Document:

EX-10.1

 

Exhibit 10.1

Kennametal Inc.

STOCK AND INCENTIVE PLAN OF 2002

(as amended on October 23, 2007)

     Section 1. Establishment. There is hereby established the Kennametal Inc. Stock and Incentive
Plan of 2002 (hereinafter called the “Plan”) pursuant to which Eligible Individuals who are
or will be mainly responsible for its continued growth and development and future financial success
may be granted Awards in order to secure to the Company the advantage of the incentive and sense of
proprietorship inherent in stock ownership by such persons, to further align such person’s
interests with those of the shareowners, to reward such persons for services previously performed
and/or as an added inducement to continue to provide service to the Company.

     Section 2. Certain Definitions. As used herein or, unless otherwise specified, in any
document with respect to an Award, the following definitions shall apply:

          (a) “Affiliate” of a person means a person controlling, controlled by, or under common
control with such person where control means the power to direct the policies and practices of such
person.

          (b) “Award” means any Incentive Bonus Award, Option, Performance Share Award,
Performance Unit Award, Restricted Stock Award, Restricted Unit Award, SAR, Share Award or Stock
Unit Award granted under the Plan.

          (c) “Board” means the Board of Directors of the Company.

          (d) “Business Combination” shall mean a merger or consolidation of the Company with
another corporation or entity, other than a corporation or entity which is an Affiliate.

          (e) “Capital Stock” means the Capital Stock, par value $1.25 per share, of the Company
as adjusted pursuant to Section 10 of this Plan.

          (f) “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Exchange Act as in effect on the date thereof or, if Item 6(e) is no longer in effect, any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 which serve similar purposes; provided that, without limitation, such a Change
in Control shall be deemed to have occurred if: (i) a Business Combination shall have occurred, 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 any Affiliate 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.

          (g) “Code” means the Internal Revenue Code of 1986, as amended.

          (h) “Committee” means a committee of the Board.

          (i) “Company” means Kennametal Inc., a Pennsylvania corporation.

          (j) “Consultant” means any person, including an advisor, who is engaged by the Company
or any Parent or Subsidiary of the Company to render services and is compensated for such services.

          (k) “Continuous Status as an Employee” means the absence of any interruption or
termination of the employment relationship by the Employee with the Company or any Parent or
Subsidiary of the Company. Continuous Status as an Employee shall not be considered interrupted in
the case of: (i) sick leave; (ii) military leave; (iii) any other leave of absence approved by the
Plan Administrator; or (iv) transfers between locations of the Company or between the Company, its
Parents, its Subsidiaries or its successor.

          (l) “Disability” means disability as determined by the Company’s disability policy as
in effect from time to time or as determined by the Plan Administrator consistent therewith.

          (m) “Eligible Individual” means any Employee or Consultant.

          (n) “Employee” means any person, including officers and directors, employed by the
Company or any Parent or Subsidiary of the Company or any prospective employee who shall have
received an offer of employment from the Company or any Parent or Subsidiary of the Company. The
payment of a director’s fee by the Company shall not be sufficient to constitute “employment” by
the Company.

          (o) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          (p) “Fair Market Value” means, as of any date, the value of the Capital Stock
determined as follows:

          (i) If the Capital Stock is listed on any established stock exchange, system or
market, its Fair Market Value shall be the mean between the highest and lowest sales prices
for the Capital Stock as quoted on such exchange, system or market for the last trading day
prior to the time of determination as reported in the Wall Street Journal or such other
source as the Plan Administrator deems reliable and;

          (ii) In the absence of an established market for the Capital Stock, the Fair Market
Value thereof shall be determined in good faith by the Plan Administrator.

          (q) “Grantee” means an Eligible Individual who has been granted an Award.

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          (r) “Incentive Bonus Award” means the opportunity to earn a future cash payment tied
to the level of achievement with respect to one or more Qualifying Performance Criteria for a
performance period as established by the Plan Administrator.

          (s) “Incentive Stock Option” means an Option intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code.

          (t) “Non-Employee Director” means a member of the Board who is not an employee of the
Company or any Parent or Subsidiary of the Company.

          (u) “Nonstatutory Stock Option” means an Option not intended to qualify as an
Incentive Stock Option.

          (v) “Option” means a right to purchase Shares granted pursuant to the Plan.

          (w) “Optionee” means a Participant who holds an Option or SAR.

          (x) “Original Option Period” means the initial period or periods for which an Option
or SAR may be exercised as determined by the Plan Administrator at the time of the Award or, if no
such determination is made, a period of 10 years from the date of grant of the Award.

          (y) “Parent” means a “parent corporation,” whether now or hereafter existing, as
defined in Section 424(e) of the Code.

          (z) “Participant” means any person who has an Award under the Plan including any
person (including any estate) to whom an Award has been assigned or transferred in accordance with
the Plan.

          (aa) “Performance Share Award” means a grant of a right to receive Shares or Stock
Units contingent on the achievement of performance or other objectives during a specified period.

          (bb) “Performance Unit Award” means a grant of a right to receive a designated dollar
value amount of Shares or Stock Units contingent on the achievement of performance or other
objectives during a specified period.

          (cc) “Plan” means this Stock and Incentive Plan of 2002.

          (dd) “Plan Administrator” means the Board and/or any Committee appointed by the Board
to administer the Plan; provided, however, that the Board, in its sole discretion, may,
notwithstanding the appointment of any Committee to administer the Plan, exercise any authority
under this Plan.

          (ee) “Prior Stock Plans” means the Kennametal Inc. Stock Option and Incentive Plan of
1988, the Kennametal Inc. Stock Option and Incentive Plan of 1992, the Kennametal Inc.
Stock Option and Incentive Plan of 1996, the Kennametal Inc. 1999 Stock Plan, and the
Kennametal Inc. Stock Option and Incentive Plan of 1999.

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          (ff) “Qualifying Performance Criteria” means any one or more of the following
performance criteria, either individually, alternatively or in any combination, applied to either
the Company as a whole or to a business unit or Subsidiary, either individually, alternatively or
in any combination, and measured over a period of time including any portion of a year, annually or
cumulatively over a period of years, on an absolute basis or relative to a pre-established target,
to previous years’ results or to a designated comparison group, in each case as specified in the
Award: (a) cash flow, (b) earnings (including earnings before interest, taxes, depreciation, and
amortization or some variation thereof), (c) stock price, (d) return on equity, (e) total
stockholder return, (f) return on capital, (g) return on assets or net assets, (h) revenue, (i)
income or net income, (j) operating income or net operating income, (k) operating profit or net
operating profit, (l) operating margin or profit margin, (m) return on operating revenue, and (n)
market share. To the extent consistent with Section 162(m) of the Code and unless otherwise
determined by the Committee at the time an Award is granted or as otherwise provided in an
applicable Award agreement, the Plan Administrator shall appropriately adjust any evaluation of
performance under a Qualifying Performance Criteria to exclude any of the following events that
occurs during a performance period: (i) asset write-downs, (ii) litigation or claim judgments or
settlements, (iii) the effect of changes in tax law, accounting principles or other such laws or
provisions affecting reported results, (iv) accruals for reorganization and restructuring programs
and (v) any extraordinary non-recurring items as described in management’s discussion and analysis
of financial condition and results of operations or the financial statements and notes thereto
appearing in the Company’s annual report to shareowners for the applicable year.

          (gg) “Restricted Stock Award” means a grant of Shares subject to a risk of forfeiture
or other restrictions that will lapse upon the achievement of one or more goals relating to
completion of service by the Grantee, or achievement of performance or other objectives, as
determined by the Plan Administrator.

          (hh) “Restricted Unit Award” means a grant of Stock Units subject to a risk of
forfeiture or other restrictions that will lapse upon the achievement of one or more goals relating
to completion of service by the Participant, or achievement of performance or other objectives, as
determined by the Plan Administrator.

