<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
</TABLE>
KENNAMETAL INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
N.A.
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies: _______
(2) Aggregate number of securities to which transaction applies: __________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ____________
(4) Proposed maximum aggregate value of transaction: ______________________
(5) Total fee paid: _______________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: _______________________________________________
(2) Form, Schedule or Registration Statement No.: _________________________
(3) Filing Party: _________________________________________________________
(4) Date Filed: ___________________________________________________________
<PAGE> 2
KENNAMETAL INC.
LATROBE, PENNSYLVANIA 15650
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
TO BE HELD OCTOBER 24, 2000
To the Shareowners of Kennametal Inc.:
The Annual Meeting of Shareowners of Kennametal Inc. will be held at the
Technology Center, located at 1600 Technology Way (on Route 981 South),
approximately 1/4 mile south of its intersection with U.S. Route 30 near
Latrobe, Unity Township, Pennsylvania, on Tuesday, October 24, 2000, at 2:00
p.m., to consider and act upon the following matters:
1. The election of three directors for terms to expire in 2003;
2. The election of one director for a term to expire in 2002;
3. The election of auditors for the fiscal year ending June 30, 2001; and
4. Approval of the Kennametal Inc. 2000 Employee Stock Purchase Plan.
Shareowners also will be asked to consider such other business as may
properly come before the meeting. The Board of Directors has fixed Tuesday,
September 5, 2000, as the record date for the determination of shareowners
entitled to notice of and to vote at the Annual Meeting.
IF YOU ARE UNABLE TO ATTEND THE MEETING, IT IS REQUESTED THAT YOU COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS
David T. Cofer
Secretary
September 18, 2000
<PAGE> 3
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREOWNERS
OCTOBER 24, 2000
This Proxy Statement is being furnished to the shareowners of Kennametal
Inc. (the "Corporation") in connection with the solicitation by the Board of
Directors of the Corporation of proxies to be voted at the Annual Meeting of
Shareowners which is scheduled to be held on October 24, 2000. Only holders of
record of capital stock, par value $1.25 per share, of the Corporation ("Capital
Stock") at the close of business on September 5, 2000, will be entitled to vote
at the meeting. On that date there were 30,782,894 shares of Capital Stock
outstanding and entitled to one vote per share. Any shareowner who executes and
returns the proxy may revoke it at will at any time prior to the voting of the
proxy, but revocation of the proxy will not be effective until written notice
thereof has been received by the Secretary of the Corporation. The proxy may
also be revoked by voting in person at the meeting or by delivering a
later-dated, signed proxy. The shares represented by all properly executed
proxies received by the Secretary in the accompanying form of proxy prior to the
meeting and not so revoked will be voted. Where a choice is specified on the
form of proxy, the shares will be voted in accordance with the choice made
therein. If no such choice is made, the shares will be voted in accordance with
the recommendation of the Board of Directors. The form of proxy also confers
discretionary authority on the named proxies to vote the shares represented by
the proxy on any matter that is properly presented for action at the Annual
Meeting of Shareowners. Under Pennsylvania law and the Corporation's Articles of
Incorporation and By-Laws, abstentions and broker non-votes will have no effect
on matters to be voted on at the Annual Meeting since directors are to be
elected by plurality vote and auditors are to be elected and the Kennametal Inc.
2000 Employee Stock Purchase Plan is to be approved by the affirmative vote of
at least a majority of the votes cast by shareowners present, in person or by
proxy, at the meeting. A majority of the named proxies who shall be present and
shall act at the meeting (or if only one shall be present and act, then that
one) may exercise all powers granted to them by the proxies solicited hereunder.
The address of the principal executive offices of the Corporation is 1600
Technology Way, Latrobe, Pennsylvania 15650, and the date this Proxy Statement
was mailed to shareowners was on or about September 21, 2000.
ELECTION OF DIRECTORS
Three directors are to be elected to hold office as Directors of the Second
Class for terms of three years and one director is to be elected to hold office
as a Director of the First Class for a term of two years until their successors
are elected and qualified.
The owners of Capital Stock have cumulative voting rights in the election
of directors. In voting for directors, a shareowner has the right to multiply
the total number of shares which the shareowner is entitled to vote by the
number of directors to be elected in each class, and to cast the whole number of
votes so determined for one nominee in the class or to distribute them among the
nominees if more than one nominee is named in such class. Proxies who vote at
the meeting on behalf of a shareowner will have the discretion to and may
exercise such cumulative voting rights. The three individuals who receive the
largest number of votes cast will be elected as Directors of the Second Class.
The persons named in the enclosed form of proxy were selected by the Board
of Directors and have advised the Board of Directors that, unless authority is
withheld, they intend to vote the shares represented by them at the meeting for
the election of the following nominees named to serve as directors. The nominees
for election for terms of three years in the Second Class of Directors are
Richard C. Alberding, William R. Newlin and Timothy S. Lucas, who have served as
directors since 1982, 1982 and 1998, respectively. The nominee for election for
a term of two years in the First Class of Directors is Kathleen J. Hempel, who
was elected by the Board of Directors on July 24, 2000 (following the
resignation of Robert L. McGeehan as a director on that date) to serve until the
next annual meeting of shareowners. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THESE NOMINEES.
<PAGE> 4
If at the time of the meeting any of the foregoing nominees is not
available to serve as a director, an event which the Corporation has no reason
to anticipate, the Corporation has been informed that the persons named in the
enclosed form of proxy intend to vote the shares represented by them at the
meeting for such other person or persons, if any, as may be nominated by the
Board of Directors.
The following table provides certain information concerning each nominee
for election as a director and each director whose term of office will continue
after the meeting.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME, AGE AND YEAR AND DIRECTORSHIPS OF OTHER
FIRST ELECTED (1) PUBLICLY-TRADED CORPORATIONS (2)
------------------ --------------------------------
<S> <C>
Nominees for Directors of the Second Class Whose Terms Expire in 2003
Richard C. Alberding Retired, having served as Executive Vice President,
Age: 69 Marketing and International, of Hewlett-Packard Company (a
Director since 1982 designer and manufacturer of electronic products for
measurement and computation). Director of Walker Interactive
Systems, Inc., Sybase, Inc., Digital Microwave Corp., Paging
Network, Inc., Digital Link Corporation and JLK Direct
Distribution Inc. Former director of Quickturn Design
Systems, Inc. and Storm Technology, Inc.
William R. Newlin(3) Managing Partner of Buchanan Ingersoll Professional
Age: 59 Corporation (attorneys at law) since 1980. Managing General
Director since 1982 Partner of CEO Venture Funds (private venture capital
funds). Director of Black Box Corporation, National City
Bank of Pennsylvania, Parker/Hunter Incorporated, ACE*COMM
Corporation and the Pittsburgh Technology Council. Chairman
of the Board of Directors of the Corporation and of JLK
Direct Distribution Inc.
Timothy S. Lucas Chairman since 1997 and President and Chief Executive
Age: 44 Officer since 1990 of MacroSonix Corporation (a developer
Director since 1998 and licensor of resonant macrosonic synthesis (RNS)
technologies).
Directors of the Third Class Whose Terms Expire in 2001
A. Peter Held President of Cooper Tools, a division of Cooper Industries,
Age: 56 Inc. (a manufacturer and marketer of hand tools and
Director since 1995 industrial power tools), having served as Vice President and
General Manager International of its Champion Spark Plug
Division from 1992 to 1994. Director of Loxcreen, Inc.
Aloysius T. McLaughlin, Jr. Retired, having served as Vice Chairman of Dick Corporation
Age: 65 (a general contractor) from 1993 to 1995 and as its
Director since 1986 President and Chief Operating Officer from 1985 until 1993.
Director of JLK Direct Distribution Inc.
Larry Yost Chairman and Chief Executive Officer of ArvinMeritor, Inc.
Age: 62 (a provider of components for vehicles), having previously
Director since 1987 served as President, Heavy Vehicle Systems, Rockwell
International Corporation, from November 1994 until March
1997 and as Senior Vice President of the Operations Group of
Allen-Bradley Company until November 1994.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME, AGE AND YEAR AND DIRECTORSHIPS OF OTHER
FIRST ELECTED (1) PUBLICLY-TRADED CORPORATIONS (2)
------------------ --------------------------------
<S> <C>
Directors of the First Class Whose Terms Expire in 2002
Peter B. Bartlett(4) General Partner of Brown Brothers Harriman & Co. (private
Age: 66 bankers). Director of Erie Indemnity Company, Erie Life
Director since 1975 Insurance Company and Erie Insurance Company.
Markos I. Tambakeras President and Chief Executive Officer of the Corporation
Age: 49 since July 1999. From 1997 to June 1999, served as
Director since 1999 President, Industrial Controls Business of Honeywell
Incorporated (provider of control technologies), having
previously served as President, Industrial Automation and
Control, Honeywell Incorporated from 1995 to 1996 and as
President, Honeywell Asia Pacific in Hong Kong from 1992 to
1994. Director of JLK Direct Distribution Inc.
Nominee for Director of the First Class Whose Term Expires in 2002
Kathleen J. Hempel From 1992-1997, served as Vice Chairman and Chief Financial
Age: 49 Officer of Fort Howard Corporation, which merged into Fort
Initially elected James Corporation (manufacturer, converter and marketer of
July 24, 2000 sanitary tissue products) having previously served as Senior
Executive Vice President and Vice President of Human
Resources. Director of Oshkosh Truck Corporation, A.O. Smith
Corporation and Whirlpool Corporation.
</TABLE>
---------------
(1) Each current director has served continuously since such director was first
elected.
(2) Unless otherwise shown in the table, each person named has served in such
person's principal occupation during the past five years.
(3) The Corporation engaged Buchanan Ingersoll Professional Corporation, the law
firm of which William R. Newlin is Managing Partner, to perform services for
the Corporation during fiscal 2000 and fiscal 2001.
(4) The Corporation engaged Brown Brothers Harriman & Co., the banking firm of
which Peter B. Bartlett is a General Partner, to perform services for the
Corporation during fiscal 2000 and fiscal 2001.
