KENNAMETAL INC, DEF 14A, 1999-09-20

KENNAMETAL INC
DEF 14A, 1999-09-20
MACHINE TOOLS, METAL CUTTING TYPES

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<PAGE> 1

SCHEDULE 14A
(RULE 14A)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934

Filed by the Registrant [ X ]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY RULE
14A-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
</TABLE>

KENNAMETAL INC.
- --------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

- --------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)

Payment of filing fee (Check the appropriate box):

[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.

[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

---------------------------------------------------------------

(2) Aggregate number of securities to which transaction applies:

---------------------------------------------------------------

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

---------------------------------------------------------------

(4) Proposed maximum aggregate value of transaction:
---------------

(5) Total fee paid:
------------------------------------------------

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:
----------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------
(3) Filing Party:
--------------------------------------------------
(4) Date Filed:
----------------------------------------------------

[ X ] No fee required

<PAGE> 2

KENNAMETAL INC.
LATROBE, PENNSYLVANIA 15650

NOTICE OF ANNUAL MEETING OF SHAREOWNERS
TO BE HELD OCTOBER 25, 1999

To the Shareowners of Kennametal Inc.:

The Annual Meeting of Shareowners of Kennametal Inc. will be held at the
Technology Center, located at 1600 Technology Way (on Route 981 South),
approximately 1/4 mile south of its intersection with U.S. Route 30 near
Latrobe, Unity Township, Pennsylvania, on Monday, October 25, 1999, at 2:00
p.m., to consider and act upon the following matters:

1. The election of three directors for terms to expire in 2002;

2. The election of auditors for the fiscal year ending June 30, 2000; and

3. Approval of the Kennametal Inc. Stock Option and Incentive Plan of 1999.

Shareowners also will be asked to consider such other business as may
properly come before the meeting. The Board of Directors has fixed Tuesday,
September 7, 1999, as the record date for the determination of shareowners
entitled to notice of and to vote at the Annual Meeting.

IF YOU ARE UNABLE TO ATTEND THE MEETING, IT IS REQUESTED THAT YOU COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE.

BY ORDER OF THE BOARD OF DIRECTORS

David T. Cofer
Secretary

September 12, 1999
<PAGE> 3

PROXY STATEMENT FOR ANNUAL MEETING OF SHAREOWNERS

OCTOBER 25, 1999

This Proxy Statement is being furnished to the shareowners of Kennametal
Inc. (the "Corporation") in connection with the solicitation by the Board of
Directors of the Corporation of proxies to be voted at the Annual Meeting of
Shareowners which is scheduled to be held on October 25, 1999. Only holders of
record of capital stock, par value $1.25 per share, of the Corporation ("Capital
Stock") at the close of business on September 7, 1999, will be entitled to vote
at the meeting. On that date there were 30,116,071 shares of Capital Stock
outstanding and entitled to one vote per share. Any shareowner who executes and
returns the proxy may revoke it at will at any time prior to the voting of the
proxy, but revocation of the proxy will not be effective until written notice
thereof has been received by the Secretary of the Corporation. The proxy may
also be revoked by voting in person at the meeting or by delivering a
later-dated, signed proxy. The shares represented by all properly executed
proxies received by the Secretary in the accompanying form of proxy prior to the
meeting and not so revoked will be voted. Where a choice is specified on the
form of proxy, the shares will be voted in accordance with the choice made
therein. If no such choice is made, the shares will be voted in accordance with
the recommendation of the Board of Directors. The form of proxy also confers
discretionary authority on the named proxies to vote the shares represented by
the proxy on any matter that is properly presented for action at the Annual
Meeting of Shareowners. Under Pennsylvania law and the Corporation's Articles of
Incorporation and By-Laws, abstentions and broker non-votes will have no effect
on matters to be voted on at the Annual Meeting since directors are to be
elected by plurality vote and auditors are to be elected and the Stock Option
and Incentive Plan of 1999 is to be approved by the affirmative vote of at least
a majority of the votes cast by shareowners present, in person or by proxy, at
the meeting. A majority of the named proxies who shall be present and shall act
at the meeting (or if only one shall be present and act, then that one) may
exercise all powers granted to them by the proxies solicited hereunder. The
address of the principal executive offices of the Corporation is 1600 Technology
Way, Latrobe, Pennsylvania 15650, and the date this Proxy Statement was mailed
to shareowners was on or about September 20, 1999.

ELECTION OF DIRECTORS

Three directors are to be elected to hold office as Directors of the First
Class for terms of three years, and until their successors are elected and
qualified.

The owners of Capital Stock have cumulative voting rights in the election
of directors. In voting for directors, a shareowner has the right to multiply
the total number of shares which the shareowner is entitled to vote by the
number of directors to be elected in each class, and to cast the whole number of
votes so determined for one nominee in the class or to distribute them among the
nominees if more than one nominee is named in such class. Proxies who vote at
the meeting on behalf of a shareowner will have the discretion to and may
exercise such cumulative voting rights. The three individuals who receive the
largest number of votes cast will be elected as Directors of the First Class.

The persons named in the enclosed form of proxy were selected by the Board
of Directors and have advised the Board of Directors that, unless authority is
withheld, they intend to vote the shares represented by them at the meeting for
the election of the following nominees named to serve as directors. The nominees
for election for terms of three years in the First Class of Directors are Peter
B. Bartlett, Robert L. McGeehan and Markos I. Tambakeras, who have served as
directors since 1975, 1989 and 1999, respectively. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THESE NOMINEES. Mr.
Tambakeras was named a director by the Board of Directors and President and
Chief Executive Officer of the Corporation effective July 1, 1999 to succeed
Robert L. McGeehan who retired from employment effective that date. Mr. McGeehan
continues as a director of the Corporation and was nominated for re-election to
serve as a director of the Corporation.
<PAGE> 4

If at the time of the meeting any of the foregoing nominees is not
available to serve as a director, an event which the Corporation has no reason
to anticipate, the Corporation has been informed that the persons named in the
enclosed form of proxy intend to vote the shares represented by them at the
meeting for such other person or persons, if any, as may be nominated by the
Board of Directors.

The following table provides certain information concerning each nominee
for election as a director and each director whose term of office will continue
after the meeting.

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME, AGE AND YEAR AND DIRECTORSHIPS OF OTHER
FIRST ELECTED (1) PUBLICLY-TRADED CORPORATIONS (2)
------------------ ------------------------------------------------------------
<S> <C>
Nominees for Directors of the First Class Whose Terms Expire in 2002

Peter B. Bartlett General Partner of Brown Brothers Harriman & Co. (private
Age: 65 bankers). Director of Erie Indemnity Company, Erie Life
Director since 1975 Insurance Company and Erie Insurance Company.

Robert L. McGeehan Retired July 1, 1999, having served as President of the
Age: 62 Corporation since July 1989 and Chief Executive Officer
Director since 1989 since October 1991.

Markos I. Tambakeras President and Chief Executive Officer of the Corporation
Age: 48 since July 1999. From 1997 to June 1999, served as
Director since 1999 President, Industrial Controls Business of Honeywell
Incorporated (provider of control technologies), having
previously served as President, Industrial Automation and
Control, Honeywell Incorporated from 1995 to 1996 and as
President, Honeywell Asia Pacific in Hong Kong from 1992 to
1994. Director of JLK Direct Distribution Inc.

Directors of the Second Class Whose Terms Expire in 2000

Richard C. Alberding Retired, having served as Executive Vice President,
Age: 68 Marketing and International, of Hewlett-Packard Company (a
Director since 1982 designer and manufacturer of electronic products for
measurement and computation). Director of Walker Interactive
Systems, Inc., Sybase, Inc., Digital Microwave Corp., Paging
Network, Inc., Digital Link Corporation and JLK Direct
Distribution Inc. Former director of Quickturn Design
Systems, Inc. and Storm Technology, Inc.

William R. Newlin(3) Managing Partner of Buchanan Ingersoll Professional
Age: 58 Corporation (attorneys at law) since 1980. Managing General
Director since 1982 Partner of CEO Venture Funds (private venture capital
funds). Director of Black Box Corporation, National City
Bank of Pennsylvania, Parker/Hunter Incorporated and the
Pittsburgh Technology Council. Chairman of the Board of
Directors of the Corporation and of JLK Direct Distribution
Inc.

Timothy S. Lucas Chairman since 1997 and President and Chief Executive
Age: 43 Officer since 1990 of MacroSonix Corporation which develops
Director since 1998 and licenses resonant macrosonic synthesis (RNS)
technologies.
</TABLE>

2
<PAGE> 5

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME, AGE AND YEAR AND DIRECTORSHIPS OF OTHER
FIRST ELECTED (1) PUBLICLY-TRADED CORPORATIONS (2)
------------------ ------------------------------------------------------------
<S> <C>
Directors of the Third Class Whose Terms Expire in 2001

A. Peter Held President of Cooper Power Tools Inc., a division of Cooper
Age: 55 Industries, Inc. (a manufacturer and marketer of industrial
Director since 1995 power tools), having served as Vice President and General
Manager International of its Champion Spark Plug Division
from 1992 to 1994.

Aloysius T. McLaughlin, Jr. Retired, having served as Vice Chairman of Dick Corporation
Age: 64 (a general contractor) from 1993 to 1995 and as its
Director since 1986 President and Chief Operating Officer from 1985 until 1993.
Director of JLK Direct Distribution Inc.

Larry Yost Chairman and Chief Executive Officer of Meritor Automotive
Age: 61 Inc. (a provider of components for heavy vehicles), having
Director since 1987 previously served as President, Heavy Vehicle Systems,
Rockwell International Corporation, from November 1994 until
March 1997 and as Senior Vice President of the Operations
Group of Allen-Bradley Company until November 1994.
</TABLE>

- ---------------
(1) Each current director has served continuously since he was first elected.

(2) Unless otherwise shown in the table, each person named has served in his
principal occupation during the past five years.

(3) The Corporation engaged Buchanan Ingersoll Professional Corporation, the law
firm of which William R. Newlin is Managing Partner, to perform services for
the Corporation during fiscal 1999 and fiscal 2000.

BOARD OF DIRECTORS AND BOARD COMMITTEES

The Corporation's Board of Directors held six meetings during the year
ended June 30, 1999. The committees of the Board of Directors include an
Executive Committee, an Audit Committee, a Committee on Executive Compensation
and a Nominating Committee. Each director attended at least 75% of the meetings
of the Board of Directors and any committee of which he is a member.