          (ii) “Retirement” means, in the case of an Employee, the termination of employment
with the Company or any Subsidiary or Parent of the Company at a time when the Employee is eligible
to receive immediately payable retirement benefits under a then existing retirement plan and, in
the case of a Non-Employee Director, means retirement from service on the Board.

          (jj) “SAR” means a stock appreciation right, which is the right to receive a payment
in cash, Shares or Stock Units equal to the amount of appreciation, if any, in the Fair Market
Value of a Share from the date of the grant of the right to the date of its payment.

          (kk) “Share” means a share of Capital Stock.

          (ll) “Share Award” means a grant of Shares without a risk of forfeiture and without
other restrictions.

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          (mm) “Stock Unit” means the right to receive a Share at a future point in time.

          (nn) “Stock Unit Award” means the grant of a Stock Unit without a risk of forfeiture
and without other restrictions.

          (oo) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing,
as defined in Section 424(f) of the Code.

     Section 3. Administration.

          (a) The Plan shall be administered by the Plan Administrator.

          (b) Subject to the provisions of this Plan and, in the case of a Committee, the specific
duties delegated to or limitations imposed upon such Committee by the Board, the Plan Administrator
shall have the authority, in its discretion:

          (i) to establish, amend and rescind rules and regulations relating to the Plan;

          (ii) to select the Eligible Individuals to whom Awards may from time to time be granted
hereunder;

          (iii) to determine the amount and type of Awards, including any combination thereof, to
be granted to any Eligible Individual;

          (iv) subject to Section 3(c) hereof, to grant Awards to Eligible Individuals and, in
connection therewith, to determine the terms and conditions, not inconsistent with the terms
of this Plan, of any such Award including, but not limited to, the number of Shares or Stock
Units that may be issued or amount of cash that may be paid pursuant to the Award, the
exercise or purchase price of any Share or Stock Unit, the circumstances under which Awards
or any cash, Shares or Stock Units relating thereto are issued, retained, become exercisable
or vested, are no longer subject to forfeiture or are terminated, forfeited or expire, based
in each case on such factors as the Plan Administrator shall determine, in its sole
discretion;

          (v) to determine the Fair Market Value of the Capital Stock, in accordance with this
Plan;

          (vi) to establish, verify the extent of satisfaction of, or adjust any performance
goals or other conditions applicable to the grant, issuance, exercisability, vesting and/or
ability to retain any Award;

          (vii) to approve forms of agreement for use under the Plan;

          (viii) to determine whether and under what circumstances an Award may be settled in
cash instead of Shares or Stock Units;

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          (ix) to determine whether, to what extent and under what circumstances Shares and other
amounts payable with respect to an Award under this Plan shall be deferred either
automatically or at the election of the participant (including providing for and determining
the amount, if any, of any deemed earnings on any deferred amount during any deferral
period);

          (x) to determine whether and to what extent an adjustment is required under Section 10
of this Plan;

          (xi) to interpret and construe this Plan, any rules and regulations under this Plan and
the terms and conditions of any Award granted hereunder, and to make exceptions to any such
provisions in good faith and for the benefit of the Company; and

          (xii) to make all other determinations deemed necessary or advisable for the
administration of this Plan.

          (c) Notwithstanding anything contained in this Plan, the Plan Administrator may not:

          (i) grant any Option or SAR in substitution for an outstanding Option or SAR except as
provided in Section 10(b);

          (ii) reduce the exercise price of an outstanding Option or SAR, whether through
amendment, cancellation or replacement of such Option or SAR, unless such reduction is
approved by the shareowners of the Company;

          (iii) grant a Restricted Stock Award or Restricted Unit Award with a risk of forfeiture
or restriction that lapses earlier than at the rate of one-third of the Shares subject to
the Award on each of the first, second and third anniversary of the date of grant; provided,
however, that the Plan Administer may grant a Restricted Stock Award or Restricted Unit
Award with a risk of forfeiture or restriction that lapses upon the later to occur of (x)
the date of achievement of one or more performance criteria and (y) the one year anniversary
of the date of grant of the Award;

          (iv) grant a Performance Share Award or Performance Unit Award that vests earlier than
the later to occur of (x) the date of achievement of one or more performance criteria and
(y) the one year anniversary of the date of the Award;

          (v) lapse or waive restrictions applicable to any Restricted Stock Award, Restricted
Unit Award, Performance Share Award, or Performance Unit Award; or

          (vi) grant any Share Award or Stock Unit Award to any officer or director of the
Company except in lieu of salary or cash bonus.

          (d) The limitations of Section 3(c) shall not apply to Awards for up to ten percent of the
Shares under the Plan granted by a Committee composed entirely of “independent directors” (under
all definitions of independence then applicable to the Company).

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          (e) Except as specifically provided in this Plan, no action of the Plan Administrator shall
deprive any person without such person’s consent of any rights theretofore granted pursuant hereto.

          (f) All decisions, determinations and interpretations of the Plan Administrator shall be final
and binding on all Participants.

     Section 4. Shares Subject to the Plan.

          (a) The aggregate number of Shares which may be issued pursuant to the Plan shall be 3,750,000
plus Shares added to the Plan from the Prior Stock Plans pursuant to Sections 4(d) and 4(e) hereof.

          (b) Upon shareowner approval of this Plan, no further grants or awards of any kind shall be
made by the Company under its Prior Stock Plans.

          (c) The number of Shares which may be issued under the Plan and covered by outstanding Awards
is subject to adjustment as provided in Section 10.

          (d) To the extent that Options granted under the Plan or under the Prior Stock Plans shall
expire or terminate without being exercised or Shares awarded under the Plan or under the Prior
Stock Plans shall be forfeited, such Shares shall remain available or be added to and shall
increase the number of Shares available for purposes of the Plan.

          (e) Shares delivered in payment of the purchase price in connection with the exercise of
Options or Shares delivered or withheld to pay tax withholding obligations or otherwise under the
Plan or under the Prior Stock Plans shall be added to and shall increase the number of Shares
available for purposes of the Plan.

          (f) The aggregate number of Shares that may be issued pursuant to Incentive Stock Options
shall be limited to 3,750,000. Notwithstanding anything to the contrary in this Plan, the
foregoing limitation shall be subject to adjustment under Section 10, but only to the extent that
such adjustment will not affect the status of any Award intended to qualify as an Incentive Stock
Option. The foregoing limitation shall not apply to the extent that it is no longer required in
order for Options to qualify as Incentive Stock Options.

          (g) The aggregate number of Shares issuable under all Awards granted under this Plan during
any fiscal year to any one Eligible Individual shall not exceed 500,000. Notwithstanding anything
to the contrary in this Plan, the foregoing limitation shall be subject to adjustment under Section
10, but only to the extent that such adjustment will not affect the status of any Award intended to
qualify as “performance-based compensation” under Section 162(m) of the Code. The foregoing
limitation shall not apply to the extent that it is no longer required in
order for compensation in connection with grants under this Plan to be treated as
“performance-based compensation” under Section 162(m) of the Code.

          (h) Capital Stock to be issued under the Plan may be either authorized and unissued Shares or
Shares held in treasury by the Company.

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     Section 5. Terms of Options and SARs. Each Option and SAR granted under the Plan shall be
evidenced by a written document (including an electronic version thereof) and shall be subject to
the following terms and conditions:

          (a) Subject to adjustment as provided in Section 10 of this Plan, the price at which a Share
covered by an Option may be purchased shall not be less than the Fair Market Value thereof at the
time the Option is granted. If required by the Code, 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 of the Company) and an Option granted to such Optionee is intended to qualify
as an Incentive Stock Option, the price at which a Share covered by an Option may be purchased
shall be not less than 110% of the Fair Market Value thereof at the time the Option is granted.

