Coltec Industries Inc
430 Park Avenue
New York, NY 10022
212/940-0400
April 13, 1995
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Coltec Industries Inc
Registration Statement on Form S-3
(No. 33-56139)
Dear Sirs:
On behalf of Coltec Industries Inc, a Pennsylvania corporation (the
"Company"), transmitted herewith for filing under
the Securities Act of 1933, as amended, and pursuant to Rule 424(b)(3) of the
General Rules and Regulations of the Securities and Exchange Commission is the
Company's final Prospectus, dated April 12, 1995, relating to the above
captioned registration statement.
Very truly yours,
DONALD E. O'KEEFE
Donald E. O'Keefe
<PAGE>
PROSPECTUS Filed Pursuant
to Rule 424(b)(3)
Registration No.
33-56139
1,010,391 Shares
Coltec Industries Inc
Common Stock
_____________
All the shares of Common Stock (the "Shares") offered hereby are
being offered by the Selling Stockholder. See "Selling Stock
holder". Coltec Industries Inc ("Coltec") will not receive any
proceeds from the sale of the Shares being offered hereby. The
Common Stock is traded on the New York Stock Exchange (the "NYSE")
and the Pacific Stock Exchange (the "PSE") under the symbol "COT".
On April 7, 1995, the last reported sale price of the Common Stock
on the New York Stock Exchange was $17-1/8 per share.
The Shares being registered hereby may be sold from time to time by
the Selling Stockholder, or by pledgees, transferees or other
successors in interest, on the NYSE, the PSE (or such other
exchange on which the Shares are listed at the time of sale) in the
over-the-counter market or otherwise, at prices and at terms then
prevailing or at prices related to the then current market price,
or in privately negotiated transactions.
____________
INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH UNDER
"CERTAIN SIGNIFICANT CONSIDERATIONS".
____________
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.
No person is authorized in connection with any offering made
hereby to give any information or to make any representation not
contained in this Prospectus and, if given or made, such informa-
tion or representation must not be relied upon as having been
authorized by Coltec or by the Selling Stockholder. This Prospec-
tus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the shares of Common Stock
offered hereby, nor does it constitute an offer to sell or
solicitation of an offer to buy any of the securities offered
hereby to any person in any jurisdiction in which it is unlawful to
make such an offer or solicitation to such person. Neither the
delivery of this Prospectus nor any sale made hereunder shall under
any circumstances create any implication that the information
contained herein is correct as of any time subsequent to the date
hereof.
No action has been or will be taken in any jurisdiction by
Coltec or the Selling Stockholder that would permit a public
offering of the Common Stock or possession or distribution of this
Prospectus in any jurisdiction where action for that purpose is
required, other than in the United States. Persons into whose
possession this Prospectus comes are required by Coltec and the
Selling Stockholder to inform themselves about and to observe any
restrictions as to the offering of the Common Stock and the
distribution of this Prospectus.
The date of this Prospectus is April 12, 1995.
_______________
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Coltec's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, filed with the Securities and Exchange Commis-
sion (File No. 1-7568) by Coltec pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), is hereby
incorporated by reference in this Prospectus.
In addition, all documents filed by Coltec pursuant to Section
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 (the "Offering") shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing of
such documents. Any statement contained in a document 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 incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute
a part of this Prospectus.
Copies of all documents which are incorporated by reference
(not including the exhibits to such information, unless such
exhibits are specifically incorporated by reference in such
information) will be provided without charge to each person,
including any beneficial owner, to whom this Prospectus is
delivered, upon written or oral request. Requests should be
directed to Coltec, Attention: Secretary, 430 Park Avenue, New
York, New York 10022-3597; telephone (212) 940-0400.
ADDITIONAL INFORMATION
Coltec has filed with the Commission a Registration Statement
(which term shall include any amendments thereto) on Form S-3 under
the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the securities being registered hereby. This Prospectus
does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission and to which reference
is hereby made. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to
are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference.
Coltec is subject to the informational requirements of the
Exchange Act and in accordance therewith files reports and other
information with the Commission. The Registration Statement and
the exhibits thereto, as well as such reports, proxy statements and
other information filed by Coltec with the Commission, may be
inspected and copied at the public reference facilities of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices at 7 World Trade Center, 13th
floor, New York, New York 10048 and at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained from the public reference
section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. Such reports and other information
may also be inspected at the offices of the NYSE, 20 Broad Street,
New York, New York 10005 and the PSE, 301 Pine Street, Suite 1104,
San Francisco, California 94104.