Executive Committee: The Executive Committee met four times during the past
fiscal year. The Committee's duties include monitoring performance of the
Corporation's business plan, reviewing certain business strategies and reviewing
management performance and succession. The following directors currently
comprise the Committee: William R. Newlin (Chairman), Peter B. Bartlett and
Richard C. Alberding.

Audit Committee: The Audit Committee met four times during the past fiscal
year. The Committee's primary function is to evaluate management's performance
of its financial reporting responsibilities including the annual report and
proxy materials. The Committee also reviews the internal financial and
operational controls of the Corporation, monitors the fees, results and
effectiveness of the annual audit and compliance with the Corporation's code of
business conduct and the independence of the public accountants. The Committee
also reviews compliance with legal and regulatory and employee benefit plan
reporting requirements and monitors critical management information systems. The
Committee recommends to the Board of Directors for approval by the Board of
Directors and the shareowners the election of the independent public
accountants. The following directors currently comprise the Committee: Larry
Yost (Chairman), A. Peter Held, Warren H. Hollinshead and Aloysius T.
McLaughlin, Jr.

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<PAGE> 6

Committee on Executive Compensation: The Committee on Executive
Compensation met nine times during the past fiscal year. The Committee's duties
include the setting of compensation rates of the Corporation's officers, the
determination of additional compensation, if any, to be awarded to such officers
and the administration of the Corporation's stock-based incentive plans. The
following directors currently comprise the Committee: Richard C. Alberding
(Chairman), Peter B. Bartlett and Aloysius T. McLaughlin, Jr. The report of the
Committee on Executive Compensation appears elsewhere in this Proxy Statement.

Nominating Committee: The Nominating Committee met once during the past
fiscal year. The Committee's duties include recommending to the Board of
Directors nominees for directors to be elected at the Annual Meeting of
Shareowners or to be elected to fill any vacancies in the Board of Directors
which may occur. The Committee considers nominees recommended by shareowners.
Pursuant to the By-Laws of the Corporation, shareowner recommendations of
nominees for the Board must be submitted in advance of any meeting and must
comply with certain requirements set forth in the By-Laws. See "Shareowner
Proposals and Nominating Procedures" on page 19 of this Proxy Statement. The
following directors currently comprise the Committee: A. Peter Held (Chairman),
Warren H. Hollinshead and Timothy S. Lucas.

Directors who are not employees of the Corporation each receive
compensation from the Corporation for services as a director at an annual rate
of $30,000. Members of the Audit Committee and members of the Committee on
Executive Compensation who are not employees of the Corporation each receive
additional annual compensation of $4,000. Non-employee directors who are members
of the Executive Committee receive a fee of $1,100 per Executive Committee
meeting. Non-employee directors who are members of the Nominating Committee
receive a fee of $1,000 per meeting. The non-employee members of the Board of
Directors were awarded the following stock options during fiscal 1999 for
serving on the Board: Mr. Newlin, 45,000 shares at $21.75 and 3,000 shares at
$20.6250; Messrs. Alberding, Bartlett, Held, Hollinshead, Lucas, McLaughlin and
Yost, each 3,000 shares at $20.6250. Under the Deferred Fee Plan for Outside
Directors (the "Deferred Fee Plan"), directors are permitted annually to request
that the payment of any compensation that may be payable to them for services as
a director or committee member be deferred for payment, with interest, at a
later time. The deferred payments would be actually funded by a transfer of cash
into a deferred compensation trust (a so-called "Rabbi Trust"), administered by
an independent trustee, upon the occurrence of a threatened or actual change in
control of the Corporation (as defined in the deferred compensation trust
agreement). Under the Corporation's Directors Stock Incentive Plan, any director
who is not an employee may elect to receive shares of the Corporation's Capital
Stock in lieu of all or a portion of any consideration payable for services as a
director that is not deferred pursuant to the Deferred Fee Plan. In addition,
any director who is not an employee may elect to receive credits, representing
shares of the Corporation's Capital Stock ("Stock Credits") or Class A Common
Stock of JLK Direct Distribution Inc., the Corporation's majority-owned
subsidiary, with respect to all or a portion of any consideration deferred
pursuant to the Directors Stock Incentive Plan. Directors who are not employees
of the Corporation also receive $50,000 of life insurance coverage which is paid
for by the Corporation. Directors who are employees of the Corporation do not
receive any compensation for services as a director or as a member of any
committee of the Board of Directors.

4
<PAGE> 7

OWNERSHIP OF CAPITAL STOCK BY
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS

The following table sets forth the beneficial ownership of the
Corporation's Capital Stock as of July 30, 1999, by each director, each nominee
for director, each Named Executive Officer (as hereinafter defined) and all
directors and executive officers as a group.

<TABLE>
<CAPTION>
AMOUNT OF TOTAL BENEFICIAL
BENEFICIAL OWNERSHIP AND
NAME OF BENEFICIAL OWNER OWNERSHIP (1)(2) STOCK CREDITS (7) STOCK CREDITS
- ------------------------ ---------------- ----------------- ----------------
<S> <C> <C> <C>
Richard C. Alberding.............................. 6,720(3) 310 7,030
Peter B. Bartlett................................. 6,800 13,546 20,346
A. Peter Held..................................... 6,210 887 7,097
Warren H. Hollinshead............................. 8,005(4) 1,324 9,329
Timothy S. Lucas.................................. 2,000 0 2,000
Robert L. McGeehan................................ 375,747(5) 17,655 393,402
Aloysius T. McLaughlin, Jr........................ 26,280 7,301 33,581
William R. Newlin................................. 124,785(6) 15,861 140,646
Larry Yost........................................ 6,000 4,627 10,627
Markos I. Tambakeras.............................. 93,012 0 93,012
H. Patrick Mahanes, Jr............................ 135,504 8,589 144,093
Richard J. Orwig.................................. 107,861 12,898 120,759
David B. Arnold................................... 83,541 6,551 90,092
James R. Breisinger............................... 40,687(8) 0 40,687
Directors and Executive Officers as a Group (18
persons)........................................ 1,191,249 108,204 1,299,453
</TABLE>

- ---------------
(1) The figures shown include 297,308, 86,734, 88,727, 56,056, 26,884 and
810,542 shares over which Messrs. McGeehan, Mahanes, Orwig, Arnold and
Breisinger, and all directors and executive officers as a group,
respectively, have the right to acquire as of July 30, 1999 or the right to
acquire within 60 days thereafter pursuant to the Corporation's stock option
plans. The figures shown also include 6,000 shares over which each of
Messrs. Alberding, Bartlett, Held, Hollinshead, McLaughlin and Yost, 2,000
shares over which Mr. Lucas, and 101,000 shares over which Mr. Newlin,
respectively, have the right to acquire as of July 30, 1999 or the right to
acquire within 60 days thereafter pursuant to the Corporation's stock option
plans.

(2) Other than Mr. McGeehan, who beneficially owns 1.2% of the Capital Stock, no
individual beneficially owns in excess of one percent of the total shares
outstanding. Directors and executive officers as a group beneficially own
3.9% of the total shares outstanding. Unless otherwise noted, the shares
shown are subject to the sole voting and investment power of the person
named.

(3) The figure shown includes 720 shares owned jointly by Mr. Alberding and his
wife.

(4) The figure shown includes 2,005 shares owned jointly by Mr. Hollinshead and
his wife.

(5) The figure shown includes 8,214 shares owned jointly by Mr. McGeehan and his
wife.

(6) The figure shown includes 2,377 shares owned jointly by Mr. Newlin and his
wife and 6,291 shares owned by Mr. Newlin's wife. Mr. Newlin disclaims
beneficial ownership of shares owned by his wife.

(7) These amounts represent Stock Credits to which non-employee directors are
entitled pursuant to the Directors Stock Incentive Plan described on page 4
and to which executive officers are entitled pursuant to the Corporation's
Management Performance Bonus Plan.

(8) The figure shown includes 8,000 shares owned jointly by Mr. Breisinger and
his wife.

5
<PAGE> 8

COMPENSATION OF EXECUTIVE OFFICERS

The following table sets forth the compensation paid by the Corporation
during its last three fiscal years to its Chief Executive Officer and each of
the other four most highly compensated executive officers (the "Named Executive
Officers") each of whose aggregate direct remuneration exceeded $100,000 during
the fiscal year ended June 30, 1999.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
---------------------------
ANNUAL COMPENSATION SECURITIES RESTRICTED ALL OTHER
-------------------------- UNDERLYING STOCK COMPENSATION
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY($)(1) BONUS($)(2) OPTIONS(#)(3) AWARDS($) (5)(6)($)
- --------------------------- ----------- ------------ ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. McGeehan, 1999 619,668 150,000 60,000 14,120
Former President and 1998 599,880 444,000 56,000 17,384
Chief Executive Officer (8) 1997 550,045 330,000 45,000 15,629
15,000(7)
H. Patrick Mahanes, Jr., 1999 329,412 122,500 100,000 625,000(4) 6,050
Vice President, 1998 325,465 189,997 31,600 8,450
Chief Operating Officer 1997 306,295 122,500 15,000 5,750
Richard J. Orwig, 1999 333,334 50,000 75,000 8,964
President and 50,000(7)
Chief Executive Officer, 1998 308,464 193,875 31,600 10,170
JLK Direct 1997 284,880 150,000 15,000 5,970
Distribution Inc. (9)
David B. Arnold, 1999 237,864 0 15,000 8,595
Vice President and 1998 242,605 106,375 22,300 9,243
Chief Technical Officer 1997 232,045 62,500 10,000 7,167
James R. Breisinger, 1999 208,255 68,766 10,000 6,457
Vice President and 1998 169,364 75,019 10,600 12,350
Chief Financial Officer 1997 147,045 43,750 4,000 11,048
5,000(7)
</TABLE>

- ---------------
(1) Reflects salary reductions implemented during fiscal 1999 pursuant to a cost
containment program.

(2) Includes, for Messrs. McGeehan, Mahanes, Orwig, Arnold and Breisinger,
bonuses paid partially or entirely in shares of Capital Stock or in Stock
Credits as elected by the individual under the Corporation's Management
Performance Bonus Plan. Under the Management Performance Bonus Plan, any
portion of a bonus paid in shares of Capital Stock or in Stock Credits was
increased by 25% of that value.

(3) Unless otherwise indicated, represents options to purchase shares of the
Corporation's Capital Stock.

(4) Mr. Mahanes was granted a restricted stock award for 30,000 shares on April
26, 1999 under the Kennametal Inc. 1999 Stock Plan. The award vests over
three years in equal amounts. Dividends will be paid on the shares subject
to the award.

