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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)
Filed by the Registrant / X /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
/ X / Definitive Proxy Statement (AS PERMITTED BY RULE 14C-5(D)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
KENNAMETAL INC.
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(Name of Registrant as specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ X / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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KENNAMETAL INC.
LATROBE, PENNSYLVANIA 15650
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 28, 1996
To the Stockholders of Kennametal Inc.:
The Annual Meeting of Stockholders of Kennametal Inc. will be held at the
Corporate Technology Center, located on Route 981 South, approximately 1/4 mile
south of its intersection with U.S. Route 30 near Latrobe, Unity Township,
Pennsylvania, on Monday, October 28, 1996, at 2:00 p.m., to consider and act
upon the following matters:
1. The election of three directors for terms to expire in 1999;
2. The election of auditors for the fiscal year ending June 30, 1997;
3. The approval of the adoption of the proposed Kennametal Inc. Stock
Option and Incentive Plan of 1996 as set forth in Exhibit A to the
accompanying Proxy Statement; and
4. Such other business as may properly come before the meeting.
The Board of Directors has fixed Tuesday, September 3, 1996, as the record
date for the determination of stockholders 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 16, 1996
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PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 28, 1996
This Proxy Statement is being furnished to the stockholders 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
Stockholders which is scheduled to be held on October 28, 1996. Only holders of
capital stock, par value $1.25 per share, of the Corporation ("Capital Stock")
of record at the close of business on September 3, 1996, will be entitled to
vote at the meeting. On that date there were 26,747,827 shares of Capital Stock
outstanding and entitled to one vote per share. Any stockholder 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. 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 elected by plurality vote and auditors are to be elected and
the new Stock Option and Incentive Plan of 1996 approved by the affirmative vote
of at least a majority of the votes cast by stockholders 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 Route 981
South at Westmoreland County Airport, P.O. Box 231, Latrobe, Pennsylvania 15650,
and the date this Proxy Statement was mailed to stockholders was on or about
September 20, 1996.
ELECTION OF DIRECTORS
Three directors are to be elected to hold office as Directors of the First
Class for terms of three years, and until their successors are elected and
qualified.
The holders of Capital Stock have cumulative voting rights in the election
of directors. In voting for directors, a stockholder has the right to multiply
the total number of shares which the stockholder 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 stockholder 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 First 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 First Class of Directors are Peter
B. Bartlett, Warren H. Hollinshead and Robert L. McGeehan, who have served as
directors since 1975, 1990 and 1989, respectively. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THESE NOMINEES.
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.
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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.
PRINCIPAL OCCUPATION
NAME, AGE AND YEAR AND DIRECTORSHIPS OF OTHER
FIRST ELECTED (1) PUBLICLY-TRADED CORPORATIONS (2)
- ----------------------------- -----------------------------------------------------------
Nominees for Directors of the First Class Whose Terms Expire in 1999
Peter B. Bartlett General Partner of Brown Brothers Harriman & Co. (private
Age: 62 bankers). Director of Erie Indemnity Company, Erie Family
Director since 1975 Life Insurance Company and Erie Insurance Company.
Warren H. Hollinshead Retired effective September 1, 1994, as Executive Vice
Age: 60 President of Westinghouse Electric Corporation (a
Director since 1990 technology-based manufacturing and services company), a
position he held since March 1, 1994, having previously
served as Executive Vice President--Chief Financial Officer
from January 1991 until March 1994, and Vice President,
Deputy Finance from July 1990 until January 1991.
Robert L. McGeehan President of the Corporation since July 1989 and Chief
Age: 59 Executive Officer since October 1991. Served as Director of
Director since 1989 Metalworking Systems Division from 1988 to 1989, and as
General Manager of Machining Systems Division from 1985 to
1988.
Directors of the Second Class Whose Terms Expire in 1997
Richard C. Alberding Retired, having served as Executive Vice President,
Age: 65 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., Quickturn Design Systems Inc.
and Digital Link Corporation.
Quentin C. McKenna Chairman of the Board of Directors of the Corporation. Also
Age: 70 served as President until July 1989 and as Chief Executive
Director since 1971 Officer until October 1991. Director of Interlake
Corporation.
William R. Newlin (3) Managing Director of Buchanan Ingersoll Professional
Age: 55 Corporation (attorneys at law). General Partner of CEO
Director since 1982 Venture Fund (a private venture capital fund). Director of
Black Box Corporation, National City Bank of Pennsylvania,
Parker/Hunter Incorporated, the Pittsburgh High Technology
Council and CME Information Services, Inc.
Directors of the Third Class Whose Terms Expire in 1998
A. Peter Held President of Cooper Power Tools Division of Cooper
Age: 52 Industries, Inc. (a manufacturer and marketer of industrial
Director since 1995 power tools), having served as Vice President and General
Manager International of its Champion Spark Plug Division
from 1992 to 1994, and as Vice President International
Operations of its Cooper Hand Tools Division until 1992.
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PRINCIPAL OCCUPATION
NAME, AGE AND YEAR AND DIRECTORSHIPS OF OTHER
FIRST ELECTED (1) PUBLICLY-TRADED CORPORATIONS (2)
- ----------------------------- -----------------------------------------------------------
Aloysius T. McLaughlin, Jr. Consultant to Dick Corporation (a general contractor),
Age: 61 having served as Vice Chairman from 1993 to 1995 and as
Director since 1986 President and Chief Operating Officer from 1985 until 1993.
Larry Yost President, Heavy Vehicle Systems, Rockwell International
Age: 58 Corporation (a provider of components for heavy vehicles),
Director since 1987 having previously served as Senior Vice President of the
Operations Group of Allen-Bradley Company until November
1994.
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(1) Each current director has served continuously since he was first elected.
(2) Unless otherwise shown in the table, each person named has served in his
principal occupation during the past five years.
(3) The law firm of which William R. Newlin is a member performed services for
the Corporation during fiscal years 1996 and 1997.
BOARD OF DIRECTORS AND BOARD COMMITTEES
The Corporation's Board of Directors held five meetings during the year
ended June 30, 1996. The committees of the Board of Directors include an
Executive Committee, an Audit Committee, a 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 he is a member.
Executive Committee: The Executive Committee met five 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,
Aloysius T. McLaughlin, Jr. and Richard C. Alberding.
Audit Committee: The Audit Committee met six times during the past fiscal
year. 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 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 stockholders the election of the independent public
accountants. The following directors currently comprise the Committee: Richard
C. Alberding (Chairman), Peter B. Bartlett and Larry Yost.
Committee on Executive Compensation: The Committee on Executive
Compensation met seven 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 Stock Option Plan of 1982, the Stock
Option and Incentive Plan of 1988, the Stock Option and Incentive Plan of 1992
and, if adopted at the 1996 Annual Meeting of Stockholders, the Kennametal Inc.
Stock Option and Incentive Plan of 1996. The following directors currently
comprise the Committee: Aloysius T. McLaughlin, Jr. (Chairman), Warren H.
Hollinshead and A. Peter Held. The report of the Committee on Executive
Compensation appears elsewhere in this Proxy Statement.
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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
Stockholders or to be elected to fill any vacancies in the Board of Directors
which may occur. The Committee considers nominees recommended by stockholders.
Pursuant to the By-Laws of the Corporation, stockholder 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 "Stockholder
Proposals and Nominating Procedures" on page 18 of this Proxy Statement. The
following directors currently comprise the Committee: Robert L. McGeehan
(Chairman), A. Peter Held and Larry Yost.
Directors who are not employees of the Corporation each receive
compensation from the Corporation for services as a director at an annual rate
of $24,000. Members of the Audit Committee and members of the Committee on
Executive Compensation who are not employees of the Corporation each receive
additional annual compensation of $3,900. Nonemployee directors who are members
of the Executive Committee receive a fee of $1,100 per Executive Committee
meeting. Nonemployee directors who are members of the Nominating Committee
receive a fee of $900 per meeting. 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"), with respect to all
or a portion of any consideration deferred pursuant to the Deferred Fee 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.
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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 August 12, 1996, by each director, each
nominee for director, each Named Executive Officer (as hereinafter defined) and
all directors and executive officers as a group.
