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EXHIBIT 10.5
KENNAMETAL INC.
1999 STOCK PLAN
SECTION 1. ESTABLISHMENT. There is hereby established the Kennametal
Inc. 1999 Stock Plan (hereinafter called the "Plan") pursuant to which
directors, officers and key employees of Kennametal Inc. (hereinafter called the
"Company") and its subsidiaries, including prospective directors, officers and
key employees, who are or will be mainly responsible for its continued growth
and development and future financial success may be granted options to purchase
shares of Capital Stock of the Company (as defined in Section 5 below) and/or
may receive awards of shares of Capital Stock in order to secure to the Company
the advantage of the incentive and sense of proprietorship inherent in stock
ownership by such persons, to reward such persons for services previously
performed and/or as an added inducement to continue or begin to provide service
to the Company.
SECTION 2. DURATION. Options and share awards under this Plan may be
granted only within the ten-year period beginning on the date on which the Plan
is adopted by the board of directors. Any options or share awards outstanding
after the expiration of such ten-year period may be exercised within the periods
prescribed by Section 7.
SECTION 3. ADMINISTRATION. The Plan shall be administered by the full
Board of Directors or a committee constituted so as to permit transactions under
the Plan to comply with Rule 16b-3 (or any successor rule) promulgated under the
Securities Exchange Act of 1934, as amended (the "Plan Administrator"). Subject
to the provisions of the Plan, the Plan Administrator is authorized to adopt
such rules and regulations and to take such action in the administration of the
Plan as it shall deem proper.
SECTION 4. ELIGIBILITY. Directors, officers and key employees of the
Company and its subsidiaries, including prospective directors, officers and key
employees, who, in the opinion of the Plan Administrator, are or will be mainly
responsible for the continued growth, development and future financial success
of the business, shall be eligible to participate in the Plan. The Plan
Administrator shall, in its sole discretion, from time to time, select from such
eligible persons those to whom options shall be granted or shares awarded and
determine the number of shares to be included in such option or award. No
participant shall have any right to receive an option or share award, except as
the Plan Administrator in its discretion shall determine. The term "subsidiary,"
where used in the Plan or in any stock option agreement entered into under the
Plan, means a "subsidiary corporation" as defined in Section 425 of the Internal
Revenue Code of 1986, as it may be amended from time to time (the "Code").
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SECTION 5. SHARES SUBJECT TO THE PLAN. The total number of shares of
stock which may be issued pursuant to the Plan shall be 600,000 shares of
capital stock, par value $1.25 per share, of the Company (the "Capital Stock")
provided, however, that: (i) the number of shares of Capital Stock to be issued
pursuant to the Plan is subject to adjustment as provided in Section 11; (ii) to
the extent that options granted under the Plan shall expire or terminate without
being exercised or shares awarded under the Plan shall be forfeited, such shares
shall remain available for purposes of the Plan; and (iii) shares used to
exercise options or pay tax obligations shall be available for purposes of the
Plan. Capital Stock to be issued under the Plan may be either authorized and
unissued shares or shares held in treasury by the Company.
SECTION 6. TYPES OF OPTIONS. Options granted pursuant to the Plan will
not qualify as incentive stock options under the Code.
SECTION 7. TERMS OF OPTIONS. Each option granted under the Plan shall
be evidenced by a stock option agreement between the Company and the person to
whom such option is granted and shall be subject to the following terms and
conditions:
(a) Subject to adjustment as provided in Section 11 of this
Plan, the price at which each share covered by an option may be
purchased shall be determined in each case by the Plan Administrator;
provided, however, that such price shall not be less than the fair
market value thereof at the time the option is granted.
(b) During the lifetime of the optionee the option may be
exercised only by the optionee. The option shall not be transferable by
the optionee otherwise than by will or by the laws of descent and
distribution or, if in compliance with Rule 16b-3 (or any successor
rule), pursuant to a domestic relations order. After the death of the
optionee, the option may be transferred to the Company upon such terms
and conditions, if any, as the Plan Administrator and the personal
representative or other person entitled to the option may agree within
the period specified in subsection 7(c)(iii) hereof.