THE COMPANY
Coltec and its consolidated subsidiaries (together herein
referred to as "Coltec") manufacture and sell a diversified range
of highly-engineered aerospace, automotive and industrial products
in the United States and, to a lesser extent, abroad. Coltec's
operations are conducted through three principal segments:
Aerospace/Government, Automotive and Industrial. Through its
Aerospace/Government segment, Coltec is a leading manufacturer of
landing gear systems, engine fuel controls, turbine blades, fuel
injectors, nozzles and related components for commercial and
military aircraft, and also produces high-horsepower diesel engines
for naval ships and diesel, gas and dual-fuel engines for electric
power plants. Coltec's Automotive segment manufactures and markets
a selected line of high value-added products, including fuel
injection system assemblies and components, transmission controls,
suspension controls, emission control air pumps, oil pumps and
seals for original equipment manufacturers and the replacement
parts market. Through its Garlock Inc subsidiary ("Garlock"),
Coltec is a leading manufacturer of industrial seals, gaskets,
packing products and self-lubricating bearings and, through its
Delavan-Delta, Inc. subsidiary, also produces technologically
advanced spray nozzles for agricultural, home heating and industri-
al applications. Coltec also produces air compressors for
manufacturers. Coltec's Aerospace/Government, Automotive and
Industrial segments contributed approximately 32%, 38% and 30%,
respectively, of Coltec's total sales in 1994.
CERTAIN SIGNIFICANT CONSIDERATIONS
Leveraged Position and Debt Service
As a result of a recapitalization of Coltec completed in 1986
(the "1986 Recapitalization") and the acquisition of Coltec by
Coltec Holdings Inc. ("Holdings") in 1988, Coltec is highly
leveraged. Although a recapitalization in 1992 (the "1992
Recapitalization") reduced the deficit in shareholders' equity and
reduced indebtedness and interest expense, Coltec continues to have
substantial indebtedness and negative shareholders' equity. As of
December 31, 1994, Coltec's total indebtedness was $970.1 million.
At such date, Coltec's total assets were $847.5 million and its
shareholders' equity was a deficit of $525.6 million. Coltec's
negative shareholders' equity is due to the 1986 Recapitalization
and the retirement of an intercompany note in the principal amount
of $846.3 million distributed by Coltec to Holdings.
Although the 1992 Recapitalization and the refinancing of its
credit agreement (the "1992 Credit Agreement", and as refinanced
the "1994 Credit Agreement") in January 1994 have improved Coltec's
operating and financing flexibility, Coltec's remaining substantial
indebtedness could limit its ability to respond to changing
business and economic conditions. Insofar as changing business and
economic conditions may affect the financial condition and
financing requirements of Coltec, they could impose significant
risks to the holders of Common Stock of Coltec. Furthermore, the
ability of Coltec to satisfy its obligations and to service, repay
or refinance its debt will be dependent upon the future performance
of Coltec, which will be subject to prevailing economic conditions
and to financial, business and other factors, including factors
beyond the control of Coltec which affect its business and
operations.
The 1994 Credit Agreement imposes significant operating and
financial restrictions on Coltec. Such restrictions affect, and in
many respects significantly limit or prohibit, among other things,
the ability of Coltec to incur additional indebtedness, create
liens, sell assets, engage in mergers and acquisitions, make
certain capital expenditures or pay dividends. The indentures
under which Coltec's 9-3/4% Senior Notes Due 1999, 9-3/4% Senior
Notes Due 2000, 11-1/4% Debentures Due 1996-2015 and 10-1/4% Senior
Subordinated Notes Due 2002 were issued contain certain similar
restrictive covenants. These restrictions, in combination with the
highly leveraged nature of Coltec, could limit the ability of
Coltec to effect future financings or otherwise may restrict
corporate activities. See "Description of Certain Indebtedness".
Borrowings under the 1994 Credit Agreement bear interest at
fluctuating rates. Increases in interest rates with respect to
such borrowings could adversely affect Coltec's financial condi-
tion.
Cyclical Business and Competition; Litigation
Coltec operates in markets that are cyclical in nature and
highly competitive, and Coltec's results of operations are affected
by changes in its customers' markets, including changes that affect
government defense contracts and commercial aircraft and automobile
production. Currently, defense spending and commercial aircraft
production schedules are at reduced levels and have adversely
affected sales in the Aerospace/Government segment. Many of
Coltec's competitors have substantially greater financial resources
than Coltec.
Certain of the contracts under which Coltec is a supplier,
including those with commercial aviation manufacturers and the
United States government, contain provisions allowing for early
termination, including termination due to lack of congressional
appropriation or for convenience. In addition, substantially all
of Coltec's government contracts are fixed-price contracts under
which Coltec agrees to perform the work for a fixed price and,
accordingly, realizes all the benefit or detriment occasioned by
decreased or increased costs of performing the contracts. From
time to time, Coltec accepts fixed-price contracts for products
that have not been previously developed. In such cases, Coltec is
subject to the risk of delays and cost overruns.
From time to time the business operations of Coltec result in
product liability actions, including asbestos litigation. See
"Legal Proceedings" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in Coltec's Form 10-
K for the fiscal year ended December 31, 1994.