BOARD OF DIRECTORS AND BOARD COMMITTEES
The Corporation's Board of Directors held six meetings during the year
ended June 30, 2000. The committees of the Board of Directors include an
Executive Committee, an Audit Committee, a Committee on Organization and
Compensation (previously named the Committee on Executive Compensation) and a
Nominating Committee. Each director attended at least 75% of the meetings of the
Board of Directors and any committee of which such director is a member.
Executive Committee: The Executive Committee met four times during the past
fiscal year. The Committee's duties include monitoring performance of the
Corporation's business plan, reviewing certain business strategies and reviewing
management performance and succession. The following directors currently
comprise the Committee: William R. Newlin (Chairman), Peter B. Bartlett and
Richard C. Alberding.
Audit Committee: The Audit Committee met four times during the past fiscal
year. The Audit Committee adopted a new Audit Committee charter during the 2000
fiscal year, a copy of which is attached hereto as Exhibit A. The Committee's
primary function is to evaluate management's performance of its financial
reporting responsibilities including the annual report and proxy materials. The
Committee also
3
<PAGE> 6
reviews the internal financial and operational controls of the Corporation,
monitors the fees, results and effectiveness of the annual audit and compliance
with the Corporation's code of business conduct and the independence of the
public accountants. The Committee also reviews compliance with legal and
regulatory and employee benefit plan reporting requirements and monitors
critical management information systems. The Committee recommends to the Board
of Directors for approval by the Board of Directors and the shareowners the
election of the independent public accountants. The following directors
currently comprise the Committee: Larry Yost (Chairman), A. Peter Held and
Aloysius T. McLaughlin, Jr.
Committee on Organization and Compensation: The Committee on Organization
and Compensation met six times during the past fiscal year. The Committee's
duties include the setting of compensation rates of the Corporation's officers,
the determination of additional compensation, if any, to be awarded to such
officers and the administration of the Corporation's stock-based incentive
plans. The following directors currently comprise the Committee: Richard C.
Alberding (Chairman), Peter B. Bartlett and Aloysius T. McLaughlin, Jr. The
report of the Committee on Organization and Compensation appears elsewhere in
this Proxy Statement.
Nominating Committee: The Nominating Committee met once during the past
fiscal year. The Committee's duties include recommending to the Board of
Directors nominees for directors to be elected at the Annual Meeting of
Shareowners or to be elected to fill any vacancies in the Board of Directors
which may occur. The Committee considers nominees recommended by shareowners.
Pursuant to the By-Laws of the Corporation, shareowner recommendations of
nominees for the Board must be submitted in advance of any meeting and must
comply with certain requirements set forth in the By-Laws. See "Shareowner
Proposals and Nominating Procedures" on page 17 of this Proxy Statement. The
following directors currently comprise the Committee: A. Peter Held (Chairman)
and Timothy S. Lucas.
Directors who are not employees of the Corporation each receive
compensation from the Corporation for services as a director at an annual rate
of $30,000. Members of the Audit Committee and members of the Committee on
Organization and Compensation who are not employees of the Corporation each
receive additional annual compensation of $4,000. Non-employee directors who are
members of the Executive Committee receive a fee of $1,100 per Executive
Committee meeting. Non-employee directors who are members of the Nominating
Committee receive a fee of $1,000 per meeting. The non-employee members of the
Board of Directors were awarded the following stock options during fiscal 2000
for serving on the Board: Messrs. Newlin, Alberding, Bartlett, Held, Lucas,
McLaughlin and Yost, 7500 shares each at $26.40625. Under the Deferred Fee Plan
for Outside Directors (the "Deferred Fee Plan"), directors are permitted
annually to request that the payment of any compensation that may be payable to
them for services as a director or committee member be deferred for payment,
with interest, at a later time. The deferred payments would be actually funded
by a transfer of cash into a deferred compensation trust (a so-called "Rabbi
Trust"), administered by an independent trustee, upon the occurrence of a
threatened or actual change in control of the Corporation (as defined in the
deferred compensation trust agreement). Under the Corporation's Directors Stock
Incentive Plan, any director who is not an employee may elect to receive shares
of the Corporation's Capital Stock in lieu of all or a portion of any
consideration payable for services as a director that is not deferred pursuant
to the Deferred Fee Plan. In addition, any director who is not an employee may
elect to receive credits, representing shares of the Corporation's Capital Stock
("Stock Credits") or Class A Common Stock of JLK Direct Distribution Inc., a
majority-owned subsidiary of the Corporation, with respect to all or a portion
of any consideration deferred pursuant to the Directors Stock Incentive Plan.
Directors who are not employees of the Corporation also receive $50,000 of life
insurance coverage which is paid for by the Corporation. Directors who are
employees of the Corporation do not receive any compensation for services as a
director or as a member of any committee of the Board of Directors.
4
<PAGE> 7
OWNERSHIP OF CAPITAL STOCK BY
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of the
Corporation's Capital Stock as of June 30, 2000, by each director, each nominee
for director, each Named Executive Officer (as hereinafter defined) and all
directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT OF TOTAL BENEFICIAL
BENEFICIAL OWNERSHIP AND
NAME OF BENEFICIAL OWNER OWNERSHIP (1)(2) STOCK CREDITS (3) STOCK CREDITS
------------------------ ---------------- ----------------- ----------------
<S> <C> <C> <C>
Richard C. Alberding........................... 7,987(4) 415 8,402
Peter B. Bartlett.............................. 7,800 15,049 22,849
A. Peter Held.................................. 7,216 1,306 8,522
Kathleen J. Hempel............................. 0 0 0
Timothy S. Lucas............................... 5,000 0 5,000
Aloysius T. McLaughlin, Jr..................... 27,834 7,489 35,323
William R. Newlin.............................. 126,298(5) 20,049 146,347
Larry Yost..................................... 7,000 5,449 12,449
Markos I. Tambakeras........................... 161,615 0 161,615
H. Patrick Mahanes, Jr......................... 173,743 13,357 187,100
Derwin R. Gilbreath............................ 40,938 2,561 43,499
David B. Arnold................................ 88,687 6,719 95,406
James R. Breisinger............................ 49,592(6) 0 49,592
Richard J. Orwig............................... 19,331 13,230 32,561
Directors and Executive Officers as a Group (20
persons)..................................... 876,990 93,124 970,114
</TABLE>
---------------
(1) No individual beneficially owns in excess of one percent of the total shares
outstanding. Directors and executive officers as a group beneficially own
3.2% of the total shares outstanding. Unless otherwise noted, the shares
shown are subject to the sole voting and investment power of the person
named.
(2) The figures shown include 61,667, 120,067, 38,200, 61,056, 30,217 and
554,540 shares over which Messrs. Tambakeras, Mahanes, Gilbreath, Arnold and
Breisinger and all directors and executive officers as a group,
respectively, have the right to acquire as of June 30, 2000 or the right to
acquire within 60 days thereafter pursuant to the Corporation's stock option
plans, and 27,667 and 3,338 shares over which Messrs. Tambakeras and
Mahanes, respectively, have sole voting power but no investment power. The
figures shown also include 7,000 shares over which each of Messrs.
Alberding, Bartlett, Held, McLaughlin and Yost, 5,000 shares over which Mr.
Lucas, and 102,000 shares over which Mr. Newlin, respectively, have the
right to acquire as of June 30, 2000 or the right to acquire within 60 days
thereafter pursuant to the Corporation's stock option plans.
(3) These amounts represent Stock Credits to which non-employee directors are
entitled pursuant to the Directors Stock Incentive Plan described on page 4
and to which executive officers are entitled pursuant to the Corporation's
Management Performance Bonus Plan.
(4) The figure shown includes 987 shares owned jointly by Mr. Alberding and his
wife.
(5) The figure shown includes 2,442 shares owned jointly by Mr. Newlin and his
wife and 6,326 shares owned by Mr. Newlin's wife. Mr. Newlin disclaims
beneficial ownership of shares owned by his wife.
(6) The figure shown includes 8,000 shares owned jointly by Mr. Breisinger and
his wife.
5
<PAGE> 8
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation paid by the Corporation
during its last three fiscal years to its Chief Executive Officer, each of the
other four most highly compensated executive officers, and one former executive
officer (the "Named Executive Officers"), each of whose aggregate direct
remuneration exceeded $100,000 during the fiscal year ended June 30, 2000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
--------------------------
ANNUAL COMPENSATION SECURITIES RESTRICTED ALL OTHER
-------------------------- UNDERLYING STOCK COMPENSATION
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY($)(1) BONUS($)(2) OPTIONS(#)(3) AWARDS($) ($)(4)(5)
--------------------------- ----------- ------------ ----------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Markos I. Tambakeras, 2000 550,008 562,515 -- 5,100
President and Chief Executive 1999 60,417 300,000 185,000 2,394,031(6)
Officer(6)
H. Patrick Mahanes, Jr., 2000 370,260 294,000 20,000 13,204
Executive Vice President, 1999 329,412 122,500 100,000 625,000(7) 6,050
Global Strategic Initiatives 1998 325,465 189,997 31,600 8,450
Derwin R. Gilbreath, 2000 232,221 187,504 15,000 6,262
Vice President, 1999 208,078 0 32,000 7,919
Chief Operating Officer, 1998 185,170 76,903 12,500 6,824
Metalworking Solutions
and Services Group
David B. Arnold, 2000 247,008 143,750 12,500 15,738
Vice President, 1999 237,864 0 15,000 8,595
Chief Technical Officer 1998 242,605 106,375 22,300 9,243
James R. Breisinger, 2000 227,337 152,500 15,000 7,843
Vice President, 1999 208,255 68,766 10,000 6,457
Chief Operating Officer, 1998 169,364 75,019 10,600 12,350
Advanced Materials
Solutions Group
Richard J. Orwig, 2000 350,004 40,000 -- 15,755
Former President and 1999 333,334 50,000 75,000 8,964
Chief Executive Officer, 50,000(8)
JLK Direct Distribution Inc.(9) 1998 308,464 193,875 31,600 10,170
</TABLE>
---------------
(1) Reflects salary reductions implemented during fiscal 1999 and continued
until November 1999 pursuant to a cost containment program.
