<PAGE> 1
PROSPECTUS SUPPLEMENT Filed pursuant to rule 424(b)(5)
Registration Number 333-40809
(TO PROSPECTUS DATED JANUARY 22, 1998)
3,000,000 SHARES
KENNAMETAL INC.
KENNAMETAL LOGO
COMMON STOCK
------------------------
All of the shares of capital stock, par value $1.25 per share (the "Common
Stock"), of Kennametal Inc., a Pennsylvania corporation ("Kennametal" or the
"Company"), offered hereby (the "Offering") are being sold by the Company. The
Common Stock is listed on the New York Stock Exchange ("NYSE") and is traded
under the symbol "KMT." On March 16, 1998, the last reported sale price of the
Common Stock on the NYSE was $52 5/16 per share. See "Price Range of Common
Stock and Dividend Policy." Each share is issued with a nontransferable
preferred stock purchase right. See "Description of Common Stock--Rights
Agreement."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===============================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY(2)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share(3)........................ $51.75 $1.75 $50.00
Total(4)............................ $155,250,000 $5,250,000 $150,000,000
===============================================================================================================
</TABLE>
(1) See "Underwriting" for information concerning indemnification of the
Underwriter and other information.
(2) Before deducting expenses incurred by the Company in connection with the
Offering estimated at $800,000.
(3) Each share is issued with a nontransferable preferred stock purchase right.
See "Description of Common Stock--Rights Agreement."
(4) The Underwriter has been granted an option by the Company, exercisable
within 30 days after the date hereof, to purchase up to 450,000 additional
shares of Common Stock for the purpose of covering over-allotments, if any.
If the Underwriter exercises such option in full, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $178,537,500,
$6,037,500 and $172,500,000, respectively. See "Use of Proceeds" and
"Underwriting."
------------------------
The shares of Common Stock are offered by the Underwriter when, as and if
delivered to and accepted by it, subject to its right to withdraw, cancel or
reject orders in whole or in part and subject to certain other conditions. It is
expected that delivery of the certificates representing the shares will be made
against payment therefor on or about March 20, 1998 at the offices of CIBC
Oppenheimer Corp., CIBC Oppenheimer Tower, One World Financial Center, New York,
New York 10281.
------------------------
CIBC Oppenheimer Logo
The date of this Prospectus Supplement is March 17, 1998
<PAGE> 2
This Prospectus Supplement contains certain forward-looking statements (as
such term is defined in the Securities Act) concerning the Company's operations,
performance and financial condition, including, in particular, the likelihood of
the Company's success in integrating the acquisition of Greenfield Industries,
Inc. ("Greenfield"). These statements are based upon a number of assumptions and
estimates which are inherently subject to significant uncertainties and
contingencies, many of which are beyond the control of the Company. Actual
results may differ materially from those expressed or implied by such
forward-looking statements to the extent that economic conditions in the United
States, Europe and, to a lesser extent, the Asia Pacific region change from the
Company's expectations and to the extent that the Company does not effectively
integrate the acquisition of Greenfield and achieve expected synergistic
benefits.
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMPANY'S COMMON
STOCK. SUCH TRANSACTIONS MAY INCLUDE STABILIZING BIDS AND PURCHASES, SYNDICATE
SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
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<PAGE> 3
THE COMPANY
The Company is a vertically integrated global manufacturer, marketer and
distributor of a broad range of consumable tools, supplies and services for the
metalworking, mining and highway construction industries. Kennametal specializes
in developing and manufacturing tools utilizing tungsten carbide powder
metallurgy for the three primary metalcutting methods--turning, milling and
drilling. In addition, through its 80%-owned subsidiary, JLK Direct Distribution
Inc. ("JLK"), the Company markets and distributes a broad line of consumable
metalcutting tools, as well as abrasives, machine tool accessories, hand tools,
measuring equipment and other industrial supplies used in the metalworking
industry. The Company is a recognized leader in turning and milling consumable
metalcutting tools and believes it is the largest North American and the second
largest global provider of consumable metalcutting tools and supplies.
Leveraging its expertise in tungsten carbide powder metallurgy, the Company has
developed innovative consumable tools for the mining and construction industries
and believes it is the largest global manufacturer, marketer and distributor of
such tools to these markets.
In November 1997, the Company acquired Greenfield, the leading North
American manufacturer of drilling and other rotary high-speed steel consumable
metalcutting tools for the metalworking industry. Kennametal believes that
Greenfield's operations strongly complement its core businesses and that the
acquisition of Greenfield, in addition to providing the Company with
opportunities for substantial cost savings, offers significant strategic
benefits, including: (i) providing an important new channel of traditional
industrial distributors through which to sell the Company's products; (ii)
expanding and enhancing the Company's line of drilling products; (iii) allowing
the Company to diversify into new markets such as certain wear products by
leveraging its material science expertise in tungsten carbide powder metallurgy;
and (iv) providing the opportunity to introduce and sell each company's products
into the markets served by the other company.
RECENT DEVELOPMENTS
GREENFIELD ACQUISITION
In November 1997, Kennametal, through a subsidiary, acquired Greenfield.
The total purchase price for the acquisition of Greenfield (including estimated
transaction costs and assumed Greenfield debt and convertible redeemable
preferred securities of approximately $320 million) was approximately $1.0
billion. There can be no assurance that the Company will effectively integrate
and manage the acquired business or retain the operating management and the
numerous distributorship customers of Greenfield. In addition, there can be no
assurance that the anticipated benefits of the Greenfield acquisition will be
achieved. If Kennametal does not successfully integrate and manage the
acquisition, there could be a material adverse effect on the Company.
FINANCINGS
In connection with the acquisition of Greenfield, the Company entered into
a $1.4 billion credit agreement (the "New Bank Credit Facility") with
BankBoston, N.A., Deutsche Bank AG, New York Branch, Mellon Bank, N.A. and PNC
Bank, National Association. As of February 28, 1998, the Company had borrowed
$500 million in term loans and approximately $571 million in revolving credit
loans under the New Bank Credit Facility. The proceeds from the loans were
principally used to pay for the acquisition of Greenfield, to pay transaction
costs, to refinance certain indebtedness of Greenfield and to refinance certain
indebtedness of the Company. Subject to certain conditions, the New Bank Credit
Facility permits revolving credit loans of up to $900 million for working
capital requirements, capital expenditures and general corporate purposes. The
New Bank Credit Facility was initially secured by all of the stock of certain of
Kennametal's significant domestic subsidiaries, by guarantees of certain of such
subsidiaries and by 65% of the stock of Kennametal's significant foreign
subsidiaries. On December 24, 1997, the stock held as security was released. The
New Bank Credit Facility contains various financial and operating covenants
which, among other things, set parameters for the Company's consolidated net
worth, require the maintenance of certain financial ratios and restrict the
ability of the Company (or to permit its subsidiaries) to (i) borrow funds from
other sources and to utilize funds for various purposes, (ii) create liens or
incur additional indebtedness, (iii) make loans or enter into guaranty
obligations, (iv) make certain advances and investments, (v) dispose of assets
or engage in mergers and acquisitions or (vi) enter into transactions with
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<PAGE> 4
affiliates. Violation of the foregoing covenants could result in a default under
the New Bank Credit Facility which would permit the lenders thereunder to
restrict the Company's ability to borrow undrawn funds under the New Bank Credit
Facility, to cease issuance of letters of credit and to accelerate the maturity
of borrowings under the New Bank Credit Facility. The term loans under the New
Bank Credit Facility are subject to mandatory amortization commencing on
November 30, 1998 and all loans mature on August 31, 2002. Proceeds from the
Offering will be used to prepay loans and, correspondingly, permanently reduce
the commitments of the lenders under the New Bank Credit Facility.
To maintain financial flexibility and to optimize the cost of capital,
Kennametal's financial objective, over the long term, is to maintain a total
debt-to-capital ratio of not more than 40.0%. After giving effect to the
application of the net proceeds from the Offering, Kennametal's total
debt-to-capital ratio will be approximately 57.6%. Depending upon conditions in
the capital markets and other matters, the Company may raise additional capital
in the future through various sources, including the equity and debt markets, in
connection with a refinancing of the New Bank Credit Facility and achieving its
stated financial objective, as well as to be able to pursue future business
opportunities. There can be no assurance that Kennametal will raise additional
equity or debt capital or refinance the New Bank Credit Facility.
OTHER ACQUISITIONS
The Company and its subsidiaries recently acquired Rubig G.m.b.H. of
Munich, Germany, a marketer of carbide precision tools for milling, drilling and
other metalcutting applications, and Presto Engineers Cutting Tools Limited of
Sheffield, United Kingdom, a manufacturer of industrial high-speed steel cutting
tools. The Company's JLK subsidiary recently acquired Car-Max Tool & Cutter
Sales, Inc. and GRS Industrial Supply Company, which are engaged in the
distribution of metalcutting tools and industrial supplies in the midwestern
United States, and Production Tool Sales, Inc. and Dalworth Tool & Supply, Inc.,
which are engaged in the distribution of metalcutting tools and industrial
supplies in the southwestern United States.
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<PAGE> 5
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the shares
of Common Stock, after deducting estimated underwriting discounts and expenses
incurred in connection with the Offering payable by the Company, are expected to
be approximately $149.2 million (or approximately $171.7 million if the
Underwriter's over-allotment option is exercised in full). See "Underwriting."
The net proceeds from the Offering will be used to prepay loans and,
correspondingly, permanently reduce commitments of the lenders under the New
Bank Credit Facility, which indebtedness was incurred by the Company in
connection with the acquisition of Greenfield and had a weighted average
interest rate as of March 13, 1998 of 7.0%. An affiliate of CIBC Oppenheimer
Corp. is a lender under the New Bank Credit Facility and may receive a portion
of the net proceeds as a result of the repayment. See "Underwriting."
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Company's Common Stock is currently traded on the NYSE under the symbol
"KMT." The high and low sales prices as reported on the NYSE Composite Tape and
dividends paid for the periods indicated are set forth in the table below.
<TABLE>
<CAPTION>
PRICE RANGE
-----------
HIGH LOW DIVIDENDS
---- --- ---------
<S> <C> <C> <C>
Fiscal 1996
First Quarter............................................. $41 1/8 $34 5/8 $0.15
Second Quarter............................................ 36 1/4 28 3/4 0.15
Third Quarter............................................. 37 1/4 27 3/4 0.15
Fourth Quarter............................................ 38 1/4 33 5/8 0.15
Fiscal 1997
First Quarter............................................. $34 3/8 $28 7/8 $0.15
Second Quarter............................................ 39 32 3/4 0.17
Third Quarter............................................. 43 1/8 34 7/8 0.17
Fourth Quarter............................................ 44 1/8 33 1/8 0.17
Fiscal 1998
First Quarter............................................. $49 1/2 $41 1/4 $0.17
Second Quarter............................................ 55 11/16 47 0.17
Third Quarter (through March 16, 1998).................... 53 43 15/16 0.17
</TABLE>
On March 16, 1998, the last reported sale price of the Common Stock on the
NYSE was $52 5/16 per share.
The Company has paid cash dividends in every quarter since fiscal 1947. The
Board of Directors intends to continue its present policy of declaring regular
quarterly dividends when justified by the financial condition of the Company.
The amount of future dividends, if any, will depend on general business
conditions encountered by the Company, earnings, financial condition and capital
requirements of the Company, and such other factors as the Board of Directors
may deem relevant. The payment of dividends is subject to compliance with
certain financial covenants in the New Bank Credit Facility (see "Description of
Common Stock--Covenant Restrictions").
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<PAGE> 6
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1997 and as adjusted to reflect the Offering and the application of
the net proceeds therefrom, after deducting estimated underwriting commissions
and expenses of the Offering (assuming that the over-allotment option is not
exercised). See "Use of Proceeds." The information set forth in this table
should be read in conjunction with the consolidated financial statements of the
Company and the related notes thereto incorporated by reference in this
Prospectus Supplement.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
-----------------------------
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
Short-term debt............................................. $ 31,349 $ 31,349
========== ==========
Long-term debt.............................................. $1,110,074 $ 960,874
Minority interest in consolidated subsidiaries.............. 45,989 45,989
Shareholders' equity:
Preferred stock, 5,000 shares authorized; none issued..... -- --
Capital stock, $1.25 par value per share;
70,000 shares authorized; 29,370 and 32,370 shares
issued(a).............................................. 36,712 40,462
Additional paid-in capital................................ 151,623 297,073
Retained earnings......................................... 424,282 424,282
Less treasury shares, at cost; 3,041 shares held.......... (59,758) (59,758)
Cumulative translation adjustments........................ (17,078) (17,078)
---------- ----------
Total shareholders' equity............................. 535,781 684,981
---------- ----------
Total capitalization................................... $1,691,844 $1,691,844
========== ==========
</TABLE>
- ---------
(a) Does not include: (i) 1,650,748 shares of Common Stock as of December 31,
1997, issuable upon exercise of outstanding options of which options
covering 1,623,492 shares were exercisable as of that date; (ii) 64,672
shares issuable as of December 31, 1997 pursuant to the Company's deferred
stock plans; or (iii) shares which may be issued pursuant to the Company's
dividend reinvestment and stock purchase plan.
S-6
<PAGE> 7
SELECTED CONDENSED CONSOLIDATED FINANCIAL DATA
The selected condensed consolidated income statement and balance sheet data
for the Company presented below are derived from the Company's consolidated
financial statements. The Company's consolidated financial statements as of and
for the fiscal years ended June 30, 1993, 1994, 1995, 1996 and 1997 have been
audited by Arthur Andersen LLP. The consolidated financial statements as of and
for the six months ended December 31, 1996 and 1997 are derived from the
Company's unaudited interim financial statements incorporated by reference in
this Prospectus Supplement, which in the opinion of management include all
adjustments (consisting only of normal recurring adjustments) necessary to state
fairly the data included therein in accordance with generally accepted
accounting principles for interim financial information. Results for the six
months ended December 31, 1997 are not necessarily indicative of the results of
operations to be expected for the full fiscal year. The selected financial
information presented below should be read in conjunction with, and is qualified
by reference to, the more detailed information in the consolidated financial
statements of the Company and the related notes thereto, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
other financial information incorporated by reference in this Prospectus
Supplement.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, DECEMBER 31,
-------------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1996 1997
-------- -------- -------- ---------- ---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............................. $598,496 $802,513 $983,873 $1,079,963 $1,156,343 $548,638 $680,840
Cost of goods sold.................. 352,773 472,533 560,867 625,473 668,415 320,582 398,115
-------- -------- -------- ---------- ---------- -------- --------
Gross profit.......................... 245,723 329,980 423,006 454,490 487,928 228,056 282,725
Research and development expenses... 14,714 15,201 18,744 20,585 24,105 11,433 10,183
Selling, marketing and distribution
expenses.......................... 144,850 189,487 219,271 242,375 263,980 127,790 147,627
General and administrative
expenses.......................... 41,348 58,612 55,853 65,417 69,911 34,005 48,536
Restructuring charge................ -- 24,749 -- 2,666 -- -- --
Patent litigation income............ (1,738) -- -- -- -- -- --
Amortization of intangibles......... 3,425 3,996 2,165 1,596 2,907 1,294 3,765
-------- -------- -------- ---------- ---------- -------- --------
Operating income...................... 43,124 37,935 126,973 121,851 127,025 53,534 72,614
Interest expense.................... 9,549 13,811 12,793 11,296 10,393 5,415 19,873
Other income (expense).............. 519 1,860 54 4,821 1,531 1,235 (661)
-------- -------- -------- ---------- ---------- -------- --------
Income before income taxes and
minority interest................... 34,094 25,984 114,234 115,376 118,163 49,354 52,080
Provision for income taxes............ 14,000 15,500 45,000 43,900 44,900 19,200 22,100
Minority interest..................... -- (431) 940 1,744 1,231 384 2,858
-------- -------- -------- ---------- ---------- -------- --------
Income before cumulative effect of
accounting changes.................. 20,094 10,915 68,294 69,732 72,032 29,770 27,122
Cumulative effect of accounting
changes............................. -- (15,003) -- -- -- -- --
-------- -------- -------- ---------- ---------- -------- --------
Net income (loss)..................... $ 20,094 $ (4,088) $ 68,294 $ 69,732 $ 72,032 $ 29,770 $ 27,122
======== ======== ======== ========== ========== ======== ========
PER SHARE DATA:
Income before cumulative effect of
accounting changes.................. $ 0.93 $ 0.45 $ 2.58 $ 2.62 $ 2.71 $ 1.11 $ 1.03
Basic earnings (loss)................. 0.93 (0.17) 2.58 2.62 2.71 1.11 1.03
Diluted earnings (loss)............... 0.92 (0.17) 2.56 2.60 2.69 1.11 1.02
Dividends............................. 0.58 0.58 0.60 0.60 0.66 0.32 0.34
Weighted average shares outstanding... 21,712 24,304 26,486 26,635 26,575 26,743 26,223
Diluted average shares outstanding.... 21,753 24,449 26,640 26,825 26,786 26,904 26,565
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
---------------------------------------------------- DECEMBER 31,
1993 1994 1995 1996 1997 1997
-------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.............................. $120,877 $130,777 $184,072 $217,651 $175,877 $ 517,611
Total assets................................. 448,263 697,532 781,609 799,491 869,309 2,061,216
Long-term debt (less current maturities)..... 87,891 90,178 78,700 56,059 40,445 1,110,074
Shareholders' equity......................... 255,141 322,836 391,885 438,949 459,608 535,781
</TABLE>
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<PAGE> 8
DESCRIPTION OF COMMON STOCK
The following brief description of the Company's capital stock does not
purport to be complete and is subject in all respects to applicable Pennsylvania
law and to the provisions of the Company's Amended and Restated Articles of
Incorporation (the "Restated Articles") and its By-Laws (the "By-Laws"), copies
of which have been filed with the Commission.
COMMON STOCK
The Company has authorized 70,000,000 shares of capital stock, par value
$1.25 per share ("Common Stock"). As of February 28, 1998, there were 26,346,091
shares of Common Stock outstanding. Holders of Common Stock are entitled to such
dividends as may be declared by the Board of Directors out of funds legally
available therefor after payment of dividends on any outstanding Preferred Stock
and are entitled to one vote for each share of Common Stock held by them with
respect to all matters upon which they are entitled to vote.