Anti-Takeover Effects of Provisions of the Restated Articles of
Incorporation and By-laws
Certain provisions of the Restated Articles of Incorporation
and By-laws of Coltec may be deemed to have anti-takeover effects
and may discourage or make more difficult a takeover attempt that
a shareholder might consider in its best interest. Such provisions
may also adversely affect prevailing market prices for the Common
Stock. These provisions, among other things: (i) provide that
only the Board of Directors or the Chairman of the Board of
Directors of Coltec may call special meetings of the shareholders;
(ii) eliminate the ability of the shareholders to take any action
without a meeting; and (iii) establish certain advance notice
procedures for nomination of candidates for election as directors
and for shareholder proposals to be considered at shareholders'
meetings. See "Description of Capital Stock".
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is traded on the NYSE and PSE. The following
table sets forth the high and low sales prices (expressed as
dollars per common share) of the Common Stock as reported on the
NYSE Composite Tape for the periods indicated.
High Low
Fiscal 1993
First Quarter............................. $19-1/4 $16-1/4
Second Quarter............................ 17-1/2 14-7/8
Third Quarter............................. 18 15-1/4
Fourth Quarter............................ 19-3/8 16
<PAGE>
Fiscal 1994
First Quarter............................. 21-7/8 18-3/4
Second Quarter............................ 20-1/2 18-1/4
Third Quarter............................. 19-7/8 18-1/8
Fourth Quarter ........................... 19 16
Fiscal 1995
First Quarter ............................ 17-3/8 15-3/8
At April 6, 1995, there were 503 holders of record of the
Common Stock.
Coltec does not currently intend to pay cash dividends on the
Common Stock. Coltec currently intends to retain earnings for
support of its working capital, repayment of indebtedness, capital
expenditures and other general corporate purposes. The 1994 Credit
Agreement and certain of the indentures governing issues of
Coltec's long-term debt limit the payment of cash dividends on the
Common Stock. See "Description of Certain Indebtedness". Subject
to such restrictions, any future determination to pay cash
dividends will be dependent upon Coltec's results of operations,
financial condition, contractual restrictions and other factors
deemed relevant by the Board of Directors.
USE OF PROCEEDS
Coltec will not receive any proceeds from the sale by the
Selling Stockholder of the Shares offered hereby. The aggregate
proceeds to the Selling Stockholder from the sale of the Shares
will be the purchase price of the Shares sold, less the aggregate
agents' commissions and underwriters' discounts, if any, and any
other expenses of issuance and distribution not borne by Coltec.
PLAN OF DISTRIBUTION
All Shares covered by this Prospectus are being offered for
the account of the Selling Stockholder. Consequently, Coltec will
not receive any of the proceeds from the sale of the Shares offered
hereby.
The Shares may be sold from time to time by the Selling
Stockholder, or by his pledgees, transferees or other successors in
interest, on the NYSE or the PSE (or such other exchange on which
the Shares are listed at the time of sale), in the over-the-counter
market or otherwise, at prices and on terms then prevailing or at
prices related to the then current market price, or in privately
negotiated transactions. The Shares may be sold by various
methods, including, but not limited to, one or more of the
following: (a) directly in a privately negotiated transaction, (b)
a block trade in which the broker or dealer so engaged will attempt
to sell Shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction, (c) purchased
by a broker or dealer as principal and resold by the broker or
dealer for its own account pursuant to this Prospectus, (d) a
transaction on the NYSE or PSE in accordance with the rules of such
exchanges, and (e) ordinary brokers transactions and transactions
in which the broker solicits the purchasers. In effecting sales,
brokers or dealers engaged by the Selling Stockholder may arrange
for other brokers or dealers to participate. Alternatively, the
Selling Stockholder may from time to time offer the Shares through
underwriters, dealers or agents who may receive compensation in the
form of underwriting discounts, concessions, or commissions from
the Selling Stockholder or purchasers of Shares for whom they act
as agents. In addition, any of the Shares that qualify for sale
pursuant to Rule 144 under the Securities Act, or otherwise
pursuant to an applicable exemption under the Securities Act, may
be sold other than pursuant to this Prospectus.
The Selling Stockholder and any such underwriters, dealers or
agents that participate in the distribution of Shares may be deemed
to be underwriters, and any profit on the sale of the Shares by
them and any discounts, commissions or concessions received by them
may be deemed to be underwriting discounts and commissions under
the Securities Act. The Shares may by sold from time to time in
one or more transactions at a fixed offering price, which may be
changed, or at varying prices determined at the time of sale or at
negotiated prices. Such prices will be determined by the Selling
Stockholder or by an agreement between the Selling Stockholder and
underwriters or dealers. Brokers or dealers acting in connection
with the sale of the Shares contemplated by this Prospectus may
receive commissions in connection therewith.
