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Exhibit 10.7
JLK DIRECT DISTRIBUTION INC.
DIRECTORS STOCK INCENTIVE PLAN
ARTICLE I
GENERAL PROVISIONS
SECTION 1.1. ESTABLISHMENT AND PURPOSE. There is hereby established the
JLK Direct Distribution Inc. Directors Stock Incentive Plan (the "Plan")
pursuant to which each director of JLK Direct Distribution Inc. (the "Company")
who is not an employee of the Company or any of its subsidiaries (a
"Non-Employee Director") shall be eligible, through an election to defer receipt
of any compensation to be earned by such Non-Employee Director made under the
JLK Direct Distribution Inc. Deferred Fee Plan for Outside Directors (the
"Deferred Compensation Plan"), to have Stock Credits (as hereinafter defined)
credited to an account established for such Non-Employee Director by the
Company. The purpose of the Plan is to assist the Company in attracting,
retaining and motivating highly qualified Non-Employee Directors and to promote
identification of, and align Non-Employee Directors' interests more closely
with, the interests of the stockholders of the Company.
SECTION 1.2. DEFINITIONS. In addition to the terms previously or
hereafter defined herein, the following terms when used herein shall have the
meanings set forth below:
"Board" shall mean the Board of Directors of the Company.
"Committee" shall mean the committee of the Board appointed by the
Board to administer the Plan. Unless otherwise determined by the Board, the
Committee shall be the Committee on Executive Compensation of the Board.
"Common Stock" shall mean the Company's Common Stock, par value $.01
per share.
"Company Stock Credit" shall mean a credit that is equivalent to one
share of Common Stock.
"Compensation" shall mean all remuneration paid to a Non-Employee
Director for service as such that is not deferred pursuant to the Deferred
Compensation Plan.
"Deferred Compensation" shall mean all remuneration paid to a
Non-Employee Director for service as such that is deferred pursuant to the
Deferred Compensation Plan.
"Fair Market Value" shall mean: (a) with respect to Common Stock, as of
any date, the mean of the highest and lowest sales prices for the Common Stock
as reported in the New York Stock Exchange--Composite Transactions reporting
system for the date in question or, if no sales were effected on such date, on
the next preceding date on which sales were effected; and (b)
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with respect to Capital Stock of Kennametal Inc. ("Kennametal"), as of any date,
the mean of the highest and lowest sales prices for the Capital Stock of
Kennametal as reported in the New York Stock Exchange--Composite Transactions
reporting system for the date in question or, if no sales were effected on such
date, on the next preceding date on which sales were effected.
"Kennametal Stock Credit" shall mean a credit that is equivalent to one
share of Class A Common Stock of JLK.
"Plan Year" shall mean the twelve-month period beginning January 1 and
ending December 31 in any particular year.
"Stock Credit" shall mean either a Company Stock Credit or a Kennametal
Stock Credit, as the case may be.
SECTION 1.3. ADMINISTRATION. The Plan shall be administered by the
Committee. The Committee shall serve at the pleasure of the Board of Directors.
A majority of the Committee shall constitute a quorum, and the acts of a
majority of the members of the Committee present at any meeting at which a
quorum is present, or acts approved in writing by a majority of the members of
the Committee, shall be deemed the acts of the Committee. The Committee is
authorized to interpret and construe the Plan, to make all determinations and
take all other actions necessary or advisable for the administration of the
Plan, and to delegate to employees of the Company or any subsidiary the
authority to perform administrative functions under the Plan; provided, however,
that the Committee shall have no authority to determine the persons entitled to
receive Common Stock or Stock Credits under the Plan nor the timing, amount or
price of Common Stock or Stock Credits issued under the Plan.
SECTION 1.4. ELIGIBILITY. An individual who is a Non-Employee Director
shall be eligible to participate in the Plan.