(c) An option may be exercised in whole at any time, or in
part from time to time, within such period or periods as may be
determined by the Plan Administrator and set forth in the stock option
agreement (such period or periods being hereinafter referred to as the
"option period"), provided that:
(i) If the optionee who is an employee of the Company
or any of its subsidiaries shall cease to be employed by the
Company or any of its subsidiaries, the option may be
exercised only within three months after the termination of
employment and within the option period or, if such
termination was due to disability or retirement (as
hereinafter defined), within one year after termination of
employment and within the option period, unless such
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termination of employment shall be for cause or in violation
of an agreement by the optionee to remain in the employ of the
Company or one of its subsidiaries, in which case the option
shall forthwith terminate; provided, however, that the Plan
Administrator may in its sole discretion extend the option
period of any option for up to three years from the date of
termination of employment regardless of the original option
period. For purposes of the Plan, retirement shall mean the
termination of employment with the Company at a time when the
participant in the Plan is eligible to receive immediately
payable retirement benefits under the Company's then existing
retirement plan or under any other retirement plan that is
maintained by a Company subsidiary.
(ii) If the optionee who is a director of the Company
or any of its subsidiaries shall cease to serve as a director
of the Company or any of its subsidiaries, the option may be
exercised only within three months after the cessation of
service and within the option period or, if such cessation was
due to disability, within one year after cessation of service
and within the option period, unless such cessation of service
as a director was the result of removal for cause, in which
case the option shall forthwith terminate; provided, however,
that the Plan Administrator may in its sole discretion extend
the option period of any option for up to three years from the
date of cessation of service regardless of the original option
period.
(iii) If the optionee shall die, the option may be
exercised only within 450 calendar days after the optionee's
death and within the option period and only by the optionee's
personal representative or persons entitled thereto under the
optionee's will or the laws of descent and distribution; and
(iv) The option may not be exercised for more shares
(subject to adjustment as provided in Section 11) after the
termination of the optionee's employment, cessation of service
as a director or the optionee's death (as the case may be)
than the optionee was entitled to purchase thereunder at the
time of the termination of the optionee's employment or the
optionee's death.
(d) The option price of each share purchased pursuant to an
option shall be paid in full at the time of each exercise (the "Payment
Date") of the option (i) in cash; (ii) by delivering to the Company a
notice of exercise with an irrevocable direction to a registered
broker-dealer under the Securities Exchange Act of 1934, as amended, to
sell a sufficient portion of the shares and deliver the sale proceeds
directly to the Company to pay the exercise price; (iii) in the
discretion of the Plan Administrator, through the delivery to the
Company of previously owned shares of Capital Stock having an aggregate
fair market value equal to the option price of the shares being
purchased pursuant to the exercise of the option; provided, however,
that shares of Capital Stock delivered in payment of the option price
must have been held by the participant for at least six (6) months in
order to be utilized to pay the option price; (iv) through an
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election pursuant to Section 8 hereof to have shares of Capital Stock
otherwise issuable to the optionee withheld to pay the exercise price
of such option; or (v) in the discretion of the Plan Administrator,
through any combination of the payment procedures set forth in
subsections (i)-(iv) of this Section 7(d).
(e) The Plan Administrator, in its discretion, may authorize
"stock retention options" which provide, upon the exercise of an option
granted under this Plan, the Stock Option and Incentive Plan of 1988,
the Stock Option and Incentive Plan of 1992 or the Stock Option and
Incentive Plan of 1996 (a "prior option") using previously owned
shares, for the automatic issuance of a new option under this Plan with
an exercise price equal to the current fair market value and for up to
the number of shares equal to the number of previously owned shares
delivered in payment of the exercise price of the prior option. Such
stock retention option shall have the same option period as the prior
option.
(f) In consideration for the granting of each option, the
optionee shall agree to remain in the employment of the Company or one
of its subsidiaries, at the pleasure of the Company or such subsidiary,
for at least one year from the date of the granting of such option or
until the first day of the month coinciding with or next following the
optionee's sixty-fifth birthday, whichever may be earlier. Nothing
contained in the Plan nor in any stock option agreement shall confer
upon any optionee any right with respect to the continuance of
employment by the Company or any of its subsidiaries nor interfere in
any way with the right of the Company or any subsidiary to terminate
his employment or change his compensation at any time.
(g) The Plan Administrator may include such other terms and
conditions not inconsistent with the foregoing as the Plan
Administrator shall approve. Without limiting the generality of the
foregoing sentence, the Plan Administrator shall be authorized to
determine that options shall be exercisable in one or more installments
during the term of the option and the right to exercise may be
cumulative as determined by the Plan Administrator.
SECTION 8. SHARE WITHHOLDING.
(a) An optionee may, in the discretion of the Plan
Administrator, elect to pay the exercise price of an option, in whole
or in part, by requesting that the Company withhold shares of stock
otherwise issuable to the optionee having a fair market value equal to
the portion of the exercise price of the option being paid pursuant to
such election (a "Share Withholding Election").
(b) A Share Withholding Election must be in writing and must
be delivered to the Company no later than with the delivery of the
notice of exercise of the option.