At the time a particular offer of Shares is made, to the
extent required, a supplement to this Prospectus will be distribut-
ed that will identify and set forth the aggregate amount of Shares
being offered and the terms of the offering, including the name or
names of any underwriters, dealers or agents, the purchase price
paid by any underwriters for Shares purchased from the Selling
Stockholder, any discounts, commissions and other items constitut-
ing compensation from the Selling Stockholder or Coltec and any
discounts, commissions or concessions allowed or reallowed or paid
to dealers, including the proposed selling price to the public.
Such supplement to this Prospectus and, if necessary, a post-
effective amendment to the Registration Statement of which this
Prospectus is a part, will be filed with the Commission to reflect
the disclosure of additional information with respect to the
distribution of the Shares. Coltec will pay all the expenses
incident to the registration, and certain other expenses related to
this Offering of the Shares, other than underwriting commissions
and discounts, normal commission expenses and brokerage fees,
applicable transfer taxes and attorneys' fees of Selling Stock-
holder's counsel.
The Selling Stockholder has entered into an indemnification
agreement with Coltec pursuant to which Coltec will be indemnified
against failure by the Selling Stockholder to deliver a Prospectus
if required, as well as against certain civil liabilities,
including liabilities under the Securities Act or the Exchange Act
incurred in connection with any untrue (or alleged untrue)
statement of a material fact or omission of a material fact in this
Registration Statement to the extent such liability relates to
information supplied by the Selling Stockholder for inclusion in
the Registration Statement or Prospectus.
Under applicable rules and regulations under the Exchange Act,
any person engaged in a distribution of the Shares may not
simultaneously engage in market-making activities with respect to
the Shares for a period of nine business days prior to the
commencement of such distribution. In addition and without
limiting the foregoing, the Selling Stockholder and any person
participating in the distribution of the Shares will be subject to
applicable provisions of the Exchange Act and the rules and
regulations thereunder, including without limitation, Rules 10b-2,
10b-6 and 10b-7, which provisions may limit the timing of purchases
and sales of the Shares by the Selling Stockholder. All of the
foregoing may affect the marketability of the Shares.
In order to comply with certain states' securities laws, if
applicable, the Shares will be sold in such jurisdictions only
through registered or licensed brokers or dealers. In certain
states the Shares may not be sold unless the Shares have been
registered or qualify for sale in such state, or unless an
exemption from registration or qualification is available and
complied with.
There can be no assurance that the Selling Stockholder will
sell any or all of the Shares offered by him hereby.
SELLING STOCKHOLDER
Mr. David I. Margolis, the Selling Stockholder referred to
herein, retired from Coltec on February 1, 1995, but continues as
a member of the Board of Directors and as Chairman of the Executive
Committee. During the three years prior to January 31, 1995, he
was Chairman of the Board and Chief Executive Officer of Coltec.
Mr. Margolis has advised Coltec that as of the date of the
Prospectus he beneficially owns 1,194,041 shares of Coltec common
stock, including 180,000 shares that may be acquired from Coltec
within 60 days upon the exercise of options for common stock (an
additional 120,000 shares become exercisable at future dates) and
3,650 shares (as of January 31, 1995) credited to his individual
account in the Retirement Savings Plan for Salaried Employees. The
1,194,041 shares represent 1.7% of the outstanding shares of Coltec
common stock outstanding on March 1, 1995.
1,010,391 shares are being offered hereby and, assuming all
are sold, he will own 183,650 shares, consisting of the 180,000
shares and 3,650 shares referred to above. Because the Selling
Stockholder may sell all or a part of the Shares he holds pursuant
to this Prospectus and the fact that this Offering is not being
underwritten on a firm commitment basis, no estimate can be given
as to the number of Shares that will be held by the Selling
Stockholder upon termination of this Offering. See "Plan of
Distribution". The Common Stock offered by this Prospectus may be
offered from time to time in whole or in part by the Selling
Stockholder or by his transferees, as to whom applicable informa-
tion will, to the extent required, be set forth in a prospectus
supplement.
DESCRIPTION OF CAPITAL STOCK
Coltec's authorized capital stock consists of 100 million
shares of Common Stock, par value $.01 per share, and 2.5 million
shares of preferred stock, par value $.01 per share ("Preferred
Stock"). The following summary description of the capital stock of
Coltec does not purport to be complete and is qualified in its
entirety by reference to Coltec's Restated Articles of Incorpora-
tion, a copy of which was filed as an exhibit to Coltec's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994,
which is incorporated by reference in this Prospectus.
Common Stock
Subject to the prior rights of any series of Preferred Stock
that may from time to time be authorized and outstanding, holders
of Common Stock are entitled to receive dividends out of funds
legally available therefor when, as and if declared by the Board of
Directors and to receive pro rata the net assets of Coltec legally
available for distribution upon liquidation or dissolution.
Holders of Common Stock are entitled to one vote for each share of
Common Stock held on each matter submitted to a vote of sharehold-
ers, including the election of directors. All outstanding shares
of Common Stock are fully paid and nonassessable.
