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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JUNE 11, 1999
KENNAMETAL INC.
(Exact name of registrant as specified in its charter)
Commission file number 1-5318
PENNSYLVANIA 25-0900168
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
WORLD HEADQUARTERS
1600 TECHNOLOGY WAY
P.O. BOX 231
LATROBE, PENNSYLVANIA 15650-0231
(Address of registrant's principal executive offices)
Registrant's telephone number, including area code: (724) 539-5000
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ITEM 5. OTHER EVENTS
On May 4, 1999, Kennametal Inc. entered into an Executive Employment Agreement
("Agreement") with Markos I. Tambakeras, pursuant to which Mr. Tambakeras will
serve as President and Chief Executive Officer of Kennametal Inc. and a member
of the Board of Directors, effective July 1, 1999. This Agreement, and other
related agreements, are filed herewith.
ITEM 7. EXHIBITS
(10) Material Contracts
(10.1) Executive Employment Agreement dated May 4, 1999 between
Kennametal Inc. and Markos I. Tambakeras. Filed herewith.
(10.2) Nonstatutory Stock Option Agreement dated April 30, 1999
between Kennametal Inc. and Markos I. Tambakeras. Filed
herewith.
(10.3) Restricted Stock Agreement dated May 4, 1999 between
Kennametal Inc. and Markos I. Tambakeras. Filed herewith.
(10.4) Stock Option Agreement dated May 4, 1999 between Kennametal
Inc. and Markos I. Tambakeras. Filed herewith.
(10.5) Kennametal Inc. 1999 Stock Plan. Filed herewith.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KENNAMETAL INC.
Date: June 11, 1999 By: /s/ FRANK P. SIMPKINS
-------------------------
Frank P. Simpkins
Corporate Controller and
Chief Accounting Officer
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EXHIBIT 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT, is made and entered into this 4th day of May, 1999 (the
"Effective Date"), by and between KENNAMETAL INC., a corporation organized under
the laws of the Commonwealth of Pennsylvania, for and on behalf of itself and on
behalf of its subsidiary companies (hereinafter referred to as "Kennametal"),
and Markos I. Tambakeras, an individual (hereinafter referred to as "Employee");
WITNESSETH:
WHEREAS, Kennametal and the Employee desire to enter into this
Agreement in order to set forth the terms and conditions of Employee's
employment with Kennametal; and
WHEREAS, Employee acknowledges that by reason of employment by
Kennametal, it is anticipated that Employee will work with, add to, create, have
access to and be entrusted with trade secrets and confidential information
belonging to Kennametal which are of a technical nature or business nature or
pertain to future developments, the disclosure of which trade secrets or
confidential information would be highly detrimental to the interests of
Kennametal;
NOW, THEREFORE, Kennametal and Employee, each intending to be legally
bound hereby, do mutually covenant and agree as follows:
1. (a) Kennametal hereby agrees to employ the Employee and the
Employee hereby agrees to be employed by the Company commencing on July 1, 1999
for the Term (as hereinafter defined) of the Agreement, in the position and with
the duties and responsibilities set forth in paragraph 1(b) below, and upon the
other terms and subject to the conditions hereinafter stated.
(b) During the Term, the Employee shall serve as the President
and Chief Executive Officer of Kennametal and a member of the Board of
Directors. The Employee shall have general executive supervision over the
business and affairs of Kennametal, subject to the policies and directions of,
and the executive responsibilities that may be assigned to him (which in each
case shall be consistent with his position and title) by the Board of Directors
of Kennametal (the "Board of Directors"). The Employee shall generally be
responsible for supervising the development, coordination and implementation of
the strategies for Kennametal's business. Employee's duties shall be performed
principally at Kennametal's executive offices which are located in the Latrobe,
Pennsylvania area. A demotion in Employee's position will be considered
termination without Cause (as defined herein) by Kennametal.
(c) The Employee shall devote his full time and attention to
the business and affairs of Kennametal; provided, however, that nothing
contained herein shall prohibit the Employee from (a) serving as a member of the
Board of Directors of any other for-profit entity so long as Employee has
obtained the prior consent of Board of Directors, or (b) engaging in charitable
and community affairs.
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(d) The term of this Agreement shall be for a period of three
(3) years, commencing on July 1, 1999 and ending on June 30, 2002 (the "Term").
(e) For the services rendered by Employee to Kennametal during
the Term, the Employee shall be paid the compensation and receive the benefits
as follows:
(i) Employee shall be entitled to receive a salary at
the rate of $550,000 per annum, payable in accordance with Kennametal's payroll
practices ("Base Salary");
(ii) Employee shall receive a sign-on bonus of
$300,000 which will be paid to Employee not later than August 31, 1999;
(iii) During the three years ended June 30, 2002,
Employee shall be eligible to receive future bonuses of not less than $300,000
per annum under Kennametal's bonus plan for executive officers;
(iv) Employee shall receive stock options covering
150,000 shares of the Capital Stock of Kennametal, priced prior to the public
announcement of Employee's position with Kennametal, and under the terms and
conditions and pursuant to the Stock Option Agreement in the form of Exhibit A
attached hereto;
(v) Employee shall receive, as of the Effective Date,
a restricted stock grant for 83,000 shares of Capital Stock under the terms and
conditions and pursuant to the Restricted Stock Agreement in the form of Exhibit
B attached hereto; and
(vi) Kennametal agrees to provide Employee with
pension benefits in an amount not less than the following benefits (in the event
that the benefits Employee would receive under Kennametal's pension plans would
exceed the following benefits, Employee will receive those amounts instead of
the following benefits):
(A) If Employee is terminated by Kennametal
without Cause, by Employee for Employer's Breach (as defined herein) or by
Employee at or after age 60, in any year set forth in Column A of Schedule I
attached hereto, then Employee will be entitled to receive from Kennametal the
Lump Sum Amount (as hereinafter defined) equal to the annual benefit set forth
in the row in Column B of Schedule I corresponding to the row in Column A of the
year of termination; and
(B) If Employee voluntarily terminates his
employment with Kennametal after four or more years of service in any year set
forth in Column A of Schedule I attached hereto, then Employee will be entitled
to receive from Kennametal the Lump Sum Amount equal to one-half of the annual
benefit set forth in the row in Column B of Schedule I corresponding to the row
in Column A of the year of termination.
"Lump Sum Amount" shall mean a single payment amount
equal to the present value of the relevant annual benefit determined in
accordance with the actuarial methods and assumptions used by the Pension
Benefit Guaranty Corporation for valuing immediate annuity contracts reduced by
the present value, determined in accordance with such methods, of any benefit
provided to Employee under Kennametal's other pension benefit plans.
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2. In addition to the compensation set forth or contemplated elsewhere
herein, Employee, subject to the terms and conditions of this Agreement, shall
be entitled to participate in all group insurance programs, retirement income
(pension) plans, thrift plans and vacation and holiday programs normally
provided for other executives of Kennametal. Nothing herein contained shall be
deemed to limit or prevent Employee, during his employment hereunder, from being
reimbursed by Kennametal for out-of-pocket expenditures incurred for travel,
lodging, meals, entertainment expenses or any other expenses in accordance with
the policies of Kennametal applicable to the executives of Kennametal.
