Document:

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                                                                   EXHIBIT 10.15

                         OFFICER'S EMPLOYMENT AGREEMENT

THIS AGREEMENT, is made and entered into this 29th day of April, 2003, by and
between KENNAMETAL INC., a corporation organized under the laws of the
Commonwealth of Pennsylvania, for and on behalf of itself and on behalf of its
subsidiary companies (hereinafter referred to as "Kennametal"), and Carlos M.
Cardoso, an individual (hereinafter referred to as "Employee").

                                   WITNESSETH:

                  WHEREAS, Employee acknowledges that by reason of employment by
Kennametal, it is anticipated that Employee will work with, add to, create, have
access to and be entrusted with trade secrets and confidential information
belonging to Kennametal which are of a technical nature or business nature or
pertain to future developments, the disclosure of which trade secrets or
confidential information would be highly detrimental to the interests of
Kennametal;

                  WHEREAS, in order to have the benefit of Employee's
assistance, Kennametal is desirous of employing or continuing the employment of
Employee;

                  WHEREAS, Kennametal offered, and Employee accepted, certain
terms of employment to which the parties mutually agreed, as set forth in the
letter agreement, dated as of March 8, 2003 (the "Letter Agreement"), attached
hereto as Exhibit A;

                  WHEREAS, on the date hereof, the Board of Directors of
Kennametal elected Employee a Vice President of Kennametal;

                  NOW, THEREFORE, Kennametal and Employee, each intending to be
legally bound hereby, do mutually covenant and agree as follows:

1.       (a)      Subject to the terms and conditions set forth herein,
         Kennametal hereby agrees to employ Employee as of the date hereof, and
         Employee hereby accepts such employment and agrees to devote his full
         time and attention to the business and affairs of Kennametal, in such
         capacity or capacities and to perform to the best of his ability such
         services as shall be determined from time to time by the Chief
         Executive Officer and the Board of Directors of Kennametal until the
         termination of his employment hereunder.

         (b)      Subject to the terms of the Letter Agreement, Employee's base
         salary, the size of bonus awards, if any, granted to him and other
         emoluments for his services, if any, shall be determined by the Board
         of Directors or its Committee on Executive Compensation, as
         appropriate, from time to time in their sole discretion.

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         (c)      Attached hereto as Exhibits B, C and D are the Incentive Stock
         Option Grant, the Nonstatutory Stock Option Grant and the Restricted
         Stock Award agreements, respectively, granted by the Company to
         Employee in accordance with the terms of the Letter Agreement.

         (d)      As set forth in the Letter Agreement, Employee will forfeit
         the Nonstatutory Stock Options, the Restricted Stock Award, and
         eligibility for target bonuses and any guaranteed or sign-on bonuses
         paid if Employee shall voluntarily terminate his employment with
         Kennametal within twelve (12) months of the commencement of Employee's
         employment. In the event that Employee has received any such bonuses or
         has sold any stock pursuant to the options or award prior to a
         voluntary termination within twelve (12) months of the commencement of
         Employee's employment, Employee shall immediately reimburse Kennametal
         for such bonuses or gain from such stock sales as the case may be.

2.       In addition to the compensation set forth or contemplated elsewhere
herein, Employee, subject to the terms and conditions of this Agreement, shall
be entitled to participate in all group insurance programs, retirement income
(pension) plans, thrift plans and vacation and holiday programs normally
provided for other executives of Kennametal. Nothing herein contained shall be
deemed to limit or prevent Employee, during his employment hereunder, from being
reimbursed by Kennametal for out-of-pocket expenditures incurred for travel,
lodging, meals, entertainment expenses or any other expenses in accordance with
the policies of Kennametal applicable to the executives of Kennametal.

3.       Employee's employment may be terminated with or without any reason for
termination by either party hereto at any time by giving the other party prior
written notice thereof, provided, however, that any termination on the part of
Kennametal shall occur only if specifically authorized by its Board of
Directors; provided, further, that termination by Kennametal for Cause (as
hereinafter defined) shall be made by written notice which states that it is a
termination for Cause; and provided, further, that termination by Employee,
other than termination for Good Reason (as hereafter defined) following a
Change-in-Control (as hereafter defined), shall be on not less than 30 days
prior written notice to Kennametal.

4.       (a)      In the event that Employee's employment is 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), an amount, payable promptly after the Date of
         Termination, equal to three months' base salary at the annual rate in
         effect on the Date of termination.