(2) Includes, for Messrs. Tambakeras, Mahanes, Gilbreath, Arnold and Breisinger,
bonuses paid partially or entirely in shares of Capital Stock or in Stock
Credits as elected by the individual under the Corporation's Management
Performance Bonus Plan. Under the Management Performance Bonus Plan, any
portion of a bonus paid in shares of Capital Stock or in Stock Credits was
increased by 25% of that value.
(3) Unless otherwise indicated, represents options to purchase shares of the
Corporation's Capital Stock.
(4) This figure includes imputed income based upon premiums paid by the
Corporation to secure and maintain for certain officers, including all
executive officers of the Corporation who elect to participate, a $500,000
term life insurance policy on the life of such officer until he reaches age
65. For Mr. Orwig and Mr. Arnold, this figure also includes amounts paid for
Medicare tax and income tax gross-up on supplemental pension benefit
accrual.
(5) This figure includes amounts contributed by the Corporation under its Thrift
Plan. Eligible employees may elect to contribute 2% to 12% of their monthly
compensation (salary and, if applicable, bonus) to
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<PAGE> 9
this plan. The Corporation contributes shares of Capital Stock to each
participant's account in an amount equal to one-half of that portion of the
employee's contribution that does not exceed 6% of the employee's
compensation. Contributed sums are invested in proportions as directed by
the employee in a fixed income fund, various equity funds (including the
Corporation's Capital Stock) and balanced funds (consisting of both equity
and fixed-income securities), each managed by investment management
companies, and can be withdrawn by the employee only upon the occurrence of
certain events. Certain terms of the plan are designed to make available to
participants the provisions of section 401(k) of the Internal Revenue Code,
as amended (the "Code"), which permit elective employee contributions on a
pre-tax basis.
(6) Mr. Tambakeras became President and Chief Executive Officer on July 1, 1999.
His employment commenced May 21, 1999. Mr. Tambakeras was granted a
restricted stock award for 83,000 shares on May 4, 1999 under the Kennametal
Inc. 1999 Stock Plan. The award vests over 24 months in three equal amounts
at 8 months, 16 months and 24 months. Dividends will be paid on the shares
subject to the award.
(7) Mr. Mahanes was granted a restricted stock award for 30,000 shares on April
26, 1999 under the Kennametal Inc. 1999 Stock Plan. The award vests over
three years in equal amounts. Dividends will be paid on the shares subject
to the award.
(8) Represents options to purchase shares of the Class A Common Stock of JLK
Direct Distribution Inc. ("JLK Common Stock").
(9) Mr. Orwig became President of JLK Direct Distribution Inc. on September 17,
1998. In connection therewith, Mr. Orwig received a loan, for relocation
purposes, in the amount of $175,000 which was interest-free until September
10, 1999. The entire amount of the loan, including accrued interest, was
repaid in fiscal 2000. Mr. Orwig resigned his position effective May 2,
2000.
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Corporation has agreements with Messrs. Arnold, Breisinger, Mahanes and
Gilbreath whereby, subject to review by the Board of Directors and a provision
for termination without cause by either party upon written notice, each will be
employed by the Corporation. The agreements generally provide that the officers
will devote their entire time and attention to the business of the Corporation,
will refrain during employment and for three years thereafter from competing
with the Corporation (unless employment is terminated by the Corporation without
cause or following a change in control) and will not disclose confidential or
trade secret information belonging to the Corporation. These agreements also
require the officers to assign to the Corporation all inventions conceived or
made during their employment by the Corporation. The agreements provide for
severance payments upon termination of employment occurring either before or
after a change in control of the Corporation.
In the event of termination of his employment by the officer's employer
prior to a change in control, each officer would receive as severance pay an
amount equal to three months' base salary at the time of such termination. In
the event of termination by the officer prior to a change in control, or without
good reason following a change in control, no severance payments will be made.
In general, in the event of termination of employment after a change in control
by the officer for good reason or by the employer other than for cause or
disability, each officer would receive as severance pay 2.8 times the sum of (i)
his respective annual base salary at the date of termination or, at the
officer's election, his salary as of the beginning of the month preceding the
month in which the change in control occurs, and (ii) the average of any bonuses
which he was entitled to or paid during the three most recent fiscal years
ending prior to the date of termination or, at the officer's election, the
average of any bonuses which the officer was entitled to or paid for the three
fiscal years preceding the fiscal year in which the change in control occurred.
In addition, for a three-year period the officer would receive the same medical
and group insurance benefits that he received at the date of
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<PAGE> 10
termination. The officer would also receive three years of additional credit for
purposes of computing benefits under the Corporation's supplemental retirement
plan.
The Corporation also has entered into an agreement with Markos I.
Tambakeras dated as of May 4, 1999, as amended on March 3, 2000, pursuant to
which Mr. Tambakeras serves as President and Chief Executive Officer of the
Corporation, effective July 1, 1999. Mr. Tambakeras receives a minimum annual
base salary of $550,000 and is eligible to receive future bonuses of not less
than $300,000 under the Corporation's bonus plans then in effect. The agreement
is for a three-year term. Pursuant to the agreement, Mr. Tambakeras received a
$300,000 sign-on bonus (which, at Mr. Tambakeras' request, was paid in shares of
Capital Stock pursuant to the terms of the Performance Bonus Plan of 1995), an
option to purchase 150,000 shares of Capital Stock at $26.00 per share vesting
over a three-year period, a restricted stock grant covering 83,000 shares of
Capital Stock vesting over 24 months and certain supplemental retirement
benefits.
The agreement with Mr. Tambakeras provides that if, during the term of the
agreement and prior to a change-in-control, Mr. Tambakeras is terminated without
cause, or if he terminates the agreement due to the Corporation's breach, he
will be entitled to a lump sum payment equal to the greater of the base salary
and bonuses that he would have earned during the term or two times his highest
base salary plus targeted bonus for the year of termination. In addition, the
options and restricted stock awards discussed above would vest. If his
employment is terminated after the term by the Corporation prior to a
change-in-control and other than for cause, Mr. Tambakeras would receive a
lump-sum payment equal to two years' annual base salary at the rate then in
effect plus targeted bonus for the year of termination.
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, Mr. Tambakeras' employment is
terminated by him for good reason or by the Corporation other than for cause, or
if Mr. Tambakeras terminates his employment during the thirty (30) day period
commencing twelve months after the change-in-control, then Mr. Tambakeras would
receive a lump sum payment equal to three times his base salary and targeted
bonus for the year of termination. Severance payments upon change-in-control
would be grossed-up for the excise tax during the three-year term. After the
term, payments due on change-in-control would be reduced to avoid implicating
the excise tax.
In connection with Mr. Orwig's departure from JLK Direct Distribution Inc.
("JLK"), the Corporation, JLK and Mr. Orwig entered into a separation agreement.
Pursuant to the separation agreement, Mr. Orwig is entitled to receive severance
payments equal to the amount of his current base salary, less applicable
withholdings and deductions, through November 2, 2001. Until November 2, 2001 or
until Mr. Orwig is entitled to or eligible for similar benefits from a new
employer, JLK will continue to provide Mr. Orwig with benefits similar to the
coverage in place at the time of his departure. If Mr. Orwig is employed by or
provides consultation for a competitor on or before November 2, 2001, the
payments and benefits described above will cease. Mr. Orwig is also entitled to
receive the following payments: (1) a bonus in the amount of $40,000 for fiscal
year 2000; (2) up to $25,000 for moving expenses and /or real estate commissions
on an after-tax basis, under specified circumstances; and (3) a payment of
$26,923 for accrued but unused vacation time. Mr. Orwig will receive credit for
employment service under the Corporation's Supplemental Executive Retirement
Plan until November 2, 2001. The separation agreement provides that options to
acquire JLK Common Stock held by Mr. Orwig will continue to vest through
November 2, 2001 and Mr. Orwig may exercise any vested JLK options through
February 2, 2002. Additionally, options to purchase the Corporation's Capital
Stock ceased to vest on May 2, 2000 and must be exercised by August 2, 2000. In
the separation agreement, Mr. Orwig provided JLK and the Corporation with
certain business information releases and agreed to certain business information
confidentiality and non-competition provisions.
8
<PAGE> 11
STOCK OPTIONS
The Kennametal Inc. Stock Option and Incentive Plan of 1992 (the "1992
Plan") provides for the granting of nonstatutory and incentive stock options and
share awards covering the lesser of 1,650,000 shares (gross) and 1,109,255
shares (net) of the Corporation's Capital Stock. The Kennametal Inc. Stock
Option and Incentive Plan of 1996 (the "1996 Plan") provides for the granting of
nonstatutory and incentive stock options and share awards covering 1,500,000
shares of the Corporation's Capital Stock. The Kennametal Inc. 1999 Stock Plan
provides for the granting of nonstatutory stock options and share awards
covering 600,000 shares of the Corporation's Capital Stock. The Kennametal Inc.
Stock Option and Incentive Plan of 1999 (the "1999 Plan") provides for granting
non-statutory and incentive stock options and share awards covering 2,500,000
shares of the Corporation's Capital Stock. Although options are still
outstanding under the Kennametal Inc. Stock Option and Incentive Plan of 1988
(the "1988 Plan"), no further grants of options may be made under that plan.
Under each of the plans, the price at which shares covered by an option may
be purchased must not be less than the fair market value of such shares at the
time the option is granted or, in the case of the non-qualified stock options
granted under the 1992 Plan and the 1996 Plan, at not less than 75% of the fair
market value. The purchase price must be paid in full at the time of exercise
either in cash or, in the discretion of the Committee administering the plan, by
delivering shares of the Corporation's Capital Stock or a combination of shares
and cash having an aggregate fair market value equal to the purchase price.