          (b) The aggregate Fair Market Value of Shares 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 and Parent) shall not exceed the limitations, if any, imposed by the Code.

          (c) If any Option designated as an Incentive Stock Option, either alone or in conjunction with
any other Option or Options, exceeds the foregoing limitation, or does not otherwise qualify for
treatment as an Incentive Stock Option, all or 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.

          (d) Except as otherwise provided by the Plan Administrator, during the lifetime of the
Optionee the Option or SAR may be exercised only by the Optionee and the Option or SAR shall not be
transferable by the Optionee other than by will or by the laws of descent and distribution or
pursuant to a domestic relations order. After the death of the Optionee, the Option or SAR 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 this Section 5.

          (e) An Option or SAR may be exercised in whole at any time, or in part from time to time,
within the Original Option Period; provided, however, that, unless otherwise provided by the Plan
Administrator:

          (i) If the Optionee is an Employee who shall cease to be employed by the Company or any
Subsidiary or Parent of the Company by reason of death, Disability or
Retirement, the Option or SAR may be exercised only within three years after
termination of employment and within the Original Option Period;

          (ii) If the Optionee is an Employee who shall cease to be employed by the Company or
any Subsidiary or Parent of the Company by reason of termination of the Optionee for cause,
the Option or SAR shall forthwith terminate and the Optionee shall

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not be permitted to
exercise the Option or SAR following the Optionee’s termination of employment;

          (iii) If the Optionee is an Employee who shall cease to be employed by the Company or
any Subsidiary or Parent of the Company by reason of the Optionee’s voluntary termination or
a termination of the Optionee other than for cause, the Option or SAR may be exercised only
within the three months after the termination of employment and within the Original Option
Period;

          (iv) If the Optionee is a Non-Employee Director who shall cease to serve on the Board,
the Option or SAR may be exercised only within three months after the cessation of Board
service and within the Original Option Period or, if such cessation was due to death,
Disability or Retirement, within three years after cessation of Board service and within the
Original Option Period, unless such cessation of service as a Non-Employee Director was the
result of removal for cause, in which case the Option or SAR shall forthwith terminate;

          (v) Notwithstanding anything to the contrary contained in this Plan, each Option or SAR
held by an Employee who is terminated by the Company or any Subsidiary or Parent of the
Company for any reason during the two-year period following a Change in Control or a
Non-Employee Director who is removed from the Board for any reason during the two-year
period following a Change in Control shall immediately vest and may be exercised at any time
within the three-month period after the termination of employment or cessation of Board
service regardless of the Original Option Period;

          (vi) If the Optionee shall die, the Option or SAR may be exercised by the Optionee’s
personal representative or persons entitled thereto under the Optionee’s will or the laws of
descent and distribution;

          (vii) Except as provided in Sections 5(e)(v), (ix) and (x), the Option or SAR may not
be exercised for more Shares (subject to adjustment as provided in Section 10) after the
termination of the Optionee’s employment, cessation of service as a Non-Employee Director or
the Optionee’s death (as the case may be) than the Optionee was entitled to purchase
thereunder at the time of such Optionee’s termination of employment, cessation of service as
a Non-Employee Director or the Optionee’s death;

          (viii) To the extent provided by the Code, 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 of the Company) at the time an Option is granted to such Optionee and
such Option is intended to qualify as an Incentive Stock
Option, the Option, if not exercised within five years from the date of grant or any
other period proscribed by the Code, will cease to be an Incentive Stock Option;

          (ix) If the Optionee is an Employee who shall cease to be employed by the Company or
any Subsidiary or Parent of the Company or is a Non-Employee Director who shall cease to
serve on the Board by reason of death or Disability, as the case may

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be, all Options and
SARs held by the Optionee shall automatically vest and become exercisable in full as of the
date that the Optionee’s employment with the Company or any Subsidiary or Parent of the
Company or service on the Board ceased; and

          (x) In the event that an Optionee ceases to be employed by the Company or any
Subsidiary or Parent of the Company or to serve on the Board, as the case may be, as a
result of such Optionee’s Retirement, all Options and SARs held by the Optionee which are
not vested on the date of Retirement shall continue to vest and become exercisable in
accordance with their original vesting schedule during the two-year period following such
Optionee’s Retirement. Any Options or SARs which remain unvested on the second anniversary
of such Optionee’s Retirement shall forthwith terminate on such date. In the event of the
death or Disability of such Optionee during the two-year period following Retirement, all
Options or SARs held by the Optionee shall automatically vest and become exercisable in
full.

          (f) Except as otherwise provided by the Plan Administrator, the purchase 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) through the delivery to the Company (by attestation of
Share ownership or as otherwise provided by the Plan Administrator) of previously-owned Shares
having an aggregate fair market value equal to the price of the Shares being purchased pursuant to
the Option; provided, however, that Shares delivered in payment of the Option price must have been
purchased in the open market or held by the Participant for at least six (6) months in order to be
utilized to pay the purchase price of the Option or must meet such other conditions as established
by the Plan Administrator; or (iv) through any combination of the payment procedures set forth in
subsections (i)-(iii) of this Section 5(f).

          (g) Exercise of an Option or SAR in any manner shall result in a decrease in the number of
Shares which thereafter may be available under the Option or SAR by the number of Shares as to
which the Option or SAR is exercised. In addition, in the event of an Option granted in tandem
with an SAR, the exercise of the Option in any manner shall result in a decrease in the number of
Shares which thereafter may be available under the SAR by the number of Shares as to which the
Option is exercised, and the exercise of the SAR in any manner shall result in a decrease in the
number of Shares which thereafter may be available under the Option by the number of Shares as to
which the SAR is exercised.

          (h) The Plan Administrator, in its discretion, may authorize the issuance of “stock retention
Options” under this Plan which provide, upon the exercise of an Option granted under this Plan or
under any other stock plan (a “prior Option”) and payment of the purchase
price using previously-owned Shares, for the automatic issuance of a new Option under this
Plan 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, with an exercise price equal to the current Fair
Market Value and for a term equal to the term of the prior Option.

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          (i) The Plan Administrator may include such other terms and conditions of Options or SARs 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 or SARs shall be exercisable in one or more installments during the term of the Option or
SAR as determined by the Plan Administrator.

     Section 6. Performance Share Awards, Performance Unit Awards, Restricted Stock Awards,
Restricted Unit Awards, Share Awards and Stock Unit Awards.

          (a) Subject to the terms of this Plan, including Section 3(c) hereof, Performance Share
Awards, Performance Unit Awards, Restricted Stock Awards, Restricted Unit Awards, Share Awards or
Stock Unit Awards may be issued by the Plan Administrator to Eligible Individuals, either alone, in
addition to, or in tandem with other Awards granted under the Plan and/or cash awards made outside
of this Plan. Such Awards shall be evidenced by a written document (including an electronic
version thereof) containing any provisions regarding (i) the number of Shares or Stock Units
subject to such Award or a formula for determining such, (ii) the purchase price of the Shares or
Stock Units, if any, and the means of payment for the Shares or Stock Units, (iii) the performance
criteria, if any, and level of achievement versus these criteria that shall determine the number of
Shares or Stock Units granted, issued, retainable and/or vested, (iv) such terms and conditions on
the grant, issuance, vesting and/or forfeiture of the Shares or Stock Units as may be determined
from time to time by the Plan Administrator, including continued employment or service, (v)
restrictions on the transferability of the Shares or Stock Units and (vi) such further terms and
conditions in each case not inconsistent with this Plan as may be determined from time to time by
the Plan Administrator.