         (b)      In the event that Employee's employment is terminated by
         Employee following a Change-in-Control (as hereafter defined) without
         good reason (as such term in defined in paragraph 4(h)) or prior to a
         Change-in-Control (as hereinafter defined), Employee will not be
         entitled to receive any severance pay in addition to the amounts, if
         any, due him at the Date of Termination (as hereinafter defined).

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         (c)      In the event at or after a Change-in-Control and prior to the
         third anniversary of the date of the Change-in-Control that Employee's
         employment is terminated by Employee for Good Reason or by Kennametal
         other than for Cause or Disability pursuant to paragraph 5, Employee
         will receive as severance pay (in addition to all other amounts due him
         at the Date of Termination) an amount equal to the product of:

                  (i)      the lesser of

                           (x)      two and eight tenths (2.8),

                           (y)      a number equal to the number of calendar
                           months remaining from the Date of Termination to the
                           Employee's Retirement Date (as such term is hereafter
                           defined) divided by twelve (12), or

                           (z)      a number equal to the product obtained by
                           multiplying thirty-six (36) less the number of
                           completed months after the date of the Change
                           in-Control during which the Employee was employed and
                           did not have Good Reason for termination times one-
                           twelfth (1/12);

                  times

                  (ii)     the sum of

                           (x)      Employee's base salary at the annual rate in
                           effect on the Date of Termination (or, at Employee's
                           election, at the annual rate in effect on the first
                           day of the calendar month immediately prior to the
                           Change-in-Control), plus

                           (y)      the average of any bonuses which Employee
                           was entitled to or paid during the three most recent
                           fiscal years ending prior to the Date of Termination.

                  Such severance pay shall be paid by delivery of a cashier's or
         certified check to the Employee at Kennametal's executive offices on a
         date which is no later than five business days following the Date of
         Termination.

                  In addition to the severance payments provided for in this
         paragraph 4(c), Employee also will receive the same or equivalent
         medical, dental, disability and group insurance benefits as were
         provided to the Employee at the Date of Termination, which benefits
         shall be provided to Employee for a three year period commencing on the
         Date of Termination. The Employee shall also be deemed and shall be
         credited for computing benefits, for vesting and for all other purposes
         under any pension or retirement income plan of Kennametal and under the
         Supplemental Executive Retirement Plan to have continuously remained in
         the employment of Kennametal for the three year period (or, if clause
         (i)(y) or

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         clause(i)(z) above of this paragraph 4(c) is applicable to determine
         the severance payments to be made, the lesser period measured in years
         equal to clause (i)(y) or clause (i)(z) above, whichever is applicable)
         following the Date of Termination at an annual compensation equal to
         the sum of the base salary and bonus which were used to compute the
         payment due the Employee under the first paragraph of this paragraph
         4(c).

         (d)      If for any reason, whether by law or provisions of
         Kennametal's employee medical, dental or group insurance, pension or
         retirement plan or other benefit plans, any benefits which the Employee
         would be entitled to under the foregoing subparagraph (c) of this
         paragraph 4 cannot be paid pursuant to such employee benefit plans,
         then Kennametal hereby contractually agrees to pay to the Employee the
         difference between the benefits which the Employee would have received
         in accordance with the foregoing subparagraphs of this paragraph 4 if
         the relevant employee medical, dental or group insurance or pension or
         retirement plan or other benefit plan could have paid such benefit and
         the amount of benefits, if any, actual paid by such employee medical,
         dental or group insurance or pension or retirement plan or other
         benefit plan. Kennametal shall not be required to fund its obligation
         to pay the foregoing difference.

         (e)      In the event of a termination of employment under the
         circumstances above described in paragraph 4(c), Employee shall have no
         duty to seek any other employment after termination of Employee's
         employment with Kennametal and Kennametal hereby waives and agrees not
         to raise or use any defense based on the position that Employee had a
         duty to mitigate or reduce the amounts due him hereunder by seeking
         other employment whether suitable or unsuitable and should Employee
         obtain other employment, then the only effect of such on the
         obligations of Kennametal hereunder shall be that Kennametal shall be
         entitled to credit against any payments which would otherwise be made
         for medical, dental or group insurance or similar benefits (excluding,
         however, any credit against Kennametal payments relating to pension or
         retirement benefits or the Supplemental Executive Retirement Plan)
         pursuant to the benefit provisions set forth in the second paragraph of
         paragraph 4(c) hereof, any comparable payments to which Employee is
         entitled under the employee benefit plans maintained by Employee's
         other employer or employers in connection with services to such
         employer or employers after termination of his employment with
         Kennametal.