Preferred Stock
The Board of Directors has the authority to issue the
Preferred Stock in one or more classes or series and to fix the
voting powers, preferences and relative participating, optional or
other special rights, without any further vote or action by the
shareholders. The ability of the Board of Directors to issue
Preferred Stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could have the
effect of making it more difficult for a third party to acquire, or
of discouraging a third party from acquiring, a majority of the
outstanding voting stock of Coltec, Coltec has no current plans to
issue any of the Preferred Stock.
Certain Provisions of the Restated Articles of Incorporation and
By-laws
The Restated Articles of Incorporation provide that any action
required or permitted to be taken by the shareholders of Coltec may
be effected only at an annual or special meeting of shareholders,
and prohibits shareholders' action by written consent in lieu of a
meeting. Coltec's By-laws provide that special meetings of
shareholders may be called only by the chairman or by a majority of
the members of the Board of Directors. Shareholders are not
permitted to call a special meeting or to require that the Board of
Directors call a special meeting of shareholders.
Coltec's By-laws establish an advance notice procedure for the
nomination, other than by or at the direction of the Board of
Directors or a committee thereof, of candidates for election as
directors as well as for other shareholder proposals to be
considered at shareholders' meetings. Notice of shareholder
proposals and director nominations must be timely given in writing
to the Secretary of Coltec prior to the meeting at which the
matters are to be acted upon or directors are to be elected. The
notice must contain certain information specified in Coltec's By-
laws.
Limitation of Directors' Liability and Indemnification
The Restated Articles of Incorporation provide for indemnifi-
cation of officers and directors of Coltec to the extent permitted
by Pennsylvania law, which generally permits indemnification for
actions taken by officers or directors as representatives of Coltec
in good faith and in a manner reasonably believed to be in or not
opposed to Coltec's best interests, subject to certain limitations.
In accordance with Pennsylvania law, the Restated Articles of
Incorporation and Coltec's By-laws contain provisions eliminating
the personal liability of directors to Coltec and its shareholders
for monetary damages for breaches of their fiduciary duties, except
for breach of a director's duty to act with statutorily defined due
care and for a breach which constitutes self-dealing, willful
misconduct or recklessness. The applicable provisions of Pennsyl-
vania law pertain only to breaches of duty by directors as
directors and not in any other corporate capacity, including as
officers. As a result of the inclusion of such provisions,
shareholders may be unable to recover monetary damages against
directors for actions taken by them which constitute negligence or
gross negligence or which are in violation of their fiduciary
duties, although it may be possible to obtain injunctive or other
equitable relief with respect to such actions. If equitable
remedies are found not to be available to shareholders in any
particular case, shareholders may not have any effective remedy
against the challenged conduct.
Statutory Provisions
On April 27, 1990, the Pennsylvania Business Corporation Law
of 1988 (the "BCL") was amended, among other things, to protect
public companies from hostile takeover attempts. Set forth below
is a summary of significant anti-takeover provisions of the BCL.
Such provisions may delay, defer or prevent a takeover attempt that
a shareholder might consider to be in its best interest. As
indicated, and as permitted by the BCL, Coltec has elected not to
be governed by certain anti-takeover provisions.
Statutory Provisions Applicable to Coltec
Business Combinations (Subchapter 25-F). A public corporation
may not engage in any business combination with a 20% shareholder
for five years following the 20% acquisition unless: (a) the
combination or the purchase of the control shares was approved by
the board of directors before the date that the shareholder became
an interested shareholder or (b)(i) the combination is approved by
the holders of a majority of the shares not controlled by the
interested shareholder at a special meeting held not less than
three months after the shareholder acquired an 80% voting stake,
and the aggregate amount of the offer meets certain fair price
criteria or (ii) by unanimous vote. If the combination was not
previously approved, the 20% shareholder may effect a combination
after the five-year period only if the shareholder receives
approval from a majority of the shares not owned by the acquiror or
the aggregate amount of the offer meets certain fair price
criteria.
Fiduciary Obligations of Directors (Sections 1715 et al.). In
discharging their duties, directors may, in considering the best
interests of the corporation, consider (a) the effects of any
action upon any or all groups affected by such action, including
shareholders, employees, suppliers, customers and creditors of the
corporation, and communities in which the corporation is located,
(b) the short-term and long-term interests of the corporation,
including the possibility that these interests may be best served
by the corporation's continued independence, (c) the resources,
intent and conduct (past, stated and potential) of any person
seeking to acquire control and (d) all other pertinent factors.
Directors need not treat any corporate interest or interests of any
particular group affected by such action (e.g., shareholders) as
the dominant or controlling interest or factor.
Statutory Provisions Inapplicable to Coltec
Control Transactions (Subchapter 25-E). Any person who
acquires the direct or indirect power to control the vote of at
least 20% of the outstanding voting interests in a public corpora-
tion is required to pay any other shareholder who exercises his
rights under the BCL an amount equal to the fair value of the
voting shares held by such shareholder as of the date of the
transaction pursuant to which control of at least 20% voting
interest was obtained.