ARTICLE II
ELECTIONS AND DISTRIBUTIONS
SECTION 2.1. ELECTIONS TO RECEIVE COMPANY STOCK CREDITS FROM DEFERRED
COMPENSATION. Any Non-Employee Director may elect to receive Company Stock
Credits under this Plan in any Plan Year with respect to all or a portion of the
Deferred Compensation credited to the Non-Employee Director in that Plan Year (a
"Company Stock Credit Election"). If a Non-Employee Director makes a Company
Stock Credit Election, an account established for the Non-Employee Director and
maintained by the Company shall be credited with that number of Company Stock
Credits equal to the number of shares of Common Stock (including fractions of a
share to four decimal places) that could have been purchased with the amount of
Deferred Compensation subject to a Company Stock Credit Election based on the
Fair Market Value of the Common Stock on the day that the Deferred Compensation
is credited under the Deferred Compensation Plan. A Company Stock Credit
Election shall be valid in any period only if the Non-Employee Director has
elected to participate in the Deferred Compensation Plan for such period.
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SECTION 2.2. ELECTIONS TO RECEIVE KENNAMETAL STOCK CREDITS FROM
DEFERRED COMPENSATION. Any Non-Employee Director may elect to receive Kennametal
Stock Credits under this Plan in any Plan Year with respect to all or a portion
of the Deferred Compensation credited to the Non-Employee Director in that Plan
Year (a "Kennametal Stock Credit Election"). If a Non-Employee Director makes a
Kennametal Stock Credit Election, an account established for the Non-Employee
Director and maintained by the Company shall be credited with that number of
Kennametal Stock Credits equal to the number of shares of Capital Stock of
Kennametal (including fractions of a share to four decimal places) that could
have been purchased with the amount of Deferred Compensation subject to a
Kennametal Stock Credit Election based on the Fair Market Value of the Capital
Stock of Kennametal on the day that the Deferred Compensation is credited under
the Deferred Compensation Plan. A Kennametal Stock Credit Election shall be
valid in any period only if the Non-Employee Director has elected to participate
in the Deferred Compensation Plan for such period.
SECTION 2.3. TERMS AND CONDITIONS OF ELECTIONS. A Company Stock Credit
Election or Kennametal Stock Credit Election (an "Election") shall be subject to
the following terms and conditions:
(a) An Election shall be in writing and shall be irrevocable; and
(b) An Election shall be effective for any Plan Year only if made on or
prior to the June 30 immediately preceding the commencement of such
Plan Year.
(c) An Election shall remain in effect for all future Plan Years unless
terminated or changed pursuant to an Election made on or prior to June
30 to take effect for the next Plan Year.
SECTION 2.4. ADJUSTMENT OF STOCK CREDIT ACCOUNTS.
(a) Cash Dividends--As of the date that any cash dividend is
paid to stockholders of the Company or Kennametal, the applicable Stock
Credit account of the Non-Employee Director shall be credited with
additional Stock Credits equal to the number of shares of stock
underlying such Stock Credit (including fractions of a share to four
decimal places) that could have been purchased on that date with the
dividends paid on the underlying shares based on the Fair Market Value
of the Common Stock or Kennametal Capital Stock, as the case may be, on
that date.
(b) Stock Dividends--In the event that a stock dividend shall
be paid upon the stock underlying the Stock Credit Account, the number
of Stock Credits in the Non-Employee Director's applicable Stock Credit
account shall be adjusted by adding thereto additional Stock Credits
equal to the number of shares of the underlying stock which would have
been distributable on such stock represented by Stock Credits if such
shares had been outstanding on the date fixed for determining the
stockholders entitled to receive such stock dividend.
(c) Other Adjustments--In the event that the outstanding
shares of Common Stock or Capital Stock of Kennametal, as the case may
be, shall be changed into or
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exchanged for a different number or kind of shares of stock or
other securities whether through reorganization, recapitalization,
stock split-up, combination of shares, merger or consolidation, then
there shall be substituted, for the shares of stock underlying the
Stock Credits, the number and kind of shares of stock or other
securities which would have been substituted therefor if the underlying
shares had been outstanding on the date fixed for determining the
stockholders entitled to receive such changed or substituted stock or
other securities.