         (f)      The term "Change in Control" shall mean a change in control of
         a nature that would be required to be reported in response to Item 6(e)
         of Schedule 14A promulgated under the Securities Exchange Act of 1934
         as in effect on the date hereof ("1934 Act"), or if Item 6(e) is no
         longer in effect, any regulations issued by the Securities and Exchange
         Commission pursuant to the 1934 Act which serve similar purposes;
         provided that, without limitation, such a change in control shall be
         deemed to have occurred if (A) Kennametal shall be merged or
         consolidated with any corporation or other entity other than a merger
         or consolidation with a corporation or other entity all of whose equity
         interests are owned by Kennametal immediately prior to the merger or
         consolidation, or

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         (B) Kennametal shall sell all or substantially all of its operating
         properties and assets to another person, group of associated persons or
         corporation, or (C) any "person" (as such term is used in Sections
         13(d) and 14(d) of the 1934 Act), is or becomes a beneficial owner,
         directly or indirectly, of securities of Kennametal representing 25% or
         more of the combined voting power of Kennametal's then outstanding
         securities coupled with or followed by the existence of a majority of
         the board of directors of Kennametal consisting of persons other than
         persons who either were directors of Kennametal immediately prior to or
         were nominated by those persons who were directors of Kennametal
         immediately prior to such person becoming a beneficial owner, directly
         or indirectly, of securities of Kennametal representing 25% or more of
         the combined voting power of Kennametal's then outstanding securities.

         (g)      For purposes of this Agreement "Date of Termination" shall
         mean:

                  (i)      if Employee's employment is terminated due to his
                  death or retirement, the date of death or retirement,
                  respectively; or

                  (ii)     if Employee's employment is terminated for any other
                  reason, the date on which the termination becomes effective as
                  stated in the written notice of termination given to or by the
                  Employee.

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

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

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

                  (iii)    a failure by Kennametal to continue to provide
                  incentive compensation, under the rules by which incentives
                  are provided, comparable to that provided by Kennametal
                  immediately prior to any Change-in-Control;

                  (iv)     the failure by Kennametal to continue in effect any
                  benefit or compensation plan, stock option plan, pension plan,
                  life insurance plan,

<PAGE>

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

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

                  (vi)     the relocation of the Executive to a facility or a
                  location more than 50 miles from the Executives then present
                  location, without the Executives prior written consent; or

                  (vii)    any purported termination of the employment of
                  Employee by Kennametal which is not for Cause as provided in
                  paragraph 5.

5.       In the event that Employee (a) shall be guilty of malfeasance, willful
misconduct or gross negligence in the performance of the services contemplated
by this Agreement, or (b) shall not make his services available to Kennametal on
a full time basis in accordance with paragraph 1(a) hereof for any reason
(including Disability) other than arising from Employee's incapacity due to
physical or mental illness or injury which does not constitute Disability and
other than by reason of the fact Employee's employment has been terminated under
the circumstances described in paragraph 4(a), or (c) shall breach the
provisions of paragraph 8 hereof (the matters described in subparagraphs (a),
(b) and (c) are collectively referred to as "Cause"), Kennametal shall have the
right, exercised by resolution adopted by a majority of its Board of Directors,
to terminate Employee's employment for Cause by giving prior written notice to
Employee of its election so to do. In that event, Employee's employment shall be
deemed terminated for Cause, Employee shall not be entitled to the benefits set
forth in paragraph 4 which shall not be paid or payable and Kennametal only
shall have the obligation to pay Employee the unpaid portion of Employee's base
salary for the period from the last period from which Employee was paid to the
Date of Termination; provided, however, that if Employee's employment is
terminated as a result of the Disability of Employee, the benefits set forth in
paragraph 4 shall not be paid or payable but Employee shall be entitled to
receive the annual supplement under the Supplemental Executive Retirement Plan
and Employee's employment by Kennametal shall not be deemed terminated for
purposes of the Long-Term Disability Plan, Retirement Income Plan for US
Salaried Employees or any other benefit plan which so provides. For purposes of
this Agreement "Disability" shall mean such incapacity due to physical or mental
illness or injury which results in the Employee's being absent from his
principal office at Kennametal's offices for the entire portion of 180
consecutive business days. Prior to a Change-in-Control, a decision by the Board
of Directors of Kennametal that "Cause" exists shall be in the discretion of the
Board of Directors and shall be final and binding upon the

<PAGE>

Employee and his rights hereunder. After a Change-in-Control, "Cause" shall not
be deemed to include opposition by Employee to such a Change-in-Control or any
matter incidental thereto and any determination by the Board of Directors that
"Cause" existed shall not be final or binding upon the Employee or his rights
hereunder or entitled to any deference in any court or other tribunal.