          (b) The grant, issuance, retention and/or vesting of Shares or Stock Units pursuant to any
Performance Share Award, Performance Unit Award, Restricted Stock Award or Restricted Unit Award
shall occur at such time and in such installments as determined by the Plan Administrator or under
criteria established by the Plan Administrator and consistent with this Plan, including Section
3(c) hereof. The Plan Administrator shall have the right to make the timing of the grant and/or
the issuance, ability to retain and/or vesting of Shares or Stock Units subject to continued
employment, passage of time and/or such performance criteria as deemed appropriate by the Plan
Administrator and consistent with this Plan, including Section 3(c) hereof. Notwithstanding
anything to the contrary herein, the performance criteria for any Award that is intended to satisfy
the requirements for “performance-based compensation” under Section 162(m) of the Code shall be a
measure based on one or more Qualifying Performance Criteria selected by the Plan Administrator and
specified at the time the Award is granted.

          (c) Notwithstanding the foregoing, no single Share Award or Stock Unit Award to any one
Grantee in any fiscal year shall be for more than 200 Shares.

          (d) With respect to any Performance Share Award, Performance Unit Award, Restricted Stock
Award or Restricted Unit Award:

          (i) If, prior to a Change in Control, the designated goals have not been achieved
within the designated period or the Grantee ceases to be employed by the Company or ceases
to serve on the Board for any reason other than death, Disability or

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Retirement prior to the
lapse of any restrictions or vesting of the Award, the Grantee shall forfeit such Award;

          (ii) Unless otherwise provided by the Plan Administrator at the time an Award is
granted or in the applicable Award agreement, in the event that a Grantee ceases to be an
Employee or to serve on the Board as a result of such Grantee’s death, Disability or
Retirement, all outstanding Awards held by such Grantee shall automatically vest and all
restrictions shall lapse as of the date of such Grantee’s death, Disability or Retirement;

          (iii) Notwithstanding anything to the contrary contained in this Plan, each Award held
by an Employee who is terminated by the Company or any Subsidiary or Parent of the Company
for any reason during the two-year period following a Change in Control or a Non-Employee
Director who is removed from the Board for any reason during the two-year period following a
Change in Control shall automatically vest and all restrictions shall lapse as of the date
of such Grantee’s termination of employment or cessation of Board service; and

          (iv) During the lifetime of the Grantee, the Award shall not be transferable otherwise
than by will or by the laws of descent and distribution or pursuant to a domestic relations
order.

          (e) Except as otherwise provided by the Plan Administrator, a Grantee who has received a
Restricted Stock Award shall have all rights of a shareowner in such Shares including, but not
limited to, the right to vote and receive dividends with respect thereto from and after the date of
grant of such Award; provided, however, that Shares awarded pursuant to the Plan which have not
vested or which contain restrictions or conditions may not be sold or otherwise transferred by the
Grantee and stock certificates representing such Shares may bear a restrictive legend to that
effect.

     Section 7. Incentive Bonus Awards.

          (a) Each Incentive Bonus Award will confer upon the Employee the opportunity to earn a future
payment tied to the level of achievement with respect to one or more performance criteria
established for a performance period established by the Plan Administrator.

          (b) Each Incentive Bonus Award shall be evidenced by a document containing provisions
regarding (a) the target and maximum amount payable to the Employee, (b) the performance criteria
and level of achievement versus these criteria that shall determine the amount of such payment, (c)
the term of the performance period as to which performance shall be measured for determining the
amount of any payment, (d) the timing of any payment earned by virtue of performance, (e)
restrictions on the alienation or transfer of the bonus prior to actual
payment, (f) forfeiture provisions and (g) such further terms and conditions, in each case not
inconsistent with this Plan as may be determined from time to time by the Plan Administrator. The
maximum amount payable as a bonus may be a multiple of the target amount payable, but the maximum
amount payable pursuant to that portion of an Incentive Bonus Award granted under this Plan for any
fiscal year to any Employee that is intended to

-12-

 

satisfy the requirements for “performance-based
compensation” under Section 162(m) of the Code shall not exceed $2,000,000.

          (c) The Plan Administrator shall establish the performance criteria and level of achievement
versus these criteria that shall determine the target and maximum amount payable under an Incentive
Bonus Award, which criteria may be based on financial performance and/or personal performance
evaluations. The Plan Administrator may specify the percentage of the target incentive bonus that
is intended to satisfy the requirements for “performance-based compensation” under Section 162(m)
of the Code. Notwithstanding anything to the contrary herein, the performance criteria for any
portion of an Incentive Bonus Award that is intended by the Plan Administrator to satisfy the
requirements for “performance-based compensation” under Section 162(m) of the Code shall be a
measure based on one or more Qualifying Performance Criteria selected by the Plan Administrator and
specified at the time the Incentive Bonus Award is granted. The Plan Administrator shall certify
the extent to which any Qualifying Performance Criteria has been satisfied, and the amount payable
as a result thereof, prior to payment of any incentive bonus that is intended to satisfy the
requirements for “performance-based compensation” under Section 162(m) of the Code.

          (d) The Plan Administrator shall determine the timing of payment of any incentive bonus. The
Plan Administrator may provide for or, subject to such terms and conditions as the Plan
Administrator may specify, may permit an election for the payment of any incentive bonus to be
deferred to a specified date or event. An Incentive Bonus Award may be payable in Shares, Stock
Units or in cash or other property, including any Award permitted under this Plan.

          (e) Notwithstanding satisfaction of any performance goals, the amount paid under an Incentive
Bonus Award on account of either financial performance or personal performance evaluations may be
reduced by the Plan Administrator on the basis of such further considerations as the Plan
Administrator shall determine.

     Section 8. Non-Employee Director Awards.

          Notwithstanding anything to the contrary contained in this Plan, each Non-Employee Director
shall only be entitled to receive the following Awards under this Plan, effective as of January 1,
2006:

          (a) Each Non-Employee Director shall receive a Nonstatutory Stock Option to purchase up to
5,000 shares, as determined by the Board, at Fair Market Value, such Option to Vest as to
exercisability in 3 equal, annual installments and to have a term of ten (10) years.

          (b) Each Non-Employee Director shall receive a Restricted Stock Award for Shares with a Fair
Market Value of up to $40,000, as determined by the Board, rounded to the nearest whole Share.
Such Awards shall vest and the restrictions on transfer shall lapse as to one-
third of the Shares subject to the Award on each anniversary of the date of grant provided
that the Non-Employee Director continues to serve on the Board.

-13-

 

          (c) Each new Non-Employee Director shall receive, as of the first date of service on the
Board, a Nonstatutory Stock Option to purchase twice the number of Shares provided in the
Nonstatutory Stock Option most recently granted to the Non-Employee Directors (other than the lead
director) and a Restricted Stock Award based on the number of Shares provided in the Restricted
Stock Award most recently granted to the Non-Employee Directors (other than the lead director) but
pro rated for the amount of the fiscal year remaining as of the first date of service.

     Section 9. 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 9 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 the applicable disqualifying period, 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 Participant 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 withholding by the Company of Shares otherwise deliverable to
the Participant or through the delivery by the Participant to the Company of previously-owned
Shares in each case having an aggregate Fair Market Value on the Tax Date equal to the tax
obligation; or (iii) in the discretion of the Plan Administrator, through a combination of the
foregoing.

     Section 10. Adjustment of Number and Price of Shares.

          (a) In the event of a corporate transaction involving the Company (including, without
limitation, any stock dividend, stock split, reverse stock split, extraordinary cash dividend,
recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or
exchange of shares), the Plan Administrator shall make an equitable adjustment to the shares to be
issued under the Plan and to outstanding Awards to preserve the benefits or potential benefits of
the Awards. Action by the Plan Administrator may include: (i) adjustment of the number and kind of
securities which may be delivered under the Plan; (ii) adjustment of the number and kind of
securities subject to outstanding Awards; (iii) adjustment of the exercise price of outstanding
Options and SARs; (iv) adjustment of the share limitations contained in this Plan; and (v) any
other adjustments that the Plan Administrator determines to be equitable. Any such adjustment
shall be effective and binding for all purposes of the Plan and on each outstanding Award.