PREFERRED STOCK
The Company has authorized 5,000,000 shares of Class A Preferred Stock, no
par value per share (the "Preferred Stock"). At present, there are no shares of
Preferred Stock outstanding. The Board of Directors of the Company, without
further action by the stockholders, is authorized to designate and issue in
series Preferred Stock and to fix as to any series the dividend rate, redemption
prices, preferences on dissolution, the terms of any sinking fund, conversion
rights, voting rights, and any other preferences or special rights and
qualifications. The Board of Directors of the Company has authorized 200,000
shares of Series One Preferred Stock for use in the Rights Agreement. See
"Rights Agreement."
Any Preferred Stock so issued may rank senior to the Common Stock with
respect to the payment of dividends or amounts upon liquidation, dissolution or
winding up, or both. In addition, any such shares of Preferred Stock may have
class or series voting rights. Issuances of Preferred Stock, while providing the
Company with flexibility in connection with general corporate purposes, may,
among other things, have an adverse effect on the rights of holders of Common
Stock. The Company has no present plans to issue any Preferred Stock.
COVENANT RESTRICTIONS
The Company's New Bank Credit Facility contains financial and operating
covenants, including restrictions on the ability of the Company to, among other
things, incur additional debt, make advances and investments, create, incur or
permit the existence of certain liens, make loans or guarantees and requires the
Company to achieve and maintain certain financial ratios, including minimum net
worth, maximum leverage ratio and minimum fixed charge coverage ratio. See
"Recent Developments--Financings."
CERTAIN CHARTER AND BY-LAW PROVISIONS
Certain provisions of the Restated Articles and By-Laws could have an
anti-takeover effect. These provisions are intended to enhance the likelihood of
continuity and stability in the composition of the Company's Board of Directors
and in the policies formulated by the Board and to discourage an unsolicited
takeover of the Company if the Board determines that such takeover is not in the
best interests of the Company and its shareholders. However, these provisions
could have the effect of discouraging certain attempts to acquire the Company or
remove incumbent management even if some or a majority of shareholders deemed
such an attempt to be in their best interests.
The provisions in the Restated Articles and By-Laws include: (i) the
classification of the Board of Directors into three classes; (ii) a procedure
which requires shareholders to nominate directors in advance of a meeting to
elect such directors; and (iii) the authority to issue additional shares of
Common Stock or Preferred Stock without shareholder approval.
The Restated Articles also include a provision requiring a 75 percent
shareholder vote for certain mergers or other business combinations or
transactions with five percent shareholders; a provision requiring a 75 percent
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<PAGE> 9
shareholder vote to remove the entire Board, a class of the Board, any
individual member of the Board without cause, or to increase the size of the
Board to more than twelve members or decrease the size of the Board to fewer
than eight members; a provision requiring disinterested shareholder approval of
stock repurchases at a premium over market by the Company from certain four
percent Shareholders (as defined in the Restated Articles); and a provision
requiring a majority of disinterested shareholders to approve certain business
combinations involving a stockholder who beneficially owns more than 10 percent
of the voting power of the Company, unless certain minimum price, form of
consideration and procedural requirements are satisfied or the transaction is
approved by a majority of disinterested directors.
Pursuant to the Restated Articles, the Board of Directors is permitted to
consider the effects of a change in control on non-shareholder constituencies of
the Company, such as its employees, suppliers, creditors, customers and the
communities in which it operates. Pursuant to this provision, the Board may be
guided by factors in addition to price and other financial considerations.
PBCL Anti-Takeover Provisions. The Pennsylvania Business Corporation Law
(the "PBCL") contains a number of statutory "anti-takeover" provisions,
including Subchapters E, F, G and H of Chapter 25 and Section 2538 of the PBCL,
which apply automatically to a Pennsylvania registered corporation (usually a
public company) unless such corporation elects to opt-out as provided in such
provisions. The Company, as a Pennsylvania registered corporation, has elected
in its By-Laws to opt-out of certain of the anti-takeover provisions entirely,
namely Subchapters G and H.
The following descriptions are qualified in their entirety by reference to
such provisions of the PBCL:
Subchapter E (relating to control transactions) generally provides
that if any person or group acquires 20% or more of the voting power of a
covered corporation, the remaining shareholders may demand from such person
or group the fair value of their shares, including a proportionate amount
of any control premium.
Subchapter F (relating to business combinations) generally delays for
five years and imposes conditions upon "business combinations" between an
"interested shareholder" and the corporation. The term "business
combination" is defined broadly to include various transactions between a
corporation and an interested shareholder including mergers, sales or
leases of specified amounts of assets, liquidations, reclassifications and
issuances of specified amounts of additional shares of stock of the
corporation. An "interested shareholder" is defined generally as the
beneficial owner of at least 20% of a corporation's voting shares.
Section 2538 of the PBCL generally establishes certain shareholder
approval requirements with respect to specified transactions with
"interested shareholders."
TRANSFER AGENT AND REGISTRAR
ChaseMellon Shareholder Services, L.L.C. is the Transfer Agent and
Registrar for the Common Stock.
RIGHTS AGREEMENT
The Company has adopted a rights plan pursuant to which the Board of
Directors authorized and the Company distributed one preferred stock purchase
right (each a "right") for each outstanding share of Common Stock of the
Company. The terms of the rights are governed by a Rights Agreement between the
Company and Mellon Bank, N.A., as Rights Agent, dated as of October 25, 1990
(the "Rights Agreement"). The rights, which currently are automatically
transferred with the related shares of Common Stock and are not separately
transferable, will entitle the holder thereof to purchase one-hundredth of a
share of a new series of preferred stock of the Company at a price of $105
(subject to certain adjustments). See "Preferred Stock."
Subject to certain restrictions, the rights become exercisable only if a
person or group of persons acquires or intends to make a tender offer for 20
percent or more of the Company's Common Stock. If any person acquires 20 percent
of the Common Stock, each right will entitle the shareholder to receive upon
exercise that number of shares of Common Stock having a market value of two
times the exercise price. If the Company is acquired in a
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<PAGE> 10
merger or certain other business combinations, each right then will entitle the
shareholder to purchase at the exercise price, that number of shares of the
acquiring company having a market value of two times the exercise price.
The rights will expire on November 2, 2000, and are subject to redemption
in certain circumstances by the Company at a redemption price of $0.01 per
right.
The foregoing summary description of the Rights Agreement does not purport
to be complete and is qualified in its entirety by reference to the Rights
Agreement, a copy of which has been filed with the Commission as an exhibit in
the Registration Statement of which this Prospectus Supplement forms a part. For
a more detailed description of the Rights Agreement, see the Company's Form 8-A
filed with the Commission with respect to the rights and incorporated by
reference into the Prospectus.
CERTAIN U.S. TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Common
Stock by a Non-U.S. Holder. For this purpose, a "Non-U.S. Holder" is any person
who is, for United States federal income tax purposes, a foreign corporation, a
non-resident alien individual, a foreign partnership or a foreign estate or
trust. This discussion does not address all aspects of United States federal
income and estate taxes and does not deal with foreign, state and local
consequences that may be relevant to such Non-U.S. Holders in light of their
personal circumstances. Furthermore, this discussion is based on provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), existing and
proposed regulations promulgated thereunder and administrative and judicial
interpretations thereof, as of the date hereof, all of which are subject to
change. EACH PROSPECTIVE PURCHASER OF COMMON STOCK IS ADVISED TO CONSULT A TAX
ADVISOR WITH RESPECT TO CURRENT AND POSSIBLE FUTURE TAX CONSEQUENCES OF
ACQUIRING, HOLDING AND DISPOSING OF COMMON STOCK AS WELL AS ANY TAX CONSEQUENCES
THAT MAY ARISE UNDER THE LAWS OF ANY U.S. STATE, MUNICIPALITY OR OTHER TAXING
JURISDICTION.
DIVIDENDS
Dividends paid to a Non-U.S. Holder of Common Stock generally will be
subject to withholding of United States federal income tax at a 30% rate or such
lower rate as may be specified by an applicable income tax treaty. However,
dividends that are effectively connected with the conduct of a trade or business
by the Non-U.S. Holder within the United States or, where certain tax treaties
apply, are attributable to a United States permanent establishment of the
Non-U.S. Holder, are not subject to the withholding tax, but instead are subject
to United States federal income tax on a net income basis at applicable
graduated individual or corporate rates. Certain certification and disclosure
requirements must be complied with in order to be exempt from withholding under
such effectively connected income exemption. Any such effectively connected
dividends received by a foreign corporation may, under certain circumstances, be
subject to an additional "branch profits tax" at a 30% rate or such lower rate
as may be specified by an applicable income tax treaty.
Under current law, dividends paid to an address outside the United States
are presumed to be paid to a resident of such country (unless the payer has
knowledge to the contrary) for purposes of the withholding tax discussed above
and, under the current interpretation of United States Treasury regulations, for
purposes of determining the applicability of a tax treaty rate. Under recently
finalized United States Treasury regulations (the "Final Regulations"), a
Non-U.S. Holder of Common Stock who wishes to claim the benefit of an applicable
treaty rate (and avoid back-up withholding as discussed below) for dividends
paid after December 31, 1998, will be required to satisfy applicable
certification and other requirements.
A Non-U.S. Holder of Common Stock eligible for a reduced rate of United
States withholding tax pursuant to an income tax treaty may obtain a refund of
any excess amounts withheld by filing an appropriate claim for refund with the
Internal Revenue Service (the "IRS").
S-10
<PAGE> 11
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to United States federal
income tax with respect to gain recognized on a sale or other disposition of
Common Stock unless (i) the gain is effectively connected with a trade or
business of the Non-U.S. Holder in the United States, or, where certain tax
treaties apply, is attributable to a United States permanent establishment of
the Non-U.S. Holder, (ii) in the case of a Non-U.S. Holder who is an individual
and holds the Common Stock as a capital asset, such holder is present in the
United States for 183 or more days in the taxable year of the sale or other
disposition and certain other conditions are met, or (iii) the Company is or has
been a "U.S. real property holding corporation" for United States federal income
tax purposes. The Company does not believe that it is or will become a U.S. real
property holding corporation.
An individual Non-U.S. Holder described in clause (i) above will be subject
to tax on the net gain derived from the sale under regular graduated United
States federal income tax rates. An individual Non-U.S. Holder described in
clause (ii) above will be subject to a flat 30% tax on the gain derived from the
sale, which may be offset by United States source capital losses (even though
the individual is not considered a resident of the United States). If a Non-U.S.
Holder that is a foreign corporation falls under clause (i) above, it will be
subject to tax on its gain under regular graduated United States federal income
tax rates and, in addition, may be subject to the branch and profits within the
meaning of the Code for the taxable year, as adjusted for certain items, unless
it qualifies for a lower rate under an applicable income tax treaty.
FEDERAL ESTATE TAX
Common Stock held by an individual Non-U.S. Holder at the time of death
will be included in such holder's gross estate for United States federal estate
tax purposes, unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACK-UP WITHHOLDING
The Company must report annually to the IRS and to each Non-U.S. Holder the
amount of dividends paid to such holder and the tax withheld with respect to
such dividends, regardless of whether withholding was required. Copies of the
information returns reporting such dividends and withholding may also be made
available to the tax authorities in the country in which the Non-U.S. Holder
resides under the provisions of an applicable income tax treaty.
Under current law, back-up withholding at the rate of 31% generally will
not apply to dividends paid to a Non-U.S. Holder at an address outside the
United States (unless the payer has knowledge that the payee is a U.S. person).
Under the Final Regulations, however, a Non-U.S. Holder will be subject to
back-up withholding unless applicable certification requirements are met.
Payment of the proceeds of a sale of Common Stock by or through a United
States office of a broker is subject to both back-up withholding and information
reporting unless the beneficial owner certifies under penalties of perjury that
it is a Non-U.S. Holder or otherwise establishes an exemption. In general,
back-up withholding and information reporting will not apply to a payment of the
proceeds of a sale of Common Stock by or through a foreign office of a broker.
If, however, such person, a controlled foreign corporation, or a foreign person
that derives 50% or more of its gross income for a certain period from the
conduct of a trade or business in the United States, such payments will be
subject to information reporting, but not back-up withholding, unless (1) such
broker has documentary evidence in its records that the beneficial owner is a
Non-U.S. Holder and certain other conditions are met, or (2) the beneficial
owner otherwise establishes an exemption.
Any amounts withheld under the back-up withholding rules may be allowed as
a refund or a credit against such holder's U.S. federal income tax liability
provided the required information is furnished to the IRS.
S-11
<PAGE> 12
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement") between the Company and CIBC Oppenheimer Corp.
(the "Underwriter"), the Company has agreed to sell to the Underwriter, and the
Underwriter has agreed to purchase from the Company, all of the shares of Common
Stock offered hereby.
In the Underwriting Agreement, the Underwriter has agreed, subject to the
terms and conditions set forth therein, to purchase all of the shares of Common
Stock being sold pursuant to such agreement if any of the shares of Common Stock
being sold pursuant to such agreement are purchased.
The Underwriter proposes to offer the shares of Common Stock directly to
the public initially at the public offering price set forth on the cover page of
this Prospectus and may offer shares in part to certain securities dealers at
such price less a concession not in excess of $0.25 per share. The Underwriter
may allow, and such dealers may reallow, a concession not in excess of $0.10 per
share to certain other brokers and dealers. After the shares of Common Stock are
released for sale to the public, the offering price and other selling terms may
from time to time be varied by the Underwriter.
The Company has granted an option to the Underwriter, exercisable for 30
days after the date of this Prospectus Supplement, to purchase up to an
aggregate of 450,000 additional shares of Common Stock at the public offering
price set forth on the cover page of this Prospectus Supplement, less the
underwriting discount. The Underwriter may exercise this option only to cover
over-allotments, if any, made on the sale of the shares of Common Stock covered
hereby.
The Company has agreed not to (i) directly or indirectly, offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase or
otherwise transfer or dispose of any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or file any
registration statement under the Securities Act with respect to any of the
foregoing or (ii) enter into any swap or any other agreement or any transaction
that transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Common Stock or any securities convertible into
or exercisable or exchangeable for Common Stock whether any such swap or
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise, for a period of
90 days from the date of this Prospectus Supplement without the prior written
consent of the Underwriter, other than any shares of Common Stock: (i) to be
sold pursuant to the Underwriting Agreement; (ii) issued by the Company upon
exercise of an option, warrant, or the conversion of a security in existence on
the date hereof; (iii) issued, or options to purchase such shares granted,
pursuant to employee benefit plans in existence on the date hereof or (iv)
issued pursuant to any non-employee director stock plan or dividend reinvestment
plan.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including, without limitation, liabilities under the Securities Act
of 1933, as amended, and to contribute to payments the Underwriter may be
required to make in respect hereof.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriter to
bid for and purchase shares of Common Stock. As an exception to these rules, the
Underwriter is permitted to engage in certain transactions that stabilize or
otherwise affect the price of the Common Stock. Such transactions may consist of
bids or purchases for the purpose of pegging, fixing or maintaining the price of
the Common Stock.
If the Underwriter creates a short position in the Common Stock in
connection with the Offering, (i.e., if it sells more shares of Common Stock
than are set forth on the cover page of this Prospectus), the Underwriter may
reduce that short position by purchasing Common Stock in the open market. The
Underwriter also may elect to reduce any short position by exercising all or
part of the over-allotment option described herein. In addition, the Underwriter
may impose "penalty bids" whereby it may reclaim from dealers, if any,
participating in the Offering, the selling concession with respect to Common
Stock that is distributed in the Offering but subsequently purchased for the
account of the Underwriter in the open market.
S-12
<PAGE> 13
In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might also have an effect on the price of a security
to the extent that it were to discourage resales of the security.
Neither the Company nor the Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor the Underwriter makes any representation that the Underwriter
will engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.
CIBC Oppenheimer Corp. has from time to time provided investment banking or
financial advisory services to the Company, and may continue to do so in the
future. An affiliate of CIBC Oppenheimer Corp. is a lender under the New Bank
Credit Facility.
LEGAL MATTERS
The validity of the shares of Common Stock being offered hereby will be
passed upon for the Company by Buchanan Ingersoll Professional Corporation,
Pittsburgh, Pennsylvania. William R. Newlin, Chairman of the Board of the
Company, is a shareholder in Buchanan Ingersoll Professional Corporation. As of
February 28, 1998, Mr. Newlin owned 21,882 shares of Common Stock, stock credits
representing the right to acquire 10,594 shares of Common Stock and 117 shares
of JLK common stock pursuant to the Company's directors deferred fee plan,
20,000 shares of JLK common stock and held options to acquire 21,500 shares of
Common Stock and 15,000 shares of JLK common stock. Certain legal matters in
connection with the Offering will be passed upon for the Underwriter by Simpson
Thacher & Bartlett, New York, New York. Simpson Thacher & Bartlett will rely on
Buchanan Ingersoll Professional Corporation with respect to matters of
Pennsylvania law.
EXPERTS
The consolidated financial statements of the Company as of June 30, 1996
and June 30, 1997 and for each of the three years in the period ended June 30,
1997, incorporated by reference in this Prospectus Supplement and in the
Registration Statement, of which this Prospectus Supplement is a part, have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, and are incorporated by reference in the
Registration Statement in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports. The consolidated financial
statements of Greenfield as of December 31, 1995, and December 31, 1996, and for
each of the three years in the period ended December 31, 1996, incorporated by
reference in this Prospectus Supplement, have been so incorporated in reliance
on the report of Price Waterhouse LLP, independent accountants given on the
authority of said firm as experts in auditing and accounting.
S-13
<PAGE> 14
PROSPECTUS
KENNAMETAL INC.
STOCK PURCHASE CONTRACTS
STOCK PURCHASE UNITS
DEBT SECURITIES
COMMON STOCK
KENNAMETAL FINANCING I
PREFERRED SECURITIES
GUARANTEED AS SET FORTH HEREIN BY
KENNAMETAL INC.