6.       Employee understands and agrees that, except to the extent Employee is
entitled to the benefits provided in paragraph 4(c) hereof, in the event
Employee resigns or his employment is terminated for any reason other than death
or Disability prior to his "Retirement Date" (as hereinafter defined), he will
forfeit any interest he may have in any Kennametal retirement income plan
(except to the extent vested by actual service to date of separation as per the
plan provisions), and all other benefits dependent upon continuing service. The
term "Retirement Date" shall mean the first day of the month following the day
on which Employee attains his sixty-fifth birthday, or at Employee's request,
any other day that Kennametal's Board of Directors may approve in writing.

7.       Nothing herein contained shall affect the right of Employee to
participate in and receive benefits under and in accordance with the then
current provisions of any retirement income, profit-sharing, additional year-end
or periodic remuneration or bonus, incentive compensation, insurance or any
other employee welfare plan or program of Kennametal and all payments hereunder
shall be in addition to any benefits received thereunder (including long term
disability payments).

8.       During the period of employment of Employee by Kennametal and for
three years thereafter, (provided, however, that this paragraph 8 shall not
apply to the Employee following a termination of Employee's employment (x) if a
Change-in-Control, shall have occurred prior to the Date of Termination or (y)
if Employee's employment is terminated by Kennametal other than for Cause), he
will not, in any geographic area in which Kennametal is offering its services
and products, without the prior written consent of Kennametal:

         (a)      directly or indirectly engage in, or

         (b)      assist or have an active interest in (whether as proprietor,
         partner, investor, shareholder, officer, director or any type of
         principal whatsoever), or

         (c)      enter the employ of, or act as agent for, or advisor or
          consultant to, any person, firm, partnership, association, corporation
         or business organization, entity or enterprise which is or is about to
         become directly or indirectly engaged in, any business which is
         competitive with any business of Kennametal or any subsidiary or
         affiliate thereof in which Employee is or was engaged; provided,
         however, that the foregoing provisions of this paragraph 8 are not
         intended to prohibit and shall not prohibit Employee from purchasing,
         for investment, not in excess of I% of any class of stock or other
         corporate security of any company which is registered pursuant to
         Section 12 of the Securities Exchange Act of 1934.

<PAGE>

         Employee acknowledges that the breach by him of the provisions of this
paragraph 8 would cause irreparable injury to Kennametal, acknowledges and
agrees that remedies at law for any such breach will be inadequate and consents
and agrees that Kennametal shall be entitled, without the necessity of proof of
actual damage, to injunctive relief in any proceedings which may be brought to
enforce the provisions of this paragraph 8. Employee acknowledges and warrants
that he will be fully able to earn an adequate livelihood for himself and his
dependents if this paragraph 8 should be specifically enforced against him and
that such enforcement will not impair his ability to obtain employment
commensurate with his abilities and fully acceptable to him.

         If the scope of any restriction contained in this paragraph 8 is too
broad to permit enforcement of such restriction to its full extent, then such
restriction shall be enforced to the maximum extent permitted by law and
Employee and Kennametal hereby consent and agree that such scope may be
judicially modified in any proceeding brought to enforce such restriction.

9.       (a)      Employee acknowledges and agrees that in the course of his
         employment by Kennametal, Employee may work with, add to, create or
         acquire trade secrets and confidential information ("Confidential
         Information") which could include, in whole or in part, information:

                  (i)      of a technical nature such as, but not limited to,
                  Kennametal's manuals, methods, know-how, formulae, shapes,
                  designs, compositions, processes, applications, ideas,
                  improvements, discoveries, inventions, research and
                  development projects, equipment, apparatus, appliances,
                  computer programs, software, systems documentation, special
                  hardware, software development and similar items; or

                  (ii)     of a business nature such as, but not limited to,
                  information about business plans, sources of supply, cost,
                  purchasing, profits, markets, sales, sales volume, sales
                  methods, sales proposals, identity of customers and
                  prospective customers, identity of customers' key purchasing
                  personnel, amount or kind of customers' purchases and other
                  information about customers; or

                  (iii)    pertaining to future developments such as, but not
                  limited to, research and development or future marketing or
                  merchandising.