(5) This figure includes imputed income based upon premiums paid by the
Corporation to secure and maintain for certain officers, including all
executive officers of the Corporation who elect to participate, a $500,000
term life insurance policy on the life of such officer until he reaches age
65. For Mr. McGeehan, Mr. Orwig and Mr. Arnold, this figure also includes
amounts paid for Medicare tax and income tax gross-up on supplemental
pension benefit accrual.

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<PAGE> 9

(6) This figure includes amounts contributed by the Corporation under its Thrift
Plan. Eligible employees may elect to contribute 2% to 12% of their monthly
compensation (salary and, if applicable, bonus) to this plan. The
Corporation contributes to each participant's account an amount equal to
one-half of that portion of the employee's contribution that does not exceed
6% of the employee's compensation. Contributed sums are invested in
proportions as directed by the employee in a fixed income fund, various
equity funds (including the Corporation's Capital Stock) and balanced funds
(consisting of both equity and fixed-income securities), each managed by
investment management companies, and can be withdrawn by the employee only
upon the occurrence of certain events. Certain terms of the plan are
designed to make available to participants the provisions of section 401(k)
of the Internal Revenue Code, as amended (the "Code"), which permit elective
employee contributions on a pre-tax basis.

(7) Represents options to purchase shares of the Class A Common Stock of JLK
Direct Distribution Inc. ("JLK Common Stock").

(8) Mr. McGeehan retired from employment effective July 1, 1999.

(9) Mr. Orwig became President of JLK Direct Distribution Inc. and ceased to
serve as Vice President and Chief Financial and Administrative Officer of
the Corporation on September 17, 1998. In connection with Mr. Orwig's new
position, Mr. Orwig received a loan, for relocation purposes, in the amount
of $175,000 which was interest-free until September 10, 1999. The entire
amount of the loan was outstanding as of September 12, 1999.

EMPLOYMENT AGREEMENTS

The Corporation has similar agreements with four (4) of the Named Executive
Officers and three (3) other executive officers whereby, subject to review by
the Board of Directors and a provision for termination without cause by either
party upon written notice, they will be employed by the Corporation. The
agreements generally provide that the officers will devote their entire time and
attention to the business of the Corporation, will refrain during employment and
for three years thereafter from competing with the Corporation (unless
employment is terminated by the Corporation without cause or following a change
in control) and will not disclose confidential or trade secret information
belonging to the Corporation. These agreements also require the officers to
assign to the Corporation all inventions conceived or made during their
employment by the Corporation. The agreements provide for severance payments
upon termination of employment occurring either before or after a change in
control of the Corporation.

In the event of termination of his employment by the officer's employer
prior to a change in control, each officer would receive as severance pay an
amount equal to three months' base salary at the time of such termination. In
the event of termination by the officer prior to a change in control, or without
good reason following a change in control, no severance payments will be made.
In general, in the event of termination of employment after a change in control
by the officer for good reason or by the employer other than for cause or
disability, each officer would receive as severance pay 2.8 times the sum of (i)
his respective annual base salary at the date of termination or, at the
officer's election, his salary as of the beginning of the month preceding the
month in which the change in control occurs, and (ii) the average of any bonuses
which he was entitled to or paid during the three most recent fiscal years
ending prior to the date of termination or, at the officer's election, the
average of any bonuses which the officer was entitled to or paid for the three
fiscal years preceding the fiscal year in which the change in control occurred.
In addition, for a three-year period the officer would receive the same medical
and group insurance benefits that he received at the date of termination. The
officer would also receive three years of additional credit for purposes of
computing benefits under the Corporation's retirement and supplemental
retirement plans.

The Corporation also has entered into an agreement with Markos I.
Tambakeras dated as of May 4, 1999 pursuant to which Mr. Tambakeras serves as
President and Chief Executive Officer of the Corporation, effective July 1,
1999. Mr. Tambakeras receives a minimum annual base salary of $550,000 and is
eligible to receive future bonuses of not less than $300,000 under the
Corporation's bonus plans then in effect. The

7
<PAGE> 10

agreement is for a three-year term. Pursuant to the agreement, Mr. Tambakeras
received a $300,000 sign-on bonus (which, at Mr. Tambakeras' request, was paid
in shares of Capital Stock pursuant to the terms of the Performance Bonus Plan
of 1995), an option to purchase 150,000 shares of Capital Stock at $26.00 per
share vesting over a three-year period, a restricted stock grant covering 83,000
shares of Capital Stock vesting over 24 months and certain supplemental
retirement benefits. In addition, Mr. Tambakeras received, on May 4, 1999, an
option to purchase 35,000 shares of Capital Stock at $38 per share.

The agreement with Mr. Tambakeras provides that if, during the term of the
agreement and prior to a change-in-control, Mr. Tambakeras is terminated without
cause, or if he terminates the agreement due to the Corporation's breach, he
will be entitled to a lump sum payment equal to the greater of the base salary
and bonuses that he would have earned during the term or two times his highest
base salary plus targeted bonus for the year of termination. In addition, the
options and restricted stock awards discussed above would vest. If his
employment is terminated after the term by the Corporation prior to a
change-in-control and other than for cause, Mr. Tambakeras would receive a
lump-sum payment equal to two years' annual base salary at the rate then in
effect plus targeted bonus for the year of termination.

In the event that, at or after a change-in-control and prior to the third
anniversary of the date of the change-in-control, Mr. Tambakeras' employment is
terminated by him for good reason or by the Corporation other than for cause, or
if Mr. Tambakeras terminates his employment during the thirty (30) day period
commencing twelve months after the change-in-control, then Mr. Tambakeras would
receive a lump sum payment equal to three times his base salary and targeted
bonus for the year of termination. Severance payments upon change-in-control
would be grossed-up for the excise tax during the three-year term. After the
term, payments due on change-in-control would be reduced to avoid implicating
the excise tax.

STOCK OPTIONS

The Kennametal Inc. Stock Option and Incentive Plan of 1992 (the "1992
Plan") provides for the granting of nonstatutory and incentive stock options and
share awards covering the lesser of 1,650,000 shares (gross) and 1,109,255
shares (net) of the Corporation's Capital Stock. The Kennametal Inc. Stock
Option and Incentive Plan of 1996 (the "1996 Plan") provides for the granting of
nonstatutory and incentive stock options and share awards covering 1,500,000
shares of the Corporation's Capital Stock. The Kennametal Inc. 1999 Stock Plan
provides for the granting of nonstatutory stock options and share awards
covering 600,000 shares. Although options are still outstanding under the
Kennametal Inc. Stock Option and Incentive Plan of 1988 (the "1988 Plan"), no
further grants of options may be made under that plan.

Under each of the plans, the price at which shares covered by an option may
be purchased must not be less than the fair-market value of such shares at the
time the option is granted or, in the case of the non-qualified stock options
granted under the 1992 Plan and the 1996 Plan, at not less than 75% of the fair-
market value. The purchase price must be paid in full at the time of exercise
either in cash or, in the discretion of the Committee administering the plan, by
delivering shares of the Corporation's Capital Stock or a combination of shares
and cash having an aggregate fair-market value equal to the purchase price.

8
<PAGE> 11

The following table sets forth information concerning options granted to
the Named Executive Officers during the fiscal year ended June 30, 1999:

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS EXERCISE OR GRANT DATE
OPTIONS GRANTED IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(1)(#) FISCAL YEAR ($/SHARE) DATE VALUE(3)($)
- ---- ------------- ----------- --------- ---- -----------
<S> <C> <C> <C> <C> <C>
Robert L. McGeehan....... 60,000(4) 5.3 31.6875 7/29/2008(2) 439,446
H. Patrick Mahanes, Jr... 75,000(4) 6.7 21.75 4/25/2009 377,040
25,000(4) 2.2 31.6875 7/29/2008 183,103
Richard J. Orwig......... 50,000(4) 4.4 20.8125 10/29/2008 240,525
25,000(4) 2.2 31.6875 7/29/2008 183,103
50,000(5) 34.7 11.53125 10/29/2008 240,180
David B. Arnold.......... 15,000(4) 1.3 31.6875 7/29/2008 109,862
James R. Breisinger...... 10,000(4) 0.9 31.6875 7/29/2008 73,241
</TABLE>

- ---------------
(1) Options with respect to the Corporation's Capital Stock were granted with an
exercise price equal to the fair market value of the Capital Stock on the
date of grant. These options vest in three equal, annual amounts on the
first three anniversaries of the date of grant.

(2) Although such option was originally granted with a 10 year term, such option
now expires on June 30, 2002 due to Mr. McGeehan's retirement from the
Corporation.

(3) Based on the Black-Scholes Option Valuation model adjusted for dividends to
determine grant date present value of the options. The Corporation does not
advocate or necessarily agree that the Black-Scholes model properly reflects
the value of an option. The assumptions used in calculating the option value
with respect to the Corporation's Capital Stock include the following: a
risk-free interest rate of 5.10% (the rate applicable to a five-year
treasury security at the time of the awards); a dividend yield of 2.61% (the
annualized yield at the date of grant); volatility of 24.36% (calculated
using daily stock returns for the Capital Stock for the five-year period
preceding the option award); and a stock price at date of grant of $31.6875,
$20.8125 and $21.75 for grants with expiration dates of July 29, 2008,
October 29, 2008 and April 25, 2009, respectively (each of the exercise
prices at which these options were granted was equal to the fair market
value of the Capital Stock on the date of grant). The value of these options
under the Black-Scholes model of option valuation applying the preceding
assumptions is $7.3241, $4.8105 and $5.0272 per share for grants with
expiration dates of July 29, 2008, October 29, 2008 and April 25, 2009,
respectively. The assumptions used in calculating the option value with
respect to the JLK Common Stock include the following: a risk-free interest
rate of 4.37% (the rate applicable to a five-year treasury security at the
time of the award); no dividend yield (JLK has not previously and does not
presently intend to pay cash dividends to the holders of its common stock);
volatility of 40.0% (calculated using daily stock returns for the JLK Common
Stock for the twelve-month period preceding the option award); and a stock
price at date of grant of $11.53125 (the exercise price at which this option
was granted was equal to the fair market value of the JLK Common Stock on
date of grant). The value of these options under the Black-Scholes model of
option valuation applying the preceding assumptions is $4.8036 per share.
The ultimate values of the options will depend on the future market price of
the stock of the Corporation or JLK, as the case may be, which cannot be
forecast with reasonable accuracy. The actual value if any, an optionee will
realize upon exercise of an option will depend on the excess of the market
value of the relevant stock over the exercise price on the date the option
is exercised. No adjustments were made for forfeitures or vesting
restrictions on exercise.

(4) Represents options to purchase shares of the Corporation's Capital Stock.