The following table sets forth information concerning options granted to
the Named Executive Officers during the fiscal year ended June 30, 2000:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS EXERCISE OR GRANT DATE
OPTIONS GRANTED IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(#)(1) FISCAL YEAR ($/SHARE) DATE VALUE($)(2)
---- ------------- ----------- --------- ---- -----------
<S> <C> <C> <C> <C> <C>
Markos I. Tambakeras.......... 0 - - - -
H. Patrick Mahanes, Jr........ 20,000 6.3 26.40625 1/31/2010 162,232
Derwin R. Gilbreath........... 15,000 4.7 26.40625 1/31/2010 121,674
David B. Arnold............... 12,500 3.9 26.40625 1/31/2010 101,395
James R. Breisinger........... 15,000 4.7 26.40625 1/31/2010 121,674
Richard J. Orwig.............. 0 - - - -
</TABLE>
---------------
(1) Options with respect to the Corporation's Capital Stock were granted with an
exercise price equal to the fair market value of the Capital Stock on the
date of grant. These options vest in three equal, annual amounts on the
first three anniversaries of the date of grant.
(2) Based on the Black-Scholes Option Valuation model adjusted for dividends to
determine grant date present value of the options. The Corporation does not
advocate or necessarily agree that the Black-Scholes model properly reflects
the value of an option. The assumptions used in calculating the option value
with respect to the Corporation's Capital Stock include the following: a
risk-free interest rate of 6.64% (the rate applicable to a five-year
treasury security at the time of the awards); a dividend yield of 2.46% (the
annualized yield at the date of grant); volatility of 31.11% (calculated
using daily stock returns for the Capital Stock for the five-year period
preceding the option award); and a stock price at date of grant of $26.40625
(the exercise price at which these options were granted was equal to the
fair market value of the Capital Stock on the date of grant). The value of
these options under the Black-Scholes model of option valuation applying the
preceding assumptions is $8.1116 per share.
9
<PAGE> 12
The following table sets forth information concerning options to purchase
the Corporation's Capital Stock held by the Named Executive Officers:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR END (#) YEAR END ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Markos I. Tambakeras............. 0 - 61,667/123,333 0/0
H. Patrick Mahanes, Jr........... 0 - 111,734/86,660 0/0
Derwin R. Gilbreath.............. 0 - 34,200/36,300 0/0
David B. Arnold.................. 0 - 56,056/22,500 0/0
James R. Breisinger.............. 0 - 26,884/21,666 0/0
Richard J. Orwig................. 0 - 105,394/49,999 0/0
</TABLE>
RETIREMENT BENEFITS
The following table indicates, for purposes of illustration, the
approximate annual retirement benefits that would be payable at the present time
on a straight life annuity basis pursuant to the Kennametal Inc. Retirement
Income Plan and the Supplemental Executive Retirement Plan under various
assumptions as to salary, bonus and years of service to employees in higher
salary classifications. The amounts shown have not been adjusted for Social
Security offset.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ANNUALIZED
COVERED
COMPENSATION ANNUAL BENEFIT UPON RETIREMENT WITH YEARS OF CREDITED SERVICE INDICATED
------------ ------------------------------------------------------------------------
15 20 25 30 35
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 100,000 $ 45,000 $ 50,000 $ 55,000 $ 60,000 $ 65,000
200,000 90,000 100,000 110,000 120,000 130,000
400,000 180,000 200,000 220,000 240,000 260,000
600,000 270,000 300,000 330,000 360,000 390,000
800,000 360,000 400,000 440,000 480,000 520,000
1,000,000 450,000 500,000 550,000 600,000 650,000
1,200,000 540,000 600,000 660,000 720,000 780,000
1,400,000 630,000 700,000 770,000 840,000 910,000
</TABLE>
As of June 30, 2000, the credited years of service under the Retirement
Income Plan for the Named Executive Officers were approximately: Markos I.
Tambakeras, 1 year; H. Patrick Mahanes, Jr., 15 years; Derwin R. Gilbreath, 6
years; David B. Arnold, 21 years; James R. Breisinger, 21 years; and Richard J.
Orwig, 16 years.
Annualized Covered Compensation (which is the latest base salary plus the
average annual bonus over the past fiscal three years as shown in the Summary
Compensation Table) as of June 30, 2000, for purposes of the retirement benefits
under the Retirement Income Plan and the Supplemental Executive Retirement Plan
for the Named Executive Officers, is as follows: Markos I. Tambakeras,
$1,112,523; H. Patrick Mahanes, Jr., $664,260; Derwin R. Gilbreath, $419,725;
David B. Arnold, $390,758; James R. Breisinger, $379,837 and Richard J. Orwig,
$390,004.
10
<PAGE> 13
REPORT OF THE BOARD OF DIRECTORS
COMMITTEE ON ORGANIZATION AND COMPENSATION
EXECUTIVE COMPENSATION PHILOSOPHY
Executive and managerial compensation programs at the Corporation are designed
and implemented with certain guiding principles in mind:
- To link the interests of executives and managers to the interests of the
shareowners and other potential investors.
- To provide incentives for working toward increasing the market value of
the Corporation's stock and to increase shareowner value through
achieving financial and business objectives.
- To provide incentives for strategic vision and decision-making that will
promote the longer-term health and viability of the Corporation.
- To provide incentives for innovation, quality management, responsiveness
to customer needs, value-added products and services, and an
action-oriented approach to opportunities in the marketplace.
- To attract and retain individuals with the leadership and technical
skills required to carry the Corporation forward into the future, given
the belief that the Corporation's human resources can provide a
competitive advantage in the marketplace.
GENERAL COMPENSATION PLAN DESIGN
Executive and management compensation plans consist of (1) a long-term element,
(2) annual performance rewards, (3) basic compensation, and (4) executive
ownership goals.
- The primary vehicles for providing long-term incentives are the
Corporation's stock option plans. The belief is that key executives and
certain managers should hold stock options in such quantities as to
provide an incentive to make decisions and take actions that will enhance
the performance of the Corporation and increase its value. The interests
of shareowners and executives are tied together by the market value of
the stock.
- Annual performance rewards include a management performance bonus plan
and annual base salary merit increases.
-- The Prime Bonus Plan for executives and managers is designed to closely
tie bonus awards to corporate performance, unit performance, and
individual contribution, relative to the Corporation's business plans,
and strategies. The Prime Bonus Plan is also intended to maintain
management compensation at a competitive level, as indicated by
published compensation surveys.
-- The annual Base Salary Merit Increase Review for executives and
managers provides rewards for more qualitative achievements in
innovation, quality, service to the customer and leadership.
Consideration is given to competitive salary increases that are being
awarded by other industrial firms, as indicated by published salary
surveys.
- Basic compensation, for executives, is intended to be competitive in the
employment market and is designed to attract, retain and motivate
high-quality individuals. Basic compensation includes base salary,
flexible and fixed-benefit plans, minor executive perquisites and the
Supplemental Executive Retirement Plan.
- In 1995, executive stock ownership goals were established by the Chief
Executive Officer, ratified by the Board of Directors Committee on
Executive Compensation and presented to the Board of Directors. The
ownership goals are voluntary but very much encouraged.
11
<PAGE> 14
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
- Markos I. Tambakeras became President and Chief Executive Officer on July
1, 1999.
- Under the plan design of the Prime Bonus Plan for fiscal 2000, a bonus
pool was calculated by management and approved by the Board of Directors.
Based on specific personal achievements, the Committee recommended a
bonus award of $500,000 for Mr. Tambakeras. On July 24, 2000, Mr.
Tambakeras' bonus award was approved by the Board of Directors.
COMPENSATION OF EXECUTIVE OFFICERS
- Stock options were awarded to certain executive officers on February 1,
2000 for the purpose of providing an incentive for managing the
continuing performance and value of the Corporation. The awards, as
recommended by Mr. Tambakeras, were approved by the Board of Directors
Committee on Organization and Compensation on January 24, 2000.
- Individual executive officer bonus awards were determined by corporate,
unit and individual performance as recommended by Mr. Tambakeras, and
were approved by the Board of Directors Committee on Organization and
Compensation on July 23, 2000.
Committee on Organization and
Compensation:
Richard C. Alberding, Chairman
Peter B. Bartlett
Aloysius T. McLaughlin, Jr.
12
<PAGE> 15
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The following graph compares cumulative total shareowner return on the
Corporation's Capital Stock with the cumulative total shareowner return on the
common equity of the companies in the Standard & Poor's Mid-Cap 400 Market Index
(the "S&P Mid-Cap"), a peer group of companies determined by the Corporation
(the "Old Peer Group") and a new peer group of companies determined by the
Corporation (the "New Peer Group") for the period from July 1, 1995 to June 30,
2000.
The New Peer Group consists of the following companies: Danaher Corp.;
Eaton Corp.; Hardinge Inc.; Ingersoll-Rand Company; Kaydon Corp.; Lincoln
Electric Holdings Inc.; MascoTech, Inc.; Milacron Inc.; Parker-Hannifin Corp.;
and Timken Co. The Corporation has created the New Peer Group for benchmarking
its sales and earnings growth, return on invested capital, profitability and
asset management.
The Old Peer Group consists of the following companies: Sames Corporation;
Brown & Sharpe Manufacturing Co.; Milacron Inc.; Federal Screw Works Inc.;
Federal-Mogul Corp.; Kaydon Corp.; Genesis Worldwide Inc. (formerly, Monarch
Machine Tool Company Inc.); Newcor Inc.; Regal-Beloit Corp.; Snap-On
Incorporated; SPS Technologies, Inc.; The L. S. Starrett Company; and Timken Co.
Gleason Corp. ceased to be a publicly traded entity during fiscal 2000 and,
therefore, has been removed from the Old Peer Group for all periods presented.
The performance for the Old Peer Group is presented for comparative purposes as
required and will not be provided in the future.
COMPARISON OF CUMULATIVE TOTAL RETURNS*
<TABLE>
<CAPTION>
OLD PEER GROUP NEW PEER GROUP S&P MID-CAP KENNAMETAL INC.