3. Employee's employment may be terminated with or without any reason
for termination by either party hereto at any time by giving the other party
prior written notice thereof; provided, however, that any termination on the
part of Kennametal shall occur only if specifically authorized by its Board of
Directors; provided further, however, that termination by Kennametal for Cause
shall be made by written notice which states that it is a termination for Cause;
and provided further, however, that termination by Employee, other than
termination for Good Reason (as hereinafter defined) following a
Change-in-Control (as hereinafter defined), shall be on not less than 30 days
prior written notice to Kennametal.
4. (a) (i) In the event that Employee's employment is terminated
during the Term by Kennametal prior to a Change-in-Control and other than for
Cause, or by Employee for Employer's Breach, Employee will receive as severance
pay, in addition to all amounts due him at the Date of Termination (as
hereinafter defined), a lump sum payment equal to the greater of: (A) the amount
of Base Salary and any bonuses that Employee would have earned during the Term
under Kennametal bonus plans then in effect had Employee been employed by
Kennametal as its President and Chief Executive Officer for the full Term and
had plan been met for each period during the Term, or (B) the amount equal to
two (2) times (y) Base Salary plus Employee's targeted bonus (but not less than
60% of Base Salary) for the year in which the Date of Termination occurs.
Additionally, the stock options and restricted stock granted to Employee under
paragraphs 1(e)(iv) and (v) will vest immediately upon the occurrence of the
events stated above in this paragraph 4(a)(i). All amounts will be paid within
five (5) business days after such termination.
"Employer's Breach" shall be defined as a material breach of this
Agreement by Kennametal, including specifically any reduction in Employee's
position, authority or responsibility.
(ii) In the event that Employee's employment is
terminated after the Term by Kennametal prior to a Change-in-Control and other
than for Cause, Employee will receive as severance pay, in addition to all
amounts due him at the Date of Termination, an amount, payable promptly after
the Date of Termination, equal to two years' annual base salary at the rate then
in effect on the Date of Termination plus Employee's targeted bonus (but not
less than 60% of then base salary) for the year in which the Date of Termination
occurs.
(b) In the event that Employee's employment is terminated by
Employee without Good Reason following a Change-in-Control (as hereinafter
defined) or prior to a Change-in-Control other than for Employer's Breach,
Employee will not be entitled to receive any severance pay other than the
amounts, if any, due him at the Date of Termination.
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(c) In the event that, at or after a Change-in-Control and
prior to the third anniversary of the date of the Change-in-Control, Employee's
employment is terminated by Employee for Good Reason or by Kennametal other than
for Cause or Disability pursuant to paragraph 5, then Employee will receive as
severance pay (in addition to all other amounts due him at the Date of
Termination) an amount equal to the product of:
(i) three (3)
times
(ii) the sum of
(x) Employee's Base Salary at the
annual rate in effect on the Date
of Termination (or, at Employee's
election, at the annual rate in
effect on the first day of the
calendar month immediately prior to
the Change-in-Control), plus
(y) Employee's targeted bonus (but not
less than 60% of then base salary)
for the year in which the Date of
Termination occurs.
Such severance pay shall be paid by delivery of a
cashier's or certified check to the Employee at Kennametal's executive offices
on a date which is no later than five (5) business days following the Date of
Termination.
If there is a Change-in-Control, and if Employee
elects to terminate his employment for any reason or no reason during the thirty
(30) day period commencing twelve (12) months after the date of the
Change-in-Control, the Employee shall be paid severance benefits as though
Employee had been terminated by Kennametal without Cause.
In addition to the severance payments provided for in
this paragraph 4(c), Employee also will receive the same or equivalent medical,
dental, disability and group insurance benefits as were provided to the Employee
at the Date of Termination, which benefits shall be provided to Employee for a
three year period commencing on the Date of Termination. The Employee shall also
be deemed and shall be credited for computing benefits, for vesting and for all
other purposes under any pension or retirement income plan of Kennametal
(including any supplemental retirement plan) to have continuously remained in
the employment of Kennametal for the three year period following the Date of
Termination at an annual compensation equal to the sum of the base salary and
bonus which were used to compute the payment due the Employee under the first
paragraph of this paragraph 4(c).
(d) If for any reason, whether by law or provisions of
Kennametal's employee medical, dental or group insurance, pension or retirement
plan or other benefit plans, any benefits which the Employee would be entitled
to under the foregoing paragraph 4(c) cannot be paid pursuant to such employee
benefit plans, then Kennametal hereby contractually agrees to pay to the
Employee the difference between the benefits which the Employee would have
received in accordance with the foregoing paragraph 4(c) if the relevant
employee medical,
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dental or group insurance or pension or retirement plan or other benefit plan
could have paid such benefit and the amount of benefits, if any, actually paid
by such employee medical, dental or group insurance or pension or retirement
plan or other benefit plan. Kennametal shall not be required to fund its
obligation to pay the foregoing difference.
(e) In the event of a termination of employment under the
circumstances described above in paragraph 4(a) or paragraph 4(c), Employee
shall have no duty to seek any other employment after termination of Employee's
employment with Kennametal and Kennametal hereby waives and agrees not to raise
or use any defense based on the position that Employee had a duty to mitigate or
reduce the amounts due him hereunder by seeking other employment whether
suitable or unsuitable and should Employee obtain other employment, then the
only effect of such on the obligations of Kennametal hereunder shall be that
Kennametal shall be entitled to credit against any payments which would
otherwise be made for medical, dental or group insurance or similar benefits
(excluding, however, any credit against Kennametal payments relating to pension
or retirement benefits including under any supplemental retirement plan)
pursuant to the benefit provisions set forth in paragraph 4(c) hereof, any
comparable payments to which Employee is entitled under the employee benefit
plans maintained by Employee's other employer or employers in connection with
services to such employer or employers after termination of his employment with
Kennametal.
(f) The term "Change-in-Control" shall mean a change in
control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A promulgated under the Securities Exchange Act of 1934 as in
effect on the date hereof ("1934 Act"), or if Item 6(e) is no longer in effect,
any regulations issued by the Securities and Exchange Commission pursuant to the
1934 Act which serve similar purposes; provided that, without limitation, such a
change in control shall be deemed to have occurred if (A) Kennametal shall be
merged or consolidated with any corporation or other entity other than a merger
or consolidation with a corporation or other entity all of whose equity
interests are owned by Kennametal immediately prior to the merger or
consolidation, or (B) Kennametal shall sell all or substantially all of its
operating properties and assets to another person, group of associated persons
or corporation, or (C) any "person" (as such term is used in Sections 13(d) and
14(d) of the 1934 Act), is or becomes a beneficial owner, directly or
indirectly, of securities of Kennametal representing 25% or more of the combined
voting power of Kennametal's then outstanding securities coupled with or
followed by the existence of a majority of the board of directors of Kennametal
consisting of persons other than persons who either were directors of Kennametal
immediately prior to or were nominated by those persons who were directors of
Kennametal immediately prior to such person becoming a beneficial owner,
directly or indirectly, of securities of Kennametal representing 25% or more of
the combined voting power of Kennametal's then outstanding securities.
