EX-10.5






Exhibit 10.5




AMENDMENT NO. 3 TO



OFFICER’S EMPLOYMENT AGREEMENT




     This Amendment No. 3 to Officer’s Employment Agreement, dated as of December 8, 2008, by and
between KENNAMETAL INC., a corporation organized under the laws of the Commonwealth of Pennsylvania
(hereinafter referred to as “Kennametal” or the “Corporation”), for and on behalf
of itself and on behalf of its subsidiary companies, and Carlos M. Cardoso, an individual
(hereinafter referred to as “Employee’).



WITNESSETH:




     WHEREAS, the Corporation and Employee are parties to that certain letter agreement, dated
March 8, 2003 and that certain Officer’s Employment Agreement, dated as of April 29, 2003, as
amended by that certain Amendment to Officer’s Employment Agreement, dated as of December 17, 2003
and as further amended by that certain letter agreement, dated December 6, 2005 (collectively, the
“Employment Agreement”), and desire to amend the Employment Agreement as set forth herein
to ensure compliance with Section 409A of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder (“Section 409A”); and



     WHEREAS, Section 12 of the Employment Agreement provides that the Employment Agreement may
only be amended by an instrument in writing signed by each of the parties to the agreement.



     NOW THEREFORE, in consideration of the premises, the mutual covenants and agreements contained
herein; and other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Corporation and Employee, intending to be legally bound, agree as follows:


1. Amendments. The parties hereto hereby amend the Employment Agreement as follows:




     A. Section 3. Section 3 of the Employment Agreement is hereby amended by deleting the
phrase “for termination” and by deleting the phrase “, other than termination for Good Reason (as
hereafter defined) following a Change in Control (as hereafter defined)”.




B. Section 4. Section 4 of the Employment Agreement is hereby amended as follows:




i. Section 4(a) is hereby amended and restated in its entirety to read as follows:




“In the event that Employee’s employment is involuntarily terminated by
Kennametal prior to a Change-in-Control (as hereinafter defined) and other
than for Cause, Employee will receive as severance pay, in addition to all
amounts due him at the Date of Termination (as hereinafter defined), the
continuance of the Employee’s base salary (at the rate in effect on the Date
of Termination and subject to applicable deductions and withholdings) for
twenty-four (24) months following the Date of Termination, which salary
continuation will be directly offset by any subsequent salary or employment
during such twenty-four month period. Any severance pay will be paid in
substantially equal installments, no less frequently than monthly, in
accordance with Kennametal’s established payroll policies and practices as in
effect on the Date of Termination beginning on the first normal pay date
thereafter; provided however, any payments that the Employee would be entitled
to during the first six months following the Date of Termination shall be
delayed and accumulated and paid on the first business day of the seventh
month following the Employee’s Date of Termination (or, if earlier, the date
of the Employee’s death).”



     ii. Section 4(c) of the Employment Agreement is hereby amended by inserting the word
“involuntarily” before the phrase “by Kennametal” appearing in the third line thereof, by replacing
the phrase “at Employee’s election” found in clause (x) of subsection (ii) of this Section 4(c)
with the phrase “if greater” and the sentence following clause (y) of subsection (ii) of this
Section 4(c) is deleted in its entirety and replaced with the following language:



 









 






“Such severance pay shall be paid by delivery of a cashier’s or certified
check to the Employee at Kennametal’s executive offices on the first business
day of the seventh month following the Employee’s Date of Termination (or, if
earlier, the date of the Employee’s death).”



     iii. Section 4(d) is hereby deleted in its entirety, with the following language inserted in
lieu thereof:




“The medical, dental, disability and group insurance benefits to be
provided under Paragraph 4(c) will be provided as follows:




(i) Life insurance benefits and disability benefits shall be provided
through the reimbursement of Employee’s premiums upon conversion to individual
policy.




(ii) The first eighteen (18) months of medical and dental insurance coverage
will be available through the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended (“COBRA”). Provided the Employee timely elects COBRA
continuation coverage, the Employee shall continue to participate in all
medical and dental insurance plans he was participating in on the date of
termination, and the Corporation shall pay the applicable premium. To the
extent that Employee had dependent coverage immediately prior to termination
of employment, such continuation of benefits for Employee shall also cover
Employee’s dependents for so long as Employee is receiving benefits under this
Paragraph and such dependents remain eligible. The COBRA continuation period
for medical and dental insurance under this Paragraph shall be deemed to run
concurrent with the continuation period federally mandated by COBRA, or any
other legally mandated and applicable federal, state, or local coverage
period.