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SECTION 9. SHARE AWARDS.
(a) The Plan Administrator may, from time to time, subject to
the provisions of the Plan, award shares to participants.
(b) The award of shares shall be evidenced by a share award
agreement executed by the Company and the grantee setting forth the
number of shares of Capital Stock awarded, the vesting period, the
vesting schedule or criteria and such other terms and conditions as the
Plan Administrator may determine.
(c) The grantee of a share award shall receive shares of
Capital Stock without payment to the Company immediately upon grant;
provided, however, that the grantee's ownership of such shares shall be
subject to the following terms and conditions:
(i) Any single award of shares to a participant in an
amount greater than 100 shares shall vest in installments upon
the passage of time or upon the achievement by the Company or
grantee of specified performance goals as determined by the
Plan Administrator and as provided in the share award
agreement;
(ii) If the grantee or the Company, as the case may
be, fails to achieve the designated goals or the grantee
ceases to be employed by the Company for any reason (including
death, permanent disability or retirement) prior to the
expiration of the vesting period, the grantee shall forfeit
all shares so awarded which have not then vested;
(iii) A grantee who has received a share award
pursuant to the Plan shall have all rights of a stockholder in
such Capital Stock, including but not limited to the right to
vote and receive dividends with respect thereto; provided,
however, that shares awarded pursuant to the Plan which have
not vested may not be sold or otherwise transferred by the
grantee and stock certificates representing such shares shall
bear a restrictive legend to that effect; and
(iv) No share award (or portion thereof) granted to a
person subject to Section 16(b) shall vest within the
six-month period beginning on the date of grant of such share
award.
SECTION 10. TAX WITHHOLDING.
(a) Whenever shares are to be issued under the Plan, the
Company shall have the right to require the grantee to remit to the
Company an amount sufficient to satisfy federal, state and local tax
withholding requirements prior to the delivery of any
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certificate for such shares; provided, however, that in the case of a
grantee who receives an award of shares under the Plan which is not
fully vested, the grantee shall remit such amount on the first business
day following the Tax Date. The "Tax Date" for purposes of this Section
10 shall be the date on which the amount of tax to be withheld is
determined.
(b) A grantee who is obligated to pay the Company an amount
required to be withheld under applicable tax withholding requirements
may pay such obligated amount (i) in cash; (ii) in the discretion of
the Plan Administrator, through the delivery to the Company of
previously owned shares of Capital Stock having an aggregate fair
market value on the Tax Date equal to the tax obligation provided that
the previously owned shares delivered in satisfaction of the
withholding obligations must have been held by the participant for at
least six (6) months; or (iii) in the discretion of the Plan
Administrator, through a combination of the procedures set forth in
subsections (i) and (ii) of this Section 10(b).
(c) A grantee who is obligated to pay to the Company an amount
required to be withheld under applicable tax withholding requirements
in connection with either the exercise of a stock option or a share
award under the Plan may, in the discretion of the Plan Administrator,
elect to satisfy this withholding obligation, in whole or in part, by
requesting that the Company withhold shares of stock otherwise issuable
to the grantee having a fair market value on the Tax Date equal to the
amount of the tax required to be withheld; provided, however, that
shares may be withheld by the Company only if such withheld shares have
vested. Any fractional amount shall be paid to the Company by the
optionee in cash or shall be withheld from the optionee's next regular
paycheck.
(d) An election by a grantee to have shares of stock withheld
to satisfy federal, state and local tax withholding requirements
pursuant to Section 10(c) (a "Tax Withholding Election") must be in
writing.
SECTION 11. ADJUSTMENT OF NUMBER AND PRICE OF SHARES.
(a) In the event that a dividend shall be declared upon the
Capital Stock of the Company payable in shares of said stock, the
number of shares of Capital Stock covered by each outstanding option
and the number of shares which may be issued pursuant to the Plan but
are not yet covered by outstanding options shall be adjusted by adding
thereto the number of shares of Capital Stock which would have been
distributable thereon if such shares had been outstanding on the date
fixed for determining the stockholders entitled to receive such stock
dividend.
(b) In the event that the outstanding shares of Capital Stock
of the Company shall be changed into or exchanged for a different
number or kind of shares of stock or other securities of the Company or
of another corporation, whether through reorganization,
recapitalization, stock split-up, combination of shares, merger or
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consolidation, then there shall be substituted for the shares of
Capital Stock covered by each outstanding option, and the shares which
may be issued pursuant to the Plan but are not yet covered by
outstanding options, the number and kind of shares of stock or other
securities which would have been substituted therefor if such shares
had been outstanding on the date fixed for determining the stockholders
entitled to receive such changed or substituted stock or other
securities.
