 2, 1998 to June 11, 1998, supplements to Prospectus dated February 13, 1998 and Prospectus Supplement dated March 31, 1998, File No. 333-44757 with respect to issuance of $198,000,000 of Medium Term Notes are incorporated herein by reference.
	(G)	Carpenter’s Registration Statement No. 333-71518 as filed on Form S-4 on October 12, 2001, and amended on November 29, 2001, with respect to an offer to exchange $100,000,000 of Medium Term Notes is incorporated herein by reference.
	(H)	First Supplemental Indenture dated May 22, 2003, between Carpenter and U.S. Bank National Trust Association (formerly known as First Trust of New York, as successor Trustee to Morgan Guaranty Trust Company of New York) related to Carpenter’s issuance of $100,000,000 principal amount of its 6.625% Senior Notes due 2013 is incorporated herein by reference to Exhibit 4(I) of Carpenter’s 2003 Annual Report on Form 10-K filed September 12, 2003.
	(I)	Exchange and Registration Rights Agreement dated May 22, 2003, between Carpenter and Wachovia Securities as the initial purchaser of $100,000,000 principal amount of Carpenter’s 6.625% Senior Notes due 2013 is incorporated herein by reference to Exhibit 4(J) of Carpenter’s 2003 Annual Report on Form 10-K filed September 12, 2003.
	(J)	Form of Global Security with respect to the issuance by Carpenter and purchase by Wachovia Securities of $100,000,000 principal amount of Carpenter’s 6.625% Senior Notes due 2013 is incorporated herein by reference to Exhibit 4(K) of Carpenter’s 2003 Annual Report on Form 10-K filed September 12, 2003.
10.		Material Contracts
	(A)	Supplemental Retirement Plan for Executives of Carpenter Technology Corporation, restated as of August 20, 2007, is attached as an Exhibit to this Annual Report on Form 10-K.
	(B)	Management and Officers Capital Appreciation Plan, an Incentive Stock Option Plan, amended as of April 26, 2001, is incorporated herein by reference to Exhibit 10(B) of Carpenter’s 2006 Annual Report on Form 10-K filed August 29, 2006.
	(C)	Carpenter Technology Corporation Deferred Compensation Plan for Non-Management Directors, amended and restated as of January 1, 2005, is attached as an Exhibit to this Annual Report on Form 10-K.
	(D)	Deferred Compensation Plan for Officers and Key Employees of Carpenter Technology Corporation, amended and restated as of January 1, 2005, is attached as an Exhibit to this Annual Report on Form 10-K.

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(E)	Executive Bonus Compensation Plan, restated June 29, 2006 and further amended as of August 24, 2006 to be effective June 29, 2006 is incorporated herein by reference to Exhibit 10(A) of Carpenter’s Form 10-Q for the quarter ended September 30, 2006 filed November 3, 2006.
(F)	Carpenter Technology Corporation Stock-Based Incentive Compensation Plan For Non-Employee Directors, as amended through April 24, 2007, is attached as an Exhibit to this Annual Report on Form 10-K.
(G)	Officers and Key Employees Supplemental Retirement Plan of Carpenter Technology Corporation, restated as of August 20, 2007 is attached as an Exhibit to this Annual Report on Form 10-K.
(H)	Trust Agreement between Carpenter and the Chase Manhattan Bank, N.A., dated September 11, 1990 as restated on May 1, 1997 and amended December 31, 2002 and January 10, 2003, relating in part to the Supplemental Retirement Plan for Executive Officers, Deferred Compensation Plan for Corporate and Division Officers and the Officers’ Supplemental Retirement Plan of Carpenter Technology Corporation is incorporated by reference to Exhibit 10(I) of Carpenter’s 2004 Annual Report on Form 10-K filed September 3, 2004 and the amendments thereof are incorporated herein by reference to Exhibit 10 (I) of Carpenter’s 2005 Annual Report on Form 10-K filed September 9, 2005.
(I)	Form of Indemnification Agreement, entered into between Carpenter and each of the directors and the following executive officers: David A. Christiansen, T. Kathleen Hanley, Mark S. Kamon, Dennis M. Oates(left the Company as of July 25, 2007), K. Douglas Ralph, Michael L. Shor, Anne L. Stevens and Sunil Y. Widge is incorporated herein by reference to Exhibit 10 (J) of Carpenter’s 2005 Annual Report on Form 10-K filed September 9, 2005.
(J)	Stock-Based Incentive Compensation Plan for Officers and Key Employees, as amended and restated August 24, 2006 to be effective June 29, 2006, is incorporated herein by reference to Exhibit 10(C) of Carpenter’s Form 10-Q for the quarter ended September 30, 2006 filed November 3, 2006.
(K)	Amended and Restated Carpenter Technology Corporation Change of Control Severance Plan, adopted April 26, 2001 and amended as of August 20, 2007, is attached as an Exhibit to this Annual Report on Form 10-K.
(L)	Form of Amended and Restated Special Severance Agreement entered into between Carpenter and each of the following executive officers: David A. Christiansen, T. Kathleen Hanley, Mark S. Kamon, Dennis M. Oates(left the Company as of July 25, 2007), K. Douglas Ralph, Michael L. Shor, Anne L. Stevens and Sunil Y. Widge is attached as an Exhibit to this Annual Report on Form 10-K.

E-3

(M)	Earnings Adjustment Plan of Carpenter Technology Corporation, restated as of August 20, 2007 is attached as an Exhibit to this Annual Report on Form 10-K.
(N)	Benefit Equalization Plan of Carpenter Technology Corporation, restated as of August 20, 2007 is attached as an Exhibit to this Annual Report on Form 10-K.
(O)	Employment Agreement of Anne L. Stevens, dated November 1, 2006 is incorporated herein by reference to Carpenter’s Form 8-K filed November 3, 2006.
(P)	Second Amendment dated August 21, 2003, to Five-Year Revolving Credit Agreement dated November 20, 2001, among Carpenter and certain of its subsidiaries as Borrowers and Wachovia Bank, National Association (successor to First Union National Bank), JP Morgan and a number of other financial institutions as lenders is incorporated herein by reference to Exhibit 10(O) of Carpenter’s 2003 Annual Report on Form 10-K filed September 12, 2003.
(Q)	Trust Agreement between Carpenter and the Chase Manhattan Bank, N.A., dated December 7, 1990 as restated on May 1, 1997 and amended December 31, 2002 and January 10, 2003, relating in part to the Directors’ Retirement Plan and the Deferred Compensation Plan for Non-Management Directors, is incorporated by reference to Exhibit 10(O) of Carpenter’s 2004 Annual Report on Form 10-K filed September 3, 2004 and the amendments thereof are incorporated herein by reference to Exhibit 10 (O) of Carpenter’s 2005 Annual Report on Form 10-K filed September 9, 2005.
(R)	Five-Year Revolving Credit Agreement dated as of August 31, 2005 among Carpenter and certain of its subsidiaries as Borrowers and with Wachovia Bank, National Association, JPMorgan Chase Bank and PNC Bank as Lenders is incorporated herein by reference to Exhibit 10 (P) of Carpenter’s 2005 Annual Report on Form 10-K filed September 9, 2005.
(S)	Receivables Purchase Agreement and Purchase and Sale Agreement dated as of December 20, 2001 among CRS Funding Corp., Carpenter Technology Corporation, Market Street Funding Corporation and PNC Bank, National Association is attached as an Exhibit to this Annual Report on Form 10-K.
(T)	First Amendment dated November 2, 2004 to the Purchase and Sale Agreement dated as of December 20, 2001 between Carpenter Technology Corporation and CRS Funding Corp is incorporated herein by reference to Exhibit 10(R) of Carpenter’s Annual Report on Form 10-K filed September 9, 2005.

E-4

	(U)	Second, Third and Fourth Amendments to Receivables Purchase Agreement dated July 1, 2003, June 29, 2004 and November 2, 2004, respectively, among CRS Funding Corp., Carpenter Technology Corporation, Market Street Funding Corporation and PNC Bank, National Association are incorporated herein by reference to Exhibit 10 (S) of Carpenter’s Annual Report on Form 10-K filed September 9, 2005.
	(V)	Fifth and Sixth Amendments to Receivables Purchase Agreement dated December 15, 2006 and December 21, 2006, respectively, are attached as an Exhibit to this Annual Report on Form 10-K.
12.		Computations of Ratios of Earnings to Fixed Charges (unaudited)
21.		Subsidiaries of the Registrant
23.		Consent of Experts and Counsel Consent of Registered Public Accounting Firm
24.		Powers of Attorney Powers of Attorney in favor of K. Douglas Ralph or David A. Christiansen
31.		Rule 13a-14(a)/15d-14(a) Certifications A. Certification of Anne L. Stevens B. Certification of K. Douglas Ralph
32.		Section 1350 Certifications Certifications of Anne L. Stevens and K. Douglas Ralph
99.		Additional Exhibits Agreement to Furnish Debt Instruments

E-5

EX-10.A

Exhibit 10A

SUPPLEMENTAL RETIREMENT PLAN

FOR EXECUTIVES OF

CARPENTER TECHNOLOGY CORPORATION

Effective December 13, 1979

Restated August 20, 2007

1. Purpose

The purpose of this Plan is to attract, retain and motivate designated employees of Carpenter Technology Corporation (the “Company” or “Corporation”) who are Participants in the Plan by providing supplemental pension and death benefits to enhance their economic security during their active careers with the Corporation and in Retirement.

2. Definitions

(A) “Annual Base Formula Retirement Benefit” shall mean the annual benefit computed to measure total annual retirement income, as provided in Section 6.

(B) “Annual Supplemental Retirement Benefit” shall mean the annual benefit to be paid from the Plan, as provided in Section 7 hereof.

(C) “Average Annual Earnings” shall, after the adjustment of “earnings” as indicated below, mean “average monthly earnings” as both of these terms are used in the General Retirement Plan multiplied by 12 (in the event the Participant or Former Participant has insufficient service to calculate such average monthly earnings, such Participant’s average monthly compensation shall be determined by the Board in its discretion). Such average monthly earnings shall be recalculated with the following adjustments to the definition of earnings under the General Retirement Plan.

(1) Annual compensation under the General Retirement Plan will not be limited by the application of section 401(a)(17) of the Code and the regulations thereunder, as amended.

(2) Compensation deferred under the Deferred Compensation Plan for Officers and Key Employees of Carpenter Technology Corporation or any similar non-qualified plan or arrangement will count as earnings.

(3) The amount of any bonus payments for fiscal year 2002 under the Corporation’s Executive Bonus Compensation Plan (then titled the Executive Annual Compensation Plan or EACP) that were voluntarily waived will count as earnings.

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(4) The Fair Market Value as of the last day of fiscal year 2004 of any restricted shares of the Corporation’s Common Stock received in lieu of cash compensation under the Corporation’s Executive Bonus Compensation Plan (then titled the EACP) for fiscal year 2004 will count as earnings.

(D) “Board” shall mean the Board of Directors of Carpenter Technology Corporation.

(E) “Change in Control” shall mean and include each of the following:

(1) The acquisition by any person, entity, or group of persons (within the meaning of section 13(d)(3) or 14(d)(2) of the Exchange Act) (each, a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of either (i) 50% or more of the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) 30% or more of the total 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, the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, (ii) any acquisition by a person that is considered immediately prior to such acquisition or acquisitions to effectively control the Company within the meaning of Section 409A of the Code, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company or (iv) any acquisition by any corporation pursuant to a transaction that complies with Sections 2(E)(3)(i), 2(E)(3)(ii), and 2(E)(3)(iii);

(2) the date a majority of the individuals who constitute the Board of Directors (the “Incumbent Board”) cease for any reason, during any 12-month period, to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director during such 12-month period 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 of Directors;

(3) consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company or the

2

acquisition of the assets or stock of another entity (a “Business Combination”), in each case, unless, following such Business Combination, (i) 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 and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the surviving entity resulting from such Business Combination (including, without limitation, a surviving 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, (ii) no Person (excluding any surviving entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such surviving entity resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the surviving entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such surviving entity, except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the surviving 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

(4) approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

(F) “Code” means the Internal Revenue Code of 1986, as amended.

(G) “Disability” shall mean that a qualified physician designated by the Corporation has reviewed and approved the determination that prior to Separation from Service the employee:

(1) is unable to engage in any substantial gainful activity 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, or

(2) is, by reason of any medically determinable physical or mental impairment

3

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 Corporation.

(H) “Early Retirement Benefit” shall mean the annual benefit payable to a Participant under Section 7(B) hereof.

(I) “Former Participant” shall mean any person who was previously a Participant and was either (i) a Participant for at least three years or (ii) an employee of the Company for at least ten years.

(J) “General Retirement Plan” shall mean the Corporation’s “General Retirement Plan for Employees of Carpenter Technology Corporation” as in effect on the last date of a Participant’s employment with the Corporation as a participant under the General Retirement Plan.

(K) “Participant” shall mean any person included in the Plan, as provided in Section 3 and shall also mean a Former Participant except as otherwise provided in Section 6.

(L) “Plan” shall mean this Supplemental Retirement Plan for Executives of Carpenter Technology Corporation.

(M) “Retirement” shall mean the Participant’s Separation from Service on account of “retirement”, as that term is defined in the General Retirement Plan.

(N) “Separation from Service” shall mean a Participant’s termination of employment with the Company which entitles the Participant to benefits under the Plan.

(O) “Surviving Spouse” shall have the meaning ascribed to such term in Sections 3.13(f) or 4.5(a)(1), as applicable, of the General Retirement Plan.

3. Participants

Participants in the Plan will consist of such employees of the Corporation as the Board in its sole discretion may from time to time designate. An employee previously designated a Participant shall cease to be eligible to participate upon the occurrence of the following:

(A) Such Participant’s Separation from Service with the Corporation for any reason other than Retirement under conditions where benefits are payable under Section 7 (except that a Former Participant shall be eligible to receive any previously accrued benefit under this Plan);

4

(B) The Board’s determination, in its sole discretion, that such Participant is no longer eligible to participate in the Plan (except that a Former Participant shall be eligible to receive any previously accrued benefit under this Plan);

(C) Such Participant commences performing services for the Corporation solely as an independent contractor or consultant (except that such Participant shall continue to receive any previously accrued benefit under this Plan); or

(D) The Board’s determination that such Participant breached the non-competition covenant contained in the Supplemental Retirement Agreement described in Section 4(C) hereof (in which case no further payments will be made under the Plan).

4. Supplemental Retirement Agreement

Each Participant, as a condition precedent to becoming a Participant, will enter into an agreement with the Corporation, in a form supplied by and satisfactory to the Corporation, which will, inter alia,

(A) set forth any additional terms and conditions to benefits or participation not otherwise provided herein,

(B) permit the Corporation, in its sole discretion, to insure the Participant’s life under an individual life insurance policy in which the Corporation is the owner and beneficiary at no cost to the Participant, and

(C) contain a non-competition covenant.

5. Payment of Benefits

Each Participant who shall have a Separation from Service under the conditions set forth in Section 7 will receive a monthly Annual Supplemental Retirement Benefit paid from the general assets of the Corporation for a period of fifteen years commencing as provided herein. Notwithstanding the foregoing, upon a Change in Control, each Participant shall receive a lump sum payment of their benefits hereunder, as described in Section 5(C) below.

(A) Disability. Upon a Participant’s Disability, a Participant shall commence payment on or about the first of the month following Retirement subject to any age reduction applicable under Section 7(B).

(B) Death. In the event of the death of a Participant prior to the commencement of the

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Annual Supplemental Retirement Benefit under Section 7 or prior to the completion of payments commenced under Sections 5(A) or 5(D) hereof, a Participant’s Annual Supplemental Retirement Benefit shall be payable in the following order:

(1) To the last beneficiary effectively designated by such Participant in monthly installments for the remainder of the payment period provided in Section 5(A) or 5(D), as applicable, then

(2) To the Surviving Spouse of the Participant, if different, in monthly installments for the remainder of the payment period provided in Section 5(A) or 5(D), as applicable, and finally

(3) To the estate of the Participant or the estate of a payee provided in Sections 5(C)(i) or 5(C)(ii) above, as the Pension Board determines, in its sole discretion, in a lump sum. Any lump sum payment hereunder shall be calculated as the present value of the remaining payments, determined in accordance with the average rate of interest published by the Pension Benefit Guaranty Corporation for immediate annuities for the 36 months immediately preceding the date of such payment.

(C) Change in Control. Within 30 days following the occurrence of a Change in Control event, all Participants as of the date of this restatement (January 1, 2007) shall receive the actuarial present value of the benefits that would be payable under Section 7(A) hereof, calculated as if each such Participant had a Separation from Service as of the date of such Change in Control event, in a lump sum calculated as in Section 5(B)(3) above. Notwithstanding the foregoing, any such Participants not eligible for a Normal Retirement under Section 7(A) of this Plan as of the date of such Change in Control will receive a lump sum that is adjusted for Early Retirement as indicated in Section 7(B) of this Plan. In addition, unless otherwise determined by the Board of Directors, if a Participant is liable for the payment of any excise tax (the “Basic Excise Tax”) pursuant to Section 4999 of the Code, or any successor or like provision, as a result of any payment under this Section 5(C), the Company shall pay the Participant an amount (the “Special Reimbursement”) which, after payment to the Participant (or on the Participant’s behalf) of any federal, state and local taxes, including, without limitation, any further excise tax under said Section 4999, with respect to or resulting from the Special Reimbursement, equals the net amount of the Basic Excise Tax. The Special Reimbursement shall be paid as soon as practicable after it is determined by the Company or the Participant and reviewed for accuracy by the Company’s certified public accountants, but in no event later than the close of the calendar year next following the calendar year in which the taxes due under this Section 3.1.4 are remitted to the taxing authority.

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(D) Other Retirement.

(1) If the Participant has a Separation from Service with eligibility under Section 7(A), the initial installment shall be paid on or about the first of the month immediately following Retirement.

(2) If the Participant has a Separation from Service with eligibility under Section 7(B or C), the initial installment shall be paid on or about:

(a) the first of the month following Retirement for Participants who are (i) at least age 55 with 10 but less then 30 years of service, or (ii) at least age 60 with a vested benefit but less then 10 years of service, or

(b) for all other Participants, the first of the month following (i) attainment of age 55 for those with 10 but less then 30 years of service, or attainment of age 60 for those with a vested benefit but less then 10 years of service.

(3) Notwithstanding anything to the contrary in this Section 5(D), a Participant is a “Specified Employee,” as that term is defined in section 409A of the Code and the applicable regulations thereunder, payment of such Participant’s benefits shall commence no earlier than the first day of the 7th month following such Participant’s Retirement. In such event, such Participant’s first installment payment shall be increased by an amount equal to

(a) that number of monthly payments that would have otherwise been made to such Participant during the period between such Participant’s Retirement and the first installment payment provided by this Section 5(D) under the form of annuity in which such Participant’s are payable, plus

(b) a reasonable rate of interest on each of the monthly payments that would have otherwise been made to such Participant during the period between such Participant’s Retirement and the first installment payment provided by this Section 5(D).

(E) No benefit payable under this Plan shall be subject in any way to alienation, sale, transfer, assignment, pledge, attachment, garnishment, execution, or encumbrance of any kind, and any attempt to accomplish the same shall be void and of no effect.

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6. Annual Base Formula Retirement Benefit

The Annual Base Formula Retirement Benefit shall be calculated on either (i) the date of the applicable Participant’s Retirement, (ii) in the case of a Former Participant, upon such Former Participant’s termination of participation or (iii) the date of a Change in Control, and will be equal to:

(A) the Participant’s or Former Participant’s Average Annual Earnings,

(B) multiplied by a percentage which is:

(1) five percent for each year of service, or fraction thereof, with the Corporation up to a maximum of ten years, that an individual has been designated a Participant in this Plan, plus

(2) for each additional year in excess of the service credited in (1) above that the Participant accrues a benefit under paragraph 3.3 of the General Retirement Plan, 1.3 percent for each additional year of service during the first 20 years of Continuous Service (as defined in the General Retirement Plan) and 1.4 percent for each other additional year of service, or fraction thereof

provided, however, that the aggregate of the percentages of this Subparagraph 6(B) shall not exceed the sum of 60% plus one-quarter percent per year for each year, or fraction thereof, of Continuous Service exceeding 30 years,

(C) reduced by the sum of the following (such reduction to commence and be fixed as of the respective calculation dates hereinafter stated):

(1) the Participant’s accrued pension benefits calculated to be payable from any other defined benefit pension plans provided by the Corporation or its subsidiaries (including but not limited to the General Retirement Plan, the Benefit Equalization Plan, the Earnings Adjustment Plan, the Officers’ Supplemental Retirement Plan, or any replacement or successor pension plans) as of the respective date or dates of earliest entitlement (including the application of any early retirement factor) or, if later, the date of retirement under such pension plans, before any actuarial reduction for option election or conversion in Appendix I of the General Retirement Plan to a life annuity; provided, however, that any such reduction shall not include the portion of any other pension benefit resulting from the Participant’s express contribution or any Increased Benefit calculated under paragraph 3.6 of the General Retirement Plan, nor any benefits attributable to a defined contribution entitlement, and

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(2) the amount of the Primary Social Security Retirement Benefit calculated to be payable as of the date of earliest entitlement or, if later, the date of Retirement hereunder.

7. Annual Supplemental Retirement Benefits

(A) Normal Retirement

(1) A Participant shall receive upon Retirement a Normal Supplemental Retirement Benefit (as defined below) if the Participant has attained (a) age 62 or older with five or more years of service with the Corporation or its subsidiaries, or (b) thirty years of service with the Corporation or its subsidiaries.

(2) “Normal Supplemental Retirement Benefit” shall mean the Annual Base Formula Retirement Benefit, as set forth in Section 6.

(B) Early Retirement

(1) In the event of Retirement before attainment of eligibility for Normal Retirement or grant of a Mutual Consent Retirement, a Participant shall commence receiving his or her Early Retirement Benefit (as defined below) as indicated in Section 5(D) of this Plan.

(2) “Early Retirement Benefit” shall mean the Annual Base Formula Retirement Benefit, as set forth in Section 6(A) and 6(B), reduced to its equivalent actuarial value from age 62 to the date of initial payment to the Participant based on the early retirement factors in paragraph 3.3(c)(2) of the General Retirement Plan, and subsequently adjusted for any further reduction required under Section 6(C).

(C) Mutual Consent Retirement

(1) A Participant shall receive an actuarially adjusted monthly Plan benefit as of the commencement date indicated in Section 5(D) based upon the value of the Plan benefit that would have been paid at Retirement hereunder with ten or more years’ service with the Corporation or its subsidiaries, a “Mutual Consent Retirement,” if: (a) the Participant is entitled to retire with monthly payments under the General Retirement Plan in the month following a Separation from Service, and (b) both the Participant and the Corporation agree that retirement under this Plan would be mutually beneficial.

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(2) The amount of such benefit will be the Annual Base Formula Retirement Benefit, as set forth in Section 6.

(D) Notwithstanding anything to the contrary contained in this Plan, no Participant, Surviving Spouse or other beneficiary may become entitled to benefits under this Plan without the Participant or Former Participant first completing five consecutive years of service with the Corporation or its subsidiaries, unless otherwise provided in writing and expressly authorized by Board approval.

8. General Provision

(A) The exclusive power to interpret this Plan and the responsibility for carrying out its provisions are vested in the Human Resources Committee, including any successor committee, of the Board, in the same manner and scope as the Pension Board’s authority under paragraph 7.1 of the General Retirement Plan. Management of this Plan’s administration including the determination of initial claim applications is delegated to the Corporation’s vice-president responsible for benefit administration. Whenever such vice-president submits a claim application under this Plan, determination of eligibility will be made by the Corporation’s Chief Executive Officer.

(B) Except for substituting the adjudicators designated in Section 8(A) above, the claim procedures established under the General Retirement Plan shall be utilized herein.

(C) The benefits provided by this Plan will be paid from the general assets of the Corporation or otherwise as the Board may from time to time determine.

(D) The Board or, when so designated by the Board, the Human Resources Committee or such Committee’s designee reserves the right at any time to modify or amend in whole or in part any or all of the provisions of the Plan, subject to the provisions of the Supplemental Retirement Agreement between the Corporation and each Participant.

(E) The masculine pronoun shall mean the feminine pronoun wherever appropriate.

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EX-10.C

Exhibit 10C

CARPENTER TECHNOLOGY CORPORATION

DEFERRED COMPENSATION PLAN

FOR NON-MANAGEMENT DIRECTORS

As amended and restated, effective January 1, 2005

REVISED

This is the Carpenter Technology Corporation Deferred Compensation Plan for Non-Management Directors, effective January 1, 1995, established by Carpenter Technology Corporation and its subsidiaries expressly included herein to provide its non-employee directors with an additional method of planning for their retirement. The Plan is intended to be an unfunded plan maintained for the purpose of providing deferred compensation to the non-employee directors of Carpenter Technology Corporation.

The Plan has been amended and restated, effective January 1, 2005, to meet the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, to achieve deferral of taxation until deferred amounts are distributed in accordance with the terms of the Plan.

ARTICLE I—DEFINITIONS

The following words and phrases as used herein have the following meanings unless the context plainly requires a different meaning:

1.1 Account means the total amount credited to the bookkeeping accounts in which a Participant’s Deferral Credits are maintained, including earnings thereon. The Accounts will consist of Tranches for each type of Deferral made under Article IV, as the Plan Administrator deems necessary.

1.2 Beneficiary means the person that the Participant designates to receive any unpaid portion of the Participant’s Account should the Participant’s death occur before the Participant receives the entire balance to the credit of such Participant’s Account. If the Participant does not designate a beneficiary, his Beneficiary shall be his spouse if he is married at the time of his death, or his estate if he is unmarried at the time of his death.

1.3 Board of Directors means the board of directors of Carpenter Technology Corporation.

1.4 Change in Control means and includes each of the following:

1.4.1 The acquisition by any person, entity, or group of persons (within the meaning of section 13(d)(3) or 14(d)(2) of the Exchange Act) (each, a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of either (i) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) 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, the following

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acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company or (iv) any acquisition by any corporation pursuant to a transaction that complies with Sections 1.4.3 (i), 1.4.3 (ii) and 1.4.3(iii);

1.4.2 individuals who, as of the date hereof, constitute the Board of Directors (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors; 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 of Directors;

1.4.3 consummation of a reorganization, merger, consolidation or 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 (a “Business Combination”), in each case, unless, following such Business Combination, (i) 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 and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the surviving entity resulting from such Business Combination (including, without limitation, a surviving 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, (ii) no Person (excluding any surviving entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such surviving entity resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the surviving entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such surviving entity, except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the surviving 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 of Directors providing for such Business Combination; or

1.4.4 approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

1.5 Code means the Internal Revenue Code of 1986, as amended.

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1.6 Company means the Carpenter Technology Corporation or any successor by merger, purchase or otherwise.

1.7 Compensation means all cash amounts that a Director receives in payment for serving on the Board of Directors. Notwithstanding the preceding sentence, Compensation shall not include amounts either granted or elected as stock units under the Carpenter Technology Corporation Stock-Based Compensation Plan for Non-Employee Directors, or identified by the Company as expense allowances or reimbursements.

1.8 Credits means the amount credited to a Participant’s Account or Tranche, as appropriate, as a result of a Participant’s Deferrals plus earnings credited under Section 4.4.

1.9 Deferral means an amount deferred under the Plan pursuant to a Participant’s election under Article IV and credited to a Participant’s Account. No money or other assets will actually be contributed to such Accounts.

1.10 Director means an individual who serves on the Board of Directors or on the board of directors of any subsidiary that the Board of Directors of Carpenter Technology Corporation designates to participate in the Plan. A list of the subsidiaries currently designated to participate in the Plan is attached hereto as Appendix A.

1.11 Disability means a qualified physician designated by the Company has reviewed and approved the determination that a Participant:

1.11.1 is unable to engage in any substantial gainful activity 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, or

1.11.2 is, by reasons 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 Directors or employees of the Company or any subsidiary.

1.12 Effective Date means January 1, 1995.

1.13 Event means any one or combination of the following elected by the Participant in writing prior to the year of deferral to govern distribution of a Tranche: Change in Control, Disability, Termination or specific date or dates (such as attainment of a specified age). When a Participant elects a combination of events, the Participant must specify whether the event that is the “earlier of” or “later of” will control distribution. In the absence of a designation by the Participant, the “earlier of” will apply to a combination of events.

1.14 Five-Year Medium Term Note Borrowing Rate means the Company’s Five-Year Medium Term Note Borrowing Rate, as provided by one of the Company’s investment bankers for any such medium term note that would have been issued on November 15 (or the next business day thereafter if November 15 is not a business day) of each Plan Year.

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1.15 Participant means a Director who is eligible and elects to participate in the Plan pursuant to Article II.

1.16 Pension Board means the Pension Board appointed pursuant to the General Retirement Plan for Employees of Carpenter Technology Corporation, as constituted from time to time.

1.17 Plan means this Carpenter Technology Corporation Deferred Compensation Plan for Non-Management Directors, as may be amended from time to time.

1.18 Plan Administrator means the Pension Board.

1.19 Plan Year means the 12-month period beginning January 1 and ending December 31.

1.20 Termination means a Participant’s termination of service as a Director with the Company and, if applicable, the board of all participating subsidiaries listed in Appendix A.

1.21 Tranche means the Deferrals and associated investment results related to each separate election made by a Participant under Article IV.

1.22 Unforeseeable Emergency means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Code section 152(a)) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

ARTICLE II—PARTICIPATION

2.1 Eligibility to Participate. All Directors who are neither current nor past employees of the Company or any of its subsidiaries are eligible to participate in the Plan.

2.2 Participation. Any Director who elects to participate in the Plan shall become a Participant in the Plan immediately upon enrolling as a Participant by the method required by the Plan Administrator. An individual shall remain a Participant in the Plan until all amounts credited to the Participant’s Account have been distributed to the Participant or the Participant’s Beneficiary.

ARTICLE III—VESTING

Participants are always fully vested in all amounts credited to their Accounts.

ARTICLE IV—DEFERRAL CREDITS

4.1 Eligibility to Receive Deferral Credits. Subject to Section 5.4.2, a Participant may receive Deferral Credits in each Plan Year that the Participant is a Director and is not an employee of the Company.

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4.2 Deferrals. A Participant may elect to defer receipt of up to 100% of the Participant’s Compensation and to have the Company credit that amount to the Participant’s Account under the Plan.

4.3 Elections.

4.3.1 Frequency and Timing of Elections. Any elections made pursuant to this Section 4.3 may not be modified during the Plan Year to which such election applies, except that a Participant’s elections must cease to apply in the event such Participant receives a hardship distribution under the Savings Plan of Carpenter Technology Corporation or a distribution from this Plan due to an Unforeseeable Emergency. The Participant must make an election by December 15 of a Plan Year for it to take effect for the next Plan Year. Notwithstanding the foregoing, a newly appointed Director may file an initial election governing Deferrals during the first 30 days of eligibility to participate in the Plan.

4.3.2 Duration of Elections. Elections to receive Deferral Credits under this Article IV expire at the end of each Plan Year for which the election was made. Each such election shall constitute a separate Tranche.

4.3.3 Restriction on Elections. Elections to receive Deferral Credits may be in the form of a whole percentage or in $1 increments.

4.4 Earnings. All amounts credited to a Participant’s Account shall be credited with earnings at a rate equal to the Five-Year Medium Term Note Borrowing Rate, established as of November 15 (or the next business day thereafter if November 15 is not a business day) of the prior Plan Year. For the first Plan Year, the rate is 8.25%. The Pension Board shall communicate to all Directors the Five-Year Medium Term Note Borrowing Rate for the next Plan Year no later than November 30 of the current Plan Year. Earnings on Credits shall begin to accrue on the date that such Deferral would have been paid to the Participant but for an election to defer under this Article IV. Earnings shall be compounded semi-annually on each January 1 and July 1. In addition, any distribution not made on either January 1 or July 1 shall have earnings compounded as of the date of distribution.

ARTICLE V—DISTRIBUTIONS

5.1 Source of Distributions. All distributions shall, at the Company’sdiscretion, be made directly out of the Company’s general assets or from the Carpenter Technology Corporation Non-Qualified Benefits Trust for Directors, if available.

5.2 Form of Distributions. A Participant may receive distributions in one of the following manners, which the Participant shall elect on the initial enrollment form for each Tranche.

5.2.1 A lump sum distribution of the Participant’s entire Tranche;

5.2.2 Ten annual installments, with the distribution each year equal to the product resulting from multiplying the then current Tranche balance by a fraction. The numerator

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of the fraction is always one, and the denominator of the fraction is ten for the first distribution and is reduced by one for each subsequent distribution; or

5.2.3 Fifteen annual installments, with the distribution each year equal to the product resulting from multiplying the then current Tranche balance by a fraction. The numerator of the fraction is always one, and the denominator of the fraction is fifteen for the first distribution and is reduced by one for each subsequent distribution.

5.3 Timing of Distributions. Each Participant shall elect the timing of the distribution with respect to each of his or her Tranches in the manner authorized by the Plan Administrator. The Participant’s election(s) shall indicate that payment of each Tranche shall be made (in the case of a lump sum election) or shall commence (in the case of an installment election) as soon as administratively practicable following the Participant’s elected Event; provided, however, if the Participant is a key employee, as defined in Code section 416(i) without regard to paragraph (5) thereof, and the common stock of the Company is publicly traded on an established securities market, any distributions scheduled to be paid upon Termination shall not commence before the date which is 6 months following the date of Termination (or, if earlier, the death of the Participant or Event elected by the Participant other than Termination) and, if such distribution is the first in a series of installments, subsequent distributions shall be paid upon the anniversary of the Termination date.

Notwithstanding a Participant’s elections under Article IV, the balance of a Participant’s Account shall be paid as soon as practicable following the date of the Participant’s death.

5.4 Change in Form or Time of Distribution. A Participant may change his or her form and timing election applicable to the distribution of any Tranche under Sections 5.2 and 5.3, provided that such request for change is made (i) at least twelve (12) consecutive months prior to the date on which such distribution would otherwise have been made or commenced and (ii) the first payment with respect to such new election is deferred for a period of not less than 5 years beyond the date such distribution would otherwise have been made.

5.5 Distributions Due to Unforeseeable Emergency. Distributions hereunder may commence if the Plan Administrator determines, based on uniform, established standards, that the Participant has incurred an Unforeseeable Emergency. The amount distributed under this Section 5.5 shall not exceed the amount necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship). The Plan Administrator shall make such distribution from the Tranche(s) identified by the Participant. If the Participant fails to identify Tranches with sufficient Credits to satisfy the Unforeseeable Emergency, the Plan Administrator shall determine any additional Tranches required to complete the distribution.

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5.6 Termination of Service. Upon Termination, a Participant, or the Beneficiary if the Termination is caused by the Participant’s death, shall receive distribution of the Participant’s Account pursuant to the election(s) in place under Sections 5.2, 5.3 and 5.4.

ARTICLE VI—PLAN ADMINISTRATION

6.1 General. The Plan shall be administered by the Company subject to the oversight of the Plan Administrator. Employees (of the Company) and members (of the Committee or Pension Board), including any appointee or designee of such entity, 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 employee’s or member’s conduct of a similar situation.

The Committee, Company or Pension Board may appoint such agents, who need not be members (of the Committee or Pension Board) or employees (of the Company), 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 Committee, Company or Pension Board, as applicable, may deem expedient and appropriate.

6.2 Responsibilities and Reports. The Plan Administrator may pursuant to a written resolution allocate specific responsibilities under the Plan among one or more of its members, or such other persons it deems appropriate. The Plan Administrator shall be entitled to rely conclusively upon all tables, valuations, certificates, opinions and reports that are furnished by any actuary, accountant, controller, counsel, investment banker or other person who is employed or engaged for such purposes.

6.3 Governing Law. This Plan shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, to the extent not preempted by federal law.

ARTICLE VII—CLAIMS PROCEDURE

7.1 Plan Interpretation. The Human Resources Committee of the Board of Directors (including any designated sub-committee or successor committee performing similar duties, hereafter the “Committee”) shall have the authority and responsibility to interpret and construe the Plan and to decide all questions arising thereunder, including without limitation, questions of eligibility for participation, eligibility for Deferral Credits, the amount of Account balances, and the timing of the distribution thereof, and shall have the authority to deviate from the literal terms of the Plan to the extent it shall determine to be necessary or appropriate to operate the Plan in compliance with the provisions of applicable law. Notwithstanding the above, a member of the Human Resources Committee shall not take any part in decisions regarding his participation in the Plan. The decisions of the Committee upon all matters within the scope of its authority shall be final, binding and conclusive upon all parties.

7.2 Denial of Claim for Benefits. Any denial by the Committee of any claim for benefits under the Plan by a Participant or Beneficiary shall be stated in writing by the Committee and delivered or mailed to the Participant or Beneficiary. The Committee shall furnish the claimant with notice of the decision not later than 90 days after receipt of the claim,

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unless special circumstances require an extension of time for processing the claim. If such an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 90 day period. In no event shall such extension exceed a period of 90 days from the end of such initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the final decision. The notice of the Committee’s decision shall be written in a manner calculated to be understood by the claimant and shall include (i) the specific reasons for the denial, including, where appropriate, references to the Plan, (ii) any additional information necessary to perfect the claim with an explanation of why the information is necessary, and (iii) an explanation of the procedure for perfecting the claim.

7.3 Appeal of Denial. The claimant shall have 60 days after receipt of written notification of denial of his or her claim in which to file a written appeal with the Committee. As a part of any such appeal, the claimant may submit issues and comments in writing and shall, on request, be afforded an opportunity to review any documents pertinent to the perfection of his or her claim. The Committee shall render a written decision on the claimant’s appeal ordinarily within 60 days of receipt of notice thereof but, in no case, later than 120 days.