AMOUNT OF
BENEFICIAL OWNERSHIP
NAME OF BENEFICIAL OWNER (1)(2)
------------------------ --------------------
Richard C. Alberding........................... 234(3)
Peter B. Bartlett.............................. 800
A. Peter Held.................................. 0
Warren H. Hollinshead.......................... 1,980(4)
Robert L. McGeehan............................. 212,031(5)
Quentin C. McKenna............................. 20,538(6)
Aloysius T. McLaughlin, Jr..................... 22,950
William R. Newlin.............................. 8,449(7)
Larry Yost..................................... 0
H. Patrick Mahanes, Jr......................... 85,068
Richard J. Orwig............................... 81,927
Michael W. Ruprich............................. 38,658
David B. Arnold................................ 79,032
Directors and Executive Officers as a Group (16
persons)..................................... 689,959(8)(9)
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(1) The figures shown include 165,489, 69,800, 62,793, 34,834, 55,756 and
475,392 shares over which Messrs. McGeehan, Mahanes, Orwig, Ruprich and
Arnold and all directors and executive officers as a group, respectively,
have the right to acquire within 60 days of August 12, 1996, pursuant to the
Corporation's stock option plans.
(2) No individual beneficially owns in excess of one percent of the total shares
outstanding. Directors and executive officers as a group beneficially own
2.5% of the total shares outstanding. Unless otherwise noted, the shares
shown are subject to the sole voting and investment power of the person
named.
(3) All such shares are owned jointly by Mr. Alberding and his wife.
(4) All such shares are owned jointly by Mr. Hollinshead and his wife.
(5) The figure shown includes 8,214 shares owned jointly by Mr. McGeehan and his
wife.
(6) The figure shown includes 100 shares owned by Mr. McKenna's wife, of which
shares he has disclaimed beneficial ownership.
(7) The figure shown includes 611 shares owned jointly by Mr. Newlin and his
wife.
(8) In addition to these shares, Messrs. Bartlett, Held, Hollinshead,
McLaughlin, Newlin and Yost hold Stock Credits for an aggregate of 12,147
shares to which they are entitled at certain dates in the future, pursuant
to the Deferred Fee Plan described on page 4.
(9) In addition to these shares, Messrs. McGeehan, Mahanes, Orwig, Ruprich and
Arnold and all executive officers as a group hold Stock Credits for 6,625,
2,981, 3,313, 3,314, 1,739 and 19,007 shares to which they are entitled,
respectively, at certain dates in the future, pursuant to the Corporation's
Performance Stock Bonus Plan.
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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 and each of
the four most highly compensated executive officers of the Corporation (the
"Named Executive Officers") whose aggregate direct remuneration exceeded
$100,000 during the fiscal year ended June 30, 1996.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION ALL OTHER
------------------------ AWARDS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(2) OPTIONS (#) (3)(4)($)
- ---------------------------- ---- --------- ----------- ------------ ------------
Robert L. McGeehan, 1996 513,025 240,000 20,000 25,793
President and 1995 463,662 375,000 45,000 11,827
Chief Executive Officer 1994 383,541 290,000 100,000(1) 16,349
H. Patrick Mahanes, Jr., 1996 285,765 98,000 15,000 5,750
Vice President, 1995 265,345 160,000 25,800 6,241
Chief Operating Officer 1994 217,711 100,000 -0- 8,436
Richard J. Orwig, 1996 248,665 100,000 13,000 5,970
Vice President, 1995 215,072 140,000 20,793 6,461
Chief Financial and 1994 177,728 100,000 -0- 7,443
Administrative Officer
Michael W. Ruprich, 1996 197,968 103,696 11,000 5,045
Vice President 1995 178,384 123,270 11,334 4,500
Kennametal Inc. and 1994 155,044 82,693 -0- 4,660
President J&L Industrial
Supply Company (5)
David B. Arnold, 1996 221,577 52,500 11,000 7,151
Vice President and 1995 211,504 100,000 20,756 6,716
Chief Technical Officer 1994 201,835 60,000 -0- 7,691
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(1) Adjusted for the effect of a two-for-one stock split effected on August 22,
1994.
(2) Includes, for each of the Named Executive Officers, bonuses paid in shares
of Capital Stock or in Stock Credits as elected by the individual under the
Corporation's Performance Bonus Stock Plan.
(3) 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 or she
reaches age 65. For Mr. McGeehan and Mr. Arnold, this figure also includes
amounts paid for Medicare tax and income tax gross-up on supplemental
pension benefit accruals.
(4) 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 this plan. The
Corporation contributes to each participant's account an amount equal to
one-half of that portion of the employee's contribution which does not
exceed 6% of the employee's compensation. Contributed sums are invested in
proportions as directed by the employee in an Equity Fund, a Fixed Income
Fund and a Balanced Fund (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
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designed to make available to participants the provisions of section 401(k)
of the Internal Revenue Code, which permit elective employee contributions
on a pre-tax basis.
(5) J&L Industrial Supply Company is a wholly owned subsidiary of Kennametal
Inc. Effective July 1, 1996, Mr. Ruprich was named Director of Global
Marketing and Sales, Kennametal Inc.
EMPLOYMENT AGREEMENTS
The Corporation has agreements with four (4) of the Named Executive
Officers and three (3) other executive officers whereby, subject to review by
the Board of Directors and a provision for termination without cause by either
party upon written notice, they 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, 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. Change
in control is defined to include a business combination involving the
Corporation or the acquisition of more than 25% of the Corporation's outstanding
Capital Stock by persons not then affiliates of the Corporation, coupled with a
change in membership of at least a majority of the directors, not approved by at
least two-thirds (2/3) of the Corporation's directors immediately prior to the
change in control.
In the event of termination of his employment by the Corporation 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 of employment by either party at or after a change in control of the
Corporation, each officer would receive as severance pay during the four
consecutive years following such termination 85%, 70%, 60% and 50%,
respectively, of 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) his
bonus for the fiscal year ended immediately prior to the date of termination or,
at the officer's election, his bonus for the next prior fiscal year. During such
severance payment period, the officer would receive the same medical and group
insurance benefits that he received at the date of termination. Severance
payments following a change in control of the Corporation would cease to any
officer who enters the employment of a competitor, upon the expiration of nine
months of employment with any other employer, or in any event when the officer
attains the age of sixty-five.
In addition to the severance payments, the agreements provide for the
annual payment of supplemental retirement benefits for life following
termination of active employment by retirement or disability. These supplemental
retirement benefits vest in equal annual increments over a term of five years
commencing on the officer's 56th birthday or which vest completely upon the
occurrence of a change in control of the Corporation, whether or not the
transaction or election causing the change in control is approved by at least
two-thirds (2/3) of the directors. If the officer dies while actively employed
or receiving such payments, his spouse or other designated beneficiary will
receive annually up to 50% of the vested amount for life. The severance payments
and the accrued supplemental retirement benefits would be funded by the transfer
of cash into the Rabbi Trust upon the occurrence of a threatened or actual
change in control of the Corporation (as defined in the deferred compensation
trust agreement).
STOCK OPTIONS
The Kennametal Inc. Stock Option and Incentive Plan of 1988 (the "1988
Plan") provides for the granting of nonstatutory and incentive stock options and
share awards covering 1,000,000 shares of the Capital Stock of the Corporation.
The Kennametal Inc. Stock Option and Incentive Plan of 1992 (the
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"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
1,100,000 shares (net) of the Corporation's Capital Stock. Although options are
still outstanding under the Kennametal Inc. Stock Option Plan of 1982, as
amended, 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, 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. Under the 1988 Plan,
any shares of the Corporation's Capital Stock delivered as payment, in whole or
in part, of the purchase price must have been held by the optionee for at least
six months.
The following table sets forth information concerning options granted to
the Named Executive Officers during the fiscal year ended June 30, 1996:
OPTION GRANTS IN LAST FISCAL YEAR
GRANT DATE
INDIVIDUAL GRANT VALUE(2)
---------------------------------------------------------- ----------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(1)(#) FISCAL YEAR ($/SHARE) DATE VALUE ($)
- ------------------------ ------------- ------------ ----------- ---------- ----------
Robert L. McGeehan...... 20,000 3.4 31.0625 10/29/05 255,957
H. Patrick Mahanes, Jr.. 15,000 2.6 37.0625 7/29/05 245,276
Richard J. Orwig........ 13,000 2.2 37.0625 7/29/05 212,572
Michael W. Ruprich...... 11,000 1.9 37.0625 7/29/05 179,869
David B. Arnold......... 11,000 1.9 37.0625 7/29/05 179,869
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(1) These options were granted with an exercise price equal to the fair market
value of the Capital Stock on the date of grant and require the optionee to
hold ten percent of the shares received from any exercise for a one-year
period from the date of exercise.