(g) For purposes of this agreement "Date of Termination" shall
mean:
(i) if Employee's employment is terminated due to his
death or retirement, the date of death or retirement, respectively; or
(ii) if Employee's employment is terminated for any
other reason, the date on which the termination becomes effective as stated in
the written notice of termination
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given to or by the Employee or, if no written notice is given, the date
determined by Kennametal in good faith.
(h) The term "Good Reason" for termination by the Employee
shall mean the occurrence of any of the following at or after a
Change-in-Control:
(i) without the Employee's express written consent,
the assignment to the Employee of any duties materially and substantially
inconsistent with his positions, duties, responsibilities and status with
Kennametal immediately prior to a Change-in-Control, or a material change in his
reporting responsibilities, titles or offices as in effect immediately prior to
a Change-in-Control, or any removal of the Employee from or any failure to
re-elect the Employee to any of such positions, except in connection with the
termination of the Employee's employment due to Cause or as a result of the
Employee's death;
(ii) a reduction by Kennametal in the Employee's base
salary as in effect immediately prior to any Change-in-Control;
(iii) a failure by Kennametal to continue to provide
incentive compensation, under the rules by which incentives are provided,
comparable to that provided by Kennametal immediately prior to any
Change-in-Control;
(iv) the failure by Kennametal to continue in effect
any benefit or compensation plan, stock option plan, pension plan, life
insurance plan, health and accident plan or disability plan in which Employee is
participating immediately prior to a Change-in-Control (provided, however, that
there shall not be deemed to be any such failure if Kennametal substitutes for
the discontinued plan, a plan providing Employee with substantially similar
benefits) or the taking of any action by Kennametal which would adversely affect
Employee's participation in or materially reduce Employee's benefits under any
of such plans or deprive Employee of any material fringe benefit enjoyed by
Employee immediately prior to a Change-in-Control;
(v) the failure of Kennametal to obtain the
assumption of this Agreement by any successor as contemplated in paragraph 11
hereof;
(vi) the relocation of the Employee to a facility or
a location more than 50 miles from the Employee's then present location, without
the Employee's prior written consent; or
(vii) any purported termination of the employment of
Employee by Kennametal which is not for Cause as provided in paragraph 5.
5. In the event that Employee
(a) shall be guilty of malfeasance, willful misconduct or
gross negligence in the performance of the services contemplated by this
Agreement;
(b) shall willfully, deliberately and continually fail to
perform his duties or to implement the policies or directives of the Board of
Directors;
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(c) shall not make his services available to Kennametal on a
full time basis in accordance with paragraph 1 hereof for any reason (excluding
Disability) prior to termination other than arising from Employee's incapacity
due to physical or mental illness or injury which does not constitute
Disability;
(d) shall breach the provisions of paragraph 8 of this
Agreement; or
(e) shall be convicted of a felony.
(each of the matters described in subparagraphs (a),
(b), (c), (d) and (e)) above shall be "Cause"), Kennametal shall have the right,
exercised by resolution adopted by a majority of its Board of Directors, to
terminate Employee's employment for Cause by giving prior written notice to
Employee of its election so to do.
In that event, Employee's employment shall be deemed
terminated for Cause, Kennametal shall not be obligated to pay and Employee
shall not be entitled to the benefits set forth in paragraphs 1 and 4; provided,
however, that Kennametal shall have the obligation to pay Employee the unpaid
portion of Employee's base salary for the period from the last period from which
Employee was paid to the Date of Termination; provided further, however, that if
Employee's employment is terminated as a result of the Disability of Employee,
the benefits set forth in paragraphs 1 and 4 shall not be paid or payable but
Employee shall be entitled to receive the annual supplement under the
supplemental retirement plan and Employee's employment by Kennametal shall not
be deemed terminated for purposes of the Long-Term Disability Plan, Retirement
Income Plan for US Salaried Employees or any other benefit plan which so
provides.
For purposes of this agreement "Disability" shall mean such
incapacity due to physical or mental illness or injury which results in the
Employee's being absent from his principal office at Kennametal's offices for
the entire portion of 180 consecutive business days. "Cause" shall not be deemed
to include opposition by Employee to a Change-in-Control or any matter
incidental thereto and any determination by the Board of Directors that "Cause"
existed shall not be final or binding upon the Employee or his rights hereunder
or entitled to any deference in any court or other tribunal.
6. Kennametal agrees to indemnify Employee from his net losses arising
from Section 4(c) of Exhibit A to that certain Stock Option Agreement dated
February 17, 1998 or any such similar provisions contained in any stock options
granted to Employee. In the event Employee's current employer cancels or
otherwise refuses to honor Employee's currently vested stock options, Kennametal
will immediately pay Employee, in cash, an amount equal to the amount by which
the fair market value of the option shares (measured as of the date of
Employee's termination from his current employer) exceeds the option exercise
price on such options. In consideration of the foregoing, Employee will use his
reasonable best efforts to prevent any such loss and, so long as Kennametal
agrees to pay the costs of such, to contest and assist Kennametal in contesting
any such potential loss. It is expected that Employee will, within his
employment period with his current employer, exercise all vested options and
sell the shares received upon such exercises.
7. Nothing herein contained shall affect the right of Employee to
participate in and receive benefits under and in accordance with the then
current provisions of any retirement
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income, profit-sharing, additional year-end or periodic remuneration or bonus,
incentive compensation, insurance or any other employee welfare plan or program
of Kennametal and all payments hereunder shall be in addition to any benefits
received thereunder (including long term disability payments).
8. During the period of employment of Employee by Kennametal and for
three years thereafter (provided, however, that this paragraph 8 shall not apply
to the Employee following a termination of Employee's employment (x) if a
Change-in-Control shall have occurred prior to the Date of Termination or (y) if
Employee's employment is terminated by Kennametal other than for Cause or by
Employee due to Employer's Breach), Employee will not, in any geographic area in
which Kennametal is offering its services and products, without the prior
written consent of Kennametal:
(a) directly or indirectly engage in, or
(b) assist or have an active interest in (whether as
proprietor, partner, investor, shareholder, officer, director or any type of
principal whatsoever), or
(c) enter the employ of, or act as agent for, or
advisor or consultant to, any person, firm, partnership, association,
corporation or business organization, entity or enterprise which is or is about
to become directly or indirectly engaged in, any business which is competitive
with any business of Kennametal or any subsidiary or affiliate thereof in which
Employee is or was engaged; provided, however, that the foregoing provisions of
this paragraph 8 are not intended to prohibit and shall not prohibit Employee
from purchasing, for investment, not in excess of 1% of any class of stock or
other corporate security of any company which is registered pursuant to Section
12 of the Securities Exchange Act of 1934.