ARTICLE VIII—FUNDING

8.1 Funding. The Company shall not segregate or hold separately from its general assets any amounts credited to the Accounts, and shall be under no obligation whatsoever to fund in advance any amounts under the Plan, including all Credits and earnings thereon.

8.2 Insolvency. In the event that the Company becomes insolvent, all Participants and Beneficiaries shall be treated as general, unsecured creditors of the Company with respect to any amounts credited to the Accounts under the Plan.

ARTICLE IX—AMENDMENT AND TERMINATION

9.1 Reservation of Rights. The Company reserves the right to amend or terminate the Plan at any time by action of the Board of Directors. Notwithstanding the foregoing, no such amendment or termination shall reduce the balance of any Participant’s Account as of the date of such amendment or termination.

9.2 Funding upon Termination. Upon a complete termination of the Plan, the Company shall contribute to the Carpenter Technology Corporation Non-Qualified Benefits Trust for Directors an amount equal to the aggregate of all amounts credited to Participants’ Accounts as of the date of such termination. If the Carpenter Technology Corporation Non-Qualified Benefits Trust for Directors does not exist at the time the Plan is terminated, the Company shall create an irrevocable grantor trust to which it will contribute such amounts. This newly created trust shall be designed to ensure that Participants will not be subject to taxation on amounts contributed to and held under the trust on their behalf before the amounts are distributed.

9.3 Survival of Accounts and Elections. Notwithstanding any termination of the Plan, the trustee of the trust to which amounts are contributed under Section 9.2 shall maintain

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the Accounts for Participants in the same manner as under this Plan and all elections for distributions under Article V of the Plan shall survive the termination and remain in effect.

ARTICLE X—MISCELLANEOUS

10.1 Limited Purpose of Plan. The establishment or existence of the Plan shall not confer upon any individual the right to continue as a Director.

10.2 Non-alienation. No amounts payable under the Plan shall be subject in any manner to anticipation, assignment, or voluntary or involuntary alienation.

10.3 Facility of Payment. If the Plan Administrator, in its sole discretion, deems a Participant or Beneficiary who is eligible to receive any payment hereunder to be incompetent to receive the same by reason of age, illness or any infirmity or incapacity of any kind, the Plan Administrator may direct the Company to apply such payment directly for the benefit of such person, or to make payment to any person selected by the Plan Administrator to disburse the same for the benefit of the Participant or Beneficiary. Payments made pursuant to this Section 10.3 shall operate as a discharge, to the extent thereof, of all liabilities of the Company and the Plan Administrator to the person for whose benefit the payments are made.

To record the adoption of the Plan as amended and restated to be effective January 1, 2005, the Carpenter Technology Corporation has caused its authorized officers to affix its corporate name and seal this              day of                     , 2007.

[CORPORATE SEAL]		CARPENTER TECHNOLOGY CORPORATION
Attest:		By:
	Walter L. Pease		David A. Christiansen
	Assistant Secretary		Vice President, General Counsel & Secretary

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CARPENTER TECHNOLOGY CORPORATION

DEFERRED COMPENSATION PLAN FOR NON-MANAGEMENT DIRECTORS

APPENDIX A

PARTICIPATING SUBSIDIARIES

None

As of January 1, 2005

EX-10.D

Exhibit 10D

DEFERRED COMPENSATION PLAN FOR

OFFICERS AND KEY EMPLOYEES OF

CARPENTER TECHNOLOGY CORPORATION

As amended and restated, effective January 1, 2005

REVISED

This is the Deferred Compensation Plan for Officers and Key Employees of Carpenter Technology Corporation, effective January 1, 1995, established by Carpenter Technology Corporation and its subsidiaries expressly included herein to provide its senior executives with an additional method of planning for their retirement. The Plan is intended to be an “unfunded” plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended.

The Plan has been amended and restated, effective January 1, 2005, to meet the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, to achieve deferral of taxation until deferred amounts are distributed in accordance with the terms of the Plan.

ARTICLE I

DEFINITIONS

The following words and phrases as used herein have the following meanings unless the context plainly requires a different meaning:

1.1. Account means the total amount credited to the bookkeeping accounts in which a Participant’s Deferral Credits are maintained, including earnings thereon. The Accounts will consist of Tranches for each type of Deferral made under Article IV, as the Plan Administrator deems necessary.

1.2. Beneficiary means the person that the Participant designates to receive any unpaid portion of the Participant’s Account should the Participant’s death occur before the Participant receives the entire balance to the credit of such Participant’s Account. If the Participant does not designate a beneficiary, his Beneficiary shall be his spouse if he is married at the time of his death, or his estate if he is unmarried at the time of his death.

1.3. Board of Directors means the board of directors of Carpenter Technology Corporation or the Human Resources Committee thereof (including any duly appointed sub-committee or successor committee performing similar duties, hereafter the “Committee”), whenever said Board delegates responsibilities under this Plan to the Committee.

1.4. Bonus Compensation means any compensation plan designated by the Committee or, for Employees whose Salary is not determined by said Committee, the Company’s Chief Executive Officer as a bonus compensation plan eligible for Deferrals under Section 4.2.2 including, but not limited to, the Executive Bonus Compensation Plan, the Salaried Exempt Annual Compensation Plan and any successor plans.

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1.5. Change in Control means and includes each of the following:

1.5.1. The acquisition by any person, entity, or group of persons (within the meaning of section 13(d)(3) or 14(d)(2) of the Exchange Act) (each, a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of either (i) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) 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, the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company or (iv) any acquisition by any corporation pursuant to a transaction that complies with Sections 1.5.3 (i), 1.5.3 (ii) and 1.5.3 (iii);

1.5.2. individuals who, as of the date hereof, constitute the Board of Directors (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors; 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 of Directors;

1.5.3. consummation of a reorganization, merger, consolidation or 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 (a “Business Combination”), in each case, unless, following such Business Combination, (i) 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 and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the surviving entity resulting from such Business Combination (including, without limitation, a surviving 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, (ii) no Person (excluding any surviving entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such surviving entity resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the surviving entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such surviving entity, except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members

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of the board of directors of the surviving 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 of Directors providing for such Business Combination; or

1.5.4. approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

1.6. Code means the Internal Revenue Code of 1986, as amended.

1.7. Company means Carpenter Technology Corporation or any successor by merger, purchase or otherwise.

1.8. Credits means the amount credited to a Participant’s Account or Tranche, as appropriate, as a result of a Participant’s Deferrals plus investment returns credited under Section 4.6.

1.9. Deferral means an amount deferred under the Plan pursuant to a Participant’s election or an Employer Addition under Article IV, and credited to a Participant’s Account. No money or other assets will actually be contributed to such Accounts.

1.10. Disability means a qualified physician designated by the Company has reviewed and approved the determination that the Employee:

1.10.1. is unable to engage in any substantial gainful activity 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, or

1.10.2. is, by reasons 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 an Employer.

1.11. Effective Date means January 1, 1995.

1.12. Employee means an individual who is employed by an Employer.

1.13. Employer means the Company and any subsidiary that (1) the Board of Directors designates as an Employer and (2) the board of such subsidiary approves participation in the Plan. A list of the subsidiaries currently designated as Employers is attached hereto as Appendix A.

1.14. Employer Addition means Deferrals made on behalf of a Participant by an Employer.

1.15. Event means any one or combination of the following elected by the Participant in writing prior to the year of deferral to govern distribution of a Tranche: Change in Control, Disability, Termination or specific date or dates (such as attainment of a specified age).

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When a Participant elects a combination of events, the Participant must specify whether the event that is the “earlier of” or “later of” will control distribution. In the absence of a designation by the Participant, the “earlier of” will apply to a combination of events.

1.16. Executive Bonus Compensation Plan means the Carpenter Technology Corporation Executive Bonus Compensation Plan, as may be amended from time to time.

1.17. Investment Funds means the investment alternatives made available by the Plan Administrator from time to time under the Plan.

1.18. Participant means a Senior Executive who elects to participate or is otherwise granted participation in the Plan pursuant to Section 2.2.

1.19. Pension Board means the Pension Board appointed pursuant to the General Retirement Plan for Employees of Carpenter Technology Corporation, as constituted from time to time.

1.20. Plan means this Deferred Compensation Plan for Officers and Key Employees of Carpenter Technology Corporation, as may be amended from time to time.

1.21. Plan Administrator means the Pension Board.

1.22. Plan Year means the 12-month period beginning January 1 and ending December 31.

1.23. Salary means all amounts of cash compensation that are treated as wages for federal income tax withholding under section 3401(a) of the Code for the Plan Year (or would be except for payment by a foreign Company subsidiary) plus amounts that would be paid to the Employee during the year but for the Employee’s election under a cash or deferred arrangement described in section 401(k) of the Code or a cafeteria plan described in section 125 of the Code. Notwithstanding the preceding sentence, Salary shall not include Bonus Compensation or any compensation plan designated under Section 4.2.3;

1.23.1. severance payments under a written agreement with the Company or any subsidiary following an Employee’s Termination;

1.23.2. contributions by the Employer to this or any other plan or plans for the benefit of its employees, except as otherwise expressly provided in this Section 1.23; or

1.23.3. amounts identified by the Employer as expense allowances or reimbursements regardless of whether such amounts are treated as wages under the Code.

1.24. Senior Executive means an Employee who is classified as “exempt” under the Fair Labor Standards Act of 1938, as amended, and whose salary grade is at least 19, or its equivalent as determined by the management of Carpenter Technology Corporation, or any other Employee who the Board of Directors expressly designates as a Senior Executive.

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1.25 Termination means a Participant’s termination of employment with the Company.

1.26 Tranche means the Deferrals and associated investment results related to each separate election made by a Participant under Article IV.

1.27 Unforeseeable Emergency means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Code section 152(a)) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

1.28 Valuation Date means any day on which the New York Stock Exchange or any successor to its business is open for trading.

ARTICLE II

PARTICIPATION

2.1 Eligibility to Participate. All Senior Executives are eligible to participate in the Plan.

2.2 Participation. Any Senior Executive who elects to participate in the Plan shall become a Participant in the Plan immediately upon enrolling as a Participant by the method required by the Plan Administrator. Any Senior Executive receiving Employer Additions shall become a Participant on the date of the initial Employer Addition, if the Participant has not enrolled under the preceding sentence. An individual shall remain a Participant in the Plan until all amounts credited to the Participant’s Account have been distributed to the Participant or the Participant’s Beneficiary.

ARTICLE III

VESTING

Participants are always fully vested in all amounts credited to their Accounts.

ARTICLE IV

DEFERRAL CREDITS

4.1 Eligibility to Receive Deferral Credits. A Participant may receive Deferral Credits in each Plan Year that the Participant is a Senior Executive.

4.2 Participant Deferrals.

4.2.1. Salary Deferrals. A Participant may elect to defer receipt of up to 35% of the Participant’s Salary and to have the Employer credit that amount to the Participant’s Account under the Plan.

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4.2.2. Bonus Compensation Deferrals. A Participant may elect to defer receipt of up to 100% of the amounts the Participant is eligible to receive under any Bonus Compensation plan and to have the Employer credit that amount to the Participant’s Account under the Plan.

4.2.3 Other Cash Deferrals. A Participant may elect to defer receipt of up to 100% of the amount the Participant is eligible to receive under any cash compensation plan that the Board of Directors or, for Employees whose Salary is not determined by said Board, the Company’s Chief Executive Officer designates a compensation plan for purposes of this Section 4.2.3, and to have the Employer credit of that amount to the Participant’s Account under the Plan.

4.3 Employer Additions. The Participant’s Employer will contribute to a separate Tranche on behalf of a Senior Executive whose Company Basic Contributions (as defined in the Savings Plan of Carpenter Technology Corporation (“Savings Plan”)) are limited by Code section 401(a)(17). The amount of the Employer Addition will equal the amount that would have been contributed to the Savings Plan as Company Basic Contributions except for such limitation.

4.4 Elections.

4.4.1. Frequency and Timing of Elections. Any elections made pursuant to this Section 4.4 may not be modified during the Plan Year to which such election applies, except that a Participant’s elections must cease to apply in the event such Participant receives a hardship distribution under the Savings Plan or a distribution from this Plan due to an Unforeseeable Emergency. For Salary Deferrals, Other Cash Deferrals and Employer Additions, described in Sections 4.2.1, 4.2.3, and 4.3 respectively, the Participant must make an election by December 15 of a Plan Year for it to take effect for the next Plan Year. Notwithstanding the foregoing, a new Participant may file an initial election governing Salary Deferrals and Employer Additions during the first 30 days of participation in this Plan. For Bonus Compensation Deferrals described in Section 4.2.2 and any Other Cash Deferrals described in Section 4.2.3 that are constructed as bonus compensation, the Participant must make an election by the earlier of:

4.4.1.1. December 15 of the final fiscal year of the performance period applicable to such Bonus Compensation; or

4.4.1.2. six months prior to any date within the performance period upon which the outcome of any performance goals or measures will determine all or a portion of the Bonus Compensation to be paid to the Participant.

For example, to defer an award paid after the end of the two-year July 1, 2006 to June 30, 2008 performance period, during which the Participant’s bonus, although not paid until the end of the performance period, is calculated separately for each year, the Participant must make an election by the earlier of December 15, 2007 (4.4.1.1 above) or December 31, 2006 (4.4.1.2 above).

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4.4.2. Duration of Elections. Elections to defer amounts under this Article IV expire at the end of the Plan Year, fiscal year or performance period for which the election was made. Each such election shall constitute a separate Tranche.

4.4.3. Restriction on Elections. Elections to defer amounts may be in the form of a whole percentage or in $1 increments.

4.5 Investment Funds. The Plan Administrator shall establish multiple Investment Funds which shall be maintained for the purpose of determining the investment return to be credited to each Participant’s Account. The Plan Administrator may change the number, identity or composition of the Investment Funds from time to time. Each Participant shall indicate the Investment Funds based on which Deferrals under Sections 4.2 and 4.3 are to be adjusted.

4.6 Investment Returns. Each Participant’s Account shall be increased or decreased by the net amount of investment earnings or losses that it would have achieved had it actually been invested in the deemed investments. The Company is not required to purchase or hold any of the deemed investments. Investment Fund elections must be made in a minimum of 1% increments and in such a manner as the Plan Administrator shall specify. A Participant may change his or her Investment Fund election as soon as administratively practicable following the date the Plan Administrator receives notice of such change in the form prescribed by the Plan Administrator.

No less frequently than as of each Valuation Date, each Participant’s Account shall be increased or decreased to reflect investment results. Each Participant’s Account shall be adjusted by the investment return of the Investment Funds in which the Participant’s elected to be deemed to participate. The investment return adjustment is intended to reflect the actual performance of the Investment Fund net of any applicable investment management fees or administrative expenses determined by the Plan Administrator. Notwithstanding the above, the amount of any payment of Plan benefits pursuant to Article V shall be determined as of the Valuation Date preceding the date of payment.

ARTICLE V

DISTRIBUTIONS

5.1 Source of Distributions. All distributions shall, at the Employer’s discretion, be made directly out of the Employer’s general assets or from the Carpenter Technology Corporation Non-Qualified Employee Benefits Trust, if available.

5.2 Form of Distributions. A Participant may receive distributions in one of the following manners, which the Participant shall elect on the initial enrollment forms for each Tranche. A Participant may elect to receive distributions from each Tranche in different manners and at different times.

5.2.1. A lump sum distribution of the Participant’s entire Tranche;

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5.2.2. Ten annual installments, with the distribution each year equal to the product resulting from multiplying the then current Tranche balance by a fraction. The numerator of the fraction is always one, and the denominator of the fraction is ten for the first distribution and is reduced by one for each subsequent distribution; or

5.2.3. Fifteen annual installments, with the distribution each year equal to the product resulting from multiplying the then current Tranche balance by a fraction. The numerator of the fraction is always one, and the denominator of the fraction is fifteen for the first distribution and is reduced by one for each subsequent distribution.

5.3 Timing of Distributions. Each Participant shall elect the timing of the distribution with respect to each of his or her Tranches in the manner authorized by the Plan Administrator. The Participant’s election(s) shall indicate that payment of each Tranche shall be made (in the case of a lump sum election) or shall commence (in the case of an installment election) as soon as administratively practicable following the Participant’s elected Event; provided, however, if the Participant is a key employee, as defined in Code section 416(i) without regard to paragraph (5) thereof, and the common stock of the Company is publicly traded on an established securities market, any distributions scheduled to be paid upon Termination shall not commence before the date which is 6 months following the date of Termination (or, if earlier, the death of the Participant) and, if such distribution is the first in a series of installments, subsequent distributions shall be paid upon the anniversary of the Termination date.

Notwithstanding the foregoing, a Participant’s elections under Article IV, the balance of a Participant’s Account shall be paid as soon as practicable following the date of the Participant’s death.

5.4 Default Form and Timing Election. If the Participant has not affirmatively made a form or timing of distribution election pursuant to Sections 5.2 and/or 5.3 above, the Participant will be deemed to have made elections as indicated in Sections 5.2.1 and 5.3 based upon Termination.

5.5 Change in Form or Time of Distribution. A Participant may change his or her form and timing election applicable to the distribution of any Tranche under Sections 5.2 and 5.3 (or a deemed election under Section 5.4), provided that such request for change is made (i) at least twelve (12) consecutive months prior to the date on which such distribution would otherwise have been made or commenced and (ii) the first payment with respect to such new election is deferred for a period of not less than 5 years beyond the date such distribution would otherwise have been made.

5.6 Distributions Due to Unforeseeable Emergency. Distributions hereunder may commence if the Plan Administrator determines, based on uniform, established standards, that the Participant has incurred an Unforeseeable Emergency. The amount distributed under this Section 5.6 shall not exceed the amount necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent

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the liquidation of such assets would not itself cause severe financial hardship). The Plan Administrator shall determine the Investment Fund or Funds under Section 4.5 and the Participant shall identify the Tranche(s) from which such distribution shall be made. If the Participant fails to identify Tranches with sufficient credits to satisfy the Unforeseeable Emergency, the Plan Administrator shall determine any additional Tranches required to complete the distribution.

5.7 Termination of Employment. Upon Termination, a Participant, or the Beneficiary if the Termination is caused by the Participant’s death, shall receive distribution of the Participant’s Account pursuant to the election(s) in place under Sections 5.2, 5.3, 5.4 and 5.5.

ARTICLE VI

PLAN ADMINISTRATION

6.1 General. The Plan shall be administered by the Company subject to the oversight of the Plan Administrator. Employees (of the Company) and members (of the Committee or Pension Board), including any appointee or designee of such entity, 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 employee’s or member’s conduct of a similar situation.

The Committee, Company or Pension Board may appoint such agents, who need not be members (of the Committee or Pension Board) or employees (of the Company), 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 Committee, Company or Pension Board, as applicable, may deem expedient and appropriate.

6.2 Responsibilities and Reports. The Plan Administrator may, pursuant to a written resolution, allocate specific responsibilities under the Plan among one or more of its members, or such other persons it deems appropriate. The Plan Administrator shall be entitled to rely conclusively upon all tables, valuations, certificates, opinions and reports that are furnished by any actuary, accountant, controller, counsel, investment banker or other person who is employed or engaged for such purposes.

6.3 Governing Law. This Plan shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, to the extent not preempted by federal law.

ARTICLE VII

CLAIMS PROCEDURE

7.1 Plan Interpretation. The Committee shall have the authority and responsibility to interpret and construe the Plan and to decide all questions arising thereunder, including, without limitation, questions of eligibility for participation, eligibility for Deferral Credits, the amount of Account balances, and the timing of the distribution thereof, and shall have the authority to deviate from the literal terms of the Plan to the extent it shall determine to be necessary or appropriate to operate the Plan in compliance with the provisions of applicable

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law. Notwithstanding the above, a member of the Human Resources Committee shall not take any part in decisions regarding his participation in the Plan. The decisions of the Committee upon all matters within the scope of its authority shall be final, binding and conclusive upon all parties.

7.2 Denial of Claim for Benefits. Any denial by the Committee of any claim for benefits under the Plan by a Participant or Beneficiary shall be stated in writing by the Committee and delivered or mailed to the Participant or Beneficiary. The Committee shall furnish the claimant with notice of the decision not later than 90 days after receipt of the claim, unless special circumstances require an extension of time for processing the claim. If such an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 90-day period. In no event shall such extension exceed a period of 90 days from the end of such initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the final decision. The notice of the Committee’s decision shall be written in a manner calculated to be understood by the claimant and shall include (i) the specific reasons for the denial, including, where appropriate, references to the Plan, (ii) any additional information necessary to perfect the claim with an explanation of why the information is necessary, and (iii) an explanation of the procedure for perfecting the claim.

7.3 Appeal of Denial. The claimant shall have 60 days after receipt of written notification of denial of his or her claim in which to file a written appeal with the Committee. As a part of any such appeal, the claimant may submit issues and comments in writing and shall, on request, be afforded an opportunity to review any documents pertinent to the perfection of his or her claim. The Committee shall render a written decision on the claimant’s appeal ordinarily within 60 days of receipt of notice thereof but, in no case, later than 120 days.

ARTICLE VIII

FUNDING

8.1 Funding. The Employer shall not segregate or hold separately from its general assets any amounts credited to the Accounts, and shall be under no obligation whatsoever to fund in advance any amounts under the Plan, including all Credits and earnings thereon.

8.2 Insolvency. In the event that the Employer becomes insolvent, all Participants and Beneficiaries shall be treated as general, unsecured creditors of the Employer with respect to any amounts credited to the Accounts under the Plan.

ARTICLE IX

AMENDMENT AND TERMINATION

9.1 Reservation of Rights. The Employer reserves the right to amend or terminate the Plan at any time by action of the Board of Directors. Notwithstanding the foregoing, no such amendment or termination shall reduce the balance of any Participant’s Account as of the date of such amendment or termination.

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9.2 Funding upon Termination. Upon a complete termination of the Plan, the Employer shall contribute to the Carpenter Technology Corporation Non-Qualified Employee Benefits Trust an amount equal to the aggregate of all amounts credited to Participants’ Accounts as of the date of such termination. If the Carpenter Technology Corporation Non-Qualified Employee Benefits Trust does not exist at the time the Plan is terminated, the Employer shall create an irrevocable grantor trust to which it will contribute such amounts. This newly created trust shall be designed to ensure that Participants will not be subject to taxation on amounts contributed to and held under the trust on their behalf before the amounts are distributed.

9.3 Survival of Accounts and Elections. Notwithstanding any termination of the Plan, the trustee of the trust to which amounts are contributed under Section 9.2 shall maintain the Accounts for Participants in the same manner as under this Plan and all elections for distributions under Article V of the Plan shall survive the termination and remain in effect.

ARTICLE X

MISCELLANEOUS

10.1 Limited Purpose of Plan. The establishment or existence of the Plan shall not confer upon any individual the right to continue as an Employee. The Employer expressly reserves the right to discharge any Employee whenever in its judgment its best interests so require.

10.2 Non-alienation. No amounts payable under the Plan shall be subject in any manner to anticipation, assignment, or voluntary or involuntary alienation.

10.3 Facility of Payment. If the Plan Administrator, in its sole discretion, deems a Participant or Beneficiary who is eligible to receive any payment hereunder to be incompetent to receive the same by reason of age, illness or any infirmity or incapacity of any kind, the Plan Administrator may direct the Employer to apply such payment directly for the benefit of such person, or to make payment to any person selected by the Plan Administrator to disburse the same for the benefit of the Participant or Beneficiary. Payments made pursuant to this Section 10.3 shall operate as a discharge, to the extent thereof, of all liabilities of all Employers and the Plan Administrator to the person for whose benefit the payments are made.

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To record the adoption of the Plan as amended and restated effective January 1, 2005, the Carpenter Technology Corporation has caused its authorized officers to affix its corporate name and seal this              day of                     , 2007.

[CORPORATE SEAL]		CARPENTER TECHNOLOGY CORPORATION
Attest:		By:
	Walter L. Pease		T. Kathleen Hanley
	Secretary		Sr. Vice-President, Org. Effect,
			Strategy & Corporate Staffs

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DEFERRED COMPENSATION PLAN FOR

OFFICERS AND KEY EMPLOYEES OF

CARPENTER TECHNOLOGY CORPORATION

APPENDIX A

PARTICIPATING SUBSIDIARIES

[NONE]

As of January 1, 2005

EX-10.F

Exhibit 10F

CARPENTER TECHNOLOGY CORPORATION

STOCK-BASED COMPENSATION PLAN FOR

NON-EMPLOYEE DIRECTORS

Effective August 9, 1990

Restated as of October 20, 1997

As amended through April 24, 2007

1. Purpose:

The purposes of the Plan are to attract and retain the services of experienced and knowledgeable non-employee directors, to encourage Eligible Directors of Carpenter Technology Corporation (the “Company”) to acquire a proprietary and vested interest in the growth and performance of the Company, and to generate an increased incentive for Eligible Directors to contribute to the Company’s future success and prosperity, thus enhancing the value of the Company for the benefit of its stockholders.

This Plan is an amendment and restatement of the Carpenter Technology Corporation Non-Qualified Stock Option Plan for Non-Employee Directors as adopted effective August 9, 1990, restated October 20, 1997 and last amended June 29, 2006. The rights of any Eligible Director whose service as an Eligible Director ended on or before April 24, 2007 shall be governed by the terms of the Plan as in effect when that Eligible Director’s Award was granted.

2. Definitions:

As used in the Plan, the following terms shall have the meanings set forth below:

a) “Annual Retainer” shall mean base compensation for services as an Eligible Director. Annual Retainer shall not include meeting fees, committee service fees, if any, expense allowances or reimbursements or any other additional compensation for services as an Eligible Director.

b) “Award” shall mean the Options, Performance Units and Stock Units granted under the Plan.

c) “Award Agreement” shall mean the written agreement, instrument or document evidencing an Award.

d) “Beneficiary” shall mean the person who the Eligible Director designates to receive any unpaid portion of the Eligible Director’s account should the Eligible Director’s death occur before the Eligible Director receives the entire balance to the credit of such Eligible Director’s account. If the Eligible Director does not designate a Beneficiary, the Beneficiary shall be the person’s spouse if the person is married at the time of death, or the Eligible Director’s estate if unmarried at the time of the person’s death.

e) “Board” shall mean the Board of Directors of the Company.

f) “Cause” shall mean the Eligible Director’s: (i) willful misconduct or gross negligence in connection with the performance of the Eligible Director’s duties for the Company or any affiliated company; (ii) conviction of, or a plea of guilty or nolo contendere to, a felony or a crime involving fraud or moral turpitude; (iii) engagement in any business that directly or indirectly competes with the Company or any affiliated company; or (iv) disclosure of trade secrets, customer lists or confidential information of the Company or any affiliated company to a competitor or unauthorized person.

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g) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

h) “Common Stock” shall mean the Common Stock, $5.00 par value, of the Company.

i) “Company” shall mean Carpenter Technology Corporation, a Delaware corporation, or any successor corporation.

j) “Disability” shall mean that a qualified physician designated by the Company has reviewed and approved the determination that an Eligible Director 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 or directors of the Company or any subsidiary.

k) “Election Date” shall mean with respect to an Option hereunder the date of the appointment, election, or re-election of the Eligible Director that prompted the grant of such Option.

l) “Eligible Director” shall mean each director of the Company who is not an employee of the Company or any of the Company’s subsidiaries [as defined in section 424(f) of the Code], or who is not otherwise excluded from participation by agreement.

m) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

n) “Fair Market Value” shall mean the fair market value of the Company’s Common Stock, determined in accordance with section 409A of the Code, and based upon (i) the last sale price of the Common Stock on the date on which such value is determined, as reported on the consolidated tape of New York Stock Exchange issues or, if there shall be no trades on such date, on the date nearest preceding such date; (ii) if the Common Stock is not then listed for trading on the New York Stock Exchange, the last sale price of the Common Stock on the date on which such value is determined, as reported on another recognized securities exchange or on the NASDAQ National Market System if the Common Stock shall then be listed and traded upon such exchange or system or, if there shall be no trades on such date, on the date nearest preceding such date; or (iii) the mean between the bid and asked quotations for such stock on such date (as reported by a recognized stock quotation services) or, in the event that there shall be no bid or asked quotations on such date, then upon the basis of the mean between the bid and asked quotations on the date nearest preceding such date.

o) “Grant Date” shall mean with respect to an Option hereunder the date upon which such Option is granted, and with respect to Performance Units the date upon which the Board determines Performance Goals and passes a resolution creating a Performance Unit opportunity.

p) “Option” shall mean any right granted to an Eligible Director allowing such Eligible Director to purchase Shares at such price or prices and during such period or periods as set forth under the Plan. All Options shall be non-qualified options not entitled to special tax treatment under section 422 of the Code.

q) “Performance Goal” shall mean a goal the attainment of which is substantially uncertain at the time the Performance Goal is established that must be met by the end of a Performance Period specified by the Board. Performance Goals may be measured on an absolute or relative basis. Relative performance may be measured against an external index, such as a group of peer companies, industry groups or a financial market index. Performance Goals may be based upon: (i) the price of Common Stock, (ii) the market share of the Company or its

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subsidiaries (or any business unit thereof), (iii) sales or revenue by the Company or its subsidiaries (or any business unit thereof), (iv) earnings or diluted earnings per share of Common Stock, with or without net pension credit/expense, (v) return on shareholder equity of the Company, (vi) costs of the Company or its subsidiaries (or any business unit thereof), (vii) cash flow of the Company or its subsidiaries (or any business unit thereof), (viii) return on total assets of the Company or its subsidiaries (or any business unit thereof) (“ROA”), (ix) return on invested capital of the Company or its subsidiaries (or any business unit thereof), (x) return on net assets of the Company or its subsidiaries (or any business unit thereof) (“RONA”), (xi) operating income of the Company or its subsidiaries (or any business unit thereof), with or without net pension credit/expense, (xii) net income of the Company or its subsidiaries (or any business unit thereof) with or without net pension credit/expense, (xiii) costs of capital of the Company or its subsidiaries (or any business unit thereof), (xiv) earnings before interest and income taxes (“EBIT”) or earnings before interest, income taxes, depreciation and amortization (“EBITDA”) of the Company or its subsidiaries, (xv) economic profit of the Company or its subsidiaries, (xvi) total shareholder return, (xvii) economic value added, or (xviii) any other financial or other measurement deemed appropriate by the Board, as it relates to the results of operations or other measurable progress of the Company or its subsidiaries (or any business unit thereof). The Board shall have discretion to determine the specific targets with respect to each of these categories of Performance Goals.

r) “Performance Period” shall mean a period of twelve consecutive months or more during which the performance of the Company, any subsidiary or any department thereof, or any individual is measured for the purpose of determining the extent to which a Performance Goal is achieved. Nothing in this Plan shall prevent the Board from establishing a Performance Period that commences prior to the termination of one or more other Performance Periods.

s) “Performance Unit” shall mean the right to receive, following termination of service as an Eligible Director, one share of Common Stock. Performance Units will be earned, if at all, based upon the attainment of Performance Goals during the applicable Performance Period specified by the Board. For purposes of this Plan, fractional Performance Units, measured to the nearest four decimal places, may be credited.

t) “Release Date” shall mean the fifth business day occurring after the Company’s earnings release for the preceding fiscal period. In calculating the Release Date, the day of an earnings release shall be counted if the earnings release is made before the opening of trading on the New York Stock Exchange and shall not be counted if such release is made after the opening of trading.

u) “Retirement” shall mean termination of Board service other than for Cause with a minimum of three years of service as an Eligible Director.

v) “Shares” shall mean shares of Common Stock.

w) “Stock Unit” shall mean the right to receive, following both service as an Eligible Director for one year following the grant of the Stock Unit under Section 8(a) and termination of service as an Eligible Director, one share of Common Stock. For purposes of this Plan, fractional Stock Units, measured to the nearest four decimal places, may be credited.

x) “Unit” shall mean a Performance Unit, a Stock Unit, or both, as required by context.

y) “Window” shall mean a 30 calendar-day period of time beginning on a Release Date.

3. Administration:

(a) The Plan shall be administered by the Company. Subject to the terms of the Plan, the Board shall have the power to interpret the provisions and supervise the administration of the Plan. Any action of the Board in

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administering the Plan shall be final, conclusive and binding on all persons, including the Company, Eligible Directors, persons claiming rights from or through Eligible Directors and stockholders of the Company.

(b) Subject to the provisions of the Plan, the Board shall have full and final authority in its discretion (a) to determine the terms and conditions of any Award granted under the Plan (including, but not limited to, restrictions as to vesting, transferability or forfeiture, exercisability or settlement of an Award and waivers or accelerations thereof, and waivers of or modifications to performance conditions relating to an Award, based in each case on such considerations as the Board shall determine) and all other matters to be determined in connection with an Award; (b) to determine whether, to what extent, and under what circumstances an Award may be canceled, forfeited, or surrendered; (c) to determine whether, and to certify that, Performance Goals to which the settlement of an Award is subject are satisfied for the relevant Performance Period; (d) to correct any defect or supply any omission or reconcile any inconsistency in the Plan, and to adopt, amend and rescind such rules and regulations as, in its opinion, may be advisable in the administration of the Plan; and (e) to make all other determinations as it may deem necessary or advisable for the administration of the Plan. Notwithstanding the foregoing, an Eligible Director must be recused and abstain from participating in any action of the Board that affects his or her outstanding Award, and a Performance Period may only be waived following an Eligible Director’s death, Disability, Retirement or termination without Cause or as indicated in Section 13(c) upon a Change in Control.

(c) Notwithstanding anything to the contrary herein, discretionary Awards to any Eligible Director under Sections 5, 6 or 9 of the Plan shall be made by the Board or an independent committee of the Board without the vote of any directors who are also employees of the Company.

4. Shares Subject to the Plan:

a) Total Number. Subject to adjustment as provided in this Section, the total number of Shares as of August 18, 2006 available for Awards under the Plan shall be 500,000 increased by any shares of Common Stock that were reserved under the Plan prior to this amendment but were either (a) not subject to Awards or (b) subject to Awards that were forfeited, canceled or expired unexercised. Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued Shares or treasury Shares.

b) Reduction of Shares Available.

(i) The grant of an Option will reduce the number of Shares available for further grants by the number of Shares subject to such Option.

(ii) Any shares issued by the Company through the assumption or substitution of outstanding grants from an acquired company shall not reduce the Shares available for grants under the Plan.

(iii) The grant of Performance Units or Stock Units will reduce the number of Shares available for further grants by the number of Units granted.

c) Increase of Shares Available. The lapse, cancellation or other termination of an Option or Unit that has not been fully exercised or paid shall increase the available Shares for such Options or Units by the number of Shares that have not been issued upon exercise of such Option or payment of such Unit.

d) Other Adjustments. The total number and kind of Shares available for Options or Units under the Plan or which may be allocated to any one Eligible Director, the number and kind of Shares subject to outstanding Options or Units, and the exercise price for such Options or the value of Units shall be appropriately adjusted by the Board for any increase or decrease in the number of outstanding Shares resulting from a stock dividend, subdivision, combination of Shares, reclassification, or other change in corporate structure affecting the Shares or for any conversion of the Shares into or exchange of the Shares for other Shares as a result of any merger or consolidation (including a sale of assets) or other recapitalization as may be necessary to maintain the proportionate interest of the Option or Unit holder.

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5. Initial Options:

Initial Options may be granted to Eligible Directors as follows:

a) Initial Grant. Each Eligible Director who has not previously received a grant under this Plan may be granted an Option to acquire up to 2,000 Shares on such Eligible Director’s Election Date or such later date as may be required to comply with the Company’s normal practices under applicable security laws and regulations.

b) Terms and Conditions. Any Option granted under this Section 5 shall be subject to the following terms and conditions:

(i) Option Price. The purchase price per Share purchasable under an Option shall be 100% of the Fair Market Value of a Share on the Grant Date.

(ii) Exercisability. Unless otherwise provided by this Plan, an Option shall become exercisable in whole or in part one year from the Grant Date.

6. Annual Options:

Annual Options may be granted to Eligible Directors as follows:

a) Annual Grant. Each Eligible Director on or after the Effective Date of the Plan may be granted, immediately after the annual meeting of the Company’s stockholders, an Option to acquire up to 4,000 Shares either in lieu of or in addition to such Eligible Director’s Annual Retainer.

b) Terms and Conditions. Any Option granted under this Section 6 shall be subject to the following terms and conditions:

(i) Option Price. The purchase price per Share purchasable under an Option shall be 100% of the Fair Market Value of a Share on the Grant Date.

(ii) Exercisability. Unless otherwise provided by this Plan, an Option shall become exercisable in whole or in part one year from the Grant Date.

7. General Terms:

The following provisions shall apply to any Option:

a) Option Period. Each Option shall expire ten years from its Grant Date, subject to earlier termination as hereinafter provided.

b) Each Option granted under this Plan shall become exercisable by the Eligible Director only after the completion of one year of Board service immediately following the Grant Date; provided, however, that for Annual Options under Section 6, uninterrupted Board service by the Eligible Director until the annual meeting of the Company’s stockholders next following the Grant Date shall be deemed completion of one year of Board service. Exercise of any or all prior existing Options shall not be required.

c) No Option under this Plan may be transferable by the Eligible Director except by will or the laws of descent and distribution. In the event of the death of the Eligible Director more than one year after the Grant

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Date, an Option may be transferred to the Eligible Director’s personal representative, heirs or legatees (“Transferee”) and may be exercised by the Transferee for the remainder of the exercise period then available to the Eligible Director. In the event of the Retirement from Board service or Disability of an Eligible Director, an Option may be exercised prior to its expiration during the original ten-year exercise period beginning on the Grant Date. In all other cases of termination of Board service of an Eligible Director except for removal for Cause, an Option, if otherwise exercisable by the Eligible Director at the time of such termination, may be exercised within three months after such termination. In the event of removal for Cause, all existing Options shall be of no force and effect.

d) Method of Exercise. Any Option may be exercised by the Eligible Director in whole or in part at such time or times and by such methods as the Board may specify. The applicable Award Agreement may provide that the Eligible Director may make payment of the Option price in cash, Shares, held for at least six months, or such other consideration as the Board may specify, or any combination thereof, having a Fair Market Value on the exercise date equal to the total Option price.