9
<PAGE> 12

(5) Represents options to purchase shares of JLK Common Stock.

The following table sets forth information concerning options to purchase
the Corporation's Capital Stock held by the Named Executive Officers:

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES(1)

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR END (#) YEAR END ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---- --------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Robert L. McGeehan(1)..... 0 -- 297,308/55,448 1,488,941/217,238
0 -- 15,000/0(2) 0/--
H. Patrick Mahanes, Jr.... 14,000 61,631 86,734/91,666 107,813/693,750
Richard J. Orwig(1)....... 14,000 53,813 88,727/66,666 132,769/509,375
0 -- 0/50,000(2) --/0
David B. Arnold........... 9,000 33,750 56,056/10,000 50,350/0
James R. Breisinger(1).... 0 -- 26,884/6,666 31,688/0
0 -- 5,000/0(2) 0/--
</TABLE>

- ---------------

(1) Unless otherwise indicated, represents options to purchase the Corporation's
Capital Stock.

(2) Represents options to purchase shares of JLK Common Stock.

RETIREMENT BENEFITS

The following table indicates, for purposes of illustration, the
approximate annual retirement benefits that would be payable at the present time
on a straight life annuity basis pursuant to the Kennametal Inc. Retirement
Income Plan and the Supplemental Executive Retirement Plan under various
assumptions as to salary, bonus and years of service to employees in higher
salary classifications. The amounts shown have not been adjusted for Social
Security offset.

PENSION PLAN TABLE

<TABLE>
<CAPTION>
ANNUALIZED ANNUAL BENEFIT UPON RETIREMENT WITH YEARS OF CREDITED SERVICE INDICATED
COVERED ------------------------------------------------------------------------
COMPENSATION 15 20 25 30 35
- ------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$ 100,000 $ 45,000 $ 50,000 $ 55,000 $ 60,000 $ 65,000
200,000 90,000 100,000 110,000 120,000 130,000
400,000 180,000 200,000 220,000 240,000 260,000
600,000 270,000 300,000 330,000 360,000 390,000
800,000 360,000 400,000 440,000 480,000 520,000
1,000,000 450,000 500,000 550,000 600,000 650,000
1,200,000 540,000 600,000 660,000 720,000 780,000
</TABLE>

As of June 30, 1999, the credited years of service under the Retirement
Income Plan for the Named Executive Officers were approximately: Robert L.
McGeehan, 26 years; H. Patrick Mahanes, Jr., 14 years; Richard J. Orwig, 15
years; David B. Arnold, 20 years and James R. Breisinger, 20 years.

Annualized Covered Compensation (which is the latest base salary plus the
average annual bonus over the past three years as shown in the Summary
Compensation Table) as of June 30, 1999, for purposes of the retirement benefits
under the Retirement Income Plan and supplemental benefits for the Named
Executive

10
<PAGE> 13

Officers, is as follows: Robert L. McGeehan, $865,000; H. Patrick Mahanes, Jr.,
$425,000; Richard J. Orwig, $421,700; David B. Arnold, $295,000 and James R.
Breisinger, $253,000.

REPORT OF THE BOARD OF DIRECTORS
COMMITTEE ON EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION PHILOSOPHY

Executive and managerial compensation programs at the Corporation are designed
and implemented with certain guiding principles in mind:

- To link the interests of executives and managers to the interests of the
shareowners and other potential investors.

- To provide incentives for working toward increasing the market value of
the Corporation's stock and to increase shareowner value through value
management.

- To provide incentives for strategic vision and decision-making that will
promote the longer-term health and viability of the Corporation.

- To provide incentives for innovation, quality management, responsiveness
to customer needs, value-added products and services, and an
action-oriented approach to opportunities in the marketplace.

- To attract and retain individuals with the leadership and technical
skills required to carry the Corporation forward into the future, given
the belief that the Corporation's human resources can provide a
competitive advantage in the marketplace.

GENERAL COMPENSATION PLAN DESIGN

Executive and management compensation plans consist of (1) a long-term element,
(2) annual performance rewards, (3) basic compensation, and (4) executive
ownership goals.

- The primary vehicles for providing long-term incentives are the
Corporation's stock option plans. The belief is that key executives and
certain managers should hold stock options in such quantities as to
provide an incentive to make decisions and take actions that will enhance
the performance of the Corporation and increase its value. The interests
of shareowners and executives are tied together by the market value of
the stock.

- Annual performance rewards include a management performance bonus plan
and annual base salary merit increases.

-- The Management Performance Bonus Plan for executives and managers is
designed to closely tie bonus awards to corporate performance, unit
performance, and individual contribution, relative to the
Corporation's business plans, strategies and shareowner value
creation. The Management Performance Bonus Plan is also intended to
maintain management compensation at a competitive level, as indicated
by published compensation surveys.

-- The annual Base Salary Merit Increase Review for executives and
managers provides rewards for more qualitative achievements in
innovation, quality, service to the customer and leadership.
Consideration is given to competitive salary increases that are being
awarded by other industrial firms, as indicated by published salary
surveys.

- Basic compensation, for executives, is intended to be competitive in the
employment market and is designed to attract, retain and motivate
high-quality individuals. Basic compensation includes base salary,
flexible and fixed-benefit plans, minor executive perquisites and the
Supplemental Executive Retirement Plan.

11
<PAGE> 14

- In 1995, executive stock ownership goals were established by the Chief
Executive Officer, ratified by the Board of Directors Committee on
Executive Compensation and presented to the Board of Directors. The
ownership goals are voluntary but very much encouraged.

COMPENSATION OF THE CHIEF EXECUTIVE OFFICER

- Mr. Robert L. McGeehan served as Chief Executive Officer until the end of
fiscal 1999. Mr. McGeehan received a stock option grant of 60,000 shares
on July 30, 1998. The option price was the average of the high and low
market prices on the date of the award. On July 27, 1998, the option
award was approved by the Board of Directors.

- Under the plan design of the Management Performance Bonus Plan for fiscal
1999, a bonus pool was calculated by management and approved by the Board
of Directors. Based on specific personal achievements, the Committee
recommended a bonus award of $150,000 for Mr. McGeehan. On July 26, 1999,
Mr. McGeehan's bonus award was approved by the Board of Directors.

COMPENSATION OF EXECUTIVE OFFICERS

- Stock options were awarded to certain executive officers and others on
July 30, 1998 for the purpose of providing an incentive for managing the
continuing performance and value of the Corporation. The awards, as
recommended by Mr. McGeehan, were approved by the Board of Directors
Committee on Executive Compensation on July 26, 1998.

- Individual executive officer bonus awards were determined by individual
performance as recommended by Mr. McGeehan, and were approved by the
Board of Directors Committee on Executive Compensation on July 15, 1999.

Committee on Executive Compensation:

Richard C. Alberding, Chairman
Peter B. Bartlett
Aloysius T. McLaughlin, Jr.

12
<PAGE> 15

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN

The following graph compares cumulative total shareowner return on the
Corporation's Capital Stock with the cumulative total shareowner return on the
common equity of the companies in the Standard & Poor's Mid-Cap 400 Market Index
(the "S&P Mid-Cap") and a peer group of companies determined by the Corporation
(the "Peer Group") for the period from July 1, 1994 to June 30, 1999. The Peer
Group consists of the following companies: Sames Corporation; Brown & Sharpe
Manufacturing Co.; Milacron Inc.; Federal Screw Works Inc.; Federal-Mogul Corp.;
Gleason Corp.; Kaydon Corp.; Monarch Machine Tool Company Inc.; Newcor Inc.;
Regal-Beloit Corp.; Snap-On Incorporated; SPS Technologies, Inc.; The L. S.
Starrett Company; and Timken Co.

<TABLE>
<CAPTION>
PEER GROUP S&P MID-CAP KENNAMETAL INC.
---------- ----------- ---------------
<S> <C> <C> <C>
'1994' 100.00 100.00 100.00
'1995' 113.97 122.34 143.25
'1996' 129.24 148.75 143.66
'1997' 180.86 183.45 184.96
'1998' 209.06 233.26 182.04
'1999' 168.34 262.58 139.06
</TABLE>

The above graph assumes a $100 investment on July 1, 1994, in each of
Kennametal Inc. Capital Stock, the S & P Mid-Cap and the Peer Group, and further
assumes the reinvestment of all dividends.

13
<PAGE> 16

PRINCIPAL HOLDERS OF VOTING SECURITIES

The following table sets forth each person or entity who may be deemed to
have beneficial ownership of more than 5% of the outstanding Capital Stock of
the Corporation based upon information publicly available as of June 30, 1999.

<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF OUTSTANDING
NAME AND ADDRESS SHARES CAPITAL STOCK(1)
- ---------------- --------- ----------------
<S> <C> <C>
Key Trust Company, National Assoc. 2,815,302(2) 9.3
4900 Tiedeman Rd.
Brooklyn, OH 44144-2302

PRIMECAP Management Company 1,711,200(3) 5.7
225 South Lake Ave. #400
Pasadena, CA 91101-3005

Fidelity Management and Resource Corp. 2,476,632(4) 8.2
82 Devonshire Street
Boston, MA 02109-6995
</TABLE>

- ---------------
(1) Based on the number of shares outstanding as of September 7, 1999.

(2) Key Trust has sole dispositive power over 2,746,302 shares and shared
dispositive power over 1,500 shares.

(3) PRIMECAP has sole voting power over all shares.

(4) Fidelity has sole dispositive power over 196,800 shares.

ELECTION OF AUDITORS

Unless otherwise directed by the shareowners, proxies will be voted for the
election of Arthur Andersen LLP as the Corporation's independent auditors for
the fiscal year ending June 30, 2000. The affirmative vote of the owners of at
least a majority of the shares cast at the meeting is required to elect such
firm as auditors. Representatives of Arthur Andersen LLP are expected to be
present at the meeting to respond to appropriate questions and will have the
opportunity to make a statement if they desire to do so. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF ARTHUR ANDERSEN LLP AS THE
CORPORATION'S AUDITORS.

APPROVAL OF STOCK OPTION AND INCENTIVE PLAN OF 1999

In July 1999, the Board of Directors adopted, subject to shareowner
approval at the 1999 Annual Meeting, the new Kennametal Inc. Stock Option and
Incentive Plan of 1999 (the "1999 Plan"). THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT THE 1999 PLAN BE APPROVED BY THE SHAREOWNERS.