Employee acknowledges that the breach by him of the provisions
of this paragraph 8 would cause irreparable injury to Kennametal, acknowledges
and agrees that remedies at law for any such breach will be inadequate and
consents and agrees that Kennametal shall be entitled, without the necessity of
proof of actual damage, to injunctive relief in any proceedings which may be
brought to enforce the provisions of this paragraph 8. Employee acknowledges and
warrants that he will be fully able to earn an adequate livelihood for himself
and his dependents if this paragraph 8 should be specifically enforced against
him and that such enforcement will not impair his ability to obtain employment
commensurate with his abilities and fully acceptable to him.
If the scope of any restriction contained in this paragraph 8
is too broad to permit enforcement of such restriction to its full extent, then
such restriction shall be enforced to the maximum extent permitted by law and
Employee and Kennametal hereby consent and agree that such scope may be
judicially modified in any proceeding brought to enforce such restriction.
9. (a) Employee acknowledges and agrees that in the course of his
employment by Kennametal, Employee may work with, add to, create or acquire
trade secrets and confidential information ("Confidential Information") which
could include, in whole or in part, information:
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(i) of a technical nature such as, but not limited
to, Kennametal's manuals, methods, know-how, formulae, shapes, designs,
compositions, processes, applications, ideas, improvements, discoveries,
inventions, research and development projects, equipment, apparatus, appliances,
computer programs, software, systems documentation, special hardware, software
development and similar items; or
(ii) of a business nature such as, but not limited
to, information about business plans, sources of supply, cost, purchasing,
profits, markets, sales, sales volume, sales methods, sales proposals, identity
of customers and prospective customers, identity of customers' key purchasing
personnel, amount or kind of customers' purchases and other information about
customers; or
(iii) pertaining to future developments such as, but
not limited to, research and development or future marketing or merchandising.
Employee further acknowledges and agrees that (i) all
Confidential Information is the property of Kennametal; (ii) the unauthorized
use, misappropriation or disclosure of any Confidential Information would
constitute a breach of trust and could cause irreparable injury to Kennametal;
and (iii) it is essential to the protection of Kennametal's goodwill and to the
maintenance of its competitive position that all Confidential Information be
kept secret and that Employee not disclose any Confidential Information to
others or use any Confidential Information to the detriment of Kennametal.
Employee agrees to hold and safeguard all Confidential
Information in trust for Kennametal, its successors and assigns and Employee
shall not (except as required in the performance of Employee's duties), use or
disclose or make available to anyone for use outside Kennametal's organization
at any time, either during employment with Kennametal or subsequent thereto, any
of the Confidential Information, whether or not developed by Employee, without
the prior written consent of Kennametal.
(b) Employee agrees that:
(i) he will promptly and fully disclose to Kennametal
or such officer or other agent as may be designated by Kennametal any and all
inventions made or conceived by Employee (whether made solely by Employee or
jointly with others) during employment with Kennametal (A) which are along the
line of the business, work or investigations of Kennametal, or (B) which result
from or are suggested by any work which Employee may do for or on behalf of
Kennametal; and
(ii) he will assist Kennametal and its nominees
during and subsequent to such employment in every proper way (entirely at its or
their expense) to obtain for its or their own benefit patents for such
inventions in any and all countries; the said inventions, without further
consideration other than such salary as from time to time may be paid to him by
Kennametal as compensation for his services in any capacity, shall be and remain
the sole and exclusive property of Kennametal or its nominee whether patented or
not; and
(iii) he will keep and maintain adequate and current
written records of all such inventions, in the form of but not necessarily
limited to notes, sketches, drawings, or
<PAGE> 10
reports relating thereto, which records shall be and remain the property of and
available to Kennametal at all times.
(c) Employee agrees that, promptly upon termination of his
employment, he will disclose to Kennametal, or to such officer or other agent as
may be designated by Kennametal, all inventions which have been partly or wholly
conceived, invented or developed by him for which applications for patents have
not been made and shall thereafter execute all such instruments of the character
hereinbefore referred to, and will take such steps as may be necessary to secure
and assign to Kennametal the exclusive rights in and to such inventions and any
patents that may be issued thereon any expense therefor to be borne by
Kennametal.
(d) Employee agrees that he will not at any time aid in
attacking the patentability, scope, or validity of any invention to which the
provisions of subparagraphs (b) and (c), above, apply.
10. In the event that (a) Employee institutes any legal action to
enforce his rights under, or to recover damages for breach of this Agreement, or
(b) Kennametal institutes any action to avoid making any payments due to
Employee under this Agreement, Employee, if he is the prevailing party, shall be
entitled to recover from Kennametal any actual expenses for attorney's fees and
other disbursements incurred by him in relation thereto. Except as set forth
above, Employee's sole and exclusive remedy for breach of this Agreement by
Kennametal shall be recovery of the amounts due to Employee for Employer's
Breach in paragraphs 1(e)(vi) and 4(a)(i) and 4(c). Employee acknowledges that
Employee's actual damages in the event of Employer's Breach would be difficult
to determine and that such amount is a reasonable amount of liquidated damages
for any such Employer's Breach.
11. The terms and provision of this Agreement shall be binding upon,
and shall inure to the benefit of, Employee and Kennametal, it subsidiaries and
affiliates and their respective successors and assigns.
12. This Agreement constitutes the entire Agreement between the parties
hereto and supersedes all prior agreements and understandings, whether oral or
written, among the parties with respect to the subject matter hereof. This
Agreement may not be amended orally, but only by an instrument in writing signed
by each of the parties to this Agreement.
13. The invalidity or unenforceability of any provision of this
Agreement shall not affect the other provisions hereof, and this Agreement shall
be construed in all respects as if such invalid or unenforceable provision were
omitted.
14. Any pronoun and any variation thereof used in this agreement shall
be deemed to refer to the masculine, feminine, neuter, singular or plural, as
the identity of the parties hereto may require.
15. Kennametal shall be entitled as a condition to paying any severance
pay or providing any benefits hereunder upon a termination of the Employee's
employment to require the Employee to deliver on or before the making of any
severance payment or providing of any benefit a release in the form of Exhibit C
attached hereto.
<PAGE> 11
16. (a) During the Term, any payments under this Agreement or any other
payments or benefits received or to be received by Employee in connection with a
change in control of Kennametal, Employee's termination of employment, or
Employee's cessation of active service (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with Kennametal, or any
person affiliated with Kennametal) (the "Severance Payments") will be subject to
the tax (the "Excise Tax") imposed by section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), or any similar tax that may hereafter be
imposed, Kennametal shall pay to Employee, at the time specified below, an
additional amount (the "Excise Tax Payment") such that the amount retained by
Employee, after deduction of any Excise Tax on the Severance Payments and any
federal, state and local income tax and Excise Tax upon the payment provided for
by this paragraph 16(a), but not including any deduction for federal, state or
local income tax on the original amount of the Severance Payments, shall be
equal to the Severance Payments.