         Employee further acknowledges and agrees that (i) all Confidential
Information is the property of Kennametal; (ii) the unauthorized use,
misappropriation or disclosure of any Confidential Information would constitute
a breach of trust and could cause irreparable injury to Kennametal; and (iii) it
is essential to the protection of Kennametal's goodwill and to the maintenance
of its competitive position that all Confidential Information be kept secret and
that Employee not disclose any Confidential Information to others or use any
Confidential Information to the detriment of Kennametal.

<PAGE>

         Employee agrees to hold and safeguard all Confidential Information in
trust for Kennametal, its successors and assigns and Employee shall not (except
as required in the performance of Employee's duties), use or disclose or make
available to anyone for use outside Kennametal's organization at any time,
either during employment with Kennametal or subsequent thereto, any of the
Confidential Information, whether or not developed by Employee, without the
prior written consent of Kennametal.

         (b)      Employee agrees that:

                  (i)      he will promptly and fully disclose to Kennametal or
                  such officer or other agent as may be designated by Kennametal
                  any and all inventions made or conceived by Employee (whether
                  made solely by Employee or jointly with others) during
                  employment with Kennametal (1) which are along the line of the
                  business, work or investigations of Kennametal, or (2) which
                  result from or are suggested by any work which Employee may do
                  for or on behalf of Kennametal; and

                  (ii)     he will assist Kennametal and its nominees during and
                  subsequent to such employment in every proper way (entirely at
                  its or their expense) to obtain for its or their own benefit
                  patents for such inventions in any and all countries; the said
                  inventions, without further consideration other than such
                  salary as from time to time may be paid to him by Kennametal
                  as compensation for his services in any capacity, shall be and
                  remain the sole and exclusive property of Kennametal or its
                  nominee whether patented or not; and

                  (iii)    he will keep and maintain adequate and current
                  written records of all such inventions, in the form of but not
                  necessarily limited to notes, sketches, drawings, or reports
                  relating thereto, which records shall be and remain the
                  property of and available to Kennametal at all times.

         (c)      Employee agrees that, promptly upon termination of his
         employment, he will disclose to Kennametal, or to such officer or other
         agent as may be designated by Kennametal, all inventions which have
         been partly or wholly conceived, invented or developed by him for which
         applications for patents have not been made and shall thereafter
         execute all such instruments of the character hereinbefore referred to,
         and will take such steps as may be necessary to secure and assign to
         Kennametal the exclusive rights in and to such inventions and any
         patents that may be issued thereon any expense therefor to be borne by
         Kennametal.

         (d)      Employee agrees that he will not at any time aid in attacking
         the patentability, scope, or validity of any invention to which the
         provisions of subparagraphs (b) and (c), above, apply.

<PAGE>

10.      In the event that (a) Employee institutes any legal action to enforce
his rights under, or to recover damages for breach of this Agreement, or (b)
Kennametal institutes any action to avoid making any payments due to Employee
under this Agreement, Employee, if he is the prevailing party, shall be entitled
to recover from Kennametal any actual expenses for attorney's fees and other
disbursements incurred by him in relation thereto.

11.      The terms and provision of this Agreement shall be binding upon, and
shall inure to the benefit of, Employee and Kennametal, it subsidiaries and
affiliates and their respective successors and assigns.

12.      This Agreement and the Letter Agreement constitute the entire agreement
between the parties hereto and supersede all prior agreements and
understandings, whether oral or written, among the parties with respect to the
subject matter hereof. This Agreement may not be amended orally, but only by an
instrument in writing signed by each of the parties to this Agreement.

13.      The invalidity or unenforceability of any provision of this Agreement
shall not affect the other provisions hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provision were
omitted.

14.      Any pronoun and any variation thereof used in this Agreement shall be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the parties hereto may require.

15.      Kennametal shall be entitled as a condition to paying any severance pay
or providing any benefits hereunder upon a termination of the Employee's
employment to require the Employee to deliver on or before the making of any
severance payment or providing of any benefit a release in the form of Exhibit E
attached hereto.