(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
include the following: a risk-free interest rate of 6.04% for Mr. McGeehan
and 6.28% for all others (the rate applicable to a ten-year treasury
security at the time of the award); a dividend yield of 1.9% (the annualized
yield at the date of grant); volatility of 30.337% for Mr. McGeehan and
30.227% for all others (calculated using daily stock returns for the
twelve-month period preceding the option award); and a stock price at date
of grant of $31.0625 for Mr. McGeehan and $37.0625 for all others (the
exercise price at which these options were granted was equal to the fair
market value on the date of grant). No adjustments were made for forfeitures
or vesting restrictions on exercise. The value of these options under the
Black-Scholes model of option valuation applying the preceding assumptions
is $12.79783 per share for Mr. McGeehan and $16.35170 per share for all
others. The ultimate values of the options will depend on the future market
price of the Corporation's stock, which cannot be forecast with reasonable
accuracy. The actual value, if any, an optionee will realize upon exercise
of an option will depend on the excess of the market value of the
Corporation's stock over the exercise price on the date the option is
exercised.
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The following table sets forth information concerning options to purchase
the Corporation's Capital Stock held by the Named Executive Officers:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT FISCAL AT FISCAL
VALUE YEAR END (#) YEAR END ($)
SHARES ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE
- ------------------------ --------------- ----------- -------------- -------------------
Robert L. McGeehan...... 10,301 212,780 165,489/33,274 1,830,504/569,681
H. Patrick Mahanes, Jr.. 16,120 341,545 69,800/0 525,338/0
Richard J. Orwig........ 2,000 41,937 68,938/0 587,520/0
Michael W. Ruprich...... -0- -0- 34,834/0 144,684/0
David B. Arnold......... 10,000 148,437 55,756/0 462,743/0
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 agreements providing supplemental retirement benefits under
various assumptions as to salary and years of service to employees in higher
salary classifications. The amounts shown have not been adjusted for Social
Security offset.
PENSION PLAN TABLE
ANNUAL BENEFIT UPON RETIREMENT WITH YEARS OF CREDITED
SERVICE INDICATED
-----------------------------------------------------------
ANNUALIZED COVERED
COMPENSATION 15 20 25 30 35
- ------------------ ------- -------- -------- -------- --------
$ 75,000 $22,500 $ 30,000 $ 37,500 $ 41,250 $ 45,000
100,000 30,000 40,000 50,000 55,000 60,000
150,000 45,000 60,000 75,000 82,500 90,000
200,000 60,000 80,000 100,000 110,000 120,000
250,000 75,000 100,000 125,000 137,500 150,000
Pursuant to the Kennametal Inc. Retirement Income Plan, annual benefits
payable upon retirement to eligible salaried employees are calculated based upon
a monthly benefit equal to 2% of Covered Compensation for each year of credited
service up to a maximum of twenty-five years, plus 1% of Covered Compensation
for each year of credited service over twenty-five years, less 1.5% of the
primary monthly Social Security benefit payable for each year of credited
service up to a maximum of 33 1/3 years (50% of the monthly Social Security
benefit). Covered Compensation is based on average monthly earnings, consisting
solely of base salary and bonus (which amounts for the past three fiscal years
are included in the Salary and Bonus columns of the Summary Compensation Table),
for the nine years out of the last twelve years of service immediately preceding
retirement during which the highest compensation was received. The entire cost
of the plan is paid by the Corporation. Under the Internal Revenue Code, certain
limits are imposed on payments under the plan. Payments in excess of the maximum
annual pension benefits payable under this plan to the Named Executive Officers
and certain other executive officers would be paid pursuant to agreements with
such individuals providing for the annual payment of supplemental retirement
benefits, as more fully described under the section "Employment Agreements"
above.
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As of June 30, 1996, the credited years of service under the Retirement
Income Plan for the Named Executive Officers were approximately: Robert L.
McGeehan, 23 years; H. Patrick Mahanes, Jr., 11 years; Richard J. Orwig, 12
years; Michael W. Ruprich, 7 years; and David B. Arnold, 17 years.
Annualized Covered Compensation as of June 30, 1996, for purposes of the
retirement benefits table set forth above for the Named Executive Officers is as
follows: Robert L. McGeehan, $150,000; H. Patrick Mahanes, Jr., $149,773;
Richard J. Orwig, $140,017; Michael W. Ruprich, $135,752; and David B. Arnold,
$150,000.
REPORT OF THE BOARD OF DIRECTORS
COMMITTEE ON EXECUTIVE 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
stockholders and other potential investors.
- To provide incentives for working toward increasing the market value of
the stock and to increase stockholder value through value management.
- 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 stockholders 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 Management Performance 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, strategies, and stockholder value creation. The 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 provides
rewards for more qualitative achievements in innovation, quality,
service to the customer, and leadership.
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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.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
- The Chief Executive Officer, Mr. Robert L. McGeehan, received a stock
option award of 20,000 shares on October 30, 1995. The option price was
the average of the high and low market prices on the date of the award.
Ten percent of shares exercised must be held in ownership for a period of
one year following the exercise date. On October 30, 1995, the option
award was approved by the Board of Directors.
- Under the plan design of the Management Performance Bonus Plan for Fiscal
Year 1996, a stockholder value creation target and a bonus pool were
calculated by management and approved by the Board of Directors. Based on
the actual level of stockholder value creation in Fiscal Year 1996 and on
specific personal achievements, the Committee recommended a bonus award of
$200,000 for the Chief Executive Officer. On July 29, 1996, Mr. McGeehan's
bonus award was approved by the Board of Directors.
- Mr. McGeehan's base salary was reviewed by the Board of Directors
Committee on Executive Compensation in January 1996. In recognition of Mr.
McGeehan's leadership and performance as Chief Executive Officer of the
Corporation, and in consideration of competitive salary survey data, the
Committee recommended a base salary increase to $540,000, effective
February 1, 1996. The increase was approved by the Board of Directors on
January 29, 1996. The base salary increase, the aforementioned bonus
award, and the aforementioned stock option award, constituted a
coordinated compensation program for Mr. McGeehan's leadership in
performance of certain corporate value creation goals, and in the general
growth and performance of the Corporation.
COMPENSATION OF EXECUTIVE OFFICERS
- Stock options were awarded to the executive officers and others, on July
30, 1995, for the purpose of providing an incentive for managing the
continuing performance and value of the Corporation. The awards, as
recommended by the Chief Executive Officer, were approved by the Board of
Directors Committee on Executive Compensation on July 30, 1995.
- Individual executive officer bonus awards were determined by corporate
performance (actual value creation vs. planned value creation), by unit
performance, and by individual performance. The awards, as recommended by
the Chief Executive Officer, were approved by the Board of Directors
Committee on Executive Compensation on July 28, 1996.
- Base salary performance increases for certain corporate executive
officers were approved by the Board of Directors Committee on Executive
Compensation on January 22, 1996. The individual increases, as recommended
by the Chief Executive Officer and approved by the Committee, were based
on individual performance and competitive salary survey data.
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- A. Peter Held became a member of the Committee on Executive Compensation
on July 30, 1995.
Committee on Executive Compensation:
Aloysius T. McLaughlin, Jr.,
Chairman
Warren H. Hollinshead
A. Peter Held
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The following graph compares cumulative total stockholder return on the
Corporation's Capital Stock with the cumulative total stockholder return on the
common equity of the companies in the Standard & Poor's Mid-Cap 400 Market Index
(the "S&P Mid-Cap") and a peer group of companies determined by the Corporation
(the "Peer Group") for the period from July 1, 1991 to June 30, 1996. The Peer
Group consists of the following companies: Acme-Cleveland Corp.; Binks
Manufacturing Co. Inc.; Brown & Sharpe Manufacturing Co.; Cincinnati Milacron
Inc.; Federal Screw Works Inc.; Federal-Mogul Corp.; Gleason Corp.; Kaydon
Corp.; Monarch Machine Tool Co. Inc.; Newcor Inc.; Regal-Beloit Corp.; Snap-On
Tools Corp.; SPS Technologies Inc.; L S Starrett Co. Inc.; and Timken Co. Inc.