          (b) Without limiting the foregoing, in the event that, by reason of a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization or liquidation,

-14-

 

the Board shall authorize the issuance or assumption of an Option 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 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.

          (c) No adjustment or substitution provided for in this Section 10 shall require the Company to
issue or to sell a fractional share and the total adjustment or substitution with respect to each
Award agreement shall be limited accordingly.

          (d) Without limiting the foregoing, and notwithstanding anything to the contrary contained in
the Plan or any document with respect to any Award, in the event of a Business Combination under
the terms of which the holders of Capital Stock of the Company will receive upon consummation
thereof cash for each share of Capital Stock of the Company surrendered pursuant to such Business
Combination (the “Cash Purchase Price”), the Plan Administrator may provide that all outstanding
Awards representing the right to purchase or receive Shares shall terminate upon consummation of
the Business Combination and each such Award, including each Option and SAR, shall receive, in
exchange therefor, a cash payment equal to the amount (if any) by which (i) the Cash Purchase Price
multiplied by the number of Shares subject to such Award held by such Grantee exceeds (ii) the
aggregate purchase or exercise price, if any, thereof.

     Section 11. Change in Control. Unless the Board shall determine by resolution prior to a
Change in Control, in the event of a Change in Control, the following provisions shall apply to
Awards previously granted under the Plan, notwithstanding any provision herein or in any agreement
to the contrary:

          (a) All Options which provide for exercise in one or more installments shall become
immediately exercisable in full immediately prior to the Change in Control; and

          (b) All Awards which have not previously vested shall become vested and all restrictions on
Awards shall lapse immediately prior to the Change in Control.

     Section 12. Termination of Employment and Forfeiture. Notwithstanding any other provision of
the Plan (other than provisions regarding Change in Control, which shall apply in all events), a
Participant shall have no right to exercise any Option or vest in any Shares awarded under the Plan
if following the Participant’s termination of employment with the Company or any Subsidiary or
Parent of the Company and within a period of two years thereafter, the Participant engages in any
business or enters into any employment which the Board in its sole discretion determines to be
either directly or indirectly competitive with the business of the Company or substantially
injurious to the Company’s financial interest (the occurrence of an event described above shall be
referred to herein as “Injurious Conduct”). Furthermore, notwithstanding any other provision of
the Plan to the contrary, in the event that a Participant receives or is entitled to the delivery
or vesting of cash or Shares pursuant to an Award made
during the 12-month period prior to the Participant’s termination of employment with the
Company or any Subsidiary or Parent of the Company or during the 24-month period

-15-

 

following the
Participant’s termination of such employment, then the Board, in its sole discretion, may require
the Participant to return or forfeit to the Company the cash or Capital Stock received with respect
to such Award (or its economic value as of (i) the date of the exercise of the Option or (ii) the
date of grant or payment with respect to any other Award, as the case may be) in the event that the
participant engages in Injurious Conduct.

     Section 13. Amendment and Discontinuance. The Board 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 and, provided further, that the Board may not
materially amend this Plan without shareowner approval.

     Section 14. 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 securities hereunder prior to registration of the Shares subject to the Plan
under the Securities Act of 1933, as amended, 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. and any other exchange or
market on which the Shares are listed or quoted. The Company shall use its reasonable best efforts
to effect such registrations and to comply with such laws, regulations and rulings forthwith upon
advice by its counsel that any such registration or compliance is necessary.

     Section 15. 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 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 16. 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 17. No Right to Employment. The Plan shall not confer upon any Participant any right
with respect to continuation of any employment or consulting relationship with the Company or
membership on the Board, nor shall it interfere in any way with the right to terminate such
Participant’s employment or consulting relationship at any time, with or without cause.

     Section 18. Governing Law. The validity, constrictions and effect of this Plan, agreements
entered into pursuant to the Plan, and of any rules, regulations, determinations or decisions made
by the Plan Administrator relating to the Plan or such agreements, and the rights of any and all
persons having or claiming to have any interest therein or thereunder, shall be determined
exclusively in accordance with applicable federal laws and the laws of the Commonwealth of
Pennsylvania, without regard to its conflict of laws principles.

-16-

 

     Section 19. Effective Date of Plan/Duration. The Plan shall become effective upon approval of
the Plan by the affirmative vote of holders of a majority of the outstanding Shares present and
voting at a meeting of shareowners; provided that at least a majority of the outstanding Shares
votes for, against or abstains on the matter and at least a majority of these Shares votes in favor
of the Plan. No Award may be granted under the Plan after July 23, 2012. Awards granted on or
prior to July 23, 2012 shall remain outstanding in accordance with this Plan and their respective
terms.

-17-EX-10.2

 

Exhibit 10.2

KENNAMETAL INC.

2008 STRATEGIC TRANSFORMATIONAL EQUITY PROGRAM

     KENNAMETAL INC., a Pennsylvania corporation (the “Company”), hereby establishes the KENNAMETAL
INC. 2008 STRATEGIC TRANSFORMATIONAL EQUITY PROGRAM (the “Program”), in accordance with the
provisions of the Kennametal Inc. Stock and Incentive Plan of 2002, as now or hereafter amended
(the “Plan”), and the terms provided herein.

     WHEREAS, the Company maintains the Plan for the benefit of its employees and that of its
Subsidiaries;

     WHEREAS, in order to further align the interests of key employees with the interests of the
shareowners and to enhance the Company’s ability to retain the employment of participants in the
Program, the Company desires to provide long-term incentive compensation; and

     WHEREAS, Section 6 of the Plan authorizes the Company to grant Stock Units under a Performance
Share Award.

     NOW, THEREFORE, the Committee hereby adopts the Program on the following terms and conditions:

1. Plan. In addition to the terms and conditions set forth herein, awards under the
Program are subject to, and governed by, the terms and conditions set forth in the Plan, which
terms are hereby incorporated by reference. Unless the context otherwise requires, capitalized
terms not otherwise defined herein shall have the meanings set forth in the Plan. In the event of
any conflict between the provisions of the Program and the Plan, the Committee shall have full
authority and discretion to resolve such conflict and any such determination shall be final and
binding on the Participant (as defined below).

2. Effective Date. The effective date of this Program is October 1, 2007.

3. Eligibility.

     3.1 The Chief Executive Officer of the Company (the “CEO”) shall nominate the
employees of the Company and its Subsidiaries (other than the CEO) who shall be eligible to
participate in the Program. The Committee shall select, from a group consisting of the CEO and the
CEO nominated employees, those individuals who shall participate in the Program (each a
“Participant” and collectively the “Participants”). In the event that an employee is hired
by the Company or a Subsidiary during the Performance Period, upon nomination by the CEO and to the
extent consistent with Section 162(m) of the Code, the Committee shall determine whether such
employee will become a Participant in the Program, subject to such adjustments as the Committee
determines to be necessary or desirable.

     3.2 Notwithstanding the foregoing or any provision of this Program to the contrary, the
Committee may terminate a Participant’s participation in this Program at any time if the
Committee determines, in its sole discretion, that the Participant has experienced a change in
status that no longer warrants participation in the Program, including, but not limited to, a

 

 

reassignment or transfer of position or authority resulting in a diminution of duties and/or
responsibilities (“Change in Status”). In making decisions regarding a Participant’s continued
participation in the Program, the Committee may consider any and all factors it considers relevant,
including, but not limited to whether the Participant continues to: lead a corporate function, line
business unit or strategic team/initiative; have a meaningful impact on the Company’s key financial
or strategic business objectives and/or goals; be a critical resource in the development and
execution of the Company’s long-term strategic plan; serve as an executive officer or have the
potential to become an executive officer; perform consistently and satisfy expectations for their
defined role; be a team player and role model for the Company’s core values; and/or have potential
for a future leadership role.