8. Stock Units:

a) Grant of Stock Units. On the date of the annual meeting of stockholders, each Eligible Director shall be granted each year, in place of equivalent cash compensation, a number of Stock Units determined by dividing 50% of the Eligible Director’s Annual Retainer by the Fair Market Value on that date.

b) Election of Stock Units. By written election filed with the Board before the end of any calendar year, an Eligible Director may elect to increase the percentage in Section 8(a) above to 100%, and thereby have the entire Eligible Director’s Annual Retainer payable in each calendar year beginning after the date of the election granted in Stock Units. An election under this Section 8(b) shall remain in effect until changed, in writing, by the Eligible Director. Any such change shall be effective in the first calendar year beginning after the date of the written notice of change.

c) Forfeiture of Stock Units. Stock Units granted at an annual meeting of stockholders will be forfeited if the Eligible Director terminates service as an Eligible Director for any reason other than Retirement, Disability, or death, before the next annual meeting of stockholders. Stock Units voluntarily deferred under Section 8(b) are at all times fully vested.

9. Performance Units:

a) Grant of Performance Units. Opportunities to earn Performance Units may be granted annually to an Eligible Director. When granting an opportunity for Performance Units, the Board shall determine the number of Performance Units (including fractions) eligible to be earned by an Eligible Director, the Performance Goals applicable to such Performance Units, the applicable Performance Period, and any restrictions on the Performance Units or Shares that may become earned with the attainment of the Performance Goals.

b) Allocation of Performance Units. After the close of the applicable Performance Period, the Board shall determine the extent to which Performance Units are earned as a result of the attainment of Performance Goals. As soon as practicable following the Board’s determination, earned Performance Units (or fractions thereof) shall be allocated to the Eligible Director’s account with an initial value equal to the Fair Market Value at the close of the applicable Performance Period.

10. Nontransferability of Units:

Neither Performance Units nor Stock Units may be sold, transferred, pledged, assigned or otherwise alienated, other than by will or by the laws of descent and distribution.

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11. Dividend Equivalents:

An Eligible Director who has earned Performance Units or been granted Stock Units will also be allocated additional Units, determined on a quarterly basis. The number of additional Units to be allocated will be determined by multiplying the quarterly dividend per Share for the immediately preceding quarter by the number of Units credited to the Eligible Director’s account on the first day of that calendar quarter and dividing the result by the Fair Market Value on the last business day of that quarter.

12. Payment of Units:

a) Following an Eligible Director’s Retirement, or termination of service on account of Disability, the Eligible Director shall be paid a number of Shares equal to the number of whole Units credited to the Eligible Director’s account, with cash paid in lieu of any fractional Units. The amount of cash to be paid will be based on the Fair Market Value on the date of the Eligible Director’s termination of service as an Eligible Director. In the case of the Eligible Director’s death, the payment will be made to the Eligible Director’s Beneficiary.

b) Manner and Form of Payment. An Eligible Director shall receive Shares in payment of Units credited to the Eligible Director’s account in a single lump sum distribution as soon as is practicable following the Eligible Director’s termination of service, provided, however, that no payment shall be made later than March 15 of the calendar year following the Eligible Director’s termination of service.

13. Change in Control:

a) Notwithstanding anything in this Plan to the contrary, in the event of a Change in Control of the Company, the Options granted under Sections 5 and 6 shall vest and become immediately exercisable and any unvested Stock Units granted under Section 8 shall vest.

b) For purposes of this Plan, “Change in Control” means:

(i) The acquisition by any individual, entity or group within the meaning of section 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of either (A) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) 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, for purposes of this Section 13(b), the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company or (iv) any acquisition by any corporation pursuant to a transaction that complies with Sections 13(b)(iii)(A), 13(b)(iii)(B) and 13(b)(iii)(C);

(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; 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;

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(iii) consummation of a reorganization, merger, consolidation or 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 (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 and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation 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 of the corporation 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

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

c) Payment for Performance Units. Within 30 days following a Change in Control of the Company, as defined in Section 13(b) of this Plan, there shall be paid in cash to Eligible Directors with an opportunity to receive Performance Units under an incomplete Performance Period a pro rata amount based upon the assumed achievement of all relevant Performance Goals at target levels, and upon the length of time within the Performance Period that has elapsed before the Change in Control of the Company; provided, however, that (i) the Board shall endeavor in good faith to comply with the requirements of section 409A of the Code with any payment hereunder; (ii) if the Board determines that actual performance to the date of the Change in Control of the Company exceeds targeted levels, the prorated payouts shall be made using the actual performance data; and (iii) there shall not be an accelerated payout with respect to Performance Units that qualify as “Derivative Securities” under section 16 of the Exchange Act that were granted less than six months before the Change in Control of the Company.

14. Amendments and Termination:

a) Board Authority. The Board may amend or terminate the Plan at any time; provided that no amendment may be made (i) without the appropriate approval of the Company’s stockholders if such approval is necessary to comply with any tax or other regulatory requirement, including any stockholder approval required as a condition to exemptive relief under section 16(b) of the Exchange Act; (ii) which would constitute a repricing or exchange of any Option; or (iii) which would adversely impair or affect, without the consent of the Eligible Director, any rights or obligations under any Option or Unit theretofore granted to such Eligible Director, unless required by the Code, applicable securities laws, or the rules of any exchange upon which the Company’s Common Stock is listed.

b) Prior Stockholder and Eligible Director Approval. Anything herein to the contrary notwithstanding, in the event that amendments to the Plan are required in order that the Plan or any other stock-based compensation plan of the Company complies with (1) the requirements of Rule 16b-3 issued under the Exchange Act, as amended from time to time, (2) any successor rules promulgated by the Securities and Exchange Commission related to the treatment of benefit and compensation plans under section 16 of the Exchange Act, or (3) other applicable law, stock exchange rule or accounting rule, the Board is authorized to make such amendments without the consent of Eligible Directors or the stockholders of the Company.

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15. General Provisions:

a) Compliance Regulations. All certificates for Shares delivered under this Plan pursuant to any Option or Unit shall be subject to such stock-transfer orders and other restrictions as the Board may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed, and any applicable federal or state securities law, and the Board may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. The Company shall not be required to issue or deliver any Shares under the Plan prior to the completion of any registration or qualification of such Shares under any federal or state law, or under any ruling or regulations of any governmental body or national securities exchange that the Board in its sole discretion shall deem to be necessary or appropriate.

b) Other Plans. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required by applicable law or the rules of any stock exchange on which the Common Stock is then listed; and such arrangements may be either generally applicable or applicable only in specific cases.

c) Governing Law. The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Delaware and applicable federal law.

d) Conformity With Law. If any provision of this Plan is or becomes or is deemed invalid, illegal, or unenforceable in any jurisdiction, or would disqualify the Plan or any Option or Unit under any law deemed applicable by the Board, such provision shall be construed or deemed amended in such jurisdiction to conform to applicable laws or if it cannot be construed or deemed amended without, in the determination of the Board, materially altering the intent of the Plan, it shall be stricken and the remainder of the Plan shall remain in full force and effect.

e) Insufficient Shares. In the event there are insufficient Shares remaining to satisfy all of the grants of Options or Units made on the same day, such Options or Units shall be reduced pro-rata.

16. Effective Date and Termination:

The Plan’s original effective date, as approved by the Board and ratified by the stockholders at the Annual Meeting held October 30, 1990, was August 9, 1990. The Plan was last amended before its restatement by the Board on August 10, 1995; and ratified by the stockholders at the Annual Meeting held October 23, 1995. The Plan was restated under its current title and ratified by the stockholders at the Annual Meeting held October 20, 1997. The restated Plan was previously amended effective April 26, 2001 and October 22, 2001 and June 29, 2006. The last of these amended documents was ratified by the Company’s stockholders at the Annual Meeting held on October 16, 2006. The effective date of this amendment is April 24, 2007. The Plan will terminate upon the date on which all outstanding Options have expired or terminated, and all outstanding Units have been paid or otherwise provided for.

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EX-10.G

Exhibit 10G

OFFICERS AND KEY EMPLOYEES

SUPPLEMENTAL RETIREMENT PLAN OF

CARPENTER TECHNOLOGY CORPORATION

Restated August 20, 2007

INTRODUCTION

The Officers Supplemental Retirement Plan of Carpenter Technology Corporation (“OSRP”) was authorized by the Board of Directors of Carpenter Technology Corporation to be applicable effective January 1, 1983 to pay certain benefits which Participants would have been entitled to receive under the General Retirement Plan, but which may not be paid under the General Retirement Plan as a result of the application of section 415 of the Code. Following the expansion of the related employee deferred compensation plan to include “officers and key employees,” this Plan and its title were amended to recognize the expanded population under the employee deferred compensation plan. Effective January 1, 2004, the former OSRP was amended to be the Officers and Key Employees Supplemental Retirement Plan of Carpenter Technology Corporation.

All benefits payable under this Plan shall be paid out of the general assets of the Company.

Article I - Definitions

1.1 “Adjusted GRP Benefit” shall mean the gross amount of monthly benefits payable to or on account of the Participant as calculated under the General Retirement Plan (disregarding any reduction in the amount of benefits under the General Retirement Plan attributable to any provision therein incorporating limitations imposed by section 415 of the Internal Revenue Code of 1986, and the regulations thereunder, as amended).

1.2 “Benefits” shall mean the monthly benefits payable to or on behalf of a Participant as a result of a Commencement Event, calculated as:

1.2.1 the Adjusted GRP Benefit (but calculated using Earnings as defined in Section 1.9 herein to modify the definition of “earnings” contained in the General Retirement Plan) that is (or would be payable except for the Participant’s deferral of payments thereunder) as of the date of such Commencement Event or, if earlier, were paid at the commencement of General Retirement Plan payments, minus

1.2.2 the Adjusted GRP Benefit that is (or would be payable except for the Participant’s deferral of payments thereunder) as of the date of such Commencement Event or, if earlier, were paid at the commencement of General Retirement Plan payments.

Where the benefit under the General Retirement Plan begins at a date other then the Commencement Event determined under Section 1.4 of this Plan, the monthly amount, if any, payable under this Plan will be adjusted by an enrolled actuary to preserve the value of the

Benefits. Where the General Retirement Plan benefit is paid as a lump sum or commences after the Commencement Event, the form of benefit under the General Retirement Plan used to determine the value of Benefits under this Plan will be determined by marital status of the Participant at the Commencement Date or, if earlier, payment of a lump sum under the General Retirement Plan. At such date, single Participants will be calculated based upon a single-life annuity and married Participants as a 50% joint and survivor annuity.

If a Participant who is receiving Benefits hereunder as a result of a Commencement Event other than a Change in Control is subsequently reemployed by the Company, the monthly payments under the Plan shall be discontinued and, upon such Participant’s subsequent Separation from Service, the Participant’s Benefits, if any, under the Plan shall be recomputed in accordance with this Section 1.2 and shall again become payable to such Participant in accordance with the provisions of the Plan.

1.3 “Board” shall mean the Board of Directors of Carpenter Technology Corporation.

1.4 “Change in Control” means and includes each of the following:

1.4.1 The acquisition by any person, entity, or group of persons (within the meaning of section 13(d)(3) or 14(d)(2) of the Exchange Act) (each, a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of either (i) 50% or more of the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) 30% or more of the total 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, the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, (ii) any acquisition by a Person that is considered immediately prior to such acquisition or acquisitions to effectively control the Company within the meaning of Section 409A of the Code, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company or (iv) any acquisition by any corporation pursuant to a transaction that complies with Sections 1.4.3(i), 1.4.3(ii), and 1.4.3(iii);

1.4.2 the date a majority of the individuals who constitute the Board (the “Incumbent Board”) cease for any reason, during any 12-month period, to constitute at least a majority of the Board; provided, however, that any individual becoming a director during such 12-month period 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;

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1.4.3 consummation of a reorganization, merger, consolidation or 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 (a “Business Combination”), in each case, unless, following such Business Combination, (i) 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 and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the surviving entity resulting from such Business Combination (including, without limitation, a surviving 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, (ii) no Person (excluding any surviving entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such surviving entity resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the surviving entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such surviving entity, except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the surviving 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

1.4.4 approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

1.5 “Code” means the Internal Revenue Code of 1986, and the regulations thereunder, as amended.

1.6 “Commencement Event” with respect to a Participant’s or Surviving Spouse’s Benefit shall mean the date of a Change in Control or, if earlier, the first day of the month following the earliest of the following to occur:

1.6.1 Separation from Service after a determination of Disability following completion of 15 or more years of service;

1.6.2 Separation from Service or death with 10 but less than 30 years of service and, if under age 55, attainment of age 55;

1.6.3 Separation from Service or death with a vested benefit under the General Retirement Plan but less than 10 years of service and, if under age 60, attainment of age 60; or

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1.6.4 Separation from Service or death following completion of 30 or more years of service.

1.7 “Company” shall mean Carpenter Technology Corporation.

1.8 “Disability” shall mean that a qualified physician designated by the Company has reviewed and approved the determination that the Participant:

1.8.1 is unable to engage in any substantial gainful activity 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, or

1.8.2 is, 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.

1.9 “Earnings” shall mean “earnings” as determined under the General Retirement Plan but also including any amounts deferred pursuant to the Deferred Compensation Plan for Officers and Key Employees of Carpenter Technology Corporation.

1.10 “Effective Date” shall mean January 1, 1983.

1.11 Employee” shall mean “employee” as determined under the General Retirement Plan.

1.12 “General Retirement Plan” or “GRP” shall mean the Corporation’s “General Retirement Plan for Employees of Carpenter Technology Corporation” as in effect on the last date of a Participant’s employment with the Corporation as a participant under the General Retirement Plan.

1.13 “Participant” shall mean any person who participates in the Plan as provided in Article 2.

1.14 “Pension Board” shall mean the Pension Board as defined in the General Retirement Plan.

1.15 “Plan” shall mean the Officers and Key Employees Supplemental Retirement Plan of Carpenter Technology Corporation, as described herein or as hereafter amended, and the predecessor Officers’ Supplemental Retirement Plan of Carpenter Technology Corporation.

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1.16 “Separation from Service” shall mean a Participant’s termination of employment with the Company which entitles the Participant to Benefits under the Plan.

1.17 “Surviving Spouse” shall mean the individual described in Sections 3.13(f) or 4.5(a)(1), as applicable, of the General Retirement Plan.

Article 2 - Participation

2.1 Every Company Employee who is a participant in both the General Retirement Plan and the Deferred Compensation Plan for Officers and Key Employees of Carpenter Technology Corporation (“Deferred Compensation Plan”) shall become a Participant in this Plan simultaneously with participation in said Deferred Compensation Plan.

2.2 A Participant’s participation in the Plan shall terminate if the Participant’s employment with the Company terminates unless at that time the Participant is entitled to a pension pursuant to the General Retirement Plan that is reduced as a result of the Participant’s deferrals under the Deferred Compensation Plan.

Article 3 - Amount and Payment of Benefits

3.1 Benefits. Except as provided below, a Participant’s Benefits shall be payable in substantially equal monthly payments for the life of the Participant (“a single-life annuity”) commencing on the first day of the month following the Commencement Event.

3.1.2 A Participant may elect, prior to the date upon which single-life annuity payments would commence under Section 3.1.1 to have such Participant’s Benefits paid in such other form of life annuity as the Company may from time to time permit, provided that such form of life annuity must be actuarially equivalent to a single-life annuity applying reasonable actuarial assumptions.

3.1.3 If a Participant is a “Specified Employee”, as that term is defined in section 409A of the Code and the applicable regulations thereunder, payment of such Participant’s Benefits shall commence no earlier than the first day of the 7^th month following such Participant’s Separation from Service. In such event, such Participant’s first installment payment shall be increased by an amount equal to:

(a) that number of monthly payments that would have otherwise been made to such Participant during the period between such Participant’s Separation from Service and the first installment payment provided by this Section 3.1.3 under the form of annuity in which such Participant’s Benefits are payable, plus

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(b) a reasonable rate of interest on each of the monthly payments that would have otherwise been made to such Participant during the period between such Participant’s Separation from Service and the first installment payment provided by this Section 3.1.3.

3.1.4 Notwithstanding anything to the contrary in this Section 3.1, in the event the Board determines that a Commencement Event as a result of a Change in Control has occurred, a Participant’s Benefits shall be payable in a single lump sum representing the actuarial present value of the Benefits that would be payable pursuant to Section 3.1.1 within 30 days following such Change in Control. In addition, unless otherwise determined by the Board of Directors, if a Participant is liable for the payment of any excise tax (the “Basic Excise Tax”) pursuant to Section 4999 of the Code, or any successor or like provision, as a result of any payment under this Section 3.1.4, the Company shall pay the Participant an amount (the “Special Reimbursement”) which, after payment to the Participant (or on the Participant’s behalf) of any federal, state and local taxes, including, without limitation, any further excise tax under said Section 4999, with respect to or resulting from the Special Reimbursement, equals the net amount of the Basic Excise Tax. The Special Reimbursement shall be paid as soon as practicable after it is determined by the Company or the Participant and reviewed for accuracy by the Company’s certified public accountants, but in no event later than the close of the calendar year next following the calendar year in which the taxes due under this Section 3.1.4 are remitted to the taxing authority.

Article 4 - Administration and Claims

4.1 The administration of the Plan, the exclusive power to interpret it, and the responsibility for carrying out its provisions are vested in the Pension Board in the same manner and scope as the Pension Board’s authority under the General Retirement Plan. All expenses of administering the Plan shall be paid by the Company.

4.2 The claims procedures established under the General Retirement Plan shall be utilized herein.

Article 5 - General Provisions

5.1 Neither the Plan nor an individual’s status as a Participant in the Plan shall be construed as conferring any right upon any Participant to continued employment or continued participation in the Plan, nor shall it interfere with the rights of the Company, in its discretion, to discharge or otherwise discipline any Participant.

5.2 The Company shall have the right to deduct from each payment to be made under the Plan any required withholding taxes.

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5.3 Subject to any applicable law, no Benefits under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt so to do shall be void, nor shall any such Benefits be in any manner liable for or subject to garnishment, attachment, execution or levy, or liable for or subject to the debts, contracts, liabilities, engagements or torts of the Participant.

5.4 The Plan shall be construed in accordance with and governed by the laws of the Commonwealth of Pennsylvania.

5.5 The masculine pronoun shall mean the feminine wherever appropriate.

Article 6 - Amendment or Termination

6.1 The Board or, when so designated by such Board, the Human Resources Committee or such Committee’s designee reserves the right to modify or to amend, in whole or in part, or to terminate, this Plan at any time compliant with the requirements of the Code. However, no modification, amendment or termination of the Plan shall, without the Participant’s consent, adversely affect the Benefits of any Participant prior to such modification, amendment or termination.

Article 7 - Binding Effect

7.1 This Plan shall be a binding obligation upon and shall inure to the benefit of the Company, its successors and assigns and the Participants and their beneficiaries, executors, administrators and legal representatives.

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EX-10.K

Exhibit 10K

AMENDED AND RESTATED

CARPENTER TECHNOLOGY CORPORATION

CHANGE OF CONTROL SEVERANCE PLAN

INTRODUCTION

As is the case with many publicly held corporations, there exists the possibility of a Change of 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 of 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 of 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 of 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 of Control.

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

The Company now desires to make certain amendments to the Carpenter Technology Corporation Change Of Control Severance Plan as deemed advisable to prevent an inclusion of income or imposition of penalties under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) or as deemed advisable to facilitate compliance with Section 409A of the Code.

Therefore, in order to fulfill the immediately preceding purpose, the Carpenter Technology Corporation Change Of Control Severance Plan has been amended and restated in its entirety.

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 of 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.

(e) Change of 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

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under the Exchange Act) of 20% or more 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, for purposes of this subsection (i), the following acquisitions shall not constitute a Change of 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 of Control;

(ii) Individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date 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

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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

(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.

(j) Disability. A condition such that the Participant has terminated employment with the Participant’s Employer with a qualifying disability and has immediately begun receiving benefits from a long-term disability plan of the Company or any Employer.

(k) Effective Date. August 20, 2007.

(l) Employee. A full-time employee of an Employer.

(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 Bonus opportunity, as in effect during the 120-day period immediately preceding the Change of 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

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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 of 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 of 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 of 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 of 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 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.

(p) Participant. Any individual whose employment is classified as job class 19 or above and any other individual 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 of control or similar agreement with the Company or any of its Affiliated Companies entered into prior to a Change of Control shall be a Participant so long as such agreement remains in force. Each individual who is a Participant immediately prior to a Change of Control shall remain a Participant at least until the second anniversary of the Change of Control. Notwithstanding the foregoing, individuals employed primarily outside of the United States are not eligible to be Participants.

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

(r) Separation Benefits. The benefits described in Section 4.2 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.

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(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.

ARTICLE IV

SEPARATION BENEFITS

4.1 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 of 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.

4.2 Separation Benefits.

(a) 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 as set forth in subsection (b) below, and shall provide to the Participant the continued benefits and outplacement as set forth in subsections (c) and (d) below. For purposes of determining the benefits set forth in subsection (b), 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.

(b) The cash lump sum referred to in Section 4.2(a) 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;

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

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

(c) The Company shall at its sole expense provide the Participant with reasonable outplacement services, at a cost not to exceed $20,000, 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.

(d) The Participant (and eligible family members) shall be eligible for participation in and shall receive all benefits under any medical and dental plan, plan, program, policy, practice, contract or agreement of the Company and its Affiliated Companies for which the Participant was eligible prior to the Change of Control, on terms no less favorable than those applicable to the Participant prior to the Participant’s Date of Termination, for the six months immediately following the Participant’s Date of Termination; provided, however, that during any period when the Participant becomes reemployed with another employer and is eligible to receive any such benefits under another employer-provided plan, the medical and dental benefits provided by the Company and the Affiliated Companies described herein shall be secondary to those provided under such other plan during such period of eligibility.

4.3 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.

4.4 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 of 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.

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(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 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

5.1 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.

5.2 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.

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ARTICLE VI

DURATION, AMENDMENT AND TERMINATION

6.1 Duration of Plan. If a Change of Control has not occurred and the Board does not have knowledge of an event that could reasonably be expected to constitute a Change of Control, this Plan may be terminated by resolution adopted by the Board; provided that the Participants are given written notice of such termination three years in advance of such termination. If a Change of 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 of 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.

6.2 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 of Control.

6.3 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.

6.4 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

7.1 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.

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7.2 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.

7.3 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.

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

7.5 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

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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 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 of Control. It will not be necessary for any Participant to exhaust these procedures and remedies after a Change of 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.

7.6 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.

7.7 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.

7.8 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.

7.9 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.

7.10 Section 409A. Notwithstanding any provision of this Agreement to the contrary, to the extent that the benefits provided under Sections 4.2(c) and (d), Section 4.4, and

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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 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.

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EX-10.L

Exhibit 10L

SPECIAL SEVERANCE AGREEMENT [3x]

AGREEMENT, dated as of the [        ] day of [                    ], [                    ] (this “Agreement”), by and between Carpenter Technology Corporation, a Delaware corporation (the “Company”), and [                    ] (the “Executive”).

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined herein). The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive’s full attention and dedication to the current Company and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control that ensure that the compensation and benefits expectations of the Executive will be satisfied and that provide the Executive with compensation and benefits arrangements that are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement.

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

Section 1. Certain Definitions. (a) “Effective Date” means the first date during the Change of Control Period (as defined herein) on which a Change of Control occurs. Notwithstanding anything in this Agreement to the contrary, if a Change of Control occurs and if the Executive’s employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (1) was at the request of a third party that has taken steps reasonably calculated to effect a Change of Control or (2) otherwise arose in connection with or anticipation of a Change of Control (such a termination of employment, an “Anticipatory Termination”), then “Effective Date” means the date immediately prior to the date of such termination of employment. Notwithstanding any provision in this Agreement to the contrary, in the event of an Anticipatory Termination, any severance payments and benefits that the Company shall be required to pay pursuant to Section 5(a) of this Agreement shall be paid (i) if such Change of Control is a “change in control event” within the meaning of Section 409A of the Code, on the later to occur of (A) the date of such Change of Control, and (B) if the Executive is a “specified employee” within the meaning of Section 409A of the Code (as determined in accordance with the methodology established by the Company as in effect on the Date of Termination) (a “Specified Employee”), the first business day after the date that is six months following the Executive’s “separation from service” within the meaning of Section 409A of the Code (the “409A Payment Date”), and (ii) if such Change of Control is not a “change in control event” within the meaning of Section 409A of the Code, (A) if the Executive is a Specified Employee and the Change of Control occurs prior to the 409A Payment Date, on the 409A Payment Date, and (B) if the date of such Change of Control occurs after the 409A Payment Date, on the first business day following the one-year anniversary of the date of such Anticipatory Termination.

(b) “Change of Control Period” means the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that, commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof, the “Renewal Date”), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the Company shall give notice to the Executive that the Change of Control Period shall not be so extended.

(c) “Affiliated Company” means any company controlled by, controlling or under common control with the Company.

(d) “Change of Control” means:

(1) 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 20% or more of either (A) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) 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, for purposes of this Section 1(d), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company or (iv) any acquisition pursuant to a transaction that complies with Sections 1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C).

(2) 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; 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.

(3) 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-

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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

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

Section 2. Employment Period. The Company hereby agrees to continue the Executive in its employ, subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the third anniversary of the Effective Date (the “Employment Period”). The Employment Period shall terminate upon the Executive’s termination of employment for any reason.

Section 3. Terms of Employment. (a) Position and Duties. (1) During the Employment Period, (A) the Executive’s position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date, (B) the Executive’s services shall be performed at the office where the Executive was employed immediately preceding the Effective Date or at any other location less than 50 miles from such office, and (C) the Executive shall not be required to travel on Company business to a substantially greater extent than required during the 120-day period immediately prior to the Effective Date.

(2) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period, it shall not be a violation of this Agreement for the Executive to

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(A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive’s responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that, to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive’s responsibilities to the Company.

(b) Compensation. (1) Base Salary. During the Employment Period, the Executive shall receive an annual base salary (the “Annual Base Salary”) at an annual rate at least equal to 12 times the highest monthly base salary paid or payable, including any base salary that has been earned but deferred, to the Executive by the Company and the Affiliated Companies in respect of the 12-month period immediately preceding the month in which the Effective Date occurs. The Annual Base Salary shall be paid at such intervals as the Company pays executive salaries generally. During the Employment Period, the Annual Base Salary shall be reviewed at least annually, beginning no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date. Any increase in the Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. The Annual Base Salary shall not be reduced after any such increase and the term “Annual Base Salary” shall refer to the Annual Base Salary as so increased.

(2) Annual Bonus. In addition to the Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the “Annual Bonus”) in cash at least equal to the Annual Target Bonus, where the “Annual Target Bonus” is an amount equal to the Annual Base Salary times the Executive Bonus Compensation Plan Total Target Percentage (as most recently approved by the Company’s Board of Directors or Human Resources Committee for the year in which the Effective Date occurs), or any comparable bonus under any predecessor or successor plan. Each such Annual Bonus shall be paid no later than two and a half months after the end of the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus pursuant to an arrangement that meets the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).

(3) Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all cash incentive, equity incentive, savings and retirement plans, practices, policies, and programs applicable generally to other peer executives of the Company and the Affiliated Companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and the Affiliated Companies for the Executive under such plans, practices, policies and

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programs as in effect at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the Affiliated Companies.

(4) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and the Affiliated Companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and the Affiliated Companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits that are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and the Affiliated Companies.

(5) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and the Affiliated Companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the Affiliated Companies.

(6) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and the Affiliated Companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the Affiliated Companies.

(7) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and the Affiliated Companies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and the Affiliated Companies.

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(8) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and the Affiliated Companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the Affiliated Companies.

Section 4. Termination of Employment. (a) Death or Disability. The Executive’s employment shall terminate automatically if the Executive dies during the Employment Period. If the Company determines in good faith that the Disability (as defined herein) of the Executive has occurred during the Employment Period (pursuant to the definition of “Disability”), it may give to the Executive written notice in accordance with Section 11(b) of its intention to terminate the Executive’s employment. In such event, the Executive’s employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties. “Disability” means the absence of the Executive from the Executive’s duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness that is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal representative.

(b) Cause. The Company may terminate the Executive’s employment during the Employment Period with or without Cause. “Cause” means:

(1) the willful and continued failure of the Executive to perform substantially the Executive’s duties (as contemplated by Section 3(a)(1)(A)) with the Company or any Affiliated Company (other than any such failure resulting from incapacity due to physical or mental illness or following the Executive’s delivery of a Notice of Termination for Good Reason), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company that specifically identifies the manner in which the Board or the Chief Executive Officer of the Company believes that the Executive has not substantially performed the Executive’s duties, or

(2) the willful engaging by the Executive in illegal conduct or gross misconduct that is materially and demonstrably injurious to the Company.

For purposes of this Section 4(b), no act, or failure to act, on the part of the Executive shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon (A) authority 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 (the “Applicable Board”), (B) the instructions of the Chief Executive Officer of the Company or a senior officer of the Company as determined by the Executive’s direct reporting responsibility or (C) the advice of counsel for the Company shall be conclusively presumed to be

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done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Applicable Board (excluding the Executive, if the Executive is a member of the Applicable Board) at a meeting of the Applicable Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel for the Executive, to be heard before the Applicable Board), finding that, in the good faith opinion of the board, the Executive is guilty of the conduct described in Section 4(b)(1) or 4(b)(2), and specifying the particulars thereof in detail.

(c) Good Reason. The Executive’s employment may be terminated during the Employment Period by the Executive for Good Reason or by the Executive voluntarily without Good Reason. “Good Reason” means:

(1) the assignment to the Executive of any duties inconsistent in any respect with the Executive’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3(a), or any other diminution in such position, authority, duties or responsibilities (whether or not occurring solely as a result of the Company’s ceasing to be a publicly traded entity), excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive;

(2) any failure by the Company to comply with any of the provisions of Section 3(b), other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Executive;

(3) the Company’s requiring the Executive (i) to be based at any office or location other than as provided in Section 3(a)(1)(B), or (ii) to be based at a location other than the principal executive offices of the Company if the Executive was employed at such location immediately preceding the Effective Date;

(4) any purported termination by the Company of the Executive’s employment otherwise than as expressly permitted by this Agreement; or

(5) any failure by the Company to comply with and satisfy Section 10(c).

For purposes of this Section 4(c), any good faith determination of Good Reason made by the Executive shall be conclusive. The Executive’s mental or physical incapacity following the occurrence of an event described above in clauses (1) through (5) shall not affect the Executive’s ability to terminate employment for Good Reason.

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(d) Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11(b). “Notice of Termination” means a written notice that (1) indicates the specific termination provision in this Agreement relied upon, (2) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and (3) if the Date of Termination (as defined herein) is other than the date of receipt of such notice, specifies the Date of Termination (which Date of Termination shall be not more than 30 days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s respective rights hereunder.

(e) Date of Termination. “Date of Termination” means (1) if the Executive’s employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified in the Notice of Termination, (which date shall not be more than 30 days after the giving of such notice), as the case may be, (2) if the Executive’s employment is terminated by the Company other than for Cause or Disability, the date on which the company notifies the Executive of such termination, (3) if the Executive resigns without Good Reason, the date on which the Executive notifies the Company of such termination, and (4) if the Executive’s employment is terminated by reason of death or Disability, the date of death of the Executive or the Disability Effective Date, as the case may be. The Company shall take all steps necessary (including with regard to any post-termination services by the Executive) to ensure that any termination described in this Section 4 constitutes a “separation from service” within the meaning of Section 409A of the Code, and the date on which such separation from service takes place shall be the “Date of Termination.”

Section 5. Obligations of the Company upon Termination. (a) Good Reason; Other Than for Cause, Death or Disability. If, during the Employment Period, the Company terminates the Executive’s employment other than for Cause or Disability or the Executive terminates employment for Good Reason:

(1) The Company shall pay to the Executive, in a lump sum in cash within 10 days after the Date of Termination, the aggregate of the following amounts:

(A) the sum of (i) the Executive’s Annual Base Salary through the Date of Termination to the extent not theretofore paid, (ii) any accrued vacation pay, to the extent not theretofore paid (the sum of the amounts described in subclauses (i) and (ii), the “Accrued Obligations”), and (iii) the Annual Target Bonus times a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination and the denominator of which is 365 (the “Pro Rata Bonus”) ;

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(B) the amount equal to three times the sum of (x) the Executive’s Annual Base Salary and (y) the Annual Target Bonus, reduced by any lump sum severance amount payable to the Executive pursuant to the General Retirement Plan for Employees of Carpenter Technology Corporation or any successor thereto (the “GRP”); and

(C) an amount equal to the excess of (i) the actuarial equivalent of the benefit under the Company’s qualified defined benefit retirement plan (the “Retirement Plan”) (utilizing actuarial assumptions no less favorable to the Executive than those in effect under the Retirement Plan immediately prior to the Effective Date), any excess or supplemental retirement plan in which the Executive participates (collectively, the “SERP”) that the Executive would receive if the Executive’s employment continued for three years after the Date of Termination, assuming for this purpose that (A) the Executive’s age is increased by three years and (B) the Executive’s compensation in each of the three years is that required by Sections 3(b)(1) and 3(b)(2) payable in equal monthly installments, over (ii) the actuarial equivalent of the Executive’s actual benefit (paid or payable), if any, under the Retirement Plan and the SERP as of the Date of Termination.

(2) For three years after the Executive’s Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive’s family at least equal to those that would have been provided to them in accordance with the plans, programs, practices and policies described in Section 3(b)(4) or 3(b)(6) (including, without limitation, tax and financial planning services to the extent the Executive was entitled to such services under Section 3(b)(6)) if the Executive’s employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and the Affiliated Companies and their families, provided, however, that, if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree medical and life insurance benefits, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period. Notwithstanding the foregoing, if the Company reasonably determines that providing continued coverage under one or more of its health insurance benefit plans as contemplated herein could adversely affect the tax treatment of the Executive, or would otherwise have adverse legal ramifications or adverse economic impact, the Company may, in its discretion, provide other insurance coverage substantially similar in the aggregate as the continued coverage otherwise required hereunder;

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(3) To the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or that the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and the Affiliated Companies (such other amounts and benefits, the “Other Benefits”) in accordance with the terms of the underlying plans or agreements.

(4) The Company shall at its sole expense provide the Executive with reasonable outplacement services, at a cost not to exceed $20,000, during the one-year period following the Executive’s Date of Termination.

Notwithstanding the foregoing provisions of this Section 5(a)(1), in the event that the Executive is a Specified Employee, amounts that would otherwise be payable and benefits that would otherwise be provided under Section 5(a)(1) during the six-month period immediately following the Date of Termination (other than the Accrued Obligations) shall instead be paid, with interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Code (“Interest”), or provided on the 409A Payment Date.

(b) Death. If the Executive’s employment is terminated by reason of the Executive’s death during the Employment Period, the Company shall provide the Executive’s estate or beneficiaries with the Accrued Obligations and the timely payment or delivery of the Other Benefits in accordance with the terms of the underlying plans or agreements, and shall have no other severance obligations under this Agreement. The Accrued Obligations shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within 10 days of the Date of Termination. With respect to the provision of the Other Benefits, the term “Other Benefits” as utilized in this Section 5(b) shall include, without limitation, and the Executive’s estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and the Affiliated Companies to the estates and beneficiaries of peer executives of the Company and the Affiliated Companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive’s estate and/or the Executive’s beneficiaries, as in effect on the date of the Executive’s death with respect to other peer executives of the Company and the Affiliated Companies and their beneficiaries.

(c) Disability. If the Executive’s employment is terminated by reason of the Executive’s Disability during the Employment Period, the Company shall provide the Executive with the Accrued Obligations and the timely payment or delivery of the Other Benefits in accordance with the terms of the underlying plans or agreements, and shall have no other severance obligations under this Agreement. The Accrued Obligations shall be paid to the Executive in a lump sum in cash within 10 days of the Date of Termination. With respect to the provision of the Other Benefits, the term “Other Benefits” as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by

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the Company and the Affiliated Companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive’s family, as in effect at any time thereafter generally with respect to other peer executives of the Company and the Affiliated Companies and their families.

(d) Cause; Other Than for Good Reason. If the Executive’s employment is terminated for Cause during the Employment Period, the Company shall provide to the Executive with the Executive’s Annual Base Salary through the Date of Termination and the timely payment or delivery of the Other Benefits in accordance with the terms of the underlying plans or agreements, in each case, to the extent theretofore unpaid, and shall have no other severance obligations under this Agreement. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, the Company shall provide to the Executive the Accrued Obligations and the timely payment or delivery of the Other Benefits in accordance with the terms of the underlying plans or agreements, and shall have no other severance obligations under this Agreement. In such case, all the Accrued Obligations shall be paid to the Executive in a lump sum in cash within 10 days of the Date of Termination.

Section 6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company or the Affiliated Companies and for which the Executive may qualify, nor, subject to Section 11(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any other contract or agreement with the Company or the Affiliated Companies. Amounts that are vested benefits or that the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any other contract or agreement with the Company or the Affiliated Companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or any other contract or agreement, except as explicitly modified by this Agreement. Without limiting the generality of the foregoing, the Executive’s resignation under this Agreement with or without Good Reason, shall in no way affect the Executive’s ability to terminate employment by reason of the Executive’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 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. Notwithstanding the foregoing, if the Executive receives payments and benefits pursuant to Section 5(a) of this Agreement, the Executive shall not be entitled to other severance pay or benefits under any severance plan, program or policy of the Company and the Affiliated Companies, unless otherwise specifically provided therein in a specific reference to this Agreement, or provided under the GRP or the Severance Pay Plan for Salaried Employees.