(iii) Following the conclusion of the COBRA continuation period, the
Corporation will provide coverage for the remainder of the three year period
as follows:




     (a) If the relevant medical plan is self insured (within the meaning of
Code Section 105(h)), and such plan permits coverage for the Employee, then
the Corporation will continue to provide coverage during the three year period
and will annually impute income to the Employee for the fair market value of
the premium.




     (b) If, however, the plan does not permit the continued participation
following the end of the COBRA continuation period as contemplated above, then
the Corporation will reimburse Employee for the actual cost to Employee of a
comparable individual medical or dental insurance policy obtained by Employee.




(iv) Reimbursements to the Employee pursuant to the provisions of this
paragraph 4(d) will be available only to the extent that (a) such expense is
actually incurred for any particular calendar year and reasonably
substantiated; (b) reimbursement shall be made no later than the end of the
calendar year following the year in which such expense is incurred by the
Employee; (c) no reimbursement provided for any expense incurred in one
taxable year will affect the amount available in another taxable year; and (d)
the right to this reimbursement is not subject to liquidation or exchange for
another benefit. Notwithstanding the foregoing, no reimbursement will be
provided for any expense incurred following the three year period contemplated
by this Agreement.”



     iv. Section 4(g) is hereby amended by substituting a semi-colon for the period found at the
end of subsection 4(g)(ii) and inserting the word “or” thereafter and adding subsection 4(g)(iii),
which shall read as follows:




“For purposes of this Agreement, the Employee will be considered to have
experienced a termination of employment only if the Employee has separated from
service with the Corporation and all of its controlled group members within the
meaning of Section 409A of the Code. For purposes hereof, the determination of



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controlled group members shall be made pursuant to the provisions of Section
414(b) and 414(c) of the Code; provided that the language “at least 50 percent”
shall be used instead of “at least 80 percent” in each place it appears in
Section 1563(a)(1),(2) and (3) of the Code and Treas. Reg. § 1.414(c)-2.
Whether the Employee has separated from service will be determined based on all
of the facts and circumstances and in accordance with the guidance issued under
Section 409A of the Code.”



     v. Section 4(h) is hereby deleted in its entirety, with the following language inserted in
lieu thereof:




“The term “Good Reason” for termination by the Employee shall mean the
occurrence of any of the following at or after a Change-in-Control:




(i) without the Employee’s express written consent, the material
diminution of responsibilities or the assignment to the Employee of any duties
materially and substantially inconsistent with his positions, duties,
responsibilities and status with Kennametal immediately prior to a
Change-in-Control, or a material change in his reporting responsibilities,
titles or offices as in effect immediately prior to a Change-in-Control, or
any removal of the Employee from or any failure to re-elect the Employee to
any of such positions, except in connection with the termination of the
Employee’s employment due to Cause (as hereinafter defined) or as a result of
the Employee’s death;




(ii) a material reduction by Kennametal in the Employee’s base salary as
in effect immediately prior to any Change-in-Control;




(iii) a failure by Kennametal to continue to provide incentive
compensation, under the rules by which incentives are provided, on a basis not
materially less favorable to that provided by Kennametal immediately prior to
any Change-in-Control;




(iv) a material reduction in the overall level of employee benefits,
including any benefit or compensation plan, stock option plan, retirement
plan, life insurance plan, health and accident plan or disability plan in
which Employee is actively participating immediately prior to a
Change-in-Control (provided, however, that there shall not be deemed to be any
such failure if Kennametal substitutes for the discontinued plan, a plan
providing Employee with substantially similar benefits) or the taking of any
action by Kennametal which would adversely affect Employee’s participation in
or materially reduce Employee’s overall level of benefits under such plans or
deprive Employee of any material fringe benefits enjoyed by Employee
immediately prior to a Change-in-Control;




(v) the breach of this Agreement caused by the failure of Kennametal to
obtain the assumption of this Agreement by any successor as contemplated in
paragraph 11 hereof; and




(vi) the relocation of the Employee to a facility or a location more than
50 miles from the Employee’s then present location, without the Employee’s
prior written consent.




Notwithstanding the forgoing, in order for the Employee to terminate for
Good Reason: (a) the Employee must give written notice to Kennametal of the
Employee’s intention to terminate employment for Good Reason within sixty (60)
days after the event or omission which constitutes Good Reason, and any
failure to give such written notice within such period will result in a waiver
by the Employee of his right to terminate for Good Reason as a result of such
act or omission, (b) the event must remain uncorrected by Kennametal for
thirty (30) days following such notice (the “Notice Period”), and (c) such
termination must occur within sixty (60) days after the expiration of the
Notice Period.”