-------------- -------------- ----------- ---------------
<S> <C> <C> <C> <C>
1995 100.00 100.00 100.00 100.00
1996 112.15 113.76 121.58 100.29
1997 157.58 159.70 149.95 129.12
1998 181.90 169.11 190.66 127.08
1999 147.35 210.42 214.63 97.08
2000 85.04 155.93 251.07 68.85
</TABLE>
*TOTAL RETURN BASED ON $100 INITIAL INVESTMENT & REINVESTMENT OF DIVIDENDS
The above graph assumes a $100 investment on July 1, 1995, in each of
Kennametal Inc. Capital Stock, the S&P Mid-Cap and the New Peer Group and the
Old Peer Group, and further assumes the reinvestment of all dividends.
13
<PAGE> 16
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth each person or entity who may be deemed to
have beneficial ownership of more than 5% of the outstanding Capital Stock of
the Corporation based upon information publicly available as of June 30, 2000.
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF OUTSTANDING
NAME AND ADDRESS SHARES CAPITAL STOCK(1)
---------------- --------- ----------------
<S> <C> <C>
FMR Corp. 3,617,497(2) 11.8%
82 Devonshire Street
Boston, Massachusetts 02109-6995
Key Corp. 2,594,818(3) 8.4%
127 Public Square
Cleveland, Ohio 44114-1306
</TABLE>
---------------
(1) Based on the number of shares outstanding as of September 5, 2000.
(2) FMR Corp. has sole power to vote 25,400 shares. Fidelity Management &
Research Company, a wholly owned subsidiary of FMR Corp., is the beneficial
owner of 3,524,997 shares. Fidelity Management Trust Company, a wholly owned
subsidiary of FMR Corp., is the beneficial owner of 92,500 shares.
(3) Key Corp. has shared power to vote 2,400 shares, sole dispositive power over
2,559,507 shares and shared dispositive power over 79,610 shares.
ELECTION OF AUDITORS
Unless otherwise directed by the shareowners, proxies will be voted for the
election of Arthur Andersen LLP as the Corporation's independent auditors for
the fiscal year ending June 30, 2001. The affirmative vote of the owners of at
least a majority of the shares cast at the meeting is required to elect such
firm as auditors. Representatives of Arthur Andersen LLP are expected to be
present at the meeting to respond to appropriate questions and will have the
opportunity to make a statement if they desire to do so. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF ARTHUR ANDERSEN LLP AS THE
CORPORATION'S AUDITORS.
APPROVAL OF KENNAMETAL INC. 2000 EMPLOYEE STOCK PURCHASE PLAN
On July 24, 2000 the Board of Directors adopted, subject to approval by the
Corporation's shareowners, the Kennametal Inc. 2000 Employee Stock Purchase Plan
(the "Plan"). The Plan provides a means for employees of the Corporation and of
subsidiaries of the Corporation that are designated by the Corporation to
participate in the Plan ("Designated Subsidiaries") to purchase the
Corporation's Capital Stock at a 15% discount to its fair market value. The Plan
is intended to qualify as an "employee stock purchase plan" under Section 423 of
the Internal Revenue Code of 1986, as amended (the "Code"). THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE PLAN BE APPROVED BY THE SHAREOWNERS.
The Board of Directors believes that the Plan will encourage broader stock
ownership by employees of the Corporation and of Designated Subsidiaries and
thereby provide additional incentive for employees to contribute to the
continued profitability and success of the Corporation. The Plan also is
intended to benefit the Corporation as a tool for recruiting and retaining high
quality employees.
14
<PAGE> 17
MATERIAL FEATURES OF THE PLAN
The material features of the Plan are summarized below. The summary is
qualified in its entirety by reference to the specific provisions of the Plan,
the full text of which is set forth as Exhibit B to this Proxy Statement.
Shares Subject To The Plan. The aggregate number of shares of Capital Stock
that may be issued and purchased under the Plan may not exceed 1,500,000 shares,
subject to adjustment in the event of certain changes in the capital structure
of the Corporation. Shares needed to satisfy purchases under the Plan may be
authorized but unissued shares or previously issued shares reacquired and held
by the Corporation.
Administration. The Plan is administered by a committee appointed by the
Board of Directors, except to the extent the Board elects to administer the
Plan. The Board or such committee has full power, authority, and discretion to
interpret the Plan, adopt rules, regulations and guidelines for administration
of the Plan, and make all determinations under the Plan.
Eligibility. Each employee of the Corporation or a Designated Subsidiary
whose customary employment is more than 20 hours per week and is customarily
employed more than five months per year, which includes any individual
designated as a "full-time employee" or regular part-time employee under the
Corporation's Human Resources Department Policy, is eligible to participate in
the Plan ("Eligible Employee"), unless such employee owns 5% or more of the
total combined voting power or value of all outstanding shares of all classes of
securities of the Corporation or any of its subsidiaries. Persons who are not
employees of the Corporation or a Designated Subsidiary are not eligible to
participate in the Plan. As of September 18, 2000, approximately 9,000 employees
were eligible to participate in the Plan.
Operation Of The Plan. The Plan will be implemented through consecutive
"Purchase Periods." Generally, a Purchase Period is a three-month period ending
on March 31, June 30, September 30, and December 31. An Eligible Employee who
elects to participate in the Plan must enroll prior to the commencement of a
"Purchase Period." After initial enrollment in the Plan, a participant will
automatically be enrolled for subsequent Purchase Periods through the following
December 31, unless the participant withdraws from the Plan.
Upon enrollment in the Plan, a participant must elect a rate at which he or
she will make payroll contributions or direct payments for the purchase of
Capital Stock. A participant may elect to make contributions of not more than
15% of such participant's compensation. A participant may prospectively increase
or decrease the contribution rate by giving notice to the Corporation.
At the end of each Purchase Period, all funds accumulated in a
participant's account during the Purchase Period will be used to purchase shares
of Capital Stock at a purchase price equal to the lesser of 85% of the fair
market value of the Capital Stock (a) on the first trading day within the
Purchase Period or (b) on the last trading day within such Purchase Period. No
participant may purchase under the Plan, together with any other employee stock
purchase plans of the Corporation, shares of Capital Stock having an aggregate
fair market value in excess of $25,000 in any calendar year.
As a condition to the purchase of Capital Stock under the Plan, the
Corporation may require that a participant agree not to sell, pledge or
otherwise transfer the shares within two years of the first day of the Purchase
Period or such other period of time as may be determined by administrator of the
Plan (the "Holding Period").
Shares purchased by a participant under the Plan will be held in the Plan
until the expiration of the Holding Period applicable to such shares. Dividends
paid on Capital Stock held on behalf of participants' will be automatically
reinvested in additional shares in the manner prescribed by the Plan
Administrator.
Participants have the right to vote or direct the shares purchased under
the Plan and Participants' rights under the Plan are nontransferable except
pursuant to the laws of descent and distribution.
15
<PAGE> 18
A participant may voluntarily withdraw from the Plan by notifying the
Corporation at any time prior to the end of a Purchase Period. Upon withdrawal
from the Plan, the participant's option to purchase Capital Stock will
terminate, and the entire amount contributed to the Plan by such participant
during the Purchase Period will be refunded without interest. If a participant
terminates employment with the Corporation for any reason, the participant will
be deemed to have withdrawn from the Plan as of the date of such termination of
employment.
Amendment And Termination Of The Plan. The Board of Directors or the
Committee may amend the Plan, but must obtain shareowner approval for an
amendment to the extent necessary to comply with Section 423 of the Code. The
Board or the Committee may terminate the Plan at any time.
FEDERAL INCOME TAX CONSEQUENCES
A participant who is subject to United States income tax will not incur
federal income tax as a result of participation in the Plan nor as a result of
the purchase of Capital Stock at the purchase price. A participant who, either
through sale, gift or transfer (other than because of a corporate
reorganization), disposes of Capital Stock during his or her lifetime at least
two years after the first day of the Purchase Period in which the shares were
acquired under the Plan at a gain, or dies before disposition of the shares,
will recognize (a) ordinary income in an amount equal to the lesser of (i) the
excess of the fair market value of the Capital Stock at the time of such
disposition or death over the amount paid for the Capital Stock or (ii) the
excess of the fair market value of the Capital Stock on the first day of the
Purchase Period over the price on the first day of the Purchase Period and (b)
long-term capital gain equal to the amount by which the sales proceeds exceed
the sum of the amount paid for the Capital Stock and the ordinary income
recognized in subsection (a). A participant who disposes of such shares before
two years have expired will have (a) ordinary income generally equal to the
difference between the purchase price and the fair market value of the Capital
Stock on the date of purchase and (b) long-term or short-term capital gain
(depending on how long the participant held the shares) equal to the amount, if
any, by which the sales proceeds exceed the sum of the amount paid for the
Capital Stock and the ordinary income recognized in subsection (a). A
participant who disposes of Capital Stock during his or her lifetime less than
two years after the first day of the Purchase Period in which the shares were
acquired under the Plan at a price that is less than the purchase price will not
recognize any ordinary income due to the sale, but will have a capital loss
equal to the excess of the price paid for the Capital Stock over the sales
price.
The Corporation generally will not be entitled to a business expense
deduction in connection with the sale of shares of Capital Stock under the Plan,
unless a participant disposes of Capital Stock received under the Plan before
expiration of the two-year holding period described above. In that case, the
Corporation will be entitled to a compensation expense deduction to the extent
ordinary income is recognized by the participant.
Effective Date and Term. The Plan shall be effective on the date it is
approved by shareowners of the Corporation at the annual meeting and unless
earlier terminated shall continue in effect until the tenth anniversary of its
effective date.
Vote Required. The affirmative vote of owners of a majority of the shares
present and voting at the meeting is required for approval of the Plan, provided
that a majority of outstanding shares votes on the matter. THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE KENNAMETAL INC. 2000 EMPLOYEE
STOCK PURCHASE PLAN.