Measurement Period KENNAMETAL
(Fiscal Year Covered) INC S&P MID- CAP PEER GROUP
1991 100.00 100.00 100.00
1992 100.00 122.00 110.00
1993 103.5 147.13 142.04
1994 152.85 147.20 142.67
1995 220.70 177.68 163.85
1996 221.00 219.00 180.00
The above graph assumes a $100 investment on July 1, 1991, in each of Kennametal
Inc. Capital Stock, the S & P Mid-Cap and the Peer Group, and further assumes
the reinvestment of all dividends.
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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 available to the Corporation as of
September 3, 1996.
PERCENT OF
NUMBER OF OUTSTANDING
NAME AND ADDRESS SHARES CAPITAL STOCK(1)
- ---------------------------- --------- ----------------
FMR Corp. 3,458,757(2) 12.9%
82 Devonshire Street
Boston, MA 02109
PRIMECAP Management Company 1,639,700(3) 6.1%
225 South Lake Avenue #400
Pasadena, CA 91101-3005
- ---------
(1) Based on the number of shares outstanding as of September 3, 1996.
(2) According to a Schedule 13G amendment filed in March 1996, Fidelity
Management & Research Company, a wholly-owned subsidiary of FMR Corp., is
the beneficial owner of 3,418,657 shares, or 12.8% of the Capital Stock
outstanding as of September 3, 1996, as investment adviser to several
registered investment companies (the "Fidelity Funds"). The stock ownership
of one investment company, Fidelity Magellan Fund, amounted to 2,651,854
shares, or 9.9% of the Capital Stock outstanding. Edward C. Johnson, III,
Chairman of FMR Corp., FMR Corp. and the Fidelity Funds each has sole power
to dispose of the 3,418,557 shares owned by the Fidelity Funds. Neither FMR
Corp. nor Edward C. Johnson, III has the sole power to vote or direct the
voting of the shares owned directly by the Fidelity Funds; such power
resides with the Fidelity Funds' Board of Trustees. Fidelity Management
Trust Company, another wholly-owned subsidiary of FMR Corp., is the
beneficial owner of 40,100 shares, or 0.1% of the Capital Stock outstanding,
as a result of its serving as investment manager of the institutional
accounts. Edward C. Johnson, III and FMR Corp. each has sole power to
dispose of the 40,100 shares owned by the institutional accounts but no
power to vote or direct the voting of such shares.
(3) According to a Schedule 13G dated May 6, 1996, PRIMECAP Management Company
is a registered investment advisor. All shares are held with sole voting
power and sole dispositive power.
PROPOSED KENNAMETAL INC. STOCK OPTION AND INCENTIVE PLAN OF 1996
In July 1996, the Board of Directors adopted, subject to stockholder
approval at the 1996 annual meeting, the new Kennametal Inc. Stock Option and
Incentive Plan of 1996 (the "1996 Plan"). The Board recommends that the 1996
Plan be approved by the stockholders.
The Kennametal Stock Option Plan of 1988, as amended (the "1988 Plan"),
currently provides for the granting to officers and key employees of options to
purchase shares of Capital Stock. The Kennametal Inc. Stock Option and Incentive
Plan of 1992 (the "1992 Plan") currently provides for the granting to officers
and key employees of options to purchase and awards of shares of Capital Stock.
See "Compensation of Executive Officers--Stock Options." As of August 12, 1996,
only 13,210 shares of Capital Stock remain available for grant under the 1988
Plan and the 1992 Plan.
In the judgment of the Board of Directors, it is important that the
Corporation be in a position to continue to grant stock options and, to make
certain limited stock awards in the form of shares, to officers and employees
who are responsible for the Corporation's continued growth, development and
future financial success, in order to secure to the Corporation the advantages
of incentive and the sense of proprietorship inherent in stock ownership by such
person, to reward prior performance and to assist in the Corporation's efforts
to recruit, retain and motivate high quality employees. Furthermore, the Board
believes that it is important to have the ability to grant stock-based
compensation to non-employee
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directors in order to recruit and retain highly qualified directors and to
further align their interests with those of shareholders.
GENERAL
The following description is intended to summarize certain provisions of
the new 1996 Plan if adopted as proposed. The full text of the 1996 Plan is set
forth in Exhibit A hereto and the following description is qualified in its
entirety by reference to Exhibit A.
Administration. The 1996 Plan is to be administered by the full Board of
Directors or by a committee of the Board (the "Plan Administrator") constituted
to permit transactions under the Plan to comply with Rule 16b-3 of the
Securities Exchange Act of 1934. Subject to the terms of the 1996 Plan, the Plan
Administrator will select from eligible employees those persons to whom options
will be granted and/or shares awarded. The Plan Administrator will determine the
type of option, the number of shares to be included in each option, the option
price and the period in which each option may be exercised. The Plan
Administrator also will determine the number of shares to be awarded pursuant to
the Plan and the terms and conditions which must be met in order for such shares
to vest.
Eligibility. Options and shares may be granted under the 1996 Plan to
directors, officers and employees of the Corporation and its subsidiaries who,
in the opinion of the Plan Administrator, are mainly responsible for the
continued growth and development and future financial success of the business of
the Corporation. There currently are approximately 200 officers and employees of
the Corporation who may be eligible generally under the 1996 Plan, including
officers named in the table shown under "Compensation of Executive Officers" in
this Proxy Statement, although other employees may receive options or shares
under the 1996 Plan to reward superior performance. No determination has been
made as to the individuals to whom options may be granted, shares may be
awarded, or the amount of options or shares that may be granted to any such
individual under the 1996 Plan.
Shares Available for Issuance. The 1996 Plan provides for the issuance of
1,500,000 shares of Capital Stock, although the maximum number of shares of
Capital Stock that can take the form of share awards is 75,000. The number of
shares available under the 1996 Plan is subject to adjustment to prevent
dilution or enlargement of rights. The shares may be either authorized and
unissued shares or shares held in the treasury of the Corporation. Shares
covered by options granted under the 1996 Plan that terminate or expire without
being exercised and, in certain cases, shares that are awarded pursuant to the
1996 Plan but that are forfeited will remain available for the future granting
of options and share awards under the 1996 Plan. No options or share awards can
be granted under the 1996 Plan after October 25, 2006.
Stock Options. The 1996 Plan provides for the Plan Administrator, in its
discretion, to grant options either in the form of incentive stock options
("Incentive Stock Options") qualified as such under the Internal Revenue Code of
1986, as amended, or other options ("Nonstatutory Stock Options"). See "Federal
Income Tax Consequences" below for a summary of the differing tax consequences
of Incentive Stock Options and Nonstatutory Stock Options. The aggregate fair
market value of the shares with respect to which Incentive Stock Options are
first exercisable by the optionee in any calendar year may not exceed $100,000
determined at the time of the grant. Options designated as Incentive Stock
Options in excess of such limitation automatically are reclassified as
Nonstatutory Stock Options, as described in the 1996 Plan.
The price at which each share covered by an option granted under the 1996
Plan may be purchased will be determined in each case by the Plan Administrator
but may not be less than the fair market value at the time the option is
granted. Fair market value is defined to be the mean between the highest and
lowest sales prices for the Capital Stock of the Corporation as reported on the
New York Stock Exchange--Composite Transactions reporting system for the date in
question or, if no sales were made
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on that date, on the next preceding date on which sales were made. On September
4, 1996, such fair market value for the Corporation's Capital Stock was $31.31
per share.
An option may be exercised in whole at any time or in part from time to
time within such period as may be determined by the Plan Administrator provided
that the option period for an Incentive Stock Option may not exceed ten years
from the granting of the option. If the optionee ceases to be employed by the
Corporation or any of its subsidiaries, the option may be exercised only within
three months after the termination of employment and within the option period,
or, if such termination was due to disability or retirement, within one year
after termination of employment and within the option period, unless such
termination of employment shall be for cause or in violation of an agreement by
the optionee to remain in the employ of the Corporation or the subsidiary, in
which case the option shall terminate. In the discretion of the Plan
Administrator, the option period may be extended for up to three years from the
date of termination regardless of the original option period. Further, the
option may be exercised only within 450 calendar days after the optionee's death
and within the option period and only by the optionee's personal representatives
or persons entitled thereto under the optionee's will or the laws of the descent
and distribution.