16.      Notwithstanding any other provision of this Agreement, in the event
that any payment or benefit received, or to be received, by Employee in
connection with a change in control of the Corporation, or the termination of
the Employees' employment (whether pursuant to the terms of this Agreement or
any other plan, arrangement or agreement with the Corporation, any person whose
actions result in a change in control or any person affiliated with the
Corporation or such person) (collectively, the "Total Payments") would not be
deductible, in whole or in part, as a result of section 28OG of the Internal
Revenue Code of 1986 (the "Code") by the Corporation, an affiliate or other
person making such payment or providing such benefit, the payments due under
this Agreement (the "Contract Payments") shall be reduced until no portion of
the Total Payments is not deductible, or the Contract Payments are reduced to
zero. In the event that the Corporation determines that the Total Payments would
not be deductible, in whole or part, as a result of section 28OG of the Code,
the Corporation shall immediately notify Employee of this determination and the
amount which would not be so deductible as well as a computation of Total
Payments. Employee shall have five (5) business days after receipt of the
foregoing notice and computation to waive in writing all or any portion of any
of the Total Payments and any portion of the Total Payments the receipt or
enjoyment of which Employee shall have effectively

<PAGE>

waived in writing shall not be taken into account. If the Corporation had
already withheld any Contract Payments prior to receipt of such waiver, the
Corporation upon receipt of such waiver shall immediately pay to Employee any
withheld Contract Payments which would have been paid had the Corporation had
the Employee's written waiver prior to the date the Corporation withheld any
such payments.

         For purposes of this limitation:

         (a)      no portion of the Total Payments shall be taken into account
         which in the opinion of tax counsel selected by the Corporation's
         independent auditors and acceptable to Employee does not constitute a
         "parachute payment" within the meaning of section 28OG(b)(2) of the
         Code,

         (b)      the Contract Payments shall be reduced only to the extent
         necessary so that the Total Payments (other than those Contract
         Payments which are waived in writing by the Employee or referred to in
         clause (a)) in their entirety constitute reasonable compensation for
         services actually rendered within the meaning of section 28OG(b)(4) of
         the Code or are otherwise not subject to disallowance as deductions, in
         the opinion of the tax counsel referred to in clause (a); and

         (c)      the value of any non-cash benefit or any deferred payment or
         benefit included in the Total Payments shall be determined by the
         Corporation's independent auditors in accordance with the principles of
         section 28OG(d)(3) and (4) of the Code.

17.      This Agreement and the Letter Agreement, and any dispute hereunder or
         thereunder, shall be governed, interpreted, construed and applied in
         accordance with the laws of the Commonwealth of Pennsylvania, without
         regard to the conflicts of laws provisions.

         WITNESS the due execution hereto the day and year first above written.

ATTEST:                                KENNAMETAL INC.

/s/ Susan Melbourne                    /s/ David W. Greenfield

Susan Melbourne                        By: David W. Greenfield
                                       Vice President, Secretary and General
                                       Counsel

WITNESS:                               EMPLOYEE:

/s/ Jacqueline L. Zitt                 /s/ Carlos M. Cardoso

Jacqueline L. Zitt                     Carlos M. Cardoso
                                       President, Metalworking Solutions and
                                       Services Group<PAGE>

                                                                   EXHIBIT 10.16

                                 KENNAMETAL INC.
                        STOCK AND INCENTIVE PLAN OF 2002

                          (AS AMENDED ON JULY 29, 2003)

         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

<PAGE>

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.

                                      -2-

<PAGE>

                  (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.

                                      -3-

<PAGE>

                  (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, 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.

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

                                      -4-

<PAGE>

                  (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;

                           (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

                                      -5-

<PAGE>

         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).

                                      -6-

<PAGE>

                  (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 1,750,000 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 1,750,000.
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.

                                      -7-

<PAGE>

         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

                                      -8-

<PAGE>

         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 be,

                                      -9-

<PAGE>

         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.

                                      -10-

<PAGE>

                  (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

                                      -11-

<PAGE>

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

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

                                      -12-

<PAGE>

                  (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, which Awards will be made on the day following the first
regular Board meeting of each fiscal year beginning in fiscal year 2004:

                  (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 $10,000, 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.

                  (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

                                      -13-

<PAGE>

(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 may adjust 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, 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

                                      -14-

<PAGE>

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 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

                                      -15-

<PAGE>

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.

         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

                                      -16-

<PAGE>

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-

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