16
<PAGE> 19
FORM 10-K ANNUAL REPORT TO THE SECURITIES
AND EXCHANGE COMMISSION
COPIES OF THE ANNUAL REPORT (FORM 10-K) OF THE CORPORATION FOR THE FISCAL
YEAR ENDED JUNE 30, 2000 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
WILL BE AVAILABLE TO SHAREOWNERS AFTER SEPTEMBER 28, 2000. A SHAREOWNER MAY
OBTAIN ONE WITHOUT CHARGE BY WRITING TO: CHIEF FINANCIAL OFFICER, KENNAMETAL
INC., 1600 TECHNOLOGY WAY, P.O. BOX 231, LATROBE, PENNSYLVANIA 15650.
OTHER MATTERS
The Corporation knows of no other matters to be presented for action at the
Annual Meeting. However, the enclosed form of proxy confers discretionary
authority with respect to the transaction of any other business that may
properly come before the meeting. If any other matters should properly come
before the meeting, it is intended that votes will be cast pursuant to the proxy
in respect thereto in accordance with their best judgment.
The Corporation will pay the expense in connection with the printing,
assembling and mailing of the notice of meeting, this Proxy Statement and the
accompanying form of proxy to the owners of Capital Stock of the Corporation. In
addition to the use of the mails, proxies may be solicited by directors,
officers or employees of the Corporation personally or by telephone or telex or
facsimile. The Corporation may request the persons holding stock in their names,
or in the names of their nominees, to send proxy material to and obtain proxies
from their principals and will reimburse such persons for their expense in so
doing. In addition, the Corporation has retained the services of Georgeson
Shareholder Communications Inc., a professional soliciting organization, to
assist in soliciting proxies from brokerage houses, custodians, nominees, other
fiduciaries and other shareowners of the Corporation. The fees and expenses of
that firm in connection with such solicitation are not expected to exceed
$25,000.
SHAREOWNER PROPOSALS AND NOMINATING PROCEDURES
Shareowners who intend to submit a proposal for inclusion in the
Corporation's 2001 Proxy Statement for consideration at the Annual Meeting of
the Shareowners of the Corporation to be held in October 2001, must submit such
proposal to the attention of the Secretary of the Corporation at the address of
its executive offices no later than May 21, 2001. Any such proposal must comply
with Rule 14a-8 of Regulation 14A of the proxy rules of the Securities and
Exchange Commission and must contain certain information specified in the
By-Laws of the Corporation.
The By-Laws of the Corporation require that all shareowner proposals to be
submitted at the Annual Meeting but not included in the Corporation's Proxy
Statement be submitted to the Secretary of the Corporation at the address of its
executive offices no earlier than May 1, 2001 and prior to July 1, 2001,
together with certain information specified in the By-Laws. The By-Laws of the
Corporation also require that nominations for directors to be elected at the
2001 Annual Meeting, other than those made by the Board of Directors, be
submitted to the Secretary of the Corporation no earlier than May 1, 2001 and
prior to July 1, 2001. The By-Laws require that notice of such nominations
contain certain information regarding the nominee and certain information
regarding the nominating shareowner. Any shareowner may obtain a copy of the
applicable By-Law from the Secretary of the Corporation upon written request.
17
<PAGE> 20
EXHIBIT A
AUDIT COMMITTEE CHARTER
RESOLVED, that pursuant to Article IV, Section 9 of the By-Laws of this
Corporation, a committee of the Board of Directors, designated as the Audit
Committee, was formed and charged with assisting the Board of Directors in
monitoring (1) the integrity of the financial statements of the Corporation, (2)
the compliance by the Corporation with legal and regulatory requirements and (3)
the independence and performance of the Corporation's General Auditor and
independent public accountants, to be constituted of at least three members of
the Board of Directors who shall meet the independence and experience
requirements of the New York Stock Exchange, such Committee to be chartered to
have the following powers and duties and to report thereon to the Board of
Directors and shareowners:
I. To review and reassess its charter annually and submit any changes to
the Board of Directors for approval;
II. For each fiscal year, to select and recommend employment of, subject to
approval of the shareowners (and to replace, where appropriate), independent
public accountants to audit the books, records, accounts and financial
statements of the Corporation and its subsidiaries;
III. To review with the independent and public accountants, who shall be
accountable to the Board of Directors and the Audit Committee;
A. the scope of and the audit procedures utilized in their annual
audit and quarterly reviews of the Corporation's financial statements;
B. the Corporation's annual and quarterly financial statements before
their release, including significant financial reporting issues and
judgements made in connection therewith, as well as changes to the
Corporation's accounting principles;
C. the adequacy of the Corporation's system of internal controls and
any recommendations of the independent public accountants with respect
thereto; and
D. any comments they may have on significant issues related to their
audit activities, restrictions, if any, imposed on their work and the
cooperation they received during the audit;
IV. To review and approve the fees charged, and the scope and extent of any
non-audit services performed, by the independent public accountants and to
receive and evaluate at least annually a report from such accountants as to
their independence, and to report to the Board of Directors the results of its
evaluation;
V. To review with the Corporation's General Auditor:
A. the internal audit department's budget and staffing;
B. the scope of the annual internal audit plan and the results of
completed internal audits; and
C. any comments the General Auditor may have on significant issues
related to the internal audit activities or restrictions, if any, imposed
thereon.
VI. To review with the Corporation's Chief Executive Officer, Chief
Financial Officer, General Counsel and other management personnel:
A. the Corporation's annual financial statements before their release,
including significant financial reporting issues and judgements made in
connection therewith, as well as changes to the Corporation's accounting
principles;
B. significant internal control matters
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C. standards of business conduct policies, compliance by the employees
of the Corporation with the Corporation's standards of business conduct
policies and other related matters;
D. financial risk exposures and management's initiatives to monitor
and control such exposures;
E. the appointment of the Corporation's General Auditor; and
F. other matters within the scope of the Committee's duties.
VII. To review with the Corporation's Chief Financial Officer, Controller
and other management personnel the Corporation's quarterly financial statements
before their release, including significant financial reporting issues and
judgments made in connection therewith, as well as changes to the Corporation's
accounting principles;
VIII. To meet at least annually with the Corporation's Chief Executive
Officer, Chief Financial Officer and General Counsel, the Corporation's General
Auditor and the independent public accountants in separate executive sessions;
IX. To investigate any matter brought to its attention within the scope of
its duties and to engage consultants or independent counsel in connection
therewith as the Committee deems appropriate; and further
RESOLVED, that notwithstanding the responsibilities and powers set forth in
the foregoing charter, it is not the duty of the Audit Committee to plan or
conduct audits or to determine that the Corporation's financial statements are
complete and accurate and are in accordance with generally accepted accounting
principles, it being understood that this is the responsibility of management
and the independent public accounts, and that it is not the duty of the Audit
Committee to conduct investigations, to resolve disagreements, if any, between
management and the independent public accountants or to assure compliance with
laws and regulations and the Corporation's standards of business conduct
policies.
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<PAGE> 22
EXHIBIT B
KENNAMETAL INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. There is hereby established the Kennametal Inc. 2000 Employee
Stock Purchase Plan (the "Plan"). The purpose of the Plan is to provide
employees of the Company and its Designated Subsidiaries with an opportunity to
purchase Capital Stock of the Company through accumulated payroll deductions. It
is the intention of the Company to have the Plan qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Code. The provisions of the Plan,
accordingly, shall be construed so as to extend and limit participation in a
manner consistent with the requirements of the Code.
2. DEFINITIONS.
(a) "Administrator" shall mean the Board or any committee of the Board
as may be appointed by the Board, with such authority and power as the
Board may determine, to administer the Plan. The Administrator may, in
turn, delegate all or a portion of its authority to one or more individuals
to perform administrative functions under the Plan.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Business Day" shall mean a day on which national stock exchanges
and the Nasdaq System are open for trading.
(d) "Capital Stock" shall mean the Capital Stock, par value $1.25 per
share of Kennametal Inc.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(f) "Company" shall mean Kennametal and any Designated Subsidiary of
Kennametal.
(g) "Compensation" shall mean an Employee's total gross earnings,
including commissions, payments for overtime, shift premium, incentive
compensation, bonuses and other compensation.
(h) "Designated Subsidiary" shall mean any Subsidiary which has been
designated by the Administrator from time to time in its sole discretion as
eligible to participate in the Plan; provided, however, that the
Administrator shall not have the power to designate a Subsidiary if such
designation would cause the Plan to cease to qualify under Section 423 of
the Code.
(i) "Employee" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company is at
least twenty (20) hours per week and more than five (5) months in any
calendar year and shall include individuals designated as "full-time
employees" or "regular part-time employees" under the Company's Human
Resources Department Policy. For purposes of the Plan, the employment
relationship shall be treated as continuing intact while the individual is
on sick leave or other leave of absence approved by the Company. Where the
period of leave exceeds 182 days and the individual's right to reemployment
is not guaranteed either by statute or by contract, the employment
relationship shall be deemed to have terminated on the 183rd day of such
leave.
(j) "Enrollment Date" shall mean the first day of each Purchase
Period.
(k) "Exercise Date" shall mean the last day of each Purchase Period.
(l) "Fair Market Value" shall mean, as of any date, 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, or if no sales were made on that date, on the next preceding date
on which sales were made.
(m) "Offering Period" shall mean, except as described below with
respect to the first year that the Plan is in effect and for participants
who enroll after the first day of an Offering Period, a period of
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twelve (12) months, commencing on the first Business Day on or after
January 1 and terminating on the last Business Day in the period ending the
following December 31. During the first year that the Plan is in effect,
the first Offering Period shall commence on the date determined by the Plan
Administrator and terminate on the last Business Day in the period ending
on December 31, 2000. If a participant enrolls after the first day of the
Offering Period, the Offering Period for such participant shall commence on
the next Enrollment Date and shall terminate on the last Business Day in
the period ending the following December 31. The duration of Offering
Periods may be changed pursuant to Section 4 of this Plan.
(n) "Kennametal", shall mean a Kennametal Inc. Pennsylvania
corporation, and any successor corporation.
(o) "Plan" shall mean this Employee Stock Purchase Plan.