The option price of each share purchased pursuant to an option shall be
paid in full at the time of each exercise of the option (i) in cash, (ii)
through a cashless exercise procedure in which a broker sells sufficient shares
to deliver the exercise price to the Company or (iii) in the discretion of the
Plan Administrator, (a) by delivering shares of Capital Stock (held by the
participant for at least six (6) months) having an aggregate fair market value
equal to the option price of the shares being purchased; (b) through an election
to withhold shares of Capital Stock otherwise issuable having an aggregate fair
market value equal to the option price of the shares being purchased; or (c)
through any combination of the foregoing.
The Plan Administrator, in its discretion, may grant rights authorizing the
automatic issuance, upon exercise of an option granted under the 1996 Plan, the
1992 Plan, the 1988 Plan or the 1982 Plan using previously owned shares, of
additional stock options under the 1996 Plan with an exercise price equal to the
fair market value on the date of exercise and for up to the number of shares
delivered in payment of the exercise price of the option. Such additional stock
options must have the same option period as the original option.
In consideration for the granting of each option, the optionee shall agree
to remain in the employment of the Corporation or a subsidiary for at least one
year from the date of the granting of the option or until the first day of the
month coinciding with or next following the optionee's sixty-fifth birthday,
whichever may be earlier.
Share Awards. The Plan Administrator may from time to time award shares to
participants pursuant to share award agreements which may contain such terms and
conditions as the Plan Administrator shall determine. The aggregate maximum
number of shares of Capital Stock that may take the form of share awards is
75,000. The Plan Administrator may establish such vesting period, schedule and
criteria as it deems appropriate for each share award, such as vesting in
installments upon the achievement by the Corporation or grantee of specified
periods of continued employment, specific performance criteria or other goals;
provided, however, that any single award of shares to a participant in an amount
greater than 100 shares shall vest only upon the Corporation satisfying
specified performance goals. If the grantee or the Corporation, as the case may
be, fails to achieve the designated goals or the grantee ceases to be employed
by the Corporation for any reason prior to the expiration of the vesting period,
the grantee will forfeit all non-vested shares.
Allotment of Shares. Not more than 15% of the aggregate number of shares
subject to the 1996 Plan may be optioned or awarded in the aggregate to any one
individual excluding shares covered by an
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option previously granted to the individual to the extent it has expired or
terminated without being exercised and excluding shares to the extent the award
has terminated without such shares having vested.
Change in Control. The 1996 Plan provides that in the event of a change in
control of the Corporation (as defined in the 1996 Plan), (a) all options that
become exercisable in installments shall become immediately exercisable in full,
(b) an optionee who ceases to be employed by the Corporation or a subsidiary
within one year following the change in control may in all events exercise his
or her options for a period of three months after the termination of employment
and within the option period, and (c) all awards of shares which have not
previously vested shall become vested.
Tax Withholding. When shares are issued under the 1996 Plan, or if an
optionee makes a disqualifying disposition of shares acquired upon exercise of
an Incentive Stock Option, the Corporation has the right to require the optionee
to remit to the Corporation an amount sufficient to satisfy required income tax
withholding. In the discretion of the Plan Administrator, the grantee may elect
to satisfy this withholding obligation by requesting that the Corporation
withhold shares of stock otherwise issuable to him or her or by delivering to
the Corporation previously owned shares. All such elections will be subject to
the approval of the Plan Administrator.
Amendment or Discontinuance. The Board of Directors may alter, amend,
suspend or discontinue the 1996 Plan, provided that no such action may deprive
any person without such person's consent of any rights granted under the plan.
FEDERAL INCOME TAX CONSEQUENCES
Stock Options. The grantee of an Incentive Stock Option under the 1996
Plan will not be required to recognize any income for federal income tax
purposes at the time of award nor is the Corporation entitled to any deduction.
The exercise of an Incentive Stock Option is also not a taxable event although
the difference between the option price and the fair market value on the date of
exercise is an item of tax preference for purposes of the alternative minimum
tax. If stock acquired upon exercise of an Incentive Stock Option is held for
two years from the date the option was granted and one year from the date the
stock was transferred to the grantee (the "ISO Holding Period"), then the
grantee will have a long-term capital gain or loss on the sale of such stock
measured by the difference between the amount realized and the option price. If
the ISO Holding Period is not met, upon disposition of such shares (a
"disqualifying disposition"), the grantee will realize compensation taxable as
ordinary income in an amount equal to the excess of the fair market value of the
shares at the time of exercise over the option price limited, however, to the
gain on sale. Any additional gain would be taxable as long-term or short-term
capital gain. If the Incentive Stock Option is exercised by delivery of
previously owned shares of Capital Stock in partial or full payment of the
option price, no gain or loss will ordinarily be recognized by the grantee on
the transfer of such previously owned shares. However, if the previously owned
shares transferred were acquired through the exercise of an Incentive Stock
Option, the grantee may realize ordinary income with respect to the shares used
to exercise an Incentive Stock Option if such transferred shares have not been
held for the ISO Holding Period. If the grantee recognizes ordinary income upon
a disqualifying disposition, the Corporation will be entitled to a tax deduction
in the same amount.
The grantee of a Nonstatutory Stock Option under the 1996 Plan will not be
required to recognize any income for federal income tax purposes at the time of
award nor is the Corporation then entitled to any deduction. Upon exercise of a
Nonstatutory Stock Option (or, in certain cases, six months after the date of
grant), the grantee will realize compensation taxable as ordinary income in an
amount measured by the excess, if any, of the fair market value of the shares on
the date of exercise (or, if applicable, the date six months from the date of
grant) over the option price. The Corporation will be entitled to a deduction in
the same amount and at the same time. Upon the sale of shares acquired on
exercise of a Nonstatutory Stock Option, the grantee will realize capital gain
(or loss) measured by the difference between the amount realized and the fair
market value of the shares on the date of exercise (or, if
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applicable, the date six months later). If the exercise price of a Nonstatutory
Stock Option is paid in whole or in part in shares of Capital Stock, the tax
results to the grantee are (i) a tax-free exchange of previously owned shares
for an equivalent number of new shares and (ii) the realization of ordinary
income in an amount equal to the fair market value on the date of exercise of
any additional shares received in excess of the number exchanged.
Share Awards. The grantee of shares awarded under the 1996 Plan will
normally not be required to recognize any income for federal income tax purposes
at the time of the award, nor is the Corporation entitled to any deduction, to
the extent that the shares awarded have not vested. When any part of a share
award vests, the grantee will realize compensation taxable as ordinary income in
an amount equal to the fair market value of the vested shares on the vesting
date. The grantee may, however, make an election (the "Tax Election") within
thirty days following the grant of the share award, to be taxed at the time of
the award based on the fair market value of the shares on that date. The
Corporation will be entitled to a deduction in the same amount and at the same
time that the grantee recognizes ordinary income. Upon the sale of the share
awarded, the grantee will realize capital gain (or loss) measured by the
difference between the amount realized and the fair market value of the shares
on the date the award vested (or on the date of grant if the grantee made the
Tax Election).
VOTE REQUIRED FOR ADOPTION OF THE 1996 PLAN
The affirmative vote of holders of a majority of the shares present and
voting at the meeting is required for approval of the 1996 Plan provided that a
majority of outstanding shares votes on the matter. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1996 PLAN.
ELECTION OF AUDITORS
Unless otherwise directed by the stockholders, proxies will be voted for
the election of Arthur Andersen LLP as the Corporation's independent auditors
for the fiscal year ending June 30, 1997. The affirmative vote of the holders 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.
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, 1996, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
WILL BE AVAILABLE TO STOCKHOLDERS AFTER SEPTEMBER 30, 1996. A STOCKHOLDER MAY
OBTAIN ONE WITHOUT CHARGE BY WRITING TO: CHIEF FINANCIAL OFFICER, KENNAMETAL
INC., 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, 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 the best judgment of the persons acting as proxies.