For purposes of determining whether any of the
Severance Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) all Severance Payments shall be treated as "parachute payments"
within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) shall be treated as subject
to the Excise Tax, unless in the opinion of tax counsel selected by the Board of
Directors, such Severance Payments (in whole or in part) do not constitute
parachute payments, or such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code in excess of the base amount within
the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to
the Excise Tax, (ii) the amount of the Severance Payments which shall be treated
as subject to the Excise Tax shall be equal to the lesser of (A) the total
amount of the Severance Payments or (B) the amount of excess parachute payments
within the meaning of Section 280G(b)(1) (after applying clause (i), above), and
(iii) the value of any non-cash benefits or any deferred payment or benefit
shall be determined by Kennametal's independent auditors in accordance with the
principles of Section 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Excise
Tax Payment, Employee shall be deemed to pay federal income taxes at Employee's
highest marginal rate of federal income taxation in the calendar year in which
the Excise Tax Payment is to be made and state and local income taxes at
Employee's highest marginal rate of taxation in the state and locality of
Employee's residence on the Date of Termination (or earlier cessation of
Employee's active service), net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local taxes.
In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at the time
of termination of Employee's employment (or earlier cessation of Employee's
active service), Employee shall repay to Kennametal at the time that the amount
of such reduction in Excise Tax is finally determined the portion of the Excise
Tax Payment attributable to such reduction (plus the portion of the Excise Tax
Payment attributable to the Excise Tax and federal and state and local income
tax imposed on the Excise Tax Payment being repaid by Employee if such repayment
results in a reduction in Excise Tax and/or a federal and state and local income
tax deduction) plus interest on the amount of such
<PAGE> 12
repayment from the date the Excise Tax Payment was initially made to the date of
repayment at the rate provided in Section 1274(b)(2)(B) of the Code (the
"Applicable Rate").
In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder at the time of the termination of
Employee's employment or earlier cessation of Employee's active service
(including by reason of any payment the existence or amount of which cannot be
determined at the time of the Excise Tax Payment), Kennametal shall make an
additional Excise Tax Payment in respect of such excess (plus any interest
payable with respect to such excess) at the time that the amount of such excess
is finally determined. Any payment to be made to Employee under this paragraph
shall be payable within five (5) business days of Employee's Date of Termination
(or within five (5) business days of Employee's earlier cessation of active
service).
(b) (i) After the Term, notwithstanding any other provision of
this Agreement, in the event that any payment or benefit received, or to be
received, by Employee in connection with a change in control of Kennametal, or
the termination of the Employees' employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with Kennametal, any
person whose actions result in a change in control or any person affiliated with
Kennametal or such person), as provided by paragraph 16(a) (collectively, the
"Total Payments"), would not be deductible, in whole or in part, by Kennametal,
an affiliate or other person making such payment or providing such benefit as a
result of Section 28OG of the Code, the payments due under this Agreement (the
"Contract Payments") shall be reduced until no portion of the Total Payments is
not deductible, or the Contract Payments are reduced to zero. In the event that
Kennametal determines that the Total Payments would not be deductible, in whole
or part, as a result of Section 28OG of the Code, Kennametal shall immediately
notify Employee of this determination and the amount which would not be so
deductible as well as a computation of Total Payments. Employee shall have five
(5) business days after receipt of the foregoing notice and computation to waive
in writing all or any portion of any of the Total Payments and any portion of
the Total Payments, the receipt or enjoyment of which Employee shall have
effectively waived in writing, shall not be taken into account. If Kennametal
had already withheld any Contract Payments prior to receipt of such waiver,
Kennametal upon receipt of such waiver shall immediately pay to Employee any
withheld Contract Payments which would have been paid had Kennametal had the
Employee's written waiver prior to the date Kennametal withheld any such
payments.
(ii) For purposes of the limitation described in this
paragraph 16(b):
(A) no portion of the Total Payments shall
be taken into account which in the opinion of tax counsel selected by the Board
of Directors does not constitute a "parachute payment" within the meaning of
Section 28OG(b)(2) of the Code,
(B) the Contract Payments shall be reduced
only to the extent necessary so that the Total Payments (other than those
Contract Payments which are waived in writing by the Employee or referred to in
clause (b)) in their entirety constitute reasonable compensation for services
actually rendered within the meaning of Section 28OG(b)(4) of the Code or are
otherwise not subject to disallowance as deductions, in the opinion of the tax
counsel referred to in clause (a); and
<PAGE> 13
(C) the value of any non-cash benefit or any
deferred payment or benefit included in the Total Payments shall be determined
by Kennametal's independent auditors in accordance with the principles of
Section 28OG(d)(3) and (4) of the Code.
17. This agreement shall be governed by the laws of the Commonwealth of
Pennsylvania without regard to its conflict or choice of law provisions.
WITNESS the due execution hereto the day and year first above written.
WITNESS: KENNAMETAL INC.
/s/ Ronald Basso By: /s/ William R. Newlin
- ------------------------------- -------------------------------
Chairman of the Board
WITNESS: EMPLOYEE:
/s/ Carie Blake /s/ Markos I. Tambakeras
- ------------------------------- -------------------------------
Markos I. Tambakeras
<PAGE> 14
Schedule I
SUPPLEMENTAL BENEFITS TABLE
<TABLE>
<CAPTION>
COLUMN A COLUMN B
-------- --------
YEAR OF TOTAL BENEFIT AT TOTAL BENEFIT AT TOTAL BENEFIT AT
TERMINATION AGE 60 AGE 63 AGE 66
----------- ------ ------ ------
<S> <C> <C> <C>
2000 $ 29,224
2001 57,291
2002 82,904
2003 103,783
2004 129,910
2005 160,413
2006 192,926
2007 228,852
2008 $267,512
2009 309,440
2010 and beyond $295,826
</TABLE>
<PAGE> 15
EXHIBIT A
KENNAMETAL INC.
NONSTATUTORY STOCK OPTION AGREEMENT
DATE OF GRANT OF THIS OPTION: APRIL 30, 1999
THIS AGREEMENT made by and between KENNAMETAL INC., a Pennsylvania
corporation (hereinafter called the "Company"), and Markos I. Tambakeras
(hereinafter called the "Optionee") is made as of the above date under the
Kennametal Inc. 1999 Stock Option Plan (the "Plan").
WITNESSETH:
1. The Company grants to the Optionee a Nonstatutory Stock Option (the
"Option") to purchase 150,000 shares of the $1.25 Par Value Capital Stock of the
Company at the price of $ 26.00 per share, subject to the terms and conditions
of the Plan, except as expressly provided in the Agreement.
2. The Option must be exercised within ten (10) years from July 1,
1999, and only at the times and for the number of shares indicated as follows:
(a) prior to June 30, 2000, this Option is not exercisable as to any shares; (b)
on June 30, 2000, this Option shall become exercisable as to 50,000 shares; (c)
on June 30, 2001, this Option shall become exercisable as to 50,000 shares; and
(d) on June 30, 2002, this Option shall become exercisable as to the remaining
50,000 shares.
3. In addition to the vesting provisions stated in the Plan, the Shares
subject to this Agreement shall immediately vest upon termination of Employee
without Cause or upon Employee's termination of employment due to an Employer's
Breach, or upon a Change-in-Control, all as defined in Employee's Executive
Employment Agreement dated as of May 4, 1999.
4. It is intended that the Option not constitute an Incentive Stock
Option under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
5. The Optionee or any purchaser permitted to purchase the shares
pursuant to the terms of the Plan shall purchase not less than 100 shares at any
one purchase (or the total number of shares purchasable under this Option at
such time, if less than 100).