------------------------
Kennametal Inc., a Pennsylvania corporation ("Kennametal" or the
"Company"), from time to time may offer together or separately: (i) Stock
Purchase Contracts ("Stock Purchase Contracts") to purchase shares of capital
stock, par value $1.25 per share ("Common Stock"), of the Company; (ii) Stock
Purchase Units ("Stock Purchase Units"), each representing ownership of a Stock
Purchase Contract and Preferred Securities (as defined herein) or debt
obligations of third parties, including U.S. Treasury securities, securing the
holder's obligation to purchase Common Stock under the Stock Purchase Contracts;
(iii) its debentures (the "Trust Debentures") to be purchased with the proceeds
from the sale of preferred securities representing preferred undivided
beneficial interests in Kennametal Financing I ("Preferred Securities"), a
statutory business trust created under the laws of the State of Delaware (the
"Trust"), and its other debentures, notes and other debt securities in one or
more series, (the "Senior Debt Securities;" and together with the Trust
Debentures, the "Debt Securities"); (iv) Common Stock; and (v) the Trust may
offer, from time to time, its Preferred Securities, in each case in amounts, at
prices and on terms to be determined at the time or times of offering. The
aggregate initial offering price of all of the Securities (as defined herein)
which may be sold pursuant to this Prospectus will not exceed U.S.
$1,400,000,000 (or its equivalent based on the applicable exchange rate at the
time of issue in one or more foreign currencies or currency units as shall be
designated by Kennametal). The Stock Purchase Contracts, Stock Purchase Units,
Debt Securities, Common Stock and Preferred Securities are collectively called
the "Securities."
(continued on next page)
The Common Stock is listed on the New York Stock Exchange (the "NYSE")
under the trading symbol "KMT." An accompanying Prospectus Supplement will state
whether any Securities offered thereby will be listed on any national securities
exchange. If such Securities are not listed on any national securities exchange,
there can be no assurance that there will be a secondary market for any such
Securities.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The Company may sell the Securities to or through underwriters, through
dealers or agents, directly to purchasers or through a combination of such
methods. See "Plan of Distribution." An accompanying Prospectus Supplement sets
forth the names of any underwriters, dealers or agents, if any, involved in the
sale of the Securities in respect of which this Prospectus is being delivered,
and any applicable fee, commission or discount arrangements with them.
------------------------
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
------------------------
THE DATE OF THIS PROSPECTUS IS JANUARY 22, 1998.
<PAGE> 15
(continued from prior page)
Certain specific terms of the particular Securities in respect of which
this Prospectus is being delivered are set forth in an accompanying prospectus
supplement (the "Prospectus Supplement"), including, where applicable: (i) in
the case of Stock Purchase Contracts, the number of shares of Common Stock
issuable thereunder, the purchase price of the Common Stock, the date or dates
on which the Common Stock is required to be purchased by the holders of the
Stock Purchase Contracts, any periodic payments required to be made by the
Company to the holders of the Stock Purchase Contracts or vice versa, and the
terms of the offering and sale thereof; (ii) in the case of Stock Purchase
Units, the specific terms of the Stock Purchase Contracts and any Preferred
Securities or debt obligations of third parties securing the holder's obligation
to purchase the Common Stock under the Stock Purchase Contracts, and the terms
of the offering and sale thereof; (iii) in the case of Debt Securities, the
specific designation, aggregate principal amount, denominations, maturity,
interest payment dates, interest rate (which may be fixed or variable) or method
of calculating interest, if any, applicable Extension Period (as defined below)
or interest deferral terms, if any, place or places where principal, premium, if
any, and interest, if any, will be payable, any terms of redemption, any sinking
fund provisions, terms for any conversion or exchange into other securities,
initial offering or purchase price, methods of distribution and any other
special terms; (iv) in the case of Preferred Securities, the specific title,
aggregate amount, stated liquidation preference, number of securities, the rate
of payment of periodic cash distributions ("Distributions") or method of
calculating such rate, applicable Extension Period or Distribution deferral
terms, if any, place or places where Distributions will be payable, any terms of
redemption, initial offering or purchase price, methods of distribution and any
other special terms; and (v) in the case of Common Stock, the number of shares
offered, the methods of distribution and the public offering or purchase price.
If so specified in the applicable Prospectus Supplement, the Securities offered
thereby may be issued in whole or in part in the form of one or more temporary
or permanent global securities ("Global Securities").
Unless otherwise specified in a Prospectus Supplement, the Debt Securities
will be senior unsecured obligations of the Company and will rank pari passu in
right of payment with all of the Company's other senior unsecured obligations.
If provided in an accompanying Prospectus Supplement, the Company will have the
right to defer principal payments or payments of interest on any series of Debt
Securities by extending the interest payment period thereon at any time or from
time to time for such number of consecutive interest payment periods (which
shall not extend beyond the maturity of the Debt Securities) with respect to
each deferral period as may be specified in such Prospectus Supplement (each, an
"Extension Period"). See "Description of Debt Securities--Option to Defer
Interest Payments". The Debt Securities may be denominated in U.S. Dollars, or
at the option of Kennametal, to the extent described herein and in the
applicable Prospectus Supplement, in one or more foreign currencies or currency
units.
The Company will be the owner of the common securities (the "Common
Securities" and, together with the Preferred Securities, the "Trust Securities")
of the Trust. The payment of Distributions with respect to the Preferred
Securities and payments on liquidation or redemption with respect to the
Preferred Securities, in each case out of funds held by the Trust, will be
irrevocably guaranteed by the Company to the extent described herein (the
"Guarantee"). Certain payments in respect of the Common Securities may also be
guaranteed by the Company. See "Description of the Guarantee." Unless otherwise
specified in a Prospectus Supplement, the obligations of the Company under the
Guarantee will be senior unsecured obligations of the Company and will rank pari
passu with all of the Company's other senior unsecured obligations. Concurrently
with the issuance by the Trust of the Preferred Securities, the Trust will
invest the proceeds thereof and any contributions made in respect of the Common
Securities in the Trust Debentures, which will have terms corresponding to the
terms of the Preferred Securities. The Trust Debentures will be the sole assets
of the Trust, and payments under the Trust Debentures and those made by the
Company in respect of fees and expenses incurred by the Trust will be the only
revenues of the Trust. Upon the occurrence of certain events as are described
herein and in the applicable Prospectus Supplement, the Company may redeem the
Trust Debentures and cause the redemption of the Trust Securities. In addition,
if provided in the applicable Prospectus Supplement, the Company may dissolve
the Trust at any time and, after satisfaction of the liabilities to creditors of
the Trust as provided by applicable law, cause the Trust Debentures to be
distributed to the holders of the Preferred Securities in liquidation of their
interests in
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<PAGE> 16
the Trust. See "Description of Preferred Securities--Redemption--Distribution of
Trust Debentures" and "--Liquidation Distribution Upon Dissolution."
Holders of the Preferred Securities will be entitled to receive
preferential cumulative cash Distributions accruing from the date of original
issuance and payable periodically as specified in an accompanying Prospectus
Supplement. If provided in an accompanying Prospectus Supplement, the Company
will have the right to defer payments of interest on the Trust Debentures by
extending the interest payment period thereon at any time or from time to time
for one or more Extension Periods (which shall not extend beyond the maturity of
the Trust Debentures). If interest payments are so deferred, Distributions on
the Preferred Securities will also be deferred and the Company will not be
permitted, subject to certain exceptions set forth herein, to declare or pay any
cash distributions with respect to the Company's capital stock or debt
securities that rank junior to the Trust Debentures. During an Extension Period,
Distributions will continue to accumulate (and the Preferred Securities will
accumulate additional Distributions thereon at the rate per annum if and as
specified in the related Prospectus Supplement). See "Description of Preferred
Securities--Distributions."
Taken together, the Company's obligations under the Trust Debentures, the
Indenture (as defined herein), the Declaration (as defined herein) and the
Guarantee, in the aggregate, have the effect of providing a full, irrevocable
and unconditional guarantee of payments of Distributions and other amounts due
on the Preferred Securities. See "Relationship Among the Preferred Securities,
the Trust Debentures and the Guarantee."
------------------------
No dealer, salesman or other individual has been authorized to give any
information or to make any representations not contained in this Prospectus, any
accompanying Prospectus Supplement or the documents incorporated or deemed
incorporated by reference herein. If given or made, such information or
representations must not be relied upon as having been authorized by the Company
or any underwriter, dealer or agent. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, any securities other than
the registered securities to which it relates, or an offer to sell or a
solicitation of an offer to buy those securities to which it relates, in any
jurisdiction where, or to any person to whom, it is unlawful to make such offer
or solicitation. Neither the delivery of this Prospectus or any Prospectus
Supplement nor any sale made hereunder shall, under any circumstances, create
any implication that there has not been any change in the facts set forth in
this Prospectus or in the affairs of the Company since the date hereof.
3
<PAGE> 17
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at the Commission's regional offices at
Seven World Trade Center, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and copies may be obtained
at prescribed rates from the Public Reference Section of the Commission at its
principal office in Washington, D.C. In addition, the Registration Statement may
be accessed electronically at the Commission's site on the World Wide Web at
http://www.sec.gov. The Company's reports are also on file at the offices of the
NYSE, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto, as
permitted by the rules and regulations of the Commission. For further
information with respect to the Securities being offered, reference is made to
the Registration Statement which can be inspected at the public reference
facilities at the offices of the Commission. No separate financial statements of
the Trust have been included herein. The Company and the Trust do not consider
that such financial statements would be material to holders of the Preferred
Securities because the Trust is a newly formed special purpose entity, has no
operating history or independent operations and is not engaged in and does not
propose to engage in any activity other than its holding as trust assets the
Trust Debentures, and the issuance of the Trust Securities. See "The Trust,"
"Description of Preferred Securities" and "Description of the Guarantee."
The Trust is not currently subject to the information reporting
requirements of the Exchange Act.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated herein
by reference:
(1) Kennametal's Annual Report on Form 10-K for the fiscal year ended June
30, 1997, and Greenfield Industries, Inc.'s ("Greenfield") Annual
Report on Form 10-K for the fiscal year ended December 31, 1996;
(2) Kennametal's Proxy Statement dated September 12, 1997, and Greenfield's
Information Statement pursuant to Section 14(f) dated October 17, 1997;
(3) Kennametal's Current Report on Form 8-K dated November 20, 1997, as
amended on December 31, 1997;
(4) Kennametal's Quarterly Report on Form 10-Q for the period ended
September 30, 1997, and Greenfield's Quarterly Reports on Form 10-Q for
the periods ended March 31, 1997, June 30, 1997 and September 30, 1997;
and
(5) the descriptions of Kennametal's Common Stock and Preferred Stock
Purchase Rights contained in Kennametal's Registration Statements filed
under Section 12(b) of the Exchange Act, including any amendments or
reports filed for the purpose of updating such descriptions.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not
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<PAGE> 18
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus or any such amendment or supplement.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person, a
copy of any or all of the documents incorporated herein, other than exhibits to
such documents unless such exhibits are specifically incorporated by reference
into such documents. Requests for such documents should be directed to:
Kennametal Inc., Route 981 South at Westmoreland County Airport, Latrobe,
Pennsylvania 15650, Attention: David T. Cofer, Vice President, Secretary and
General Counsel, telephone (412) 539-5000.
KENNAMETAL INC.
The Company is a vertically integrated global manufacturer, marketer and
distributor of a broad range of consumable tools, supplies and services for the
metalworking, mining and highway construction industries. Kennametal specializes
in developing and manufacturing tools utilizing tungsten carbide powder
metallurgy for the three primary metalcutting methods: turning, milling and
drilling. In addition, through its 80%-owned subsidiary, JLK Direct Distribution
Inc. ("JLK"), the Company markets and distributes a broad line of consumable
metalcutting tools, as well as abrasives, machine tool accessories, hand tools,
measuring equipment and other industrial supplies used in the metalworking
industry. The Company is a recognized leader in turning and milling consumable
metalcutting tools and believes it is the largest North American and the second
largest global provider of consumable metalcutting tools and supplies.
Leveraging its expertise in tungsten carbide powder metallurgy, the Company has
developed innovative consumable tools for the mining and construction industries
and believes it is the largest global manufacturer, marketer and distributor of
such tools to these markets. End users of the Company's metalworking products
include manufacturers and suppliers in the aerospace, automotive, construction
and farm machinery, railroad equipment, power generation and transmission
equipment, home appliance, electrical equipment and oil field services and gas
exploration industries.
The address of the Company's principal executive office is Route 981 South
at Westmoreland County Airport, Latrobe, Pennsylvania 15650 and its telephone
number is (412) 539-5000.
THE TRUST
The Trust is a statutory business trust created under the laws of the State
of Delaware pursuant to (i) an agreement of trust, dated as of November 12,
1997, executed by the Company, as sponsor (the "Sponsor") and certain of the
trustees of the Trust (the "Kennametal Trustees") and (ii) the filing of a
certificate of trust with the Secretary of State of the State of Delaware on
November 12, 1997. Such agreement of trust will be amended and restated in its
entirety (the "Declaration") substantially in the form filed as an exhibit to
the Registration Statement of which this Prospectus forms a part. The
Declaration will be qualified as an indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). The Company will directly or
indirectly acquire Common Securities in an aggregate liquidation amount equal to
3% of the total capital of the Trust. The Trust exists for the exclusive
purposes of (i) issuing the Trust Securities representing undivided beneficial
interests in the assets of the Trust, (ii) investing the proceeds of the Trust
Securities in the Trust Debentures and (iii) engaging in only those other
activities necessary or incidental thereto unless otherwise specified in the
applicable Prospectus Supplement. The Trust has a term of approximately seven
(7) years, but may dissolve earlier as provided in the Declaration.
Pursuant to the Declaration, the number of Kennametal Trustees initially is
five. Three of the Kennametal Trustees (the "Regular Trustees") are persons who
are employees or officers of or who are affiliated with the Company. Pursuant to
the Declaration, the fourth trustee will be a financial institution that is
unaffiliated with the Company, which trustee serves as institutional trustee
under the Declaration and as indenture trustee for the purposes of compliance
with the provisions of the Trust Indenture Act (the "Institutional Trustee").
For the purpose of compliance with the provisions of the Trust Indenture Act,
the Institutional Trustee will also act as trustee (the "Guarantee Trustee")
under the Guarantee for the purposes of the Trust Act (as defined herein), until
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<PAGE> 19
removed or replaced by the holder of the Common Securities. See "Description of
the Guarantee" and "Description of Preferred Securities--Voting Rights;
Amendment of Declaration."
The Institutional Trustee will hold title to the Trust Debentures for the
benefit of the holders of the Trust Securities and the Institutional Trustee
will have the power to exercise all rights, powers and privileges under the
Indenture as the holder of the Trust Debentures. In addition, the Institutional
Trustee will maintain exclusive control of a segregated non-interest bearing
bank account (the "Property Account") to hold all payments made in respect of
the Trust Debentures for the benefit of the holders of the Trust Securities. The
Institutional Trustee will make payments of distributions and payments on
liquidation, redemption and otherwise to the holders of the Trust Securities out
of funds from the Property Account. The Guarantee Trustee will hold the
Guarantee for the benefit of the holders of the Preferred Securities. The
Company, as the direct or indirect holder of all the Common Securities, will
have the right to appoint, remove or replace any Kennametal Trustee and to
increase or decrease the number of Kennametal Trustees; provided, that the
number of Kennametal Trustees shall be at least three, a majority of which shall
be Regular Trustees. The Company will pay all fees and expenses related to the
Trust and the offering of the Trust Securities. See "Description of the
Guarantee."
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are set forth in the
Declaration, the Delaware Business Trust Act, as amended (the "Trust Act"), and
the Trust Indenture Act. See "Description of the Preferred Securities."
The trustee in the State of Delaware (the "Delaware Trustee") is First
Chicago Delaware, Inc., Wilmington, Delaware. The principal place of business of
the Trust is c/o Kennametal Inc., Route 981 South, at Westmoreland County
Airport, Latrobe, PA 15650, and its telephone number is (412) 539-5000.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of
Kennametal for the periods indicated. For the purpose of the calculation of this
ratio, earnings represents income from continuing operations before fixed
charges, minority interest, provision for income taxes and the cumulative effect
of accounting changes. Fixed charges includes interest expense, including
amounts capitalized and the portion (one-third) of rental expenses deemed to be
representative of interest expense.
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED JUNE 30, ENDED SEPTEMBER 30,
- -------------------------------- -------------------
1993 1994 1995 1996 1997 1996 1997
- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
3.75 2.47 8.02 8.62 8.75 7.65 14.94
</TABLE>
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement,
Kennametal intends to apply the net proceeds from the sale of the Securities
(including Trust Debentures issued to the Trust in connection with the
investment by the Trust of all of the proceeds from the sale of the Preferred
Securities) to which this Prospectus relates to its general funds to be used for
general corporate purposes including capital expenditures, acquisitions, the
reduction of indebtedness and other purposes. Funds not required immediately for
such purposes may be invested in short-term obligations or used to reduce the
future level of the Company's indebtedness.
6
<PAGE> 20
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions
of the Debt Securities to which any Prospectus Supplement may relate. The
particular terms and provisions of the series of Debt Securities offered by a
Prospectus Supplement, and the extent to which such general terms and provisions
described below may apply thereto, will be described in the Prospectus
Supplement relating to such series of Debt Securities.
The Debt Securities are to be issued in one or more series under an
Indenture, as supplemented or amended from time to time (as supplemented or
amended, the "Indenture"), between the Company and The First National Bank of
Chicago, as trustee (the "Debt Trustee"). This summary of certain terms and
provisions of the Debt Securities and the Indenture is not necessarily complete,
and reference is hereby made to the copy of the form of the Indenture which is
filed as an exhibit to the Registration Statement of which this Prospectus forms
a part, and to the Trust Indenture Act. Whenever particular defined terms of the
Indenture are referred to in this Section or in a Prospectus Supplement, such
defined terms are incorporated herein or therein by reference.
GENERAL
Unless otherwise specified in the applicable Prospectus Supplement, each
series of Debt Securities will be issued as senior unsecured debt under the
Indenture and will rank pari passu in right of payment with all of the Company's
other senior unsecured obligations. Except as otherwise provided in the
applicable Prospectus Supplement, the Indenture does not limit the incurrence or
issuance of other secured or unsecured debt of the Company, whether under the
Indenture, any other indenture that the Company may enter into in the future or
otherwise. See the Prospectus Supplement relating to any offering of Securities.