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 holders of Capital
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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 & Company Inc., a professional soliciting
organization, to assist in soliciting proxies from brokerage houses, custodians,
nominees, other fiduciaries and other stockholders of the Corporation. The fees
and expenses of that firm in connection with such solicitation are not expected
to exceed $20,000.
STOCKHOLDER PROPOSALS AND NOMINATING PROCEDURES
Stockholders who intend to submit a proposal for inclusion in the
Corporation's 1997 Proxy Statement for consideration at the Annual Meeting of
the Stockholders of the Corporation to be held in October 1997 must submit such
proposal to the attention of the Secretary of the Corporation at the address of
its executive offices no later than May 23, 1997. 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 stockholder 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 prior to July 1, 1997, 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 1997 Annual Meeting, other than
those made by the Board of Directors, be submitted to the Secretary of the
Corporation no earlier than May 1, 1997 and prior to July 1, 1997. The By-Laws
require that notice of such nominations contain certain information regarding
the nominee and certain information regarding the nominating stockholder. Any
stockholder may obtain a copy of the applicable By-Law from the Secretary of the
Corporation upon written request.
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EXHIBIT A
KENNAMETAL INC.
STOCK OPTION AND INCENTIVE PLAN OF 1996
SECTION 1. ESTABLISHMENT.
There is hereby established the Kennametal Inc. Stock Option and Incentive
Plan of 1996 (hereinafter called the "Plan") pursuant to which directors,
officers and employees of Kennametal Inc. (hereinafter called the "Company") and
its subsidiaries who are mainly responsible for its continued growth and
development and future financial success may be granted options to purchase
shares of Capital Stock of the Company (as defined in Section 5 below) and/or
may receive awards of shares of Capital Stock in order to secure to the Company
the advantage of the incentive and sense of proprietorship inherent in stock
ownership by such persons, to reward such persons for services previously
performed and/or as an added inducement to continue to provide service to the
Company.
SECTION 2. DURATION.
Options and share awards under this Plan may be granted only within the
ten-year period beginning on the date on which the Plan is adopted by the
stockholders. Any options or share awards outstanding after the expiration of
such ten-year period may be exercised within the periods prescribed by Section
7.
SECTION 3. ADMINISTRATION.
The Plan shall be administered by the full Board of Directors or a
committee constituted so as to permit transactions under the Plan to comply with
Rule 16b-3 (or any successor rule) promulgated under the Securities Exchange Act
of 1934, as amended (the "Plan Administrator"). Subject to the provisions of the
Plan, the Plan Administrator is authorized to adopt such rules and regulations
and to take such action in the administration of the Plan as it shall deem
proper.
SECTION 4. ELIGIBILITY.
Directors, officers and employees of the Company and its subsidiaries who,
in the opinion of the Plan Administrator, are mainly responsible for the
continued growth and development and future financial success of the business
shall be eligible to participate in the Plan. The Plan Administrator shall, in
its sole discretion, from time to time, select from such eligible persons those
to whom options shall be granted or shares awarded and determine the number of
shares to be included in such option or award; provided, however, that no option
may be granted in substitution for an outstanding option except as provided in
Section 12(d). No participant shall have any right to receive an option or share
award, except as the Plan Administrator in its discretion shall determine. The
term "subsidiary," where used in the Plan or in any stock option agreement
entered into under the Plan, means a "subsidiary corporation" as defined in
Section 425 of the Internal Revenue Code of 1986, as it may be amended from time
to time (the "Code").
SECTION 5. SHARES SUBJECT TO THE PLAN.
The total number of shares of stock which may be issued pursuant to the
Plan shall be 1,500,000 shares of capital stock, par value $1.25 per share, of
the Company (the "Capital Stock") provided, however, that: (i) the number of
shares of Capital Stock to be issued pursuant to the Plan is subject to
adjustment as provided in Section 12; and (ii) to the extent that options
granted under the Plan shall expire or terminate without being exercised or
shares awarded under the Plan shall be forfeited, such
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shares shall remain available for purposes of the Plan. Capital Stock to be
issued under the Plan may be either authorized and unissued shares or shares
held in treasury by the Company.
SECTION 6. TYPES OF OPTIONS.
Options granted pursuant to the Plan may be either options which are
incentive stock options under Section 422 of the Code (hereinafter called
"Incentive Stock Options") or other options (hereinafter called "Nonstatutory
Stock Options"). Incentive Stock Options and Nonstatutory Stock Options shall be
granted separately hereunder. The Plan Administrator, in its discretion, shall
determine whether and to what extent options granted under the Plan shall be
Incentive Stock Options or Nonstatutory Stock Options. The provisions of the
Plan and any stock option agreement pursuant to which Incentive Stock Options
shall be issued shall be construed in a manner consistent with Section 422 of
the Code and rules and regulations promulgated or proposed thereunder.
SECTION 7. TERMS OF OPTIONS.
Each option granted under the Plan shall be evidenced by a stock option
agreement between the Company and the person to whom such option is granted and
shall be subject to the following terms and conditions:
(a) Subject to adjustment as provided in Section 12 of this Plan, the
price at which each share covered by an option may be purchased shall be
determined in each case by the Plan Administrator; provided, however, that
such price shall not be less than the fair market value thereof at the time
the option is granted. If an optionee owns (or is deemed to own under
applicable provisions of the Code and rules and regulations promulgated
thereunder) more than ten percent (10%) of the combined voting power of all
classes of the stock of the Company (or any parent or subsidiary
corporation of the Company) and an option granted to such optionee is
intended to qualify as an Incentive Stock Option, the option price shall be
no less than 110% of the fair market value of the shares covered by the
option on the date the option is granted.
(b) The aggregate fair market value of shares of Capital Stock with
respect to which Incentive Stock Options are first exercisable by the
optionee in any calendar year (under all Plans of the Company and its
subsidiaries) shall not exceed the limitations, if any, imposed by Section
422(d) of the Code (or any successor provision). If any option designated
as an Incentive Stock Option, either alone or in conjunction with any other
option or options, exceeds the foregoing limitation, the portion of such
option in excess of such limitation shall automatically be reclassified (in
whole share increments and without fractional share portions) as a
Nonstatutory Stock Option, with later granted options being so reclassified
first.
(c) During the lifetime of the optionee the option may be exercised
only by the optionee. The option shall not be transferable by the optionee
otherwise than by will or by the laws of descent and distribution or, if in
compliance with Rule 16b-3 (or any successor rule), pursuant to a domestic
relations order. After the death of the optionee, the option may be
transferred to the Company upon such terms and conditions, if any, as the
Plan Administrator and the personal representative or other person entitled
to the option may agree within the period specified in subsection 7(d)(iii)
hereof.
(d) An option may be exercised in whole at any time, or in part from
time to time, within such period or periods (not to exceed ten years from
the granting of the option in the case of an Incentive Stock Option) as may
be determined by the Plan Administrator and set forth in the stock option
agreement (such period or periods being hereinafter referred to as the
"option period"), provided that:
(i) If the optionee who is an employee of the Company or any of its
subsidiaries shall cease to be employed by the Company or any of its
subsidiaries, the option may be exercised
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only within three months after the termination of employment and within
the option period or, if such termination was due to disability or
retirement (as hereinafter defined), within one year after termination
of employment and within the option period, unless such termination of
employment shall be for cause or in violation of an agreement by the
optionee to remain in the employ of the Company or one of its
subsidiaries, in which case the option shall forthwith terminate;
provided, however, that the Plan Administrator may in its sole
discretion extend the option period of any option for up to three years
from the date of termination of employment regardless of the original
option period. For purposes of the Plan, retirement shall mean the
termination of employment with the Company at a time when the
participant in the Plan is eligible to receive immediately payable
retirement benefits under the Company's then existing retirement plan or
under any other retirement plan that is maintained by a Company
subsidiary.
(ii) If the optionee who is a director of the Company or any of its
subsidiaries shall cease to serve as a director of the Company or any of
its subsidiaries, the option may be exercised only within three months
after the cessation of service and within the option period or, if such
cessation was due to disability, within one year after cessation of
service and within the option period, unless such cessation of service
as a director was the result of removal for cause, in which case the
option shall forthwith terminate; provided, however, that the Plan
Administrator may in its sole discretion extend the option period of any
option for up to three years from the date of cessation of service
regardless of the original option period.