6. If the Optionee shall cease to be employed by the Company or any of
its subsidiaries, the Option will continue its normal vesting period as provided
above, unless such termination of employment shall be for Cause (as defined in
Optionee's Executive Employment Agreement dated as of May 4, 1999) 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
<PAGE> 16
option period of any option for up to three years from the date of termination
of employment regardless of the original option period.
7. The Option may be exercised only by written request to the Treasurer
of the Company at Latrobe, Pennsylvania, accompanied by payment of the option
price in full either (i) in cash for the shares with respect to which it is
exercised, (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, (iii) by delivering shares of
the $1.25 Par Value Capital Stock ("Capital Stock") of the Company; provided
however that the 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; or (iv) a combination of payment
procedures set forth above.
8. The Optionee may pay the Company the amount required to be withheld
under applicable tax withholding requirements (i) in cash; (ii) 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; or
(iii) through any combination of payment procedures set forth in subsections
(i)-(ii). Tax withholding obligations may not be satisfied by withholding shares
of Capital Stock otherwise issuable in connection with an exercise of the
Option.
9. Each capitalized term used herein without being defined herein shall
have the meaning ascribed to it in the Plan.
IN WITNESS WHEREOF, the undersigned have executed this Stock Option
Agreement as of the date first above written.
EXECUTED IN DUPLICATE
ATTEST: KENNAMETAL INC.
_______________________________ By: ________________________________
Secretary Vice President
WITNESS: Optionee:
_______________________________ ____________________________________
Markos I. Tambakeras
<PAGE> 17
EXHIBIT B
KENNAMETAL INC.
RESTRICTED STOCK AGREEMENT
DATE OF GRANT: MAY 4, 1999
THIS AGREEMENT made by and between KENNAMETAL INC., a Pennsylvania
corporation (hereinafter called the "Company"), and Markos I. Tambakeras
(hereinafter called the "Employee") is made as of the above date under the
Kennametal Inc. 1999 Stock Plan (the "Plan").
WHEREAS, pursuant to the provisions of the Company's Plan, the
Committee on Executive Compensation of the Company's Board of Directors (the
"Compensation Committee") has taken action effective April 26, 1999, pursuant to
which action Employee became eligible to receive a restricted stock grant for
83,000 shares of the $1.25 Par Value Capital Stock (the "Shares"), in accordance
with the Plan and as more particularly provided herein.
WITNESSETH:
1. Tendered to Employee herewith is a copy of a certificate for the
Shares registered in the name of Employee.
2. The Shares may not be sold, assigned, pledged, exchanged,
hypothecated or otherwise transferred, encumbered or disposed of, except as
described in the Plan, to the extent then subject to the Forfeiture Restrictions
(as hereinafter defined), and in the event of termination of Employee's
employment with the Company or employing subsidiary (i) for Cause (as defined in
Optionee's Executive Employment Agreement dated the date hereof) or (ii) in
violation of an agreement by Employee to remain in the employ of the Company or
one of its subsidiaries, Employee shall, for no consideration, forfeit to the
Company all Shares to the extent then subject to the Forfeiture Restrictions.
The prohibition against transfer and the obligation to forfeit and surrender
Shares to the Company upon termination of employment are herein referred to as
"Forfeiture Restrictions." The Forfeiture Restrictions shall be binding upon and
enforceable against any transferee of Shares.
3. The Forfeiture Restrictions shall lapse as to the Shares in
accordance with the following schedule provided that Employee has been
continuously employed by the Company from the date of this Agreement through the
lapse date:
<PAGE> 18
a. One-third of the shares shall become vested and no longer
subject to a risk of forfeiture eight (8) months after July 1,
1999.
b. The second one-third of the Shares shall vest and no longer be
subject to a risk of forfeiture sixteen (16) months after July
1, 1999.
c. The third one-third of the shares shall vest and no longer be
subject to a risk of forfeiture twenty-four (24) months after
July 1, 1999.
4. In no case will this Agreement result in Employee being vested in
(or becoming eligible to become vested in) more than a total of 83,000 Shares.
5. At such time as any Shares vest under this Agreement, the Company
shall cancel the certificate referenced in paragraph 1, above (or any
certificate issued in its place), and issue two new certificates in place of the
canceled certificate, one to be delivered to Employee for the number of Shares
vested (reduced by any Shares withheld for taxes pursuant to Section 10 of the
Plan), and one to be retained by the Company pursuant to the terms hereof (with
a copy delivered to Employee), for the number of Shares remaining unvested
pursuant hereto. the Company shall not be obligated to issue or deliver any
Shares if the issuance or delivery thereof shall constitute a violation of any
provision of any law or of any regulation of any government authority or
national securities exchange.
6. The original of any certificate for unvested Shares issued pursuant
to this Agreement shall, until any of such shares become vested, remain in the
custody of the Office of the Treasurer of the Company.
7. Employee agrees that the Shares will not be sold or otherwise
disposed of in any manner which would constitute a violation of any applicable
federal or state securities laws. Employee also agrees (i) that the certificates
representing the Shares may bear such legend or legends as the Company deems
appropriate in order to assure compliance with applicable securities laws, (ii)
that the Company may refuse to register the transfer of the Shares on the stock
transfer records of the Company which constitute a violation of any applicable
securities law, and (iii) that the Company may give related instructions to its
transfer agent, if any, to stop registration of the transfer of the Shares.
8. In the event that any withholding for tax purposes is required or
elected upon vesting of any Shares pursuant to this Agreement and Section 10 of
the Plan, the Company will withhold in Shares that number of whole shares with a
fair market value which is as nearly equal to but less than the amount to be
withheld, and will remit in cash that the Fair Market Value of Shares so
withheld to satisfy such withholding requirements (along with any cash required
of Employee pursuant to Section 10 of the Plan).
<PAGE> 19
9. All Shares subject to this Agreement shall have become vested if at
all, on or before July 1, 2001 on which date this Agreement shall terminate and
any shares subject to this Agreement and unvested at the date shall, without any
action on the part of Employee, be transferred to the Company for its use and
ownership.
10. In addition to the vesting provisions stated in the Plan, the
Shares subject to this Agreement shall immediately vest upon termination of
Employee without Cause or upon Employee's termination of employment due to an
Employer's Breach, or upon a Change-in-Control, all as defined in Employee's
Executive Employment Agreement dated as of May 4, 1999.
11. For purposes of this Agreement, Employee shall be considered to be
in the employment of the Company as long as Employee remains an employee of
either the Company any successor corporation or a parent or subsidiary
corporation (as defined in section 424 of the Code) of the Company or any
successor corporation. Any question as to whether and when there has been a
termination of such employment, and the cause of such termination, shall be
determined by the Compensation Committee, or its delegate, as appropriate, and
its determination shall be final.
12. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania.
13. Capitalized terms not defined in this Agreement have the meaning
assigned to them in the Plan.
Witness the signatures of the parties effective the day first written
above.
ATTEST: KENNAMETAL INC.