4. Stock Units.

          4.1 The Committee shall determine the number of Stock Units to be awarded to each Participant.
Each Stock Unit awarded under the Program shall represent a contingent right to receive one share
of the Company’s Capital Stock as described more fully herein, to the extent such Stock Unit is
earned and becomes payable pursuant to the terms of this Program. Notwithstanding, Stock Units as
initially awarded have no independent economic value, but rather are mere units of measurement used
for purpose of calculating the number of Shares, if any, to be delivered under the Program.

          4.2 Stock Units shall be adjusted in accordance with the terms of the Program as described
more fully herein. Notwithstanding any provision of this Program to the contrary, the Committee
shall not use its discretionary authority to increase the number of Stock Units that would
otherwise be earned upon full attainment of the Performance Conditions (as defined below) with
respect to any Performance Share Award.

5. Performance and Service Conditions.

          5.1 Subject to Section 8, sixty-five percent (65%) of the total number of Stock Units that may
be earned by a Participant will be based on the Company’s adjusted earnings per share (“EPS”), and
thirty-five percent (35%) of the total number of Stock Units that may be earned by a Participant
will be based on total shareowner return (“TSR”) (each a “Performance Condition” and collectively
the “Performance Conditions”). The Performance Conditions shall be measured at one or more
measurement dates (“Measurement Dates”) during the performance period of October 1, 2007 through
September 30, 2011 (the “Performance Period”), each as approved in writing by (and determined in
accordance with the procedures established by) the Committee on November 26, 2007 and on file with
the Committee; provided, however, that, except as otherwise specifically provided herein, the
ability to earn Stock Units and to receive payment thereon under the Program is expressly
contingent upon: (a) achievement of the Performance Conditions; (b) satisfaction of the Service
Condition (as defined below); and (c) otherwise satisfying all other terms and conditions
of the Program.

          5.2 Except as otherwise provided in Section 8, each Participant must be actively employed by
the Company on, and not Separate from Service before, the Payment Date to be eligible to receive
payment of any Stock Units earned under the Program (the “Service Condition”). For purposes of this
Program, “Separation from Service” shall mean the

 

 

Participant’s death, retirement or other termination of employment with the Company and all of
its controlled group members within the meaning of Section 409A of the Code. For purposes hereof,
the determination of 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; provided, further, where legitimate business reasons exist
(within the meaning of Treas. Reg. § 1.409A-1(h)(3)), the language “at least 20 percent” shall be
used instead of “at least 80 percent” in each place it appears. Whether a Participant has a
Separation from Service will be determined based on all of the facts and circumstances and in
accordance with the guidance issued under Section 409A.

6. Issuance and Distribution.

          6.1 The Committee shall certify in writing prior to payment the extent to which the applicable
Performance Conditions and any other material terms of the Program have been achieved. For
purposes of this provision, and for so long as the Code permits, the approved minutes of the
Committee meeting in which the certification is made may be treated as written certification.

          6.2 Subject to the terms and conditions of this Program, Stock Units earned by a Participant
will be settled and paid in Shares of the Company’s Capital Stock as soon as practicable following
the end of the Performance Period on a date determined in the Company’s discretion, but in no event
later than March 15th of the calendar year following the calendar year in which the
Performance Period ends (the “Payment Date”).

          6.3 Subject to the terms and conditions of this Program, in the event a Participant Separates
from Service on account of: (a) death or Disability during the Performance Period; (b) an
involuntary termination by the Company without cause during the Performance Period; or (c) on
account of Retirement, the Stock Units, to the extent earned by the Participant, shall be paid as
soon as practicable following the date of such Separation from Service, but in no event later than
March 15th of the calendar year following the calendar year in which such termination
occurred, in accordance with the provisions of Section 8 herein.

          6.4 Notwithstanding any other provision of this Program, in the event of a Change in Control,
any Stock Units earned by the Participant based on Measurement Dates prior to the closing date of
the Change-in-Control transaction shall be paid on the closing date of the Change in Control
transaction; provided, further, in the event of a Change in Control, Stock Units may, in the
Committee’s discretion, be settled in cash and/or securities or other property.

7. Dividends. Stock Units will not be credited with dividends that are paid on the
Company’s common stock.

8. Change in Participant’s Status.

          8.1 Death or Disability.

          (a) In the event a Participant Separates from Service during the Performance Period on account
of death or Disability, the Service Condition will be waived, the Performance

 

 

Conditions will be deemed to have been achieved and the Participant will be deemed to have
earned that number of such Participant’s Stock Units determined by: (i) multiplying .50 by the
total number of Stock Units in the Participant’s Performance Share Award; and (ii) multiplying the
resulting number of Stock Unit’s determined under Subsection 8.1(a)(i) by the percentage
determined by dividing (x) the number of completed months starting with October 2007 and ending
with the month of the Participant’s death or Disability, by (y) the total number of months in the
Performance Period provided, however, that the Committee may determine, in its sole discretion at
the time of Separation of Service, that the Participant shall have earned a greater number of such
Participant’s Stock Units. Stock Units that become payable under this Section 8.1(a) shall be paid
and settled as provided in Section 6.3 above.

          (b) In the event a Participant Separates from Service during the period between the end of the
Performance Period and the Payment Date on account of death or Disability, the Service Condition
will be waived and the Participant shall be entitled to receive payment for any Stock Units that
have been earned based on Measurement Dates prior to the date of Separation from Service. Stock
Units that become payable under this Section 8.1(b) shall be paid and settled as provided in
Section 6.2 above.

          8.2 Retirement.

          (a) In the event a Participant Separates from Service during the Performance Period on account
of Retirement, all Stock Units granted to the Participant shall be cancelled and forfeited, whether
payable or not, without payment by the Company or any Affiliate; provided, however, that the
Committee may, in its sole discretion at the time of Retirement, waive the Service Condition and
determine that any Stock Units that have been earned based on Measurement Dates prior to the date
of Separation from Service shall not be cancelled and forfeited. Stock Units, if any, that become
payable under this Section 8.2(a) shall be paid and settled as provided in Section 6.3 above.

          (b) In the event a Participant Separates from Service during the period between the end of the
Performance Period and the Payment Date on account of Retirement, all Stock Units granted to the
Participant shall be cancelled and forfeited, whether payable or not, without payment by the
Company or any Affiliate; provided, however, that the Committee may, in its sole discretion at the
time of Retirement, waive the Service Condition and determine that any Stock Units that have been
earned based on Measurement Dates prior to the date of Separation from Service shall not be
cancelled and forfeited. Stock Units, if any, that become payable under this Section 8.2(b) shall
be paid and settled as provided in Section 6.2 above.

          8.3 Involuntary Termination (without cause).

          (a) In the event a Participant Separates from Service on account of an involuntary termination
by the Company without cause during the Performance Period, the Service Condition will be waived
and the Participant shall be entitled to receive payment for any Stock Units that have been earned
based on Measurement Dates prior to the date of Separation from Service. Stock Units that become
payable under this Section 8.3 shall be paid and settled as provided in Section 6.3 above.

 

 

          (b) In the event a Participant Separates from Service during the period between the end of the
Performance Period and the Payment Date on account of an involuntary termination by the Company
without cause, the Service Condition will be waived and the Participant shall be entitled to
receive payment for any Stock Units that have been earned based on Measurement Dates prior to the
date of Separation from Service. Stock Units that become payable under this Section 8.3(b) shall be
paid and settled as provided in Section 6.2 above.