The Debt Securities will be issuable in one or more series pursuant to an
indenture supplemental to the Indenture or a resolution of the Company's Board
of Directors or a committee thereof.
The applicable Prospectus Supplement or Prospectus Supplements will
describe the following terms of each series of Debt Securities: (i) the title of
the Debt Securities; (ii) any limit upon the aggregate principal amount of the
Debt Securities; (iii) the date or dates on which the principal of the Debt
Securities is payable or the method of determination thereof or the right, if
any, of the Company to defer payment of principal; (iv) the rate or rates, if
any, at which the Debt Securities shall bear interest (including reset rates, if
any, and the method by which any such rate will be determined), the Interest
Payment Dates on which any such interest shall be payable and the right, if any,
of the Company to defer any interest payment; (v) the place or places where,
subject to the terms of the Indenture as described below under "--Payment and
Paying Agents," the principal of and premium, if any, and interest, if any, on
the Debt Securities will be payable ("Place of Payment") and where, subject to
the terms of the Indenture as described below under "--Denominations,
Registration and Transfer," the Company will maintain an office or agency where
Debt Securities may be presented for registration of transfer or exchange and
the place or places where notices and demands to or upon the Company in respect
of the Debt Securities and the Indenture may be made; (vi) any period or periods
within, or date or dates on which, the price or prices at which and the terms
and conditions upon which Debt Securities may be redeemed, in whole or in part,
at the option of the Company pursuant to any sinking fund or otherwise; (vii)
the obligation, if any, of the Company to redeem or purchase the Debt Securities
pursuant to any sinking fund or analogous provisions or at the option of a
holder and the period or periods within which, the price or prices at which, the
currency or currencies (including currency unit or units) in which and the other
terms and conditions upon which the Debt Securities shall be redeemed or
purchased, in whole or in part, pursuant to such obligation; (viii) the
denominations in which any Debt Securities shall be issuable if other than
denominations of $1,000 and any integral multiple thereof; (ix) if other than in
U.S. Dollars, the currency or currencies (including currency unit or units) in
which the principal of (and premium, if any) and interest, if any, on the Debt
Securities shall be payable, or in which the Debt Securities shall be
denominated; (x) any additions, modifications or deletions in the Events of
Default or covenants of the Company specified in the Indenture with respect to
the Debt Securities; (xi) if other than the principal amount thereof, the
portion of the principal amount of Debt Securities that shall be payable upon
declaration of acceleration of the maturity thereof; (xii) any additions or
changes to the Indenture with respect to a series of Debt Securities as shall be
necessary to permit or facilitate the issuance of such series in bearer form,
registrable or not registrable as to principal, and with or without interest
coupons; (xiii) any index or indices used to determine the amount of
7
<PAGE> 21
payments of principal of and premium, if any, on the Debt Securities and the
manner in which such amounts will be determined; (xiv) subject to the terms
described under "--Global Debt Securities," whether the Debt Securities of the
series shall be issued in whole or in part in the form of one or more Global
Securities and, in such case, the depositary for such Global Securities; (xv)
the appointment of any trustee, registrar, paying agent or agents; (xvi) the
terms and conditions of any obligation or right of the Company or a holder to
convert or exchange Debt Securities into Preferred Securities or other
securities; (xvii) whether the defeasance and covenant defeasance provisions
described under "--Satisfaction and Discharge; Defeasance" shall be
inapplicable; and (xviii) any other terms of the Debt Securities not
inconsistent with the provisions of the Indenture.
Debt Securities may be sold at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate which at the time of
issuance is below market rates. Certain material U.S. federal income tax
consequences and special considerations applicable to any such Debt Securities
will be described in the applicable Prospectus Supplement.
If the purchase price of any of the Debt Securities is payable in one or
more foreign currencies or currency units or if any Debt Securities are
denominated in one or more foreign currencies or currency units or if the
principal of, premium, if any, or interest, if any, on any Debt Securities is
payable in one or more foreign currencies or currency units, the restrictions,
elections, certain material U.S. federal income tax considerations, specific
terms and other information with respect to such issue of Debt Securities and
such foreign currency or currency units will be set forth in the applicable
Prospectus Supplement.
If any index is used to determine the amount of payments of principal,
premium, if any, or interest on any series of Debt Securities, certain material
U.S. federal income tax, accounting and other considerations applicable thereto
will be described in the applicable Prospectus Supplement.
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable Prospectus Supplement, the
Debt Securities will be issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. Debt Securities of
any series will be exchangeable for other Debt Securities of the same issue and
series, of any authorized denominations of a like aggregate principal amount,
the same original issue date ("Original Issue Date"), stated maturity ("Stated
Maturity") and bearing the same interest rate.
Each series of Debt Securities may be presented for exchange as provided
above, and may be presented for registration of transfer (with the form of
transfer endorsed thereon, or a satisfactory written instrument of transfer,
duly executed), at the office of the appropriate Securities Registrar or at the
office of any transfer agent designated by the Company for such purpose with
respect to such series of Debt Securities and referred to in the applicable
Prospectus Supplement, without service charge and upon payment of any taxes and
other governmental charges as described in the Indenture. The Company will
appoint the Debt Trustee of each series of Debt Securities as Securities
Registrar for such series under the Indenture. If the applicable Prospectus
Supplement refers to any transfer agents (in addition to the Securities
Registrar) initially designated by the Company with respect to any series of
Debt Securities, the Company may at any time rescind the designation of any such
transfer agent or approve a change in the location through which any such
transfer agent acts, provided that the Company maintains a transfer agent in
each Place of Payment for such series. The Company may at any time designate
additional transfer agents with respect to any series of Debt Securities.
In the event of any redemption, neither the Company nor the Debt Trustee
shall be required to (i) issue, register the transfer of or exchange Debt
Securities of any series during a period beginning at the opening of business 15
days before the day of mailing of a notice for redemption of Debt Securities of
that series, and ending at the close of business on the day of mailing of the
relevant notice of redemption or (ii) transfer or exchange any Debt Securities
so selected for redemption, except, in the case of any Debt Securities being
redeemed in part, any portion thereof not to be redeemed.
8
<PAGE> 22
GLOBAL DEBT SECURITIES
Unless otherwise specified in the applicable Prospectus Supplement, the
Debt Securities of a series may be issued in whole or in part in the form of one
or more global securities ("Global Debt Securities") that will be deposited
with, or on behalf of, a depositary identified in the Prospectus Supplement
relating to such series. Global Debt Securities may be issued only in fully
registered form and in either temporary or permanent form. Unless and until it
is exchanged in whole or in part for the individual Debt Securities represented
thereby, a Global Debt Security may not be transferred except as a whole by the
depositary for such Global Debt Security to a nominee of such depositary or by a
nominee of such depositary to such depositary or another nominee of such
depositary or by the depositary or any nominee to a successor depositary or any
nominee of such successor.
The specific terms of the depositary arrangement with respect to a series
of Debt Securities will be described in the Prospectus Supplement relating to
such series. The Company anticipates that the following provisions will
generally apply to depositary arrangements.
Upon the issuance of a Global Debt Security, and the deposit of such Global
Debt Security with or on behalf of the applicable depositary, the depositary for
such Global Debt Security or its nominee will credit on its book-entry
registration and transfer system, the respective principal amounts of the
individual Debt Securities represented by such Global Debt Security to the
accounts of persons that have accounts with such depositary ("Participants").
Such accounts shall be designated by the dealers, underwriters or agents with
respect to such Debt Securities or by the Company if such Debt Securities are
offered and sold directly by the Company. Ownership of beneficial interests in a
Global Debt Security will be limited to participants or persons that may hold
interests through Participants. Ownership of beneficial interests in such Global
Debt Security will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the applicable depositary or its
nominee (with respect to interests of Participants) and the records of
Participants (with respect to interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Debt Security.
So long as the depositary for a Global Debt Security, or its nominee, is
the registered owner of such Global Debt Security, such depositary or such
nominee, as the case may be, will be considered the sole owner or holder of the
Debt Securities represented by such Global Debt Security for all purposes under
the Indenture. Except as provided below, owners of beneficial interests in a
Global Debt Security will not be entitled to have any of the individual Debt
Securities of the series represented by such Global Debt Security registered in
their names, will not receive or be entitled to receive physical delivery of any
such Debt Securities of such series in definitive form and will not be
considered the owners or holders thereof under the Indenture.
Payments of principal of (and premium, if any) and interest on individual
Debt Securities represented by a Global Debt Security registered in the name of
a depositary or its nominee will be made to such depositary or its nominee, as
the case may be, as the registered owner of the Global Debt Security
representing such Debt Securities. None of the Company, the Debt Trustee, any
paying agent, or the Securities Registrar for such Debt Securities will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interest of the Global Debt
Security for such Debt Securities or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
The Company expects that the depositary for a series of Debt Securities or
its nominee, upon receipt of any payment of principal, premium or interest in
respect of a permanent Global Debt Security representing any of such Debt
Securities, immediately will credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interest in the principal
amount of such Global Debt Security for such Debt Securities as shown on the
records of such depositary or its nominee. The Company also expects that
payments by Participants to owners of beneficial interests in such Global Debt
Security held through such Participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name."
Such payments will be the responsibility of such Participants.
9
<PAGE> 23
Unless otherwise specified in the applicable Prospectus Supplement, if the
depositary for a series of Debt Securities is at any time unwilling, unable or
ineligible to continue as depositary and a successor depositary is not appointed
by the Company within 90 days, the Company will issue individual Debt Securities
of such series in exchange for the Global Debt Security representing such series
of Debt Securities. In addition, unless otherwise specified in the applicable
Prospectus Supplement, the Company may at any time and in its sole discretion,
subject to any limitations described in the Prospectus Supplement relating to
such Debt Securities, determine not to have any Debt Securities of such series
represented by one or more Global Debt Securities and, in such event, will issue
individual Debt Securities of such series in exchange for such Global Debt
Securities. Further, if the Company so specifies with respect to the Debt
Securities of a series, an owner of a beneficial interest in a Global Debt
Security representing Debt Securities of such series may, on terms acceptable to
the Company, the Debt Trustee and the depositary for such Global Debt Security,
receive individual Debt Securities of such series in exchange for such
beneficial interests, subject to any limitations described in the Prospectus
Supplement relating to such Debt Securities. In any such instance, an owner of a
beneficial interest in a Global Debt Security will be entitled to physical
delivery of individual Debt Securities of the series represented by such Global
Debt Security equal in principal amount to such beneficial interest and to have
such Debt Securities registered in its name. Individual Debt Securities of such
series so issued will be issued in denominations, unless otherwise specified by
the Company, of $1,000 and integral multiples thereof. The applicable Prospectus
Supplement may specify other circumstances under which individual Debt
Securities may be issued in exchange for the Global Debt Security representing
any Debt Securities.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of (and premium, if any) and any interest on Debt Securities will
be made at the office of the Debt Trustee in Delaware or at the office of such
paying agent or paying agents as the Company may designate from time to time in
the applicable Prospectus Supplement, except that at the option of the Company
payment of any interest may be made (i) except in the case of Global Debt
Securities, by check mailed to the address of the person or entity entitled
thereto as such address shall appear in the Securities Register or (ii) by
transfer to an account maintained by the person or entity entitled thereto as
specified in the Securities Register, provided that proper transfer instructions
have been received by the Regular Record Date. Unless otherwise indicated in the
applicable Prospectus Supplement, payment of any interest on Debt Securities
will be made to the person or entity in whose name such Debt Security is
registered at the close of business on the Regular Record Date for such
interest, except in the case of defaulted interest ("Defaulted Interest"). The
Company may at any time designate additional paying agents or rescind the
designation of any paying agent; however, the Company will at all times be
required to maintain a paying agent in each Place of Payment for each series of
Debt Securities.
Any moneys deposited with the Debt Trustee or any paying agent, or held by
the Company in trust, for the payment of the principal of (and premium, if any)
or interest on any Debt Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall, at the request of the Company, be repaid to the Company or released from
such trust, as applicable, and the holder of such Debt Security shall thereafter
look, as a general unsecured creditor, only to the Company for payment thereof.
OPTION TO DEFER INTEREST PAYMENTS
If provided in the applicable Prospectus Supplement, the Company shall have
the right, at any time and from time to time during the term of any series of
Debt Securities, to defer the payment of interest for such number of consecutive
interest payment periods as may be specified in the applicable Prospectus
Supplement (each, an "Extension Period"), subject to the terms, conditions and
covenants, if any, specified in such Prospectus Supplement, provided that such
Extension Period may not extend beyond the Stated Maturity of the final
installment of principal of such series of Debt Securities. Certain material
U.S. federal income tax consequences and special considerations applicable to
any such Debt Securities will be described in the applicable Prospectus
Supplement.
10
<PAGE> 24
MODIFICATION OF INDENTURE
From time to time, the Indenture may be modified by the Company and the
Debt Trustee without the consent of any holders of any series of Debt Securities
with respect to certain matters, including (i) to cure any ambiguity, defect or
inconsistency or to correct or supplement any provision which may be
inconsistent with any other provision of the Indenture, (ii) to qualify, or
maintain the qualification of, the Indenture under the Trust Indenture Act and
(iii) to make any change that does not materially adversely affect the interests
of any holder of such series of Debt Securities. In addition, under the
Indenture, certain rights, covenants and obligations of the Company and the
rights of holders of any series of Debt Securities may be modified by the
Company and the Debt Trustee with the written consent of the holders of at least
a majority in aggregate principal amount of such series of outstanding Debt
Securities; but no extension of the maturity of any series of Debt Securities,
reduction in the interest rate or extension of the time for payment of interest,
change in the optional redemption or repurchase provisions in a manner adverse
to any holder of such series of Debt Securities, other modification in the terms
of payment of the principal of, or interest on, such series of Debt Securities,
or reduction of the percentage required for modification, will be effective
against any holder of such series of outstanding Debt Securities without such
holder's consent.
In addition, the Company and the Debt Trustee may execute, without the
consent of any holder of the Debt Securities, any supplemental Indenture for the
purpose of creating any new series of Debt Securities.
INDENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to a series of Debt Securities that has occurred and is
continuing constitutes an "Indenture Event of Default" with respect to such
series of Debt Securities:
(i) failure for 30 days to pay any interest or any sinking fund payment on
such series of the Debt Securities when due (subject to the deferral of any due
date in the case of an Extension Period); or
(ii) failure to pay any principal or premium, if any, on such series of the
Debt Securities when due whether at maturity, upon redemption, by declaration or
otherwise; or
(iii) failure to observe or perform in any material respect certain other
covenants contained in the Indenture for 90 days after written notice has been
given to the Company from the Debt Trustee or the holders of at least 25% in
principal amount of such series of outstanding Debt Securities; or
(iv) default resulting in acceleration of other indebtedness of the Company
for borrowed money where the aggregate principal amount so accelerated exceeds
$25 million and such acceleration is not rescinded or annulled within 30 days
after the written notice thereof to the Company by the Trustee or to the Company
and the Trustee by the holders of 25% in aggregate principal amount of the Debt
Securities of such series then outstanding, provided that such Event of Default
will be remedied, cured or waived if the default that resulted in the
acceleration of such other indebtedness is remedied, cured or waived; or
(v) certain events in bankruptcy, insolvency or reorganization of the
Company.
The holders of a majority in outstanding principal amount of such series of
Debt Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Debt Trustee. The Debt
Trustee or the holders of not less than 25% in aggregate outstanding principal
amount of such series of Debt Securities may declare the principal due and
payable immediately upon an Indenture Event of Default. The holders of a
majority in aggregate outstanding principal amount of such series of Debt
Securities may annul such declaration and waive the default if the default
(other than the non-payment of the principal of such series of Debt Securities
which has become due solely by such acceleration) has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debt Trustee.
The holders of a majority in outstanding principal amount of a series of
Debt Securities affected thereby may, on behalf of the holders of all the
holders of such series of Debt Securities, waive any past default, except a
default in the payment of principal or interest (unless such default has been
cured and a sum sufficient to pay all
11
<PAGE> 25
matured installments of interest and principal due otherwise than by
acceleration has been deposited with the Debt Trustee) or a default in respect
of a covenant or provision which under the Indenture cannot be modified or
amended without the consent of the holder of each outstanding Debt Security of
such series of Debt Securities. The Company is required to file annually with
the Debt Trustee a certificate as to whether or not the Company is in compliance
with all the conditions and covenants applicable to it under the Indenture.
In case an Indenture Event of Default shall occur and be continuing as to a
series of Debt Securities, all of which are held by the Trust, the Institutional
Trustee will have the right to declare the principal of and the interest on such
Debt Securities, and any other amounts payable under the Indenture, to be
forthwith due and payable and to enforce its other rights as a creditor with
respect to such Debt Securities.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company shall not consolidate with or merge
into any other person or entity or sell, assign, convey, transfer or lease its
properties and assets substantially as an entirety to any person or entity
unless (i) either the Company is the continuing corporation, or any successor or
purchaser is a corporation, partnership, or trust or other entity organized
under the laws of the United States of America, any State thereof or the
District of Columbia, and any such successor or purchaser expressly assumes the
Company's obligations on the Debt Securities under a supplemental indenture; and
(ii) immediately before and after giving effect thereto, no Indenture Event of
Default, and no event which, after notice or lapse of time or both, would become
an Indenture Event of Default, shall have happened and be continuing.
The general provisions of the Indenture do not afford holders of the Debt
Securities protection in the event of a highly leveraged or other transaction
involving the Company that may adversely affect holders of the Debt Securities.
SATISFACTION AND DISCHARGE; DEFEASANCE
The Indenture provides that when, among other things, all Debt Securities
not previously delivered to the Debt Trustee for cancellation (i) have become
due and payable or (ii) will become due and payable at their Stated Maturity
within one year, and the Company deposits or causes to be deposited with the
Debt Trustee, as trust funds in trust for the purpose, an amount in the currency
or currencies in which the Debt Securities are payable sufficient to pay and
discharge the entire indebtedness on the Debt Securities not previously
delivered to the Debt Trustee for cancellation, for the principal (and premium,
if any) and interest to the date of the deposit or to the Stated Maturity, as
the case may be, then the Indenture will cease to be of further effect (except
as to the Company's obligations to pay all other sums due pursuant to the
Indenture and to provide the officers' certificates and opinions of counsel
described therein), and the Company will be deemed to have satisfied and
discharged the Indenture.