(p) "Purchase Period" shall mean a period of three (3) months within
an Offering Period. The duration of Purchase Periods may be changed
pursuant to Section 4 of this Plan.
(q) "Purchase Price" shall mean an amount equal to 85% of the Fair
Market Value of a share of Capital Stock on the Enrollment Date or on the
Exercise Date for the Purchase Period, whichever is lower; provided,
however, that the Purchase Price may be adjusted by the Administrator
pursuant to Section 20.
(r) "Reserves" shall mean the number of shares of Capital Stock
covered by each option under the Plan that have not yet been exercised and
the number of shares of Capital Stock that have been authorized for
issuance under the Plan but not yet placed under option.
(s) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by Kennametal or a
Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
3. ELIGIBILITY.
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the
Code) would own capital stock of the Company and/or hold outstanding
options to purchase such stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of the capital stock of
the Company or of any Subsidiary, or (ii) to the extent that his or her
rights to purchase stock under all employee stock purchase plans of the
Company and its Subsidiaries accrues at a rate which exceeds Twenty-Five
Thousand Dollars ($25,000) worth of stock (determined at the Fair Market
Value of the shares at the time such option is granted) for each calendar
year in which such option is outstanding at any time.
4. OFFERING PERIODS AND PURCHASE PERIODS.
(a) The Plan shall be generally implemented by consecutive Offering
Periods until terminated in accordance with Section 20 hereof. The
Administrator shall have the power to change the duration of Offering
Periods (including the commencement dates thereof) with respect to future
offerings without shareholder approval if such change is announced at least
five (5) days prior to the scheduled beginning of the first Offering Period
to be affected thereafter.
(b) Each full Offering Period shall generally consist of four (4)
consecutive Purchase Periods of three (3) months' duration. The last day of
each Purchase Period shall be the "Purchase Date" for such Purchase Period.
A Purchase Period commencing on January 1 shall end on the next March 31. A
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Purchase Period commencing on April 1 shall end on the next June 30. A
Purchase Period commencing on July 1 shall end on the next September 30. A
Purchase Period commencing on October 1 shall end on the next December 31.
The first Purchase Period of the first Offering Period that the Plan is in
effect shall commence on the first Business Day determined by the Plan
Administrator and shall end on December 31, 2000. The Administrator shall
have the power to change the duration and/or frequency of Purchase Periods
with respect to future purchases without shareholder approval if such
change is announced at least five (5) days prior to the scheduled beginning
of the first Purchase Period to be affected.
5. PARTICIPATION.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement (authorizing payroll deductions or
electing to pay directly for shares) in the form of Exhibit A to this Plan
and filing it with the Company's Human Resources Department or the stock
brokerage or other financial services firm designated by the Company prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in
the Offering Period to which such authorization is applicable, unless
sooner terminated by the participant as provided in Section 10 hereof.
6. PAYROLL DEDUCTIONS.
(a) At the time a participant files his or her subscription agreement,
he or she shall elect to either (i) have payroll deductions made on each
pay day during the Offering Period in an amount not exceeding 15 percent
(15%) of the Compensation that he or she receives on each pay day during
the Offering Period, or (ii) if in the discretion of the Administrator,
this alternative is then available, make direct payment for shares at the
time of option exercise in an amount not exceeding 15 percent (15%) of the
aggregate Compensation that he or she receives during the Offering Period.
(b) All payroll deductions made for a participant shall be credited to
his or her account under the Plan and shall be withheld in whole
percentages only. A participant may discontinue his or her participation in
the Plan as provided in Section 10 hereof, or may increase or decrease the
rate of his or her payroll deductions or direct payment amount during the
Offering Period by completing and filing with the Company a new
subscription agreement authorizing a change in payroll deduction rate or
direct payment amount or following such other procedure as may be
established by the Administrator for this purpose. The Administrator may,
in its discretion, limit the number of participation rate or direct payment
amount changes during any Offering Period. The change in rate shall be
effective with the first full payroll period following five Business Days
after the Company's receipt of the new subscription agreement (or such
other information or documents as may be required in connection with an
alternative procedure approved by the Administrator) unless the Company
elects to sooner process a given change in participation. A participant's
subscription agreement (or most recent direction) shall remain in effect
for successive Offering Periods unless terminated as provided in Section 10
hereof.
(c) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) or direct payment
amount decreased to $-0- at any time during an Offering Period. Payroll
deductions shall recommence at the rate or direct payment elections shall
be deemed to have been made, as the case may be, as provided in such
participant's subscription agreement at the beginning of the first Offering
Period that is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(d) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Capital Stock issued under the Plan
is disposed of, the participant must make adequate
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provision for the Company's federal, state or other tax withholding
obligations, if any, that arise upon the exercise of the option or the
disposition of the Capital Stock. At any time, the Company shall have the
right to withhold from the participant's compensation the amount necessary
for the Company to meet applicable withholding obligations, including any
withholding required to make available to the Company any tax deductions or
benefits attributable to the sale or early disposition of Capital Stock by
the Employee.
7. GRANT OF OPTION. On each Enrollment Date during the Offering Period,
each eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date (at the applicable Purchase Price) up
to a number of shares of the Company's Capital Stock determined by dividing such
Employee's payroll deductions accumulated prior to such Exercise Date and
retained in the Participant's account or direct payment made, as the case may
be, as of the Exercise Date by the applicable Purchase Price; provided that such
purchase shall be subject to the limitations set forth in Sections 3(b) and 11.
Exercise of the option shall occur as provided in Section 8, unless the
participant has withdrawn pursuant to Section 10.
8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares
shall be exercised automatically on each Exercise Date of an Offering Period,
and the maximum number of full shares subject to option shall be purchased for
such participant at the applicable Purchase Price with the accumulated payroll
deductions in his or her account or the direct payment made by the participant,
as the case may be. No fractional shares shall be purchased; any payroll
deductions accumulated in a participant's account that are not sufficient to
purchase a full share shall be retained in the participant's account for the
subsequent Purchase Period, subject to earlier withdrawal by the participant as
provided in Section 10. Any other funds in a participant's account after the
Exercise Date shall be returned to the participant. During a participant's
lifetime, a participant's option to purchase shares hereunder is exercisable
only by such participant.
9. DELIVERY AND AUTOMATIC DIVIDEND REINVESTMENT.
(a) As promptly as practicable after each Exercise Date on which a
purchase of shares occurs, the Company shall cause shares to be issued for
the benefit of the participant or the participant and the participant's
spouse and held in the Plan until such time as certificates are delivered
pursuant to Section 9(b).
(b) At any time following the conclusion of the holding period set
forth in Section 24 and subject to such terms and conditions as the
Administrator may impose, a participant may elect to have the shares held
by the Plan on behalf of the participant delivered in certificate form. The
delivery of certificates will occur as soon as practicable after receipt of
an election notice.
(c) Prior to the delivery of certificates to or for the benefit of a
participant, any and all cash dividends paid on shares of Capital Stock
issued under the Plan shall be reinvested to acquire either newly issued
shares of Capital Stock or shares of Capital Stock purchased on the open
market or otherwise. Purchases of Capital Stock under this Section 9(c)
shall be made on such terms and for such prices as may be determined by the
Administrator.
10. WITHDRAWAL.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his
or her option under the Plan or elect not to purchase shares by direct
payment, as the case may be, at any time by giving written notice to the
Company in the form of Exhibit B to this Plan. All of the participant's
payroll deductions credited to his or her account shall be paid to such
participant promptly after receipt of notice of withdrawal and such
participant's option for the Offering Period shall be automatically
terminated, and no further payroll deductions for the purchase of shares
shall be made for such Offering Period. A participant who withdraws from an
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Offering Period shall not participate in a succeeding Offering Period
unless such participant delivers to the Company a new subscription
agreement.
(b) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan
that may hereafter be adopted by the Company or in succeeding Offering
Periods that commence after the termination of the Offering Period from
which the participant withdraws.
11. TERMINATION OF EMPLOYMENT. Upon a participant's ceasing to be an
Employee for any reason, he or she shall be deemed to have elected to withdraw
from the Plan and the payroll deductions credited to such participant's account
during the Offering Period but not yet used to exercise the option shall be
returned to such participant or, in the case of his or her death, to the person
or persons entitled thereto under Section 15, and such participant's option
shall be automatically terminated. The Plan does not, directly or indirectly,
create in any Employee or class of Employees any right with respect to
continuation of employment by the Company or any Subsidiary and it shall not be
deemed to interfere in any way with the Company's or any Subsidiary's right to
terminate, or otherwise modify, an Employee's employment at any time.
12. INTEREST. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. STOCK.
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19, the maximum number of shares of the
Company's Capital Stock that shall be made available for sale under the
Plan shall be 1,500,000 shares, The Capital Stock to be issued under the
Plan may be authorized but unissued shares, treasury shares or shares
acquired in the open market or otherwise. If, on a given Exercise Date, the
number of shares with respect to which options are to be exercised exceeds
the number of shares then available under the Plan, the Company shall make
a pro rata allocation of the shares remaining available for purchase in as
uniform a manner as shall be practicable and as it shall determine to be
equitable.
(b) The participant shall have no interest or voting right in shares
covered by his or her option until such option has been exercised.
14. ADMINISTRATION. The Plan shall be administered by the Administrator,
who shall have full and exclusive discretionary authority to construe, interpret
and apply the terms of the Plan, to determine eligibility and to adjudicate all
disputed claims filed under the Plan. Every finding, decision and determination
made by the Administrator or its committee shall, to the full extent permitted
by law, be final and binding upon all parties.
15. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to an
Exercise Date on which the option is exercised but prior to delivery to
such participant of such shares and cash. In addition, a participant may
file a written designation of a beneficiary who is to receive any cash from
the participant's account under the Plan in the event of such participant's
death prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required
for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant
and in the absence of a beneficiary validly designated under the Plan who
is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the
estate of the participant, or if no such personal representative or
administrator has been appointed (to the knowledge of the Company), the
Company, in its discretion, may deliver such shares and/or cash to the
spouse or to any one or more
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dependents or relatives of the participant, or if no spouse, dependent or
relative is known to the Company, then to such other person as the Company
may designate.