________________________________ _________________________________
Secretary Vice President
WITNESS:
________________________________ _________________________________
Markos I. Tambakeras
<PAGE> 20
EXHIBIT C
RELEASE
KNOW ALL MEN BY THESE PRESENTS that the undersigned for good and
valuable consideration, the receipt of which is hereby acknowledged, and
intending to be legally bound, hereby releases, remises, quitclaims and
discharges completely and forever Kennametal Inc. and its directors, officers,
employees, subsidiaries and affiliates from any and all claims, causes of action
or rights which the undersigned has or may have, whether arising by virtue of
contract or of applicable state laws or federal laws, and whether such claims,
causes of action or lights are known or unknown; provided, however, that this
Release shall not release, raise, quitclaim or discharge any claims, causes of
action or rights which the undersigned may have (i) under that certain Executive
Employment Agreement dated as of May 4, 1999 between the undersigned and
Kennametal Inc., (ii) to any unreimbursed expense account or similar
out-of-pocket reimbursement amounts owing the undersigned, or (iii) under the
bylaws of Kennametal Inc. or the applicable state corporate statutes to
indemnification for having served as an officer and/or employee of Kennametal
Inc. and/or its subsidiaries.
EMPLOYEE:
______________________________
Markos I. Tambakeras
Dated:___________________
<PAGE> 1
EXHIBIT 10.2
KENNAMETAL INC.
NONSTATUTORY STOCK OPTION AGREEMENT
DATE OF GRANT OF THIS OPTION: APRIL 30, 1999
THIS AGREEMENT made by and between KENNAMETAL INC., a Pennsylvania
corporation (hereinafter called the "Company"), and Markos I. Tambakeras
(hereinafter called the "Optionee") is made as of the above date under the
Kennametal Inc. 1999 Stock Option Plan (the "Plan").
WITNESSETH:
1. The Company grants to the Optionee a Nonstatutory Stock Option (the
"Option") to purchase 150,000 shares of the $1.25 Par Value Capital Stock of the
Company at the price of $ 26.00 per share, subject to the terms and conditions
of the Plan, except as expressly provided in the Agreement.
2. The Option must be exercised within ten (10) years from July 1,
1999, and only at the times and for the number of shares indicated as follows:
(a) prior to June 30, 2000, this Option is not exercisable as to any shares; (b)
on June 30, 2000, this Option shall become exercisable as to 50,000 shares; (c)
on June 30, 2001, this Option shall become exercisable as to 50,000 shares; and
(d) on June 30, 2002, this Option shall become exercisable as to the remaining
50,000 shares.
3. In addition to the vesting provisions stated in the Plan, the Shares
subject to this Agreement shall immediately vest upon termination of Employee
without Cause or upon Employee's termination of employment due to an Employer's
Breach, or upon a Change-in-Control, all as defined in Employee's Executive
Employment Agreement dated as of May 4, 1999.
4. It is intended that the Option not constitute an Incentive Stock
Option under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
5. The Optionee or any purchaser permitted to purchase the shares
pursuant to the terms of the Plan shall purchase not less than 100 shares at any
one purchase (or the total number of shares purchasable under this Option at
such time, if less than 100).
6. If the Optionee shall cease to be employed by the Company or any of
its subsidiaries, the Option will continue its normal vesting period as provided
above, unless such termination of employment shall be for Cause (as defined in
Optionee's Executive Employment Agreement dated as of May 4, 1999) 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
<PAGE> 2
option period of any option for up to three years from the date of termination
of employment regardless of the original option period.
7. The Option may be exercised only by written request to the Treasurer
of the Company at Latrobe, Pennsylvania, accompanied by payment of the option
price in full either (i) in cash for the shares with respect to which it is
exercised, (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, (iii) by delivering shares of
the $1.25 Par Value Capital Stock ("Capital Stock") of the Company; provided
however that the 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; or (iv) a combination of payment
procedures set forth above.
8. The Optionee may pay the Company the amount required to be withheld
under applicable tax withholding requirements (i) in cash; (ii) 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; or
(iii) through any combination of payment procedures set forth in subsections
(i)-(ii). Tax withholding obligations may not be satisfied by withholding shares
of Capital Stock otherwise issuable in connection with an exercise of the
Option.
9. Each capitalized term used herein without being defined herein shall
have the meaning ascribed to it in the Plan.
IN WITNESS WHEREOF, the undersigned have executed this Stock Option
Agreement as of the date first above written.
EXECUTED IN DUPLICATE
ATTEST: KENNAMETAL INC.
/s/ David T. Cofer By: /s/ Timothy D. Hudson
- ------------------------------- ---------------------------------
Secretary Vice President
WITNESS: Optionee:
/s/ Nancy Torba /s/ Markos I. Tambakeras
- ------------------------------- ---------------------------------
Markos I. Tambakeras
<PAGE> 1
EXHIBIT 10.3
KENNAMETAL INC.
RESTRICTED STOCK AGREEMENT
DATE OF GRANT: MAY 4, 1999
THIS AGREEMENT made by and between KENNAMETAL INC., a Pennsylvania
corporation (hereinafter called the "Company"), and Markos I. Tambakeras
(hereinafter called the "Employee") is made as of the above date under the
Kennametal Inc. 1999 Stock Plan (the "Plan").
WHEREAS, pursuant to the provisions of the Company's Plan, the
Committee on Executive Compensation of the Company's Board of Directors (the
"Compensation Committee") has taken action effective April 26, 1999, pursuant to
which action Employee became eligible to receive a restricted stock grant for
83,000 shares of the $1.25 Par Value Capital Stock (the "Shares"), in accordance
with the Plan and as more particularly provided herein.
WITNESSETH:
1. Tendered to Employee herewith is a copy of a certificate for the
Shares registered in the name of Employee.
2. The Shares may not be sold, assigned, pledged, exchanged,
hypothecated or otherwise transferred, encumbered or disposed of, except as
described in the Plan, to the extent then subject to the Forfeiture Restrictions
(as hereinafter defined), and in the event of termination of Employee's
employment with the Company or employing subsidiary (i) for Cause (as defined in
Optionee's Executive Employment Agreement dated the date hereof) or (ii) in
violation of an agreement by Employee to remain in the employ of the Company or
one of its subsidiaries, Employee shall, for no consideration, forfeit to the
Company all Shares to the extent then subject to the Forfeiture Restrictions.
The prohibition against transfer and the obligation to forfeit and surrender
Shares to the Company upon termination of employment are herein referred to as
"Forfeiture Restrictions." The Forfeiture Restrictions shall be binding upon and
enforceable against any transferee of Shares.
3. The Forfeiture Restrictions shall lapse as to the Shares in
accordance with the following schedule provided that Employee has been
continuously employed by the Company from the date of this Agreement through the
lapse date:
<PAGE> 2
a. One-third of the shares shall become vested and no longer
subject to a risk of forfeiture eight (8) months after July 1,
1999.
b. The second one-third of the Shares shall vest and no longer be
subject to a risk of forfeiture sixteen (16) months after July
1, 1999.
c. The third one-third of the shares shall vest and no longer be
subject to a risk of forfeiture twenty-four (24) months after
July 1, 1999.