(iii) If the optionee shall die, the option may be exercised only
within 450 calendar days after the optionee's death and within the
option period and only by the optionee's personal representative or
persons entitled thereto under the optionee's will or the laws of
descent and distribution;
(iv) The option may not be exercised for more shares (subject to
adjustment as provided in Section 12) after the termination of the
optionee's employment, cessation of service as a director or the
optionee's death (as the case may be) than the optionee was entitled to
purchase thereunder at the time of the termination of the optionee's
employment or the optionee's death;
(v) If an optionee owns (or is deemed to own under applicable
provisions of the Code and rules and regulations promulgated thereunder)
more than 10% of the combined voting power of all classes of stock of
the Company (or any parent or subsidiary corporation of the Company) and
an option granted to such optionee is intended to qualify as an
Incentive Stock Option, the option by its terms may not be exercisable
after the expiration of five years from the date such option is granted;
and
(vi) No option granted to an optionee subject to Section 16(b) may
be exercised during the six-month period beginning on the date of grant.
(e) The option price of each share purchased pursuant to an option
shall be paid in full at the time of each exercise (the "Payment Date") of
the option (i) in cash; (ii) by delivering to the Company a notice of
exercise with an irrevocable direction to a registered broker-dealer under
the Securities Exchange Act of 1934, as amended, to sell a sufficient
portion of the shares and deliver the sale proceeds directly to the Company
to pay the exercise price; (iii) in the discretion of the Plan
Administrator, through the delivery to the Company of previously owned
shares of Capital Stock having an aggregate fair market value equal to the
option price of the shares being purchased pursuant to the exercise of the
option; provided, however, that shares of Capital Stock delivered in
payment of the option price must have been held by the participant for at
least six (6) months in order to be utilized to pay the option price; (iv)
through an election pursuant to Section 8 hereof to have shares of Capital
Stock otherwise issuable to the optionee withheld to pay the exercise price
of
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such option; or (v) in the discretion of the Plan Administrator, through
any combination of the payment procedures set forth in subsections (i)-(iv)
of this Section 7(e).
(f) The Plan Administrator, in its discretion, may authorize "stock
retention options" which provide, upon the exercise of an option granted
under this Plan, the Stock Option Plan of 1982, the Stock Option and
Incentive Plan of 1988 or the Stock Option and Incentive Plan of 1992 (a
"prior option") using previously owned shares, for the automatic issuance
of a new option under this Plan with an exercise price equal to the current
fair market value and for up to the number of shares equal to the number of
previously owned shares delivered in payment of the exercise price of the
prior option. Such stock retention option shall have the same option period
as the prior option.
(g) In consideration for the granting of each option, the optionee
shall agree to remain in the employment of the Company or one of its
subsidiaries, at the pleasure of the Company or such subsidiary, for at
least one year from the date of the granting of such option or until the
first day of the month coinciding with or next following the optionee's
sixty-fifth birthday, whichever may be earlier. Nothing contained in the
Plan nor in any stock option agreement shall confer upon any optionee any
right with respect to the continuance of employment by the Company or any
of its subsidiaries nor interfere in any way with the right of the Company
or any subsidiary to terminate his employment or change his compensation at
any time.
(h) The Plan Administrator may include such other terms and conditions
not inconsistent with the foregoing as the Plan Administrator shall
approve. Without limiting the generality of the foregoing sentence, the
Plan Administrator shall be authorized to determine that options shall be
exercisable in one or more installments during the term of the option and
the right to exercise may be cumulative as determined by the Plan
Administrator.
SECTION 8. SHARE WITHHOLDING.
(a) An optionee may, in the discretion of the Plan Administrator, elect to
pay the exercise price of an option, in whole or in part, by requesting that the
Company withhold shares of stock otherwise issuable to the optionee having a
fair market value equal to the portion of the exercise price of the option being
paid pursuant to such election (a "Share Withholding Election").
(b) A Share Withholding Election must be in writing and must be delivered
to the Company no later than with the delivery of the notice of exercise of the
option.
SECTION 9. SHARE AWARDS.
(a) The Plan Administrator may, from time to time, subject to the
provisions of the Plan, award shares to participants; provided, however, that
the maximum number of shares of Capital Stock that may take the form of share
awards is 75,000.
(b) The award of shares shall be evidenced by a share award agreement
executed by the Company and the grantee setting forth the number of shares of
Capital Stock awarded, the vesting period, the vesting schedule or criteria and
such other terms and conditions as the Plan Administrator may determine.
(c) The grantee of a share award shall receive shares of Capital Stock
without payment to the Company immediately upon grant; provided, however, that
the grantee's ownership of such shares shall be subject to the following terms
and conditions:
(i) Any single award of shares to a participant in an amount greater
than 100 shares shall vest in installments upon achievement by the Company
or grantee of specified performance goals as determined by the Plan
Administrator and as provided in the share award agreement;
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(ii) If the grantee or the Company, as the case may be, fails to
achieve the designated goals or the grantee ceases to be employed by the
Company for any reason (including death, permanent disability or
retirement) prior to the expiration of the vesting period, the grantee
shall forfeit all shares so awarded which have not then vested;
(iii) A grantee who has received a share award pursuant to the Plan
shall have all rights of a stockholder in such Capital Stock, including but
not limited to the right to vote and receive dividends with respect
thereto; provided, however, that shares awarded pursuant to the Plan which
have not vested may not be sold or otherwise transferred by the grantee and
stock certificates representing such shares shall bear a restrictive legend
to that effect; and
(iv) No share award (or portion thereof) granted to a person subject
to Section 16(b) shall vest within the six-month period beginning on the
date of grant of such share award.
SECTION 10. LIMITATION ON OPTIONS AND AWARDS.
The aggregate number of shares covered by any options or share awards to
one person shall not exceed fifteen percent (15%) of the aggregate number of
shares subject to the Plan as provided in Section 5 hereof.
SECTION 11. TAX WITHHOLDING.
(a) Whenever shares are to be issued under the Plan, the Company shall have
the right to require the grantee to remit to the Company an amount sufficient to
satisfy federal, state and local tax withholding requirements prior to the
delivery of any certificate for such shares; provided, however, that in the case
of a grantee who receives an award of shares under the Plan which is not fully
vested, the grantee shall remit such amount on the first business day following
the Tax Date. The "Tax Date" for purposes of this Section 11 shall be the date
on which the amount of tax to be withheld is determined. If an optionee makes a
disposition of shares acquired upon the exercise of an Incentive Stock Option
within either two years after the option was granted or one year after the
receipt of stock by the optionee, the optionee shall promptly notify the Company
and the Company shall have the right to require the optionee to pay to the
Company an amount sufficient to satisfy federal, state and local tax withholding
requirements.
(b) A grantee who is obligated to pay the Company an amount required to be
withheld under applicable tax withholding requirements may pay such amount (i)
in cash; (ii) in the discretion of the Plan Administrator, through the delivery
to the Company of previously owned shares of Capital Stock having an aggregate
fair market value on the Tax Date equal to the tax obligation provided that the
previously owned shares delivered in satisfaction of the withholding obligations
must have been held by the participant for at least six (6) months; or (iii) in
the discretion of the Plan Administrator, through a combination of the
procedures set forth in subsections (i) and (ii) of this Section 11(b).
(c) A grantee who is obligated to pay to the Company an amount required to
be withheld under applicable tax withholding requirements in connection with
either the exercise of a Nonstatutory Stock Option or a share award under the
Plan may, in the discretion of the Plan Administrator, elect to satisfy this
withholding obligation, in whole or in part, by requesting that the Company
withhold shares of stock otherwise issuable to the grantee having a fair market
value on the Tax Date equal to the amount of the tax required to be withheld;
provided, however, that shares may be withheld by the Company only if such
withheld shares have vested. Any fractional amount shall be paid to the Company
by the optionee in cash or shall be withheld from the optionee's next regular
paycheck.
(d) An election by a grantee to have shares of stock withheld to satisfy
federal, state and local tax withholding requirements pursuant to Section 11(c)
(a "Tax Withholding Election") must be in writing and delivered to the Company
prior to the Tax Date.
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SECTION 12. ADJUSTMENT OF NUMBER AND PRICE OF SHARES.