The 1992 Plan currently provides for the granting to officers and key
employees of options to purchase and awards of shares of Capital Stock. The 1996
Plan currently provides for the granting to directors, officers and employees of
options to purchase and awards of shares of Capital Stock. The Kennametal Inc.
1999 Stock Plan (the "1999 Stock Plan") currently provides for the granting to
the directors, officers and key employees, including prospective directors,
officers and key employees of options to purchase and awards of shares of
Capital Stock. See "Compensation of Executive Officers -- Stock Options." The
term for granting options and/or awards under plans adopted prior to the 1992
Plan has expired. As of July 6, 1999, only 219,650 shares of Capital Stock
remain available for grant under the 1992 Plan, the 1996 Plan and the 1999 Stock
Plan.

14
<PAGE> 17

In the judgment of the Board of Directors, it is important that the
Corporation be in a position to continue to grant stock-based compensation to
current and prospective officers and employees who are responsible for the
Corporation's continued growth, development and future financial success, in
order to secure to the Corporation the advantages of incentive and the sense of
proprietorship inherent in stock ownership, to reward prior performance and to
assist in the Corporation's efforts to recruit, retain and motivate high-quality
employees. Furthermore, the Board believes that it is important to have the
ability to grant stock-based compensation to non-employee directors and
prospective directors in order to recruit and retain highly qualified directors
and to further align their interests with those of shareowners.

GENERAL

The following description is intended to summarize certain provisions of
the new 1999 Plan if adopted as proposed. The full text of the 1999 Plan is set
forth in Exhibit A hereto and the following description is qualified in its
entirety by reference to Exhibit A.

Administration. The 1999 Plan is to be administered by the full Board of
Directors or by a committee of the Board (the "Plan Administrator") constituted
to permit transactions under the Plan to comply with Rule 16b-3 of the
Securities Exchange Act of 1934. Subject to the terms of the 1999 Plan, the Plan
Administrator will select from eligible persons those to whom options will be
granted and/or shares awarded. The Plan Administrator will determine the type of
option, the number of shares to be included in each option, the option price and
the period in which each option may be exercised. The Plan Administrator also
will determine the number of shares to be awarded pursuant to the Plan and the
terms and conditions which must be met in order for such shares to vest.

Eligibility. Options and shares may be granted under the 1999 Plan to
directors, officers and employees of the Corporation and its subsidiaries,
including prospective directors, officers and employees, who, in the opinion of
the Plan Administrator, are mainly responsible for the continued growth and
development and future financial success of the business of the Corporation.
There currently are approximately 150 directors, officers and employees of the
Corporation who may be eligible generally under the 1999 Plan, including
officers named in the table shown under "Compensation of Executive Officers" in
this Proxy Statement, although other employees may receive options or shares
under the 1999 Plan to reward superior performance. No determination has been
made as to the individuals to whom options may be granted, shares may be
awarded, or the amount of options or shares that may be granted to any such
individual under the 1999 Plan.

Shares Available for Issuance. The 1999 Plan provides for the issuance of
2,500,000 shares of Capital Stock, although the maximum number of shares of
Capital Stock that can take the form of share awards is 750,000. The number of
shares available under the 1999 Plan is subject to adjustment to prevent
dilution or enlargement of rights. The shares may be either authorized and
unissued shares or shares held in treasury by the Corporation. Shares covered by
options granted under the 1999 Plan that terminate or expire without being
exercised and, in certain cases, shares that are awarded pursuant to the 1999
Plan but that are forfeited will remain available for the future granting of
options and share awards under the 1999 Plan. No options or share awards can be
granted under the 1999 Plan after October 25, 2009.

Stock Options. The 1999 Plan provides for the Plan Administrator, in its
discretion, to grant options either in the form of incentive stock options
("Incentive Stock Options") qualified as such under the Code or other options
("Nonstatutory Stock Options"). See "Federal Income Tax Consequences" below for
a summary of the differing tax consequences of Incentive Stock Options and
Nonstatutory Stock Options. The aggregate fair-market value of the shares with
respect to which Incentive Stock Options are first exercisable by the optionee
in any calendar year may not exceed the limitations, if any, imposed by Section
422(d) of the Code. Options designated as Incentive Stock Options in excess of
such limitation automatically are reclassified as Nonstatutory Stock Options, as
described in the 1999 Plan.

15
<PAGE> 18

The price at which each share covered by an option granted under the 1999
Plan may be purchased will be determined in each case by the Plan Administrator,
but may not be less than the fair market value at the time the option is
granted. Fair-market value is defined to be the mean between the highest and
lowest sales prices for the Capital Stock of the Corporation as reported on the
New York Stock Exchange -- Composite Transactions reporting system for the day
immediately preceding the date in question or, if no sales were made on that
date, on the next preceding date on which sales were made. On September 7, 1999,
such fair-market value for the Corporation's Capital Stock was $25.9375 per
share.

An option may be exercised in whole at any time or in part from time to
time within such period as may be determined by the Plan Administrator, provided
that the option period may not exceed ten years from the granting of the option.
If the optionee is terminated for cause or shall cease to be employed by reason
of such optionee's voluntary termination, the option shall terminate. If the
optionee ceases to be employed by the Corporation or any of its subsidiaries by
reason of a termination other than for cause, the option may be exercised only
within three months after the termination of employment and within the option
period. If the optionee shall cease to be employed due to disability, death or
retirement, the option may be exercised only within two years after termination
of employment and within the option period. If the optionee is a non-employee
director of the Corporation or any of its subsidiaries and the optionee ceases
to serve the Corporation, the option may be exercised within one year after the
cessation of service and within the option period or, if such cessation was due
to death or disability, within two years after cessation of service and within
the option period, unless cessation was the result of removal for cause, in
which case the option shall terminate. In the discretion of the Plan
Administrator, the option period in each case may be extended for up to three
years from the date of termination regardless of the original option period. If
the optionee dies, the option may only be exercised by the optionee's personal
representatives or persons entitled thereto under the optionee's will or the
laws of the descent and distribution within two years after such optionee's
death.

In the event that the optionee ceases to be employed by the Corporation, or
to serve as a director of the Corporation, as a result of such optionee's death
or disability, all options held by the optionee shall automatically vest and
become exercisable in full as of the date that the optionee's employment or
services cease. In the event that an optionee ceases to be employed by the
Corporation or any of its subsidiaries, or to serve as director of the
Corporation, as the case may be, as a result of such optionee's retirement, all
options 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. In the event of death or disability during the two-year period
following retirement or in the event of a Change of Control, all options held by
the optionee shall automatically vest and become exercisable in full.

The option price of each share purchased pursuant to an option shall be
paid in full at the time of each exercise of the option (i) in cash, (ii)
through a cashless exercise procedure in which a broker sells sufficient shares
to deliver the exercise price to the Corporation, (iii) by delivering shares of
Capital Stock (held by the participant for at least six (6) months) having an
aggregate fair-market value equal to the option price of the shares being
purchased, or, (iv) through any combination of the foregoing.

The Plan Administrator, in its discretion, may grant rights authorizing the
automatic issuance, upon exercise of an option granted under the Corporation's
other stock option plans using previously owned shares, of additional stock
options under the 1999 Plan with an exercise price equal to the fair-market
value on the date of exercise and for up to the number of shares delivered in
payment of the exercise price of the option. Such additional stock options must
have the same option period as the original option.

In consideration for the granting of each option, the optionee shall agree
to remain in the employment of the Corporation or a subsidiary for at least one
year from the date of the granting of the option or until the first day of the
month coinciding with or next following the optionee's sixty-fifth birthday,
whichever may

16
<PAGE> 19

be earlier. The optionee, however, is not entitled to continued employment by
the Corporation or its subsidiaries.

Share Awards. The Plan Administrator may from time to time award shares to
participants pursuant to share award agreements which may contain such terms and
conditions as the Plan Administrator shall determine. The aggregate maximum
number of shares of Capital Stock that may take the form of share awards is
750,000. The Plan Administrator may establish such vesting period, schedule and
criteria as it deems appropriate for each share award, such as vesting in
installments upon the achievement by the Corporation or grantee of specified
performance goals; provided, however, that any single award of shares to a
participant in an amount greater than 100 shares shall vest only upon the
satisfaction of specified performance goals. If the grantee or the Corporation,
as the case may be, fails to achieve the designated goals or the grantee ceases
to be employed by the Corporation for any reason prior to the expiration of the
vesting period, the grantee will forfeit all non-vested shares.

Allotment of Shares. Not more than 750,000 shares subject to the 1999 Plan
may be optioned to any one individual subject to certain adjustments.

Change in Control. The 1999 Plan provides that in the event of a Change in
Control of the Corporation (as defined in the 1999 Plan), (a) all options that
become exercisable in installments shall become immediately exercisable in full,
(b) an optionee who ceases to be employed by the Corporation or a subsidiary
within one year following the change in control may in all events exercise his
or her options for a period of three months after the termination of employment
and within the option period, and (c) all awards of shares which have not
previously vested shall become vested.

Tax Withholding. When shares are issued under the 1999 Plan, or if an
optionee makes a disqualifying disposition of shares acquired upon exercise of
an Incentive Stock Option, the Corporation has the right to require the optionee
to remit to the Corporation an amount sufficient to satisfy required income tax
withholding. In the discretion of the Plan Administrator, the grantee may elect
to satisfy this withholding obligation by delivering to the Corporation
previously-owned shares provided that the previously-owned shares have been held
for six months. All such elections will be subject to the approval of the Plan
Administrator.

Amendment or Discontinuance. The Board of Directors may alter, amend,
suspend or discontinue the 1999 Plan, provided that no such action may deprive
any person without such person's consent of any rights granted under the plan.

FEDERAL INCOME TAX CONSEQUENCES

Stock Options. The grantee of an Incentive Stock Option under the 1999 Plan
will not be required to recognize the value of the option as income for federal
income tax purposes at the time of award and the Corporation will not be
entitled to deduct the value of the option. The exercise of an Incentive Stock
Option is also not a taxable event although the difference between the option
price and the fair-market value on the date of exercise is an item of tax
preference for purposes of the alternative minimum tax. If stock acquired upon
exercise of an Incentive Stock Option is held for two years from the date the
option was granted and one year from the date the stock was transferred to the
grantee (the "ISO Holding Period"), then the grantee will have a long-term
capital gain or loss on the sale of such stock measured by the difference
between the amount realized and the option price. If the ISO Holding Period is
not met, upon disposition of such shares (a "disqualifying disposition"), the
grantee will realize compensation taxable as ordinary income in an amount equal
to the excess of the fair-market value of the shares at the time of exercise
over the option price limited, however, to the gain on sale. Any additional gain
would be taxable as long-term or short-term capital gain. If the Incentive Stock
Option is exercised by delivery of previously-owned shares of Capital Stock in
partial or full payment of the option price, no gain or loss will ordinarily be
recognized by the grantee on the transfer of such previously-owned shares.
However, if the previously-owned shares

17
<PAGE> 20

transferred were acquired through the exercise of an Incentive Stock Option, the
grantee may realize ordinary income with respect to the shares used to exercise
an Incentive Stock Option if such transferred shares have not been held for the
ISO Holding Period. If the grantee recognizes ordinary income upon a
disqualifying disposition, the Corporation will be entitled to a tax deduction
in the same amount.