The Indenture provides that the Company may elect either (a) to terminate
(and be deemed to have satisfied) all its obligations with respect to any series
of Debt Securities (except for the obligations to register the transfer or
exchange of such Debt Securities, to replace mutilated, destroyed, lost or
stolen Debt Securities, to maintain an office or agency in respect of the Debt
Securities, to compensate and indemnify the Trustee ("defeasance") or (b) to be
released from its obligations with respect to certain covenants, ("covenant
defeasance"), upon the deposit with the Trustee, in trust for such purpose, of
money and/or U.S. Government Obligations (as defined in the Indenture) which
through the payment of principal and interest in accordance with their terms
will provide money, in an amount sufficient (in the opinion of a nationally
recognized firm of independent public accountants) to pay the principal of,
interest on and any other amounts payable in respect of the outstanding Debt
Securities of such series. Such a trust may be established only if, among other
things, the Company has delivered to the Trustee an opinion of counsel (as
specified in the Indenture) with regard to certain matters, including an opinion
to the effect that the holders of such Debt Securities will not recognize
income, gain or loss for Federal income tax purposes as a result of such deposit
and discharge and will be subject to Federal income tax on the same amounts and
in the same manner and at the same times as would have been the case if such
deposit and defeasance or covenant defeasance, as the case may be, had not
occurred.
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<PAGE> 26
REDEMPTION
Unless otherwise indicated in the applicable Prospectus Supplement, Debt
Securities will not be subject to any sinking fund.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company may, at its option, redeem the Debt Securities of any series in whole at
any time or in part from time to time, at the redemption price set forth in the
applicable Prospectus Supplement plus accrued and unpaid interest to the date
fixed for redemption, and Debt Securities in denominations larger than $50 may
be redeemed in part but only in integral multiples of $50. If the Debt
Securities of any series are so redeemable only on or after a specified date or
upon the satisfaction of additional conditions, the applicable Prospectus
Supplement will specify such date or describe such conditions.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Debt Securities to be
redeemed at such holder's registered address. Unless the Company defaults in the
payment of the redemption price, on and after the redemption date interest shall
cease to accrue on such Debt Securities or portions thereof called for
redemption.
CONVERSION OR EXCHANGE
If and to the extent indicated in the applicable Prospectus Supplement, the
Debt Securities of any series may be convertible or exchangeable into other
securities. The specific terms on which Debt Securities of any series may be so
converted or exchanged will be set forth in the applicable Prospectus
Supplement. Such terms may include provisions for conversion or exchange, either
mandatory, at the option of the holder, or at the option of the Company, in
which case the number of shares of other securities to be received by the
holders of Debt Securities would be calculated as of a time and in the manner
stated in the applicable Prospectus Supplement.
CERTAIN COVENANTS
The Indenture contains certain covenants regarding, among other matters,
corporate existence, payment of taxes and reports to holders of Debt Securities.
If and to the extent indicated in the applicable Prospectus Supplement, these
covenants may be removed or additional covenants added with respect to any
series of Debt Securities.
GOVERNING LAW
The Indenture and the Debt Securities will be governed by and construed in
accordance with the laws of the State of New York.
MISCELLANEOUS
The Company will pay all fees and expenses related to (i) the offering of
the Trust Securities and the Debt Securities, (ii) the organization, maintenance
and dissolution of the Trust, (iii) the retention of the Kennametal Trustees and
(iv) the enforcement by the Institutional Trustee of the rights of the holders
of the Preferred Securities.
INFORMATION CONCERNING THE DEBT TRUSTEE
The Debt Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Debt Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of the Debt Securities, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which might
be incurred thereby. The Debt Trustee is not required to expend or risk its own
funds or otherwise incur personal financial liability in the performance of its
duties if the Debt Trustee reasonably believes that repayment or adequate
indemnity is not reasonably assured to it.
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<PAGE> 27
The First National Bank of Chicago, the Debt Trustee, is also Institutional
Trustee under the Declaration and Guarantee Trustee under the Guarantee. The
Company maintains trust and other business relationships in the ordinary course
of business with The First National Bank of Chicago. Pursuant to the provisions
of the Trust Indenture Act, upon the occurrence of certain events, The First
National Bank of Chicago may be deemed to have a conflicting interest, by virtue
of its acting as the Institutional Trustee, the Debt Trustee and the Guarantee
Trustee, its other business relationships with the Company, and by virtue of its
subsidiary acting as Delaware Trustee, and thereby may be required to resign and
be replaced by a successor trustee under the Indenture, the Declaration and the
Guarantee.
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DESCRIPTION OF PREFERRED SECURITIES
Pursuant to the terms of the Declaration, the Kennametal Trustees on behalf
of the Trust will issue the Preferred Securities and the Common Securities. The
Preferred Securities will represent preferred undivided beneficial interests in
the assets of the Trust and the holders thereof will be entitled to a preference
in certain circumstances with respect to Distributions and amounts payable on
redemption or liquidation over the Common Securities, as well as other benefits
as described in the Declaration. This summary of certain provisions of the
Preferred Securities and the Declaration is not necessarily complete, and
reference is hereby made to the copy of the Declaration, including the
definitions therein of certain terms, which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, and to the Trust
Indenture Act. Wherever particular defined terms of the Declaration are referred
to in this Section or in a Prospectus Supplement, such defined terms are
incorporated herein by reference.
GENERAL
The Preferred Securities of the Trust will rank pari passu, and payments
will be made thereon pro rata, with the Common Securities of the Trust except as
described under "--Subordination of Common Securities." Legal title to the Trust
Debentures will be held by the Institutional Trustee in trust for the benefit of
the holders of the Preferred Securities and Common Securities. The Guarantee
Agreement executed by the Company for the benefit of the holders of the Trust's
Preferred Securities (the "Guarantee") will be a guarantee with respect to the
Preferred Securities but will not guarantee payment of Distributions or amounts
payable on redemption or liquidation of the Preferred Securities when the Trust
does not have funds on hand available to make such payments. See "Description of
the Guarantee."
DISTRIBUTIONS
The Trust's Preferred Securities will represent preferred undivided
beneficial interests in the assets of the Trust, and the Distributions on each
Preferred Security will be payable at a rate specified in the Prospectus
Supplement for the Preferred Securities. The amount of Distributions payable for
any period will be computed on the basis of a 360-day year of twelve 30-day
months unless otherwise specified in the applicable Prospectus Supplement.
Distributions that are in arrears will accumulate additional Distributions
thereon at the rate per annum if and as specified in the applicable Prospectus
Supplement ("Additional Amounts"). The term "Distributions" as used herein
includes any Additional Amounts unless otherwise stated.
Distributions on the Preferred Securities will be cumulative, will
accumulate from the date of original issuance and will be payable on such dates
as specified in the applicable Prospectus Supplement. In the event that any date
on which Distributions are payable on the Preferred Securities is not a Business
Day (as defined below), payment of the Distribution payable on such date will be
made on the next succeeding day that is a Business Day (and without any interest
or other payment in respect of any such delay) except that, if such Business Day
is in the next succeeding calendar year, payment of such Distribution shall be
made on the immediately preceding Business Day, in each case with the same force
and effect as if made on such date (each date on which Distributions are payable
in accordance with the foregoing, a "Distribution Date"). A "Business Day" shall
mean any day other than a Saturday or a Sunday, or a day on which banking
institutions in The City of New York are authorized or required by law or
executive order to remain closed or a day on which the corporate trust office of
the Institutional Trustee or the Debt Trustee is closed for business.
If provided in the applicable Prospectus Supplement, the Company has the
right under the Indenture to defer payments of interest on the Trust Debentures
by extending the interest payment period thereon from time to time for a period
or periods that will be specified in the applicable Prospectus Supplement. Such
extension right, if exercised, would result in the deferral of Distributions on
the Preferred Securities (though such Distributions would continue to accumulate
additional Distributions thereon at the rate per annum if and as specified in
the applicable Prospectus Supplement) during any such extended interest payment
period. Such right to extend the interest payment period for the Trust
Debentures is limited to a period not extending beyond the Stated Maturity of
the Trust Debentures. In the event that the Company exercises this right, then
(a) the Company shall not declare or pay dividends on, make distributions with
respect to, or redeem, purchase or acquire, or make a
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liquidation payment with respect to, any of its capital stock other than (i)
purchases or acquisitions of capital stock (of the Company in connection with
the satisfaction by the Company of its obligations under any employee or agent
benefit plans or the satisfaction by the Company of its obligations pursuant to
any contract or security outstanding on the date of such event requiring the
Company to purchase capital stock of the Company), (ii) as a result of a
reclassification of the Company's capital stock or the exchange or conversion of
one class or a series of the Company's capital stock for another class or a
series of the Company's capital stock, (iii) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (iv) dividends or distributions in capital stock of the Company (or
rights to acquire capital stock) or repurchases or redemptions of capital stock
solely from the issuance or exchange of capital stock and (v) redemptions or
repurchases of any rights pursuant to the Rights Agreement, and the declaration
thereunder of a dividend of rights in the future), (b) the Company shall not
make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities issued by the Company that rank junior
to the Trust Debentures, although it may make any such payments or repay,
repurchase or redeem any debt securities that rank pari passu with the Trust
Debentures and (c) the Company shall not make any guarantee payments with
respect to the foregoing (other than payments pursuant to the Guarantee or the
Common Securities Guarantee (as defined herein)). Prior to the termination of
any such Extension Period, the Company may further extend the interest payment
period; provided, that such Extension Period, together with all such previous
and further extensions thereof, may not extend beyond the Stated Maturity of the
Trust Debentures. Upon the termination of any Extension Period and the payment
of all amounts then due, the Company may select a new Extension Period, subject
to the above requirements. See "Description of the Debentures--Option to Defer
Interest Payments." If Distributions are deferred, the deferred Distributions
and accumulated additional Distributions thereon shall be paid to holders of
record of the Preferred Securities as they appear on the books and records of
the Trust on the record date next following the termination of such deferral
period.
It is anticipated that the revenue of the Trust available for distribution
to holders of its Preferred Securities will be limited to payments under the
Trust Debentures in which the Trust will invest the proceeds from the issuance
and sale of the Preferred Securities and the Common Securities. If the Company
does not make interest payments on such Trust Debentures, the Institutional
Trustee will not have funds available to pay Distributions on the Preferred
Securities. The payment of Distributions (if and to the extent the Trust has
funds legally available for the payment of such Distributions and cash
sufficient to make such payments) is guaranteed by the Company on a limited
basis as set forth herein under "Description of the Guarantee."
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the register of the Trust on the relevant record
dates, which, as long as the Preferred Securities remain in book-entry form,
will be one Business Day prior to the relevant Distribution Date. Subject to any
applicable laws and regulations and the provisions of the Declaration, unless
otherwise specified in the applicable Prospectus Supplement, each such payment
will be made as described under "Book-Entry Issuance." In the event any
Preferred Securities are not in book-entry form, the relevant record date for
such Preferred Securities shall be the date, at least 15 days prior to the
relevant Distribution Date, that is specified in the applicable Prospectus
Supplement.
REDEMPTION
MANDATORY REDEMPTION. Unless otherwise specified in the applicable
Prospectus Supplement, upon any repayment, redemption, in whole or in part, of
any Trust Debentures that are held by the Trust unless otherwise specified in
the applicable Prospectus Supplement, whether at maturity or upon earlier
redemption as provided in the Indenture, the proceeds from such repayment or
redemption shall be applied by the Institutional Trustee to redeem a Like Amount
(as defined below) of the related Trust Securities, upon not less than 30 nor
more than 60 days notice, at a redemption price (the "Redemption Price") equal
to the aggregate liquidation amount of such Trust Securities plus accumulated
and unpaid Distributions thereon to the date of redemption (the "Redemption
Date") and the related amount of the premium, if any, paid by the Company upon
the concurrent redemption of such Trust Debentures. If less than all of any
series of Trust Debentures that are held by the Trust are to be repaid or
redeemed on a Redemption Date, then the proceeds from such repayment or
redemption shall be allocated to the redemption pro rata of the Preferred
Securities and the Common Securities. The amount of premium, if any,
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paid by the Company upon the redemption of all or any part of any Trust
Debentures held by the Trust shall be allocated pro rata to the Preferred
Securities and the Common Securities.
DISTRIBUTION OF TRUST DEBENTURES. Unless otherwise specified in the
applicable Prospectus Supplement, the Company will have the right at any time to
dissolve the Trust and, after satisfaction of the liabilities of creditors of
the Trust as provided by applicable law, to cause the Trust Debentures in
respect of the Trust Securities issued by the Trust to be distributed to the
holders of the Trust Securities in liquidation of the Trust.
After the liquidation date fixed for any distribution of Trust Debentures
held by the Trust, (i) the Preferred Securities will no longer be deemed to be
outstanding, (ii) the depositary (if any) for the Preferred Securities, as the
record holder of the Preferred Securities, will receive a registered global
certificate or certificates representing the Trust Debentures to be delivered
upon such distribution and (iii) any certificates representing such Preferred
Securities not held by or on behalf of such depositary will be deemed to
represent the Trust Debentures having a principal amount equal to the
liquidation amount of the Preferred Securities, and bearing accrued and unpaid
interest in an amount equal to the accrued and unpaid Distributions on the
Preferred Securities, until such certificates are presented to the Regular
Trustees or their agent for transfer or reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Trust Debentures that may be distributed in exchange for
Preferred Securities if a dissolution or liquidation of the Trust were to occur.
Accordingly, the Preferred Securities that an investor may purchase, or the
Trust Debentures that the investor may receive on dissolution or liquidation of
the Trust, may trade at a discount to the price that the investor paid to
purchase the Preferred Securities offered hereby.
SPECIAL EVENT REDEMPTION. If a Tax Event or an Investment Company Event
(each as defined below or in the applicable Prospectus Supplement, a "Special
Event") shall occur and be continuing, unless otherwise specified in the
applicable Prospectus Supplement, the Company will have the right to redeem the
Trust Debentures in whole (but not in part) and therefore cause a mandatory
redemption of the Trust Securities in whole (but not in part) at the Redemption
Price within 90 days following the occurrence of such Special Event.
If provided in the applicable Prospectus Supplement, the Company shall have
the right to extend or shorten the maturity of any series of Trust Debentures
held by the Trust at the time that the Company exercises its right to elect to
dissolve the Trust and, after satisfaction of the liability to creditors of the
Trust as provided by applicable law, cause such Trust Debentures to be
distributed to the holders of the Preferred Securities and Common Securities of
the Trust in liquidation of the Trust, provided that it can extend the maturity
only if certain conditions specified in the applicable Prospectus Supplement are
met at the time such election is made and at the time of such extension.
"Tax Event" means the receipt by the Trust of an opinion of counsel
experienced in such matters to the effect that, as a result of (i) any amendment
to, or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein affecting taxation, (ii) any amendment to or
change in an interpretation or application of such laws or regulations by any
legislative body, court, governmental agency or regulatory authority or (iii)
any interpretation or pronouncement that provides for a position with respect to
such laws or regulations that differs from the generally accepted position on
the date the Preferred Securities are issued, which amendment or change is
effective or which interpretation or pronouncement is announced on or after the
date of issuance of the Preferred Securities under the Declaration, there is
more than an insubstantial risk that (x) the Trust is, or will be within 90 days
of the date thereof, subject to U.S. federal income tax with respect to income
received or accrued on the Trust Debentures, (y) interest payable by the Company
on the Debentures is not, or within 90 days of the date thereof, will not be,
deductible, in whole or in part, for U.S. federal income tax purposes, or (z)
the Trust is, or will be within 90 days of the date thereof, subject to more
than a de minimis amount of other taxes, duties or other governmental charges.
"Investment Company Event" means the occurrence of a change in law or
regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law") to the effect that there is a more than
insubstantial risk that the Trust is or will be considered an "investment
company" that is required to be registered under the Investment
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Company Act of 1940, as amended (the "Investment Company Act"), which Change in
1940 Act Law becomes effective on or after the date of original issuance of the
Preferred Securities.
"Like Amount" means (i) with respect to a redemption of any Trust
Securities, Trust Securities having a liquidation amount equal to that portion
of the principal amount of Trust Debentures to be contemporaneously redeemed in
accordance with the Indenture, allocated to the Common Securities and to the
Preferred Securities based upon the relative liquidation amounts of such classes
of Trust Securities, and the proceeds of which will be used to pay the
Redemption Price of such Trust Securities, and (ii) with respect to a
distribution of Trust Debentures to holders of any Trust Securities in
connection with a dissolution or liquidation of Trust, Trust Debentures having a
principal amount equal to the liquidation amount of the Trust Securities of the
holder to whom such Trust Debentures are distributed.
REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date shall be redeemed at
the Redemption Price with the applicable proceeds from the contemporaneous
redemption of the Trust Debentures. Redemptions of Preferred Securities shall be
made and the Redemption Price shall be payable on each Redemption Date only to
the extent that the Trust has funds on hand available for the payment of such
Redemption Price. See also "--Subordination of Common Securities."
If the Trust gives a notice of redemption in respect of the Preferred
Securities, then, on the Redemption Date, to the extent funds are available, the
Institutional Trustee will deposit irrevocably with the Depositary for the
Preferred Securities (if such Preferred Securities are issued in the form of one
or more Global Preferred Securities) funds sufficient to pay the applicable
Redemption Price and will give such Depositary irrevocable instructions and
authority to pay the Redemption Price to the beneficial owners of the Preferred
Securities. See "--Global Preferred Securities" and "Book-Entry Issuance." If
the Preferred Securities are not issued in the form of one or more Global
Preferred Securities, the Trust, to the extent funds are available, will
irrevocably deposit with the paying agent for the Preferred Securities funds
sufficient to pay the applicable Redemption Price and will give such paying
agent irrevocable instructions and authority to pay the Redemption Price to the
holders thereof upon surrender of their certificates evidencing the Preferred
Securities. Notwithstanding the foregoing, Distributions payable on or prior to
the Redemption Date for the Preferred Securities called for redemption shall be
payable to the holders of the Preferred Securities on the relevant record dates
for the related Distribution Dates. If a notice of redemption shall have been
given and funds deposited as required, then upon the date of such deposit, all
rights of the holders of the Preferred Securities so called for redemption will
cease, except the right of the holders of the Preferred Securities to receive
the Redemption Price, but without interest on such Redemption Price, and the
Preferred Securities will cease to be outstanding. In the event that any date
fixed for redemption of Preferred Securities is not a Business Day, then payment
of the Redemption Price payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately preceding Business
Day. In the event that payment of the Redemption Price in respect of Preferred
Securities called for redemption is improperly withheld or refused and not paid
either by the Trust or by the Company pursuant to the Guarantee as described
under "Description of the Guarantee", Distributions on such Preferred Securities
will continue to accumulate at the then applicable rate, from the Redemption
Date originally established by the Trust for the Preferred Securities to the
date such Redemption Price is actually paid, in which case the actual payment
date will be the date fixed for redemption for purposes of calculating the
Redemption Price.