(a) In the event that a dividend shall be declared upon the Capital Stock
of the Company payable in shares of said stock, the number of shares of Capital
Stock covered by each outstanding option and the number of shares which may be
issued pursuant to the Plan but are not yet covered by outstanding options shall
be adjusted by adding thereto the number of shares of Capital Stock which would
have been distributable thereon if such shares had been outstanding on the date
fixed for determining the stockholders entitled to receive such stock dividend.
(b) In the event that the outstanding shares of Capital Stock of the
Company shall be changed into or exchanged for a different number or kind of
shares of stock or other securities of the Company or of another corporation,
whether through reorganization, recapitalization, stock split-up, combination of
shares, merger or consolidation, then there shall be substituted for the shares
of Capital Stock covered by each outstanding option, and the shares which may be
issued pursuant to the Plan but are not yet covered by outstanding options, the
number and kind of shares of stock or other securities which would have been
substituted therefor if such shares had been outstanding on the date fixed for
determining the stockholders entitled to receive such changed or substituted
stock or other securities.
(c) In the event there shall be any change, other than specified in this
Section 12, in the number or kind of outstanding shares of Capital Stock of the
Company or of any stock or other securities into which such Capital Stock shall
be changed or for which it shall have been exchanged, then, if the Board of
Directors shall determine, in its discretion, that such change equitably
requires an adjustment in the number or kind of shares covered by outstanding
options and the shares which may be issued pursuant to the Plan but are not yet
covered by outstanding options, such adjustment shall be made by the Board of
Directors and shall be effective and binding for all purposes of the Plan and on
each outstanding stock option agreement.
(d) In the event that, by reason of a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation, the
Board of Directors shall authorize the issuance or assumption of a stock option
or stock options in a transaction to which Section 424(a) of the Code applies,
then, notwithstanding any other provision of the Plan, the Plan Administrator
may grant an option or options upon such terms and conditions as it may deem
appropriate for the purpose of assumption of the old option, or substitution of
a new option for the old option, in conformity with the provisions of Code
Section 424(a) and the rules and regulations thereunder, as they may be amended
from time to time.
(e) No adjustment or substitution provided for in this Section 12 shall
require the Company to issue or to sell a fractional share under any stock
option agreement or share award agreement and the total adjustment or
substitution with respect to each stock option and share award agreement shall
be limited accordingly.
(f) In the case of any adjustment or substitution provided for in this
Section 12, the option price per share in each stock option agreement shall be
equitably adjusted by the Board of Directors to reflect the greater or lesser
number of shares of stock or other securities into which the stock covered by
the option may have been changed or which may have been substituted therefor.
SECTION 13. FAIR MARKET VALUE.
In any determination of fair market value hereunder, fair market value
shall be deemed to be the mean between the highest and lowest sales prices for
the Capital Stock of the Company as reported in the New York Stock
Exchange--Composite Transactions reporting system for the date in question, or
if no sales were made on that date, on the next preceding date on which sales
were made.
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SECTION 14. CHANGE IN CONTROL.
(a) In the event of a Change in Control of the Company, as hereinafter
defined, the following provisions shall apply to options and share awards
previously awarded under the Plan, notwithstanding any provision herein or in
any agreement to the contrary:
(i) All options which provide for exercise in one or more installments
shall become immediately exercisable in full;
(ii) If any optionee shall cease to be employed by the Company or any
of its subsidiaries within one (1) year following a Change in Control, then
the option may in all events be exercised for a period of three months
after such termination of employment and within the option period; and
(iii) All awards of shares under the Plan which have not previously
vested shall become vested.
(b) The term "Change in Control" shall mean a change in control of the
Company of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A promulgated under the Exchange Act as in effect on the date
thereof or, if Item 6(e) is no longer in effect, any regulations issued by the
Securities and Exchange Commission pursuant to the Exchange Act which serve
similar purposes; provided that, without limitation, such a Change in Control
shall be deemed to have occurred if: (i) the Company shall be merged or
consolidated with another corporation or entity, other than a corporation or
entity which is an "affiliate" of the Company (as such term is defined in Rule
144(a) promulgated under the Securities Act of 1933), or (ii) the Company shall
sell all or substantially all of its operating properties and assets to another
person, group of associated persons or corporation, excluding affiliates of the
Company, if any, or (iii) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes a beneficial owner, directly or
indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company's then outstanding securities coupled with
or followed by the election as directors of the Company of persons who were not
directors at the time of such acquisition if such person shall elect a majority
of the Board of Directors of the Company.
SECTION 15. AMENDMENT AND DISCONTINUANCE.
The Board of Directors may alter, amend, suspend or discontinue the Plan,
provided that no such action shall deprive any person without such person's
consent of any rights theretofore granted pursuant hereto.
SECTION 16. COMPLIANCE WITH GOVERNMENTAL REGULATIONS.
Notwithstanding any provision of the Plan or the terms of any agreement
entered into pursuant to the Plan, the Company shall not be required to issue
any shares hereunder prior to registration of the shares subject to the Plan
under the Securities Act of 1933 or the Exchange Act, if such registration shall
be necessary, or before compliance by the Company or any participant with any
other provisions of either of those acts or of regulations or rulings of the
Securities and Exchange Commission thereunder, or before compliance with other
federal and state laws and regulations and rulings thereunder, including the
rules of the New York Stock Exchange, Inc. The Company shall use its best
efforts to effect such registrations and to comply with such laws, regulations
and rulings forthwith upon advice by its counsel that any such registration or
compliance is necessary.
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SECTION 17. COMPLIANCE WITH SECTION 16.
With respect to persons subject to Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 (or its successor rule). To the extent that any grant
of an option or share award fails to so comply, it shall be deemed null and void
to the extent permitted by law and to the extent deemed advisable by the Plan
Administrator.
SECTION 18. PARTICIPATION BY FOREIGN NATIONALS.
The Plan Administrator may, in order to fulfill the purposes of the Plan
and without amending the Plan, modify grants to foreign nationals or United
States citizens employed abroad in order to recognize differences in local law,
tax policy or custom.
SECTION 19. EFFECTIVE DATE OF PLAN.
The Plan shall become effective upon approval and adoption of the Plan by
the affirmative vote of holders of a majority of the outstanding shares of
Capital Stock of the Company present and voting at the 1996 Annual Meeting of
Stockholders.
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I. ELECTION OF DIRECTORS FOR TERMS TO EXPIRE IN 1999
VOTE FOR ALL WITHHOLD Nominees: Peter B. Bartlett, Warren H. Hollinshead, Robert L. McGeehan
NOMINEES AUTHORITY (INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEES, WRITE THE
LISTED (EXCEPT TO VOTE FOR NOMINEE'S NAME ON THE LINE PROVIDED BELOW:)
AS SHOWN TO ALL NOMINEES
THE CONTARY) LISTED.
0 0 ______________________________________________________________________________________
II. ELECTION OF AUDITORS III. APPROVAL OF STOCK OPTION AND INCENTIVE
PLAN OF 1996
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
0 0 0 0 0 0
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 Item 1
above, FOR the election of auditors and FOR approval of the
Stock Option and Incentive Plan of 1996. 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.
Dated: ____________________________, 1996
_________________________________________
_________________________________________
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
KENNAMETAL INC.
September 20, 1996
Dear Kennametal Inc. Stockholder:
The 1996 Annual Meeting of the Stockholders of Kennametal Inc. will be held at
2:00 p.m. on Monday, October 28, 1996, at the Corporate Technology Center,
located on Route 981 South, 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,
Quentin C. McKenna
Chairman of the Board
Kennametal Inc.
30
PROXY PROXY
KENNAMETAL INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE CORPORATION
The undersigned hereby appoints Quentin C. McKenna, William R.
Newlin and Richard C. Alberding, and each of them with power of substitution in
each, as proxies to represent the undersigned at the annual meeting of the
stockholders of Kennametal Inc. to be held at the Corporate Technology Center,
located on Route 981 South, approximately 1/4 mile south of its intersection
with U.S. Route 30 near Latrobe, Unity Township, Pennsylvania, on Monday,
October 28, 1996 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
ITEM 1, FOR THE ELECTION OF AUDITORS AND FOR APPROVAL OF THE STOCK OPTION
AND INCENTIVE PLAN OF 1996.
(over)
FOLD AND DETACH HERE