Control Share Acquisition (Subchapter 25-G). Subject to safe
harbors for certain acquiring persons, shareholder approval is
required before a person who acquires (or seeks to acquire)
ownership or voting power over "control shares" of a public
corporation may vote the control shares. Control shares are
defined in terms of crossing any one of three specified thresholds
of percentage ownership of voting power (20%, 33-1/3% or 50%). The
public corporation has the right to redeem the control shares (at
their market price at the time of redemption) if the acquiror fails
to obtain the approval of the remaining shareholders or fails to
complete the control transaction.
Disgorgement of Profits (Subchapter 25-H). Subject to safe
harbors for certain acquiring persons, disgorgement to the public
corporation is mandated for profits realized by a person or group
that (a) acquires stock from the public corporation itself or from
the shareholders within two years before or 18 months after the
person or group attempts to acquire 20% or more of a public
corporation's voting power, or publicly discloses that it is
seeking to acquire control of the public corporation and (b) then
sells that stock within 18 months after such an attempt or
disclosure.
Severance Pay (Subchapter 25-I). Severance payments must be
made to employees of public corporations who are terminated within
24 months after a control share acquisition approved by sharehold-
ers.
Labor Contracts (Subchapter 25-J). Labor contracts are
preserved after a control share acquisition approved by sharehold-
ers.
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summary of agreements governing the 1994 Credit
Agreement and certain other outstanding long-term indebtedness of
Coltec does not purport to be complete and is qualified in its
entirety by reference to the various agreements, copies of which
have been filed, or incorporated by reference, as exhibits to
Coltec's Annual Report of Form 10-K for the fiscal year ended
December 31, 1994, which is incorporated by reference in this
Prospectus. Capitalized terms used but not defined herein have the
meanings assigned to them in the various agreements described.
1994 Credit Agreement
Coltec has entered into the 1994 Credit Agreement among
Coltec, the various financial institutions named therein (the
"Lenders"), Credit Lyonnais New York Branch, the Bank of Montreal,
The Industrial Bank of Japan, Limited, New York Branch and The Bank
of Nova Scotia, as Co-Agents thereunder, and Bankers Trust Company,
as Administrative Agent thereunder, pursuant to which the Lenders
have agreed, subject to certain conditions, to provide up to $415
million of financing to Coltec under a revolving loan facility (the
"Revolving Loan Facility") from time to time until June 30, 1999.
The 1994 Credit Agreement also provides for the issuance of letters
of credit in an aggregate amount of up to $100 million under the
Revolving Loan Facility; provided that at no time shall the
aggregate principal amount of loans outstanding, together with the
aggregate face amount of letters of credit issued, under the
Revolving Loan Facility exceed $415 million.
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Prepayments and Commitment Reductions
The Revolving Loan Facility is subject to mandatory commitment
reductions and corresponding prepayments of $50 million on each of
January 11, 1997 and January 11, 1998. In addition, the 1994
Credit Agreement requires certain other mandatory commitment
reductions and corresponding prepayments from the net proceeds of
certain sales of assets and certain issuances of debt or equity
securities. The 1994 Credit Agreement also permits voluntary
prepayments and commitment reductions of the Revolving Loan
Facility from time to time.
Interest
Loans under the 1994 Credit Agreement bear interest at an
annual rate equal to, at Coltec's option, (a) the Base Rate (as
described below) or (b) the Eurodollar Rate (as described below)
plus 1.00%; provided that the Eurodollar Rate may be reduced from
time to time based on the achievement of specified ratios of
Coltec's EBIDTA to Interest Expense (as defined in the 1994 Credit
Agreement) and of certain ratings of Coltec's long-term unsecured
indebtedness by Standard & Poor's Rating Group and Moody's
Investors Service, Inc. Interest on Base Rate Loans is payable
quarterly and interest on Eurodollar Rate Loans is payable at the
end of the relevant interest period (but not less often than
quarterly). The default rate of interest for all Loans is equal to
the higher of (a) the Base Rate applicable to such Loans plus 2.25%
per annum and (b) the Eurodollar Rate applicable to such Loans plus
2.00% per annum. The "Base Rate" is the higher of (a) 1/2 of 1% in
excess of the Federal Reserve reported certificate of deposit rate
and (b) the rate that Bankers Trust Company announces as its prime
lending rate, as in effect from time to time. The "Eurodollar
Rate" is the average of the quotations for one, two, three or six-
month London Interbank Offered Rate offered to first class banks in
the New York interbank Eurodollar market by Bankers Trust Company,
adjusted for statutory reserves at all times.
Guarantees
Amounts owed under or in respect of the 1994 Credit Agreement
by Coltec are guaranteed by each of the material domestic subsid-
iaries of Coltec, whether now existing or hereafter acquired or
organized.