Subject to applicable law (including, without limitation, U.S. federal
securities law), the Company or its subsidiaries may at any time and from time
to time purchase outstanding Preferred Securities by tender, in the open market
or by private agreement.
If less than all of the Preferred Securities and Common Securities issued
by the Trust are to be redeemed on a Redemption Date, then the aggregate
liquidation amount of such Preferred Securities and Common Securities to be
redeemed shall be allocated pro rata among the Preferred Securities and Common
Securities of such Trust based on the relative liquidation amounts of such
classes of Trust Securities. The particular Preferred Securities to
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be redeemed shall be selected on a pro rata basis not more than 60 days prior to
the Redemption Date by the Institutional Trustee from the outstanding Preferred
Securities not previously called for redemption, by such method as the
Institutional Trustee shall deem fair and appropriate and which may provide for
the selection for redemption of portions (equal to $50 or an integral multiple
of $50 in excess thereof) of the liquidation amount of Preferred Securities of a
denomination larger than $50. The Institutional Trustee shall promptly notify
the registrar in writing of the Preferred Securities selected for redemption
and, in the case of any Preferred Securities selected for partial redemption,
the liquidation amount thereof to be redeemed. For all purposes of each
Declaration, unless the context otherwise requires, all provisions relating to
the redemption of Preferred Securities shall relate, in case of any Preferred
Securities redeemed or to be redeemed only in part, to the portion of the
aggregate liquidation amount of Preferred Securities which has been or is to be
redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Preferred Securities to be
redeemed at its registered address. Unless the Company defaults in payment of
the Redemption Price on the Trust Debentures, on and after the Redemption Date
interest will cease to accrue on the Trust Debentures or portions thereof (and
Distributions will cease to accumulate on the Preferred Securities or portions
thereof) called for redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions (including Additional Amounts, if applicable) on,
and the Redemption Price of, the Trust's Preferred Securities and Common
Securities, as applicable, shall be made pro rata based on the liquidation
amount of such Trust Securities; provided, however, that if on any Distribution
Date or Redemption Date, an Indenture Event of Default shall have occurred and
be continuing, no payment of any Distribution (including Additional Amounts, if
applicable) on, or Redemption Price of, any of the Trust's Common Securities,
and no other payment on account of the redemption, liquidation or other
acquisition of such Common Securities, shall be made unless payment in full in
cash of all accumulated and unpaid Distributions (including Additional Amounts,
if applicable) on all of the Trust's outstanding Preferred Securities for all
Distribution periods terminating on or prior thereto, or in the case of payment
of the Redemption Price the full amount of such Redemption Price on all of the
Trust's outstanding Preferred Securities then called for redemption, shall have
been made or provided for, and all funds available to the Institutional Trustee
shall first be applied to the payment in full in cash of all Distributions
(including Additional Amounts, if applicable) on, or Redemption Price of, the
Trust's Preferred Securities then due and payable.
In the case of any Event of Default under the Declaration resulting from an
Indenture Event of Default, the Company as holder of the Trust's Common
Securities will be deemed to have waived any right to act with respect to any
such Event of Default under the Declaration until the effect of all such Events
of Default with respect to the Preferred Securities have been cured, waived or
otherwise eliminated. Until any such Events of Default under the Declaration
have been so cured, waived or otherwise eliminated, the Institutional Trustee
shall act solely on behalf of the holders of the Preferred Securities and not on
behalf of the Company as holder of the Trust's Common Securities, and only the
holders of the Preferred Securities will have the right to direct the
Institutional Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Unless otherwise specified in the applicable Prospectus Supplement,
pursuant to the Declaration, the Trust shall dissolve (i) on November 12, 2004,
the expiration of the term of the Trust, (ii) upon the bankruptcy of the
Company, (iii) upon the filing of a certificate of dissolution or its equivalent
with respect to the Company, after receipt by the Institutional Trustee of
written direction from the Company to dissolve the Trust or after obtaining the
consent of the holders of at least a majority in liquidation amount of the Trust
Securities affected thereby voting together as a single class to dissolve the
Trust, or the revocation of the charter of the Company and the expiration of 90
days after the date of revocation without a reinstatement thereof, (iv) upon the
distribution of Trust Debentures, (v) upon the entry of a decree of a judicial
dissolution of the holder of the Common Securities, the Company or the Trust, or
(vi) upon the redemption of all the Trust Securities.
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If an early dissolution occurs as described in clause (ii), (iii) or (v)
above, the Trust shall be liquidated by the Kennametal Trustees as expeditiously
as the Kennametal Trustees determine to be possible by distributing, after
satisfaction of liabilities to creditors of the Trust as provided by applicable
law, to the holders of the applicable Trust Securities a Like Amount of the
Trust Debentures that are then held by the Trust, unless such distribution is
determined by the Institutional Trustee not to be practical, in which event such
holders will be entitled to receive out of the assets of the Trust available for
distribution to holders, after satisfaction of liabilities to creditors of the
Trust as provided by applicable law, an amount equal to, in the case of holders
of Preferred Securities, the aggregate of the liquidation amount plus accrued
and unpaid Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If such Liquidation Distribution can be paid only
in part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Preferred Securities shall be paid on a pro rata basis. The
holder(s) of the Trust's Common Securities will be entitled to receive
distributions upon any such liquidation pro rata with the holders of the
Preferred Securities, except that if an Indenture Event of Default has occurred
and is continuing, the Preferred Securities shall have a priority over the
Common Securities. If specified in the applicable Prospectus Supplement, a
supplemental Indenture may provide that if an early dissolution occurs as
described in clause (v) above, the Trust Debentures that are then held by the
Trust may be subject to optional redemption in whole (but not in part).
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under the
Declaration (an "Event of Default") with respect to the Preferred Securities
issued thereunder (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(i) the occurrence of an Indenture Event of Default under the Indenture; or
(ii) default by the Trust in the payment of any Distribution when it
becomes due and payable, and continuation of such default for a period of 30
days; or
(iii) default by the Trust in the Payment of any Redemption Price of any
Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of any
covenant or warranty of the Kennametal Trustees in the Declaration (other than a
covenant or warranty a default in the performance of which or the breach of
which is dealt with in clause (ii) or (iii) above), and continuation of such
default or breach for a period of 90 days after written notice has been given to
the defaulting Kennametal Trustee or Trustees by the holders of at least 25% in
aggregate liquidation amount of the outstanding Preferred Securities, which
notice shall specify such default or breach and require it to be remedied and
shall state that such notice is a "Notice of Default" under the Declaration; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Institutional Trustee and the failure by the Company to appoint a
successor Institutional Trustee within 60 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Institutional Trustee, the Institutional Trustee shall
transmit notice of such Event of Default to the holders of the Preferred
Securities, the Regular Trustees and the Company, as Sponsor, unless such Event
of Default shall have been cured or waived. The Company, as Sponsor, and the
Regular Trustees are required to file annually with the Institutional Trustee a
certificate as to whether or not they are in compliance with all the conditions
and covenants applicable to them under the Declaration.
If an Indenture Event of Default has occurred and is continuing, the
Preferred Securities of the Trust shall have a preference over the Common
Securities of the Trust upon dissolution of the Trust as described above. See
"--Liquidation Distribution Upon Dissolution." The existence of an Event of
Default does not entitle the holders of Preferred Securities to accelerate the
maturity thereof.
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REMOVAL OF KENNAMETAL TRUSTEES
Unless an Indenture Event of Default shall have occurred and be continuing
with respect to the Trust Debentures, any Kennametal Trustee may be removed at
any time by the holder of the Common Securities. If an Indenture Event of
Default with respect to any series of Trust Debentures has occurred and is
continuing, the Institutional Trustee and the Delaware Trustee may be removed at
such time by the holders of a majority in liquidation amount of the outstanding
Preferred Securities of the Trust. In no event will the holders of the Preferred
Securities of the Trust have the right to vote to appoint, remove or replace the
Administrative Trustees, which voting rights are vested exclusively in the
Company as the holder of the Common Securities of the Trust. No resignation or
removal of a Kennametal Trustee and no appointment of a successor trustee shall
be effective until the acceptance of appointment by the successor trustee in
accordance with the provisions of the Declaration.
CO-TRUSTEES AND SEPARATE INSTITUTIONAL TRUSTEE
Unless an Event of Default with respect to the Preferred Securities of the
Trust shall have occurred and be continuing, at any time or times, for the
purpose of meeting the legal requirements of the Trust Indenture Act or of any
jurisdiction in which any part of the trust property ("Trust Property") may at
the time be located, the Company, as the holder of the Common Securities of the
Trust, and the Regular Trustees shall have power to appoint one or more persons
either to act as a co-trustee, jointly with the Institutional Trustee, of all or
any part of such Trust Property, or to act as separate trustee of any such
property, in either case with such powers as may be provided in the instrument
of appointment, and to vest in such person or persons in such capacity any
property, title, right or power deemed necessary or desirable, subject to the
provisions of the applicable Declaration. In case an Indenture Event of Default
with respect to the Trust Debentures has occurred and is continuing, the
Institutional Trustee alone shall have power to make such appointment.
MERGER OR CONSOLIDATION OF TRUST TRUSTEES
Any entity into which the Institutional Trustee, the Delaware Trustee or
any Regular Trustee that is not a natural person may be merged or converted or
with which it may be consolidated, or any entity resulting from any merger,
conversion or consolidation to which such Trustee shall be a party, or any
entity succeeding to all or substantially all the corporate trust business of
such Trustee, shall be the successor of such Trustee under the Declaration,
provided such entity shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other body, except as
described below or as described in "--Liquidation Distribution Upon
Dissolution". The Trust may, with the consent of the Regular Trustees and
without the consent of the holders of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any State; provided, that (i) if the Trust is not the
survivor, such successor entity either (x) assumes all of the obligations of the
Trust under the Trust Securities or (y) substitutes for the Trust Securities
other securities having substantially the same terms as the Trust Securities
(the "Successor Securities"), so long as the Successor Securities rank the same
as the Trust Securities rank with respect to distributions and payments upon
liquidation, redemption and otherwise, (ii) the Company expressly acknowledges a
trustee of such successor entity possessing the same powers and duties as the
Institutional Trustee as the holder of the Trust Debentures, (iii) the Preferred
Securities or any Successor Securities are listed, or any Successor Securities
will be listed upon notification of issuance, on any national securities
exchange or with another organization on which the Preferred Securities are then
listed or quoted, (iv) such merger, consolidation, amalgamation or replacement
does not cause the Preferred Securities (including any Successor Securities) to
be downgraded by any nationally recognized statistical rating organization, (v)
such merger, consolidation, amalgamation or replacement does not adversely
affect the rights, preferences and privileges of the holders of the Trust
Securities (including any Successor Securities) in any material respect (other
than with respect to any dilution of the holders' interest in the new entity),
(vi) such successor entity has a purpose substantially identical to that of the
Trust, (vii) prior to such merger, consolidation, amalgamation or replacement,
the Company has received an opinion of independent counsel to the Trust
experienced in such
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matters to the effect that, (A) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and privileges of
the holders of the Trust Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of the holders'
interest in the new entity), (B) following such merger, consolidation,
amalgamation or replacement, neither the Trust nor such successor entity will be
required to register as an investment company under the 1940 Act and (C)
following such merger, consolidation, amalgamation or replacement, the Trust (or
the successor entity) will continue to be classified as a grantor trust for
United States federal income tax purposes and (viii) the Company guarantees the
obligations of such successor entity under the Successor Securities at least to
the extent provided by the Guarantee and the Common Securities Guarantee.
Notwithstanding the foregoing, the Trust shall not, except with the consent of
holders of 100% in liquidation amount of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by any other entity or permit any
other entity to consolidate, amalgamate, merge with or into, or replace it, if
such consolidation, amalgamation, merger or replacement would cause the Trust or
the successor entity to be classified as other than a grantor trust for United
States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF DECLARATION
Except as provided below and under "Description of the
Guarantee--Modification of the Guarantee; Assignment" and as otherwise required
by law and the Declaration, the holders of the Preferred Securities will have no
voting rights.
Subject to the requirement of the Institutional Trustee obtaining a tax
opinion in certain circumstances set forth in the last sentence of this
paragraph, the holders of a majority in aggregate liquidation amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Institutional Trustee,
or direct the exercise of any trust or power conferred upon the Institutional
Trustee under the Declaration including the right to direct the Institutional
Trustee, as holder of the Trust Debentures, to (i) exercise the remedies
available under the Indenture with respect to the Trust Debentures, (ii) waive
any past Indenture Event of Default that is waivable under Section 513 of the
Indenture, (iii) exercise any right to rescind or annul a declaration that the
principal of all the Trust Debentures shall be due and payable or (iv) consent
to any amendment, modification or termination of the Indenture or the Trust
Debentures where such consent shall be required; provided, however, that, where
a consent or action under the Indenture would require the consent or act of
holders of more than a majority in principal amount of the Trust Debentures (a
"Super-Majority") affected thereby, only the holders of at least such
Super-Majority in aggregate liquidation amount of the Preferred Securities may
direct the Institutional Trustee to give such consent or take such action. The
Institutional Trustee shall notify all holders of the Preferred Securities of
any notice of default received from the Debt Trustee with respect to the Trust
Debentures. Such notice shall state that such Indenture Event of Default also
constitutes an Event of Default. Except with respect to directing the time,
method and place of conducting a proceeding for a remedy, the Institutional
Trustee shall not take any of the actions described in clause (i), (ii) or (iii)
above unless the Institutional Trustee has obtained an opinion of tax counsel
experienced in such matters to the effect that, as a result of such action, the
Trust will not fail to be classified as a grantor trust for United States
federal income tax purposes.
In the event the consent of the Institutional Trustee, as a holder of the
Trust Debentures, is required under the Indenture with respect to any amendment,
modification or termination of the Indenture, the Institutional Trustee shall
request the direction of the holders of the Trust Securities with respect to
such amendment, modification or termination and shall vote with respect to such
amendment, modification or termination as directed by a majority in liquidation
amount of the Trust Securities voting together as a single class; provided,
however, that where a consent under the Indenture would require the consent of a
Super-Majority, the Institutional Trustee may only give such consent at the
direction of the holders of at least the proportion in liquidation amount of the
Trust Securities which the relevant Super-Majority represents of the aggregate
principal amount of the Trust Debentures outstanding. The Institutional Trustee
shall be under no obligation to take any such action in accordance with the
directions of the holders of the Trust Securities unless the Institutional
Trustee has obtained an opinion of tax counsel experienced in such matters to
the effect that for the purposes of United States federal income tax, the Trust
will not be classified as other than a grantor trust.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Event of Default.
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Any required approval or direction of holders of Preferred Securities may
be given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the holders of Trust Securities or pursuant
to written consent. The Regular Trustees will cause a notice of any meeting at
which holders of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
mailed to each holder of record of Preferred Securities. Each such notice will
include a statement setting forth the following information: (i) the date of
such meeting or the date by which such action is to be taken; (ii) a description
of any resolution proposed for adoption at such meeting on which such holders
are entitled to vote or of such matter upon which written consent is sought; and
(iii) instructions for the delivery of proxies or consents. No vote or consent
of the holders of Preferred Securities will be required for the Trust to redeem
and cancel Preferred Securities or distribute Trust Debentures in accordance
with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by the Company or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, the Company, shall not be entitled to vote or consent and shall,
for purposes of such vote or consent, be treated as if such Preferred Securities
were not outstanding.
The procedures by which holders of Preferred Securities may exercise their
voting rights are described below. See "Book-Entry Issuance."
Holders of the Preferred Securities will have no rights to appoint or
remove the Kennametal Trustees, who may be appointed, removed or replaced solely
by the Company as the indirect or direct holder of all of the Common Securities.
GLOBAL PREFERRED SECURITIES
The Preferred Securities of the Trust may be issued in whole or in part in
the form of one or more Global Preferred Securities that will be deposited with,
or on behalf of, the depositary identified in the Prospectus Supplement relating
to the Preferred Securities. Unless otherwise indicated in the applicable
Prospectus Supplement for the Preferred Securities, the depositary will be The
Depository Trust Company ("DTC"). Global Preferred Securities may be issued only
in fully registered form and in either temporary or permanent form. Unless and
until it is exchanged in whole or in part for the individual Preferred
Securities represented thereby, a Global Preferred Security may not be
transferred except as a whole by the depositary for such Global Preferred
Security to a nominee of such depositary or by a nominee of such depositary to
such depositary or another nominee of such depositary or by such depositary or
any nominee to a successor depositary or any nominee of such successor.
While the specific terms of the depositary arrangement with respect to the
Preferred Securities of the Trust (if other than as described under "Book-Entry
Issuance") will be described in the Prospectus Supplement relating to the
Preferred Securities, the Company anticipates that the following provisions will
generally apply to depositary arrangements.
Upon the issuance of a Global Preferred Security, and the deposit of such
Global Preferred Security with or on behalf of the applicable depositary, the
depositary for such Global Preferred Security or its nominee will credit, on its
book-entry registration and transfer system, the respective aggregate
liquidation amounts of the individual Preferred Securities represented by such
Global Preferred Securities to the accounts of Participants. Such accounts shall
be designated by the dealers, underwriters or agents with respect to such
Preferred Securities or by the Company if such Preferred Securities are offered
and sold directly by the Company. Ownership of beneficial interests in a Global
Preferred Security will be limited to Participants or persons that may hold
interests through Participants. Ownership of beneficial interests in such Global
Preferred Security will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the applicable depositary or its
nominee (with respect to interests of Participants) and the records of
Participants (with respect to interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Preferred Security.