16. NON-TRANSFERABILITY OF ACCOUNT. Neither payroll deductions credited to
a participant's account nor any rights with regard to the exercise of an option
or to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15) by the participant. Any such attempt
at assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds from
an Offering Period in accordance with Section 10.
17. USE OF FUNDS. All contributions received or held by the Company under
the Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such contributions.
18. REPORTS. Individual accounts shall be maintained for each participant
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
19. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, LIQUIDATION,
MERGER OR ASSET SALE.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the Reserves, the maximum number of shares
each participant may purchase per Offering Period, as well as the price per
share and the number of shares of Capital Stock covered by each option
under the Plan that has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of
Capital Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Capital Stock, or any
other increase or decrease in the number of shares of Capital Stock
effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall
not be deemed to have been "effected without receipt of consideration".
Such adjustment shall be made by the Administrator, whose determination in
that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Capital Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in
progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date"), and shall terminate immediately prior to the consummation
of such proposed dissolution or liquidation, unless provided otherwise by
the Administrator. The New Exercise Date shall be before the date of the
Company's proposed dissolution or liquidation. The Administrator shall
notify each participant in writing, at least ten (10) business days prior
to the New Exercise Date, that the Exercise Date for the participant's
option has been changed to the New Exercise Date and that the participant's
option shall be exercised automatically on the New Exercise Date, unless
prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the
Company with or into another corporation (a "Corporate Transaction"), each
outstanding option shall be assumed or an equivalent option substituted by
the successor corporation or a Parent or Subsidiary of the successor
corporation. In the event that the successor corporation refuses to assume
or substitute for the option, each Purchase Period and Offering Period then
in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date"). The New Exercise Date shall be before the date of the
Company's proposed sale or merger. The Administrator shall notify each
participant in writing, at least ten (10) business days prior to the New
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Exercise Date, that the Exercise Date for the participant's option has been
changed to the New Exercise Date and that the participant's option shall be
exercised automatically on the New Exercise Date, unless prior to such date
the participant has withdrawn from the Offering Period as provided in
Section 10. For purposes of this Section 19, an option granted under the
Plan shall be deemed to be assumed, without limitation, if, at the time of
issuance of the stock or other consideration upon a Corporate Transaction,
each holder of an option under the Plan would be entitled to receive upon
exercise of the option the same number and kind of shares of stock or the
same amount of property, cash or securities as such holder would have been
entitled to receive upon the occurrence of the transaction if the holder
had been, immediately prior to the transaction, the holder of the number of
Shares of Capital Stock covered by the option at such time (after giving
effect to any adjustments in the number of shares covered by the option as
provided for in this Section 19); provided however that if the
consideration received in the transaction is not solely common stock of the
successor corporation or its parent (as defined in Section 424(e) of the
Code), the Board may, with the consent of the successor corporation,
provide for the consideration to be received upon exercise of the option to
be solely common stock of the successor corporation or its parent equal in
fair market value to the per share consideration received by holders of
Capital Stock in the Transaction.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the
price per Share of Capital Stock covered by each outstanding option, in the
event that the Company effects one or more reorganizations,
recapitalizations, rights offerings or other increases or reductions of
shares of its outstanding Capital Stock, and in the event of the Company's
being consolidated with or merged into any other corporation.
20. AMENDMENT OR TERMINATION.
(a) The Administrator may at any time and for any reason terminate or
amend the Plan. Except as provided in Section 19, no such termination can
affect options previously granted, provided that an Offering Period may be
terminated by the Administrator on any Exercise Date if the Administrator
determines that the termination of the Offering Period or the Plan is in
the best interests of the Company and its shareholders. Except as provided
in Section 19 and this Section 20, no amendment may make any change in any
option theretofore granted that adversely affects the rights of any
participant. To the extent necessary to comply with Section 423 of the Code
(or any other applicable law, regulation or stock exchange rule), the
Company shall obtain shareholder approval in such a manner and to such a
degree as required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Administrator shall be entitled to change the Offering Periods or Purchase
Periods, limit the frequency and/or number of changes in the amount
withheld during an Offering Period or Purchase Period or the amount or
frequency of direct payments, establish the exchange ratio applicable to
amounts withheld in a currency other than U.S. dollars, permit payroll
withholding in excess of the amount designated by a participant in order to
adjust for delays or mistakes in the Company's processing of properly
completed withholding elections, establish reasonable waiting and
adjustment periods and/or accounting and crediting procedures to ensure
that amounts applied toward the purchase of Capital Stock for each
participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or
procedures as the Administrator determines in its sole discretion are
advisable that are consistent with the Plan.
(c) In the event the Administrator determines that the ongoing
operation of the Plan may result in unfavorable financial accounting
consequences, the Administrator may, in its discretion and, to the extent
necessary or desirable, modify or amend the Plan to reduce or eliminate
such accounting consequence including, but not limited to: (i) altering the
Purchase Price for any Offering Period, including an Offering Period
underway at the time of the change in Purchase Price; (ii) shortening any
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Offering Period so that Offering Period ends on a new Exercise Date,
including an Offering Period underway at the time of the Administrator
action; and (iii) allocating shares. Such modifications or amendments shall
not require shareholder approval or the consent of any Plan participants.
21. NOTICES. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, state securities laws, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
23. TERM OF PLAN. The Plan shall become effective upon the date (the
"Effective Date") that the Plan is approved by the shareholders of the Company.
The Plan shall continue in effect for a term ending on the first Exercise Date
that is more than ten (10) years after the Effective Date, unless sooner
terminated under Section 20.
24. REQUIRED HOLDING PERIOD. As a condition to the exercise of an option,
the Company shall be entitled to require that the participant exercising such
option (or in the case of the participant's death, his or her successors as
provided under the Plan) enter into an agreement pursuant to which the
participant agrees not to sell, pledge or otherwise transfer his or her interest
in the shares acquired through the exercise of such option within (i) two (2)
years of the Enrollment Date on which the option was granted, or (ii) such other
period as may be determined by the Administrator. Any such agreement shall be
upon such terms and conditions as the Company may specify in such agreement.
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PROXY PROXY
KENNAMETAL INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE CORPORATION
The undersigned hereby appoints Markos I. Tambakeras, Peter B. Bartlett and
Aloysius T. McLaughlin, Jr., and each of them with power of substitution in
each, as proxies to represent the undersigned at the annual meeting of the
shareowners of Kennametal Inc. to be held at the Technology Center, located on
Route 981 South (recently designated "Technology Way"), approximately 1/4 mile
south of its intersection with U.S. Route 30 near Latrobe, Unity Township,
Pennsylvania, on Tuesday, October 24, 2000 at 2:00 p.m., and at any adjournments
thereof, to vote the same number of shares and as fully as the undersigned would
be entitled to vote if then personally present (including the power to vote
cumulatively in the election of directors as explained in the Proxy Statement)
in the manner directed by the undersigned as follows:
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES LISTED IN
ITEMS I AND II, FOR THE ELECTION OF AUDITORS,
AND FOR THE APPROVAL OF THE KENNAMETAL INC.
2000 EMPLOYEE STOCK PURCHASE PLAN.
(over)
FOLD AND DETACH HERE
<PAGE> 31
<TABLE>
<S> <C>
Please mark
your votes as
indicated in
this example [X]
I. ELECTION OF DIRECTORS FOR TERMS TO Nominees: Richard C. Alberding, William R. Newlin III. ELECTION OF AUDITORS
EXPIRE IN 2003 and Timothy S. Lucas
VOTE FOR ALL WITHHOLD (INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
NOMINEES LISTED AUTHORITY INDIVIDUAL NOMINEE, WRITE NOMINEE'S NAME ON THE LINE
(EXCEPT AS SHOWN TO VOTE FOR ALL PROVIDED BELOW):
TO THE CONTRARY) NOMINEES LISTED FOR AGAINST ABSTAIN
____________________________________________________
[ ] [ ] [ ] [ ] [ ]
II. ELECTION OF DIRECTOR FOR A TERM TO EXPIRE IN 2002 Nominee: Kathleen J. Hempel IV. APPROVAL OF KENNAMETAL INC.
2000 EMPLOYEE STOCK
VOTE FOR THE WITHHOLD PURCHASE PLAN
NOMINEE LISTED AUTHORITY
TO VOTE FOR THE FOR AGAINST ABSTAIN
NOMINEES LISTED
[ ] [ ] [ ] [ ] [ ]
This Proxy when properly executed will be voted in
the manner directed herein. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES IN ITEMS I AND II ABOVE, FOR THE ELECTION
OF AUDITORS, AND FOR THE APPROVAL OF THE KENNAMETAL
INC. 2000 EMPLOYEE STOCK PURCHASE PLAN. THE PROXIES
ARE AUTHORIZED, IN ACCORDANCE WITH THEIR JUDGMENT,
TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING AND ANY ADJOURNMENTS THEREOF.
SIGNATURE(S) ______________________________ SIGNATURE(S) ___________________________________ Dated: _________________________ , 2000
Sign exactly as addressed, but if executed for a corporation, minor, etc.,
sign that name and signature and capacity of authorized signer.
FOLD AND DETACH HERE
</TABLE>
KENNAMETAL INC.
September 18, 2000
Dear Kennametal Inc. Shareowner:
The 2000 Annual Meeting of the Shareowners of Kennametal Inc. will be held at
2:00 p.m. on Tuesday, October 24, 2000, at the Technology Center, located on
Route 981 South (recently designated "Technology Way"), approximately 1/4 mile
south of its intersection with U.S. Route 30 near Latrobe, Unity Township,
Pennsylvania. I cordially invite you to attend.
Whether or not you plan to attend the meeting, please detach the proxy above,
complete it, and return it in the enclosed envelope. Your vote is important to
us.
Sincerely,
William R. Newlin
Chairman of the Board
Kennametal Inc.