Security
All the obligations of Coltec under the 1994 Credit Agreement
and the other loan documents and under the interest rate protection
agreements of Coltec maintained with a Lender, and all the
obligations of the subsidiaries of Coltec guaranteeing the
obligations of Coltec thereunder, are secured by (a) all the common
stock of each current or future material domestic subsidiary of
Coltec and 66% of the common stock of any current or future foreign
subsidiary of Coltec that is owned by Coltec or any of its domestic
subsidiaries; (b) substantially all the inventory, machinery and
equipment, patents, trademarks and other personal property of
Coltec and its material domestic subsidiaries; and (c) certain real
estate and fixtures thereon owned by Coltec and its material
domestic subsidiaries.
Covenants
The 1994 Credit Agreement contains certain customary cove-
nants, including restrictive covenants that, subject to certain
exceptions, impose limitations on the ability of Coltec and its
subsidiaries to, among other things: (a) create or incur addition-
al indebtedness or contingent obligations; (b) create or incur
additional liens; (c) merge with other entities; (d) dispose of a
material portion of their assets or acquire all or substantially
all of the business or assets of other entities; (e) invest in or
make loans to other entities; (f) enter into certain real property
leases, operating leases or sale-leaseback transactions; (g) pay
dividends and redeem or repurchase capital stock; (h) engage in
certain transactions with affiliates; (i) pay, prepay, repurchase
or retire outstanding indebtedness; and (j) amend the terms of
certain indebtedness and other material agreements. The 1994
Credit Agreement also restricts the maximum amount of capital
expenditures that may be made by Coltec and its subsidiaries in any
fiscal year as follows: 1995--$55 million; 1996--$60 million;
1997--$65 million and 1998 and thereafter--$70 million; provided
that Coltec and its subsidiaries may use up to $25 million of any
amount permitted to be made and remaining unutilized from any
fiscal year in the immediately succeeding fiscal year. In
addition, the 1994 Credit Agreement includes financial covenants
requiring Coltec to maintain (a) a ratio of Consolidated Current
Assets to Consolidated Current Liabilities (in each case, as
defined in the 1994 Credit Agreement) of at least 1.25 to 1 at all
times and (b) an Interest Coverage Ratio (as defined in the 1994
Credit Agreement) of at least 2.50 to 1.
Events of Default
The 1994 Credit Agreement contains customary events of
default, including but not limited to: (a) nonpayment of princi-
pal, interest, fees or other amounts when due; (b) violation of
covenants; (c) failure of any representation or warranty to be true
in all material respects when made; (d) cross-default and cross-
acceleration; (e) bankruptcy events; (f) material judgments
rendered against Coltec; (g) violation of certain ERISA provisions;
(h) change of control; and (i) invalidity of any loan document or
security interest created thereunder.
9-3/4% Senior Notes Due 1999 and 9-3/4% Senior Notes Due 2000
The 9-3/4% Senior Notes Due 1999 (the "Senior Notes Due 1999")
were issued under an Indenture dated as of October 26, 1992 (the
"Senior Notes Due 1999 Indenture"), between Coltec and United
States Trust Company of New York, as Trustee. The Senior Notes Due
1999 are unsecured senior obligations of Coltec, mature on November
1, 1999, and bear interest at the rate of 9-3/4% per annum, payable
semiannually on May 1 and November 1 of each year. The 9-3/4%
Senior Notes Due 2000 (the "Senior Notes Due 2000") were issued
under an Indenture dated as of April 1, 1992 (the "Senior Notes Due
2000 Indenture"), between Coltec and United States Trust Company of
New York, as Trustee. The Senior Notes Due 2000 are unsecured
senior obligations of Coltec, mature on April 1, 2000, and bear
interest at the rate of 9-3/4% per annum, payable semiannually on
April 1 and October 1 of each year. Neither the Senior Notes Due
1999 nor the Senior Notes Due 2000 are redeemable prior to
maturity.
The Senior Notes Due 1999 Indenture and the Senior Notes Due
2000 Indenture each contain covenants that (a) limit, under certain
circumstances, the ability of Coltec and certain of its subsidiar-
ies to incur additional indebtedness and contingent obligations,
enter into sale-leaseback transactions or grant liens; (b) limit
the ability of Coltec and certain of its subsidiaries to redeem or
reacquire, prior to any scheduled maturity, repayment or sinking
fund payment, any indebtedness of Coltec that ranks pari passu with
or is subordinate in right of payment to the Senior Notes Due 1999
or Senior Notes Due 2000, as the case may be, which is scheduled to
mature on or after the maturity date of the Senior Notes Due 1999
or Senior Notes Due 2000, as the case may be, or pay dividends or
make other distributions on account of, or reacquire, any shares of
any class of its capital stock; (c) limit the investments which may
be made by Coltec and certain of its subsidiaries; (d) limit the
ability of certain subsidiaries of Coltec to issue capital stock in
certain circumstances; (e) limit the ability of Coltec and certain
of its subsidiaries to engage in transactions with certain of
Coltec's affiliates; (f) limit the ability of Coltec to merge,
consolidate or sell all or substantially all its assets; (g)
prohibit, subject to certain exceptions, Coltec or certain of its
subsidiaries from creating or permitting to exist any consensual
encumbrance or restriction on the ability of such subsidiaries to
pay dividends, repay certain indebtedness owed to Coltec or any
such subsidiary thereof or transfer assets to Coltec or certain of
its subsidiaries; and (h) require that the proceeds of certain
sales of assets be used to make an offer to repurchase the Senior
Notes Due 1999 or Senior Notes Due 2000, as the case may be.