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So long as the depositary for a Global Preferred Security, or its nominee,
is the registered owner of such Global Preferred Security, such depositary or
such nominee, as the case may be, will be considered the sole owner or holder of
the Preferred Securities represented by such Global Preferred Security for all
purposes under the Declaration. Except as provided below, owners of beneficial
interests in a Global Preferred Security will not be entitled to have any of the
individual Preferred Securities represented by such Global Preferred Security
registered in their names, will not receive or be entitled to receive physical
delivery of any such Preferred Securities in definitive form and will not be
considered the owners or holders thereof under the Declaration.
Payments of liquidation amount, premium or Distributions in respect of
individual Preferred Securities represented by a Global Preferred Security
registered in the name of a depositary or its nominee will be made to such
depositary or its nominee, as the case may be, as the registered owner of the
Global Preferred Security representing such Preferred Securities. None of the
Company, the Institutional Trustee, any paying agent or the registrar for such
Preferred Securities will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests of the Global Preferred Security representing such Preferred
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company expects that the depositary for the Preferred Securities of the
Trust, or its nominee, upon receipt of any payment of liquidation amount,
premium or Distributions in respect of a Global Preferred Security representing
any of such Preferred Securities, immediately will credit Participants' accounts
with payments in amounts proportionate to their respective beneficial interest
in the aggregate of such Global Preferred Security for such Preferred Securities
as shown on the records of such depositary or its nominee. The Company also
expects that payments by Participants to owners of beneficial interests in such
Global Preferred Security held through such Participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name." Such payments will be the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depositary for the Preferred Securities of a Trust is at any time unwilling,
unable or ineligible to continue as a depositary and a successor depositary is
not appointed by the Company within 90 days, the Trust will issue individual
Preferred Securities of the Trust in exchange for the Global Preferred Security
representing such Preferred Securities. In addition, the Company may at any time
and in its sole discretion, subject to any limitations described in the
Prospectus Supplement relating to the Preferred Securities, determine not to
have any Preferred Securities of the Trust represented by one or more Global
Preferred Securities and, in such event, the Trust will issue individual
Preferred Securities in exchange for the Global Preferred Security or Securities
representing such Preferred Securities. Further, if the Company so specifies
with respect to the Preferred Securities of the Trust, an owner of a beneficial
interest in a Global Preferred Security representing such Preferred Securities
may, on terms acceptable to the Company, the Institutional Trustee and the
Depositary for such Global Preferred Security, receive individual Preferred
Securities in exchange for such beneficial interests, subject to any limitations
described in the Prospectus Supplement relating to such Preferred Securities. In
any such instance, an owner of a beneficial interest in a Global Preferred
Security will be entitled to physical delivery of individual Preferred
Securities represented by such Global Preferred Security equal in liquidation
amount to such beneficial interest and to have such Preferred Securities
registered in its name. Individual Preferred Securities so issued will be issued
in denominations, unless otherwise specified by the Company, of $50 and integral
multiples thereof.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities shall be made to the
applicable depositary, which shall credit the relevant accounts at such
depositary on the applicable Distribution Dates or, if the Preferred Securities
are not held by a depositary, such payments shall be made by check mailed to the
address of the holder entitled thereto as such address shall appear on the
Register. Unless otherwise specified in the applicable Prospectus Supplement,
the paying agent for the Preferred Securities shall initially be the
Institutional Trustee and any co-paying agent chosen by the Institutional
Trustee and acceptable to the Regular Trustees and the Company. The paying agent
shall be permitted to resign as paying agent upon 30 days' written notice to the
Institutional Trustees and the Company. In the event that the Institutional
Trustee shall no longer be the paying agent, the Regular Trustees
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shall appoint a successor to act as paying agent (which shall be a bank or trust
company acceptable to the Regular Trustees and the Company).
REGISTRAR AND TRANSFER AGENT
Unless otherwise specified in the applicable Prospectus Supplement, the
Institutional Trustee will act as registrar and transfer agent for the Preferred
Securities.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment of any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange. The Trust will not be required to register or cause to be registered
the transfer of the Preferred Securities after the Preferred Securities have
been called for redemption.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The Institutional Trustee, other than during the occurrence and continuance
of an Event of Default, undertakes to perform only such duties as are
specifically set forth in the Declaration and, after such Event of Default, must
exercise the same degree of care and skill as a prudent person would exercise or
use in the conduct of his or her own affairs. Subject to this provision, the
Institutional Trustee is under no obligation to exercise any of the powers
vested in it by the Declaration at the request of any holder of Preferred
Securities unless it is offered reasonable indemnity against the costs, expenses
and liabilities that might be incurred thereby. If no Event of Default has
occurred and is continuing and the Institutional Trustee is required to decide
between alternative causes of action, construe ambiguous provisions in the
Declaration or is unsure of the application of any provision of the Declaration,
and the matter is not one on which holders of Preferred Securities are entitled
under the Declaration to vote, then the Institutional Trustee shall take such
action as is directed by the Company and if not so directed, shall take such
action as it deems advisable and in the best interests of the holders of the
Trust Securities and will have no liability except for its own bad faith,
negligence or willful misconduct.
MISCELLANEOUS
The Regular Trustees are authorized and directed to conduct the affairs of
and to operate the Trust in such a way that the Trust will not be deemed to be
an "investment company" required to be registered under the Investment Company
Act or fail to be classified as a grantor trust for U.S. federal income tax
purposes and so that the Debentures will be treated as indebtedness of the
Company for U.S. federal income tax purposes. In this connection, the Company
and the Regular Trustees are authorized to take any action, not inconsistent
with applicable law, the certificate of trust of the Trust or the Declaration,
that the Company and the Regular Trustees determine in their discretion to be
necessary or desirable for such purposes, as long as such action does not
materially adversely affect the interests of the holders of the Preferred
Securities.
Holders of the Preferred Securities have no preemptive or similar rights.
The Trust may not borrow money or issue debt or mortgage or pledge any of
its assets.
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DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee which
will be executed and delivered by the Company for the benefit of the holders
from time to time of Preferred Securities. The Guarantee will be qualified as an
indenture under the Trust Indenture Act. The First National Bank of Chicago, an
independent trustee, will act as indenture trustee under the Guarantee (the
"Guarantee Trustee") for the purposes of compliance with the provisions of the
Trust Indenture Act. The terms of the Guarantee will be those set forth in the
Guarantee and those made part of the Guarantee by the Trust Indenture Act. The
following summary is not necessarily complete, and reference is hereby made to
the copy of the form of the Guarantee (including the definitions therein of
certain terms) which is filed as an exhibit to the Registration Statement of
which this Prospectus forms a part, and to the Trust Indenture Act. Whenever
particular defined terms of the Guarantee are referred to in this Prospectus,
such defined terms are incorporated herein by reference. The Guarantee will be
held by the Trustee for the benefit of the holders of the Preferred Securities.
GENERAL
Pursuant to the Guarantee, unless otherwise specified in the applicable
Prospectus Supplement, the Company will irrevocably and unconditionally agree,
to the extent set forth therein, to pay in full to the holders of the Preferred
Securities issued by the Trust, the Guarantee Payments (as defined herein)
(except to the extent paid by the Trust), as and when due, regardless of any
defense, right of set-off or counterclaim which the Trust may have or assert.
The following payments or distributions with respect to Preferred Securities
issued by the Trust, to the extent not paid by or on behalf of the Trust (the
"Guarantee Payments"), will be subject to the Guarantee (without duplication):
(i) any accrued and unpaid distributions which are required to be paid on the
Preferred Securities, to the extent the Trust shall have funds available
therefor; (ii) with respect to any Preferred Securities called for redemption by
the Trust, the redemption price (the "Redemption Price") and all accrued and
unpaid distributions to the date of redemption, to the extent the Trust has
funds available therefor and (iii) upon a voluntary or involuntary dissolution,
winding-up or termination of the Trust (other than in connection with the
distribution of Trust Debentures to the holders of Preferred Securities or the
redemption of all of the Preferred Securities), the lesser of (a) the aggregate
of the liquidation amount and all accrued and unpaid distributions on the
Preferred Securities to the date of payment, to the extent the Trust has funds
available therefor, and (b) the amount of assets of the Trust remaining
available for distribution to holders of the Preferred Securities in liquidation
of the Trust. The Company's obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by the Company to the
holders of Preferred Securities or by causing the Trust to pay such amounts to
such holders.
The Guarantee will be a full and unconditional guarantee of the Guarantee
Payments with respect to the Preferred Securities, but will not apply to any
payment of distributions except to the extent the Trust shall have funds
available therefor. If the Company does not make interest payments on the Trust
Debentures purchased by the Trust, the Trust will not pay distributions on the
Preferred Securities issued by the Trust and will not have funds available
therefor. See "Relationship Among the Preferred Securities, the Trust Debentures
and the Guarantee." The Guarantee, when taken together with the Company's
obligations under the Indenture and the Declaration, will have the effect of
providing a full and unconditional guarantee on a subordinated basis by the
Company of payments due on the Preferred Securities.
The Company has also agreed separately to irrevocably and unconditionally
guarantee the obligations of the Trust with respect to the Common Securities
(the "Common Securities Guarantee") to the same extent as the Guarantee, except
that upon an Indenture Event of Default, holders of the Preferred Securities
shall have priority over holders of Common Securities with respect to
distributions and payments on liquidation, redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
In the Guarantee, the Company will covenant that, so long as any Preferred
Securities issued by the Trust remain outstanding, if there shall have occurred
any event that would constitute an event of default under the Guarantee or the
Declaration, then (a) the Company shall not declare or pay any dividend on, make
any distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of
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its capital stock (other than (i) purchases or acquisitions of capital stock of
the Company in connection with the satisfaction by the Company of its
obligations under any employee benefit plans or the satisfaction by the Company
of its obligations pursuant to any contract or security outstanding on the date
of such event requiring the Company to purchase capital stock of the Company,
(ii) as a result of a reclassification of the Company's capital stock or the
exchange or conversion of one class or series of the Company's capital stock for
another class or series of the Company's capital stock, (iii) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, (iv) dividends or distributions in capital stock of the
Company and (v) redemptions or purchases of any rights pursuant to the Rights
Agreement, any successor to the Rights Agreement, and the declaration thereunder
of a dividend of rights in the future), (b) the Company shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities issued by the Company which rank junior to the Trust
Debentures, although it may make any such payments or repay, repurchase or
redeem any debt securities that rank pari passu with the Trust Debentures and
(c) the Company shall not make any guarantee payments with respect to the
foregoing (other than payments pursuant to the Guarantee or the Common
Securities Guarantee).
MODIFICATION OF THE GUARANTEE; ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of Preferred Securities (in which case no vote will be required), the
Guarantee may be amended only with the prior approval of the holders of not less
than a majority in liquidation amount of the outstanding Preferred Securities
issued by the Trust. All guarantees and agreements contained in the Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
the Company and shall inure to the benefit of the holders of the Preferred
Securities then outstanding.
TERMINATION
The Guarantee will terminate as to the Preferred Securities (i) upon full
payment of the Redemption Price of all Preferred Securities then outstanding,
(ii) upon distribution of the Trust Debentures held by the Trust to the holders
of the Preferred Securities of the Trust or (iii) upon full payment of the
amounts payable in accordance with the Declaration upon liquidation of the
Trust. The Guarantee will continue to be effective or will be reinstated, as the
case may be, if at any time any holder of Preferred Securities must return
payment of any sums paid under such Preferred Securities or the Guarantee.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder.
The holders of a majority in liquidation amount of the Preferred Securities
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Guarantee Trustee in respect of the Guarantee or
to direct the exercise of any trust or power conferred upon the Guarantee
Trustee under the Guarantee. If the Guarantee Trustee fails to enforce the
Guarantee, any holder of Preferred Securities may institute a legal proceeding
directly against the Company to enforce such holder's rights under the
Guarantee, without first instituting a legal proceeding against the Trust, the
Guarantee Trustee or any other person or entity. Notwithstanding the foregoing,
if the Company has failed to make a required guarantee payment, a holder of
Preferred Securities may directly institute a proceeding against the Company for
enforcement of the Guarantee for such payment. The Company waives any right or
remedy to require that any action be brought first against the Trust or any
other person or entity before proceeding directly against the Company.
STATUS OF THE GUARANTEE
The Guarantee will constitute a senior unsecured obligation of the Company
and will rank pari passu with all of the Company's other senior unsecured
obligations. The terms of the Preferred Securities provide that each holder of
Preferred Securities issued by the Trust by acceptance thereof agrees to the
subordination provisions and other terms of the Guarantee.
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The Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly against
the Guarantor to enforce its rights under the guarantee without instituting a
legal proceeding against any other person or entity).
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default with respect to
the Guarantee, undertakes to perform only such duties as are specifically set
forth in the Guarantee and, after default, shall exercise the same degree of
care as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provisions, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by the Guarantee at the
request of any holder of Preferred Securities, unless offered reasonable
indemnity against the costs, expenses and liabilities which might be incurred
thereby; but the foregoing shall not relieve the Guarantee Trustee, upon the
occurrence of an event of default under the Guarantee, from exercising the
rights and powers vested in it by the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the
internal laws of the State of New York.
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RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE TRUST DEBENTURES
AND THE GUARANTEE
As long as payments of interest and other payments are made when due on the
Trust Debentures, such payments will be sufficient to cover Distributions and
other payments due on the Preferred Securities, primarily because (i) the
aggregate principal amount of the Trust Debentures will be equal to the sum of
the aggregate stated liquidation amount of the Preferred Securities and Common
Securities; (ii) the interest rate and interest and other payment dates on the
Trust Debentures will match the Distribution rate and Distribution and other
payment dates for the Preferred Securities; (iii) the Company shall be obligated
to pay, directly or indirectly, all costs, expenses, debts and obligations of
the Trust (other than with respect to the Trust Securities); and (iv) the
Declaration further provides that the Trust will not engage in any activity that
is not consistent with the limited purposes of the Trust.
Payments of Distributions and other amounts due on the Preferred Securities
(to the extent the Trust has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Company as and to the extent
set forth under "Description of the Guarantee." Taken together, the Company's
obligations under the Trust Debentures, the Indenture, the Declaration and the
Guarantee have the effect of providing a full, irrevocable and unconditional
guarantee of payments of Distributions and other amounts due on the Preferred
Securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes such guarantee. It is only the
combined operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Trust's obligations under the
Preferred Securities. If and to the extent that the Company does not make
payments on the Trust Debentures, the Trust will not pay Distributions or other
amounts due on the Preferred Securities. The Guarantee does not cover payment of
Distributions when the Trust does not have sufficient funds to pay such
Distributions.
Notwithstanding anything to the contrary in the Indenture, the Company has
the right to set-off any payment it is otherwise required to make thereunder
with and to the extent the Company has theretofor made, or is concurrently on
the date of such payment making, a payment under the Guarantee.
A holder of any Preferred Security may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee, the Trust or
any other person or entity.
The Trust's Preferred Securities evidence preferred undivided beneficial
interests in the assets of the Trust, and the Trust exists for the sole purpose
of issuing the Preferred Securities and Common Securities and investing the
proceeds thereof in Trust Debentures. A principal difference between the rights
of a holder of a Preferred Security and a holder of a Trust Debenture is that a
holder of a Trust Debenture will accrue, and (subject to the permissible
extension of the interest period) is entitled to receive, interest on the
principal amount of Trust Debentures held, while a holder of Preferred
Securities is only entitled to receive Distributions if and to the extent the
Trust has funds available for the payment of such Distributions.
Upon any voluntary or involuntary dissolution of the Trust involving the
liquidation of the Trust Debentures, the holders of Preferred Securities of the
Trust will be entitled to receive, out of assets held by the Trust, the
Liquidation Distribution in cash. See "Description of Preferred
Securities--Liquidation Distribution Upon Dissolution." Upon any voluntary or
involuntary liquidation or bankruptcy of the Company, the Institutional Trustee
as holder of the Trust Debentures would be entitled to receive payment in full
of principal and interest, before any shareholders of the Company receive
payments or distributions.
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DESCRIPTION OF COMMON STOCK
The following brief description of the Company's capital stock does not
purport to be complete and is subject in all respects to applicable Pennsylvania
law and to the provisions of the Company's Amended and Restated Articles of
Incorporation (the "Restated Articles") and its By-Laws (the "By-Laws"), copies
of which have been filed with the Commission.
COMMON STOCK
The Company has authorized 70,000,000 shares of capital stock, par value
$1.25 per share ("Common Stock"). As of November 30, 1997, there were 26,284,093
shares of Common Stock outstanding. Holders of Common Stock are entitled to such
dividends as may be declared by the Board of Directors out of funds legally
available therefor after payment of dividends on any outstanding Preferred Stock
and are entitled to one vote for each share of Common Stock held by them with
respect to all matters upon which they are entitled to vote.
PREFERRED STOCK
The Company has authorized 5,000,000 shares of Class A Preferred Stock, no
par value per share (the "Preferred Stock"). At present, there are no shares of
Preferred Stock outstanding. The Board of Directors of the Company, without
further action by the stockholders, is authorized to designate and issue in
series Preferred Stock and to fix as to any series the dividend rate, redemption
prices, preferences on dissolution, the terms of any sinking fund, conversion
rights, voting rights, and any other preferences or special rights and
qualifications. The Board of Directors of the Company has authorized 200,000
shares of Series One Preferred Stock for use in the Rights Agreement. See
"Rights Agreement."
Any Preferred Stock so issued may rank senior to the Common Stock with
respect to the payment of dividends or amounts upon liquidation, dissolution or
winding up, or both. In addition, any such shares of Preferred Stock may have
class or series voting rights. Issuances of Preferred Stock, while providing the
Company with flexibility in connection with general corporate purposes, may,
among other things, have an adverse effect on the rights of holders of Common
Stock. The Company has no present plans to issue any Preferred Stock.