The grantee of a Nonstatutory Stock Option under the 1999 Plan will not be
required to recognize the value of the option as income for federal income tax
purposes at the time of award and the Corporation will not be entitled to a
deduction. Upon exercise of a Nonstatutory Stock Option, the grantee will
realize compensation taxable as ordinary income in an amount measured by the
excess, if any, of the fair-market value of the shares on the date of exercise
over the option price. At this time, the Corporation will be entitled to a
deduction in the same amount. Upon the sale of shares acquired on exercise of a
Nonstatutory Stock Option, the grantee will realize capital gain (or loss)
measured by the difference between the amount realized and the fair-market value
of the shares on the date of exercise. If the exercise price of a Nonstatutory
Stock Option is paid in whole or in part in shares of Capital Stock, the tax
results to the grantee are (i) a tax-free exchange of previously owned shares
for an equivalent number of new shares and (ii) the realization of ordinary
income in an amount equal to the fair-market value on the date of exercise of
any additional shares received in excess of the number exchanged.

Share Awards. To the extent that the shares awarded are subject to vesting,
the grantee of shares awarded under the 1999 Plan will normally not be required
to recognize the value of the awards as income for federal income tax purposes
at the time of the award. When any part of a share award vests, the grantee will
realize compensation taxable as ordinary income in an amount equal to the
fair-market value of the vested shares on the vesting date. The grantee may,
however, make an election (the "Tax Election") within thirty days following the
grant of the share award, to be taxed at the time of the award based on the
fair-market value of the shares on that date. The Corporation will be entitled
to a deduction in the same amount and at the same time that the grantee
recognizes ordinary income. Upon the sale of the awarded shares, the grantee
will realize capital gain (or loss) measured by the difference between the
amount realized and the fair-market value of the shares on the date the award
vested (or on the date of grant if the grantee made the Tax Election).

VOTE REQUIRED FOR ADOPTION OF THE 1999 PLAN

The affirmative vote of owners of a majority of the shares present and
voting at the meeting is required for approval of the 1999 Plan, provided that a
majority of outstanding shares votes on the matter. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1999 PLAN.

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<PAGE> 21

FORM 10-K ANNUAL REPORT TO THE SECURITIES
AND EXCHANGE COMMISSION

COPIES OF THE ANNUAL REPORT (FORM 10-K) OF THE CORPORATION FOR THE FISCAL
YEAR ENDED JUNE 30, 1999 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
WILL BE AVAILABLE TO SHAREOWNERS AFTER SEPTEMBER 30, 1999. A SHAREOWNER MAY
OBTAIN ONE WITHOUT CHARGE BY WRITING TO: CHIEF FINANCIAL OFFICER, KENNAMETAL
INC., 1600 TECHNOLOGY WAY, P.O. BOX 231, LATROBE, PENNSYLVANIA 15650.

OTHER MATTERS

The Corporation knows of no other matters to be presented for action at the
Annual Meeting. However, the enclosed form of proxy confers discretionary
authority with respect to the transaction of any other business that may
properly come before the meeting. If any other matters should properly come
before the meeting, it is intended that votes will be cast pursuant to the proxy
in respect thereto in accordance with their best judgment.

The Corporation will pay the expense in connection with the printing,
assembling and mailing of the notice of meeting, this Proxy Statement and the
accompanying form of proxy to the owners of Capital Stock of the Corporation. In
addition to the use of the mails, proxies may be solicited by directors,
officers or employees of the Corporation personally or by telephone or telex or
facsimile. The Corporation may request the persons holding stock in their names,
or in the names of their nominees, to send proxy material to and obtain proxies
from their principals and will reimburse such persons for their expense in so
doing. In addition, the Corporation has retained the services of Georgeson
Shareholder Communications Inc., a professional soliciting organization, to
assist in soliciting proxies from brokerage houses, custodians, nominees, other
fiduciaries and other shareowners of the Corporation. The fees and expenses of
that firm in connection with such solicitation are not expected to exceed
$25,000.

SHAREOWNER PROPOSALS AND NOMINATING PROCEDURES

Shareowners who intend to submit a proposal for inclusion in the
Corporation's 2000 Proxy Statement for consideration at the Annual Meeting of
the Shareowners of the Corporation to be held in October 2000, must submit such
proposal to the attention of the Secretary of the Corporation at the address of
its executive offices no later than May 21, 2000. Any such proposal must comply
with Rule 14a-8 of Regulation 14A of the proxy rules of the Securities and
Exchange Commission and must contain certain information specified in the
By-Laws of the Corporation.

The By-Laws of the Corporation require that all shareowner proposals to be
submitted at the Annual Meeting but not included in the Corporation's Proxy
Statement be submitted to the Secretary of the Corporation at the address of its
executive offices no earlier than May 1, 2000 and prior to July 1, 2000,
together with certain information specified in the By-Laws. The By-Laws of the
Corporation also require that nominations for directors to be elected at the
2000 Annual Meeting, other than those made by the Board of Directors, be
submitted to the Secretary of the Corporation no earlier than May 1, 2000 and
prior to July 1, 2000. The By-Laws require that notice of such nominations
contain certain information regarding the nominee and certain information
regarding the nominating shareowner. Any shareowner may obtain a copy of the
applicable By-Law from the Secretary of the Corporation upon written request.

19
<PAGE> 22

EXHIBIT A

KENNAMETAL INC.
STOCK OPTION AND INCENTIVE PLAN OF 1999

SECTION 1. ESTABLISHMENT. There is hereby established the Kennametal Inc.
Stock Option and Incentive Plan of 1999 (hereinafter called the "Plan") pursuant
to which directors, officers and employees of Kennametal Inc. (hereinafter
called the "Company") and its subsidiaries, including prospective directors,
officers and employees, who are or will be mainly responsible for its continued
growth and development and future financial success may be granted options to
purchase shares of Capital Stock of the Company (as defined in Section 5 below)
and/or may receive awards of shares of Capital Stock in order to secure to the
Company the advantage of the incentive and sense of proprietorship inherent in
stock ownership by such persons, to reward such persons for services previously
performed and/or as an added inducement to continue to provide service to the
Company.

SECTION 2. DURATION. Options and share awards under this Plan may be
granted only within the ten-year period beginning on the date on which the Plan
is adopted by the shareowners. Any options or share awards outstanding after the
expiration of such ten-year period may be exercised within the periods
prescribed by Section 7.

SECTION 3. ADMINISTRATION. The Plan shall be administered by the full Board
of Directors or a committee constituted so as to permit transactions under the
Plan to comply with Rule 16b-3 (or any successor rule) promulgated under the
Securities Exchange Act of 1934, as amended (the "Plan Administrator"). Subject
to the provisions of the Plan, the Plan Administrator is authorized to adopt
such rules and regulations and to take such action in the administration of the
Plan as it shall deem proper.

SECTION 4. ELIGIBILITY. Directors, officers and employees of the Company
and its subsidiaries, including prospective directors, officers and employees,
who, in the opinion of the Plan Administrator, are or will be mainly responsible
for the continued growth and development and future financial success of the
business shall be eligible to participate in the Plan. The Plan Administrator
shall, in its sole discretion, from time to time, select from such eligible
persons those to whom options shall be granted or shares awarded and determine
the number of shares to be included in such option or award; provided, however,
that no option may be granted in substitution for an outstanding option except
as provided in Section 11(d); and provided, further, that the Plan Administrator
may not reduce the option price of an outstanding option, whether through
amendment, cancellation or replacement of such option, unless such reduction is
approved by the shareowners of the Company. No participant shall have any right
to receive an option or share award, except as the Plan Administrator in its
discretion shall determine. The term "subsidiary," where used in the Plan or in
any stock option agreement entered into under the Plan, means a "subsidiary
corporation" as defined in Section 425 of the Internal Revenue Code of 1986, as
it may be amended from time to time (the "Code").

SECTION 5. SHARES SUBJECT TO THE PLAN. The total number of shares of stock
which may be issued pursuant to the Plan shall be 2,500,000 shares of capital
stock, par value $1.25 per share, of the Company (the "Capital Stock") provided,
however, that: (i) the number of shares of Capital Stock to be issued pursuant
to the Plan is subject to adjustment as provided in Section 11; (ii) to the
extent that options granted under the Plan shall expire or terminate without
being exercised or shares awarded under the Plan shall be forfeited, such shares
shall remain available for purposes of the Plan and (iii) shares delivered in
payment of the option price in connection with the exercise of options or to pay
tax withholding obligations shall be added back to the number of shares
available for issuance pursuant to the Plan. Capital Stock to be issued under
the Plan may be either authorized and unissued shares or shares held in treasury
by the Company.

SECTION 6. TYPES OF OPTIONS. Options granted pursuant to the Plan may be
either options which are incentive stock options under Section 422 of the Code
(hereinafter called "Incentive Stock Options") or other options (hereinafter
called "Nonstatutory Stock Options"). Incentive Stock Options and Nonstatutory

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Stock Options shall be granted separately hereunder. The Plan Administrator, in
its discretion, shall determine whether and to what extent options granted under
the Plan shall be Incentive Stock Options or Nonstatutory Stock Options. The
provisions of the Plan and any stock option agreement pursuant to which
Incentive Stock Options shall be issued shall be construed in a manner
consistent with Section 422 of the Code and rules and regulations promulgated or
proposed thereunder.

SECTION 7. TERMS OF OPTIONS. Each option granted under the Plan shall be
evidenced by a stock option agreement between the Company and the person to whom
such option is granted and shall be subject to the following terms and
conditions:

(a) Subject to adjustment as provided in Section 11 of this Plan, the
price at which each share covered by an option may be purchased shall be
determined in each case by the Plan Administrator; provided, however, that
such price shall not be less than the fair market value thereof at the time
the option is granted. If an optionee owns (or is deemed to own under
applicable provisions of the Code and rules and regulations promulgated
thereunder) more than ten percent (10%) of the combined voting power of all
classes of the stock of the Company (or any parent or subsidiary
corporation of the Company) and an option granted to such optionee is
intended to qualify as an Incentive Stock Option, the option price shall be
no less than 110% of the fair market value of the shares covered by the
option on the date the option is granted.