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Section 7. Full Settlement. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense, or other claim, right or action that the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not the Executive obtains other employment except as set forth in Section 5(a)(2). The Company agrees to pay as incurred (within 10 days following the Company’s receipt of an invoice from the Executive) at any time during the Executive’s lifetime, to the full extent permitted by law, all legal fees and expenses that the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus, in each case, Interest.

Section 8. Certain Additional Payments by the Company.

(a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any Payment would be subject to the Excise Tax, then the Executive shall be entitled to receive an additional payment (the “Gross-Up Payment”) in an amount such that, after payment by the Executive of all taxes (and any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, but excluding any income taxes and penalties imposed pursuant to Section 409A of the Code, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. The Company’s obligation to make Gross-Up Payments under this Section 8 shall not be conditioned upon the Executive’s termination of employment.

(b) Subject to the provisions of Section 8(c), all determinations required to be made under this Section 8, including whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Ernst & Young LLP, or such other nationally recognized certified public accounting firm as may be designated by the Executive (the “Accounting Firm”). The Accounting Firm shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive may appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8, shall be paid by the Company to the Executive within 5 days of the receipt of the Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding upon the Company

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and the Executive. 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 Gross-Up Payments that will not have been made by the Company should have been made (the “Underpayment”), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies pursuant to Section 8(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive.

(c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable, but no later than 30 business days after the Executive is informed in writing of such claim. The Executive shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that the Company desires to contest such claim, the Executive shall:

(1) give the Company any information reasonably requested by the Company relating to such claim,

(2) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,

(3) cooperate with the Company in good faith in order effectively to contest such claim, and

(4) permit the Company to participate in any proceedings relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest, and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 8(c), the Company shall control all proceedings taken in connection with such contest, and, at its sole discretion, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the applicable taxing authority in respect of such claim and may, at its sole discretion, either pay the tax claimed to the appropriate taxing authority on behalf of the Executive and direct the Executive to sue for a refund or contest the claim in any permissible

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manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that, if the Company pays such claim and directs the Executive to sue for a refund, the Company shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties) imposed with respect to such payment or with respect to any imputed income in connection with such payment; and provided, further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to issues with respect to which the Gross-Up Payment would be payable hereunder, and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(d) If, after the receipt by the Executive of a Gross-Up Payment or payment by the Company of an amount on the Executive’s behalf pursuant to Section 8(c), the Executive becomes entitled to receive any refund with respect to the Excise Tax to which such Gross-Up Payment relates or with respect to such claim, the Executive shall (subject to the Company’s complying with the requirements of Section 8(c), if applicable) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after payment by the Company of an amount on the Executive’s behalf pursuant to Section 8(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then the amount of such payment shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.

(e) Notwithstanding any other provision of this Section 8, the Company may, in its sole discretion, withhold and pay over to the Internal Revenue Service or any other applicable taxing authority, for the benefit of the Executive, all or any portion of the Gross-Up Payment, and the Executive hereby consents to such withholding.

(f) Definitions. The following terms shall have the following meanings for purposes of this Section 8.

(i) “Excise Tax” shall mean the excise tax imposed by Section 4999 of the Code, together with any interest or penalties imposed with respect to such excise tax.

(ii) A “Payment” shall mean any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise.

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Section 9. Confidential Information. The Executive 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 the Affiliated Companies, and their respective businesses, which information, knowledge or data shall have been obtained by the Executive during the Executive’s employment by the Company or the Affiliated Companies and which information, knowledge or data shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive’s employment with the Company, the Executive 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 persons designated by the Company. In no event shall an asserted violation of the provisions of this Section 9 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement.

Section 10. Successors. (a) This Agreement is personal to the Executive, and, without the prior written consent of the Company, shall not be assignable by the Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.

(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. Except as provided in Section 10(c), without the prior written consent of the Executive this Agreement shall not be assignable by the Company.

(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. “Company” means the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law or otherwise.

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Section 11. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified other than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

(b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

if to the Executive:

to the last address listed for the Executive in the Company’s books and records.

if to the Company:

Carpenter Technology Corporation

P. O. Box 14662

Reading, PA 19612-4662

Attention: General Counsel

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

(c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

(d) The Company may withhold from any amounts payable under this Agreement such United States federal, state or local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

(e) The Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

(f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is “at will” and, subject to Section 1(a), prior to the Effective Date, the Executive’s employment may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date, except as specifically provided herein, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof.

(g) Notwithstanding any provision of this Agreement to the contrary, to the extent that the benefits provided under Sections 3(b)(4), (5), (6) and (7), Sections 5(a)(2) and (3), and Sections 7 and 8 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

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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 Executive 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 8, the tax was due to the applicable taxing authority; (iii) to the extent any such benefit is an in-kind benefit, such benefit may not be liquidated or exchanged for another benefit; and (iv) if the Executive is a Specified Employee, during the period from the Date of Termination until the 409A Payment Date, the Executive shall pay to the Company an amount in cash equal to the taxable portion of any benefit received under Section 3(b)(6) pursuant to Section 5(a)(2) for the period from the Date of Termination until the 409A Payment Date (the “Taxable Benefit Payment”); provided, however, that on the 409A Payment Date, subject to the provisions of this Section 12(g), the Executive shall be entitled to receive a payment equal to the Taxable Benefit Payment. In addition, within the time period permitted by the applicable Treasury Regulations, the Company may, in consultation with the Executive, modify the Agreement, in the least restrictive manner necessary and without any diminution in the value of the payments to the Executive, 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 Executive pursuant to Section 409A of the Code.

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IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the authorization from the Board, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.

EXECUTIVE

[Name of Executive]

CARPENTER TECHNOLOGY CORPORATION
By
	Name:
	Title:

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EX-10.M

Exhibit 10M

EARNINGS ADJUSTMENT PLAN OF

CARPENTER TECHNOLOGY CORPORATION

Effective January 1, 1989

Restated August 20, 2007

INTRODUCTION

This Earnings Adjustment Plan has been authorized by the Board of Directors of Carpenter Technology Corporation to pay certain benefits which Participants would have been entitled to receive under the General Retirement Plan, but which may not be paid under the General Retirement Plan as a result of the application of section 401(a)(17) of the Code.

Article 1 -Definitions

1.1 “Benefits” shall mean the monthly benefits that would be payable to or on behalf of a Participant as of the date of a Commencement Event, calculated as:

1.1.1 the monthly General Retirement Plan benefits (but calculated using Earnings as defined in Section 1.8 herein to modify the definition of “earnings” contained the General Retirement Plan) that are paid (or would be payable except for the Participant’s deferral of payments thereunder) as of the date of such Commencement Event or, if earlier, were paid at the commencement of General Retirement Plan payments, minus

1.1.2 the monthly General Retirement Plan benefits that are paid (or would be payable except for the Participant’s deferral of payments thereunder) as of the date of such Commencement Event or, if earlier, were paid at the commencement of General Retirement Plan payments.

Where the benefit under the General Retirement Plan begins at a date other then the Commencement Event determined under Section 1.6 of this Plan, the monthly amount, if any, payable under this Plan will be adjusted by an enrolled actuary to preserve the value of the Benefits. Where the General Retirement Plan benefit is paid as a lump sum or commences after the Commencement Event, the form of benefit under the General Retirement Plan used to determine the value of Benefits under this Plan will be determined by marital status of the Participant at the Commencement Date or, if earlier, payment of a lump sum under the General Retirement Plan. At such date, single Participants will be calculated based upon a single-life annuity and married Participants as a 50% joint and survivor annuity.

If a Participant who is receiving Benefits hereunder as a result of a Commencement Event other than a Change in Control is subsequently reemployed by the Company, the monthly payments under the Plan shall be discontinued and, upon such Participant’s subsequent Separation from Service, the Participant’s Benefits, if any, under the Plan shall be recomputed in accordance with this Section 1.1 and shall again become payable to such Participant in accordance with the provisions of the Plan.

1.2 “Board” shall mean the Board of Directors of Carpenter Technology Corporation.

1.3 “Change in Control” means and includes each of the following:

1.3.1 the acquisition by any person, entity, or group of persons (within the meaning of section 13(d)(3) or 14(d)(2) of the Exchange Act) (each, a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of either (i) 50% or more of the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) 30% or more of the total 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, the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, (ii) any acquisition by a Person that is considered immediately prior to such acquisition or acquisitions to effectively control the Company within the meaning of Section 409A of the Code, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated Company or (iv) any acquisition by any corporation pursuant to a transaction that complies with Sections 1.3.3(i), 1.3.3(ii), and 1.3.3(iii);

1.3.2 the date a majority of the individuals who constitute the Board of Directors (the “Incumbent Board”) cease for any reason, during any 12-month period, to constitute at least a majority of the Board; provided, however, that any individual becoming a director during such 12-month period 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;

1.3.3 consummation of a reorganization, merger, consolidation or 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 (a “Business Combination”), in each case, unless, following such Business Combination, (i) 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 and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the surviving entity resulting from such Business Combination (including, without limitation, a surviving 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, (ii) no Person (excluding any surviving entity resulting from such Business Combination or any employee benefit plan (or related trust) of the

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Company or such surviving entity resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the surviving entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such surviving entity, except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the surviving 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

1.3.4 approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

1.4 “Code” means the Internal Revenue Code of 1986, and the regulations thereunder, as amended.

1.5 “Company” shall mean Carpenter Technology Corporation.

1.6 “Commencement Event” with respect to a Participant’s or Surviving Spouse’s Benefit shall mean the date of a Change in Control or, if earlier, the first day of the month following the earliest of the following to occur:

1.6.1 Separation from Service after a determination of Disability with 15 or more years of service;

1.6.2 Separation from Service or death with 10 or more years of service and, if under age 55, attainment of age 55;

1.6.3 Separation from Service or death with a vested benefit under the General Retirement Plan but less than 10 years of service and, if under age 60, attainment of age 60; or

1.6.4 Separation from Service or death following completion of 30 or more years of service.

1.7 “Disability” shall mean shall mean that a qualified physician designated by the Company has reviewed and approved the determination that the Participant:

1.7.1 is unable to engage in any substantial gainful activity 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, or

1.7.2 is, 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.

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1.8 “Earnings” shall mean “earnings” as determined under the General Retirement Plan disregarding any limitation imposed by section 401(a)(17) of the Code. The removal of this limitation is not intended to restore any deferred earnings otherwise excluded from the General Retirement Plan definition of earnings.

1.9 “Employee” shall mean “employee” as determined under the General Retirement Plan.

1.10 “General Retirement Plan” shall mean the Company’s “General Retirement Plan for Employees of Carpenter Technology Corporation” as in effect on the last date of a Participant’s employment with the Company as a participant under the General Retirement Plan.

1.11 “Participant” shall mean any person who participates in the Plan as provided in Article 2.

1.12 “Pension Board” shall mean the Pension Board as defined in the General Retirement Plan.

1.13 “Plan” shall mean the Earnings Adjustment Plan of Carpenter Technology Corporation, as described herein.

1.14 “Separation from Service” shall mean a Participant’s termination of employment with the Company which entitles the Participant to Benefits under the Plan.

1.15 “Surviving Spouse” shall mean the individual described in Sections 3.13(f) or 4.5(a)(1), as applicable, of the General Retirement Plan.

Article 2 -Participation

2.1 Every Employee who, as of January 1, 1989, is a participant in the General Retirement Plan shall become a Participant as of such date. Each other Employee shall become a Participant upon commencement of participation in the General Retirement Plan.

2.2 An Employee’s participation in the Plan shall terminate upon termination of employment with the Company unless at that time the Participant is entitled to an immediate or deferred pension pursuant to the General Retirement Plan that is reduced as a result of the application of the compensation limits then applicable under section 401(a)(17) of the Code.

Article 3 -Amount and Payment of Benefits

3.1 Benefits.

3.1.1 Except as provided below, a Participant’s Benefits shall be payable in substantially equal monthly payments for the life of the Participant (“a single-life annuity”) commencing on the Commencement Event.

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3.1.2 A Participant may elect, prior to the date upon which single-life annuity payments would commence under Section 3.1.1 to have such Participant’s Benefits paid in such other form of life annuity as the Company may from time to time permit, provided that such form of life annuity must be actuarially equivalent to a single-life annuity applying reasonable actuarial assumptions.

3.1.3 If a Participant is a “Specified Employee”, as that term is defined in section 409A of the Code and the applicable regulations thereunder, payment of such Participant’s Benefits shall commence no earlier than the first day of the 7^th month following such Participant’s Separation from Service. In such event, such Participant’s first installment payment shall be increased by an amount equal to:

(a) that number of monthly payments that would have otherwise been made to such Participant during the period between such Participant’s Separation from Service and the first installment payment provided by this Section 3.1.3 under the form of annuity in which such Participant’s Benefits are payable, plus

(b) a reasonable rate of interest on each of the monthly payments that would have otherwise been made to such Participant during the period between such Participant’s Separation from Service and the first installment payment provided by this Section 3.2.3.

3.1.4 Notwithstanding anything to the contrary in this Section 3.1, in the event the Board of Directors determines that a Commencement Event as a result of a Change in Control has occurred, a Participant’s Benefits shall be payable in a single lump sum representing the actuarial present value of the Benefits that would be payable pursuant to Section 3.1.1. In addition, unless otherwise determined by the Board of Directors, if a Participant is liable for the payment of any excise tax (the “Basic Excise Tax”) pursuant to Section 4999 of the Code, or any successor or like provision, as a result of any payment under this Section 3.1.4, the Company shall pay the Participant an amount (the “Special Reimbursement”) which, after payment to the Participant (or on the Participant’s behalf) of any federal, state and local taxes, including, without limitation, any further excise tax under said Section 4999, with respect to or resulting from the Special Reimbursement, equals the net amount of the Basic Excise Tax. The Special Reimbursement shall be paid as soon as practicable after it is determined by the Company or the Participant and reviewed for accuracy by the Company’s certified public accountants, but in no event later than the close of the calendar year next following the calendar year in which the taxes due under this Section 3.1.4 are remitted to the taxing authority.

Article 4 -Administration and Claims

4.1 The administration of the Plan, the exclusive power to interpret it, and the responsibility for carrying out its provisions are vested in the Pension Board in the same manner and scope as the Pension Board’s authority under paragraph 7.1 of the General Retirement Plan. All expenses of administering the Plan shall be paid by the Company.

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4.2 The claims procedures established under the General Retirement Plan shall be utilized herein.

Article 5 -General Provisions

5.1 Neither the Plan nor an individual’s status as a Participant in the Plan shall be construed as conferring any right upon any Participant to continued employment or continued participation in the Plan, nor shall it interfere with the rights of the Company, in its discretion, to discharge or otherwise discipline any Participant.

5.2 Subject to any applicable law, no Benefits under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to do so shall be void, nor shall any such Benefits be in any manner liable for or subject to garnishment, attachment, execution or levy, or liable for or subject to the debts, contracts, liabilities, engagements or torts of the Participant.

5.3 The Plan shall be construed in accordance with and governed by the laws of the Commonwealth of Pennsylvania.

5.4 Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust or a fiduciary relationship of any kind between the Company and any person. Neither an Employee nor any other person shall acquire any interest greater than that of an unsecured creditor.

5.5 The masculine pronoun shall mean the feminine wherever appropriate.

Article 6 -Amendment or Termination

6.1 The Board or, when so designated by such Board, the Human Resources Committee or such Committee’s designee reserves the right to modify or to amend, in whole or in part, or to terminate, the Plan and any Benefits payable thereunder at any time compliant with the requirements of the Code.

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EX-10.N

Exhibit 10N

BENEFIT EQUALIZATION PLAN OF

CARPENTER TECHNOLOGY CORPORATION

Effective January 1, 1983

Restated August 20, 2007

INTRODUCTION

This Benefit Equalization Plan has been authorized by the Board of Directors of Carpenter Technology Corporation in order to pay certain benefits which Participants would have been entitled to receive under the General Retirement Plan, but which may not be paid under the General Retirement Plan as a result of the application of section 415 of the Code.

Article 1 -Definitions

1.1 “Benefits” shall mean the monthly benefits payable to or on behalf of a Participant as a result of a Commencement Event, calculated as:

1.1.1 the monthly General Retirement Plan benefits that are paid (or would be payable except for the Participant’s deferral of payments thereunder) as of the date of such Commencement Event or, if earlier, were paid at the commencement of General Retirement Plan payments, disregarding any reduction in the amount of benefits under the General Retirement Plan attributable to any provision therein incorporating limitations imposed by section 415 of the Code, minus

1.1.2 the monthly General Retirement Plan benefits that are paid (or would be payable except for the Participant’s deferral of payments thereunder) as of the date of such Commencement Event or, if earlier, were paid at the commencement of General Retirement Plan payments.

Where the benefit under the General Retirement Plan begins at a date other then the Commencement Event determined under Section 1.4 of this Plan, the monthly amount, if any, payable under this Plan will be adjusted by an enrolled actuary to preserve the value of the Benefits. Where the General Retirement Plan benefit is paid as a lump sum or commences after the Commencement Event, the form of benefit under the General Retirement Plan used to determine the value of Benefits under this Plan will be determined by marital status of the Participant at the Commencement Date or, if earlier, payment of a lump sum under the General Retirement Plan. At such date, single Participants will be calculated based upon a single-life annuity and married Participants as a 50% joint and survivor annuity.

If a Participant who is receiving Benefits hereunder as a result of a Commencement Event other than a Change in Control is subsequently reemployed by the Company, the monthly payments under the Plan shall be discontinued and, upon such Participant’s subsequent Separation from

Service, the Participant’s Benefits, if any, under the Plan shall be recomputed in accordance with this Section 1.1 and shall again become payable to such Participant in accordance with the provisions of the Plan.

1.2 “Change in Control” means and includes each of the following:

1.2.1 The acquisition by any person, entity, or group of persons (within the meaning of section 13(d)(3) or 14(d)(2) of the Exchange Act) (each, a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of either (i) 50% or more of the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) 30% or more of the total 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, the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, (ii) any acquisition by a person that is considered immediately prior to such acquisition or acquisitions to effectively control the Company within the meaning of Section 409A of the Code, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated Company or (iv) any acquisition by any corporation pursuant to a transaction that complies with Sections 1.2.3(i), 1.2.3(ii), and 1.2.3(iii);

1.2.2 the date a majority of the individuals who constitute the Board of Directors (the “Incumbent Board”) cease for any reason, during any 12-month period, to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director during such 12-month period 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 of Directors;

1.2.3 consummation of a reorganization, merger, consolidation or 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 (a “Business Combination”), in each case, unless, following such Business Combination, (i) 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 and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the surviving entity resulting from such Business Combination

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(including, without limitation, a surviving 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, (ii) no Person (excluding any surviving entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such surviving entity resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the surviving entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such surviving entity, except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the surviving 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

1.2.4 approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

1.3 “Code” means the Internal Revenue Code of 1986, and the regulations thereunder, as amended.

1.4 “Commencement Event” with respect to a Participant’s or Surviving Spouse’s Benefit shall mean the day of a Change in Control or, if earlier, the first day of the month following the earliest of the following to occur:

1.4.1 Separation from Service after a determination of Disability with 15 or more years of service;

1.4.2 Separation from Service or death with 10 but less than 30 years of service and, if under age 55, attainment of age 55;

1.4.3 Separation from Service or death with a vested benefit under the General Retirement Plan but less than 10 years of service and, if under age 60, attainment of age 60; or

1.4.4 Separation from Service or death on or after completion of 30 or more years of service.

1.5 “Company” shall mean Carpenter Technology Corporation.

1.6 “Disability” shall mean that a qualified physician designated by the Company has reviewed and approved the determination that the Employee:

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1.6.1 is unable to engage in any substantial gainful activity 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, or

1.6.2 is, 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.

1.7 “Employee” shall mean “employee” as determined under Section 1 of the General Retirement Plan.

1.8 “General Retirement Plan” shall mean the Company’s “General Retirement Plan for Employees of Carpenter Technology Corporation” as in effect on the last date of a Participant’s employment with the Company as a participant under the General Retirement Plan.

1.9 “Participant” shall mean any person who participates in the Plan as provided in Article 2.

1.10 “Pension Board” shall mean the Pension Board as defined in the General Retirement Plan.

1.11 “Plan” shall mean the Benefit Equalization Plan of Carpenter Technology Corporation, as described herein.

1.12 “Separation from Service” shall mean a Participant’s termination of employment with the Company which entitles the Participant or the Participant’s Surviving Spouse to Benefits under the Plan.

1.13 “Surviving Spouse” shall mean the individual described in Sections 3.13(f) or 4.5(a)(1), as applicable, of the General Retirement Plan.

Article 2 -Participation

2.1 Every Employee who, as of August 20, 2007, is a Participant in this Plan shall be eligible to continue to participate.

2.2 Unless otherwise determined by the Pension Board in its sole discretion, an Employee whose benefit under the General Retirement Plan would be reduced because of application of section 415 of the Code to such benefit shall become a Participant in the Plan upon a Commencement Event.

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Article 3 -Amount and Payment of Benefits

3.1 Benefits.

3.1.1 Except as provided below, a Participant’s Benefits shall be payable in substantially equal monthly payments for the life of the Participant (“a single-life annuity”) commencing on the Commencement Event.

3.1.2 A Participant may elect, prior to the date upon which single-life annuity payments would commence under Section 3.1.1 to have such Participant’s Benefits paid in such other form of life annuity as the Company may from time to time permit, provided that such form of life annuity must be actuarially equivalent to a single-life annuity applying reasonable actuarial assumptions.

3.1.3 If a Participant is a “Specified Employee,” as that term is defined in section 409A of the Code and the applicable regulations thereunder, payment of such Participant’s Benefits shall commence no earlier than the first day of the 7^th month following such Participant’s Separation from Service. In such event, such Participant’s first installment payment shall be increased by an amount equal to:

(a) that number of monthly payments that would have otherwise been made to such Participant during the period between such Participant’s Separation from Service and the first installment payment provided by this Section 3.2.3 under the form of annuity in which such Participant’s are payable, plus

(b) a reasonable rate of interest on each of the monthly payments that would have otherwise been made to such Participant during the period between such Participant’s Separation from Service and the first installment payment provided by this Section 3.2.3.

3.1.4 Notwithstanding anything to the contrary in this Section 3.1, in the event the Board of Directors determines that a Commencement Event as a result of a Change in Control has occurred, a Participant’s Benefits shall be payable in a single lump sum representing the actuarial present value of the Benefits that would be payable pursuant to Section 3.1.1. In addition, unless otherwise determined by the Board of Directors, if a Participant is liable for the payment of any excise tax (the “Basic Excise Tax”) pursuant to Section 4999 of the Code, or any successor or like provision, as a result of any payment under this Section 3.1.4, the Company shall pay the Participant an amount (the “Special Reimbursement”) which, after payment to the Participant (or on the Participant’s behalf) of any federal, state and local taxes, including, without limitation, any further excise tax under said Section 4999, with respect to or resulting from the Special Reimbursement, equals the net amount of the Basic Excise Tax. The Special Reimbursement shall be paid as soon as practicable after it is determined by the Company or the Participant and reviewed for accuracy by the Company’s certified public accountants, but in no event later than the close of the calendar year next following the

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calendar year in which the taxes due under this Section 3.1.4 are remitted to the taxing authority.

Article 4 -Administration and Claims

4.1 The administration of the Plan, the exclusive power to interpret it, and the responsibility for carrying out its provisions are vested in the Pension Board, as such term is defined in the General Retirement Plan, in the same manner and scope as the Pension Board’s authority under paragraph 7.1 of the General Retirement Plan. All expenses of administering the Plan shall be paid by the Company.

4.2 The claims procedures established under the General Retirement Plan shall be utilized herein.

Article 5 -General Provisions

5.1 Neither the Plan nor an individual’s status as a Participant in the Plan shall be construed as conferring any right upon any Participant to continued employment or continued participation in the Plan, nor shall it interfere with the rights of the Company, in its discretion, to discharge or otherwise discipline any Participant.

5.2 Subject to any applicable law, no Benefits under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to do so shall be void, nor shall any such Benefits be in any manner liable for or subject to garnishment, attachment, execution or levy, or liable for or subject to the debts, contracts, liabilities, engagements or torts of the Participant.

5.3 The Plan shall be construed in accordance with and governed by the laws of the Commonwealth of Pennsylvania.

5.4 Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust or a fiduciary relationship of any kind between the Company and any person. Neither an Employee nor any other person shall acquire any interest greater than that of an unsecured creditor.

5.5 The masculine pronoun shall mean the feminine wherever appropriate.

Article 6 -Amendment or Termination

6.1 The Board of Directors of the Company or, when so designated by such Board, the Human Resources Committee or such Committee’s designee reserves the right to modify or to amend, in whole or in part, or to terminate, the Plan and any Benefits payable thereunder at any time compliant with the requirements of the Code.

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EX-10.S

Exhibit 10S

RECEIVABLES PURCHASE AGREEMENT

dated as of December 20, 2001

among

CRS FUNDING CORP.

CARPENTER TECHNOLOGY CORPORATION

MARKET STREET FUNDING CORPORATION

and

PNC BANK, NATIONAL ASSOCIATION

TABLE OF CONTENTS

ARTICLE I.
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1. Purchase Facility	1
Section 1.2. Making Purchases	1
Section 1.3. Purchased Interest Computation	2
Section 1.4. Settlement Procedures	3
Section 1.5. Fees	6
Section 1.6. Payments and Computations, Etc.	6
Section 1.7. Increased Costs	6
Section 1.8. Requirements of Law	7
Section 1.9. Inability to Determine Euro-Rate	8
ARTICLE II.
REPRESENTATIONS AND WARRANTIES; COVENANTS; TERMINATION EVENTS
Section 2.1. Representations and Warranties; Covenants	9
Section 2.2. Termination Events	9
ARTICLE III.
INDEMNIFICATION
Section 3.1. Indemnities by the Seller	9
Section 3.2. Indemnities by the Servicer	11
ARTICLE IV. ADMINISTRATION AND COLLECTIONS
Section 4.1. Appointment of the Servicer	11
Section 4.2. Duties of the Servicer	12
Section 4.3. Lock-Box Arrangements	13
Section 4.4. Enforcement Rights	14
Section 4.5. Responsibilities of the Seller	15
Section 4.6. Servicing Fee	15

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ARTICLE V. MISCELLANEOUS
Section 5.1. Amendments, Etc.	15
Section 5.2. Notices, Etc.	16
Section 5.3. Assignability	16
Section 5.4. Costs, Expenses and Taxes	17
Section 5.5. No Proceedings; Limitation on Payments	17
Section 5.6. Confidentiality	17
Section 5.7. GOVERNING LAW AND JURISDICTION	18
Section 5.8. Execution in Counterparts	18
Section 5.9. Survival of Termination	18
Section 5.10. WAIVER OF JURY TRIAL	18
Section 5.11. Entire Agreement	19
Section 5.12. Headings	19
Section 5.13. Issuer’s, Administrator’s, Seller’s and Servicer’s Liabilities	19

EXHIBIT I	Definitions
EXHIBIT II	Conditions of Purchases
EXHIBIT III	Representations and Warranties
EXHIBIT IV	Covenants
EXHIBIT V	Termination Events
EXHIBIT VI	Supplemental Representations, Warranties and Covenants
SCHEDULE I	Credit and Collection Policy
SCHEDULE II	Lock-box Banks and Lock-box Accounts
SCHEDULE III	Trade Names
SCHEDULE IV	Consignments
ANNEX A	Form of Information Package
ANNEX B	Form of Purchase Notice
ANNEX C	Form of Paydown Notice

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This RECEIVABLES PURCHASE AGREEMENT (as amended, supplemented or otherwise modified from time to time, this “Agreement”) is entered into as of December 20, 2001, among CRS FUNDING CORP., a Delaware corporation, as seller (the “Seller”), CARPENTER TECHNOLOGY CORPORATION, a Delaware corporation (“Carpenter”), as initial servicer (in such capacity, together with its successors and permitted assigns in such capacity, the “Servicer”), MARKET STREET FUNDING CORPORATION, a Delaware corporation (together with its successors and permitted assigns, the “Issuer”), and PNC BANK, NATIONAL ASSOCIATION, a national banking association (“PNC”), as administrator (in such capacity, together with its successors and assigns in such capacity, the “Administrator”).

PRELIMINARY STATEMENTS. Certain terms that are capitalized and used throughout this Agreement are defined in Exhibit I. References in the Exhibits hereto to the “Agreement” refer to this Agreement, as amended, supplemented or otherwise modified from time to time.

The Seller desires to sell, transfer and assign an undivided variable percentage interest in a pool of receivables, and the Issuer desires to acquire such undivided variable percentage interest, as such percentage interest shall be adjusted from time to time based upon, in part, reinvestment payments that are made by the Issuer.

In consideration of the mutual agreements, provisions and covenants contained herein, the parties hereto agree as follows:

ARTICLE I.

AMOUNTS AND TERMS OF THE PURCHASES

Section 1.1. Purchase Facility. (a) On the terms and conditions hereinafter set forth, the Issuer hereby agrees to purchase, and make reinvestments of, undivided percentage ownership interests with regard to the Purchased Interest from the Seller from time to time from the date hereof to the Facility Termination Date. Under no circumstances shall the Issuer make any such purchase or reinvestment if, after giving effect to such purchase or reinvestment, the aggregate outstanding Capital of the Purchased Interest would exceed the Purchase Limit.

(b) The Seller may, upon at least 60 days’ written notice to the Administrator, terminate the purchase facility provided in this Section in whole or, upon at least 30 days’ written notice to the Administrator, from time to time, irrevocably reduce in part the unused portion of the Purchase Limit; provided, that each partial reduction shall be in the amount of at least $5,000,000, or an integral multiple of $1,000,000 in excess thereof, and that, unless terminated in whole, the Purchase Limit shall in no event be reduced below $20,000,000.

Section 1.2. Making Purchases. (a) Each purchase (but not reinvestment) of undivided percentage ownership interests with regard to the Purchased Interest hereunder shall be made upon the Seller’s irrevocable written notice in the form of Annex B (the “Purchase Notice”) delivered to the Administrator in accordance with Section 5.2 (which notice must be received by the

Administrator before 11:00 a.m., New York City time) at least two Business Days before the requested purchase date, which notice shall specify: (A) the amount requested to be paid to the Seller (such amount, which shall not be less than $1,000,000 and shall be in integral multiples of $100,000, being the Capital relating to the undivided percentage ownership interest then being purchased), (B) the date of such purchase (which shall be a Business Day), and (C) the pro forma calculation of the Purchased Interest after giving effect to the increase in Capital.

(b) On the date of each purchase (but not reinvestment) of undivided percentage ownership interests with regard to the Purchased Interest hereunder, the Issuer shall, upon satisfaction of the applicable conditions set forth in Exhibit II, make available to the Seller in same day funds, at Mellon Bank East, account number 2583896, ABA# 031000037, an amount equal to the Capital relating to the undivided percentage ownership interest then being purchased.

(c) Effective on the date of each purchase pursuant to this Section and each reinvestment pursuant to Section 1.4, the Seller hereby sells and assigns to the Issuer an undivided percentage ownership interest in: (i) each Pool Receivable then existing, (ii) all Related Security with respect to such Pool Receivables, and (iii) all Collections with respect to, and other proceeds of, such Pool Receivables and Related Security.

(d) To secure all of the Seller’s obligations (monetary or otherwise) under this Agreement and the other Transaction Documents to which it is a party, whether now or hereafter existing or arising, due or to become due, direct or indirect, absolute or contingent, the Seller hereby grants to the Issuer a security interest in all of the Seller’s right, title and interest (including any undivided interest of the Seller) in, to and under all of the following, whether now or hereafter owned, existing or arising: (i) all Pool Receivables, (ii) all Related Security with respect to such Pool Receivables, (iii) all Collections with respect to, and other proceeds of, such Pool Receivables and Related Security, (iv) the Lock-Box Accounts (and the related lock-boxes) and all amounts on deposit therein, and all certificates and instruments, if any, from time to time evidencing such Lock-Box Accounts (and such related lock-boxes) and such amounts on deposit therein, (v) all books and records of each Receivable, and all rights, remedies, powers and privileges of the Seller in any accounts into which Collections are or may be received and all rights (but none of the obligations) of the Seller under the Purchase and Sale Agreement and (vi) all proceeds and products of, and all amounts received or receivable under any or all of, the foregoing (collectively, the “Pool Assets”). The Issuer shall have, with respect to the Pool Assets, and in addition to all the other rights and remedies available to the Issuer, all the rights and remedies of a secured party under any applicable UCC.

Section 1.3. Purchased Interest Computation. The Purchased Interest shall be initially computed on the date of the initial purchase hereunder. Thereafter, until the Facility Termination Date, the Purchased Interest shall be automatically recomputed (or deemed to be recomputed) on each Business Day other than a Termination Day. The Purchased Interest as computed (or deemed recomputed) as of the day before the Facility Termination Date shall thereafter remain constant. The Purchased Interest shall become zero when the Capital thereof and Discount thereon shall have been paid in full, all the amounts owed by the Seller and the Servicer hereunder to the Issuer, the Administrator and any other Indemnified Party or Affected Person are paid in full, and the Servicer shall have received the accrued Servicing Fee thereon.

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Section 1.4. Settlement Procedures. (a) The collection of the Pool Receivables shall be administered by the Servicer in accordance with this Agreement. The Seller shall provide to the Servicer on a timely basis all information needed for such administration, including notice of the occurrence of any Termination Day and current computations of the Purchased Interest.

(b) The Servicer shall, on each day on which Collections of Pool Receivables are received (or deemed received) by the Seller or the Servicer:

(i) set aside and hold in trust (and shall, after the occurrence of a Termination Event or Unmatured Termination Event at the request of the Administrator, segregate in a separate account approved by the Administrator) for the Issuer, out of the Issuer’s Share of such Collections, first, an amount equal to the Discount accrued through such day for each Portion of Capital and not previously set aside, second, an amount equal to the fees set forth in the Fee Letter accrued and unpaid through such day, and third, to the extent funds are available therefor, an amount equal to the Issuer’s Share of the Servicing Fee accrued through such day and not previously set aside,

(ii) subject to Section 1.4(f), if such day is not a Termination Day, remit to the Seller, on behalf of the Issuer, the remainder of the Issuer’s Share of such Collections, Such remainder shall be automatically reinvested in Pool Receivables, and in the Related Security, Collections and other proceeds with respect thereto; provided, however, that if the Purchased Interest would exceed 100%, then the Servicer shall not reinvest, but shall set aside and hold in trust for the Issuer (and shall, at the request of the Administrator, segregate in a separate account approved by the Administrator) a portion of such Collections that, together with the other Collections set aside pursuant to this paragraph, shall equal the amount necessary to reduce the Purchased Interest to 100%,

(iii) if such day is a Termination Day, set aside, segregate and hold in trust (and shall, at the request of the Administrator, segregate in a separate account approved by the Administrator) for the Issuer the entire remainder of the Issuer’s Share of the Collections; provided, that if amounts are set aside and held in trust on any Termination Day of the type described in clause (a) of the definition of “Termination Day” and, thereafter, the conditions set forth in Section 2 of Exhibit II are satisfied or waived by the Administrator, such previously set-aside amounts shall be reinvested in accordance with clause (ii) on the day of such subsequent satisfaction or waiver of conditions, and

(iv) release to the Seller (subject to Section 1.4(f)) for its own account any Collections in excess of: (x) amounts required to be reinvested in accordance with clause (ii) or the proviso to clause (iii) plus (y) the amounts that are required to be set aside pursuant to clause (i), the proviso to clause (ii) and clause (iii) plus (z) the Seller’s Share of the Servicing Fee accrued and unpaid through such day and all reasonable and appropriate out-of-pocket costs and expenses of the Servicer for servicing, collecting and administering the Pool Receivables.

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(c) The Servicer shall deposit into the Administration Account (or such other account designated by the Administrator), on each Settlement Date (or solely with respect to Collections held for the Issuer pursuant to clause (f)(iii) such other date approved by the Administrator with at least five (5) Business Days prior written notice to the Administrator of such payment), Collections held for the Issuer pursuant to clause (b)(i) or (f) plus the amount of Collections then held for the Issuer pursuant to clauses (b)(ii) and (iii) of Section 1.4; provided, that if Carpenter or an Affiliate thereof is the Servicer, such day is not both a Termination Day and a day upon which the Administrator has notified Carpenter (or such Affiliate) that the right to retain the portion of the Collections set aside pursuant to clause (b)(i) that represent the Issuer’s Share of the Servicing Fee is revoked, Carpenter (or such Affiliate) may retain the portion of the Collections set aside pursuant to clause (b)(i) that represents the Issuer’s Share of the Servicing Fee in payment in full of the Issuer’s Share of accrued servicing fees so set aside. On the last day of each Settlement Period, the Administrator will notify the Servicer by facsimile of the amount of Discount accrued with respect to each Portion of Capital during such Settlement Period or portion thereof.

(d) Upon receipt of funds deposited into the Administration Account pursuant to clause (c), the Administrator shall cause such funds to be distributed as follows:

(i) if such distribution occurs on a day that is not a Termination Day and the Purchased Interest does not exceed 100%, first to the Issuer in payment in full of all accrued Discount and fees (other than Servicing Fees) with respect to each Portion of Capital, and second, if the Servicer has set aside amounts in respect of the Servicing Fee pursuant to clause (b)(i) and has not retained such amounts pursuant to clause (c), to the Servicer (payable in arrears on each Settlement Date) in payment in full of the Issuer’s Share of accrued Servicing Fees so set aside, and

(ii) if such distribution occurs on a Termination Day or on a day when the Purchased Interest exceeds 100%, first to the Issuer in payment in full of all accrued Discount with respect to each Portion of Capital, second to the Issuer in payment in full of Capital (or, if such day is not a Termination Day, the amount necessary to reduce the Purchased Interest to 100%), third, to the Servicer in payment in full of all accrued Servicing Fees, and fourth, if the Capital and accrued Discount with respect to each Portion of Capital have been reduced to zero, and all accrued Servicing Fees payable to the Servicer have been paid in full, to the Issuer, the Administrator and any other Indemnified Party or Affected Person in payment in full of any other amounts owed thereto by the Seller hereunder.