In the event there shall be any change, other than specified
in this Section 2.4, in the number or kind of outstanding shares of stock
underlying the Stock Credits or of any stock or other securities into which such
underlying Common Stock shall be changed or for which it shall have been
exchanged, then, if the Board of Directors shall determine, in its discretion,
that such change equitably requires an adjustment in the number of Stock
Credits, such adjustment shall be made by the Board of Directors and shall be
effective and binding for all purposes of the Plan and on each outstanding Stock
Credit account.
SECTION 2.5. CHANGE IN CONTROL. In the event of any threatened or
actual change in control of the Company (as defined by the Committee), the value
of the Stock Credits in each Non-Employee Director's Stock Credit account shall
be paid to such Non-Employee Director in cash.
SECTION 2.6. DISTRIBUTION OF COMPANY STOCK CREDITS. Unless a
Non-Employee Director has selected a different payment option as set forth
below, as soon as practicable following the date that such Non-Employee Director
ceases (other than by reason of such Non-Employee Director's death) to be a
Non-Employee Director (hereinafter, "retirement"), the Company shall pay the
Non-Employee director a cash amount equal to the value of the Company Stock
Credits in such Director's account. A Non-Employee Director may elect to receive
the cash payment for the Company Stock Credits in such Non-Employee Director's
Company Stock Credit account in monthly or annual installments beginning after
retirement from the Board by written notification to the Company of such elected
payment option and may modify any such election by a subsequent written
notification to the Company; provided, however, that the Company shall be
required to effect any such written notification only if submitted to the
Company no fewer than twelve months prior to such Non-Employee Director's
retirement from the Board.
SECTION 2.7. DISTRIBUTION OF KENNAMETAL STOCK CREDITS. Unless a
Non-Employee Director has selected a different payment option as set forth
below, as soon as practicable following the retirement of such Non-Employee
Director, the Company shall deliver to such Non-Employee Director or cause
Kennametal to issue pursuant to the Kennametal Directors Stock Incentive Plan
that number of shares of Capital Stock of Kennametal equal to the Fair Market
Value of shares of Capital Stock of Kennametal underlying the Kennametal Stock
Credits in such Non-Employee Director's Kennametal Stock Credit account as of
the date of retirement with any fractional shares being paid in cash. A
Non-Employee Director may elect to receive the Common Stock represented by the
Kennametal Stock Credits in such Non-Employee Director's Kennametal Stock Credit
account in monthly or
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annual installments beginning after retirement from the Board by written
notification to the Company of such elected payment option and may modify any
such election by a subsequent written notification to the Company; provided,
however, that the Company shall be required to effect any such written
notification only if submitted to the Company no fewer than twelve months prior
to such Non-Employee Director's retirement from the Board. Notwithstanding the
foregoing, the Committee, in its sole discretion, shall have the right to pay a
Non-Employee Director a cash amount equal to the value of Kennametal Stock
Credits, in lieu of delivering Kennametal Capital Stock.
SECTION 2.8. DISTRIBUTIONS ON DEATH. In the event of the death of a
Non-Employee Director, whether before or after cessation of service as a
Non-Employee Director, the Stock Credit account to which he or she was entitled
shall be converted to cash and distributed in a lump sum to such person or
persons or the survivors thereof, including corporations, unincorporated
associates or trusts, as the Non-Employee Director may have designated. All such
designations shall be made in writing, signed by the Non-Employee Director and
delivered to the Company. A Non-Employee Director may from time to time revoke
or change any such designation by written notice to the Company. If there is no
unrevoked designation on file with the Company at the time of the Non-Employee
Director's death, or if the person or persons designated therein shall have all
predeceased the Non-Employee Director or otherwise ceased to exist, such
distributions shall be made to the Non-Employee Director's estate. Any
distribution under this Section 2.8 shall be made as soon as practicable
following notification to the Company of the Non-Employee Director's death. In
any case in which the Non-Employee Director's Stock Credit account is to be
converted to cash pursuant to this Section 2.8, such cash amount shall be
determined by multiplying the number of whole and fractional shares of Common
Stock or Kennametal Capital Stock, as the case may be, to which the Non-Employee
Director's Stock Credit account is equivalent by the Fair Market Value of the
shares underlying such account on the date of death.