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     C. Section 12. Section 12 of the Employment Agreement is amended by substituting a
semicolon for the period at the end of this section and inserting the following language
thereafter:




“provided, however, the Corporation may, solely to the extent necessary to comply with
Section 409A of the Code, modify the terms of this agreement if it is determined that such
terms would subject any payments or benefits hereunder to the additional tax and/or interest
assessed under Section 409A of the Code.”



     D. Section 15. Section 15 of the Employment Agreement is hereby amended by inserting
at the end thereof the following sentence:




“Unless otherwise required by applicable law, the release must be executed and
become effective and irrevocable within thirty (30) days of the Employee’s
termination of employment.”



     E. Section 16. Section 16 of the Employment Agreement is hereby amended as follows:



     (i) Section 16(a) is hereby amended by inserting the following language at the end of the
third sentence thereof:




“that does not constitute deferred compensation and is exempt or otherwise
excepted from coverage under Section 409A (but excluding stock options or
other stock rights”



     and by substituting the phrase “Contract Payments” appearing in the fourth sentence thereof
with the phrase “contract payments.”



     (ii) Section 16(d) is hereby amended by inserting the following language at the end of the
second sentence thereof:




“, but in no event later than the end of the Employee’s taxable year following
the Employee’s taxable year in which the Employee remits the related taxes”



     F. Sections 17 and 18. Section 17 of the Employment Agreement is hereby renumbered as
Section 18 and Section 17 is hereby amended to read as follows:




“(a) The provisions of this agreement will be administered, interpreted and
construed in a manner intended to comply with Section 409A, the regulations
issued thereunder or any exception thereto (or disregarded to the extent such
provision cannot be so administered, interpreted, or construed).




(b) For purposes of Section 409A, each severance payment, including each
individual installment payment, shall be treated as a separate payment. Each
payment under this Agreement is intended to be excepted from Section 409A to
the maximum extent provided under Section 409A as follows: (i) each payment
made within the applicable 21/2 month period specified in Treas. Reg. §
1.409A-1(b)(4) is intended to be excepted under the short-term deferral
exception as specified in Treas. Reg. § 1.409A-1(b)(4); (ii) post-termination
medical benefits are intended to be excepted under the medical benefits
exceptions as specified in Treas. Reg. § 1.409A-1(b)(9)(v)(B); and (iii) to
the extent payments are made as a result of an involuntary separation, each
payment that is not otherwise excepted under the short-term deferral exception
or medical benefits exception is intended to be excepted under the involuntary
pay exception as specified in Treas. Reg. § 1.409A-1(b)(9)(iii).




(c) With respect to payments subject to Section 409A of the Code (and not
excepted therefrom), if any, it is intended that each payment is paid on a
permissible distribution event and at a specified time consistent with Section
409A of the Code. The Corporation reserves the right to accelerate and/or
defer any payment to the extent permitted and consistent with Section 409A. 



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Notwithstanding any provision of this Agreement to the contrary, to the extent
that a payment hereunder is subject to Section 409A of the Code (and not
excepted therefrom) and payable on account of a termination of employment,
such payment shall be delayed for a period of six months after the date of
termination (or, if earlier, the date of the Employee’s death) if the Employee
is a “specified employee” (as defined in Section 409A of the Code and
determined in accordance with the procedures established by the Corporation).
Any payment that would otherwise have been due or owing during such 6-month
period will be paid on the first business day of the seventh month following
the Employee’s date of termination (or, if earlier, the date of the Employee’s
death). The Employee shall have no right to designate the date of any payment
under this Agreement. Notwithstanding any provision of this agreement to the
contrary, Employee acknowledges and agrees that the Corporation shall not be
liable for, and nothing provided or contained in this agreement will be
construed to obligate or cause the Corporation to be liable for, any tax,
interest or penalties imposed on Employee related to or arising with respect
to any violation of Section 409A.”


2. Effect of Amendment. Except as expressly amended by this Amendment, the Employment
Agreement is hereby ratified and confirmed, and shall continue in full force and effect.



3. Counterparts. This Amendment may be executed in any one or more counterparts all of
which together shall constitute one and the same instrument.




     IN WITNESS WHEREOF, the Corporation’s duly authorized representative and the Employee have
duly executed this Amendment as of the day and year first above written.



	 	 	 	 	 
	 	KENNAMETAL INC.

 	 
	 	By:  	/s/ David W. Greenfield
 	 
	 	 	Name:  	David W. Greenfield 	 
	 	 	Title:  	Vice President, Secretary, and General Counsel 	 
	 
	 	 	 
	 	     /s/ Carlos M. Cardoso
 	 
	 	Carlos M. Cardoso 	 
	 	 	 
	 




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