After the Capital, Discount, fees payable pursuant to the Fee Letter and Servicing Fees with respect to the Purchased Interest, and any other amounts payable by the Seller and the Servicer to the Issuer, the Administrator or any other Indemnified Party or Affected Person hereunder, have been paid in full, all additional and/or remaining Collections with respect to the Purchased Interest shall be paid to the Seller for its own account.

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(e) For the purposes of this Section 1.4:

(i) if on any day the Outstanding Balance of any Pool Receivable is reduced or adjusted as a result of any defective, rejected, returned, repossessed or foreclosed goods or services, or any revision, cancellation, allowance, rebate, discount or other adjustment made by the Seller or any Affiliate of the Seller, or any set off or dispute between the Seller or any Affiliate of the Seller and an Obligor, the Seller shall be deemed to have received on such day a Collection of such Pool Receivable in the amount of such reduction or adjustment;

(ii) if on any day any of the representations or warranties in Section 1(g) or (n) of Exhibit III is not true with respect to any Pool Receivable, the Seller shall be deemed to have received on such day a Collection of such Pool Receivable in full;

(iii) except as provided in clause (i) or (ii), or as otherwise required by applicable law or the relevant Contract, all Collections received from an Obligor of any Receivable shall be applied to the Receivables of such Obligor in the order of the age of such Receivables, starting with the oldest such Receivable, unless such Obligor designates in writing its payment for application to specific Receivables; and

(iv) if and to the extent the Administrator or the Issuer shall be required for any reason to pay over to an Obligor (or any trustee, receiver, custodian or similar official in any Insolvency Proceeding) any amount received by it hereunder, such amount shall be deemed not to have been so received by the Administrator or the Issuer but rather to have been retained by the Seller and, accordingly, the Administrator or the Issuer, as the case may be, shall have a claim against the Seller for such amount, payable when and to the extent that any distribution from or on behalf of such Obligor is made in respect thereof.

(f) If at any time the Seller shall wish to cause the reduction of the Capital (but not to commence the liquidation, or reduction to zero, of the entire Capital of the Purchased Interest), the Seller may do so as follows:

(i) the Seller shall give the Administrator and the Servicer written notice in the form of Annex C (A) at least two Business Days’ prior to the date of such reduction for any reduction of Capital less than or equal to $10,000,000 and (B) at least five Business Days prior to the date of such reduction for any reduction of Capital greater than $10,000,000 in each case such notice shall include the amount of such proposed reduction and the proposed date on which such reduction will commence;

(ii) on the proposed date of the commencement of such reduction and on each day thereafter, the Servicer shall cause Collections not to be reinvested until the amount thereof not so reinvested shall equal the desired amount of reduction; and

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(iii) the Servicer shall hold such Collections in trust for the Issuer, for payment to the Administrator on (1) the next Settlement Date immediately following the current Settlement Period or (2) such other date approved by the Administrator with at least five (5) Business Days prior written notice to the Administrator of such payment, and the Capital shall be deemed reduced in the amount to be paid to the Administrator only when in fact finally so paid;

provided, that (a) the amount of any such reduction shall be not less than $1,000,000 and shall be an integral multiple of $100,000, and the entire Capital of the Purchased Interest after giving effect to such reduction shall be not less than $20,000,000 (unless the entire Capital shall have been reduced to zero) and (b) the Seller shall choose a reduction amount, and the date of commencement thereof, so that to the extent practicable such reduction shall commence and conclude in the same Settlement Period.

Section 1.5. Fees. The Seller shall pay to the Administrator certain fees in the amounts and on the dates set forth in a letter, dated the date hereof, among Carpenter, the Seller and the Administrator (as such letter agreement may be amended, supplemented or otherwise modified from time to time, the “Fee Letter”).

Section 1.6. Payments and Computations, Etc. (a) All amounts to be paid or deposited by the Seller or the Servicer hereunder shall be made without reduction for offset or counterclaim and shall be paid or deposited no later than noon (New York City time) on the day when due in same day funds to the Administration Account. All amounts received after noon (New York City time) will be deemed to have been received on the next Business Day.

(b) The Seller or the Servicer, as the case maybe, shall, to the extent permitted bylaw, pay interest on any amount not paid or deposited by the Seller or the Servicer, as the case may be, when due hereunder, at an interest rate equal to 2.0% per annum above the Base Rate, payable on demand.

(c) All computations of interest under clause (b) and all computations of Discount, fees and other amounts hereunder shall be made on the basis of a year of 360 (or 365 or 366, as applicable, with respect to Discount or other amounts calculated by reference to the Base Rate) days for the actual number of days elapsed. Whenever any payment or deposit to be made hereunder shall be due on a day other than a Business Day, such payment or deposit shall be made on the next Business Day and such extension of time shall be included in the computation of such payment or deposit.

Section 1.7. Increased Costs. (a) If the Administrator, the Issuer, any Purchaser, any other Program Support Provider or any of their respective Affiliates (each an “Affected Person”) reasonably determines that the existence of or compliance with: (i) any law or regulation or any change therein or in the interpretation or application thereof, in each case adopted, issued or occurring after the date hereof, or (ii) any request, guideline or directive from any central bank or other Governmental Authority (whether or not having the force of law) issued or occurring after the date of this Agreement, affects or would affect the amount of capital required or expected to be maintained by such Affected Person, and such Affected Person determines that the amount of such capital is increased by or based upon the existence of any commitment to make purchases of (or otherwise to maintain the investment in) Pool Receivables related to this Agreement or any related

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liquidity facility, credit enhancement facility and other commitments of the same type, then, upon demand by such Affected Person (with a copy to the Administrator), the Seller shall promptly pay to the Administrator, for the account of such Affected Person, from time to time as specified by such Affected Person, additional amounts sufficient to compensate such Affected Person in the light of such circumstances, to the extent that such Affected Person reasonably determines such increase in capital to be allocable to the existence of any of such commitments. A certificate as to such amounts submitted to the Seller and the Administrator by such Affected Person shall be conclusive and binding for all purposes, absent manifest error.

(b) If, due to either: (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to any Affected Person of agreeing to purchase or purchasing, or maintaining the ownership of, the Purchased Interest in respect of which Discount is computed by reference to the Euro-Rate, then, upon demand by such Affected Person, the Seller shall promptly pay to such Affected Person, from time to time as specified by such Affected Person, additional amounts sufficient to compensate such Affected Person for such increased costs. A certificate as to such amounts submitted to the Seller and the Administrator by such Affected Person shall be conclusive and binding for all purposes, absent manifest error.

(c) If such increased costs affect the related Affected Person’s portfolio of financing transactions, such Affected Person shall use reasonable averaging and attribution methods to allocate such increased costs to the transactions contemplated by this Agreement.

Section 1.8. Requirements of Law. If any Affected Person reasonably determines that the existence of or compliance with: (a) any law or regulation or any change therein or in the interpretation or application thereof, in each case adopted, issued or occurring after the date hereof, or (b) any request, guideline or directive from any central bank or other Governmental Authority (whether or not having the force of law) issued or occurring after the date of this Agreement:

(i) does or shall subject such Affected Person to any tax of any kind whatsoever with respect to this Agreement, any increase in the Purchased Interest or in the amount of Capital relating thereto, or does or shall change the basis of taxation of payments to such Affected Person on account of Collections, Discount or any other amounts payable hereunder (excluding taxes imposed on the overall pre-tax net income of such Affected Person, and franchise taxes imposed on such Affected Person, by the jurisdiction under the laws of which such Affected Person is organized or a political subdivision thereof),

(ii) does or shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, purchases, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Affected Person that are not otherwise included in the determination of the Euro-Rate or the Base Rate hereunder, or

(iii) does or shall impose on such Affected Person any other condition,

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and the result of any of the foregoing is: (A) to increase the cost to such Affected Person of acting as Administrator, or of agreeing to purchase or purchasing or maintaining the ownership of undivided percentage ownership interests with regard to the Purchased Interest (or interests therein) or any Portion of Capital, or (B) to reduce any amount receivable hereunder (whether directly or indirectly), then, in any such case, without duplication to any amounts paid or payable pursuant to Section 1.7 upon demand by such Affected Person, the Seller shall promptly pay to such Affected Person additional amounts necessary to compensate such Affected Person for such additional cost or reduced amount receivable. All such amounts shall be payable as incurred. A certificate from such Affected Person to the Seller and the Administrator certifying, in reasonably specific detail, the basis for, calculation of, and amount of such additional costs or reduced amount receivable shall be conclusive and binding for all purposes, absent manifest error; provided, however, that no Affected Person shall be required to disclose any confidential or tax planning information in any such certificate.

Section 1.9. Inability to Determine Euro-Rate. (a) If the Administrator determines before the first day of any Settlement Period (which determination shall be final and conclusive) that, by reason of circumstances affecting the interbank eurodollar market generally, deposits in dollars (in the relevant amounts for such Settlement Period) are not being offered to banks in the interbank eurodollar market for such Settlement Period, or adequate means do not exist for ascertaining the Euro-Rate for such Settlement Period, then the Administrator shall give notice thereof to the Seller. Thereafter, until the Administrator notifies the Seller that the circumstances giving rise to such suspension no longer exist, (i) no Portion of Capital shall be funded at the Alternate Rate determined by reference to the Euro-Rate and (ii) the Discount for any outstanding Portions of Capital then funded at the Alternate Rate determined by reference to the Euro-Rate shall, on the last day of the then current Settlement Period, be converted to the Alternate Rate determined by reference to the Base Rate.

(b) If, on or before the first day of any Settlement Period, the Administrator shall have been notified by any Purchaser that, such Purchaser has determined (which determination shall be final and conclusive) that, any enactment, promulgation or adoption of or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by a governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Purchaser with any guideline, request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for such Purchaser to fund or maintain any Portion of Capital at the Alternate Rate and based upon the Euro-Rate, the Administrator shall notify the Seller thereof. Upon receipt of such notice, until the Administrator notifies the Seller that the circumstances giving rise to such determination no longer apply, (i) no Portion of Capital shall be funded at the Alternate Rate determined by reference to the Euro-Rate and (ii) the Discount for any outstanding Portions of Capital then funded at the Alternate Rate determined by reference to the Euro-Rate shall be converted to the Alternate Rate determined by reference to the Base Rate either (A) on the last day of the then current Settlement Period if such Purchaser may lawfully continue to maintain such

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Portion of Capital at the Alternate Rate determined by reference to the Euro-Rate to such day, or (B) immediately, if such Purchaser may not lawfully continue to maintain such Portion of Capital at the Alternate Rate determined by reference to the Euro-Rate to such day.

ARTICLE II.

REPRESENTATIONS AND WARRANTIES; COVENANTS;

TERMINATION EVENTS

Section 2.1. Representations and Warranties; Covenants. Each of the Seller, Carpenter and the Servicer hereby makes the representations and warranties, and hereby agrees to perform and observe the covenants, applicable to it set forth in Exhibits III, IV and VI, respectively.

Section 2.2. Termination Events. If any of the Termination Events set forth in Exhibit V shall occur, the Administrator may, by notice to the Seller, declare the Facility Termination Date to have occurred (in which case the Facility Termination Date shall be deemed to have occurred); provided, that automatically upon the occurrence of any event described in paragraph (f) of Exhibit V, the Facility Termination Date shall occur. Upon any such declaration, occurrence or deemed occurrence of the Facility Termination Date, the Issuer and the Administrator shall have, in addition to the rights and remedies that they may have under this Agreement, all other rights and remedies provided after default under the New York UCC and under other applicable law, which rights and remedies shall be cumulative.

ARTICLE III.

INDEMNIFICATION

Section 3.1. Indemnities by the Seller. Without limiting any other rights that the Administrator, the Issuer, any Program Support Provider or any of their respective Affiliates, employees, officers, directors, agents, counsel, successors, transferees or assigns (each, an “Indemnified Party”) may have hereunder or under applicable law, the Seller hereby agrees to indemnify each Indemnified Party from and against any and all claims, damages, expenses, costs, losses and liabilities (all of the foregoing being collectively referred to as “Indemnified Amounts”) arising out of or resulting from this Agreement (whether directly or indirectly), the use of proceeds of purchases or reinvestments, the ownership of the Purchased Interest, or any interest therein, or in respect of any Receivable, Related Security or Contract, excluding, however: (a) Indemnified Amounts to the extent resulting from gross negligence, bad faith or willful misconduct on the part of such Indemnified Party or its officers, directors, agents or counsel, (b) recourse with respect to any Receivable to the extent that such Receivable is uncollectible on account of insolvency, bankruptcy or lack of creditworthiness of the related Obligor (except as otherwise specifically provided in this Agreement), or (c) any overall net income taxes or franchise taxes imposed on such Indemnified Party by the jurisdiction under the laws of which such Indemnified Party is organized or any political subdivision thereof. Without limiting or being limited by the foregoing, and subject to the exclusions set forth in the preceding sentence, the Seller shall pay on demand (which demand shall be accompanied by documentation of the Indemnified Amounts, in reasonable detail) to each Indemnified Party any and all amounts necessary to indemnify such Indemnified Party from and against any and all Indemnified Amounts relating to or resulting from any of the following:

(i) the failure of any Receivable included in the calculation of the Net Receivables Pool Balance as an Eligible Receivable to be an Eligible Receivable, the failure of any information contained in an Information Package to be true and correct, or the failure of any other information provided to the Issuer or the Administrator with respect to Receivables or this Agreement to be true and correct,

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(ii) the failure of any representation, warranty or statement made or deemed made by the Seller (or any of its officers) under or in connection with this Agreement to have been true and correct as of the date made or deemed made in all respects when made,

(iii) the failure by the Seller to comply with any applicable law, rule or regulation with respect to any Pool Receivable or the related Contract, or the failure of any Pool Receivable or the related Contract to conform to any such applicable law, rule or regulation,

(iv) the failure to vest in the Issuer a valid and enforceable: (A) perfected undivided percentage ownership interest, to the extent of the Purchased Interest, in the Receivables in, or purporting to be in, the Receivables Pool and the other Pool Assets, or (B) first priority perfected security interest in the Pool Assets, in each case, free and clear of any Adverse Claim,

(v) the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivables in, or purporting to be in, the Receivables Pool and the other Pool Assets, whether at the time of any purchase or reinvestment or at any subsequent time,

(vi) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable in, or purporting to be in, the Receivables Pool (including a defense based on such Receivable or the related Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the goods or services related to such Receivable or the furnishing or failure to furnish such goods or services or relating to collection activities with respect to such Receivable (if such collection activities were performed by the Seller or by any agent or independent contractor retained by the Seller or any of its Affiliates),

(vii) any failure of the Seller to perform its duties or obligations in accordance with the provisions hereof,

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(viii) any products liability or other claim, investigation, litigation or proceeding arising out of or in connection with merchandise, insurance or services that are the subject of any Contract,

(ix) the commingling of Collections at any time with other funds,

(x) the use of proceeds of purchases or reinvestments, or

(xi) any reduction in Capital as a result of the distribution of Collections pursuant to Section 1.4(d), if all or a portion of such distributions shall thereafter be rescinded or otherwise must be returned for any reason.

Section 3.2. Indemnities by the Servicer. Without limiting any other rights that the Administrator, the Issuer or any other Indemnified Party may have hereunder or under applicable law, the Servicer hereby agrees to indemnify each Indemnified Party from and against any and all Indemnified Amounts arising out of or resulting from (whether directly or indirectly): (a) the failure of any information contained in an Information Package to be true and correct, or the failure of any other information provided to the Issuer or the Administrator by, or on behalf of, the Servicer to be true and correct, (b) the failure of any representation, warranty or statement made or deemed made by the Servicer (or any of its officers) under or in connection with this Agreement to have been true and correct as of the date made or deemed made in all respects when made, (c) the failure by the Servicer to comply with any applicable law, rule or regulation with respect to any Pool Receivable or the related Contact, (d) any dispute, claim, offset or defense of the Obligor to the payment of any Receivable in, or purporting to be in, the Receivables Pool resulting from or related to the collection activities with respect to such Receivable, or (e) any failure of the Servicer to perform its duties or obligations in accordance with the provisions hereof or any other Transaction Document to which it is a party, (f) the failure of the Servicer to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivables, in or purporting to be in the Receivables Pool and any other Pool Assets, whether at the time of any purchase or reinvestment or at any subsequent time, or (g) any commingling by the Servicer of Collections at any time with other funds.

ARTICLE IV.

ADMINISTRATION AND COLLECTIONS

Section 4.1. Appointment of the Servicer. (a) The servicing, administering and collection of the Pool Receivables shall be conducted by the Person so designated from time to time as the Servicer in accordance with this Section. Until the Administrator gives notice to Carpenter (in accordance with this Section) of the designation of a new Servicer, Carpenter is hereby designated as, and hereby agrees to perform the duties and obligations of, the Servicer pursuant to the terms hereof. Upon the occurrence of a Termination Event, the Administrator may designate as Servicer any Person (including itself) to succeed Carpenter or any successor Servicer, on the condition in each case that any such Person so designated shall agree to perform the duties and obligations of the Servicer pursuant to the terms hereof.

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(b) Upon the designation of a successor Servicer as set forth in clause (a), Carpenter agrees that it will terminate its activities as Servicer hereunder in a manner that the Administrator reasonably determines will facilitate the transition of the performance of such activities to the new Servicer, and Carpenter shall cooperate with and assist such new Servicer. Such cooperation shall include, upon reasonable notice and during regular business hours, access to and transfer of related records and use by the new Servicer of all licenses, hardware or software necessary or desirable to collect the Pool Receivables and the Related Security.

(c) Carpenter acknowledges that, in making their decision to execute and deliver this Agreement, the Administrator and the Issuer have relied on Carpenter’s agreement to act as Servicer hereunder. Accordingly, Carpenter agrees that it will not voluntarily resign as Servicer.

(d) The Servicer may delegate its duties and obligations hereunder to any subservicer (each a “Sub-Servicer”); provided, that, in each such delegation: (i) such Sub-Servicer shall agree in writing to perform the duties and obligations of the Servicer pursuant to the terms hereof, (ii) the Servicer shall remain primarily liable for the performance of the duties and obligations so delegated, (iii) the Seller, the Administrator and the Issuer shall have the right to look solely to the Servicer for performance, and (iv) the terms of any agreement with any Sub-Servicer shall provide that the Administrator may terminate such agreement upon the termination of the Servicer hereunder by giving notice of its desire to terminate such agreement to the Servicer (and the Servicer shall provide appropriate notice to each such Sub-Servicer); provided, however, that if any such delegation is to any Person (i) other than an Affiliate of the Originator, the Administrator shall have consented in writing in advance to such delegation or (ii) that is an Affiliate of the Originator, the Administrator shall have consented in writing in advance to such delegation, which consent shall not be unreasonably withheld.

Section 4.2. Duties of the Servicer. (a) The Servicer shall take or cause to be taken all such action as may be necessary or advisable to administer and collect each Pool Receivable from time to time, all in accordance with this Agreement and all applicable laws, rules and regulations, with reasonable care and diligence, and in accordance with the Credit and Collection Policies. The Servicer shall set aside, for the accounts of the Seller and the Issuer, the amount of the Collections to which each is entitled in accordance with Article I. The Servicer may, in accordance with the applicable Credit and Collection Policy, take such action as the Servicer may determine to be appropriate to maximize Collections thereof or reflect adjustments required under the applicable Contract; provided, however, that: for the purposes of this Agreement, (i) such action shall not change the number of days such Pool Receivable has remained unpaid from the date of the original due date related to such Pool Receivable, (ii) such action shall not alter the status of such Pool Receivable as a Delinquent Receivable or a Defaulted Receivable or limit the rights of the Issuer or the Administrator under this Agreement and (iii) if a Termination Event has occurred and Carpenter or an Affiliate thereof is serving as the Servicer, Carpenter or such Affiliate may take such action only upon the prior approval of the Administrator. The Seller shall deliver to the Servicer and

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the Servicer shall hold for the benefit of the Seller and the Administrator (individually and for the benefit of the Issuer), in accordance with their respective interests, all records and documents (including computer tapes or disks) with respect to each Pool Receivable. Notwithstanding anything to the contrary contained herein, the Administrator may direct the Servicer (whether the Servicer is Carpenter or any other Person) to commence or settle any legal action to enforce collection of any Pool Receivable or to foreclose upon or repossess any Related Security; provided, however, that no such direction may be given unless either: (A) a Termination Event has occurred or (B) the Unmatured Termination Event described in paragraph (f) of Exhibit V has occurred and the Administrator believes in good faith that the failure to commerce, settle or effect such legal action, foreclosure or repossession could adversely affect Receivables constituting a material portion of the Pool Receivables.

(b) The Servicer shall, as soon as practicable following actual receipt of collected funds, turn over to the Seller the collections of any indebtedness that is not a Pool Receivable, less, if Carpenter or an Affiliate thereof is not the Servicer, all reasonable and appropriate out-of-pocket costs and expenses of such Servicer of servicing, collecting and administering such collections. The Servicer, if other than Carpenter or an Affiliate thereof, shall, as soon as practicable upon demand, deliver to the Seller all records in its possession that evidence or relate to any indebtedness that is not a Pool Receivable, and copies of records in its possession that evidence or relate to any indebtedness that is a Pool Receivable.

(c) The Servicer’s obligations hereunder shall terminate on the later of (i) the Facility Termination Date and (ii) the date on which all amounts required to be paid to the Issuer, the Administrator and any other Indemnified Party or Affected Person hereunder shall have been paid in full.

After such termination, if Carpenter or an Affiliate thereof was not the Servicer on the date of such termination, the Servicer shall promptly deliver to the Seller all books, records and related materials that the Seller previously provided to the Servicer, or that have been obtained by the Servicer, in connection with this Agreement.

Section 4.3. Lock-Box Arrangements. Prior to the initial purchase hereunder, the Seller shall enter into Lock-Box Agreements with all of the Lock-Box Banks and deliver original counterparts thereof to the Administrator. Upon the occurrence of any Termination Event or an Unmatured Termination Event described in paragraph (f) of Exhibit V, the Administrator may at any time thereafter give notice to each Lock-Box Bank that the Administrator is exercising its rights under the Lock-Box Agreements to do any or all of the following: (a) to have the exclusive ownership and control of the Lock-Box Accounts (and the related lock-boxes) transferred to the Administrator and to exercise exclusive dominion and control over the funds deposited therein (b) to have the proceeds that are sent to the respective Lock-Box Accounts (and the respective related lock-boxes) redirected pursuant to the Administrator’s instructions rather than deposited in the applicable Lock-Box Account (or sent to the applicable related lock-box), and (c) to take any or all other actions permitted under the applicable Lock-Box Agreement. The Seller hereby agrees that if the Administrator at any time takes any action set forth in the preceding sentence, the Administrator shall have exclusive

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control of the proceeds (including Collections) of all Pool Receivables and the Seller hereby further agrees to take any other action that the Administrator may reasonably request to transfer such control. Any proceeds of Pool Receivables received by the Seller or the Servicer thereafter shall be sent immediately to the Administrator. The parties hereto hereby acknowledge that if at any time the Administrator takes control of any Lock-Box Account (and any such related lock-box), the Administrator shall not have any rights to the funds therein in excess of the unpaid amounts due to the Administrator, the Issuer, the Seller or any other Person hereunder, and the Administrator shall distribute or cause to be distributed such funds in accordance with Section 4.2 (b) and Article I (in each case as if such funds were held by the Servicer thereunder).

Section 4.4. Enforcement Rights. (a) At any time following the occurrence of a Termination Event:

(i) the Administrator may direct or may instruct the Seller or the Servicer to direct the Obligors that payment of all amounts payable under any Pool Receivable is to be made directly to the Administrator or its designee,

(ii) the Administrator may instruct the Seller or the Servicer to give notice of the Issuer’s interest in Pool Receivables to each Obligor, which notice shall direct that payments be made directly to the Administrator or its designee, and the Seller or the Servicer, as the case may be, shall give such notice at the expense of the Seller or the Servicer, as the case maybe; provided, that if the Seller or the Servicer, as the case may be, fails to so notify each Obligor, the Administrator (at the Seller’s or the Servicer’s, as the case may be, expense) may so notify the Obligors, and

(iii) the Administrator may request the Servicer to, and upon such request the Servicer shall: (A) assemble all of the records necessary or desirable to collect the Pool Receivables and the Related Security, and transfer or license to a successor Servicer the use of all software necessary or desirable to collect the Pool Receivables and the Related Security, and make the same available to the Administrator or its designee at a place selected by the Administrator, and (B) segregate all cash, checks and other instruments received by it from time to time constituting Collections in a manner reasonably acceptable to the Administrator and, promptly upon receipt, remit all such cash, checks and instruments, duly endorsed or with duly executed instruments of transfer, to the Administrator or its designee.

(b) The Seller hereby authorizes the Administrator, and irrevocably appoints the Administrator as its attorney-in-fact with full power of substitution and with full authority in the place and stead of the Seller, which appointment is coupled with an interest, to take any and all steps in the name of the Seller and on behalf of the Seller necessary or desirable, in the determination of the Administrator after the occurrence of a Termination Event, an Unmatured Termination Event or following the designation of a successor Servicer (only if such successor Servicer is not an Affiliate of Carpenter), to collect any and all amounts or portions thereof due under any and all Pool Assets, including endorsing the name of the Seller on checks and other instruments representing Collections and enforcing such Pool Assets. Notwithstanding anything to the contrary contained in

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this subsection, none of the powers conferred upon such attorney-in-fact pursuant to the preceding sentence shall subject such attorney-in-fact to any liability if any action taken by it shall prove to be inadequate or invalid, nor shall they confer any obligations upon such attorney-in-fact in any manner whatsoever.

Section 4.5. Responsibilities of the Seller. (a) Anything herein to the contrary notwithstanding, the Seller shall: (i) perform all of its obligations, if any, under the Contracts related to the Pool Receivables to the same extent as if interests in such Pool Receivables had not been transferred hereunder, and the exercise by the Administrator or the Issuer of their respective rights hereunder shall not relieve the Seller from such obligations, and (ii) pay when due any taxes, including any sales taxes payable in connection with the Pool Receivables and their creation and satisfaction. The Administrator and the Issuer shall not have any obligation or liability with respect to any Pool Asset, nor shall either of them be obligated to perform any of the obligations of the Seller, Carpenter or the Originator thereunder.

(b) Carpenter hereby irrevocably agrees that if at any time it shall cease to be the Servicer hereunder, it shall act (if the then-current Servicer so requests) as the data-processing agent of the Servicer and, in such capacity, Carpenter shall conduct the data-processing functions of the administration of the Receivables and the Collections thereon in substantially the same way that Carpenter conducted such data-processing functions while it acted as the Servicer.

Section 4.6. Servicing Fee. (a) Subject to clause (b), the Servicer shall be paid a fee equal to 1.00% per annum (the “Servicing Fee Rate”) of the daily average aggregate Outstanding Balance of the Pool Receivables. The Issuer’s Share of such fee shall be paid through the distributions contemplated by Section 1.4(d), and the Seller’s Share of such fee shall be paid by the Seller on each Settlement Date.

(b) If the Servicer ceases to be Carpenter or an Affiliate thereof, the servicing fee shall be the greater of: (i) the amount calculated pursuant to clause (a), or (ii) an alternative amount specified by the successor Servicer not to exceed 110% of the aggregate reasonable costs and expenses incurred by such successor Servicer in connection with the performance of its obligations as Servicer.

ARTICLE V.

MISCELLANEOUS

Section 5.1. Amendments, Etc. No amendment or waiver of any pro vision of this Agreement or any other Transaction Document, or consent to any departure by the Seller or the Servicer therefrom, shall be effective unless in a writing signed by the Administrator, and, in the case of any amendment, by the other parties thereto; and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No failure on the part of the Issuer or the Administrator to exercise, and no delay in exercising any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right.

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Section 5.2. Notices, Etc. (i) All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including facsimile communication) and shall be personally delivered or sent by certified mail, postage prepaid, or by facsimile, to the intended party at the mailing address or facsimile number of such party set forth under its name on the signature pages hereof or at such other address or facsimile number as shall be designated by such party in a written notice to the other parties hereto. All such notices and communications shall be effective (i) if personally delivered, when received, (ii) if sent by certified mail three (3) Business Days after having been deposited in the mail, postage prepaid, and (iii) if transmitted by facsimile, when sent, receipt confirmed by telephone or electronic means (and shall be followed by a hard copy sent by first class mail).

Section 5.3. Assignability. (a) This Agreement and the Issuer’s rights and obligations herein (including ownership of the Purchased Interest or an interest therein) shall be assignable, in whole or in part, by the Issuer and its successors and assigns with the prior written consent of the Seller; provided, however, that such consent shall not be unreasonably withheld; and provided further, that no such consent shall be required if the assignment is made to PNC, any Affiliate of PNC (other than a director or officer of PNC), any Purchaser or other Program Support Provider or any Person that is: (i) in the business of issuing Notes and (ii) associated with or administered by PNC or any Affiliate of PNC. Each assignor may, in connection with the assignment, disclose to the applicable assignee (that shall have agreed to be bound by Section 5.6) any information relating to the Servicer, the Seller or the Pool Receivables furnished to such assignor by or on behalf of the Servicer, the Seller, the Issuer or the Administrator. The Administrator shall give prior written notice of any assignment of the Issuer’s rights and obligations (including ownership of the Purchased Interest to any Person other than a Program Support Provider).

(b) The Issuer may at any time grant to one or more banks or other institutions (each a “Purchaser”) party to the Liquidity Agreement, or to any other Program Support Provider, participating interests in the Purchased Interest. In the event of any such grant by the Issuer of a participating interest to a Purchaser or other Program Support Provider, the Issuer shall remain responsible for the performance of its obligations hereunder. The Seller agrees that each Purchaser or other Program Support Provider shall be entitled to the benefits of Sections 1.7 and 1.8.

(c) This Agreement and the rights and obligations of the Administrator hereunder shall be assignable, in whole or in part, by the Administrator and its successors and assigns; provided, that unless: (i) such assignment is to an Affiliate of PNC, (ii) it becomes unlawful for PNC to serve as the Administrator or (iii) a Termination Event exists, the Seller has consented to such assignment, which consent shall not be unreasonably withheld.

(d) Except as provided in Section 4.1(d), none of the Seller, Carpenter or the Servicer may assign its rights or delegate its obligations hereunder or any interest herein without the prior written consent of the Administrator.

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(e) Without limiting any other rights that may be available under applicable law, the rights of the Issuer may be enforced through it or by its agents.

Section 5.4. Costs, Expenses and Taxes. (a) In addition to the rights of indemnification granted under Section 3.1, the Seller agrees to pay within three (3) Business Days of demand (which demand shall be accompanied by documentation thereof in reasonable detail) all reasonable costs and expenses in connection with the preparation, execution, delivery and administration (including periodic internal audits by the Administrator of Pool Receivables) of this Agreement, the other Transaction Documents and the other documents and agreements to be delivered hereunder (and all reasonable costs and expenses in connection with any amendment, waiver or modification of any thereof), including: (i) Attorney Costs for the Administrator, the Issuer and their respective Affiliates and agents with respect thereto and with respect to advising the Administrator, the Issuer and their respective Affiliates and agents as to their rights and remedies under this Agreement and the other Transaction Documents, and (ii) all reasonable costs and expenses (including Attorney Costs), if any, of the Administrator, the Issuer and their respective Affiliates and agents in connection with the enforcement of this Agreement and the other Transaction Documents.

(b) In addition, the Seller shall pay within three (3) Business Days of demand any and all stamp and other taxes and fees payable in connection with the execution, delivery, filing and recording of this Agreement or the other documents or agreements to be delivered hereunder, and agrees to save each Indemnified Party harmless from and against any liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees.

Section 5.5. No Proceedings; Limitation on Payments. Each of the Seller, Carpenter, the Servicer, the Administrator, each assignee of the Purchased Interest or any interest therein, and each Person that enters into a commitment to purchase the Purchased Interest or interests therein, hereby covenants and agrees that it will not institute against, or join any other Person in instituting against, the Issuer any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other proceeding under any federal or state bankruptcy or similar law, for one year and one day after the latest maturing Note issued by the Issuer is paid in full. The provision of this Section 5.5 shall survive any termination of this Agreement.

Section 5.6. Confidentiality. Unless otherwise required by applicable law, each of the Seller and the Servicer agrees to maintain the confidentiality of the terms of this Agreement and the other Transaction Documents (and all drafts thereof) in communications with third parties and otherwise; provided, that this Agreement may be disclosed to: (a) third parties to the extent such disclosure is made pursuant to a written agreement of confidentiality in form and substance reasonably satisfactory to the Administrator, and (b) the Seller’s legal counsel and auditors if they agree to hold it confidential. Unless otherwise required by applicable law, each of the Administrator and the Issuer agrees to maintain the confidentiality of this Agreement and the Transaction Documents (and all drafts thereof) and non-public financial information regarding Carpenter and its Subsidiaries and Affiliates; provided, that such information may be disclosed to: (i) third parties to the extent such disclosure is made pursuant to a written agreement of confidentiality in form and substance reasonably satisfactory to Carpenter, (ii) legal counsel and auditors of the Issuer or the Administrator

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if they agree to hold it confidential (iii) the rating agencies rating the Notes, (iv) any Program Support Provider or potential Program Support Provider (if they agree to hold it confidential), (v) any placement agent placing the Notes and (vi) any regulatory authorities having jurisdiction over PNC, the Issuer, any Program Support Provider or any Purchaser.

Section 5.7. GOVERNING LAW AND JURISDICTION. (a) THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW Y0RK (INCLUDING FOR SUCH PURPOSE SECTION 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK) EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF A SECURITY INTEREST OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.

(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FEDERAL COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HERETO CONSENTS, FOR IT SELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH OF THE PARTIES HERETO WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH SERVICE MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.

Section 5.8. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which, when so executed, shall be deemed to be an original, and all of which, when taken together, shall constitute one and the same agreement.

Section 5.9. Survival of Termination. The provisions of Sections 1.7, 1.8, 3.1, 3.2, 5.4, 5.5, 5.6, 5.7, 5.10 and 5.13 shall survive any termination of this Agreement.

Section 5.10. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. EACH OF THE PARTIES HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.

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WITHOUT LIMITING THE FOREGOING, EACH OF THE PARTIES HERETO FURTHER AGREES THAT ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING THAT SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.

Section 5.11. Entire Agreement. This Agreement and the other Transaction Documents embody the entire agreement and understanding between the parties hereto, and supersede all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof, except for any prior arrangements made with respect to the payment by the Issuer of (or any indemnification for) any fees, costs or expenses payable to or incurred (or to be incurred) by or on behalf of the Seller, the Servicer and the Administrator.

Section 5.12. Headings. The captions and headings of this Agreement and any Exhibit, Schedule or Annex hereto are for convenience of reference only and shall not affect the interpretation hereof or thereof.

Section 5.13. Issuer’s, Administrator’s, Seller’s and Servicer’s Liabilities. The obligations of the Issuer, the Administrator, the Seller and the Servicer under the Transaction Documents are solely the corporate obligations of the Issuer, the Administrator, the Seller and the Servicer, respectively. No recourse shall be had for any obligation or claim arising out of or based upon any Transaction Document against any stockholder, employee, officer, director or incorporator of the Issuer, the Administrator, the Seller or the Servicer; provided, however, that this Section shall not relieve any such Person of any liability it might otherwise have for its own gross negligence or willful misconduct.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

CRS FUNDING CORP.
By:
	Name:	Jaime Vasquez
	Title:	President
Address:		CRS Funding Corp.
		1047 North Park Road
		Wyomissing, PA 19610-1339
Attention:		Jaime Vasquez
Telephone:		(610) 208-2165
Facsimile:		(610) 736-8201
CARPENTER TECHNOLOGY CORPORATION
By:
	Name:	Jaime Vasquez
	Title:	Vice President and Treasurer
Address:		Carpenter Technology Corporation
		1047 North Park Road
		Wyomissing, PA 19610-1339
Attention:		Jaime Vasquez
Telephone:		(610) 208-2165
Facsimile:		(610) 736-8201]

S-1 Receivables Purchase Agreement

MARKET STREET FUNDING CORPORATION
By:
	Name:
	Title:
Address:		Market Street Funding Corporation
		c/o AMACAR Group, LLC
		6525 Morrison Boulevard, Suite 318
		Charlotte, N.C. 28211
Attention:		Douglas K. Johnson
Telephone:		(704) 365-0569
Facsimile:		(704) 365-1362
With a copy to:
PNC Bank, National Association
One PNC Plaza
249 Fifth Avenue
Pittsburgh, PA 15222-2707
Attention:		John T. Smathers
Telephone:		(412) 762-6440
Facsimile:		(412) 762-9184

S-2 Receivables Purchase Agreement

PNC BANK, NATIONAL ASSOCIATION, as Administrator
By:
	Name:
	Title:
Address:		PNC Bank, National Association
		One PNC Plaza
		249 Fifth Avenue
		Pittsburgh, PA 15222-2707
Attention:		John T. Smathers
Telephone:		(412) 762-6440
Facsimile:		(412) 762-9184

S-3 Receivables Purchase Agreement

EXHIBIT I

DEFINITIONS

As used in the Agreement (including its Exhibits, Schedules and Annexes), the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined). Unless otherwise indicated, all Section, Annex, Exhibit and Schedule references in this Exhibit are to Sections of and Annexes, Exhibits and Schedules to the Agreement.

“Administration Account” means the account (account number 1002422076, ABA number 043000096) of the Administrator maintained at the office of PNC at One PNC Plaza, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707, or such other account as may be so designated in writing by the Administrator to the Servicer.