4. In no case will this Agreement result in Employee being vested in
(or becoming eligible to become vested in) more than a total of 83,000 Shares.
5. At such time as any Shares vest under this Agreement, the Company
shall cancel the certificate referenced in paragraph 1, above (or any
certificate issued in its place), and issue two new certificates in place of the
canceled certificate, one to be delivered to Employee for the number of Shares
vested (reduced by any Shares withheld for taxes pursuant to Section 10 of the
Plan), and one to be retained by the Company pursuant to the terms hereof (with
a copy delivered to Employee), for the number of Shares remaining unvested
pursuant hereto. The Company shall not be obligated to issue or deliver any
Shares if the issuance or delivery thereof shall constitute a violation of any
provision of any law or of any regulation of any government authority or
national securities exchange.
6. The original of any certificate for unvested Shares issued pursuant
to this Agreement shall, until any of such shares become vested, remain in the
custody of the Office of the Treasurer of the Company.
7. Employee agrees that the Shares will not be sold or otherwise
disposed of in any manner which would constitute a violation of any applicable
federal or state securities laws. Employee also agrees (i) that the certificates
representing the Shares may bear such legend or legends as the Company deems
appropriate in order to assure compliance with applicable securities laws, (ii)
that the Company may refuse to register the transfer of the Shares on the stock
transfer records of the Company which constitute a violation of any applicable
securities law, and (iii) that the Company may give related instructions to its
transfer agent, if any, to stop registration of the transfer of the Shares.
8. In the event that any withholding for tax purposes is required or
elected upon vesting of any Shares pursuant to this Agreement and Section 10 of
the Plan, the Company will withhold in Shares that number of whole shares with a
fair market value which is as nearly equal to but less than the amount to be
withheld, and will remit in cash that the Fair Market Value of Shares so
withheld to satisfy such withholding requirements (along with any cash required
of Employee pursuant to Section 10 of the Plan).
<PAGE> 3
9. All Shares subject to this Agreement shall have become vested if at
all, on or before July 1, 2001 on which date this Agreement shall terminate and
any shares subject to this Agreement and unvested at the date shall, without any
action on the part of Employee, be transferred to the Company for its use and
ownership.
10. In addition to the vesting provisions stated in the Plan, the
Shares subject to this Agreement shall immediately vest upon termination of
Employee without Cause or upon Employee's termination of employment due to an
Employer's Breach, or upon a Change-in-Control, all as defined in Employee's
Executive Employment Agreement dated as of May 4, 1999.
11. For purposes of this Agreement, Employee shall be considered to be
in the employment of the Company as long as Employee remains an employee of
either the Company any successor corporation or a parent or subsidiary
corporation (as defined in section 424 of the Code) of the Company or any
successor corporation. Any question as to whether and when there has been a
termination of such employment, and the cause of such termination, shall be
determined by the Compensation Committee, or its delegate, as appropriate, and
its determination shall be final.
12. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania.
13. Capitalized terms not defined in this Agreement have the meaning
assigned to them in the Plan.
Witness the signatures of the parties effective the day first written
above.
ATTEST: KENNAMETAL INC.
/s/ David T. Cofer /s/ Timothy D. Hudson
- ---------------------------- --------------------------------
Secretary Vice President
WITNESS:
/s/ Nancy Torba /s/ Markos I. Tambakeras
- ---------------------------- --------------------------------
Markos I. Tambakeras
<PAGE> 1
EXHIBIT 10.4
KENNAMETAL INC.
STOCK OPTION AGREEMENT
DATE OF GRANT OF THIS OPTION: MAY 4, 1999
THIS AGREEMENT made by and between KENNAMETAL INC., a Pennsylvania
corporation (hereinafter called the "Company"), and Markos I. Tambakeras
(hereinafter called the "Optionee") is made as of the above date under the
Kennametal Inc. 1999 Stock Option Plan (the "Plan").
WITNESSETH:
1. The Company grants to the Optionee a Nonstatutory Stock Option (the
"Option") to purchase 35,000 shares of the $1.25 Par Value Capital Stock of the
Company at the price of $ 38.00 per share, subject to the terms and conditions
of the Plan, except as expressly provided in the Agreement.
2. The Option must be exercised within ten (10) years from July 1,
1999, and only at the times and for the number of shares indicated as follows:
(a) prior to June 30, 2000, this Option is not exercisable as to any shares; (b)
on June 30, 2000, this Option shall become exercisable as to 11,667 shares; (c)
on June 30, 2001, this Option shall become exercisable as to 11,667 shares; and
(d) on June 30, 2002, this Option shall become exercisable as to the remaining
11,666 shares.
3. In addition to the vesting provisions stated in the Plan, the Shares
subject to this Agreement shall immediately vest upon termination of Employee
without Cause or upon Employee's termination of employment due to an Employer's
Breach, or upon a Change-in-Control, all as defined in Employee's Executive
Employment Agreement dated as of May 4, 1999.
4. It is intended that the Option not constitute an Incentive Stock
Option under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
5. The Optionee or any purchaser permitted to purchase the shares
pursuant to the terms of the Plan shall purchase not less than 100 shares at any
one purchase (or the total number of shares purchasable under this Option at
such time, if less than 100).
6. If the Optionee shall cease to be employed by the Company or any of
its subsidiaries, the Option will continue its normal vesting period as provided
above, unless such termination of employment shall be for Cause (as defined in
Optionee's Executive Employment Agreement dated as of May 4, 1999) 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
<PAGE> 2
option period of any option for up to three years from the date of termination
of employment regardless of the original option period.
7. The Option may be exercised only by written request to the Treasurer
of the Company at Latrobe, Pennsylvania, accompanied by payment of the option
price in full either (i) in cash for the shares with respect to which it is
exercised, (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, (iii) by delivering shares of
the $1.25 Par Value Capital Stock ("Capital Stock") of the Company; provided
however that the 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; or (iv) a combination of payment
procedures set forth above.
8. The Optionee may pay the Company the amount required to be withheld
under applicable tax withholding requirements (i) in cash; (ii) 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; or
(iii) through any combination of payment procedures set forth in subsections
(i)-(ii). Tax withholding obligations may not be satisfied by withholding shares
of Capital Stock otherwise issuable in connection with an exercise of the
Option.
9. Each capitalized term used herein without being defined herein shall
have the meaning ascribed to it in the Plan.
IN WITNESS WHEREOF, the undersigned have executed this Stock Option
Agreement as of the date first above written.
EXECUTED IN DUPLICATE
ATTEST: KENNAMETAL INC.
/s/ David T. Cofer By: /s/ Timothy D. Hudson
- ---------------------------- -------------------------------
Secretary Vice President
WITNESS: Optionee:
/s/ Nancy Torba /s/ Markos I. Tambakeras
- ---------------------------- -------------------------------
Markos I. Tambakeras
<PAGE> 1
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").
<PAGE> 2
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
<PAGE> 3
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
<PAGE> 4
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.
<PAGE> 5
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
<PAGE> 6
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
<PAGE> 7
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
<PAGE> 8
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
<PAGE> 9
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