          8.4 Other Separations from Service. In the event a Participant Separates from Service for any
other reason (other than death, Disability, Retirement, or an involuntary termination by the
Company without cause), including, but not limited to, voluntarily by the Participant or by the
Company with cause, prior to the Payment Date, all Stock Units granted to the Participant shall be
cancelled and forfeited, whether payable or not, without payment by the Company or any Affiliate.

          8.5 Termination of Participation (Change in Status). In the event the Committee terminates a
Participant’s participation in the Program on account of a Change in Status during the Performance
Period, all Stock Units that have not been earned based on Measurement Dates prior to the date the
Participant’s participation in the Program terminated shall be cancelled and forfeited without
payment by the Company or any Affiliate; provided, however, that the Committee may, in its sole
discretion at the time the Participant’s participation in the Program is terminated, determine that
all, or any portion of, such Stock Units shall not be cancelled and forfeited. Stock Units that
are not forfeited on account of a Change in Status shall remain subject to all of the terms and
conditions of the Program, including but not limited to, the Service Condition and the attainment
of Performance Conditions for any remaining Measurement Dates, as applicable. Stock Units, if any,
that become payable under this Section 8.5 shall be paid and settled as provided in Section 6.2
above

          8.6 Notwithstanding any other provision of this Program to the contrary, any Stock Units
awarded to a Participant that are not earned or deemed earned pursuant to this Section 8 shall be
cancelled and forfeited without payment by the Company or any Affiliate.

          8.7 Any payments due a deceased Participant shall be paid to the Participant’s estate as
provided herein. For purposes of the Program, the term “Disability” shall have the meaning
ascribed thereto under the Plan, and the term “Retirement” shall mean that a Participant
voluntarily Separates from Service at a time when the Participant meets either of the following
criteria: (a) a Participant is at least 55 years old and has at least 10 years of service to the
Company (based upon the Participant’s most recent date of hire); or (b) a Participant is a
participant under the Company’s Supplemental Executive Retirement Plan and has attained the age of
56.

9. Responsibilities of the Committee. In addition to the authority granted to the
Committee under the Plan, the Committee has responsibility for all aspects of the Program’s
administration, including but not limited to: ensuring that the Program is administered in
accordance with the provisions of the Program and the Plan; approving Participants; authorizing
awards of Stock Units to Participants; and adjusting Stock Units as authorized hereunder consistent
with the terms of the Program. All decisions of the Committee under the Program shall be final,
conclusive and binding on all interest parties. No member of the Committee shall be liable for

 

 

any action or determination made in good faith on the Program or any Stock Units awarded
thereunder.

10. Tax Consequences/Withholding.

          10.1 It is intended that: (a) a Participant’s Stock Units shall be considered to be subject to
a substantial risk of forfeiture in accordance with those terms as defined in Section 409A and
3121(v)(2) of the Code; and (b) a Participant shall have merely an unfunded, unsecured promise to
be paid a benefit, and such unfunded promise shall not consist of a transfer of “property”
within the meaning of Code Section 83.

          10.2 At the Company’s option, all applicable federal, state and local income and employment
taxes (including taxes of any foreign jurisdiction) which the Company is required to withhold or
remit at any time with respect to the Stock Units may be settled by either (a) the withholding by
the Company of that portion of the Stock Units having an aggregate Fair Market Value on the Tax
Date equal to the tax obligation, with the remaining portion payable to the Participant, or (b) the
Company requesting that Participant timely remit to the Company any such payment in full, in cash
or check, or as otherwise authorized under the terms of the Plan.

          10.3 This Program is intended to be excepted from coverage under Section 409A of the Code and
the regulations promulgated thereunder and shall be construed accordingly. Notwithstanding any
provision of this Program to the contrary, if any benefit provided under this Program is subject to
the provisions of Section 409A of the Code and the regulations issued thereunder (and not excepted
therefrom), the provisions of the Program shall be administered, interpreted and construed in a
manner necessary to comply with Section 409A and the regulations issued thereunder (or disregarded
to the extent such provision cannot be so administered, interpreted, or construed).
Notwithstanding, Section 409A of the Code may impose upon the Participant certain taxes or other
charges for which the Participant is and shall remain solely responsible, and nothing contained in
this Program or the Plan shall be construed to obligate the Company or any Affiliate for any such
taxes or other charges.

          10.4 Notwithstanding any provision of the Program to the contrary, if a Performance Share
Award is intended to qualify as performance-based compensation under Section 162(m) of the Code and
the regulations issued thereunder and a provision of this Program would prevent such award from so
qualifying, such provision shall be administered, interpreted and construed to carry out such
intention (or disregarded to the extent such provision cannot be so administered, interpreted or
construed).

11. Protective Covenants.

          11.1 General. The Participants acknowledge and recognize the highly competitive nature of the
business of the Company and its Affiliates and understand and agree that they owe the Company a
strict duty of loyalty. Toward that end, the Participants hereunder agree that this Section 11 is
reasonable and necessary in order to protect the legitimate business interests and goodwill of the
Company, including the Company’s trade secrets, valuable confidential business and proprietary
information, and specialized training provided to Participants and other employees of the Company.

 

 

          11.2 Non Competition and Non Solicitation. During the term of the Participant’s employment
and for eighteen (18) months following the termination of employment, the Participant agrees that
he/she will not, in any geographic region in which the Company or any of its Affiliates offers or
sells products or services or conducts business, directly or indirectly, on behalf of him/herself
or on behalf of others:

          (a) engage his/her services with a competitor of the Company as a principal,
executive, manager, director, employee, agent or consultant. This restriction
applies equally to services the Participant may wish to provide directly or
indirectly through any corporation, firm or organization in which the Participant
may be an officer, director, employee, substantial shareholder, partner, member or
be otherwise affiliated. A competitor of the Company is defined as any entity that
provides products or services that are the same as or similar to any products or
services offered by the Company; or

          (b) induce or attempt to induce any Company employee to terminate employment
with the Company, hire or participate in the hiring of any Company employee, or
interfere with or attempt to disrupt the relationship, contractual or otherwise,
between the Company and any Company employee. For purposes of this paragraph, a
Company employee means any person employed by the Company or any of its Affiliates
during the Performance Period or within six (6) months of the date of any action of
Participant that violates this paragraph.

          Participant acknowledges that the broad geographic restriction set forth above
is reasonable because the Company offers its products and services in a global,
international market. Participant further covenants and agrees that the geographic,
length of term and types of activities restricted (non-competition restrictions)
contained in this Agreement are reasonable and necessary to protect the legitimate
business interests of the Company because of the scope of the Company’s business.
Participant acknowledges that these non-competition restrictions are reasonable and
necessary and will not prevent Employee from being gainfully employed.

          11.3 The Participants each agree that he/she will not directly or indirectly assist others in
engaging in any of the activities, which are prohibited under Sections 11.2 above.

          11.4 It is expressly understood and agreed that although the Participants and the Company
consider the restrictions contained in this Section 11 to be reasonable, if a final judicial
determination is made by a court of competent jurisdiction that the time or territory or any other
restriction contained in this Program is unenforceable against any Participant, the provisions of
this Program shall not be rendered void but shall be deemed amended to apply as to such maximum
time and territory and to such maximum extent as such court may judicially determine or indicate to
be enforceable against such Participant. Alternatively, if any court of competent jurisdiction
finds that any restriction contained in this Program is unenforceable, and such restriction cannot
be amended so as to make it enforceable, such finding shall not affect the enforceability of any of
the other restrictions contained herein. The protective covenants set forth

 

 

in this Section 11 shall be extended by any amount of time that a Participant is in breach of
such covenants, such that the Company receives the full benefit of the time duration set forth
above.