“Administrator” has the meaning set forth in the preamble to the Agreement.

“Adverse Claim” means a lien, security interest or other charge or encumbrance, or any other type of preferential arrangement; it being understood that any thereof in favor of, or assigned to, (i) the Issuer or the Administrator (for the benefit of the Issuer) or (ii) a Consignor pursuant to a Permitted Lien shall not constitute an Adverse Claim.

“Affected Person” has the meaning set forth in Section 1.7 of the Agreement.

“Affiliate” means, as to any Person: (a) any Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person, or (b) who is a director or officer: (i) of such Person or (ii) of any Person described in clause (a), except that, with respect to the Issuer, Affiliate shall mean the holder(s) of its capital stock. For purposes of this definition, control of a Person shall mean the power, direct or indirect: (x) to vote 25% or more of the securities having ordinary voting power for the election of directors or managers of such Person, or (y) to direct or cause the direction of the management and policies of such Person, in either case whether by ownership of securities, contract, proxy or otherwise.

“Agreement” has the meaning set forth in the preamble to the Agreement.

“Alternate Rate” for any Settlement Period for any Portion of Capital of the Purchased Interest means an interest rate per annum equal to: (a) 1.25% per annum above the Euro-Rate for such Settlement Period; provided, however, that if (x) it shall become unlawful for any Purchaser or Program Support Provider to obtain funds in the London interbank eurodollar market in order to make, fund or maintain any Purchased Interest, or if such funds shall not be reasonably available to any Purchaser or Program Support Provider, or (y) there shall not be at least two Business Days prior to the commencement of an applicable Settlement Period to determine a Euro-Rate in accordance with its terms, then the “Alternate Rate” shall be equal to the Base Rate in effect for each day during the remainder of such Settlement Period or (b) if requested by the Seller the Base Rate

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for such Settlement Period; provided, however, that the “Alternate Rate” for any day while a Termination Event exists shall be an interest rate equal to 2.00% per annum above the Base Rate in effect on such day.

“Attorney Costs” means and includes all reasonable fees and disbursements of any law firm or other external counsel.

“Bankruptcy Code” means the United States Bankruptcy Reform Act of 1978 (11 U.S.C. § 101, et seq.), as amended from time to time.

“Base Rate” means, for any day, a fluctuating interest rate per annum as shall be in effect from time to time, which rate shall be at all times equal to the higher of:

(a) the rate of interest in effect for such day as publicly announced from time to time by PNC in Pittsburgh, Pennsylvania as its “prime rate.” Such “prime rate” is set by PNC based upon various factors, including PNC’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above or below such announced rate, and

(b) 0.50% per annum above the latest Federal Funds Rate.

“BBA” means the British Bankers’ Association.

“Benefit Plan” means any employee benefit pension plan as defined in Section 3(2) of ERISA in respect of which the Seller, the Originator, Carpenter or any ERISA Affiliate is, or at any time during the immediately preceding six years was, an “employer” as defined in Section 3(5) of ERISA.

“Business Day” means any day (other than a Saturday or Sunday) on which: (a) banks are not authorized or required to close in New York City, New York or Pittsburgh, Pennsylvania, and (b) if this definition of “Business Day” is utilized in connection with the Euro-Rate, dealings are carried out in the London interbank market.

“Capital” means the amount paid to the Seller in respect of the Purchased Interest by the Issuer pursuant to the Agreement, or such amount divided or combined in order to determine the Discount applicable to any Portion of Capital, in each case reduced from time to time by Collections distributed and applied on account of such Capital pursuant to Section 1.4(d) of the Agreement; provided, that if such Capital shall have been reduced by any distribution, and thereafter all or a portion of such distribution is rescinded or must otherwise be returned for any reason, such Capital shall be increased by the amount of such rescinded or returned distribution as though it had not been made.

“Carpenter” has the meaning set forth in the preamble to the Agreement.

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“Change in Control” means that (a) with respect to the Seller, Carpenter ceases to own, directly or indirectly, 100% of the capital stock of the Seller free and clear of all Adverse Claims and (b) with respect to Carpenter, the acquisition by any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) of 20% or more of the shares of outstanding voting stock of Carpenter on a fully diluted basis.

“Closing Date” means December 27, 2001.

“Collections” means, with respect to any Pool Receivable: (a) all funds that are received by the Originator, Carpenter, the Seller or the Servicer in payment of any amounts owed in respect of such Receivable (including purchase price, finance charges, interest and all other charges), or applied to amounts owed in respect of such Receivable (including insurance payments and net proceeds of the sale or other disposition of repossessed goods or other collateral or property of the related Obligor or any other Person directly or indirectly liable for the payment of such Pool Receivable and available to be applied thereon), (b) all amounts deemed to have been received pursuant to Section 1.4(e) of the Agreement and (c) all other proceeds of such Pool Receivable.

“Company Note” has the meaning set forth in Section 3.1 of the Purchase and Sale Agreement.

“Concentration Percentage” means for any: (a) Group A Obligor, 16.00%, (b) Group B Obligor, 16.00%, (c) Group C Obligor 8.00% and (d) Group D Obligor, 4.00%.

“Concentration Reserve” means, at any time: (a) the aggregate Capital at such time multiplied by (b)(i) the Concentration Reserve Percentage, divided by (ii) 100%, minus the Concentration Reserve Percentage.

“Concentration Reserve Percentage” means, at any time, the largest of: (a) the sum of four largest Group D Obligor Percentages, (b) the sum of the two largest Group C Obligor Percentages and (c) the largest Group B Obligor Percentage or Group A Obligor Percentage.

“Consignor” means each Person identified as a “consignor” (as such term is defined in the UCC) on Schedule IV hereto.

“Contract” means, with respect to any Receivable, any and all contracts, instruments, agreements, leases, invoices, notes or other writings pursuant to which such Receivable arises or that evidence such Receivable or under which an Obligor becomes or is obligated to make payment in respect of such Receivable.

“CP Rate” for any Settlement Period for any Portion of Capital means a rate calculated by the Administrator equal to: (a) the rate (or if more than one rate, the weighted average of the rates) at which Notes of the Issuer on each day during such period have been outstanding; provided, that if such rate(s) is a discount rate(s), then the CP Rate shall be the rate (or if more than one rate, the weighted average of the rates) resulting from converting such discount rate(s) to an interest-bearing

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equivalent rate plus (b) the commissions and charges charged by such placement agent or commercial paper dealer with respect to such Notes, expressed as a percentage of the face amount of such Notes and converted to an interest-bearing equivalent rate per annum. Notwithstanding the foregoing, the “CP Rate” for any day while a Termination Event exists shall be an interest rate equal to 2.00% above the Base Rate in effect on such day.

“Credit and Collection Policy” means, as the context may require, those receivables credit and collection policies and practices of the Originator in effect on the date of the Agreement and described in Schedule I to the Agreement, as modified in compliance with the Agreement.

“Cut-off Date” has the meaning set forth in the Purchase and Sale Agreement.

“Debt” means: (a) indebtedness for borrowed money, (b) obligations evidenced by bonds, debentures, notes or other similar instruments, (c) obligations to pay the deferred purchase price of property or services, (d) obligations as lessee under leases that shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, and (e) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (a) through (d).

“Defaulted Receivable” means a Receivable:

(a) as to which any payment, or part thereof, remains unpaid for more than 120 days from the original invoice date for such payment, or

(b) without duplication (i) as to which an Insolvency Proceeding shall have occurred with respect to the Obligor thereof or any other Person obligated thereon or owning any Related Security with respect thereto, or (ii) that has been written off the Seller’s books as uncollectible.

“Default Ratio” means the ratio (expressed as a percentage and rounded to the nearest 1/100 of 1%, with 5/1000th of 1% rounded upward) computed as of the last day of each calendar month by dividing: (a) the aggregate Outstanding Balance of all Pool Receivables that became Defaulted Receivables during such month excluding Ineligible Elimination Amounts, by (b) the aggregate credit sales made by the Originator during the month that is four calendar months before such month.

“Delinquency Ratio” means the ratio (expressed as a percentage and rounded to the nearest 1/100 of 1%, with 5/1000th of 1% rounded upward) computed as of the last day of each calendar month by dividing: (a) the aggregate Outstanding Balance of all Pool Receivables that were Delinquent Receivables on such day excluding Ineligible Elimination Amounts by (b) the aggregate Outstanding Balance of all Pool Receivables on such day.

“Delinquent Receivable” means a Receivable as to which any payment, or part thereof, remains unpaid for more than 90 days from the original invoice date for such payment.

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“Designated Ineligible Obligor” means an Obligor reported by Carpenter on the Information Package prepared for the calendar month that is at least 45 days following written notification to the Administrator from the Servicer designating such Obligor as being an Obligor whose Receivables are not generally representative of the other Pool Receivables; provided that the aggregate Outstanding Balance of Receivables related to all Designated Ineligible Obligors shall not exceed 10% of the aggregate Outstanding Balance of all Pool Receivables. If requested by the Servicer and approved by the Administrator, an Obligor may cease to be considered a Designated Ineligible Obligor provided that such Obligor may not subsequently be designated as a Designated Ineligible Obligor.

“Dilution Horizon” means, for any calendar month, the ratio (expressed as a percentage and rounded to the nearest 1/100th of 1%, with 5/1000th of 1% rounded upward) computed as of the last day of such calendar month of: (a) the aggregate credit sales made by the Originator during the two calendar months ending on the last day of the preceding calendar month to (b) the Net Receivables Pool Balance at the last day of the most recent calendar month.

“Dilution Ratio” means the ratio (expressed as a percentage and rounded to the nearest l/100th of 1%, with 5/1000th of 1% rounded upward), computed as of the last day of each calendar month by dividing: (a) the aggregate amount of payments required to be made by the Seller pursuant to Section 1.4(e)(i) of the Agreement, other than payments related to the Ineligible Elimination Amounts, during such calendar month by (b) the aggregate credit sales made by the Originator during the month that is one calendar month before such month.

“Dilution Reserve” means, on any date, an amount equal to: (a) the Capital at the close of business of the Servicer on such date multiplied by (b) (i) the Dilution Reserve Percentage on such date, divided by (ii) 100% minus the Dilution Reserve Percentage on such date.

“Dilution Reserve Percentage” means on any date, the greater of (a) 7.00% and (b) the product of (i) the Dilution Horizon multiplied by (ii) the sum of (x) 2 times the average of the Dilution Ratios for the twelve most recent calendar months and (y) the Spike Factor.

“Discount” means:

(a) for the Portion of Capital for any Settlement Period to the extent the Issuer will be funding such Portion of Capital during such Settlement Period through the issuance of Notes:

CPR x C x ED/360

(b) for the Portion of Capital for any Settlement Period to the extent the Issuer will not be funding such Portion of Capital during such Settlement Period through the issuance of Notes:

AR x C x ED/Year + TF

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where:

AR	=	the Alternate Rate for the Portion of Capital for such Settlement Period,
C	=	the Portion of Capital during such Settlement Period,
CPR	=	the CP Rate for the Portion of Capital for such Settlement Period,
ED	=	the actual number of days during such Settlement Period,
Year	=	if such Portion of Capital is funded based upon: (i) the Euro-Rate, 360 days, and (ii) the Base Rate, 365 or 366 days, as applicable, and
TF	=	the Termination Fee, if any, for the Portion of Capital for such Settlement Period;

provided, that no provision of the Agreement shall require the payment or permit the collection of Discount in excess of the maximum permitted by applicable law; and provided further, that Discount for the Portion of Capital shall not be considered paid by any distribution to the extent that at any time all or a portion of such distribution is rescinded or must otherwise be returned for any reason.

“Eligible Receivable” means, at any time, a Pool Receivable:

(a) the Obligor of which is (i) a United States resident, (ii) not a government or a governmental subdivision, affiliate or agency, (iii) not subject to any action of the type described in paragraph (f) of Exhibit V to the Agreement and (iv) not an Affiliate of Carpenter,

(b) that is denominated and payable only in U.S. dollars in the United States,

(c) that does not have a stated maturity which is more than 50 days after the original invoice date of such Receivable; provided, however, that up to 10% of the aggregate Outstanding Balance of all Receivables may have a stated maturity which is more than 50 days but not more than 90 days after the original invoice date of such Receivable,

(d) that arises under a duly authorized Contract for the sale and delivery of goods and services in the ordinary course of the applicable Originator’s business,

(e) that arises under a duly authorized Contract that is in full force and effect and that is a legal, valid and binding obligation of the related Obligor, enforceable against such Obligor in accordance with its terms,

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(f) that conforms in all material respects with all applicable laws, rulings and regulations in effect,

(g) that is not the subject of any asserted dispute, offset, hold back defense, Adverse Claim or other claim,

(h) that satisfies all applicable requirements of the applicable Credit and Collection Policy,

(i) that has not been modified, waived or restructured since its creation, except as permitted pursuant to Section 4.2 of the Agreement,

(j) in which the Seller owns good and marketable title, free and clear of any Adverse Claims, and that is freely assignable by the Seller (including without any consent of the related Obligor),

(k) for which the Issuer shall have a valid and enforceable undivided percentage ownership or security interest, to the extent of the Purchased Interest, and a valid and enforceable first priority perfected security interest therein and in the Related Security and Collections with respect thereto, in each case free and clear of any Adverse Claim,

(l) that constitutes an account as defined in the UCC, and that is not evidenced by instruments or chattel paper,

(m) that is neither a Defaulted Receivable nor a Delinquent Receivable,

(n) for which neither the Originator thereof, the Seller nor the Servicer has established any offset arrangements with the related Obligor,

(o) of an Obligor as to which Defaulted Receivables of such Obligor do not exceed 50% of the Outstanding Balance of all such Obligor’s Receivables,

(p) that represents amounts earned and payable by the Obligor that are not subject to the performance of additional services by the Originator thereof, and

(q) the Obligor of which has not been reported by the Servicer as a Designated Ineligible Obligor.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections.

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“ERISA Affiliate” means: (a) any corporation that is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Internal Revenue Code) as the Seller, the Originator or Carpenter, (b) a trade or business (whether or not incorporated) under common control (within the meaning of Section 414(c) of the Internal Revenue Code) with the Seller, the Originator or Carpenter, or (c) a member of the same affiliated service group (within the meaning of Section 414(m) of the Internal Revenue Code) as the Seller, the Originator, any corporation described in clause (a) or any trade or business described in clause (b).

“Euro-Rate” means with respect to any Settlement Period the interest rate per annum determined by the Administrator by dividing (the resulting quotient rounded upwards, if necessary, to the nearest 1/100th of 1% per annum) (i) the rate of interest determined by the Administrator in accordance with its usual procedures (which determination shall be conclusive absent manifest error) to be the average of the London interbank market offered rates for U.S. dollars quoted by the British Bankers’ Association (“BBA”) as set forth on Dow Jones Markets Service (formerly known as Telerate) (or appropriate successor or, if British Bankers’ Association or its successor ceases to provide display page 3750 (or such other display page on the Dow Jones Markets Service system as may replace display page 3750) at or about 11:00 a.m. (London time) on the Business Day which is two (2) Business Days prior to the first day of such Settlement Period for an amount comparable to the Portion of Capital to be funded at the Alternate Rate and based upon the Euro-Rate during such Settlement Period by (ii) a number equal to 1.00 minus the Euro-Rate Reserve Percentage. The Euro-Rate may also be expressed by the following formula:

Euro-Rate =	Average of London interbank offered rates quoted by BBA as shown on Dow Jones Markets Service display page 3750 or appropriate successor
	1.00 - Euro-Rate Reserve Percentage

where “Euro-Rate Reserve Percentage” means, the maximum effective percentage in effect on such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirements (including without limitation, supplemental, marginal, and emergency reserve requirements) with respect to eurocurrency funding (currently referred to as “Eurocurrency Liabilities”). The Euro-Rate shall be adjusted with respect to any Portion of Capital funded at the Alternate Rate and based upon the Euro-Rate that is outstanding on the effective date of any change in the Euro-Rate Reserve Percentage as of such effective date. The Administrator shall give prompt notice to the Seller of the Euro-Rate as determined or adjusted in accordance herewith (which determination shall be conclusive absent manifest error).

“Excess Concentration” means the sum of the amounts by which the Outstanding Balance of Eligible Receivables of each Obligor then in the Receivables Pool exceeds an amount equal to: (a) the applicable Concentration Percentage for such Obligor multiplied by (b) the Outstanding Balance of all Eligible Receivables then in the Receivables Pool.

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“Facility Termination Date” means the earliest to occur of: (a) December 17, 2004, (b) the date determined pursuant to Section 2.2 of the Agreement, (c) the date the Purchase Limit reduces to zero pursuant to Section 1.1(b) of the Agreement, (d) the date that the commitments of the Purchasers terminate under the Liquidity Agreement, and (e) the Issuer shall fail to cause the amendment or modification of any Transaction Document or related opinion as required by Moody’s or Standard and Poor’s, and such failure shall continue for 30 days after such amendment is initially requested.

“Federal Funds Rate” means, for any day, the per annum rate set forth in the weekly statistical release designated as H. 15(519), or any successor publication, published by the Federal Reserve Board (including any such successor, “H. 15(519)”) for such day opposite the caption “Federal Funds (Effective).” If on any relevant day such rate is not yet published in H.15 (519), the rate for such day will be the rate set forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, the “Composite 3:30 p.m. Quotations”) for such day under the caption “FederalFunds Effective Rate.” If on any relevant day the appropriate rate is not yet published in either H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such day will be the arithmetic mean as determined by the Administrator of the rates for the last transaction in overnight Federal funds arranged before 9:00 a.m. (New York time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Administrator.

“Federal Reserve Board” means the Board of Governors of the Federal Reserve System, or any entity succeeding to any of its principal functions.

“Fee Letter” has the meaning set forth in Section 1.5 of the Agreement.

“GAAP” means the generally accepted accounting principles and practices in the United States, consistently applied.

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any body or entity exercising executive, legislative, judicial, regulatory or administrative Functions of or pertaining to government, including any court, and any Person owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.

“Group A Obligor” means any Obligor with a short-term rating of at least: (a) “A-l” by Standard & Poor’s, or if such Obligor does not have a short-term rating from Standard & Poor’s, a rating of “A+” or better by Standard & Poor’s on its long-term senior unsecured and uncredit-enhanced debt securities, and (b) “P-l” by Moody’s, or if such Obligor does not have a short-term rating from Moody’s, “Al” or better by Moody’s on its long-term senior unsecured and uncredit-enhanced debt securities.

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“Group A Obligor Percentage” means, at anytime, for each Group A Obligor, the percentage equivalent of: (a) the aggregate Outstanding Balance of the Eligible Receivables of such Group A Obligor less any Excess Concentrations of such Obligor, divided by (b) the aggregate Outstanding Balance of all Eligible Receivables at such time.

“Group B Obligor” means an Obligor, not a Group A Obligor, with a short-term rating of at least: (a) “A-2” by Standard & Poor’s, or if such Obligor does not have a short-term rating from Standard & Poor’s, a rating of “BBB+” to “A” by Standard & Poor’s on its long-term senior unsecured and uncredit-enhanced debt securities, and (b) “P-2” by Moody’s, or if such Obligor does not have a short-term rating from Moody’s, “Baal” to “A2” by Moody’s on its long-term senior unsecured and uncredit-enhanced debt securities.

“Group B Obligor Percentage” means, at any time, for each Group B Obligor, the percentage equivalent of: (a) the aggregate Outstanding Balance of the Eligible Receivables of such Group B Obligor less any Excess Concentrations of such Obligor, divided by (b) the aggregate Outstanding Balance of all Eligible Receivables at such time.

“Group C Obligor” means an Obligor, not a Group A Obligor or a Group B Obligor, with a short-term rating of at least: (a) “A-3” by Standard & Poor’s, or if such Obligor does not have a short-term rating from Standard & Poor’s, a rating of “BBB-” to “BBB” by Standard & Poor’s on its long-term senior unsecured and uncredit-enhanced debt securities, and (b) “P-3” by Moody’s, or if such Obligor does not have a short-term rating from Moody’s, “Baa3” to “Baa2” by Moody’s on its long-term senior unsecured and uncredit-enhanced debt securities.

“Group C Obligor Percentage” means, at any time, for each Group C Obligor, the percentage equivalent of: (a) the aggregate Outstanding Balance of the Eligible Receivables of such Group C Obligor less any Excess Concentrations of such Obligor, divided by (b) the aggregate Outstanding Balance of all Eligible Receivables at such time.

“Group D Obligor” means any Obligor that is not a Group A Obligor, Group B Obligor or Group C Obligor.

“Group D Obligor Percentage” means, at any time, for each Group D Obligor: (a) the aggregate Outstanding Balance of the Eligible Receivables of such Group D Obligor less any Excess Concentrations of such Obligor, divided by (b) the aggregate Outstanding Balance of all Eligible Receivables at such time.

“Indemnified Amounts” has the meaning set forth in Section 3.1 of the Agreement.

“Indemnified Party” has the meaning set forth in Section 3.1 of the Agreement.

“Independent Director” has the meaning set forth in paragraph 3(c) of Exhibit IV to the Agreement.

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“Ineligible Elimination Amounts” means amounts which are reported by the Servicer as inputs to the Information Package as credit memos or aged invoices which relate to Receivables (a) the Obligor of which is not a United States resident, (b) the Obligor of which is an Affiliate of Carpenter, (c) related to consignments (as such term is defined in the UCC) or (d) the Obligor of which has been reported as a Designated Ineligible Obligor on the Information Package.

“Information Package” means a report, in substantially the form of Annex A to the Agreement including all input and calculation pages of the excel securitization model used to generate such report furnished to the Administrator pursuant to the Agreement.

“Insolvency Proceeding” means: (a) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors of a Person, or composition, marshaling of assets for creditors of a Person, or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors, in each of cases (a) and (b) undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code.

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of the Internal Revenue Code also refer to any successor sections.

“Issuer” has the meaning set forth in the preamble to the Agreement.

“Issuer’s Share” of any amount means such amount multiplied by the Purchased Interest at the time of determination.

“Liquidity Agent” means PNC in its capacity as the Liquidity Agent pursuant to the Liquidity Agreement.

“Liquidity Agreement” means the Liquidity Asset Purchase Agreement, dated as of even date herewith, between the purchasers from time to time party thereto, the Issuer and PNC, as Administrator and Liquidity Agent, as the same maybe further amended, supplemented or otherwise modified from time to time.

“Lock-Box Account” means an account in the name of the Seller and maintained by the Seller at a bank or other financial institution for the purpose of receiving Collections.

“Lock-Box Agreement” means an agreement, in form and substance satisfactory to the Administrator, among the Seller, the applicable Originator, the Servicer, the Administrator, the Issuer and a Lock-Box Bank.

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“Lock-Box Bank” means any of the banks or other financial institutions holding one or more Lock-Box Accounts.

“Loss Reserve” means, on any date, an amount equal to: (a) the Capital at the close of business of the Servicer on such date multiplied by (b)(i) the Loss Reserve Percentage on such date divided by (ii) 100% minus the Loss Reserve Percentage on such date.

“Loss Reserve Percentage” means, on any date, the greater of: (a) 5.00% or (b) the product of (i) 2 times (ii) the highest average of the Default Ratios for any three consecutive calendar months during the twelve most recent calendar months and (iii)(A) the aggregate credit sales made by the Originator during the four most recent calendar months, divided by (B) the Net Receivables Pool Balance as of such date.

“Material Adverse Effect” means, relative to any Person with respect to any event or circumstance, a material adverse effect on:

(a) the assets, operations, business or financial condition of such Person,

(b) the ability of any of such Person to perform its obligations under the Agreement or any other Transaction Document to which it is a party,

(c) the validity or enforceability of any other Transaction Document, or the validity, enforceability or collectibility of a material portion of the Pool Receivables, or

(d) the status, perfection, enforceability or priority of the Issuer’s or the Seller’s interest in the Pool Assets.

“Moody’s” means Moody’s Investors Service, Inc.

“Net Receivables Pool Balance” means, at any time: (a) the Outstanding Balance of Eligible Receivables then in the Receivables Poolminus the sum of (b) the Excess Concentration and (c) the Permitted Lien Amount.

“Notes” means short-term promissory notes issued, or to be issued, by the Issuer to fund its investments in accounts receivable or other financial assets.

“Obligor” means, with respect to any Receivable, the Person obligated to make payments pursuant to the Contract relating to such Receivable.

“Originator” has the meaning set forth in the Purchase and Sale Agreement.

“Originator Assignment Certificate” means the assignment, in substantially the form of Exhibit C to the Purchase and Sale Agreement, evidencing Seller’s ownership of the Receivables generated by the Originator, as the same may be amended, supplemented, amended and restated, or otherwise modified from time to time in accordance with the Purchase and Sale Agreement.

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“Outstanding Balance” of any Receivable at any time means the then outstanding principal balance thereof.

“Payment Date” has the meaning set forth in Section 2.2 of the Purchase and Sale Agreement.

“Permitted Lien” means a security interest in favor of a Consignor created in connection with a “consignment” (as such term is defined in the UCC) of goods by such Consignor to the Originator which consignments are set forth on Schedule IV hereto (as such schedule may be amended or modified with the consent of the Administrator).

“Permitted Lien Amount” means the sum of all amounts owing pursuant to all Permitted Liens.

“Person” means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof.

“PNC” has the meaning set forth in the preamble to the Agreement.

“Pool Assets” has the meaning set forth in Section 1.2(d) of the Agreement.

“Pool Receivable” means a Receivable in the Receivables Pool.

“Portion of Capital” means any separate portion of Capital being funded or maintained by the Issuer (or its successors or permitted assigns) by reference to a particular interest rate basis. In addition, at any time when the Capital of the Purchased Interest is not divided into two or more such portions, “Portion of Capital” means 100% of the Capital.

“Program Support Agreement” means and includes the Liquidity Agreement and any other agreement entered into by any Program Support Provider providing for: (a) the issuance of one or more letters of credit for the account of the Issuer, (b) the issuance of one or more surety bonds for which the Issuer is obligated to reimburse the applicable Program Support Provider for any drawings thereunder, (c) the sale by the Issuer to any Program Support Provider of the Purchased Interest (or portions thereof) and/or (d) the making of loans and/or other extensions of credit to the Issuer in connection with the Issuer’s Receivables-securitization program contemplated in the Agreement, together with any letter of credit, surety bond or other instrument issued thereunder (but excluding any discretionary advance facility provided by the Administrator).

“Program Support Provider” means and includes any Purchaser and any other Person (other than any customer of the Issuer) now or hereafter extending credit or having a commitment to extend credit to or for the account of, or to make purchases from, the Issuer pursuant to any Program Support Agreement.

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“Purchase and Sale Agreement” means the Purchase and Sale Agreement, dated as of even date herewith, between the Seller and the Originator, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time.

“Purchase and Sale Indemnified Amounts” has the meaning set forth in Section 9.1 of the Purchase and Sale Agreement.

“Purchase and Sale Indemnified Party” has the meaning set forth in Section 9.1 of the Purchase and Sale Agreement.

“Purchase and Sale Termination Date” has the meaning set forth in Section 1.4 of the Purchase and Sale Agreement.

“Purchase and Sale Termination Event” has the meaning set forth in Section 8.1 of the Purchase and Sale Agreement.

“Purchase Facility” has the meaning set forth in Section 1.1 of the Purchase and Sale Agreement.

“Purchase Limit” means $75,000,000, as such amount may be reduced pursuant to Section l.l(b)of the Agreement. References to the unused portion o f the Purchase Limit shall mean, at any time, the Purchase Limit minus the then outstanding Capital.

“Purchase Notice” has the meaning set forth in Section 1.2(a) of the Agreement.

“Purchase Price” has the meaning set forth in Section 2.1 of the Purchase and Sale Agreement.

“Purchase Report” has the meaning set forth in Section 2.1 of the Purchase and Sale Agreement.

“Purchased Interest” means, at anytime, the undivided percentage ownership interest in: (a) each and every Pool Receivable now existing or hereafter arising, (b) all Related Security with respect to such Pool Receivables and (c) all Collections with respect to, and other proceeds of, such Pool Receivables and Related Security. Such undivided percentage interest shall be computed as:

      Capital + Total Reserves      

Net Receivables Pool Balance

The Purchased Interest shall be determined from time to time pursuant to Section 1.3 of the Agreement.

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“Purchaser” has the meaning set forth in Section 5.3(b) of the Agreement.

“Receivable” means any indebtedness and other obligations (whether or not earned by performance) owed to the Seller (as assignee of the Originator) or the Originator by, or any right of the Seller or the Originator to payment from or on behalf of, an Obligor, whether constituting an account, chattel paper, instrument or general intangible, arising in connection with property or goods that have been or are to be sold or otherwise disposed of, or services rendered or to be rendered, by the Originator, and includes the obligation to pay any finance charges, fees and other charges with respect thereto. Indebtedness and other obligations arising from any one transaction, including indebtedness and other obligations represented by an individual invoice or agreement, shall constitute a Receivable separate from a Receivable consisting of the indebtedness and other obligations arising from any other transaction.

“Receivables Pool” means, at any time, all of the then outstanding Receivables purchased or otherwise acquired by the Seller pursuant to the Purchase and Sale Agreement prior to the Facility Termination Date.

“Reference Bank” means PNC.

“Related Rights” has the meaning set forth in Section 1.1 of the Purchase and Sale Agreement.

“Related Security” means, with respect to any Receivable:

(a) all of the Seller’s and the Originator thereof’s interest in any goods (including returned goods), and documentation of title evidencing the shipment or storage of any goods (including returned goods), relating to any sale giving rise to such Receivable,

(b) all instruments and chattel paper that may evidence such Receivable,

(c) all other security interests or liens and property subject thereto from time to time purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise, together with all UCC financing statements or similar filings relating thereto, and

(d) all of the Seller’s and the Originator thereof’s rights, interests and claims under the Contracts and all guaranties, indemnities, insurance, letters of credit and other agreements (including the related Contract) or arrangements of whatever character from time to time supporting or securing payment of such Receivable or otherwise relating to such Receivable, whether pursuant to the Contract related to such Receivable or otherwise.

“Seller” has the meaning set forth in the preamble to the Agreement.

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“Seller’s Share” of any amount means the greater of: (a) $0 and (b) such amount minus the Issuer’s Share.

“Servicer” has the meaning set forth in the preamble to the Agreement.

“Servicing Fee” shall mean the fee referred to in Section 4.6 of the Agreement.

“Servicing Fee Rate” shall mean the rate referred to in Section 4.6 of the Agreement.

“Settlement Date” means with respect to any Portion of Capital for any Settlement Period, (i) prior to the Facility Termination Date, the 20th day of each calendar month (or the next succeeding Business Day if such day is not a Business Day) beginning with January 21, 2002 and (ii) on and after the Facility Termination Date, each day selected from time to time by the Administrator (it being understood that the Administrator may select such Settlement Date to occur as frequently as daily), or, in the absence of such selection, the date specified in clause (i) above.

“Settlement Period” means: (a) before the Facility Termination Date: (i) initially the period commencing on the date of the initial purchase pursuant to Section 1.2 of the Agreement (or in the case of any fees payable hereunder, commencing on the Closing Date) and ending on (but not including) the next Settlement Date, and (ii) thereafter, each period commencing on such Settlement Date and ending on (but not including) the next Settlement Date, and (b) on and after the Facility Termination Date: such period (including a period of one day) as shall be selected from time to time by the Administrator or, in the absence of any such selection, each period of 30 days from the last day of the preceding Settlement Period.

“Solvent” means, with respect to any Person at any time, a condition under which:

(i) the fair value and present fair saleable value of such Person’s total assets is, on the date of determination, greater than such Person’s total liabilities (including contingent and unliquidated liabilities) at such time;

(ii) the fair value and present fair saleable value of such Person’s assets is greater than the amount that will be required to pay such Person’s probable liability on its existing debts as they become absolute and matured (“debts,” for this purpose, includes all legal liabilities, whether matured or unmatured, liquidated or unliquidated, absolute, fixed, or contingent);

(iii) such Person is and shall continue to be able to pay all of its liabilities as such liabilities mature; and

(iv) such Person does not have unreasonably small capital with which to engage in its current and in its anticipated business.

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For purposes of this definition:

(A) the amount of a Person’s contingent or unliquidated liabilities at any time shall be that amount which, in light of all the facts and circumstances then existing, represents the amount which can reasonably be expected to become an actual or matured liability;

(B) the “fair value” of an asset shall be the amount which may be realized within a reasonable time either through collection or sale of such asset at its regular market value;

(C) the “regular market value” of an asset shall be the amount which a capable and diligent business person could obtain for such asset from an interested buyer who is willing to Purchase such asset under ordinary selling conditions; and

(D) the “present fair saleable value” of an asset means the amount which can be obtained if such asset is sold with reasonable promptness in an arm’s-length transaction in an existing and not theoretical market.

“Spike Factor” means, for any calendar month, (a) the positive difference, if any, between: (i) the highest Dilution Ratio for any calendar month during the twelve most recent calendar months and (ii) the arithmetic average of the Dilution Ratios for such twelve months times (b) (i) the highest Dilution Ratio for any calendar month during the twelve most recent calendar months divided by (ii) the arithmetic average of the Dilution Ratios for such twelve months.

“Standard & Poor’s” means Standard & Poor’s, a division of The McGraw-Hill Companies, Inc.

“Subsidiary” means, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock of each class or other interests having ordinary voting power (other than stock or other interests having such power only by reason of the happening of a contingency) to elect a majority of the Board of Directors or other managers of such entity are at the time owned, or management of which is otherwise controlled: (a) by such Person, (b) by one or more Subsidiaries of such Person or (c) by such Person and one or more Subsidiaries of such Person.

“Tangible Net Worth” means, with respect to any Person, the tangible net worth of such Person as determined in accordance with GAAP.

“Termination Day” means: (a) each day on which the conditions set forth in Section 2 of Exhibit II to the Agreement are not satisfied or (b) each day that occurs on or after the Facility Termination Date.

“Termination Event” has the meaning specified in Exhibit V to the Agreement.

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“Termination Fee” means, for any Settlement Period during which a Termination Day occurs, the amount, if any, by which: (a) the additional Discount (calculated without taking into account any Termination Fee or any shortened duration of such Settlement Period pursuant to the definition thereof) that would have accrued during such Settlement Period on the reductions of Capital relating to such Settlement Period had such reductions not been made, exceeds (b) the income, if any, received by the Issuer from investing the proceeds of such reductions of Capital, as determined by the Administrator, which determination shall be binding and conclusive for all purposes, absent manifest error.

“Total Reserves” means, at any time the sum of: (a) the Yield Reserve, plus (b) the greater of (i) the sum of (A) Loss Reserve plus (B) the Dilution Reserve and (ii) the Concentration Reserve.

“Transaction Documents” means the Agreement, the Lock-Box Agreements, the Fee Letter, the Purchase and Sale Agreement and all other certificates, instruments, UCC financing statements, reports, notices, agreements and documents executed or delivered under or in connection with any of the foregoing, in each case as the same may be amended, supplemented or otherwise modified from time to time in accordance with the Agreement.

‘Turnover Rate” means, for any calendar month, an amount computed as of the last day of such calendar month equal to: (a) the Outstanding Balance of all Pool Receivables as of the last day of such calendar month divided by (b)(i) the aggregate credit sales made by the Originator during the three calendar months ended on or before the last day of such calendar month divided by (ii) 3.

“UCC” means the Uniform Commercial Code as from time to time in effect in the applicable jurisdiction.

“Unmatured Purchase and Sale Termination Event” means any event which, with the giving of notice or lapse of time, or both, would become a Purchase and Sale Termination Event.

“Unmatured Termination Event” means an event that, with the giving of notice or lapse of time, or both, would constitute a Termination Event.

“Yield Reserve” means, on any date, an amount equal to: (a) the Capital at the close of business of the Servicer on such date multiplied by (b)(i) the Yield Reserve Percentage on such date divided by (ii) 100% minus the Yield Reserve Percentage on such date.

“Yield Reserve Percentage” means at any time:

(PY + SFR)	x  l.5	x  TR
12

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where:

PY	=	the Base Rate as of the last day of the most recent Settlement Period,
TR	=	the Turnover Rate, and
SFR	=	the Servicing Fee Rate

Other Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles. All terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9. Unless the context otherwise requires, “or” means “and/or,” and “including” (and with correlative meaning “include” and “includes”) means including without limiting the generality of any description preceding such term.

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EXHIBIT II

CONDITIONS OF PURCHASES

1. Conditions Precedent to Initial Purchase. The Initial Purchase under this Agreement is subject to the following conditions precedent that the Administrator shall have received on or before the date of such purchase, each in form and substance (including the date thereof) satisfactory to the Administrator:

(a) A counterpart of the Agreement and the other Transaction Documents executed by the parties thereto.

(b) Certified copies of: (i) the resolutions of the Board of Directors of each of the Seller and the Originator authorizing the execution, delivery and performance by the Seller, the Originator and Carpenter, as the case may be, of the Agreement and the other Transaction Documents to which it is a party; (ii) all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to the Agreement and the other Transaction Documents and (iii) the certificate of incorporation and by-laws of the Seller and Carpenter.

(c) A certificate of the Secretary or Assistant Secretary of the Seller and the Originator certifying the names and true signatures of its officers who are authorized to sign the Agreement and the other Transaction Documents. Until the Administrator receives a subsequent incumbency certificate from the Seller, the Originator or Carpenter, as the case may be, the Administrator shall be entitled to rely on the last such certificate delivered to it by the Seller, the Originator or Carpenter, as the case may be.

(d) Proper financing statements or other instrument similar in effect, suitable for filing under the UCC of all jurisdictions that the Administrator may deem necessary or desirable in order to perfect the interests of the Seller, Carpenter and the Issuer contemplated by the Agreement and the Purchase and Sale Agreement.