(b) The aggregate fair market value of shares of Capital Stock with
respect to which Incentive Stock Options are first exercisable by the
optionee in any calendar year (under all plans of the Company and its
subsidiaries) shall not exceed the limitations, if any, imposed by Section
422(d) of the Code (or any successor provision). If any option designated
as an Incentive Stock Option, either alone or in conjunction with any other
option or options, exceeds the foregoing limitation, the portion of such
option in excess of such limitation shall automatically be reclassified (in
whole share increments and without fractional share portions) as a
Nonstatutory Stock Option, with later granted options being so reclassified
first.

(c) Except as otherwise provided in such optionee's stock option
agreement, during the lifetime of the optionee the option may be exercised
only by the optionee and the option shall not be transferable by the
optionee otherwise than by will or by the laws of descent and distribution
or, if in compliance with Rule 16b-3 (or any successor rule), pursuant to a
domestic relations order. After the death of the optionee, the option may
be transferred to the Company upon such terms and conditions, if any, as
the Plan Administrator and the personal representative or other person
entitled to the option may agree within the period, specified in this
Section 7.

(d) An option may be exercised in whole at any time, or in part from
time to time, within such period or periods (not to exceed ten years from
the granting of the option) as may be determined by the Plan Administrator
and set forth in the stock option agreement (such period or periods being
hereinafter referred to as the "option period"), provided that:

(i) If the optionee who is an employee of the Company or any of its
subsidiaries shall cease to be employed by the Company or any of its
subsidiaries by reason of death, disability or retirement, the option
may be exercised only within two years after termination of employment
and within the option period, provided, however, that the Plan
Administrator may in its sole discretion extend the option period of
any option for up to three years from the date of termination of
employment regardless of the original option period. For purposes of
the Plan, retirement shall mean the termination of employment with the
Company at a time when the participant in the Plan is eligible to
receive immediately payable retirement benefits under the Company's
then existing retirement plan or under any other retirement plan that
is maintained by a Company subsidiary;

(ii) If the optionee who is an employee of the Company or any of
its subsidiaries shall cease to be employed by the Company or any of
its subsidiaries by reason of such optionee's voluntary

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<PAGE> 24

termination of employment or by reason of the Company or any of its
subsidiaries, termination of the optionee for cause, the option shall
forthwith terminate and the optionee shall not be permitted to exercise
the option following the optionee's termination of employment; provided,
however, that the Plan Administrator may in its sole discretion extend
the option period of any option for up to three years from the date of
termination of employment regardless of the original option period;

(iii) If the optionee who is an employee of the Company or any of
its subsidiaries shall cease to be employed by the Company or any of its
subsidiaries by reason of a termination of the optionee other than for
cause, the option may be exercised only within the three months after
the termination of employment and within the option period; provided,
however, that the Plan Administrator may in its sole discretion extend
the option period of any option for up to three years from the date of
termination of employment regardless of the original option period;

(iv) If the optionee who is a non-employee director of the Company
or any of its subsidiaries shall cease to serve as a director of the
Company or any of its subsidiaries, the option may be exercised only
within one year after the cessation of service and within the option
period or, if such cessation was due to death or disability, within two
years after cessation of service and within the option period, unless
such cessation of service as a director was the result of removal for
cause, in which case the option shall forthwith terminate; provided,
however, that the Plan Administrator may in its sole discretion extend
the option period of any option for up to three years from the date of
cessation of service regardless of the original option period;

(v) If the optionee shall die, the option 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;

(vi) Except as provided in Section 7(d)(ix), the option may not be
exercised for more shares (subject to adjustment as provided in Section
11) after the termination of the optionee's employment, cessation of
service as a director or the optionee's death (as the case may be) than
the optionee was entitled to purchase thereunder at the time of the
termination of the optionee's employment, cessation of service as a
director or the optionee's death;

(vii) If an optionee owns (or is deemed to own under applicable
provisions of the Code and rules and regulations promulgated thereunder)
more than 10% of the combined voting power of all classes of stock of
the Company (or any parent or subsidiary corporation of the Company) and
an option granted to such optionee is intended to qualify as an
Incentive Stock Option, the option by its terms may not be exercisable
after the expiration of five years from the date such option is granted;

(viii) In the event that an optionee ceases to be employed by the
Company or any of its subsidiaries or to serve as a director of the
Company, as the case may be, as a result of such optionee's death or
disability, all options 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 of its subsidiaries or service as a
director of the Company ceased; and

(ix) In the event that an optionee ceases to be employed by the
Company or any of its subsidiaries or to serve as a director of the
Company, as the case may be, as a result of such optionee's retirement,
all options 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 which remain unvested
following 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 or the occurrence of a Change of Control (as hereinafter
defined)

A-3
<PAGE> 25

during such period, all options held by the optionee shall
automatically vest and become exercisable in full.

(e) The option price of each share purchased pursuant to an option
shall be paid in full at the time of each exercise (the "Payment Date") of
the option (i) in cash; (ii) by delivering to the Company a notice of
exercise with an irrevocable direction to a registered broker-dealer under
the Securities Exchange Act of 1934, as amended, to sell a sufficient
portion of the shares and deliver the sale proceeds directly to the Company
to pay the exercise price; (iii) through the delivery to the Company of
previously-owned shares of Capital Stock having an aggregate fair market
value equal to the option price of the shares being purchased pursuant to
the exercise of the option; provided, however, that shares of Capital Stock
delivered in payment of the option price must have been held by the
participant for at least six (6) months in order to be utilized to pay the
option price; or (iv) through any combination of the payment procedures set
forth in subsections (i)-(iii) of this Section 7(e).

(f) The Plan Administrator, in its discretion, may authorize "stock
retention options" which provide, upon the exercise of an option granted
under this Plan, the Stock Option Plan of 1982, the Stock Option and
Incentive Plan of 1988, the Stock Option and Incentive Plan of 1992, the
Stock Option and Incentive Plan of 1996 or the 1999 Stock Plan (a "prior
option") using previously-owned shares, for the automatic issuance of a new
option under this Plan with an exercise price equal to the current fair
market value and for up to the number of shares equal to the number of
previously-owned shares delivered in payment of the exercise price of the
prior option.

(g) In consideration for the granting of each option, the optionee
shall agree to remain in the employment of the Company or one of its
subsidiaries, at the pleasure of the Company or such subsidiary, for at
least one year from the date of the granting of such option or until the
first day of the month coinciding with or next following the optionee's
sixty-fifth birthday, whichever may be earlier. Nothing contained in the
Plan nor in any stock option agreement shall confer upon any optionee any
right with respect to the continuance of employment by the Company or any
of its subsidiaries nor interfere in any way with the right of the Company
or any subsidiary to terminate his or her employment or change his or her
compensation at any time.

(h) The Plan Administrator may include such other terms and conditions
not inconsistent with the foregoing as the Plan Administrator shall
approve. Without limiting the generality of the foregoing sentence, the
Plan Administrator shall be authorized to determine that options shall be
exercisable in one or more installments during the term of the option and
the right to exercise may be cumulative as determined by the Plan
Administrator.

SECTION 8. SHARE AWARDS.

(a) The Plan Administrator may, from time to time, subject to the
provisions of the Plan, award shares to participants; provided, however,
that the maximum number of shares of Capital Stock that may take the form
of share awards is 750,000.

(b) The award of shares shall be evidenced by a share award agreement
executed by the Company and the grantee setting forth the number of shares
of Capital Stock awarded, the vesting period, the vesting schedule or
criteria and such other terms and conditions as the Plan Administrator may
determine.

(c) The grantee of a share award shall receive shares of Capital Stock
without payment to the Company immediately upon grant; provided, however,
that the grantee's ownership of such shares shall be subject to the
following terms and conditions:

(i) Any single award of shares to a participant in an amount
greater than 100 shares shall vest in installments upon achievement by
the Company or grantee of specified performance goals as determined by
the Plan Administrator and as provided in the share award agreement;

A-4
<PAGE> 26

(ii) If the grantee or the Company, as the case may be, fails to
achieve the designated goals or the grantee ceases to be employed by
the Company for any reason other than death, permanent disability or
retirement prior to the expiration of any vesting period, the grantee
shall forfeit all shares so awarded which have not then vested;

(iii) A grantee who has received a share award pursuant to the Plan
shall have all rights of a shareowner in such Capital Stock, including
but not limited to the right to vote and receive dividends with
respect thereto; provided, however, that shares awarded pursuant to
the Plan which have not vested may not be sold or otherwise
transferred by the grantee and stock certificates representing such
shares may bear a restrictive legend to that effect; and

(iv) In the event that a grantee ceases to be an employee of the
Company or any of its subsidiaries as a result of such grantee's
death, disability or retirement, all outstanding share awards held by
such grantee shall automatically vest as of the date that such
grantee's employment with the Company or any of its subsidiaries
ceased.

SECTION 9. LIMITATION ON OPTIONS. The aggregate number of shares covered by
any options or awards to one person shall not exceed 750,000 subject to
adjustment as provided in Section 11 hereof.

SECTION 10. 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 10 shall be the date on which the amount of tax to
be withheld is determined. If an optionee makes a disposition of shares
acquired upon the exercise of an Incentive Stock Option within either two
years after the option was granted or one year after the receipt of stock
by the optionee, the optionee shall promptly notify the Company and the
Company shall have the right to require the optionee to pay to the Company
an amount sufficient to satisfy federal, state and local tax withholding
requirements.

(b) A grantee who is obligated to pay the Company an amount required
to be withheld under applicable tax withholding requirements may pay such
amount (i) in cash; (ii) in the discretion of the Plan Administrator,
through the delivery to the Company of previously-owned shares of Capital
Stock having an aggregate fair market value on the Tax Date equal to the
tax obligation provided that the previously-owned shares delivered in
satisfaction of the withholding obligations must have been held by the
participant for at least six (6) months; or (iii) in the discretion of the
Plan Administrator, through a combination of the procedures set forth in
subsections (i) an (ii) of this Section 10(b).

SECTION 11. ADJUSTMENT OF NUMBER AND PRICE OF SHARES.

(a) In the event that a dividend shall be declared upon the Capital
Stock of the Company payable in shares of said stock, the number of shares
of Capital Stock covered by each outstanding option and the number of
shares which may be issued pursuant to the Plan but are not yet covered by
outstanding options shall be adjusted by adding thereto the number of
shares of Capital Stock which would have been distributable thereon if such
shares had been outstanding on the date fixed for determining the
shareowners entitled to receive such stock dividend.