12. Confidential Information and Trade Secrets. The Participants and the Company agree that
certain materials, including, but not limited to, information, data and other materials relating to
customers, development programs, costs, marketing, trading, investment, sales activities,
promotion, credit and financial data, manufacturing processes, financing methods, plans or the
business and affairs of the Company and its Affiliates, constitute proprietary confidential
information and trade secrets. Accordingly, the Participants will not at any time during or after
a Participant’s employment with the Company (including any Affiliate) disclose or use for such
Participant’s own benefit or purposes or the benefit or purposes of any other person, firm,
partnership, joint venture, association, corporation or other business organization, entity or
enterprise other than the Company and any of its Affiliates, any proprietary confidential
information or trade secrets, provided that the foregoing shall not apply to information which is
not unique to the Company or any of its Affiliates or which is generally known to the industry or
the public other than as a result of such Participant’s breach of this covenant. The Participants
agree that upon termination of employment with the Company (including any Affiliate) for any
reason, the Participants will immediately return to the Company all memoranda, books, papers,
plans, information, letters and other data, and all copies thereof or therefrom, which in any way
relate to the business of the Company and its Affiliates. The Participants further agree that the
Participants will not retain or use for their own account at any time any trade names, trademark or
other proprietary business designation used or owned in connection with the business of the Company
or any of its Affiliates.

13. Remedies/Forfeiture.

          13.1 The Participants acknowledge that a violation or attempted violation on a Participant’s
part of Sections 11 and 12 will cause irreparable damage to the Company and its Affiliates, and the
Participants therefore agree that the Company and its Affiliates shall be entitled as a matter of
right to an injunction, out of any court of competent jurisdiction, restraining any violation or
further violation of such promises by the Participants or a Participant’s employees, partners or
agents. The Participants agree that such right to an injunction is cumulative and in addition to
whatever other remedies the Company (including any Affiliate) may have under law or equity.
Specifically, the Participants agree that such right to an injunction is cumulative and in addition
to the Participants’ obligations to make timely payment to the Company as set forth in Section 13.2
of this Program. The Participants further acknowledge and agree that a Participant’s Performance
Share Award and Stock Units granted thereunder shall be cancelled and forfeited without payment by
the Company if such Participant breaches any of his or her obligations set forth in Section 11 and
12 herein.

          13.2 At any point after becoming aware of a breach of any obligation set forth in Sections 11
and 12 of this Program, the Company shall provide notice of such breach to a Participant. By
agreeing to participate in this Program, the Participants agree that within ten (10) days after the
date the Company provides such notice, a Participant shall pay to the Company, in a form acceptable
to the Company, a dollar amount (determined as of the date of distribution) equal to any and all
distributions paid to or on behalf of such Participant under this Program. The Participants agree
that failure to make such timely payment to the Company

 

 

constitutes an independent and material breach of the terms and conditions of this Program, for which the
Company may seek recovery of the unpaid amount as liquidated damages, in addition to all other
rights and remedies the Company may have resulting from a Participant’s breach of the obligations
set forth in Sections 11 and 12. The Participants agree that timely payment to the Company as set
forth in this provision of the Program is reasonable and necessary because the compensatory damages
that will result from breaches of Sections 11 and/or 12 cannot readily be ascertained. Further,
the Participants agree that timely payment to the Company as set forth in this provision of the
Program is not a penalty, and it does not preclude the Company from seeking all other remedies that
may be available to the Company, including without limitation those set forth in this Section 13.

14. Assignment/Nonassignment.

          14.1 The Company shall have the right to assign this Program and the Participants agree to
remain obligated by all provisions of this Program that are assigned to any successor, assign or
surviving entity. Any successor to the Company is an intended third party beneficiary of this
Program.

          14.2 The Stock Units shall not be sold, pledged, assigned, hypothecated, transferred or
disposed of (a “Transfer”) in any manner, other than by will or the laws of descent and
distribution. Any attempt by a Participant to Transfer the Stock Units in violation of the terms
of the Program shall render the Stock Units null and void, and result in the immediate forfeiture
of such Stock Units, without payment by the Company or any Affiliate.

15. Impact on Benefit Plans. Payments under the Program shall not be considered as
earnings for purposes of the Company’s and/or Affiliate’s qualified retirement plans or any other
retirement or benefit plan unless specifically provided for therein. Nothing herein shall prevent
the Company or any Affiliate from maintaining additional compensation plans and arrangements for
its employees.

16. Successors; Changes in Stock. The obligation of the Company under the Program shall be
binding upon the successors and assigns of the Company. In the event of a corporate transaction,
stock split, stock dividend, or similar event, the Stock Units and the Shares of Company Capital
Stock shall be appropriately adjusted to prevent dilution or enlargement of the rights of
Participants which would otherwise result from any such event as provided under the terms of the
Plan, provided than any such adjustment shall be consistent with Code Sections 162(m) and 409A, as
applicable. Notwithstanding, in the case of a Change-in-Control, any obligation under the Program
shall be handled in accordance with the terms of Section 6 hereof.

17. Governing Law, Jurisdiction, and Venue.

          17.1 This Program shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania, without giving effect to the principles of conflicts of law.

          17.2 Participant hereby irrevocably submits to the personal and exclusive jurisdiction of the
United States District Court for the Western District of Pennsylvania or the Court of Common Pleas
of Allegheny County, Pennsylvania in any action or proceeding arising

 

 

out of, or relating to, this Program (whether such action or proceeding arises under contract,
tort, equity or otherwise). Participant hereby irrevocably waives any objection which Participant
now or hereafter may have to the laying of venue or personal jurisdiction of any such action or
proceeding brought in said courts.

          17.3 Jurisdiction over, and venue of, any such action or proceeding shall be
exclusively vested in the United States District Court for the Western District of Pennsylvania or
the Court of Common Pleas of Allegheny County, Pennsylvania.

          17.4 Provided that the Company commences any such action or proceeding in the courts
identified in Section 17.3, Participant irrevocably waives Participant’s right to object to or
challenge the above selected forum on the basis of inconvenience or unfairness under 28 U.S.C. §
1404, 42 Pa. C.S. § 5322 or similar state or federal statutes. Participant agrees to reimburse the
Company for all of the attorneys fees and costs it incurs to oppose Participant’s efforts to
challenge or object to litigation proceeding in the courts identified in Section 17.3 with respect
to actions arising out of or relating to this Program (whether such actions arise under contract,
tort, equity or otherwise).

18. Failure to Enforce Not a Waiver. The failure of the Company to enforce at any time any
provision of this Program shall in no way be construed to be a waiver of such provision or of any
other provision hereof.

19. Severability. In the event that any one or more of the provisions of this Program
shall be held to be invalid, illegal or unenforceable, the validity, legality or enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

20. Funding. The Program is not funded and all amounts payable hereunder, if any, shall be
paid from the general assets of the Company. No provision contained in this Program or the Plan
and no action taken pursuant to the provisions of this Program or the Plan shall create a trust of
any kind or require the Company to maintain or set aside any specific funds to pay benefits
hereunder. To the extent a Participant acquires a right to receive payments from the Company under
the Program, such right shall be no greater than the right of any unsecured general creditor of the
Company.

21. Headings. The descriptive headings of the Sections of this Program are inserted for
convenience of reference only and shall not constitute a part of this Program.

22. Amendment or Termination of this Program. This Program may be modified, amended,
suspended or terminated by the Committee at any time, provided that no such action shall deprive
any Participant without such Participant’s consent of any rights theretofore granted pursuant to
this Program. Notwithstanding the foregoing or any provision of this Program to the contrary, that
the Company may, in its sole discretion and without the Participant’s consent, modify or amend the
terms of the Plan or a Performance Share Award, or take any other action it deems necessary or
advisable, to cause the Plan to comply with Section 409A (or an exception thereto). Any
modification, amendment, suspension or termination shall only be effective upon a writing issued by
the Company, and a Participant shall not offer evidence of any purported oral modifications or
amendments to vary or contradict the terms of this Program document.

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