(c) In the event there shall be any change, other than
specified in this Section 11, in the number or kind of outstanding
shares of Capital Stock of the Company or of any stock or other
securities into which such Capital 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 or kind of shares covered by outstanding
options and the shares which may be issued pursuant to the Plan but are
not yet covered by outstanding options, 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 option agreement.
(d) In the event that, by reason of a corporate merger,
consolidation, acquisition of property or stock, separation,
reorganization or liquidation, the Board of Directors shall authorize
the issuance or assumption of a stock option or stock options in a
transaction to which Section 424(a) of the Code applies, then,
notwithstanding any other provision of the Plan, the Plan Administrator
may grant an option or options upon such terms and conditions as it may
deem appropriate for the purpose of assumption of the old option, or
substitution of a new option for the old option, in conformity with the
provisions of Code Section 424(a) and the rules and regulations
thereunder, as they may be amended from time to time.
(e) No adjustment or substitution provided for in this Section
11 shall require the Company to issue or to sell a fractional share
under any stock option agreement or share award agreement and the total
adjustment or substitution with respect to each stock option and share
award agreement shall be limited accordingly.
(f) In the case of any adjustment or substitution provided for
in this Section 11, the option price per share in each stock option
agreement shall be equitably adjusted by the Board of Directors to
reflect the greater or lesser number of shares of stock or other
securities into which the stock covered by the option may have been
changed or which may have been substituted therefor.
(g) In the event of a Business Combination (as defined below)
under the terms of which holders of Capital Stock of the Company will
receive upon consummation thereof a cash payment for each share of
Capital Stock of the Company surrendered pursuant to such Business
Combination (the "Cash Purchase Price"), the Board of Directors may
provide that all outstanding options shall terminate upon consummation
of the Business Combination and each optionee shall receive, in
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exchange therefor, a cash payment equal to the amount (if any) by which
(i) the Cash Purchase Price multiplied by the number of shares of
Capital Stock of the Company subject to outstanding options held by
such optionee exceeds (ii) the aggregate exercise price of such
options.
SECTION 12. FAIR MARKET VALUE. In any determination of fair market
value hereunder, fair market value shall be deemed to be the mean between the
highest and lowest sales prices for the Capital Stock of the Company as reported
in the New York Stock Exchange --Composite Transactions reporting system for the
date immediately prior to the date in question, or if no sales were made on that
date, on the next preceding date on which sales were made.
SECTION 13. CHANGE IN CONTROL.
(a) In the event of a Change in Control of the Company, as
hereinafter defined, the following provisions shall apply to options
and share awards previously awarded under the Plan, notwithstanding any
provision herein or in any agreement to the contrary:
(i) All options which provide for exercise in one or
more installments shall become exercisable in full immediately
prior to the change in control;
(ii) If any optionee shall cease to be employed by
the Company or any of its subsidiaries within one (1) year
following a Change in Control, then the option may in all
events be exercised for a period of three months after such
termination of employment and within the option period; and
(iii) All awards of shares under the Plan which have
not previously vested shall become vested immediately prior to
the change in control.
(b) The term "Change in Control" shall mean a change in
control of the Company of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A promulgated under the
Exchange Act as in effect on the date thereof or, if Item 6(e) is no
longer in effect, any regulations issued by the Securities and Exchange
Commission pursuant to the Exchange Act which serve similar purposes;
provided that, without limitation, such a Change in Control shall be
deemed to have occurred if: (i) the Company shall be merged or
consolidated with another corporation or entity, other than a
corporation or entity which is an "affiliate" of the Company (as such
term is defined in Rule 144(a) promulgated under the Securities Act of
1933) (a "Business Combination"), or (ii) the Company shall sell all or
substantially all of its operating properties and assets to another
person, group of associated persons or corporation, excluding
affiliates of the Company, if any, or (iii) any "person" (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes
a
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beneficial owner, directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's
then outstanding securities coupled with or followed by the election as
directors of the Company of persons who were not directors at the time
of such acquisition if such person shall elect a majority of the Board
of Directors of the Company.
SECTION 14. 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.
SECTION 15. 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 16. COMPLIANCE WITH SECTION 16. With respect to persons subject
to Section 16 of the Exchange Act, 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 grant of an option or share award 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 Plan Administrator.
SECTION 17. PARTICIPATION BY FOREIGN NATIONALS. The Plan Administrator
may, in order to fulfill the purposes of the Plan and without amending the Plan,
modify grants to foreign nationals or United States citizens employed abroad in
order to recognize differences in local law, tax policy or custom.
Approved by the Board of Directors on April 26, 1999