11-1/4% Debentures due 1996-2015
The 11-1/4% Debentures due 1996-2015 (the "Debentures") were
issued under an Indenture dated as of December 1, 1985 between
Coltec and the Bank of New York (as successor to Mellon Bank,
N.A.), as trustee (the "1985 Indenture").
The Debentures are redeemable at Coltec's option, in whole or
in part, from time to time at redemption prices determined by year
of redemption. Coltec may not, however, effect the optional
redemption prior to December 1, 1995, directly or indirectly, from
or in anticipation of borrowed funds having an annual interest cost
of less than 11-1/4%.
The 1985 Indenture contains, among others, covenants that
restrict the incurrence of secured debt and sale-leaseback
transactions by Coltec and certain of its subsidiaries. In
connection with the consummation of the 1992 Recapitalization,
Coltec's obligations under the 1985 Indenture and the Debentures
were secured, and any other indebtedness that Coltec may incur
under the 1985 Indenture will be secured, by certain assets of
Coltec and its subsidiaries equally and ratably, as and to the
extent required by the 1985 Indenture, with Coltec's obligations
under the 1994 Credit Agreement.
10-1/4% Senior Subordinated Notes Due 2002
The 10-1/4% Senior Subordinated Notes Due 2002 (the "Subordi-
nated Notes") were issued under an Indenture dated as of April 1,
1992 (the "Subordinated Note Indenture"), between Coltec and
Norwest Bank Minnesota, National Association, as Trustee. The
Subordinated Notes are unsecured senior subordinated obligations of
Coltec, mature on April 1, 2002, and bear interest at the rate of
10-1/4% per annum, payable semiannually on April 1 and October 1 of
each year. The Subordinated Notes are redeemable, in whole or in
part, at Coltec's option, at any time on or after April 1, 1997, at
specified redemption prices (expressed in percentages of principal
amount), together with accrued interest to the redemption date,
starting at 105.125% of the principal amount and declining
thereafter.
The Subordinated Note Indenture contains covenants that (a)
limit, under certain circumstances, the ability of Coltec and
certain of its subsidiaries to incur additional indebtedness and
contingent obligations or grant liens; (b) limit the ability of
Coltec and certain of its subsidiaries to redeem or reacquire,
prior to any scheduled maturity, repayment of sinking fund payment,
any indebtedness of Coltec that ranks pari passu with or is
subordinated in right of payment to the Subordinated Notes, which
is scheduled to mature on or after the maturity date of the
Subordinated Notes, or pay dividends or make other distributions on
account of, or reacquire, any shares of any class of its capital
stock; (c) limit the investments which may be made by Coltec and
certain of its subsidiaries; (d) prohibit the issuance by Coltec of
any indebtedness that is by its terms senior in right of payment to
the Subordinated Notes and subordinate to any "senior indebtedness"
(as such term is defined in the Subordinated Note Indenture) of
Coltec; (e) limit the ability of Coltec and certain of its
subsidiaries to engage in transactions with certain of Coltec's
affiliates; (f) limit the ability of Coltec to merge, consolidate
or sell all or substantially all its assets; (g) prohibit, subject
to certain exceptions, Coltec or certain of its subsidiaries from
creating or permitting to exist any consensual encumbrance or
restriction on the ability of such subsidiaries to pay dividends,
repay certain indebtedness owed to Coltec or any such subsidiary
thereof or transfer assets to Coltec or certain of its subsidiar-
ies; and (h) require that the proceeds of certain sales of assets
be used to make an offer to repurchase the Subordinated Notes.
The Subordinated Notes are subordinate in right of payment to
all "senior indebtedness" of Coltec, as such term is defined in the
Subordinated Note Indenture. As defined in the Subordinated Note
Indenture, "senior indebtedness" includes, among other things,
indebtedness under the 1994 Credit Agreement, the Senior Notes Due
1999, the Senior Notes Due 2000 and the Debentures.
LEGAL MATTERS
Certain legal matters with respect to the Common Stock being
registered have been passed upon for Coltec by Reed Smith Shaw &
McClay, Pittsburgh, Pennsylvania.
EXPERTS
The financial statements and schedules incorporated by
reference in this Prospectus 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 giving said reports.
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