(b) In the event that the outstanding shares of Capital Stock of the
Company shall be changed into or exchanged for a different number or kind
of shares of stock or other securities of the Company or of another
corporation, whether through reorganization, recapitalization, stock
split-up, combination of shares, merger or consolidation, then there shall
be substituted for the shares of Capital Stock covered by each outstanding
option, and the shares which may be issued pursuant to the Plan but are not
yet

A-5
<PAGE> 27

covered by outstanding options, the number and kind of shares of stock or
other securities which would have been substituted therefor if such shares
had been outstanding on the date fixed for determining the shareowners
entitled to receive such changed or substituted stock or other securities.

(c) In the event there shall be any change, other than specified in
this Section 11, in the number or kind of outstanding shares of Capital
Stock of the Company or of any stock or other securities into which such
Capital Stock shall be changed or for which it shall have been exchanged,
then, if the Board of Directors shall determine, in its discretion, that
such change equitably requires an adjustment in the number or kind of
shares covered by outstanding options and the shares which may be issued
pursuant to the Plan but are not yet covered by outstanding options, such
adjustment shall be made by the Board of Directors and shall be effective
and binding for all purposes of the Plan and on each outstanding stock
option agreement.

(d) In the event that, by reason of a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization or
liquidation, the Board of Directors shall authorize the issuance or
assumption of a stock option or stock options in a transaction to which
Section 424(a) of the Code applies, then, notwithstanding any other
provision of the Plan, the Plan Administrator may grant an option or
options upon such terms and conditions as it may deem appropriate for the
purpose of assumption of the old option, or substitution of a new option
for the old option, in conformity with the provisions of Code Section
424(a) and the rules and regulations thereunder, as they may be amended
from time to time.

(e) No adjustment or substitution provided for in this Section 11
shall require the Company to issue or to sell a fractional share under any
stock option agreement or share award agreement and the total adjustment or
substitution with respect to each stock option and share award agreement
shall be limited accordingly.

(f) In the case of any adjustment or substitution provided for in this
Section 11, the option price per share in each stock option agreement shall
be equitably adjusted by the Board of Directors to reflect the greater or
lesser number of shares of stock or other securities into which the stock
covered by the option may have been changed or which may have been
substituted therefor.

(g) In the event of a Business Combination (as defined below) under
the terms of which owners of Capital Stock of the Company will receive upon
consummation thereof a cash payment for each share of Capital Stock of the
Company surrendered pursuant to such Business Combination (the "Cash
Purchase Price"), the Board of Directors may provide that all outstanding
options shall terminate upon consummation of the Business Combination and
each optionee 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 of Capital Stock of the Company subject to outstanding
options held by such optionee exceeds (ii) the aggregate exercise price of
such options.

SECTION 12. FAIR MARKET VALUE. In any determination of fair market value
hereunder, fair market value shall be deemed to be the mean between the highest
and lowest sales prices for the Capital Stock of the Company as reported in the
New York Stock Exchange -- Composite Transactions reporting system for the day
immediately preceding the date in question, or if no sales were made on that
date, on the next preceding date on which sales were made.

SECTION 13. CHANGE IN CONTROL.

(a) In the event of a Change in Control of the Company, as hereinafter
defined, the following provisions shall apply to options and share awards
previously awarded under the Plan, notwithstanding any provision herein or
in any agreement to the contrary:

(i) All options which provide for exercise in one or more
installments shall become immediately exercisable in full prior to the
change in control;

A-6
<PAGE> 28

(ii) If any optionee shall cease to be employed by the Company or
any of its subsidiaries within one (1) year following a Change in
Control, then the option may in all events be exercised for a period
of three months after such termination of employment and within the
option period; and

(iii) All awards of shares under the Plan which have not previously
vested shall become vested prior to the change in control.

(b) The term "Change in Control" shall mean a change in control of the
Company of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A promulgated under the Exchange Act as in effect
on the date thereof or, if Item 6(e) is no longer in effect, any
regulations issued by the Securities and Exchange Commission pursuant to
the Exchange Act which serve similar purposes; provided that, without
limitation, such a Change in Control shall be deemed to have occurred if:
(i) the Company shall be merged or consolidated with another corporation or
entity, other than a corporation or entity which is an "affiliate" of the
Company (as such term is defined in Rule 144(a) promulgated under the
Securities Act of 1933) (a "Business Combination"), or (ii) the Company
shall sell all or substantially all of its operating properties and assets
to another person, group of associated persons or corporation, excluding
affiliates of the Company, if any, or (iii) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes a
beneficial owner, directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's then
outstanding securities coupled with or followed by the election as
directors of the Company of persons who were not directors at the time of
such acquisition if such person shall elect a majority of the Board of
Directors of the Company.

SECTION 14. 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 share award if following the participant's termination
of employment with the Company and, within a period of three years thereafter,
the participant engages in any business or enters into any employment which the
Board of Directors 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 in this Section 14 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 Capital Stock pursuant to an award during the 12 month
period prior to the participant's termination of employment with the Company or
during the 24 months following the participant's termination of employment, then
the Board of Directors, in its sole discretion, may require the participant to
return or forfeit the Capital Stock received with respect to such award (or its
economic value as of (i) the date of the exercise of the options or (ii) the
date of grant or payment with respect to stock awards as the case may be) in the
event that the participant engages in Injurious Conduct.

SECTION 15. AMENDMENT AND DISCONTINUANCE. The Board of Directors may alter,
amend, suspend or discontinue the Plan, provided that no such action shall
deprive any person without such person's consent of any rights theretofore
granted pursuant hereto.

SECTION 16. COMPLIANCE WITH GOVERNMENTAL REGULATIONS. Notwithstanding any
provision of the Plan or the terms of any agreement entered into pursuant to the
Plan, the Company shall not be required to issue any shares hereunder prior to
registration of the shares subject to the Plan under the Securities Act of 1933
or the Exchange Act, if such registration shall be necessary, or before
compliance by the Company or any participant with any other provisions of either
of those acts or of regulations or rulings of the Securities and Exchange
Commission thereunder, or before compliance with other federal and state laws
and regulations and rulings thereunder, including the rules of the New York
Stock Exchange, Inc. The Company shall use its best efforts to effect such
registrations and to comply with such laws, regulations and rulings forthwith
upon advice by its counsel that any such registration or compliance is
necessary.

A-7
<PAGE> 29

SECTION 17. COMPLIANCE WITH SECTION 16. With respect to persons subject to
Section 16 of the Exchange Act, transactions under this Plan are intended to
comply with all applicable conditions of Rule 16b-3 (or its successor rule). To
the extent that any grant of an option or share award fails to so comply, it
shall be deemed null and void to the extent permitted by law and to the extent
deemed advisable by the Plan Administrator.

SECTION 18. PARTICIPATION BY FOREIGN NATIONALS. The Plan Administrator may,
in order to fulfill the purposes of the Plan and without amending the Plan,
modify grants to foreign nationals or United States citizens employed abroad in
order to recognize differences in local law, tax policy or custom.

SECTION 19. EFFECTIVE DATE OF PLAN. The Plan shall become effective upon
approval and adoption of the Plan by the affirmative vote of holders of a
majority of the outstanding shares of Capital Stock of the Company present and
voting at the 1999 Annual Meeting of Shareowners.

A-8
<PAGE> 30

PROXY PROXY

KENNAMETAL INC.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE CORPORATION

The undersigned hereby appoints Robert L. McGeehan, Peter B. Bartlett and
William R. Newlin, and each of them with power of substitution in each, as
proxies to represent the undersigned at the annual meeting of the shareowners
of Kennametal Inc. to be held at the Technology Center, located on Route 981
South (recently designated "Technology Way"), approximately 1/4 mile south of
its intersection with U.S. Route 30 near Latrobe, Unity Township, Pennsylvania,
on Monday, October 25, 1999 at 2:00 p.m., and at any adjournments thereof, to
vote the same number of shares and as fully as the undersigned would be
entitled to vote if then personally present (including the power to vote
cumulatively in the election of directors as explained in the Proxy Statement)
in the manner directed by the undersigned as follows:

THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES LISTED IN ITEM I,
FOR THE ELECTION OF AUDITORS, AND FOR THE APPROVAL OF THE KENNAMETAL INC.
STOCK OPTION AND INCENTIVE PLAN OF 1999.

(over)

FOLD AND DETACH HERE
<PAGE> 31
<TABLE>
<S> <C>
Please mark
your votes
as indicated
in this example [X]

I. ELECTION OF DIRECTORS FOR TERMS TO EXPIRE IN 2002

VOTE FOR ALL WITHHOLD Nominees: Peter B. Bartlett, Robert L. McGeehan and Markos I. Tambakeras
NOMINEES LISTED AUTHORITY (INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
(EXCEPT AS SHOWN TO VOTE FOR ALL WRITE NOMINEE'S NAME ON THE LINE PROVIDED BELOW):
TO THE CONTRARY) NOMINEES LISTED
______________________________________________________________________________________

II. ELECTION OF AUDITORS III. APPROVAL OF KENNAMETAL INC. STOCK This Proxy when properly executed will be voted in
OPTION AND INCENTIVE PLAN OF 1999 the manner directed herein. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN THE NOMINEES IN ITEM I ABOVE FOR THE ELECTION OF
AUDITORS, AND FOR THE APPROVAL OF THE KENNAMETAL
[ ] [ ] [ ] [ ] [ ] [ ] INC. STOCK OPTION AND INCENTIVE PLAN OF 1999. THE
PROXIES ARE AUTHORIZED, IN ACCORDANCE WITH THEIR
JUDGMENT, TO VOTE UPON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING AND ANY
ADJOURNMENTS THEREOF.

Dated: _____________________________________ , 1999

___________________________________________________

Sign exactly as addressed, but if executed for a
corporation, minor, etc., sign that name and
signature and capacity of authorized signer.

FOLD AND DETACH HERE
</TABLE>

KENNAMETAL INC.

September 12, 1999

Dear Kennametal Inc. Shareholder:

The 1999 Annual Meeting of the Shareowners of Kennametal Inc. will be held at
2:00 p.m. on Monday, October 25, 1999, at the Technology Center, located on
Route 981 South (recently designated "Technology Way"), approximately 1/4 mile
south of its intersection with U.S. Route 30 near Latrobe, Unity Township,
Pennsylvania. I cordially invite you to attend.

Whether or not you plan to attend the meeting, please detach the proxy above,
complete it, and return it in the enclosed envelope. Your vote is important to
us.

Sincerely,

William R. Newlin
Chairman of the Board
Kennametal Inc.