(e) Proper financing statements or other instrument similar in effect, suitable for filing, if any, necessary to release all security interests and other rights of any Person in the Receivables, Contracts or Related Security previously granted by the Originator, Carpenter or the Seller.

(f) Completed UCC search reports, dated on or shortly before the date of the initial purchase hereunder, listing the financing statements filed in all applicable jurisdictions referred to in subsection (e) above that name the Originator or the Seller as debtor, together with copies of such other financing statements, and similar search reports with respect to judgment liens, federal tax liens and liens of the Pension Benefit Guaranty Corporation in such jurisdictions, as the Administrator may request, showing no Adverse Claims on any Pool Assets.

(g) Copies of executed Lock-Box Agreements with each Lock-Box Bank.

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(h) Favorable opinions, in form and substance reasonably satisfactory to the Administrator, of: (i) Dechert, counsel for the Seller, the Originator, and the Servicer, and (ii) in-house counsel for the Seller, the Originator, and the Servicer.

(i) Satisfactory results of a review and audit (performed by representatives of the Administrator) of the Servicer’s collection, operating and reporting systems, the Credit and Collection Policy of the Originator, historical receivables data and accounts, including satisfactory results of a review of the Servicer’s operating location(s) and satisfactory review and approval of the Eligible Receivables in existence on the date of the initial purchase under the Agreement.

(j) A pro forma Information Package representing the performance of the Receivables Pool for the calendar month before closing.

(k) Evidence of payment by the Seller of all accrued and unpaid fees (including those contemplated by the Fee Letter, costs and expenses to the extent then due and payable on the date thereof, including any such costs, fees and expenses arising under or referenced in Section 5.4 of the Agreement and the Fee Letter.

(l) The Fee Letter duly executed by the Seller and the Servicer.

(m) Good standing certificates with respect to each of the Seller, the Originator and the Servicer issued by the Secretary of State (or similar official) of the state of each such Person’s organization or formation and principal place of business.

(n) The Liquidity Agreement and all other Transaction Documents duly executed by the parties thereto.

(o) A computer file containing all information with respect to the Receivables as the Administrator or the Issuer may reasonably request.

(p) Such other approvals, opinions or documents as the Administrator or the Issuer may reasonably request.

2. Conditions Precedent to All Purchases and Reinvestments. Each purchase (except as to clause (a), including the initial purchase) and each reinvestment shall be subject to the further conditions precedent that:

(a) in the case of each purchase, the Servicer shall have delivered to the Administrator on or before such purchase, in form and substance satisfactory to the Administrator, a completed pro forma Information Package to reflect the level of Capital and related reserves and the calculation of the Purchased Interest after such subsequent purchase and a completed Purchase Notice in the form of Annex B; and

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(b) on the date of such purchase or reinvestment the following statements shall be true (and acceptance of the proceeds of such purchase or reinvestment shall be deemed a representation and warranty by the Seller that such statements are then true):

(i) the representations and warranties contained in Exhibit III or VI to the Agreement are true and correct in all respects on and as of the date of such purchase or reinvestment as though made on and as of such date (except to the extent that such representations and warranties relate expressly to an earlier date, and in which case such representations and warranties shall be true and correct in all material respects as of such earlier date);

(ii) no event has occurred and is continuing, or would result from such purchase or reinvestment, that constitutes a Termination Event or an Unmatured Termination Event;

(iii) after giving effect to such purchase proposed hereby, the Purchased Interest will not exceed 100% and the Capital does not exceed the Purchase Limit; and

(iv) the Facility Termination Date shall not have occurred.

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EXHIBIT III

REPRESENTATIONS AND WARRANTIES

1. Representations and Warranties of the Seller. The Seller represents and warrants as follows:

(a) The Seller is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and is duly qualified to do business and is in good standing as a foreign corporation in every jurisdiction where the nature of its business requires it to be so qualified, except where the failure to be so qualified would not have a Material Adverse Effect.

(b) The execution, delivery and performance by the Seller of the Agreement and the other Transaction Documents to which it is a party, including its use of the proceeds of purchases and reinvestments: (i) are within its corporate powers; (ii) have been duly authorized by all necessary corporate action; (iii) do not contravene or result in a default under or conflict with: (A) its charter or by-laws, (B) any law, rule or regulation applicable to it, (C) any indenture, loan agreement, mortgage, deed of trust or other material agreement or instrument to which it is a party or by which it is bound, or (D) any order, writ, judgment, award, injunction or decree binding on or affecting it or any of its property; and (iv) do not result in or require the creation of any Adverse Claim upon or with respect to any of its properties. The Agreement and the other Transaction Documents to which it is a party have been duly executed and delivered by the Seller.

(c) No authorization, approval or other action by, and no notice to or filing with, any Governmental Authority or other Person is required for its due execution, delivery and performance by the Seller of the Agreement or any other Transaction Document to which it is a party, other than the Uniform Commercial Code filings referred to in Exhibit II to the Agreement, all of which shall be suitable for filing on or before the date of the first purchase hereunder.

(d) Each of the Agreement and the other Transaction Documents to which the Seller is a party constitutes its legal, valid and binding obligation enforceable against the Seller in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws from time to time in effect affecting the enforcement of creditors’ rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law.

(e) There is no pending or, to Seller’s best knowledge, threatened action or proceeding affecting Seller or any of its properties before any Governmental Authority or arbitrator.

(f) No proceeds of any purchase or reinvestment will be used to acquire any equity security of a class that is registered pursuant to Section 12 of the Securities Exchange Act of 1934.

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(g) The Seller is the legal and beneficial owner of the Pool Receivables and Related Security, free and clear of any Adverse Claim Upon each purchase or reinvestment, the Issuer shall acquire a valid and enforceable perfected undivided percentage ownership or security interest, to the extent of the Purchased Interest, in each Pool Receivable then existing or thereafter arising and in the Related Security, Collections and other proceeds with respect thereto, free and clear of any Adverse Claim. The Agreement creates a security interest in favor of the Issuer in the Pool Assets, and the Issuer has a first priority perfected security interest in the Pool Assets, free and clear of any Adverse Claims. No effective financing statement or other instrument similar in effect covering any Pool Asset is on file in any recording office, except those filed in favor of the Seller pursuant to the Purchase and Sale Agreement, the Issuer relating to the Agreement and a Consignor relating to a Permitted Lien.

(h) Each Information Package (if prepared by the Seller or one of its Affiliates, or to the extent that information contained therein is supplied by the Seller or an Affiliate), information, exhibit, financial statement, document, book, record or report furnished or to be furnished at any time by or on behalf of the Seller to the Administrator in connection with the Agreement or any other Transaction Document to which it is a party is or will be complete and accurate in all material respects as of its date or (except as otherwise disclosed to the Administrator at such time) as of the date so furnished,

(i) The Seller’s principal place of business and chief executive office (as such terms are used in the UCC) and the office where it keeps its records concerning the Receivables are located at the address referred to in Sections 1(b) and 2(b) of Exhibit IV to the Agreement.

(j) The names and addresses of all the Lock-Box Banks, together with the account numbers of the Lock-Box Accounts (and the related lock-boxes) at such Lock-Box Banks, are specified in Schedule II to the Agreement (or at such other Lock-Box Banks and/or with such other Lock-Box Accounts (and such other related lock-boxes) as have been notified to the Administrator in accordance with the Agreement) and all Lock-Box Accounts (and all related lock-boxes) are subject to Lock-Box Agreements. The Seller has not granted to any Person, other than the Administrator as contemplated by the Lock-Box Agreements dominion and control of any Lock-Box Account (and any related lock-boxes, or the right to take control of any such account at a future time or upon the occurrence of a future event.

(k) The Seller is not in violation of any order of any court, arbitrator or Governmental Authority.

(l) Neither the Seller nor any of its Affiliates has any direct or indirect ownership or other financial interest in the Issuer.

(m) No proceeds of any purchase or reinvestment will be used for any purpose that violates any applicable law, rule or regulation, including Regulations T, U or X of the Federal Reserve Board.

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(n) Each Pool Receivable included as an Eligible Receivable in the calculation of the Net Receivables Pool Balance is an Eligible Receivable.

(o) No event has occurred and is continuing, or would result from a purchase in respect of, or reinvestment in respect of, the Purchased Interest or from the application of the proceeds therefrom, that constitutes a Termination Event or an Unmatured Termination Event.

(p) The Seller has accounted for each sale of undivided percentage ownership interests in Receivables in its books and financial statements as sales, consistent with generally accepted accounting principles.

(q) The Seller has complied in all material respects with the Credit and Collection Policies of the Originator with regard to each Receivable originated by the Originator.

(r) [RESERVED]

(s) The Seller’s complete corporate name is set forth in the preamble to the Agreement, and it does not use and has not during the last six years used any other corporate name, trade name, doing-business name or fictitious name, except as set forth on Schedule III to the Agreement and except for names first used after the date of the Agreement and set forth in a notice delivered to the Administrator pursuant to Section 1(l)(v) of Exhibit IV to the Agreement.

(t) The Seller is not an “investment company,” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended. In addition, the Seller is not a “holding company,” a “subsidiary company” of a “holding company” or an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company” within the meaning of the Public Utility Holding Company Act of 1935, as amended.

(u) With respect to each Receivable transferred to the Seller under the Purchase and Sale Agreement, Seller has given reasonably equivalent value to the Originator thereof in consideration therefor and such transfer was not made for or on account of an antecedent debt. No transfer by the Originator of any Receivable under the Purchase and Sale Agreement is or may be voidable under any section of the Bankruptcy Code.

(v) Each Contract with respect to each Receivable is effective to create, and has created, a legal, valid and binding obligation of the related Obligor to pay the Outstanding Balance of the Receivable created thereunder and any accrued interest thereon, enforceable against the Obligor in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

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(w) Since its most recent fiscal year end, there has been no change in the business, operations, financial condition, properties or assets of the Seller which would have a Material Adverse Effect on its ability to perform its obligations under the Agreement or any other Transaction Document to which it is a party or materially and adversely affect the transactions contemplated under the Agreement or such other Transaction Documents.

2. Representations and Warranties of the Servicer. The Servicer, represents and warrants as follows:

(a) Carpenter is a corporation duly formed, validly existing and in good standing under the laws of the State of Delaware, and is duly qualified to do business and is in good standing as a foreign corporation in every jurisdiction where the nature of its business requires it to be so qualified, except where the failure to be so qualified would not have a Material Adverse Effect.

(b) The execution, delivery and performance by Carpenter of the Agreement and the other Transaction Documents to which it is a party, including the Servicer’s use of the proceeds of purchases and reinvestments: (i) are within its corporate powers; (ii) have been duly authorized by all necessary corporate action; (iii) do not contravene or result in a default under or conflict with: (A) its charter or bylaws, (B) any law, rule or regulation applicable to it, (C) any indenture, loan agreement, mortgage, deed of trust or other material agreement or instrument to which it is a party or by which it is bound, or (D) any order, writ, judgment, award, injunction or decree binding on or affecting it or any of its property; and (iv) do not result in or require the creation of any Adverse Claim upon or with respect to any of its properties. The Agreement and the other Transaction Documents to which Carpenter is a party have been duly executed and delivered by Carpenter.

(c) No authorization, approval or other action by, and no notice to or filing with any Governmental Authority or other Person, is required for the due execution, delivery and performance by Carpenter of the Agreement or any other Transaction Document to which it is a party other than the Uniform Commercial Code filings referred to in Exhibit II to the Agreement, all of which shall be suitable for filing on or before the date of the first purchase hereunder.

(d) Each of the Agreement and the other Transaction Documents to which Carpenter is a party constitutes the legal, valid and binding obligation of Carpenter enforceable against Carpenter in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws from time to time in effect affecting the enforcement of creditors’ rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law.

(e) The balance sheets of Carpenter and its consolidated Subsidiaries as at June 30, 2001, and the related statements of income and retained earnings for the fiscal year then ended, copies of which have been furnished to the Administrator, fairly present the financial condition of Carpenter and its consolidated Subsidiaries as at such date and the results of the operations of Carpenter and its Subsidiaries for the period ended on such date, all in accordance with generally accepted accounting principles consistently applied, and since June 30, 2001 there has been no event or circumstances which have had a Material Adverse Effect.

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(f) Except as disclosed in the most recent audited financial statements of Carpenter furnished to the Administrator, there is no pending or, to its best knowledge, threatened action or proceeding affecting it or any of its Subsidiaries before any Governmental Authority or arbitrator which, if decided adversely, would have a Material Adverse Effect.

(g) No proceeds of any purchase or reinvestment will be used to acquire any equity security of a class that is registered pursuant to Section 12 of the Securities Exchange Act of 1934.

(h) Each Information Package (if prepared by Carpenter or one of its Affiliates, or to the extent that information contained therein is supplied by Carpenter or an Affiliate), information, exhibit, financial statement, document, book, record or report furnished or to be furnished at any time by or on behalf of the Servicer to the Administrator in connection with the Agreement is or will be complete and accurate in all material respects as of its date or (except as otherwise disclosed to the Administrator at such time) as of the date so furnished.

(i) The principal place of business and chief executive office (as such terms are used in the UCC) of Carpenter and the office where it keeps its records concerning the Receivables are located at the address referred to in Section 2(b) of Exhibit IV to the Agreement.

(j) Carpenter is not in violation of any order of any court, arbitrator or Governmental Authority, which could have a Material Adverse Effect.

(k) Neither Carpenter nor any of its Affiliates has any direct or indirect ownership or other financial interest in the Issuer.

(l) The Servicer has complied in all material respects with the Credit and Collection Policy of the Originator with regard to each Receivable originated by the Originator.

(m) [RESERVED]

(n) Carpenter is not an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended. In addition, Carpenter is not a “holding company,” a “subsidiary company” of a “holding company,” or an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company” within the meaning of the Public Utility Holding Company Act of 1935, as amended.

(o) Since its most recent fiscal year end, there has been no change in the business, operations, financial condition, properties or assets of the Servicer which would have a Material Adverse Effect on its ability to perform its obligations under the Agreement or any other Transaction Document to which it is a party or materially and adversely affect the transactions contemplated under the Agreement or such other Transaction Documents.

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(p) No license or approval is required for the Administrator or any successor Servicer to use any program used by the Servicer in the servicing of the Receivables, other than such licenses and approvals that have been obtained and are in full force and effect.

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EXHIBIT IV

COVENANTS

1. Covenants of the Seller. Until the latest of the Facility Termination Date, the date on which no Capital of or Discount in respect of the Purchased Interest shall be outstanding or the date all other amounts owed by the Seller under the Agreement to the Issuer, the Administrator and any other Indemnified Party or Affected Person shall be paid in full:

(a) Compliance with Laws, Etc. The Seller shall comply in all material respects with all applicable laws, rules, regulations and orders, and preserve and maintain its corporate existence, rights, franchises, qualifications and privileges, except to the extent that the failure so to comply with such laws, rules and regulations or the failure so to preserve and maintain such rights, franchises, qualifications and privileges would not have a Material Adverse Effect.

(b) Offices, Records and Books of Account, Etc. The Seller: (i) shall keep its principal place of business and chief executive office (as such terms or similar terms are used in the UCC) and the office where it keeps its records concerning the Receivables at the address of the Seller set forth under its name on the signature page to the Agreement or, pursuant to clause (l)(v) below, at any other locations in jurisdictions where all actions reasonably requested by the Administrator to protect and perfect the interest of the Issuer in the Receivables and related items (including the Pool Assets) have been taken and completed and (ii) shall provide the Administrator with at least 30 days’ written notice before making any change in the Seller’s name or making any other change in the Seller’s identity or corporate structure (including a Change in Control) that could render any UCC financing statement filed in connection with this Agreement “seriously misleading” as such term (or similar term) is used in the UCC; each notice to the Administrator pursuant to this sentence shall set forth the applicable change and the effective date thereof. The Seller also will maintain and implement (or cause the Servicer to maintain and implement) administrative and operating procedures (including an ability to recreate records evidencing Receivables and related Contracts in the event of the destruction of the originals thereof), and keep and maintain (or cause the Servicer to keep and maintain) all documents, books, records, computer tapes and disks and other information reasonably necessary or advisable for the collection of all Receivables (including records adequate to permit the daily identification of each Receivable and all Collections of and adjustments to each existing Receivable).

(c) Performance and Compliance with Contracts and Credit and Collection Policy. The Seller shall (and shall cause the Servicer to), at its expense, timely and fully perform and comply with all material provisions, covenants and other promises required to be observed by it under the Contracts related to the Receivables, and timely and fully comply in all material respects with the applicable Credit and Collection Policies with regard to each Receivable and the related Contract.

(d) Ownership Interest, Etc. The Seller shall (and shall cause the Servicer to), at its expense, take all action necessary or desirable to establish and maintain a valid and enforceable undivided percentage ownership or security interest, to the extent of the Purchased Interest, in the Pool

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Receivables, the Related Security and Collections with respect thereto, and a first priority perfected security interest in the Pool Assets, in each case free and clear of any Adverse Claim, in favor of the Issuer, including taking such action to perfect, protect or more fully evidence the interest of the Issuer as the Issuer, through the Administrator, may reasonably request.

(e) Sales, Liens, Etc. The Seller shall not sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Adverse Claim upon or with respect to, any or all of its right, title or interest in, to or under any Pool Assets (including the Seller’s undivided interest in any Receivable, Related Security or Collections, or upon or with respect to any account to which any Collections of any Receivables are sent), or assign any right to receive income in respect of any items contemplated by this paragraph.

(f) Extension or Amendment of Receivables. Except as provided in the Agreement, the Seller shall not, and shall not permit the Servicer to, extend the maturity or adjust the Outstanding Balance or otherwise modify the terms of any Pool Receivable in any material respect, or amend, modify or waive, in any material respect, any term or condition of any related Contract (which term or condition relates to payments under, or the enforcement of, such Contract).

(g) Change in Business or Credit and Collection Policy. The Seller shall not make any material change in the character of its business or in any Credit and Collection Policy, or any change in any Credit and Collection Policy that would be reasonably likely to have a Material Adverse Effect with respect to the Receivables. The Seller shall not make any other material change in any Credit and Collection Policy without giving prior written notice thereof to the Administrator.

(h) Audits. The Seller shall, from time to time during regular business hours as reasonably requested in advance (unless a Termination Event or an Unmatured Termination Event exists) by the Administrator, permit the Administrator, or its agents or representatives: (i) to examine and make copies of and abstracts from all books, records and documents (including computer tapes and disks) in the possession or under the control of the Seller (or the Originator) relating to Receivables and the Related Security, including the related Contracts, (ii) to visit the offices and properties of the Seller for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to Receivables and the Related Security or the Seller’s performance under the Transaction Documents or under the Contracts with any of the officers, employees, agents or contractors of the Seller having knowledge of such matters and (iii) without limiting the clauses (i) and (ii) above, no more than once annually (unless a Termination Event or an Unmatured Termination Event exists) to engage certified public accountants or other auditors acceptable to the Seller and the Administrator to conduct, at the Setter’s expense, a review of the Seller’s books and records with respect to such Receivables.

(i) Change in Lock-Box Banks, Lock-Box Accounts and Payment Instructions to Obligors. The Seller shall not add or terminate any bank as a Lock-Box Bank or any account as a Lock-Box Account (or any related lock-box) from those listed in Schedule II to the Agreement, or make any change in is instructions to Obligors regarding payments to be made to the Seller or any Lock-Box Account (or the related lock-box), unless the Administrator shall have consented thereto in writing and the Administrator shall have received copies of all agreements and documents (including Lock-Box Agreements) that it may request in connection therewith.

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(j) Deposits to Lock-Box Accounts. The Seller shall (or shall cause the Servicer to): (i) instruct all Obligors to make payments of all Receivables to one or more Lock-Box Accounts or to lock-boxes to which only Lock-Box Banks have access (and shall instruct the Lock-Box Banks to cause all items and amounts relating to such Receivables received in such lock-boxes to be removed and deposited into a Lock-Box Account on a daily basis), and (ii) deposit, or cause to be deposited, any Collections received by it into Lock-Box Accounts not later than one Business Day after receipt thereof. Each Lock-Box Account shall at all times be subject to a Lock-Box Agreement. The Seller will not deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Lock-Box Account cash or cash proceeds other than Collections.

(k) Marking of Records. At its expense, the Seller shall: mark (or cause the Servicer to mark) its master data processing records relating to Pool Receivables and related Contracts, including with a legend evidencing that the undivided percentage ownership interests with regard to the Purchased Interest related to such Receivables and related Contracts have been sold in accordance with the Agreement.

(l) Reporting Requirements. The Seller will provide to the Administrator (in multiple copies, if requested by the Administrator) the following:

(i) as soon as available and in any event within 120 days after the end of each fiscal year of the Seller, a copy of the annual report for such year for the Seller containing unaudited financial statements for such year certified as to accuracy by the chief financial officer or treasurer of the Seller;

(ii) as soon as possible and in any event within five days after the Seller obtains knowledge of the occurrence of each Termination Event or Unmatured Termination Event, a statement of the chief financial officer of the Seller setting forth details of such Termination Event or Unmatured Termination Event and the action that the Seller has taken and proposes to take with respect thereto;

(iii) promptly after the filing or receiving thereof, copies of all reports and notices that the Seller or any Affiliate files under ERISA with the Internal Revenue Service, the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or that the Seller or any Affiliate receives from any of the foregoing or from any multi employer plan (within the meaning of Section 4001(a)(3) of ERISA) to which the Seller or any of its Affiliates is or was, within the preceding five years, a contributing employer, in each case in respect of the assessment of withdrawal liability or an event or condition that could, in the aggregate, result in the imposition of liability on the Seller and/or any such Affiliate;

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(iv) at least thirty days before any change in the Seller’s name or any other change requiring the amendment of UCC financing statements, a notice setting forth such changes and the effective date thereof;

(v) as soon as possible and in any event within 15 days after the Seller obtains knowledge thereof, notice of any: (A) material litigation, investigation or proceeding that may exist at any time between the Seller and any Person or (B) material litigation or proceeding relating to any Transaction Document;

(vi) as soon as possible and in any event within 15 days after the occurrence thereof, notice of a material adverse change in the business, operations, property or financial or other condition of the Seller, the Servicer or the Originator; and

(vii) such other information respecting the Receivables or the condition or operations, financial or otherwise, of the Seller or any of its Affiliates as the Administrator may from time to time reasonably request.

(m) Certain Agreements. Without the prior written consent of the Administrator, the Seller will not (and will not permit the Originator to) amend, modify, waive, revoke or terminate any Transaction Document to which it is a party or any provision of Seller’s certificate of incorporation or by-laws;

(n) Restricted Payments. (i) Except pursuant to clause (ii) below, the Seller will not: (A) purchase or redeem any shares of its capital stock, (B) declare or pay any dividend or set aside any funds for any such purpose, (C) prepay, purchase or redeem any Debt, (D) lend or advance any funds or (E) repay any loans or advances to, for or from any of its Affiliates (the amounts described in clauses (A) through (E) being referred to as “Restricted Payments”).

(ii) Subject to the limitations set forth in clause (iii) below, the Seller may make Restricted Payments so long as such Restricted Payments are made only in one or more of the following ways: (A) the Seller may make cash payments (including prepayments) on the Company Note in accordance with its terms, and (B) if no amounts are then outstanding under the Company Note, the Seller may declare and pay dividends.

(iii) The Seller may make Restricted Payments only out of the funds it receives pursuant to Sections 1.4(b)(ii) and (iv) of the Agreement. Furthermore, the Seller shall not pay, make or declare: (A) any dividend if, after giving effect thereto, the Seller’s Tangible Net Worth would be less than $8,000,000, or (B) any Restricted Payment (including any dividend) if, after giving effect thereto, any Termination Event or Unmatured Termination Event shall have occurred and be continuing.

(o) Other Business. The Seller will not: (i) engage in any business other than the transactions contemplated by the Transaction Documents; (ii) create, incur or permit to exist any Debt of any kind (or cause or permit to be issued for its account any letters of credit or bankers’ acceptances)

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other than pursuant to this Agreement or the Company Note; or (iii) form any Subsidiary or make any investments in any other Person; provided, however, that the Seller shall be permitted to incur minimal obligations to the extent necessary for the day-to-day operations of the Seller (such as expenses for stationery, audits, maintenance of legal status, etc.).

(p) Use of Seller’s Share of Collections. The Seller shall apply the Seller’s Share of Collections to make payments in the following order of priority: (i) the payment of its expenses (including all obligations payable to the Issuer and the Administrator under the Agreement and under the Fee Letter); (ii) the payment of accrued and unpaid interest on the Company Note; and (iii) other legal and valid corporate purposes.

(q) Tangible Net Worth. The Seller will not permit its Tangible Net Worth, at any time, to be less than $8,000,000.

2. Covenants of the Servicer. Until the latest of the Facility Termination Date, the date on which no Capital of or Discount in respect of the Purchased Interest shall be outstanding or the date all other amounts owed by the Seller under the Agreement to the Issuer, the Administrator and any other Indemnified Party or Affected Person shall be paid in full:

(a) Compliance with Laws, Etc. The Servicer shall comply in all material respects with all applicable laws, rules, regulations and orders, and preserve and maintain its corporate existence, rights, franchises, qualifications and privileges, except to the extent that the failure so to comply with such laws, rules and regulations or the failure so to preserve and maintain such existence, rights, franchises, qualifications and privileges would not have a Material Adverse Effect.

(b) Offices, Records and Books of Account, Etc. The Servicer shall keep its principal place of business and chief executive office (as such terms or similar terms are used in the applicable UCC) and the office where it keeps its records concerning the Receivables at the address of the Servicer set forth under its name on the signature page to the Agreement or, upon at least 30 days’ prior written notice of a proposed change to the Administrator, at any other locations in jurisdictions where all actions reasonably requested by the Administrator to protect and perfect the interest of the Issuer in the Receivables and related items (including the Pool Assets) have been taken and completed. The Servicer also will maintain and implement administrative and operating procedures (including an ability to recreate records evidencing Receivables and related Contracts in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records, computer tapes and disks and other information reasonably necessary or advisable for the collection of all Receivables (including records adequate to permit the daily identification of each Receivable and all Collections of and adjustments to each existing Receivable).

(c) Performance and Compliance with Contracts and Credit and Collection Policy. The Servicer shall, at its expense, timely and fully perform and comply with all material provisions, covenants and other promises required to be observed by it under the Contracts related to the Receivables, and timely and fully comply in all material respects with the Credit and Collection Policy with regard to each Receivable and the related Contract.

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(d) Extension or Amendment of Receivables. Except as provided in the Agreement, the Servicer shall not extend the maturity or adjust the Outstanding Balance or otherwise modify the terms of any Pool Receivable in any material respect, or amend, modify or waive, in any material respect, any term or condition of any related Contract (which term or condition relates to payments under, or the enforcement of, such Contract).

(e) Change in Business or Credit and Collection Policy. The Servicer shall not make any material change in the character of its business or in any Credit and Collection Policy, or any change in any Credit and Collection Policy that would be reasonably likely to have a Material Adverse Effect. The Servicer and, to the extent that it ceases to be the Servicer, Carpenter, shall not make any other material change in any Credit and Collection Policy without giving prior written notice thereof to the Administrator.

(f) Audits. The Servicer shall, from time to time during regular business hours as reasonably requested in advance (unless a Termination Event or an Unmatured Termination Event exists) by the Administrator, permit the Administrator, or its agents or representatives: (i) to examine and make copies of and abstracts from all books, records and documents (including computer tapes and disks) in its possession or under its control relating to Receivables and the Related Security, including the related Contracts; (ii) to visit its offices and properties for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to Receivables and the Related Security or its performance hereunder or under the Contracts with any of its officers, employees, agents or contractors having knowledge of such matters and (iii), without limiting the clauses (i) and (ii) above, no more than once annually (unless a Termination Event or an Unmatured Termination Event exists) to engage certified public accountants or other auditors acceptable to the Servicer and the Administrator to conduct, at the Servicer’s expense, a review of the Servicer’s books and records with respect to such Receivables.

(g) Change in Lock-Box Banks, Lock-Box Accounts and Payment Instructions to Obligors. The Servicer shall not add or terminate any bank as a Lock-Box Bank or any account as a Lock-Box Account (or any related lock-box) from those listed in Schedule II to the Agreement, or make any change in its instructions to Obligors regarding payments to be made to the Servicer or any Lock-Box Account (or the related lock-box), unless the Administrator shall have consented thereto in writing and the Administrator shall have received copies of all agreements and documents (including Lock-Box Agreements) that it may request in connection therewith.

(h) Deposits to Lock-Box Accounts. The Servicer shall: (i) instruct all Obligors to make payments of all Receivables to one or more Lock-Box Accounts or to the lock-boxes to which only Lock-Box Banks have access (and shall instruct the Lock-Box Banks to cause all items and amounts relating to such Receivables received in such lock-boxes to be removed and deposited into a Lock-Box Account on a daily basis), and (ii) deposit, or cause to be deposited, any Collections received by it into Lock-Box Accounts not later than one Business Day after receipt thereof Each Lock-Box Account shall at all times be subject to a Lock-Box Agreement. The Servicer will not deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Lock-Box Account cash or cash proceeds other than Collections.

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(i) Marking of Records. At its expense, the Servicer shall mark its master data processing records relating to Pool Receivables and related Contracts, including with a legend evidencing that the undivided percentage ownership interests with regard to the Purchased Interest related to such Receivables and related Contracts have been sold in accordance with the Agreement.

(j) Reporting Requirements. Servicer shall provide to the Administrator (in multiple copies, if requested by the Administrator) the following:

(i) as soon as available and in any event within 60 days after the end of the first three quarters of each fiscal year of Carpenter, balance sheets of Carpenter and its consolidated Subsidiaries as of the end of such quarter and statements of income, retained earnings and cash flow of Carpenter and its consolidated Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified by the chief financial officer of such Person;

(ii) as soon as available and in any event within 120 days after the end of each fiscal year of such Person, a copy of the annual report for such year for such Person and its consolidated Subsidiaries, containing financial statements for such year audited by independent certified public accountants of nationally recognized standing;

(iii) as soon as available and in any event not later than two Business Days prior to the Settlement Date, an Information Package as of the most recently completed calendar month or, within six Business Days of a reasonable request by the Administrator, an Information Package for such periods as is specified by the Administrator (including on a semi-monthly, weekly or daily basis);

(iv) as soon as possible and in any event within five days after becoming aware of the occurrence of each Termination Event or Unmatured Termination Event, a statement of the chief financial officer of the Servicer setting forth details of such Termination Event or Unmatured Termination Event and the action that such Person has taken and proposes to take with respect thereto;

(v) promptly after the sending or filing thereof, copies of all reports that the Servicer sends to any of its security holders, and copies of all reports and registration statements that the Servicer or any Subsidiary files with the Securities and Exchange Commission or any national securities exchange; provided, that any filings with the Securities and Exchange Commission that have been granted “confidential” treatment shall be provided promptly after such filings have become publicly available;

(vi) promptly after the filing or receiving thereof, copies of all reports and notices that Carpenter or any of its Affiliate files under ERISA with the Internal Revenue Service, the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or that such Person or any of its Affiliates receives from any of the foregoing or from any multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA) to which such Person or any of

IV-7

its Affiliate is or was, within the preceding five years, a contributing employer, in each case in respect of the assessment of withdrawal liability or an event or condition that could, in the aggregate, result in the imposition of liability on Carpenter and/or any such Affiliate;

(vii) at least thirty days before any change in the Servicer’s name or any other change requiring the amendment of UCC financing statements, a notice setting forth such changes and the effective date thereof;

(viii) promptly after the Servicer obtains knowledge thereof, notice of any: (A) litigation, investigation or proceeding that may exist at any time between the Servicer or any of its Subsidiaries and any Governmental Authority that, if not cured or if adversely determined, as the case may be, would have a Material Adverse Effect; (B) litigation or proceeding adversely affecting such Person or any of its Subsidiaries in which the amount involved is $10,000,000 or more and not covered by insurance or in which injunctive or similar relief is sought; or (C) litigation or proceeding relating to any Transaction Document;

(ix) promptly after the occurrence thereof, notice of a Material Adverse Effect on the business, operations, property or financial or other condition of the Servicer or any of its Subsidiaries; and

(x) such other information respecting the Receivables or the condition or operations, financial or otherwise, of the Servicer or any of its Affiliates as the Administrator may from time to time reasonably request.

3. Separate Existence. Each of the Seller and Carpenter hereby acknowledges that the Purchasers, the Issuer and the Administrator are entering into the transactions contemplated by this Agreement and the other Transaction Documents in reliance upon the Seller’s identity as a legal entity separate from Carpenter and its Affiliates. Therefore, from and after the date hereof, each of the Seller and Carpenter shall take all steps specifically required by the Agreement or reasonably required by the Administrator to continue the Seller’s identity as a separate legal entity and to make it apparent to third Persons that the Seller is an entity with assets and liabilities distinct from those of Carpenter and any other Person, and is not a division of Carpenter, its Affiliates or any other Person. Without limiting the generality of the foregoing and in addition to and consistent with the other covenants set forth herein, each of the Seller and Carpenter shall take such actions as shall be required in order that:

(a) The Seller will be a limited purpose corporation whose primary activities are restricted in its certificate of incorporation to: (i) purchasing or otherwise acquiring from the Originator (or its Affiliates), owning, holding, granting security interests or selling interests in Pool Assets (or other receivables originated by the Originator or its Affiliates, and certain related assets), (ii) entering into agreements for the selling and servicing of the Receivables Pool (or other receivables pools originated by the Originator or its Affiliates), and (iii) conducting such other activities as it deems necessary or appropriate to carry out its primary activities;

IV-8

(b) The Seller shall not engage in any business or activity, or incur any indebtedness or liability, other than as expressly permitted by the Transaction Documents;

(c) Not less than one member of the Seller’s Board of Directors (the “Independent Director”) shall be an individual who is not a direct, indirect or beneficial stockholder, officer, director, employee, affiliate, associate or supplier of Carpenter or any of its Affiliates. The certificate of incorporation of the Seller shall provide that: (i) the Seller’s Board of Directors shall not approve, or take any other action to cause the filing of, a voluntary bankruptcy petition with respect to the Seller unless the Independent Director shall approve the taking of such action in writing before the taking of such action, and (ii) such provision cannot be amended without the prior written consent of the Independent Director;

(d) The Independent Director shall not at any time serve as a trustee in bankruptcy for the Seller, Carpenter or any Affiliate thereof;

(e) Any employee, consultant or agent of the Seller will be compensated from the Seller’s funds for services provided to the Seller. The Seller will not engage any agents other than its attorneys, auditors and other professionals, and a servicer and any other agent contemplated by the Transaction Documents for the Receivables Pool, which servicer will be fully compensated for its services by payment of the Servicing Fee, and a manager, which manager will be fully compensated from the Seller’s funds;

(f) The Seller will contract with the Servicer to perform for the Seller all operations required on a daily basis to service the Receivables Pool. The Seller will pay the Servicer the Servicing Fee pursuant hereto. The Seller will not incur any material indirect or overhead expenses for items shared with Carpenter (or any other Affiliate thereof) that are not reflected in the Servicing Fee. To the extent, if any, that the Seller (or any Affiliate thereof) shares items of expenses not reflected in the Servicing Fee or the manager’s fee, such as legal, auditing and other professional services, such expenses will be allocated to the extent practical on the basis of actual use or the value of services rendered, and otherwise on a basis reasonably related to the actual use or the value of services rendered; it being understood that Carpenter shall pay all expenses relating to the preparation, negotiation, execution and delivery of the Transaction Documents, including legal, agency and other fees;

(g) The Seller’s operating expenses will not be paid by Carpenter or any other Affiliate thereof;

(h) All of the Seller’s business correspondence and other communications shall be conducted in the Seller’s own name and on its own separate stationery;

(i) The Seller’s books and records will be maintained separately from those of Carpenter and any other Affiliate thereof;

IV-9

(j) The Seller’s assets will be maintained in a manner that facilitates their identification and segregation from those of Carpenter or any Affiliate thereof;

(k) The Seller will strictly observe corporate formalities in its dealings with Carpenter or any Affiliate thereof, and funds or other assets of the Seller will not be commingled with those of Carpenter or any Affiliate thereof except as permitted by the Agreement in connection with servicing the Pool Receivables. The Seller shall not maintain joint bank accounts or other depository accounts to which Carpenter or any Affiliate thereof (other than Carpenter in its capacity of Servicer) has independent access. The Seller is not named, and has not entered into any agreement to be named, directly or indirectly, as a direct or contingent beneficiary or loss payee on any insurance policy with respect to any loss relating to the property of Carpenter or any Subsidiary or other Affiliate of Carpenter. The Seller will pay to the appropriate Affiliate the marginal increase or, in the absence of such increase, the market amount of its portion of the premium payable with respect to any insurance policy that covers the Seller and such Affiliate;

(l) The Seller will maintain arm’s-length relationships with Carpenter (and any Affiliate thereof). Any Person that renders or otherwise furnishes services to the Seller will be compensated by the Seller at market rates for such services it renders or otherwise furnishes to the Seller. Neither the Seller nor Carpenter will be or will hold itself out to be responsible for the debts of the other or the decisions or actions respecting the daily business and affairs of the other. The Seller and Carpenter will immediately correct any known misrepresentation with respect to the foregoing, and they will not operate or purport to operate as an integrated single economic unit with respect to each other or in their dealing with any other entity;

(m) The Seller will conduct its business at an office separate from the offices of the Originator or to the extent office space is shared, allocate fairly and reasonably any overhead for shared office space.