COVENANT RESTRICTIONS
In connection with the acquisition of Greenfield, the Company, on November
17, 1997, entered into a bank credit facility with BankBoston, N.A., Deutsche
Bank AG, New York Branch, Mellon Bank, N.A. and PNC Bank, National Association
(the "New Bank Credit Facility"). The Company's New Bank Credit Facility
contains financial and operating covenants, including restrictions on the
ability of the Company to, among other things, incur additional debt, make
advances and investments, create, incur or permit the existence of certain
liens, make loans or guarantees and requires the Company to achieve and maintain
certain financial ratios, including minimum net worth, maximum leverage ratio
and minimum fixed charge coverage ratio.
Securities issued by the Company in the future, including the Debt
Securities and future credit agreements, may contain various restrictive
covenants similar or in addition to the covenants above described.
CERTAIN CHARTER AND BY-LAW PROVISIONS
Certain provisions of the Restated Articles and By-Laws could have an
anti-takeover effect. These provisions are intended to enhance the likelihood of
continuity and stability in the composition of the Company's Board of Directors
and in the policies formulated by the Board and to discourage an unsolicited
takeover of the Company if the Board determines that such takeover is not in the
best interests of the Company and its shareholders. However, these provisions
could have the effect of discouraging certain attempts to acquire the Company or
remove incumbent management even if some or a majority of shareholders deemed
such an attempt to be in their best interests.
The provisions in the Restated Articles and By-Laws include: (i) the
classification of the Board of Directors into three classes; (ii) a procedure
which requires shareholders to nominate directors in advance of a meeting to
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elect such directors; and (iii) the authority to issue additional shares of
Common Stock or Preferred Stock without shareholder approval.
The Restated Articles also include a provision requiring a 75 percent
shareholder vote for certain mergers or other business combinations or
transactions with five percent shareholders; a provision requiring a 75 percent
shareholder vote to remove the entire Board, a class of the Board, any
individual member of the Board without cause, or to increase the size of the
Board to more than twelve members or decrease the size of the Board to fewer
than eight members; a provision requiring disinterested shareholder approval of
stock repurchases at a premium over market by the Company from certain four
percent Shareholders (as defined in the Restated Articles); and a provision
requiring a majority of disinterested shareholders to approve certain business
combinations involving a stockholder who beneficially owns more than 10 percent
of the voting power of the Company, unless certain minimum price, form of
consideration and procedural requirements are satisfied or the transaction is
approved by a majority of disinterested directors.
Pursuant to the Restated Articles, the Board of Directors is permitted to
consider the effects of a change in control on non-shareholder constituencies of
the Company, such as its employees, suppliers, creditors, customers and the
communities in which it operates. Pursuant to this provision, the Board may be
guided by factors in addition to price and other financial considerations.
PBCL Anti-Takeover Provisions. The Pennsylvania Business Corporation Law
(the "PBCL") contains a number of statutory "anti-takeover" provisions,
including Subchapters E, F, G and H of Chapter 25 and Section 2538 of the PBCL,
which apply automatically to a Pennsylvania registered corporation (usually a
public company) unless such corporation elects to opt-out as provided in such
provisions. The Company, as a Pennsylvania registered corporation, has elected
in its By-Laws to opt-out of certain of the anti-takeover provisions entirely,
namely Subchapters G and H.
The following descriptions are qualified in their entirety by reference to
such provisions of the PBCL:
Subchapter E (relating to control transactions) generally provides
that if any person or group acquires 20% or more of the voting power of a
covered corporation, the remaining shareholders may demand from such person
or group the fair value of their shares, including a proportionate amount
of any control premium.
Subchapter F (relating to business combinations) generally delays for
five years and imposes conditions upon "business combinations" between an
"interested shareholder" and the corporation. The term "business
combination" is defined broadly to include various transactions between a
corporation and an interested shareholder including mergers, sales or
leases of specified amounts of assets, liquidations, reclassifications and
issuances of specified amounts of additional shares of stock of the
corporation. An "interested shareholder" is defined generally as the
beneficial owner of at least 20% of a corporation's voting shares.
Section 2538 of the PBCL generally establishes certain shareholder
approval requirements with respect to specified transactions with
"interested shareholders."
TRANSFER AGENT AND REGISTRAR
ChaseMellon Shareholder Services, L.L.C. is the Transfer Agent and
Registrar for the Common Stock.
RIGHTS AGREEMENT
The Company has adopted a rights plan pursuant to which the Board of
Directors authorized and the Company distributed one preferred stock purchase
right (each a "right") for each outstanding share of Common Stock of the
Company. The terms of the rights are governed by a Rights Agreement between the
Company and Mellon Bank, N.A., as Rights Agent, dated as of October 25, 1990
(the "Rights Agreement"). The rights, which currently are automatically
transferred with the related shares of Common Stock and are not separately
transferable, will entitle the holder thereof to purchase one-hundredth of a
share of a new series of preferred stock of the Company at a price of $105
(subject to certain adjustments).
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Subject to certain restrictions, the rights become exercisable only if a
person or group of persons acquires or intends to make a tender offer for 20
percent or more of the Company's Common Stock. If any person acquires 20 percent
of the Common Stock, each right will entitle the shareholder to receive upon
exercise that number of shares of Common Stock having a market value of two
times the exercise price. If the Company is acquired in a merger or certain
other business combinations, each right then will entitle the shareholder to
purchase at the exercise price, that number of shares of the acquiring company
having a market value of two times the exercise price.
The rights will expire on November 2, 2000, and are subject to redemption
in certain circumstances by the Company at a redemption price of $0.01 per
right.
The foregoing summary description of the Rights Agreement does not purport
to be complete and is qualified in its entirety by reference to the Rights
Agreement, a copy of which has been filed with the Commission as an exhibit in
the Registration Statement of which this Prospectus forms a part. For a more
detailed description of the Rights Agreement, see the Company's Form 8-A filed
with the Commission with respect to the rights and incorporated by reference
into this Prospectus.
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
The Company may issue Stock Purchase Contracts, including contracts
obligating holders to purchase from the Company, and the Company to sell to the
holders, a specified number of shares of Common Stock or Preferred Stock at a
future date or dates. The consideration per share of Preferred Stock or Common
Stock may be fixed at the time the Stock Purchase Contracts are issued or may be
determined by reference to a specific formula set forth in the Stock Purchase
Contracts. The Stock Purchase Contracts may be issued separately or as Stock
Purchase Units consisting of a Stock Purchase Contract and Preferred Securities
or debt obligations of third parties, including U.S. Treasury securities,
securing the holders' obligations to purchase the Common Stock under the Stock
Purchase Contracts. The Stock Purchase Contracts may require the Company to make
periodic payments to the holders of the Stock Purchase Units or vice versa, and
such payments may be unsecured or prefunded on some basis. The Stock Purchase
Contracts may require holders to secure their obligations thereunder in a
specified manner.
The applicable Prospectus Supplement will describe the terms of any Stock
Purchase Contracts or Stock Purchase Units. The description in the applicable
Prospectus Supplement will not necessarily be complete, and reference will be
made to the Stock Purchase Contracts, and, if applicable, collateral
arrangements and depositary arrangements, relating to such Stock Purchase
Contracts or Stock Purchase Units.
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BOOK ENTRY ISSUANCE
Unless otherwise specified in the applicable Prospectus Supplement, DTC
will act as depositary for Securities issued in the form of Global Securities.
Such Securities will be issued only as fully-registered securities registered in
the name of Cede & Co. (DTC's nominee). One or more fully-registered Global
Securities will be issued for such Securities representing in the aggregate the
total number of such Securities, and will be deposited with or on behalf of DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock Exchange,
the American Stock Exchange and the National Association of Securities Dealers,
Inc. Access to the DTC system is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or maintain
custodial relationships with Direct Participants, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants are
on file with the Commission.
Purchases of Securities within the DTC system must be made by or through
Direct Participants, which will receive a credit for such Securities on DTC's
records. The ownership interest of each actual purchaser of each Security
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchases, but Beneficial Owners are expected to receive
written confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participants through
which the Beneficial Owners purchased Securities. Transfers of ownership
interests in Securities issued in the form of Global Securities are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in such Securities, except in the event that use of
the book-entry system for such Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Securities
issued in the form of Global Securities. DTC's records reflect only the identity
of the Direct Participants to whose accounts such Securities are credited, which
may or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. as the registered holder of
Securities issued in the form of Global Securities. If less than all of a series
of such Securities are being redeemed, DTC's current practice is to determine by
lot the amount of the interest of each Direct Participant to be redeemed.
Although voting with respect to Securities issued in the form of Global
Securities is limited to the holders of record of such Securities, in those
instances in which a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to such Securities. Under its usual procedures, DTC
would mail an omnibus proxy (the "Omnibus Proxy") to the issuer of such
Securities as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts such Securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Payments in respect of Securities issued in the form of Global Securities
will be made by the issuer of such Securities to DTC. DTC's practice is to
credit Direct Participants' accounts on the relevant payment date in
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<PAGE> 47
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participant and not of DTC, the Institutional Trustee, either Trust or the
Company, subject to any statutory or regulatory requirements as may be in effect
from time to time. Payments to DTC are the responsibility of the issuer of the
applicable Securities, disbursement of such payments to Direct Participants is
the responsibility of DTC, and disbursements of such payments to the Beneficial
Owners is the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as depositary with respect to
any Securities at any time by giving reasonable notice to the issuer of such
Securities. In the event that a successor depositary is not obtained, individual
Security certificates representing such Securities are required to be printed
and delivered. The Company, at its option, may decide to discontinue use of the
system of book-entry transfers through DTC (or a successor depositary).
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Trust and the Company believe to be
accurate, but the Trust and the Company assume no responsibility for the
accuracy thereof. Neither the Trust nor the Company has any responsibility for
the performance by DTC or its Participants of their respective obligations as
described herein or under the rules and procedures governing their respective
operations.
PLAN OF DISTRIBUTION
Any of the Securities being offered hereby may be sold in any one or more
of the following ways from time to time: (i) through agents; (ii) to or through
underwriters; (iii) through dealers; and (iv) directly by the Company or, in the
case of Preferred Securities, by the Trust to purchasers.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices.
Offers to purchase Securities may be solicited by agents designated by the
Company from time to time. Any such agent involved in the offer or sale of the
Securities in respect of which this Prospectus is delivered will be named, and
any commissions payable by the Company or the Trust to such agent will be set
forth, in the applicable Prospectus Supplement. Unless otherwise indicated in
such Prospectus Supplement, any such agent will be acting on a reasonable best
efforts basis for the period of its appointment. Any such agent may be deemed to
be an underwriter, as that term is defined in the Securities Act, of the
Securities so offered and sold.
If Securities are sold by means of an underwritten offering, the Company
and, in the case of an offering of Preferred Securities, the Trust will execute
an underwriting agreement with an underwriter or underwriters at the time an
agreement for such sale is reached, and the names of the specific managing
underwriter or underwriters, as well as any other underwriters, the respective
amounts underwritten and the terms of the transaction, including commissions,
discounts and any other compensation of the underwriters and dealers, if any,
will be set forth in the applicable Prospectus Supplement which will be used by
the underwriters to make resales of the Securities in respect of which this
Prospectus is being delivered to the public. If underwriters are utilized in the
sale of any Securities in respect of which this Prospectus is being delivered,
such Securities will be acquired by the underwriters for their own account and
may be resold from time to time in one or more transactions, including
negotiated transactions, at fixed public offering prices or at varying prices
determined by the underwriters and the Company or the Trust, as applicable, at
the time of sale. Securities may be offered to the public either through
underwriting syndicates represented by managing underwriters or directly by one
or more underwriters. If any underwriter or underwriters are utilized in the
sale of Securities, unless otherwise indicated in the applicable Prospectus
Supplement, the underwriting agreement will provide that the obligations of the
underwriters are subject to certain conditions precedent and that the
underwriters with respect to a sale of such Securities will be obligated to
purchase all such Securities if any are purchased.
The Company or the Trust, as applicable, may grant to the underwriters
options to purchase additional Securities, to cover over-allotments, if any, at
the initial public offering price (with additional underwriting
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<PAGE> 48
commissions or discounts), as may be set forth in the Prospectus Supplement
relating thereto. If the Company or the Trust, as applicable, grants any
over-allotment option, the terms of such over-allotment option will be set forth
in the Prospectus Supplement for such Securities.
If a dealer is utilized in the sale of the Securities in respect of which
this Prospectus is delivered, the Company or the Trust, as applicable, will sell
such Securities to the dealer as principal. The dealer may then resell such
Securities to the public at varying prices to be determined by such dealer at
the time of resale. Any such dealer may be deemed to be an underwriter, as such
term is defined in the Securities Act, of the Securities so offered and sold.
The name of the dealer and the terms of the transaction will be set forth in the
Prospectus Supplement relating thereto.
Offers to purchase Securities may be solicited directly by the Company or
the Trust, as applicable, and the sale thereof may be made by the Company or the
Trust directly to institutional investors or others, who may be deemed to be
underwriters within the meaning of the Securities Act with respect to any resale
thereof. The terms of any such sales will be described in the Prospectus
Supplement relating thereto.
Securities may also be offered and sold, if so indicated in the applicable
Prospectus Supplement, in connection with a remarketing upon their purchase, in
accordance with a redemption or repayment pursuant to their terms, or otherwise,
by one or more firms ("remarketing firms"), acting as principals for their own
accounts or as agents for the Company or the Trust, as applicable. Any
remarketing firm will be identified and the terms of its agreement, if any, with
the Company or the Trust and its compensation will be described in the
applicable Prospectus Supplement. Remarketing firms may be deemed to be
underwriters, as that term is defined in the Securities Act, in connection with
the Securities remarketed thereby.
If so indicated in the applicable Prospectus Supplement, the Company or the
Trust, as applicable, may authorize agents and underwriters to solicit offers by
certain institutions to purchase Securities from the Company or the Trust at the
public offering price set forth in the applicable Prospectus Supplement pursuant
to delayed delivery contracts providing for payment and delivery on the date or
dates stated in the applicable Prospectus Supplement. Such delayed delivery
contracts will be subject to only those conditions set forth in the applicable
Prospectus Supplement. A commission indicated in the applicable Prospectus
Supplement will be paid to underwriters and agents soliciting purchases of
Securities pursuant to delayed delivery contracts accepted by the Company or the
Trust, as applicable.
Agents, underwriters, dealers and remarketing firms may be entitled under
relevant agreements with the Company or the Trust, as applicable, to
indemnification by the Company or the Trust, as applicable, against certain
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which such agents, underwriters, dealers and
remarketing firms may be required to make in respect thereof.
Each series of Securities will be a new issue and, other than the Common
Stock, which is listed on the NYSE, will have no established trading market. The
Company may elect to list any series of Securities on an exchange, and in the
case of the Common Stock, except as set forth in the applicable Prospectus
Supplement, on any additional exchange, but, unless otherwise specified in the
applicable Prospectus Supplement, the Company shall not be obligated to do so.
No assurance can be given as to the liquidity of the trading market for any of
the Securities.
Agents, underwriters, dealers and remarketing firms may be customers of,
engage in transactions with, or perform services for, the Company and its
subsidiaries in the ordinary course of business.
LEGAL MATTERS
The validity of the Securities will be passed upon by Buchanan Ingersoll
Professional Corporation, Pittsburgh, Pennsylvania. William R. Newlin, Chairman
of the Board of the Company, is a shareholder in Buchanan Ingersoll Professional
Corporation. As of July 30, 1997, Mr. Newlin owned 24,385 shares of Common
Stock, stock credits representing the right to acquire 9,260 shares of Common
Stock pursuant to the Company's directors deferred fee plan, 20,000 shares of
JLK common stock and held options to acquire 1,500 shares of Common Stock and
15,000 shares of JLK common stock. Except as provided in the applicable
Prospectus
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<PAGE> 49
Supplement, if the Securities are underwritten, the validity of the Securities
will be passed upon for the underwriters by Simpson Thacher & Bartlett, New
York, New York. Simpson Thacher & Bartlett will rely on Buchanan Ingersoll
Professional Corporation with respect to matters of Pennsylvania law.
EXPERTS
The consolidated financial statements of the Company as of June 30, 1996
and June 30, 1997 and for each of the three years in the period ended June 30,
1997, incorporated in this Registration Statement by reference to the Form 10-K
for the fiscal year ended June 30, 1997, of which this Prospectus is a part,
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports. The consolidated financial statements of Greenfield as
of December 31, 1995 and December 31, 1996 and for each of the three years in
the period ended December 31, 1996, incorporated in this Registration Statement
by reference to the Form 8-K dated November 20, 1997, as amended, have been so
included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS. IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY KENNAMETAL OR THE UNDERWRITER. NEITHER THIS PROSPECTUS
SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS CONSTITUTES AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY COMMON STOCK IN ANY JURISDICTION WHERE, OR TO
ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUPPLEMENT
The Company............................. S-3
Recent Developments..................... S-3
Use of Proceeds......................... S-5
Price Range of Common Stock and Dividend
Policy................................ S-5
Capitalization.......................... S-6
Selected Condensed Consolidated
Financial Data........................ S-7
Description of Common Stock............. S-8
Certain U.S. Tax Consequences to
Non-U.S. Holders...................... S-10
Underwriting............................ S-12
Legal Matters........................... S-13
Experts................................. S-13
PROSPECTUS
Available Information................... 4
Incorporation of Certain Documents by
Reference............................. 4
Kennametal Inc.......................... 5
The Trust............................... 5
Ratio of Earnings to Fixed Charges...... 6
Use of Proceeds......................... 6
Description of Debt Securities.......... 7
Description of Preferred Securities..... 15
Description of the Guarantee............ 26
Relationship Among the Preferred
Securities, the Trust Debentures and
the Guarantee......................... 29
Description of Common Stock............. 30
Description of Stock Purchase Contracts
and Stock Purchase Units.............. 32
Book Entry Issuance..................... 33
Plan of Distribution.................... 34
Legal Matters........................... 35
Experts................................. 36
</TABLE>
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3,000,000 SHARES
KENNAMETAL LOGO
KENNAMETAL INC.
COMMON STOCK
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PROSPECTUS SUPPLEMENT
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CIBC OPPENHEIMER LOGO
MARCH 17, 1998
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