SECTION 2.9. CONVERSION OF DEFERRED COMPENSATION TO STOCK CREDITS. The
Committee may, in its discretion, permit a Non-Employee Director to convert
Deferred Compensation already credited to such Non-Employee Director's cash
account to Stock Credits (a "Conversion Election"). Any such election and the
related conversion shall occur only during specified periods designated by the
Committee and shall become effective on the date such election is delivered to
the Company. If a Non-Employee Director makes a Conversion Election, such
Non-Employee Director's Stock Credit account will be credited with that number
of Stock Credits equal to the number of shares of Common Stock or Kennametal
Capital Stock, as the case may be, underlying the Stock Credit Account
(including fractions of a share to four decimal places) that could have been
purchased with the amount of Deferred Compensation subject to the Conversion
Election based on the Fair Market Value of the underlying stock on the day that
the Conversion Election is made.
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ARTICLE III
MISCELLANEOUS PROVISIONS
SECTION 3.1. AMENDMENT AND DISCONTINUANCE. The Board of Directors may
alter, amend, suspend or discontinue the Plan, provided that no such action
shall deprive any person without such person's consent of any rights theretofore
granted pursuant hereto. The Board of Directors may, in its discretion, submit
any proposed amendment to the Plan to the stockholders of the Company for
approval and shall submit proposed amendments to the Plan to the stockholders of
the Company for approval if such approval is required in order for the Plan to
comply with Rule 16b-3 of the Exchange Act (or any successor rule).
SECTION 3.2. COMPLIANCE WITH GOVERNMENTAL REGULATIONS. Notwithstanding
any provision of the Plan or the terms of any agreement entered into pursuant to
the Plan, the Company shall not be required to issue any shares hereunder prior
to registration of the shares subject to the Plan under the Securities Act of
1933 or the Exchange Act, if such registration shall be necessary, or before
compliance by the Company or any participant with any other provisions of either
of those acts or of regulations or rulings of the Securities and Exchange
Commission thereunder, or before compliance with other federal and state laws
and regulations and rulings thereunder, including the rules of the New York
Stock Exchange, Inc. The Company shall use its best efforts to effect such
registrations and to comply with such laws, regulations and rulings forthwith
upon advice by its counsel that any such registration or compliance is
necessary.
SECTION 3.3. COMPLIANCE WITH SECTION 16. With respect to persons
subject to Section 16 of the Exchange Act in relation to the Company,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 (or its successor rule). To the extent that any
provision of the Plan or any action by the Board of Directors or the Committee
fails to so comply, it shall be deemed null and void to the extent permitted by
law and to the extent deemed advisable by the Committee.
SECTION 3.4. NON-ALIENATION OF BENEFITS. No right or interest of a
Non-Employee Director in a Stock Credit account under the Plan may be sold,
assigned, transferred, pledged, encumbered or otherwise disposed of except as
expressly provided in the Plan; and no interest or benefit of any Non-Employee
Director under the Plan shall be subject to the claims of creditors of the
Non-Employee Director.
SECTION 3.5. WITHHOLDING TAXES. To the extent required by applicable
law or regulation, each Non-Employee Director must arrange with the Company for
the payment of any federal, state or local income or other tax applicable to the
receipt of stock or Stock Credits under the Plan before the Company shall be
required to deliver payment to the Non-Employee Director.
SECTION 3.6. FUNDING. Except as provided in Section 2.5 hereof, no
obligation of the Company under the Plan shall be secured by any specific assets
of the Company, nor shall any assets of the Company be designated as
attributable or allocated to the satisfaction of any such obligation. To the
extent that any person acquires a right to receive payments from the Company
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under the Plan, such right shall be no greater than the right of any unsecured
creditor of the Company.
SECTION 3.7. GOVERNING LAW. The Plan shall be governed by and construed
and interpreted in accordance with the internal laws of the Commonwealth of
Pennsylvania.
SECTION 3.8. EFFECTIVE DATE OF PLAN. The Plan became effective upon
approval and adoption of the Plan by the Board of Directors of the Company as of
July 1, 1997.
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