IV-10

EXHIBIT V

TERMINATION EVENTS

Each of the following shall be a “Termination Event”:

(a)(i) the Seller, the Originator or the Servicer (if Carpenter or any of its Affiliates) shall fail to perform or observe any term, covenant or agreement under the Agreement or any other Transaction Document and, except as otherwise provided herein, such failure shall continue for 15 Business Days after knowledge or notice thereof, (ii) the Seller or the Servicer shall fail to make when due any payment or deposit to be made by it under the Agreement, and such failure shall remain unremedied for one Business Day or (iii) Carpenter shall resign as Servicer, and no successor Servicer reasonably satisfactory to the Administrator shall have been appointed;

(b) Carpenter (or any Affiliate thereof) shall fail to transfer to any successor Servicer when required any rights pursuant to the Agreement that Carpenter (or such Affiliate) then has as Servicer;

(c) any representation or warranty made or deemed made by the Seller, the Servicer or the Originator (or any of their respective officers) under or in connection with the Agreement or any other Transaction Document, or any information or report delivered by the Seller, the Servicer or the Originator or the Servicer pursuant to the Agreement or any other Transaction Document, shall prove to have been incorrect or untrue in any respect when made or deemed made or delivered; provided, however, if the violation of this paragraph (c) by the Seller, the Originator or the Servicer may be cured without any potential or actual detriment to the Issuer, the Administrator or any Program Support Provider, the Seller, the Originator or the Servicer, as applicable, shall have 10 days from the earlier of (i) such Person’s actual knowledge of such failure and (ii) notice to such Person of such failure to so cure any such violation before a Termination Event shall occur so long as such Person is diligently attempting to effect such cure;

(d) the Seller or the Servicer shall fail to deliver the Information Package pursuant to the Agreement, and such failure shall remain unremedied for two Business Days;

(e) the Agreement or any purchase or reinvestment pursuant to the Agreement shall for any reason: (i) cease to create, or the Purchased Interest shall for any reason cease to be, a valid and enforceable perfected undivided percentage ownership or security interest to the extent of the Purchased Interest in each Pool Receivable, the Related Security and Collections with respect thereto, free and clear of any Adverse Claim, or (ii) cease to create with respect to the Pool Assets, or the interest of the Issuer with respect to such Pool Assets shall cease to be, a valid and enforceable first priority perfected security interest, free and clear of any Adverse Claim,

(f) the Seller or Carpenter shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Seller or Carpenter

V-1

seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 60 days, or any of the actions sought in such proceeding (including the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or the Seller, Carpenter or the Originator shall take any corporate action to authorize any of the actions set forth above in this paragraph;

(g)(i) the Delinquency Ratio shall exceed 8.75% or (ii) the average for three consecutive calendar months of: (A) the Default Ratio shall exceed 3.40%, (B) the Delinquency Ratio shall exceed 7.25% or (C) the Dilution Ratio shall exceed 5.50%.

(h) a Change in Control shall occur,

(i) at any time (i) the sum of (A) the Capital plus (B) the Total Reserves, exceeds (ii) the sum of (A) the Net Receivables Pool Balance at such time plus (B) the Issuer’s Share of the amount of Collections then on deposit in the Lock-Box Accounts (other than amounts set aside therein representing Discount and fees), and such circumstance shall not have been cured within five (5) days,

(j) (i) Carpenter or any of its Subsidiaries shall fail to pay any principal of or premium or interest on any of its Debt that is outstanding in a principal amount of at least $10,000,000 in the aggregate when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement, mortgage, indenture or instrument relating to such Debt (and shall have not been waived); or (ii) any other event shall occur or condition shall exist under any agreement, mortgage, indenture or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement, mortgage, indenture or instrument (and shall have not been waived), if, in either case: (a) the effect of such non-payment, event or condition is to give the applicable debt holders the right (whether acted upon or not) to accelerate the maturity of such Debt, or (b) any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), redeemed, purchased or defeased, or an offer to repay, redeem, purchase or defease such Debt shall be required to be made, in each case before the stated maturity thereof;

(k) either: (i) a contribution failure shall occur with respect to any Benefit Plan sufficient to give rise to a lien under Section 302(f) of ERISA, (ii) the Internal Revenue Service shall file a notice of lien asserting a claim or claims pursuant to the Internal Revenue Code with regard to any of the assets of Seller, the Servicer or any ERISA Affiliate and such lien shall have been filed and not released within 10 days, or (iii) the Pension Benefit Guaranty Corporation shall, or shall indicate its intention in writing to the Setter, the Servicer or any ERISA Affiliate to, either file a notice of

V-2

lien asserting a claim pursuant to ERISA with regard to any assets of the Seller, the Servicer or any ERISA Affiliate or terminate any Benefit Plan that has unfunded benefit liabilities, or any steps shall have been taken to terminate any Benefit Plan subject to Title IV of ERISA so as to result in any liability and such lien shall have been filed and not released within 10 days;

(l) one or more final judgments for the payment of money shall be entered against the Seller or (ii) one or more final judgments for the payment of money in an amount in excess of $20,000,000, individually or in the aggregate, shall be entered against the Servicer on claims not covered by insurance or as to which the insurance carrier has denied its responsibility, and such judgment shall continue unsatisfied and in effect for sixty (60) consecutive days without a stay of execution; or

(m) the “Purchase and Safe Termination Date” under and as defined in the Purchase and Sale Agreement shall occur under the Purchase and Sale Agreement or the Originator shall for any reason cease to transfer, or cease to have the legal capacity to transfer, or otherwise be incapable of transferring Receivables to the Seller under the Purchase and Sale Agreement.

V-3

EXHIBIT VI

SUPPLEMENTAL PERFECTION REPRESENTATIONS,

WARRANTIES AND COVENANTS

In addition to the representations, warranties and covenants contained in Exhibit III hereof, the Seller hereby makes the following additional representations, warranties and covenants:

1. Receivables; Lock-box Accounts.

(a) The Pool Receivables constitute “accounts”, “generalintangibles” or “tangible chattel paper”, each within the meaning of the applicable UCC.

(b) Lock-Box Accounts. Each Lock-Box Account constitutes a “deposit account” within the meaning of the applicable UCC.

2. Creation of Security Interest. The Seller owns and has good and marketable title to the Pool Receivables and Lock-Box Accounts (and the related lock-boxes), free and clear of any Adverse Claim. The Agreement creates a valid and continuing security interest (as defined in the applicable UCC) in the Pool Receivables and the Lock-Box Accounts (and the related lock-boxes) in favor of the Issuer, which security interest is prior to all other Adverse Claims and is enforceable as such as against any creditors of and purchasers from the Seller.

3. Perfection.

(a) General. The Seller has or has caused, or will or will cause within ten days after the date hereof, the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under applicable law in order to perfect the sale of the Pool Receivables from the Originator to the Seller pursuant to the Purchase and Sale Agreement and the security interest granted by the Seller to the Issuer in the Receivables and Lock-Box Accounts (and the related lock-boxes) hereunder.

(b) Tangible Chattel Paper. With respect to any Pool Receivable that constitutes “tangible chattel paper”, the Servicer is in possession of the original copies of the tangible chattel paper that constitute or evidence such Pool Receivables, and the Seller has filed and has caused the Originator to file, or will file or will cause the Originator to file within ten days after the date hereof, the financing statements described in paragraph (a) above, each of which will contain a statement that: “A purchase of or a grant of a security interest in any property described in this financing statement will violate the rights of the Issuer.” The Pool Receivables to the extent they are evidenced by “tangible chattel paper” do not have any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Seller or the Issuer.

(c) Lock-Box Accounts. With respect to all Lock-Box Accounts (and all related lock-boxes), the Seller has delivered to the Administrator, on behalf of the Issuer, a fully executed Lock-Box Agreement pursuant to which the applicable Lock-Box Bank has agreed, following the

VI-1

occurrence and continuation of any Termination Event or Unmatured Termination Event described in paragraph (f) of Exhibit V, to comply with all instructions given by the Administrator with respect to all finds on deposit in such Lock-Box Account (and all funds sent to the respective lock-box), without further consent by the Seller or the Servicer.

4. Priority.

(a) Other than the transfer of the Receivables by the Originator to the Seller pursuant to the Purchase and Sale Agreement, the grant of security interest by the Seller to the Issuer in the Pool Receivables and Lock-Box Accounts (and the related lock-boxes) hereunder and the grant of a security interest pursuant to a Permitted Lien, neither the Seller nor the Originator has pledged, assigned, sold, conveyed, or otherwise granted a security interest in any of the Pool Receivables or Lock-Box Accounts (and the related lock-boxes) to any other person other than to a Consignor pursuant to a Permitted Lien.

(b) Neither the Seller nor the Originator has authorized, or is aware of, any filing of any financing statement against the Seller or the Originator that include a description of collateral covering the Pool Receivables or any other Pool Assets, other than any financing statement filed pursuant to the Purchase and Sale Agreement, the Agreement and a Permitted Lien or financing statements that have been validly terminated prior to the date hereof.

(c) The Seller is not aware of any judgment, ERISA or tax lien filings against either the Seller or the Originator.

(d) None of the Lock-Box Accounts (and the related lock-boxes) are in the name of any Person other than the Seller or the Issuer. Neither the Seller, the Servicer or the Originator has consented to any Lock-Box Bank’s complying with instructions of any person other than the Administrator.

5. Survival of Supplemental Representations. Notwithstanding any other provision of the Agreement or any other Transaction Document, the representations contained in this Exhibit VI shall be continuing, and remain in full force and effect until such time as all the Capital has finally been paid in full and all other obligations of the Seller under the Agreement or any other Transaction Documents have been fully performed.

6. No Waiver. The parties to the Agreement: (i) shall not, without obtaining a confirmation of the then-current rating of the Notes, waive any of the representations set forth in this Exhibit VI; (ii) shall provide the ratings agencies rating the Notes with prompt written notice of any breach of any representations set forth in this Exhibit VI, and (iii) shall not, without obtaining a confirmation of the then-current rating of the Notes (as determined after any adjustment or withdrawal of the ratings following notice of such breach) waive a breach of any of the representations set forth in this Exhibit VI.

VI-2

7. Seller or Servicer to Maintain Perfection and Priority. In order to evidence the interests of the Issuer under this Agreement, the seller or the Servicer shall, from time to time take such action, or execute and deliver such instruments (other than filing financing statements) as may be necessary or advisable (including, without imitation, such actions as are requested by the Administrator on behalf of the Issuer) to maintain and perfect, as a first-priority interest, the Issuer’s security interest in the Pool Assets other than any Pool Assets that are subject to a Permitted Lien. The Seller or the Servicer shall, from time to time and within the time limits established by law, prepare and present to the Administrator for the Administrator’s authorization and approval all financing statements, amendments, continuations or initial financing statements in lieu of a continuation statement, or other filings necessary to continue, maintain and perfect the Purchaser’s security interest in the Pool Assets as a first-priority interest other than any Pool Assets that are subject to Permitted Lien. The Administrator’s approval of such firings shall authorize the Seller or the Servicer to file such financing statements under the UCC without the signature of the Seller, the Originator or the Issuer where allowed by applicable law. Notwithstanding anything else in the Transaction Documents to the contrary, neither the Seller, the Servicer, nor the Originator, shall have any authority to-file a termination, partial termination, release, partial release or any amendment that deletes the name of a debtor or excludes collateral of any such financing statements, without the prior written consent of the Administrator, on behalf of the Issuer.

VI-3

SCHEDULE I

CREDIT AND COLLECTION POLICY

Schedule I-1

SCHEDULE II

LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS

Lock-Box Bank	Lock Box No.	Account No.
Mellon Financial Services Corporation #1	10183 21039	8-242-836 8-242-836
Mellon Bank, N.A.	0220	8-242-836

Schedule II-1

SCHEDULE III

TRADE NAMES

Corporate Name	Trade Names / Fictitious Names
CRS Funding Corp.	None

Schedule III-1

SCHEDULE IV

CONSIGNMENTS

	CONSIGNOR	UCC FILE #	FILE DATE
1.	Signode Corporation	11711614	5/20/83
2.	Hi-Temp Specialty Metals	31111675	12/30/99
3.	Acme Packaging Corporation	31290051	2/16/00
4.	Shieldalloy Metallurgical Corp.	28280019	12/3/97
5.	Aerospace Metals, Inc.	29591714	11/16/98
6.	North American Refractories Co.	31510719	4/17/00
7.	Climax Molybdenum Marketing Corp.	33730198	3/19/01
8.	Mitsui & Co. (USA), Inc.	30660417	8/26/99
9.	Vametco Minerals Corporation	28051104	10/1/97
10.	U.S. Vanadium Corporation	28051114	10/1/97
11.	Kaiser Aluminum & Chemical Corporation	30611225	8/16/99
12.	Chemalloy Company. Inc.	33810677	4/10/01

Schedule IV-1

ANNEX A

to Receivables Purchase Agreement

FORM OF INFORMATION PACKAGE

Annex A-1

ANNEX B

to Receivables Purchase Agreement

FORM OF PURCHASE NOTICE

Annex B-1

FORM OF PURCHASE NOTICE

                    , [2001]

PNC Bank, National Association

One PNC Plaza, 3rd Floor

249 Fifth Avenue

Pittsburgh, PA 15222-2707

Ladies and Gentlemen:

Reference is hereby made to the Receivables Purchase Agreement, dated as of December 20, 2001 (as heretofore amended or supplemented, the “Receivables Purchase Agreement”), among CRS Funding Corp., (“Seller”). Carpenter Technology Corporation as Servicer, Market Street Funding Corporation (“Issuer”) and PNC Bank National Association, (the “Administrator”). Capitalized terms used in this Purchase Notice and not otherwise defined herein shall have the meanings assigned thereto in the Receivables Purchase Agreement.

This letter constitutes a Purchase Notice pursuant to Section 1.2(a) of the Receivables Purchase Agreement. Seller desires to sell an undivided variable interest in a pool of receivables on                     , [2001], for a purchase price of $                    . Subsequent to this purchase, the aggregate outstanding Capital will be $                     .

Seller hereby represents and warrants as of the date hereof, and as of the date of purchase, as follows:

(i) the representations and warranties contained in Exhibit III or Exhibit VI of the Receivables Purchase Agreement are correct in all respects on and as of such dates as though made on and as of such dates and shall be deemed to have been made on such dates (except to the extent that such representations and warranties relate expressly to an earlier date, and in which case such representations and warranties shall be true and correct in all respects as of such earlier date);

(ii) no Termination Event or Unmatured Termination Event has occurred and is continuing, or would result from such purchase;

(iii) after giving effect to the purchase proposed hereby, the Purchased Interest will not exceed 100% and the Capital will not exceed the Purchase Limit;

(iv) the Facility Termination Date shall not have occurred.

IN WITNESS WHEREOF, the undersigned has caused this Purchase Notice to be executed by its duly authorized officer as of the date first above written.

CRS FUNDING CORP.

By:

Name Printed:

Title:

S-l

ANNEX C

to Receivables Purchase Agreement

FORM OF PAYDOWN NOTICE

Annex C-1

FORM OF PAYDOWN NOTICE

                    ,         

PNC Bank, National Association

249 Fifth Avenue

Pittsburgh, New York 15222-2707

Attention: John T. Smathers

Ladies and Gentlemen:

Reference is hereby made to the Receivables Purchase Agreement, dated as of December 20, 2001 (as amended, supplemented or otherwise modified, the “Receivables Purchase Agreement”), among CRS Funding Corp., as Seller, Carpenter Technology Corporation as Servicer, Market Street Funding Corporation, as Issuer and PNC Bank, National Association, as Administrator. Capitalized terms used in this paydown notice and not otherwise defined herein shall have the meanings assigned thereto in the Receivables Purchase Agreement.

This letter constitutes a paydown notice pursuant to Section 1.4(f)(i) of the Receivables Purchase Agreement. The Seller desires to reduce the Capital on                     ,         ¹ by the application of $                     in cash to pay Capital and Discount to accrue (until such cash can be used to pay commercial paper notes) with respect to such Capital, together with all costs related to such reduction of Capital.

¹ Notice must be given at least five Business Days’ prior to the requested paydown date, in the case of reductions in excess of $10,000,000, or at least two Business Days’ prior to the requested paydown date, in the case of reductions of $10,000,000 or less.

IN WITNESS WHEREOF, the undersigned has caused this paydown notice to be executed by its duly authorized officer as of the date first above written.

CRS FUNDING CORP.

By:

Name:

Title:

S-l

EX-10.V

Exhibit 10V

EXECUTION COPY

CRS Funding Corporation

FIFTH AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT

This FIFTH AMENDMENT (this “Amendment”), dated as of December 15, 2006, is among CRS FUNDING CORPORATION, a Delaware corporation, as seller (the “Seller”), CARPENTER TECHNOLOGY CORPORATION, a Delaware corporation (“Carpenter”), as initial servicer (in such capacity, together with its successors and permitted assigns in such capacity, the “Servicer”), MARKET STREET FUNDING LLC, a Delaware limited liability company (together with its successors and permitted assigns, the “Issuer”), and PNC BANK, NATIONAL ASSOCIATION, a national banking association (“PNC”), as administrator (in such capacity, together with its successors and assigns in such capacity, the “Administrator”).

RECITALS

1. The Seller, the Servicer, the Issuer and the Administrator are parties to the Receivables Purchase Agreement, dated as of December 20, 2001 (as amended, supplemented or otherwise modified from time to time, the “Agreement”).

2. The Seller, the Servicer, the Issuer and the Administrator desire to amend the Agreement as hereinafter set forth.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

SECTION 1. Certain Defined Terms. Capitalized terms that are used herein without definition and that are defined in Exhibit I to the Agreement shall have the same meanings herein as therein defined.

SECTION 2. Amendments to the Agreement.

SECTION 2.1 The definition of “Facility Termination Date” as set forth in Exhibit I to the Agreement is hereby amended by deleting the date “December 15, 2006” therein and substituting the date “December 22, 2006” therefor.

SECTION 3. Representations and Warranties. Each of the Seller and Servicer hereby represents and warrants to the Issuer and the Administrator as follows:

(a) Representations and Warranties. The representations and warranties of such Person contained in Article 2 of the Agreement (as amended hereby) are true and correct as of the date hereof (unless stated to relate solely to an earlier date, in which case such representations or warranties were true and correct as of such earlier date).

(b) Enforceability. The execution and delivery by such Person of this Amendment, and the performance of each of its obligations under this Amendment and the Agreement, as amended hereby, are within its corporate powers and have been duly authorized by all necessary corporate action on its part. This Amendment and the Agreement, as amended hereby, are such Person’s valid and legally binding obligations, enforceable in accordance with its terms.

(c) No Default. Immediately after giving effect to this Amendment and the transactions contemplated hereby, no Termination Event or Unmatured Termination Event exists or shall exist.

SECTION 4. Conditions to Effectiveness. This Amendment shall become effective as of the date hereof subject to the condition precedent that the Administrator shall have received the following, each duly executed and dated as of the date hereof (or such other date satisfactory to the Administrator), in form and substance satisfactory to the Administrator:

(a) counterparts of this Amendment executed by each of the parties hereto; and

(b) such other documents and instruments as the Administrator may reasonably request.

SECTION 5. Effect of Amendment; Ratification. Except as specifically amended hereby, the Agreement is hereby ratified and confirmed in all respects, and all of its provisions shall remain in full force and effect. After this Amendment becomes effective, all references in the Agreement (or in any other Transaction Document) to “the Receivables Purchase Agreement”, “this Agreement”, “hereof, “herein”, or words of similar effect, in each case referring to the Agreement, shall be deemed to be references to the Agreement as amended hereby. This Amendment shall not be deemed to expressly or impliedly waive, amend, or supplement any provision of the Agreement other than as specifically set forth herein.

SECTION 6. Counterparts. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, and each counterpart shall be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

SECTION 7. Governing Law. This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to any otherwise applicable conflict of laws principles.

SECTION 8. Section Headings. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or the Agreement or any provision hereof or thereof.

SIGNATURE PAGES FOLLOW

2 Fifth Amendment to RPA (CRS Funding Corp.)

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.

CRS FUNDING CORPORATION
By:	/s/ Jaime Vasquez

Name:	Jaime Vasquez
Title:	VP/ Treasurer

CARPENTER TECHNOLOGY CORPORATION,

as Servicer

By: /s/ Jaime Vasquez

Name:	Jaime Vasquez
Title:	VP/ Treasurer

S-1 Fifth Amendment to RPA (CRS Funding Corp.)

MARKET STREET FUNDING LLC
By:	/s/ Doris J. Hearn
Name:	Doris J. Hearn
Title:	Vice President

S-2 Fifth Amendment to RPA (CRS Funding Corp.)

PNC BANK, NATIONAL ASSOCIATION, as Administrator
By:	/s/ John T. Smathers
Name:	John T. Smathers
Title:	Vice President

S-3 Fifth Amendment to RPA (CRS Funding Corp.)

EXECUTION COPY

CRS Funding Corporation

SIXTH AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT

This SIXTH AMENDMENT (this “Amendment”), dated as of December 21, 2006, is among CRS FUNDING CORP., a Delaware corporation, as seller (the “Seller”), CARPENTER TECHNOLOGY CORPORATION, a Delaware corporation (“Carpenter”), as initial servicer (in such capacity, together with its successors and permitted assigns in such capacity, the “Servicer”), MARKET STREET FUNDING LLC, a Delaware limited liability company (together with its successors and permitted assigns, the “Issuer”), and PNC BANK, NATIONAL ASSOCIATION, a national banking association (“PNC”), as administrator (in such capacity, together with its successors and assigns in such capacity, the “Administrator”).

RECITALS

1. The Seller, the Servicer, the Issuer and the Administrator are parties to the Receivables Purchase Agreement, dated as of December 20, 2001 (as amended, supplemented or otherwise modified from time to time, the “Agreement”).

2. The Seller, the Servicer, the Issuer and the Administrator desire to amend the Agreement as hereinafter set forth.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

SECTION 1. Certain Defined Terms. Capitalized terms that are used herein without definition and that are defined in Exhibit I to the Agreement shall have the same meanings herein as therein defined.

SECTION 2. Amendments to the Agreement.

SECTION 2.1 The definition of “Facility Termination Date” as set forth in Exhibit I to the Agreement is hereby amended by deleting the date “December 22, 2006” therein and substituting the date “March 12, 2010” therefor.

SECTION 2.2 Clause (h) of paragraph (1) of Exhibit IV to the Agreement is hereby amended and restated in its entirety as follows:

(h) Audits. The Seller shall, from time to time during regular business hours as reasonably requested in advance (unless a Termination Event or an Unmatured Termination Event exists) by the Administrator, permit the Administrator, or its agents or representatives: (i) to examine and make copies of and abstracts from all books, records and documents

(including computer tapes and disks) in the possession or under the control of the Seller (or the Originator) relating to Receivables and the Related Security, including the related Contracts, (ii) to visit the offices and properties of the Seller for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to Receivables and the Related Security or the Seller’s performance under the Transaction Documents or under the Contracts with any of the officers, employees, agents or contractors of the Seller having knowledge of such matters and (iii) without limiting clauses (i) and (ii) above, no more than once annually (unless a Termination Event or an Unmatured Termination Event exists) to engage certified public accountants or other auditors acceptable to the Seller and the Administrator to conduct, at the Seller’s expense, a review of the Seller’s books and records with respect to such Receivables; provided, that such an annual review as set forth in this clause (h)(iii) shall not be required at any time (unless a Termination Event or an Unmatured Termination Event exists) when either (a) no Capital and no other amount is outstanding or (b) if Capital or any amount is outstanding, (i) the “Facility Utilization” for any calendar month is less than 50% and (ii) Carpenter has unsecured debt ratings of at least BBB- by Standard & Poor’s or at least Baa3 by Moody’s (it being agreed that “Facility Utilization” shall mean, for any calendar month, a fraction (expressed as a percentage) (a) the numerator of which is the daily weighted average outstanding Capital during such calendar month and (b) the denominator of which is the Purchase Limit at the beginning of such calendar month);

SECTION 2.3 Clause (f) of paragraph (2) of Exhibit IV to the Agreement is hereby amended and restated in its entirety as follows:

(f) Audits. The Servicer shall, from time to time during regular business hours as reasonably requested in advance (unless a Termination Event or an Unmatured Termination Event exists) by the Administrator, permit the Administrator, or its agents or representatives: (i) to examine and make copies of and abstracts from all books, records and documents (including computer tapes and disks) in its possession or under its control relating to Receivables and the Related Security, including the related Contracts; (ii) to visit its offices and properties for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to Receivables and the Related Security or its performance hereunder or under the Contracts with any of its officers, employees, agents or contractors having knowledge of such matters and (iii), without limiting clauses (i) and (ii) above, no more than once annually (unless a Termination Event or an Unmatured Termination Event exists) to engage certified public accountants or other auditors acceptable to the Servicer and the Administrator to conduct, at the Servicer’s expense, a review of

2	Sixth Amendment to RPA
	(CRS Funding Corp.)

the Servicer’s books and records with respect to such Receivables; provided, that such an annual review as set forth in this clause (f)(iii) shall not be required at any time (unless a Termination Event or an Unmatured Termination Event exists) when either (a) no Capital and no other amount is outstanding or (b) if Capital or any amount is outstanding, (i) the “Facility Utilization” for any calendar month is less than 50% and (ii) Carpenter has unsecured debt ratings of at least BBB- by Standard & Poor’s or at least Baa3 by Moody’s (it being agreed that “Facility Utilization” shall mean, for any calendar month, a fraction (expressed as a percentage) (a) the numerator of which is the daily weighted average outstanding Capital during such calendar month and (b) the denominator of which is the Purchase Limit at the beginning of such calendar month);

SECTION 3. Representations and Warranties. Each of the Seller and Servicer hereby represents and warrants to the Issuer and the Administrator as follows:

(a) Representations and Warranties. The representations and warranties of such Person contained in Article 2 of the Agreement (as amended hereby) are true and correct as of the date hereof (unless stated to relate solely to an earlier date, in which case such representations or warranties were true and correct as of such earlier date).

(b) Enforceability. The execution and delivery by such Person of this Amendment, and the performance of each of its obligations under this Amendment and the Agreement, as amended hereby, are within its corporate powers and have been duly authorized by all necessary corporate action on its part. This Amendment and the Agreement, as amended hereby, are such Person’s valid and legally binding obligations, enforceable in accordance with its terms.

(c) No Default. Immediately after giving effect to this Amendment and the transactions contemplated hereby, no Termination Event or Unmatured Termination Event exists or shall exist.

SECTION 4. Conditions to Effectiveness. This Amendment shall become effective as of the date hereof subject to the condition precedent that the Administrator shall have received the following, each duly executed and dated as of the date hereof (or such other date satisfactory to the Administrator), in form and substance satisfactory to the Administrator:

(a) counterparts of this Amendment and that certain second amended and restated fee letter dated the date hereof (whether by facsimile or otherwise) executed by each of the parties hereto; and

(b) such other documents and instruments as the Administrator may reasonably request.

SECTION 5. Effect of Amendment; Ratification. Except as specifically amended hereby, the Agreement is hereby ratified and confirmed in all respects, and all of its provisions

3	Sixth Amendment to RPA
	(CRS Funding Corp.)

shall remain in full force and effect. After this Amendment becomes effective, all references in the Agreement (or in any other Transaction Document) to “the Receivables Purchase Agreement”, “this Agreement”, “hereof, “herein”, or words of similar effect, in each case referring to the Agreement, shall be deemed to be references to the Agreement as amended hereby. This Amendment shall not be deemed to expressly or impliedly waive, amend, or supplement any provision of the Agreement other than as specifically set forth herein.

SECTION 6. Counterparts. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, and each counterpart shall be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

SECTION 7. Governing Law. This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to any otherwise applicable conflict of laws principles.

SECTION 8. Section Headings. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or the Agreement or any provision hereof or thereof.

SIGNATURE PAGES FOLLOW

4	Sixth Amendment to RPA
	(CRS Funding Corp.)

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.

CRS FUNDING CORPORATION
By:	/s/ Jaime Vasquez
Name:	Jaime Vasquez
Title:	VP/TREASURER
CARPENTER TECHNOLOGY CORPORATION, as Servicer
By:	/s/ Jaime Vasquez
Name:	Jaime Vasquez
Title:	VP/TREASURER

S-1	Sixth Amendment to RPA
	(CRS Funding Corp.)

MARKET STREET FUNDING LLC
By:	/s/ Doris J. Hearn
Name:	Doris J. Hearn
Title:	Vice President

S-2	Sixth Amendment to RPA
	(CRS Funding Corp.)

PNC BANK, NATIONAL ASSOCIATION, as Administrator
By:	/s/ John T. Smathers
Name:	John T. Smathers
Title:	Vice President

S-3	Sixth Amendment to RPA
	(CRS Funding Corp.)

EX-12

Exhibit 12

Carpenter Technology Corporation

Computation of Ratios of Earnings to Fixed Charges — unaudited

Five Years ended June 30, 2007

(dollars in millions)

	2007			2006			2005			2004			2003
Fixed charges:
Interest costs(a)	$	23.3		$	23.6		$	23.1		$	23.8		$	31.1
Interest component of non-capitalized lease rental expense (b)		3.0			1.8			2.6			2.7			3.8
Total fixed charges	$	26.3		$	25.4		$	25.7		$	26.5		$	34.9
Earnings as defined:
Income (loss) before income taxes	$	331.0		$	309.1		$	190.0		$	49.7		$	(22.9	)
Less income from less-than-fifty-percent owned entities, and loss on sale of partial interest in less-than-fifty percent owned entities		(1.2	)		(1.6	)		(0.9	)		(1.0	)		(0.6	)
Fixed charges less interest capitalized		25.8			25.1			25.6			26.4			34.8
Amortization of capitalized interest		2.5			2.5			2.5			2.5			2.6
Earnings as defined	$	358.1		$	335.1		$	217.2		$	77.6		$	13.9
Ratio of earnings to fixed charges		13.6	x		13.2	x		8.5	x		2.9	x		0.4	x

^(a) Includes interest capitalized relating to significant construction projects, and amortization of debt discount and debt issue costs.

^(b) One-third of rental expense which approximates the interest component of non-capitalized leases.

EX-21

Exhibit 21

SUBSIDIARY LIST

Doing Business As	State of Incorporation
Carpenter Investments, Inc.	Delaware
CRS Holdings, Inc.	Delaware
CRS Investments, Inc.	Delaware
Dynamet Incorporated	Delaware
Talley Industries, Inc.	Delaware

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 2-83780, 2-81019, 2-60469, 33-42536, 33-42997, 33-65077, 33-54045, 333-40991, 333-55667, 333-55669 and 333-57774) of Carpenter Technology Corporation of our report dated August 24, 2007, relating to the financial statements, financial statement schedule, management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

August 24, 2007

EX-24

Exhibit 24

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that the undersigned, in his capacity as a Director of Carpenter Technology Corporation, does hereby appoint K. Douglas Ralph and David A. Christiansen or either of them his true and lawful attorneys to execute in his name, place and stead, in his capacity as Director of said Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 on Form 10-K, for the year ended June 30, 2007, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file the same with the Securities and Exchange Commission. Said attorneys shall individually have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or desirable to be done in the exercise of any of the rights and powers herein granted, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys.

IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 20^th day of August, 2007.

/s/ Carl G. Anderson, Jr.

Carl G. Anderson, Jr.

Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that the undersigned, in his capacity as a Director of Carpenter Technology Corporation, does hereby appoint K. Douglas Ralph and David A. Christiansen or either of them his true and lawful attorneys to execute in his name, place and stead, in his capacity as Director of said Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 on Form 10-K, for the year ended June 30, 2007, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file the same with the Securities and Exchange Commission. Said attorneys shall individually have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or desirable to be done in the exercise of any of the rights and powers herein granted, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys.

IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 21st day of August, 2007.

/s/ Philip M. Anderson

Philip M. Anderson

Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that the undersigned, in his capacity as a Director of Carpenter Technology Corporation, does hereby appoint K. Douglas Ralph and David A. Christiansen or either of them his true and lawful attorneys to execute in his name, place and stead, in his capacity as Director of said Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 on Form 10-K, for the year ended June 30, 2007, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file the same with the Securities and Exchange Commission. Said attorneys shall individually have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or desirable to be done in the exercise of any of the rights and powers herein granted, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys.

IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 20^th day of August, 2007.

/s/ I. Martin Inglis

I. Martin Inglis

Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that the undersigned, in his capacity as a Director of Carpenter Technology Corporation, does hereby appoint K. Douglas Ralph and David A. Christiansen or either of them his true and lawful attorneys to execute in his name, place and stead, in his capacity as Director of said Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 on Form l0-K, for the year ended June 30, 2007, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file the same with the Securities and Exchange Commission. Said attorneys shall individually have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or desirable to be done in the exercise of any of the rights and powers herein granted, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys.

IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 21st day of August, 2007.

/s/ Robert R. McMaster

Robert R. McMaster

Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that the undersigned, in his capacity as a Director of Carpenter Technology Corporation, does hereby appoint K. Douglas Ralph and David A. Christiansen or either of them his true and lawful attorneys to execute in his name, place and stead, in his capacity as Director of said Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 on Form 10-K, for the year ended June 30, 2007, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file the same with the Securities and Exchange Commission. Said attorneys shall individually have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or desirable to be done in the exercise of any of the rights and powers herein granted, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys.

IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 20th day of August, 2007.

/s/ Gregory A. Pratt

Gregory A. Pratt

Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that the undersigned, in his capacity as a Director of Carpenter Technology Corporation, does hereby appoint K. Douglas Ralph and David A. Christiansen or either of them his true and lawful attorneys to execute in his name, place and stead, in his capacity as Director of said Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 on Form 10-K, for the year ended June 30, 2007, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file the same with the Securities and Exchange Commission. Said attorneys shall individually have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or desirable to be done in the exercise of any of the rights and powers herein granted, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys.

IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 21st day of August, 2007.

/s/ Peter N. Stephans

Peter N. Stephans

Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that the undersigned, in his capacity as a Director of Carpenter Technology Corporation, does hereby appoint K. Douglas Ralph and David A. Christiansen or either of them his true and lawful attorneys to execute in his name, place and stead, in his capacity as Director of said Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 on Form 10-K, for the year ended June 30, 2007, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file the same with the Securities and Exchange Commission. Said attorneys shall individually have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or desirable to be done in the exercise of any of the rights and powers herein granted, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys.

IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 21st day of August, 2007.

/s/ Kathryn C. Turner

Kathryn C. Turner

Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that the undersigned, in his capacity as a Director of Carpenter Technology Corporation, does hereby appoint K. Douglas Ralph and David A. Christiansen or either of them his true and lawful attorneys to execute in his name, place and stead, in his capacity as Director of said Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 on Form 10-K, for the year ended June 30, 2007, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file the same with the Securities and Exchange Commission. Said attorneys shall individually have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or desirable to be done in the exercise of any of the rights and powers herein granted, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys.

IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 20th day of August, 2007.

/s/ Jeffrey Wadsworth

Jeffrey Wadsworth

Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that the undersigned, in his capacity as a Director of Carpenter Technology Corporation, does hereby appoint K. Douglas Ralph and David A. Christiansen or either of them his true and lawful attorneys to execute in his name, place and stead, in his capacity as Director of said Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 on Form 10-K, for the year ended June 30, 2007, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file the same with the Securities and Exchange Commission. Said attorneys shall individually have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or desirable to be done in the exercise of any of the rights and powers herein granted, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys.

IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 21st day of August, 2007.

/s/ Stephen M. Ward, Jr.

Stephen M. Ward, Jr.

Director

CARPENTER TECHNOLOGY CORPORATION

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that the undersigned, in his capacity as a Director of Carpenter Technology Corporation, does hereby appoint K. Douglas Ralph and David A. Christiansen or either of them his true and lawful attorneys to execute in his name, place and stead, in his capacity as Director of said Company, the Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 on Form 10-K, for the year ended June 30, 2007, of said Company, and any and all amendments to said Annual Report and all instruments necessary or incidental in connection therewith and to file the same with the Securities and Exchange Commission. Said attorneys shall individually have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever requisite or desirable to be done in the exercise of any of the rights and powers herein granted, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys.

IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 21st day of August, 2007.

/s/ Anne L. Stevens

Anne L. Stevens

Director

EX-31.A

Exhibit 31A

CERTIFICATIONS OF PERIODIC REPORTS PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Anne L. Stevens, Chairman, President and Chief Executive Officer of Carpenter Technology Corporation (the “Registrant”), certify that:

1. I have reviewed this Annual Report on Form 10-K (the “Report”) of the Registrant;

2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

(d) Disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Dated: August 29, 2007	/s/ Anne L. Stevens
	Anne L. Stevens, Chairman, President and Chief Executive Officer

EX-31.B

Exhibit 31B

CERTIFICATIONS OF PERIODIC REPORTS PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, K. Douglas Ralph, Senior Vice President - Finance & Chief Financial Officer of Carpenter Technology Corporation (the “Registrant”), certify that:

1. I have reviewed this Annual Report on Form 10-K (the “Report”) of the Registrant;

2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

(d) Disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Dated: August 29, 2007	/s/ K. Douglas Ralph
	K. Douglas Ralph, Senior Vice President - Finance & Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION OF PERIODIC FINANCIAL REPORTS PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Carpenter Technology Corporation (the “Issuer”) on Form 10-K for the year ended June 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Periodic Report”), I, Anne L. Stevens, Chairman, President and Chief Executive Officer of the Issuer, and I, K. Douglas Ralph, Senior Vice President-Finance and Chief Financial Officer of the Issuer, each hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Periodic Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and that information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

Date: August 29, 2007

/s/ Anne L. Stevens	/s/ K. Douglas Ralph
Anne L. Stevens	K. Douglas Ralph
Chairman, President and Chief Executive Officer	Senior Vice President-Finance and Chief Financial Officer

EX-99

Exhibit 99

AGREEMENT TO FURNISH DEBT INSTRUMENTS

Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Carpenter has not included as an Exhibit any instrument with respect to long-term debt if the total amount of debt authorized by such instrument does not exceed 10% of the total assets of Carpenter. Carpenter agrees, pursuant to this Item, to furnish a copy of any such instrument to the Securities and Exchange Commission upon request of the Commission.

CARPENTER TECHNOLOGY CORPORATION
By:	/s/ David A. Christiansen
	David A. Christiansen
	Vice President,
	General Counsel and Secretary